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3235-0059 |
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
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Filed by the Registrant
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Filed by a Party other than the Registrant
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Check the appropriate box: |
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o Preliminary Proxy Statement |
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Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2)) |
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þ Definitive Proxy Statement |
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o Definitive Additional Materials |
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Soliciting Material Pursuant to §240.14a-12 |
AMERICAN RAILCAR
INDUSTRIES, INC.
(Name
of Registrant as Specified In Its Charter)
(Name
of Person(s) Filing Proxy Statement, if other than the
Registrant)
Payment of Filing Fee (Check the appropriate box):
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þ No fee required. |
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Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11. |
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1) Title of each class of securities to which transaction applies: |
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2) Aggregate number of securities to which transaction applies: |
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3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined): |
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4) Proposed maximum aggregate value of transaction: |
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o Fee paid previously with preliminary materials. |
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o Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing. |
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1) Amount Previously Paid: |
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2) Form, Schedule or Registration Statement No.: |
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SEC 1913 (02-02) |
Persons who are to respond to the collection of information
contained in this form are not required to respond unless the form displays a currently valid
OMB control number. |
AMERICAN RAILCAR INDUSTRIES
100 Clark Street, St. Charles Missouri 63301
www.americanrailcar.com
NOTICE OF ANNUAL MEETING OF
STOCKHOLDERS
JUNE 8, 2006
To Our Stockholders:
The Annual Meeting of Stockholders of American Railcar
Industries, Inc. (the Company, we,
us, our) will be held beginning at
1:00 p.m., local time, on June 8, 2006 at the
Doubletree Guest Suites Times Square-New York City, 1568
Broadway, New York, New York 10036 for the following purposes:
1. To elect seven directors to serve for the ensuing year
and until their successors are duly elected.
2. To transact such other business as may properly come
before the meeting or any adjournment thereof.
These items are more fully described in the proxy statement
accompanying this Notice. Only stockholders of record at the
close of business on April 26, 2006 will be entitled to
notice of and to vote at the Annual Meeting and any adjournment
or postponement thereof. A list of stockholders will be open to
the examination of any stockholder, for any purpose germane to
the Annual Meeting, for a period of ten days prior to the
meeting at the Companys principal executive office, 100
Clark Street, St. Charles, Missouri 63301.
All stockholders are cordially invited to attend the meeting.
However, to assure your representation at the meeting, you are
urged to mark, sign, date and return the enclosed proxy as
promptly as possible in the enclosed postage-prepaid envelope.
Stockholders who attend the Annual Meeting may revoke their
proxies and vote in person, if they so desire.
A Proxy Statement, proxy card and a copy of the Annual Report of
the Company for the last fiscal year accompany this Notice of
Annual Meeting of Stockholders.
By order of the Board of Directors
Michael Obertop
Secretary
May 5, 2006
St. Charles, Missouri
YOUR VOTE IS IMPORTANT!
Whether or not you expect to attend the Annual Meeting,
please mark, sign and date the enclosed proxy card and return it
as promptly as possible in the enclosed envelope. Even if you
have given your proxy, the proxy may be revoked at any time
prior to exercise by filing with the Secretary of the Company a
written revocation, by executing a proxy with a later date, or
by attending and voting at the meeting.
TABLE OF CONTENTS
AMERICAN
RAILCAR INDUSTRIES
2006 ANNUAL MEETING OF
STOCKHOLDERS
June 8, 2006
General
The enclosed proxy is solicited on behalf of the Board of
Directors of American Railcar Industries, Inc. (the
Company, we, us,
our) for use at the Annual Meeting of Stockholders
to be held on June 8, 2006 (the Annual
Meeting), or at any adjournment or postponement thereof,
for the purposes set forth herein and in the accompanying Notice
of Annual Meeting of Stockholders. The Annual Meeting will be
held at the Doubletree Guest Suites Times Square-New York City,
1568 Broadway, New York, New York 10036. This proxy statement,
the accompanying Notice of Annual Meeting, the proxy card and
the annual report to stockholders were first mailed or delivered
on or about May 5, 2006.
Record
Date, Stock Ownership and Voting
Only stockholders of record at the close of business on
April 26, 2006 will be entitled to notice of and to vote at
the Annual Meeting and any adjournment thereof. As of that date,
there were outstanding and entitled to vote
21,207,773 shares of our common stock, par value
$.01 per share (our Common Stock). Each
stockholder is entitled to one vote for each share of Common
Stock. Shares represented by the enclosed proxy, if properly
executed and returned to the Company prior to the meeting, will
be voted at the Annual Meeting and at any adjournment or
postponement thereof in the manner specified, or, if not
specified, in favor of the election of the seven nominees for
Director. If any other matters shall properly come before the
Meeting, the enclosed proxy will be voted by the proxies in
accordance with their best judgment.
The presence, in person or by proxy, of the holders of record of
a majority of the shares of Common Stock outstanding and
entitled to vote is necessary to constitute a quorum for the
transaction of business at the Annual Meeting. If a quorum is
not present, a vote of a majority of the votes properly cast
will adjourn the Meeting. A holder of Common Stock will be
entitled to one vote per share on each matter properly brought
before the meeting.
The proxy card provides space for a stockholder to withhold
voting for any or all nominees for the Board of Directors. The
affirmative vote of the holders of a plurality of the shares of
Common Stock present in person or represented by proxy and
entitled to vote at the Annual Meeting is required for the
election of directors. Votes cast by proxy or in person at the
Annual Meeting will be tabulated by an inspector of elections
appointed by the Company for the Annual Meeting. The inspector
of elections will treat both abstentions and broker
non-votes (shares held by a broker or nominee that does
not have the authority, either express or discretionary, to vote
on the matter) as shares of Common Stock that are present and
entitled to vote for purposes of determining a quorum.
Abstentions will have no effect on the outcome of the vote for
the election of directors. Broker non-votes on any matter will
be treated as shares not entitled to vote with respect to that
matter and will have no effect on the proposal not voted.
Revocability
of Proxies
The proxy may be revoked at any time before it is exercised by
filing with the Secretary of the Company a written revocation,
by executing a proxy bearing a later date or by attending the
Annual Meeting and voting in person.
Costs of
Solicitation
All costs of this solicitation of proxies will be borne by the
Company. The Company may reimburse brokerage firms and other
persons representing beneficial owners of shares for their
reasonable expenses incurred in forwarding solicitation
materials to such beneficial owners. Original solicitation of
proxies by mail may be supplemented by telephone, telegram, or
personal solicitations by directors, officers or employees of
the Company. No additional compensation will be paid for any
such services.
Our executive office is located at 100 Clark Street, St.
Charles, Missouri 63301.
PROPOSAL 1 ELECTION
OF DIRECTORS
At the Annual Meeting seven directors are to be elected who
shall hold office until the next Annual Meeting of Stockholders.
The following persons, each of whom is currently a director of
the Company, have been nominated by the Board of Directors for
election as directors. The proposed nominees are not being
nominated pursuant to any arrangement or understanding with any
person. We have entered into an employment agreement with James
J. Unger, our President and Chief Executive Officer, discussed
below under Executive
Compensation Employment Agreements.
Unless otherwise instructed, the proxy holders will vote the
proxies received by them for the election of each of the seven
nominees listed below. All nominees have consented to serve as
directors if elected, but if any of them should decline or be
unable to serve as a director at the time of the Annual Meeting,
the proxies will be voted for the nominee, if any, who shall be
designated by the present Board of Directors to fill the
vacancy. The term of office of each person elected as a director
will continue until our next Annual Meeting of Stockholders or
until a successor has been elected and qualified.
The Board
of Directors unanimously recommends you vote FOR the
election of each
of the seven nominees to the Board of Directors set forth
below.
Set forth below is certain biographical information regarding
the nominees as of April 21, 2006.
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Director
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Name
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Age
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Position
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Since
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Carl C. Icahn
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70
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Chairman of the Board
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1994
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James J. Unger
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President, Chief Executive
Officer and Director
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1995
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Vincent J. Intrieri*,**
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Director
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2005
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Jon F. Weber
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Director
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2005
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Keith Meister**
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Director
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2005
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James C. Pontious***
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67
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Director
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2006
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James M. Laisure***
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Director
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2006
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Chair of the Audit Committee |
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Member of the Compensation Committee |
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Member of the Audit Committee |
2
Nominees
Carl C. Icahn. Mr. Icahn has been our
principal beneficial stockholder and has served as our chairman
of the board and as a director since 1994. Mr. Icahn has
served as chairman of the board and a director of Starfire
Holding Corporation, a privately-held holding company, and
chairman of the board and a director of various subsidiaries of
Starfire, since 1984. Since, February 2005, Mr. Icahn has
served as a director of CCI Onshore Corp. and CCI Offshore
Corp., private investment funds, and from September 2004 to
February 2005, Mr. Icahn served as the sole member of their
predecessors, CCI Onshore LLC and CCI Offshore LLC,
respectively. Mr. Icahn was also chairman of the board and
president of Icahn & Co., Inc., a registered
broker-dealer and a member of the National Association of
Securities Dealers, from 1968 to 2005. Since November 1990,
Mr. Icahn has been chairman of the board of American
Property Investors, Inc., the general partner of American Real
Estate Partners, L.P., a public limited partnership that invests
in real estate and holds various other interests, including the
interests in its subsidiaries that are engaged, among other
things, in the oil and gas business, the casino entertainment
business and the textile business. Mr. Icahn has been a
director of Cadus Pharmaceutical Corporation, a firm that holds
various biotechnology patents, since 1993. From October 1998
through May 2004, Mr. Icahn was the president and a
director of Stratosphere Corporation, which operates the
Stratosphere Hotel and Casino. Since September 29, 2000,
Mr. Icahn has served as the chairman of the board of GB
Holdings, Inc. Mr. Icahn has been chairman of the board and
a director of XO Holdings, Inc. since February 2006 and was
chairman of the board and a director of XO Communications, Inc.
(XO Holdings predecessor) from January 2003 to February
2006. XO Holdings is a publicly traded telecommunications
services provider controlled by Mr. Icahn. In May 2005,
Mr. Icahn became a director of Blockbuster Inc., a provider
of in-home movie rental and game entertainment. Mr. Icahn
received his B.A. from Princeton University.
James J. Unger. Mr. Unger has served as
our president, chief executive officer and director since March
1995. Prior to joining us, he served ACF as its president from
1988 to 1995, as its senior vice president and chief financial
officer from 1984 to 1988 and on its board of directors from
August 1993 to March 2005. After he joined us in 1995,
Mr. Unger simultaneously continued to serve as the vice
chairman of ACF until March 2005. ACF is controlled by
Mr. Icahn. Mr. Unger has served as president of Ohio
Castings, the joint venture in which we have a one-third
interest, since June 2003. Mr. Unger has been on the board
of directors of Aspen Resources Group, an oil and gas
exploration company since May 2002. Mr. Unger participates
in several industry organizations, including as an executive
committee member and board member for the Railway Supply
Institute, Inc., or RSI. He also is a board member
of the American Railway Car Institute, a member of the project
review committee for the RSI-AAR Railroad Tank Car Safety
Research Test Project, a steering committee member of the RSI
Committee on Tank Railcars, and a member of the National Freight
and Transportation Association. Mr. Unger served as a
member of the board of directors of Ranken Technical College
from 1990 to 2002. Mr. Unger received a B.S. in accounting
from the University of Missouri, Columbia and is a certified
public accountant.
Vincent J. Intrieri. Mr. Intrieri served
as our senior vice president, treasurer and secretary from March
2005 to December 2005 and has served on our board of directors
since August 2005. Mr. Intrieri is a senior managing
director of Icahn Partners LP and Icahn Partners Master
Fund LP, private investment funds controlled by
Mr. Icahn. Since January 1, 2005, Mr. Intrieri
has been senior managing director of Icahn Associates Corp. and
High River Limited Partnership, which is primarily engaged in
the business of holding and investing in securities. From March
2003 to December 2004, Mr. Intrieri served as a managing
director and from 1998 to March 2003, he served as a portfolio
manager of Icahn Associates Corp. and High River. Each of Icahn
Associates Corp. and High River are under the control of
Mr. Icahn. From 1995 to 1998, Mr. Intrieri served as
portfolio manager for distressed investments with Elliott
Associates L.P., a New York investment fund. Mr. Intrieri
is chairman of the board of directors and a director of Viskase
Companies, Inc., a publicly owned producer of cellulose and
plastic casings used in preparing and packaging meat products,
in
3
which Mr. Icahn has an interest through the ownership of
securities. In addition, Mr. Intrieri has been a director
of XO Holdings, Inc. since February 2006 and was a director of
XO Communications, Inc. (XO Holdings predecessor) from
January 2003 to February 2006. XO Holdings is a publicly traded
telecommunications services provider controlled by
Mr. Icahn. Mr. Intrieri received a B.S. in Accounting
from The Pennsylvania State University.
Jon F. Weber. Mr. Weber has served on our
board of directors since August 2005. Since April 2005,
Mr. Weber has served as the president of American Property
Investors, Inc., which is the general partner of American Real
Estate Partners, L.P., a public limited partnership controlled
by Mr. Icahn that invests in real estate and holds various
other interests, including the interests in its subsidiaries
that are engaged, among other things, in the oil and gas
business, the casino entertainment business and the textile
business. Mr. Weber has, since April 2003, been head of
portfolio company operations and chief financial officer at
Icahn Associates Corp., an entity controlled by Mr. Icahn.
Since May 2003, Mr. Weber has been a director of Viskase
Companies, Inc. and was the chief executive officer of Viskase
Companies, Inc. from May 2003 to October 2004. Mr. Weber
also serves as a director of WestPoint International Inc., a
subsidiary of American Real Estate Partners, L.P., engaged in
the home textile business. He served as chief financial officer
of venture-backed companies QuantumShift Inc. and Alchemedia
Ltd. from October 2001 to July 2002, and November 2000 to
October 2001, respectively. From May 1998 to November 2000,
Mr. Weber served as managing
director investment banking for JP Morgan Chase
and its predecessor, Chase Manhattan Bank, in São Paulo,
Brazil. Mr. Weber has been a director of XO Holdings, Inc.
since February 2006 and was a director of XO Communications,
Inc. (XO Holdings predecessor) from May 2005 to February
2006. XO Holdings is a publicly traded telecommunications
services provider controlled by Mr. Icahn. Previously,
Mr. Weber was an investment banker at Morgan Stanley and
Salomon Brothers. Mr. Weber began his career as a corporate
lawyer following his graduation from Harvard Law School. He also
holds an MBA and Bachelors degree from Babson College. He
currently serves as an Overseer (previously a trustee) of Babson
College.
Keith Meister. Mr. Meister has served on
our board of directors since August 2005. Since June 2002,
Mr. Meister has been a senior investment analyst of High
River Limited Partnership, a company owned and controlled by
Mr. Icahn that is primarily engaged in the business of
holding and investing in securities. Mr. Meister is also a
senior investment analyst of Icahn Partners LP and Icahn
Partners Master Fund LP, private investment funds
controlled by Mr. Icahn. He is also a director of Icahn
Fund Ltd., which is the feeder fund of Icahn Partners
Master Fund LP. Since August 2003, Mr. Meister has
served as the chief executive officer of American Property
Investors, Inc., (API), which is the general partner
of American Real Estate Partners, L.P., a public limited
partnership controlled by Mr. Icahn that invests in real
estate and holds various other interests, including the
interests in its subsidiaries that are engaged, among other
things, in the oil and gas business, the casino entertainment
business and the textile business. Mr. Meister served API
as its president from August 2003 to April 2005. From March 2000
through the end of 2001, Mr. Meister co-founded and served
as co-president of J Net Ventures, a venture capital fund
focused on investments in information technology and enterprise
software businesses. Mr. Meister also is a director of
American Entertainment Properties Corp. and American
Casino & Entertainment Properties Finance Corp., which
are gaming companies, and Scientia Corporation, a private health
care venture company, all of which are companies controlled by
American Real Estate Partners, L.P., which is controlled by
Mr. Icahn. Mr. Meister has been a director of XO
Holdings, Inc. since February 2006 and was a director of XO
Communications, Inc. (XO Holdings predecessor) from
January 2003 to February 2006. XO Holdings is a publicly traded
telecommunications services provider controlled by
Mr. Icahn. In August 2005, Mr. Meister became a
director of ADVENTRX Pharmaceuticals, Inc., a company, of which
Mr. Icahn is a beneficial stockholder, that is primarily
engaged in biomedical research and development. In addition, in
January 2006, Mr. Meister became a director of BKF Capital
Group Inc., a publicly traded investment firm. Mr. Meister
received his A.B. in Government cum laude from Harvard College.
James C. Pontious. Mr. Pontious has
served on our board of directors since January 2006. Since May
2005, Mr. Pontious has been a consultant in the areas of
business development and acquisitions to Wabtec Corporation, a
public company that supplies air brakes and other equipment for
locomotives, freight cars and passenger transit vehicles. In
2005, Mr. Pontious helped Wabtec found Intermodal Trailer
Express Corp, an
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intermodal operating company established to focus on hauling
highway trailers over the nations railroads.
Mr. Pontious is a principal of this newly founded company.
Mr. Pontious served Wabtec as vice president of special
projects from January 2003 through April 2005 and as vice
president of sales and marketing from April 1990 to January
2003. Mr. Pontious also served as vice president of sales
and marketing at New York Air Brake Company, a unit of General
Signal Corporation, from 1977 to 1990. Prior to this,
Mr. Pontious served the Pullman-Standard division of
Pullman, Inc., a freight and passenger railcar manufacturer,
from 1961 to 1977 in various management positions in the areas
of sales, marketing and operations. Mr. Pontious currently
serves as a director of the Intermodal Transportation Institute
at the University of Denver. Mr. Pontious holds a B.B.A.
from the University of Minnesota.
James M. Laisure. Mr. Laisure has served
on our board of directors since January 2006. Since May 2005,
Mr. Laisure has been consulting as an independent
contractor for the automotive and industrial manufacturing
space. Prior to this, he spent 32 years in various
corporate accounting, sales, engineering and operational
positions with Dana Corporation, a publicly held corporation
that designs, manufactures and supplies vehicle components and
technology, and its predecessors. Mr. Laisure served as
president of Danas Automotive Systems Group from March
2004 to May 2005. From December 2001 to February 2004,
Mr. Laisure served as president of Danas engine and
fluid management group and, from December 1999 to November 2001,
he served as president of Danas fluid management group. In
addition, he served on the board of directors of various Dana
Corporation joint ventures, including joint ventures in Germany,
Indonesia, Mexico and Turkey. Mr. Laisure served as
director of finance of P.T. Spicer Indonesia, a manufacturer of
axles and driveshafts, from 1982 to 1984. Also, he served as
accountant, internal auditor and controller at Perfect Circle, a
manufacturer of automotive engine components, from 1973 to 1981.
Mr. Laisure received a B.A. degree in Accounting from Ball
State University and an M.B.A. from Miami (Ohio) University, and
has completed the Harvard Advanced Management Program.
Board of
Directors Meetings and Committees
In anticipation of our initial public offering of our Common
Stock, our predecessor company, American Railcar Industries,
Inc., a Missouri corporation, formed us, American Railcar
Industries, Inc., a Delaware corporation, in November 2005 and
merged into us in January 2006. The Board of Directors of our
predecessor company held three meetings and acted three times by
unanimous written consent during the fiscal year ended
December 31, 2005, and our Board of Directors held two
meetings during the fiscal year ended December 31, 2005.
All meetings of our predecessors Board of Directors and
our Board of Directors were attended by each Director who was
then a member of the applicable Board of Directors. All of our
Directors are encouraged to attend our annual meetings of
stockholders.
Controlled
Company
During 2005 and through the date of this Proxy Statement,
Mr. Icahn, our principal beneficial stockholder and the
Chairman of our Board of Directors, controlled more than 50% of
the voting power of our Common Stock. See Security
Ownership Of Certain Beneficial Owners And Management,
below. Consequently, we are a controlled company
under the corporate governance standards of the Nasdaq Global
Market. Under these rules, a controlled company may
elect not to comply with certain Nasdaq Global Market corporate
governance requirements, including requirements that: (i) a
majority of the board of directors consist of independent
directors; (ii) director nominees be selected or
recommended for selection by a majority of the independent
directors or by a nominating committee composed solely of
independent directors; and (iii) compensation of officers
be determined or recommended to the board of directors by a
majority of its independent directors or by a compensation
committee that is composed entirely of independent directors.
We have elected to use these exemptions. As a result,
(i) we do not have a majority of independent directors,
(ii) we do not have a nominating committee or a nominating
committee charter, and (iii) our Compensation Committee
does not satisfy the corporate governance requirements of the
Nasdaq Global Market applicable to compensation committees of
non-controlled companies and does not have a charter. Our
standing committees are our Audit Committee and our Compensation
Committee. We have in the past and may in the
5
future establish special committees under the direction of the
Board of Directors when necessary to address specific issues.
Two of our current Directors, Messrs. Pontious and Laisure,
are independent directors as defined in NASD
Rule 4200(a)(15). Each of Mr. Weber,
Mr. Intrieri, and Mr. Meister are employed by or
otherwise affiliated with entities controlled by Mr. Icahn,
and Mr. Unger is our President and Chief Executive Officer.
Director
Nominations
We do not maintain a formal policy with respect to the review of
potential nominees to our Board of Directors. All of the members
of our Board of Directors participate in the review of potential
nominees to our Board of Directors. The Board has determined
that, given the small size of the Board and the importance of
the director nomination process, the entire Board of Directors
should participate in the evaluation of potential Board members.
As a result of his control of a majority of our outstanding
Common Stock, Mr. Icahn may control the election of all of
the members of our Board of Directors. Our Board of Directors
has therefore deemed it appropriate not to form a standing
nominating committee because the influence exercisable by
Mr. Icahn in the nomination and election process would make
a separate process superfluous in light of Mr. Icahns
and the Boards review of potential nominees. The Board of
Directors may consider candidates recommended by stockholders as
well as from other sources such as other directors or officers,
third party search firms or other appropriate sources. In
general, persons recommended by stockholders will be considered
on the same basis as candidates from other sources. If a
stockholder wishes to recommend a candidate for director for
election at the 2007 Annual Meeting of Stockholders, it must
follow the procedures described below in Stockholder
Proposals and Recommendations For Director.
Compensation
Committee
We established our Compensation Committee in February 2006 to
review and approve our compensation policies and arrangements.
Our Compensation Committee did not have any meetings in the year
ended December 31, 2005. Messrs. Intrieri and Meister
are the members of our Compensation Committee.
Audit
Committee
We established our Audit Committee in January 2006 in connection
with our initial public offering of our Common Stock. Our Audit
Committee did not have any meetings in the year ended
December 31, 2005. Messrs. Intrieri, Pontious and
Laisure are currently the members of our Audit Committee. Our
Board of Directors has determined that Mr. Laisure
qualifies as an audit committee financial expert, as
defined by applicable SEC rules, and that he satisfies the
financial sophistication standards of the Nasdaq Global Market.
Our Board of Directors has also determined that
Messrs. Laisure and Pontious are independent
under applicable SEC rules and the current listing standards of
the Nasdaq Global Market applicable to members of audit
committees.
We are relying on the exemption provided by SEC
Rule 10A-3,
promulgated under the Securities Exchange Act of 1934 (the
Exchange Act). This rule provides that a minority of
the members of our Audit Committee may be exempt from the
SECs independence requirements until January 19,
2007, the one year anniversary of the date of effectiveness of
our registration statement under the Securities Act of 1933 (the
Securities Act) covering the initial public offering
of our Common Stock. We expect that all of the members of our
Audit Committee will be independent, under
applicable SEC rules, by such date. The Board of Directors has
assessed our reliance on this exemption and has determined that
it does not materially adversely affect the ability of the Audit
Committee to act independently and to satisfy the other
requirements of
Rule 10A-3.
Our Audit Committee is responsible for oversight of the
qualifications, independence, appointment, retention,
compensation and performance of the Companys independent
registered public accounting firm and for assisting the board of
directors in monitoring the Companys financial reporting
process, accounting functions and internal controls. It also is
responsible for oversight of whistle-blowing
procedures and certain other compliance matters.
6
Our Audit Committee meets formally at least once every quarter,
and more often if necessary. Our Board of Directors has adopted
a written charter for our Audit Committee. That charter conforms
to applicable rules and regulations of the SEC and the Nasdaq
Global Market. A copy of the Audit Committee Charter is attached
to this proxy statement as Appendix A and is
publicly available on our website at
www.americanrailcar.com under the heading Investor
Relations.
Director
Compensation
Each director is entitled to reimbursement for
out-of-pocket
expenses incurred for each meeting of the full board or a
committee of the board attended. The annual compensation for our
independent directors is $30,000. In addition, each independent
director is entitled to receive $1,000 for each board or
committee meeting attended and an annual stipend of $5,000 if he
is a chairperson of a committee.
Report of
the Audit Committee
In connection with the issuance of the Companys Annual
Report on
Form 10-K
for the fiscal year ended December 31, 2005, the Audit
Committee:
1. Reviewed and discussed with management the
Companys audited financial statements as of and for the
year ended December 31, 2005;
2. Discussed with Grant Thornton LLP (Grant
Thornton), the Companys independent registered
public accounting firm, the matters required to be discussed by
the Auditing Standards Board Statement of Auditing Standards
(SAS) No. 61, as amended;
3. Requested and obtained from Grant Thornton the written
disclosures and the letter required by Independence Standards
Board (ISB) Standard No. 1, as amended, regarding Grant
Thorntons independence, and has discussed with Grant
Thornton its independence; and
Based on the review and discussions referred to in paragraph
numbers (1) (3) above, the Audit Committee
recommended to our Board of Directors that the audited financial
statements as of and for the fiscal year ended December 31,
2005 be included in the Companys Annual Report on
Form 10-K
for the fiscal year ended December 31, 2005 for filing with
the Securities and Exchange Commission.
Respectfully submitted by the Audit Committee,
Vincent J. Intrieri, Chairman
James M. Laisure
James C. Pontious
Independent
Registered Public Accounting Firm
Our Board of Directors, effective August 11, 2004,
terminated our previous independent registered public accounting
firm, KPMG LLP (KPMG). KPMGs report on our
consolidated statements of operations, shareholders equity
and comprehensive income (loss) and cash flows for the year
ended December 31, 2003 contained no adverse opinion or
disclaimer of opinion and was not otherwise qualified or
modified as to uncertainty, audit scope or accounting
principles. In connection with its audit of our financial
statements for the year ended December 31, 2003, and
through August 11, 2004 (i) there were no
disagreements with KPMG on any matter of accounting principles
or practices, financial statement disclosure or auditing scope
or procedure, which disagreements, if not resolved to the
satisfaction of KPMG, would have caused KPMG to make reference
thereto in its report on such statements for such period, and
(ii) there were no reportable events as defined
in Item 304(a)(1)(v) of
Regulation S-K
promulgated under the Exchange Act.
Following KPMGs termination, we engaged Grant Thornton LLP
(Grant Thornton) as our independent registered
public accounting firm effective August 12, 2004. The
decision to hire Grant Thornton was unanimously approved by our
Board of Directors. We did not consult with Grant Thornton with
respect to the
7
application of accounting principles to a specified transaction,
either completed or proposed, or the type of audit opinion that
might be rendered on our financial statements, or a disagreement
with KPMG and there were no reportable events as
defined in Item 304(a)(1)(v) of
Regulation S-K
promulgated under the Exchange Act during this time frame. Grant
Thornton has been given access to prior years work papers by
KPMG without limitation in accordance with Statement on Auditing
Standard No. 84, Communications Between Predecessor and
Successor Auditors.
Grant Thornton has continuously served as our independent
registered public accounting firm since its engagement,
discussed above, on August 12, 2004. The Audit Committee
has appointed Grant Thornton to audit our consolidated financial
statements for our fiscal year ending December 31, 2006. A
representative of Grant Thornton LLP is expected to attend our
annual meeting, where he or she will have the opportunity to
make a statement, if he or she desires, and will be available to
respond to appropriate questions.
Fees
Billed by Independent Registered Public Accounting
Firm
Audit Fees. We incurred $0.4 million in
audit fees and expenses for the year ended December 31,
2004 and $1.5 million in audit fees and expenses for the
year ended December 31, 2005 from Grant Thornton. We did
not incur any audit fees or expenses for the years ended
December 31, 2004 and 2005 from KPMG. We include in the
category of audit fees those fees billed by our independent
registered public accounting firm for professional services
rendered for the audit of our consolidated financial statements
and the review of our registration statement on
Form S-1,
as amended (the
Form S-1),
filed in connection with our initial public offering of our
Common Stock, and other related services that are normally
provided in connection with such statutory and regulatory
filings. The amounts included for the year ended
December 31, 2005 included $1.1 million relating to
the review of our
Form S-1.
Audit-Related Fees. We did not incur any fees
from Grant Thornton for audit-related services for the years
ended December 31, 2004 and 2005. We did not incur any
audit-related fees from KPMG for the year ended
December 31, 2004. We incurred audit-related fees from KPMG
of $0.9 million for the year ended December 31, 2005.
We include in the category of audit-related fees those fees
billed by our previous independent registered public accounting
firm for professional services rendered in connection with its
review of our
Form S-1.
Tax Fees. We did not incur any tax fees from
KPMG or Grant Thornton in the years ended December 31, 2004
and 2005.
All Other Fees. We did not incur any other
fees from KPMG or Grant Thornton in the years ended
December 31, 2004 and 2005.
The Audit Committee has considered whether the provision of
non-audit services by its independent registered public
accounting firm is compatible with maintaining auditor
independence, and has determined that the provision of such
services is compatible.
Audit
Committee Policy on Pre-Approval of Services
The Audit Committees policy is to pre-approve all audit
and permissible non-audit services provided by the
Companys independent registered public accounting firm.
These services may include audit services, audit-related
services, tax services and other services. Pre-approval is
generally provided for up to one year. The Audit Committee may
also pre-approve particular services on a
case-by-case
basis.
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following tables sets forth information, as of
April 21, 2006, with respect to the beneficial ownership of
our Common Stock by (i) each director or nominee for
director, (ii) our Chief Executive Officer and each of our
other most highly compensated executive officers during the
fiscal year ended December 31, 2005, (iii) all of our
directors and executive officers as a group, and (iv) each
person who is known to us to be the beneficial owner of more
than five percent of our Common Stock. This information is based
upon information
8
received from or on behalf of the named individuals or from
publicly available information and filings by or on behalf of
those persons with the SEC. Unless otherwise indicated, each
person has sole voting power and sole investment power with
respect to the shares listed.
|
|
|
|
|
|
|
|
|
|
|
Shares of Common Stock
|
|
|
|
Beneficially Owned
|
|
Name
|
|
Number
|
|
|
Percent of Class
|
|
|
Carl C. Icahn(1)(2)
|
|
|
11,170,859
|
|
|
|
52.7
|
%
|
James J. Unger(3)
|
|
|
333,314
|
|
|
|
1.6
|
%
|
James A. Cowan
|
|
|
9,500
|
|
|
|
*
|
|
William P. Benac
|
|
|
|
|
|
|
|
|
Alan C. Lullman
|
|
|
|
|
|
|
|
|
Vincent J. Intrieri
|
|
|
|
|
|
|
|
|
Jon F. Weber
|
|
|
|
|
|
|
|
|
Keith Meister
|
|
|
|
|
|
|
|
|
James C. Pontious
|
|
|
2,300
|
|
|
|
*
|
|
James M. Laisure
|
|
|
|
|
|
|
|
|
All executive officers and
directors as a group (10 persons)
|
|
|
11,515,973
|
|
|
|
54.3
|
%
|
|
|
|
* |
|
Less than one percent |
|
(1) |
|
The following information is based on a Schedule 13D filed
with the Securities and Exchange Commission on January 31,
2006 by Mr. Icahn and certain other parties (the
Icahn 13D): Mr. Icahn beneficially owns
5,037,165 of these shares directly and an additional 6,133,694
of these shares (the Additional Shares) are owned as
follows: (i) 4,290,918 of these shares are owned by Modal
LLC, a Delaware limited liability company (Modal);
(ii) 1,818,976 of these shares are owned by Hopper
Investments, LLC, a Delaware limited liability company
(Hopper); and (iii) 23,800 of these shares are
owned by Ms. Gail Golden, Mr. Icahns spouse.
Hopper is wholly owned by Barberry Corp., a Delaware corporation
(Barberry). Each of Barberry and Modal is wholly
owned by Mr. Icahn. Mr. Icahn may be deemed to have
shared voting power and shared investment power with regard to
the Additional Shares. Mr. Icahn has sole voting power and
sole investment power with regard to the 5,037,165 shares
he owns directly. Mr. Icahn, by virtue of his relationships
to Hopper, Modal and Ms. Golden, may be deemed to
beneficially own (as that term is defined in
Rule 13d-3
under the Exchange Act) the Additional Shares. Mr. Icahn
disclaims beneficial ownership of such Additional Shares for all
other purposes. |
|
(2) |
|
The following information is based on the Icahn 13D: In
connection with the Companys initial public offering, on
January 20, 2006, pursuant to a stock purchase agreement
(the Stock Purchase Agreement) dated
December 7, 2005, among Modal, High Coast Limited
Partnership, a Delaware limited partnership (High
Coast) and The Foundation for a Greater Opportunity, a
Delaware
not-for-profit
corporation (the Foundation), Modal purchased
4,290,918 shares of Common Stock of the Company (the
Modal Shares) from the Foundation. The aggregate
purchase price for the Modal Shares was $100,000,000. Modal paid
the purchase price with $10,000,000 in cash and the balance in a
five-year interest-only secured promissory note (the
Note). The Note is secured by the Modal Shares and
was guaranteed by High Coast, an affiliate of Mr. Icahn. In
connection with the purchase by Modal of the Modal Shares, Modal
and the Foundation entered into a pledge security agreement (the
Pledge Security Agreement), dated January 20,
2006. After an event of default (as defined in the Pledge
Security Agreement) and upon notice, the Modal Shares may be
transferred to the Foundation. Assuming no other changes to
Mr. Icahns beneficial ownership of our Common Stock,
as reported in the table above, such a transfer may constitute a
change in control of the Company. |
|
(3) |
|
Includes 23,800 shares held by the Unger Family Limited
Partnership, of which Mr. Unger is the general partner. |
9
Code of
Ethics
Pursuant to Section 406 of the Sarbanes-Oxley Act of 2002,
we have adopted a Code of Ethics for Senior Financial Officers
that applies to our principal executive officer, principal
financial officer, principal accounting officer and controller,
and other persons performing similar functions. Our Code of
Ethics for Senior Financial Officers is publicly available on
our web site at www.americanrailcar.com under the heading
Investor Relations. We may satisfy the disclosure
requirement of Item 5.05 of Current Report on
Form 8-K
regarding an amendment to, or waiver from, a provision of our
Code of Ethics by either disclosing such information in a
Current Report on
Form 8-K
or by posting such information on our website, at the internet
address specified above.
EXECUTIVE
COMPENSATION
Executive
Officers
The names of the Companys executive officers and
significant employees who are not directors of the Company, and
certain biographical information regarding them as of
April 21, 2006, are set forth below. None of the persons
listed below was appointed pursuant to any arrangement or
understanding with any person, other than the employment
agreements we have entered into with each of Messrs. Cowan
and Benac relating to their service in such capacities,
discussed below under Employment
Agreements. Executive officers are chosen by and serve at
the discretion of the Board of Directors.
|
|
|
|
|
|
|
Name
|
|
Age
|
|
Position
|
|
James A. Cowan
|
|
|
48
|
|
|
Executive Vice President and Chief
Operating Officer
|
William P. Benac
|
|
|
59
|
|
|
Senior Vice President, Chief
Financial Officer and Treasurer
|
Alan C. Lullman
|
|
|
50
|
|
|
Senior Vice President Sales,
Marketing and Services
|
James A. Cowan. Mr. Cowan has served as
our executive vice president and chief operating officer since
December 2005. Prior to joining us, he spent the last
26 years in various positions involving the engineering,
construction and manufacturing of multiple steel and tubular
products. From March 2003 to August 2005, Mr. Cowan served
as president and chief operating officer of Maverick Tube
Corporation, a North American manufacturer of welded tubular
steel products used in the energy industry. Prior to this
position, from June 2002 to March 2003, Mr. Cowan served as
president and chief operating officer of Vallourec &
Mannesmann Star, a French, German and Japanese joint venture and
seamless manufacturer of tubular steel products. From January
1992 to June 2002, he served as general manager responsible for
all sales and operations of three different steel manufacturing
facilities for North Star Steel, a business previously owned by
Cargill. Mr. Cowan was responsible for the complete
greenfield development, construction and
start-up of
one of these facilities. From July 1979 to January 1992, he
served in differing operational capacities for Cargills
steel group, North Star Steel. For two years, during 2000 and
2001, Mr. Cowan served as the Chairman of the Governor of
Ohios Steel Council. Mr. Cowan received his B.S. in
Metallurgical Engineering from Michigan Technological University.
William P. Benac. Mr. Benac has served as
our senior vice president and chief financial officer since
January 2005 and has served as our treasurer since December
2005. Prior to joining us, he spent the last 32 years in
various corporate finance, turnaround and value creation
positions. Mr. Benac co-founded bpmx, a financial services
and consulting restructuring company, where he served as senior
managing director and chief financial officer from December 2003
to January 2005. From August 2002 to February 2003,
Mr. Benac served Kinkos Inc., a print services
company, as senior vice president and chief financial officer.
From November 2000 to November 2001, Mr. Benac was the
executive vice president and chief financial officer of Grass
Valley Group, a manufacturer of digital broadcast technology.
Mr. Benac served simultaneously as an executive vice
president and chief financial officer of UICI, a diversified
financial services company, and as chief executive officer of
United Credit National Bank, a subsidiary of UICI and a credit
card bank, from May 1999 to November 2000. Mr. Benac has
held a variety of other financial management positions,
including serving Electronic Data Systems Corporation from
February 1992 to October 1997 as global vice president and
treasurer, and numerous positions with Verizon Corporation and
its predecessor companies from 1973 to
10
1990, including as president of GTE Finance Corp. from 1986 to
1990. Mr. Benac is a certified public accountant and a
certified management accountant. He has served on the National
Advisory Council of the Marriott School of
ManagementBrigham Young University since 1997.
Mr. Benac received his B.A. and his M.B.A. from Brigham
Young University and his J.D. from Pace University School of Law.
Alan C. Lullman. Mr. Lullman has served
as our senior vice president sales, marketing and services since
October 2004. From August 1998 to September 2004, he served as
our vice president sales and marketing. Prior to joining us, he
served as a regional sales manager at the Houston office of ACF
from March 1989 to July 1998, where he was responsible for sales
across 22 states. From August 1987 to February 1989,
Mr. Lullman was a district sales manager at ACF. He held
numerous other sales positions at ACF sales offices in the
Southwest, Midwest and Northeast from October 1978 to July 1987.
Mr. Lullman is a member of the Transportation and Logistics
Committee of the American Plastics Council. He received a B.A.
from Westminster College. He also served in the U.S. Marine
Corps Reserve from 1973 to 1976, when he received an honorable
discharge.
Summary
Compensation Table
The following table sets forth the compensation of our Chief
Executive Officer and each of our other most highly compensated
executive officers during the years ended December 31, 2004
and December 31, 2005. We refer to these officers as the
named executive officers.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Annual Compensation
|
|
|
|
|
|
|
|
|
|
|
Other Annual
|
|
All Other
|
|
|
Fiscal
|
|
|
|
|
|
Compensation
|
|
Compensation
|
Name and Principal
Position
|
|
Year
|
|
Salary
|
|
Bonus
|
|
(3)
|
|
(4)
|
|
James J. Unger
|
|
|
2005
|
|
|
$
|
350,000
|
|
|
|
|
|
|
$
|
32,828
|
|
|
$
|
13,578
|
|
President and Chief Executive
Officer
|
|
|
2004
|
|
|
$
|
350,000
|
|
|
|
|
|
|
$
|
48,532
|
|
|
$
|
13,918
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
James A. Cowan(1)
|
|
|
2005
|
|
|
$
|
22,727
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Executive Vice President
|
|
|
2004
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
and Chief Operating Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
William P. Benac(2)
|
|
|
2005
|
|
|
$
|
229,167
|
|
|
$
|
150,000
|
|
|
|
|
|
|
$
|
1,935
|
|
Senior Vice President and
|
|
|
2004
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Chief Financial Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Alan C. Lullman
|
|
|
2005
|
|
|
$
|
158,333
|
|
|
$
|
80,000
|
|
|
$
|
21,572
|
|
|
$
|
4,315
|
|
Senior Vice President Sales,
|
|
|
2004
|
|
|
$
|
140,000
|
|
|
$
|
45,000
|
|
|
$
|
9,431
|
|
|
$
|
574
|
|
Marketing and Services
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Mr. Cowan started his employment with us on
December 5, 2005. |
|
(2) |
|
Mr. Benac started his employment with us on
January 31, 2005. |
|
(3) |
|
Includes the following payments we made on behalf of
Messrs. Unger and Lullman: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Country
|
|
|
|
|
|
|
Car
|
|
|
Club
|
|
|
|
Fiscal Year
|
|
|
Allowances
|
|
|
Dues
|
|
|
Mr. Unger
|
|
|
2005
|
|
|
$
|
24,053
|
|
|
$
|
8,775
|
|
|
|
|
2004
|
|
|
|
39,651
|
|
|
|
8,881
|
|
Mr. Lullman
|
|
|
2005
|
|
|
|
21,572
|
|
|
|
|
|
|
|
|
2004
|
|
|
|
8,820
|
|
|
|
611
|
|
11
|
|
|
(4) |
|
Includes the following payments we made on behalf of
Messrs. Unger, Benac and Lullman: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Life
|
|
|
|
|
|
|
|
|
|
Insurance
|
|
|
401(k) Matching
|
|
|
|
Fiscal Year
|
|
|
Premiums*
|
|
|
Contributions**
|
|
|
Mr. Unger
|
|
|
2005
|
|
|
$
|
7,278
|
|
|
$
|
6,300
|
|
|
|
|
2004
|
|
|
|
7,768
|
|
|
|
6,150
|
|
Mr. Benac
|
|
|
2005
|
|
|
|
1,935
|
|
|
|
|
|
|
|
|
2004
|
|
|
|
|
|
|
|
|
|
Mr. Lullman
|
|
|
2005
|
|
|
|
1,075
|
|
|
|
3,240
|
|
|
|
|
2004
|
|
|
|
574
|
|
|
|
|
|
|
|
|
* |
|
These amounts represent the taxable income related to payment of
premiums for group term life insurance and executive survivor
insurance for the benefit of the employee. |
|
** |
|
These amounts represent matching contributions to each
employees 401(k) plan equal to 50% of the employees
deferrals up to a maximum of 6% of each employees
compensation. |
Stock
Option Grants and Exercises in Last Fiscal Year
No options were granted to or exercised by any of our named
executive officers during the years ended December 31, 2004
and December 31, 2005. We agreed in November 2005, pursuant
to a letter agreement we entered into with Mr. Unger, to
grant Mr. Unger shares of our Common Stock upon the closing
of our initial public offering. Pursuant to this letter
agreement, we issued Mr. Unger 285,714 shares of our
Common Stock upon the closing of our initial public offering.
This agreement is described in more detail below, under
Employment Agreements.
Equity
Incentive Plan
2005 Equity Incentive Plan. We adopted our
2005 Equity Incentive Plan, which has been approved by our
stockholders, to provide long-term incentives and rewards to our
employees, officers, directors, consultants and advisors. Prior
to this, we had not adopted any equity compensation plans. The
2005 plan permits us to issue stock and grant stock options,
restricted stock, stock units and other equity interests to
purchase or acquire up to 1.0 million shares of our Common
Stock. Awards covering no more than 300,000 shares may be
granted to any person during any fiscal year. If any award
expires, or is terminated, surrendered or forfeited, then shares
of Common Stock covered by the award will again be available for
grant under the 2005 plan. The 2005 plan is administered by our
Board of Directors or a committee of the Board. The Board or
committee has broad discretion to determine the terms of an
award granted under the 2005 plan, including, to the extent
applicable, the vesting schedule, purchase or grant price,
option exercise price, or the term of the option or other award;
provided that the exercise price of any options granted under
the 2005 plan may not be less than the fair market value of the
Common Stock on the date of grant. The Board or committee also
has discretion to implement an option exchange program, whereby
outstanding stock options are exchanged for stock options with a
lower exercise price, substitute another award of the same or
different type for an outstanding award, and accelerate the
vesting of, including, as applicable, lapse of restrictions with
respect to, stock options and other awards at any time. The
terms and conditions of stock options or other awards granted
under the 2005 plan will be set forth in a separate agreement
between us and the recipient of the award.
On January 19, 2006, in connection with our initial public
offering of our Common Stock, we granted a total of 484,876
options to purchase shares of our Common Stock under our 2005
Equity Incentive Plan, including the following number of shares
to our named executive officers:
|
|
|
|
|
|
|
Estimated
|
|
|
|
Number of
|
|
Named Executive
Officer
|
|
Shares
|
|
|
James A. Cowan
|
|
|
249,160
|
|
Alan C. Lullman
|
|
|
42,857
|
|
12
The exercise price of these options is $21 per share. The
options vest in three equal annual installments on
January 19, 2007, January 19, 2008 and
January 19, 2009 and have a five year term.
On February 28, 2006, the Board of Directors approved an
amendment to the 2005 Equity Incentive Plan and associated form
of stock option agreement to require eligible participants to
enter into non-solicitation, non-competition and confidentiality
agreements.
In addition, on March 31, 2006, our Compensation Committee
approved the award of options to purchase 75,000 shares of
our Common Stock to Mr. Benac, which were granted on
April 3, 2006. The exercise price of these options is
$35.69 per share. The options vest in three annual installments
on April 3, 2008, April 3, 2009, and April 3,
2010 and have a five year term. The options are subject to the
terms and conditions of our 2005 Equity Incentive Plan and a
stock option agreement, as amended, which contain
non-solicitation, non-competition and confidentiality provisions.
Securities
Authorized for Issuance under Equity Compensation
Plans
The following table discloses the securities authorized for
issuance under the Companys equity compensation plans as
of December 31, 2005.
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|
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|
|
|
|
|
|
|
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Number of securities
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|
|
|
Number of
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|
|
|
|
|
remaining
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|
|
securities to
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|
|
|
available For
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|
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be issued
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|
|
|
|
|
future issuance
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|
|
|
upon
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|
|
Weighted-average
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|
under equity
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|
|
|
exercise of
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|
exercise price of
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|
|
compensation
|
|
|
|
outstanding
|
|
|
outstanding
|
|
|
plans (excluding
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|
|
options, warrants
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|
|
options, warrants
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|
|
securities reflected
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|
|
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and rights
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|
|
and rights
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in column (a))
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Plan Category
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(a)
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(b)
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(c)
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Equity compensation plans approved
by security holders
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1,000,000
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Equity compensation plans not
approved by security holders
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Total
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1,000,000
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(1)
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|
(1) |
As of April 21, 2006, 440,124 shares of our Common
Stock remain available for issuance under our 2005 Equity
Incentive Plan.
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Employment
Agreements
James J. Unger. In November 2005, we entered into a new
employment agreement with Mr. Unger. The new employment
agreement supersedes our original agreement with Mr. Unger
which we entered into in 1994. The original agreement with
Mr. Unger provided that Mr. Unger shall be granted an
option to purchase 2.0% of our outstanding common shares at a
price equal to 2.0% of the common equity contribution by Carl C.
Icahn at our formation. The agreement provided that this option
shall be exercisable at the time of our initial public offering,
and should we be sold to parties other than in a public
offering, Mr. Unger shall receive 2.0% of the sales price,
net of the preferred interest established at our formation, and
net of the contribution for Common Stock. The original agreement
further provided that the above options and or rights shall
remain in effect as long as Mr. Unger is employed by us,
and that should we go public with an offering and Mr. Unger
exercise his stock option, Mr. Unger will agree, if we or
our Board of Directors so desires, to a three-year employment
contract providing no reductions in salary or fringe benefits.
Mr. Ungers term as our President and Chief Executive
Officer under the new employment agreement is effective until
January 24, 2007, the one year anniversary of the
completion of our initial public offering, and may be extended
for two additional one-year terms at the sole option of our
Board of Directors.
Under the terms of the new employment agreement, Mr. Unger
receives a base salary of $350,000. In addition, Mr. Unger
is eligible to receive an annual bonus, as determined by our
Board of Directors, in its sole discretion, from year to year.
The new employment agreement also provides that Mr. Unger
is entitled to
13
receive healthcare, vacation, 401(k) participation,
transportation and other similar benefits we offer our senior
employees.
Under the terms of the new employment agreement, if
Mr. Unger is terminated without cause (as defined in the
new employment agreement) or resigns for good reason (as defined
in the new employment agreement), then we shall pay him, in
addition to any unpaid and earned base salary and bonus, the
base salary Mr. Unger would have earned through the end of
his term, as extended, if applicable, by our Board of Directors.
Mr. Ungers new employment agreement contains
non-competition, non-solicitation and confidentiality
provisions. The non-competition and non-solicitation provisions
prohibit Mr. Unger from directly or indirectly competing
with us, or soliciting our employees as long as he is our
employee and generally for a one-year period thereafter.
In connection with the new employment agreement, we also entered
into a letter agreement with Mr. Unger that replaced any
option grants to Mr. Unger under the original agreement.
Pursuant to this letter agreement, we issued Mr. Unger
285,714 shares of our Common Stock upon the closing of our
initial public offering. Of these shares, 40% will be
transferable without contractual restrictions by Mr. Unger
after 180 days from the closing of our initial public
offering, 30% will be transferable without contractual
restrictions by Mr. Unger one year after the closing of our
initial public offering and the remaining 30% will be freely
transferable 540 days after the closing of our initial
public offering. If Mr. Unger is terminated for cause (as
defined in the letter agreement), or resigns without good reason
(as defined in the letter agreement) within one year from the
closing date of our initial public offering, Mr. Unger
shall return to us 60% of the shares of our Common Stock we
granted to him. We have agreed to use commercially reasonable
efforts to file a registration statement on
Form S-8
with the SEC to cover the registration of 40% of these shares.
We have agreed to include the balance of these shares in any
registration statement we file on behalf of Mr. Icahn with
regard to the registration for sale of our shares held by
Mr. Icahn, provided the contractual restrictions and
applicable
lock-up
period of these shares have lapsed.
William P. Benac. In July 2005, we entered
into an employment agreement with William P. Benac to serve as
our chief financial officer for a period of one year. The
agreement is effective as of April 22, 2005, and
automatically renews for successive one-year terms unless
terminated by either party at least 180 days before the
expiration of the then applicable term.
Under the terms of the agreement, Mr. Benac will receive a
minimum annual base salary of $250,000. Mr. Benac is also
entitled to a non-prorated cash bonus of at least $150,000 for
the 2005 fiscal year. Criteria for cash bonuses that may be
awarded for each year the agreement is extended are subject to
negotiation and will be determined during the first quarter of
each calendar year the agreement is renewed. It is expected that
the target bonus amounts during such years will not be less than
$150,000.
In addition to the salary and bonus compensation described
above, Mr. Benac will receive a one-time special cash bonus
of $500,000 on April 22, 2007, because we issued Common
Stock to the public in an offering registered with the SEC. If
at any time on or before April 22, 2007, we terminate
Mr. Benacs employment without cause, he resigns for
good reason, or a change in control occurs, he will be entitled
to receive the special cash bonus of $500,000 upon the
occurrence of such event. In addition, if we terminate
Mr. Benacs employment other than for cause, death or
disability, or if he terminates his employment for good reason,
he is entitled to receive a lump sum severance payment of
$200,000. Mr. Benacs right to the special cash bonus
of $500,000 and any severance immediately terminates if his
employment is terminated for cause or he resigns without good
reason.
Mr. Benac will be reimbursed for reasonable and necessary
business related expenses, including those expenses associated
with commuting from Dallas to our headquarters in St. Charles,
Missouri, such as air and car travel and reasonable living
expenses. He is eligible to participate in all health, medical,
retirement and other employee benefit plans we generally provide
to our senior executives. Mr. Benacs employment
agreement also contains provisions requiring him to protect our
confidential information during his employment and at all times
thereafter.
14
Mr. Benac may terminate his employment for good reason upon
at least 30 days prior written notice to us, or without
good reason upon at least 60 days prior written notice to
us. We may terminate Mr. Benacs employment without
cause upon 30 days written notice or immediately for cause
or upon his death or disability.
James A. Cowan. In December 2005, we entered
into an employment agreement with Mr. Cowan to serve as our
chief operating officer through December 31, 2008, unless
earlier terminated pursuant to the agreement.
Under the terms of the agreement, Mr. Cowan receives a base
salary at an annual rate of $300,000 per year.
Mr. Cowan is also entitled to an annual bonus for each
calendar year of employment ending on or after December 31,
2006 of up to 50% of his then applicable base salary, provided
certain performance targets established by our board of
directors are achieved.
In addition to the compensation described above and pursuant to
the terms of his employment agreement, on the pricing of our
initial public offering of Common Stock we granted
Mr. Cowan an option to purchase 249,160 shares of
Common Stock. The exercise price of the option is $21, the fair
market value of the Common Stock at the time of grant.
Mr. Cowan is eligible to participate in all health,
medical, retirement and other employee benefit plans we
generally provide to our senior executives. In addition, he will
be reimbursed for the reasonable use of an automobile and for
the payment of reasonable country club dues (excluding
initiation fees) on terms consistent with our other senior
executives.
Mr. Cowan may terminate the agreement upon 30 days
written notice. We may terminate Mr. Cowans
employment at any time, with or without cause. If
Mr. Cowans employment is terminated due to death or
disability, he is entitled to receive earned and accrued base
salary and unreimbursed business expenses due and unpaid as of
the date of his termination, bonus compensation earned and due
with respect to a completed calendar year but not paid as of the
date of termination, and a pro-rated portion of his bonus
compensation payable for any incomplete calendar year. If
Mr. Cowan is terminated without cause, he is entitled to
receive earned and accrued base salary and unreimbursed business
expenses due and unpaid as of the date of his termination, bonus
compensation earned and due with respect to a completed calendar
year but not paid as of the date of termination, a pro-rated
portion of his bonus compensation payable for any incomplete
calendar year and, in addition, a continuation of the payment of
the base salary he would have earned through December 31,
2008 had he continued to be employed by us through such date. If
Mr. Cowan resigns or if we terminate Mr. Cowan for
cause, he is entitled to receive earned and accrued base salary
and unreimbursed business expenses due and unpaid as of the date
of his termination.
Mr. Cowans employment agreement contains
non-competition and non-solicitation provisions that prohibit
Mr. Cowan from directly or indirectly competing with us
during the term of his employment and generally for a one-year
period thereafter. Mr. Cowans employment agreement
also contains provisions requiring him to protect confidential
information during his employment and at all times thereafter.
Retirement
Plans
Supplemental Executive Retirement
Plan. Mr. Unger is entitled to benefits from
a supplemental executive retirement plan, or SERP. The SERP
benefit is generally equal to the benefit that would be provided
under the Employees Retirement Plan of ACF Industries LLC
(ACF), if certain Internal Revenue Code limits and
exclusions from compensation under the retirement plan did not
apply, less the actual benefit payable under the ACF retirement
plan. ACF is responsible for payment of that portion of
Mr. Ungers SERP benefit related to service with ACF
prior to our acquisition, in 1994, of properties and assets used
in ACFs railcar components manufacturing business and its
railcar servicing business at specified locations, and certain
intellectual property rights associated with the transferred
assets and businesses, as well as specified assets used in the
manufacture and sale of industrial size mixing bowls (the
1994 ACF asset transfer). We are responsible for
payment of that portion of the benefit related to service with
us after the 1994 ACF asset transfer. The SERP benefits were
frozen effective as of March 31, 2004. As a result, no
further benefits are
15
accruing under the SERP. These benefits are generally paid at
the same time and in the same form as the participants
benefit under the retirement plan. No funds have been set aside
for the benefits payable under the SERP. The estimated annual
SERP benefit for Mr. Unger is $117,799, of which $106,769
is payable by us and $11,030 is payable by ACF.
Pension Plan. Mr. Unger and
Mr. Lullman are entitled to receive pension benefits under
the Employees Retirement Plan of ACF Industries, LLC. Each
executives benefit under the retirement plan is based on
2.25% of average annual compensation for each year of service
after April 30, 1981; plus the highest of the
executives annual compensation for five consecutive years
of employment prior to May 1, 1981 that results in the
highest such average multiplied by number of years of service
completed prior to May 1, 1981; plus a fixed dollar amount.
This fixed dollar amount is $12,800 for Mr. Unger and
$6,108 for Mr. Lullman. For purposes of this plan, years of
service include years of service with both ACF and us. This
total is then reduced by an amount equal to 0.5% of the
executives final average compensation multiplied by the
number of years of service up to 35. The benefits under this
plan were frozen effective as of March 31, 2004. As a
result, no additional benefits are accruing under this plan.
The benefits under the ACF retirement plan are generally paid
monthly for the life of the executive, following retirement in
the form of a joint and survivor annuity. As most recently
determined by the actuaries for the retirement plan, based on
current years of service with us and ACF, the estimated annual
pension commencing at age 65 for each of the named
executives is as follows: Mr. Unger: $99,633; and
Mr. Lullman: $49,752. These named executives are fully
vested in their retirement plan benefits.
Postretirement Obligations. We also provide
postretirement health and life insurance benefits for certain of
our salaried employees. Our named executive officers may become
eligible for these benefits if they retire after attaining
specified age and service requirements. We have assumed
sponsorship of these benefits for our employees.
Executive Survivor Insurance Plan. We provide
an executive survivor insurance plan for certain of our salaried
employees, including the named executive officers. This plan
provides life insurance benefits to the qualified spouse of a
named executive officer upon his death during his employment or
following retirement at or after age 55. We have purchased
a group term life insurance policy to off-set the cost of
providing this benefit. Benefits payable under this plan are
separate from any benefit payable under our retirement plans. If
the named executive officer retires and dies after attaining
age 55, then his qualified spouse is entitled to a monthly
benefit equal to what would have been payable under our
retirement plan if the named executive officer had retired with
a 50% joint and survivor benefit. If the named executive officer
dies while actively employed and before attaining age 55,
then his qualified spouse is entitled to a monthly benefit equal
to 20% of the named executive officers salary, reduced by
any amount payable under the survivor provisions of our
retirement plan. If the named executive officer dies while
actively employed and on or after attaining age 55, then
his qualified spouse is entitled to a benefit equal to the
greater of (a) the benefit described in the preceding
sentence (for death while employed and not yet 55) and
(b) the amount determined as if the named executive officer
had retired on the first day of the month coincident with or
next following the date of death. In no event may the amounts
paid under this plan exceed $6,500 per month. We have
reserved the right to amend, modify or terminate this plan.
Compensation
Committee Interlocks And Insider Participation
We formed our Compensation Committee in February 2006. During
2005, our entire Board of Directors participated in
deliberations concerning executive compensation. Our Chief
Executive Officer, Mr. Unger, participated in deliberations
and made recommendations concerning the compensation of our
other executive officers. During 2005, none of our executive
officers served on the compensation committee (or equivalent),
or the board of directors, of another entity whose executive
officer(s) served on our board of directors.
16
Report Of
The Board of Directors On Executive Compensation
The following report is provided by our Board of Directors. The
compensation of our executive officers, including our named
executive officers, for the fiscal year ending December 31,
2005 was decided upon by our entire Board of Directors prior to
the formation of our Compensation Committee in February 2006.
Executive Compensation Philosophy. The Board
of Directors believes that compensation paid to executive
officers should be aligned with our efforts to attract, motivate
and retain superior talent to enable us to achieve our business
objectives and to align the financial interests of our executive
officers with our stockholders. Based on this philosophy, it is
the view of the Board of Directors that compensation for
executive officers should consist of a combination of salary,
cash bonuses, equity awards and other employment benefits. In
addition, we have employment agreements with our President and
Chief Executive Officer, our Executive Vice President and Chief
Operating Officer and our Senior Vice President and Chief
Financial Officer, which are discussed above.
Salary and Bonus Compensation. The Board of
Directors has in the past reviewed, and the Compensation
Committee will in the future review, base salaries and target
bonuses for executive officers on an annual basis, subject to
the terms of applicable employment agreements. Any increases
will, subject to the terms of applicable employment agreements,
be based upon achievement of quantitative and qualitative
performance targets, individual performance and level of
responsibility. The Board of Directors set 2005 executive
salaries and bonus targets at levels consistent with these
criteria.
We established our 2005 Executive Incentive Plan to provide
additional compensation to eligible participants for their
contribution to the achievement of our objectives, to encourage
and stimulate superior performance, and to assist in attracting
and retaining highly qualified key employees. Our key managers,
other than Messrs. Unger, Cowan and Benac, are eligible to
participate in the 2005 Executive Incentive Plan. In 2005,
bonuses for Messrs. Unger, Cowan and Benac were determined
pursuant to their employment agreements described above. The
2005 Executive Incentive Plan permits us to make cash awards to
participants based upon a percentage of each participants
base salary, as measured against each participants
personal performance and our financial performance. Personal
performance goals are established by each participant and his or
her supervisor at the beginning of each fiscal year. Our
financial performance goals are based on certain EBITDA targets
relating to our performance at each of our facilities, our joint
venture, Ohio Castings Company, LLC, in which we own a one-third
interest, and us as a whole, as established by our Board of
Directors based on our annual business plan. Participants are
entitled to payment of a partial award if, during a fiscal year,
a participant, among other things, dies, retires or becomes
permanently disabled, provided that the participant was an
active employee for a minimum of 30 consecutive calendar days
during such fiscal year. The plan is subject to the control and
supervision of our Chief Executive Officer and our Board of
Directors.
Stock Options. The Board of Directors believes
that equity-based compensation causes our executives to have an
ongoing stake in our long-term success. Our 2005 Equity
Incentive Plan, described above, was designed, in part, to
optimize our profitability and growth over the longer term.
Compensation of our Chief Executive
Officer. In recognition of the exceptional
service rendered by Mr. Unger during 2005, in particular
with regard to his performance during 2005 related to our
initial public offering of our Common Stock, which we
consummated in January 2006, the Board of Directors approved
Mr. Ungers new employment agreement and the letter
agreement pursuant to which he was granted 285,714 shares
of our Common Stock, each of which is described above. Mr Unger
was not awarded a bonus for 2005 because the Board of Directors
believed that Mr. Ungers new employment agreement and
the letter agreement, together with his other compensation and
benefits, adequately compensated Mr. Unger.
Section 162(m). Section 162(m) of
the Internal Revenue Code of 1986, as amended, provides that
compensation in excess of $1,000,000 paid to the Chief Executive
Officer or to any of the other four most highly compensated
executive officers of a publicly held corporation will not be
deductible for federal income tax purposes unless such
compensation is paid pursuant to one of the enumerated
exceptions set forth in Section 162(m), including
transition rules for newly public companies. In general, stock
options granted under
17
our 2005 Equity Incentive Plan are intended to qualify under and
comply with the performance based compensation
exemption provided under Section 162(m), thus excluding
from the Section 162(m) compensation limitation any income
recognized by executives pursuant to such stock options. The
Board of Directors has elected, at this time, to retain
discretion over bonus payments, rather than to ensure that
payments of salary and bonus in excess of $1,000,000 are
deductible. The Board of Directors intends to review
periodically the potential impacts of Section 162(m) in
structuring and administering our compensation programs.
Summary. The Board of Directors has concluded
that our performance and the competitive market warrant the
total compensation packages approved for Mr. Unger and our
other executive officers for 2005. Through the design and
management of our executive compensation policies, as described
above, the Board of Directors believes total compensation of our
executives is linked directly to our financial performance and
stockholder return. In the future, the Board of Directors,
through the Compensation Committee, anticipates that it will
continue to emphasize performance-based and stock-based
compensation that is consistent with individual executive
performance and that links management and stockholder interests.
Respectfully submitted by the Board of Directors,
Carl C. Icahn
James J. Unger
Vincent J. Intrieri
Jon F. Weber
Keith Meister
James C. Pontious
James M. Laisure
CERTAIN
RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
TRANSACTIONS WITH CARL C. ICAHN AND ENTITIES AFFILIATED WITH
CARL C. ICAHN
Overview
Our company was formed in 1988 as a company beneficially owned
by Carl C. Icahn. Mr. Icahn is our principal beneficial
stockholder and is the chairman of our board of directors. We
grew our company through the transfer of certain assets to us
from ACF Industries, Incorporated (now known as ACF Industries,
LLC) (ACF), a company also beneficially owned by
Mr. Icahn. Since our formation, we have entered into
agreements relating to the acquisition of assets from and
disposition of assets to entities controlled by Mr. Icahn,
the provision of goods and services to us by entities controlled
by Mr. Icahn, the provision of goods and services by us to
entities affiliated with Mr. Icahn and other matters
involving entities controlled by Mr. Icahn. We have
received substantial benefit from these agreements and we expect
that in the future, we will continue to conduct business with
entities affiliated with or controlled by Mr. Icahn. In
addition, we receive other benefits from our affiliation with
Mr. Icahn and companies controlled by Mr. Icahn, such
as financial and advisory support, sales support and our
participation in buying groups and other arrangements with
entities controlled by Mr. Icahn. Until our initial public
offering, most of our capital needs had been provided by
entities controlled by Mr. Icahn. Lease sales agents of
American Railcar Leasing LLC (ARL), a company
beneficially owned by Mr. Icahn, and ACF, in connection
with their own leasing sales activities, have, from time to
time, referred their customers or contacts to us that prefer to
purchase rather than lease railcars, which has, in some cases,
led to us selling railcars to these customers or contacts. At
this time there is no formal arrangement under which these
referrals are provided and we do not compensate ARL, ACF or any
of their leasing sales agents for any railcar sales that we make
as a result of these referrals. As an accommodation to some of
their customers and contacts that they referred to us, ARL and
ACF from time to time accepted orders to purchase our railcars
and then assigned those orders to us. ARL and ACF have
discontinued accepting orders to sell railcars on our behalf.
18
We describe below the material arrangements and other
relationships that we are, or have been, a party to with
Mr. Icahn and entities affiliated with Mr. Icahn since
January 1, 2002. As noted below, some of these arrangements
and relationships were terminated prior to or in connection with
our initial public offering of our Common Stock (the
initial public offering).
Application
of the net proceeds of our initial public offering
Our initial public offering resulted in gross proceeds to us of
$205.3 million. Expenses related to the offering were
$13.3 million for underwriting discounts and commissions.
We received net proceeds of $192.0 million in the offering.
Application of these net proceeds included payments to
affiliates of Mr. Icahn of $20.5 million for repayment
of notes and $93.9 million for the redemption of our
outstanding shares of preferred stock. In addition, our Chief
Executive Officer and his wife held $0.4 million of the
industrial revenue bonds that we repaid in connection with our
initial public offering. These transactions are described in
more detail below.
Redemption
of new preferred stock
Prior to the closing of our initial public offering, all of our
new preferred stock was held by entities beneficially owned and
controlled by Mr. Icahn. At the closing of our initial
public offering, we redeemed each then outstanding share of new
preferred stock for an amount equal to the liquidation
preference of each share of new preferred stock, which was
$1,000 per share, plus all accumulated and unpaid dividends
on each share of new preferred stock through the date of the
redemption. The aggregate amount we paid to redeem all of the
shares of our new preferred stock, including all accumulated and
unpaid dividends due on our new preferred stock, was
$93.9 million.
Redemption
of mandatorily redeemable preferred stock
In anticipation of our initial public offering, and prior to our
reincorporation from Missouri to Delaware, we redeemed our one
outstanding share of mandatorily redeemable preferred stock,
which was held by Mr. Icahn. This share became mandatorily
redeemable for $1,000 on February 1, 2005. The aggregate
amount we paid to Mr. Icahn to redeem our one share of
mandatorily redeemable preferred stock including all accumulated
and unpaid dividends due on that share, was $1,805.
CERTAIN
TRANSACTIONS WITH ACF INDUSTRIES LLC AND AMERICAN
RAILCAR LEASING LLC
Overview
We have entered into a variety of agreements and transactions
with ACF Industries LLC (which we refer to, along with its
predecessor ACF Industries, Inc., as ACF), American Railcar
Leasing LLC (which we refer to as ARL) and certain other parties
related to these companies. These transactions and agreements
are described in further detail below. During the periods
discussed, ACF and ARL were beneficially owned and controlled by
Mr. Icahn, and they continue to be so owned and controlled.
On October 1, 1994, under an asset transfer agreement with
ACF, we acquired from ACF, properties and assets used in its
railcar components manufacturing business and its railcar
servicing business at specified locations, and certain
intellectual property rights associated with the transferred
assets and businesses, as well as specified assets used in the
manufacture and sale of industrial size mixing bowls. We refer
to this transaction as the 1994 ACF asset transfer.
In 2004, ACF and its subsidiaries, through a series of
transactions, transferred some of the railcar fleets that they
then owned and held primarily for lease to third parties, to ARL
and its subsidiaries. At the time, we owned all the common
interests of ARL. As of June 30, 2005, we transferred our
entire interest in ARL in exchange for the redemption of shares
of our new preferred stock, in a transaction we refer to as the
ARL exchange. All of our shares of new preferred stock were then
owned by entities beneficially owned and
19
controlled by Mr. Icahn. In connection with our initial
public offering, we redeemed all of our shares of new preferred
stock, as discussed above.
Manufacturing
operations
Prior to the transfer of ACFs and its subsidiaries
railcar fleets to ARL and its subsidiaries in 2004, we sold
railcars and railcar components to ACF and its subsidiaries for
use in their railcar fleets. Since the transfer of these fleets
to ARL, we sell railcars to ARL. We believe that since
ARLs formation in 2004, we have been the only supplier of
railcars to ARL, although ARL is not precluded from purchasing
railcars from others. In 2002, 2003 and 2004, our revenues from
manufacturing operations included $63.6 million,
$62.9 million and $64.4 million, respectively, from
transactions with affiliates. In the year ended
December 31, 2005, our revenues from manufacturing
operations included $47.2 million from transactions with
affiliates. Most of these revenues were attributable to railcars
and railcar components that we sold to ACF, ARL and their
respective subsidiaries. As of December 31, 2005, our
backlog included $77.5 million for railcar orders by ARL.
These orders are on substantially the same terms as we provide
to our other customers.
On March 31, 2006, we signed an agreement with ARL for us
to manufacture and ARL to purchase 1,000 tank railcars in 2007.
When we entered into this agreement, we planned to produce these
tank railcars with new manufacturing capacity that we expected
to have available beginning in January, 2007. The agreement also
includes options for ARL to purchase up to an additional 300
covered hopper railcars in 2007, should additional capacity
become available, and 1,000 tank railcars and 400 covered hopper
railcars in 2008. No assessment has yet been made as to what, if
any, impact the recent storm damage to our tank railcar
manufacturing facility in Marmaduke, Arkansas might have on this
contract. This agreement is on at least as favorable terms to us
as our terms with any other party for similar purposes. This
agreement was unanimously approved by the independent directors
of our Audit Committee.
ACF has also been a significant supplier of components for our
business. Components supplied to us by ACF include tank railcar
heads, wheel sets and various structural components. In 2002,
2003 and 2004, we purchased inventory of $15.7 million,
$19.0 million, and $31.3 million, respectively, of
components from ACF. In the year ended December 31, 2005,
we purchased inventory of $76.4 million from ACF. As of
December 31, 2005, we had outstanding purchase orders for
$15.1 million of inventory from ACF.
During 2003 and 2004, Castings LLC, a joint venture partner in
Ohio Castings Company, LLC (Ohio Castings), was a
wholly owned subsidiary of ACF Industries Holding Corp., an
indirect parent of ACF that is beneficially owned and controlled
by Mr. Icahn. Effective January 1, 2005, we acquired
Castings LLC from ACF Industries Holding Corp. as described
under Certain transactions involving Ohio
Castings. Our cost of railcar manufacturing for the years
ended December 31, 2003, 2004 and 2005 included
$3.0 million, $19.9 million and $30.9 million,
respectively, in railcar components produced by Ohio Castings.
Expenses of $0.4 million, $3.2 million and
$2.8 million paid to Castings LLC under a supply agreement
are also included in the cost of railcar manufacturing for the
years ended December 31, 2003, 2004 and 2005, respectively.
We also have been charged $0.2 million in the year ended
December 31, 2003 relating to certain costs incurred by
Castings LLC in the establishment of Ohio Castings. Inventory at
December 31, 2003, 2004 and 2005 includes approximately
$0.3 million, $5.3 million and $3.0 million,
respectively, of purchases from Ohio Castings. In September
2003, Castings LLC loaned Ohio Castings $3.0 million under
a promissory note which was due in January 2004. The note was
renegotiated for $2.2 million and bears interest at 4.0%.
Payments are made in quarterly installments with the last
payment due in November 2008. As of December 31, 2005,
$1.8 million was outstanding under this note.
Railcar
services
We have provided railcar repair and maintenance services and
fleet management services to ACF and ARL and we continue to
provide these services to ARL. As of December 31, 2005, we
managed approximately 22,000 railcars for ARL, and we also
provide repair and maintenance services for these railcars. In
2002, 2003 and 2004, our revenues from railcar repair and
refurbishment and fleet management services included
$12.8 million, $11.0 million and $18.2 million,
respectively, from transactions with affiliates. In the
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year ended December 31, 2005, our revenues from railcar
repair and refurbishment and fleet management services included
$20.6 million from transactions with affiliates. Almost all
of these revenues were attributable to services we provided to
ACF, ARL and their subsidiaries.
Cost of
railcar services
Through December 31, 2005, ACF and ARL have provided
certain leasing and other fleet management services that we were
required to provide to subsidiaries of ARL, under management
agreements we entered into with those companies in July and
October 2004. Through March 31, 2005, we paid to ACF and,
from March 31, 2005 through December 31, 2005, we paid
to ARL, the leasing and management fees we received under those
management agreements. In 2004 and the year ended
December 31, 2005, we incurred $1.2 million and
$2.0 million, respectively, of cost of railcar services in
connection with these arrangements. These arrangements were
terminated on June 30, 2005, when we assigned our
management agreements to ARL.
Administrative
and other support expenses
During the current and last three fiscal years, ACF and ARL have
provided us outsourced services related to our information
technology needs as well as other administrative and support
services. We incurred $0.3 million of expenses in each of
2002, 2003 and 2004 in connection with these arrangements, and
in the year ended December 31, 2005, we incurred
$1.5 million of such expenses. The increased expenses in
2005 reflect additional information technology services not
provided in previous years. Until October 2004, ACF received the
majority of our cash receipts and disbursed our cash on our
behalf. We maintained a receivable/payable from affiliates
bearing interest at ACFs internal cost of funds in
accordance with an administration agreement between ACF and us,
which is described below. Under this arrangement, ACF provided
financing to us based on our cash flow needs. We have also
subleased our headquarters facility which is located in St.
Charles, Missouri, from affiliates. The St. Charles property is
owned by an affiliate of James Unger, our Chief Executive
Officer. In each of 2002, 2003 and 2004, our expenses included
$0.1 million of rent and $0.4 million of related
facility expense payments required to be made to affiliates
associated with our lease of the St. Charles headquarters
facility. In the year ended December 31, 2005, our expenses
included $7.0 million of rent and $0.8 million of
related expense for these facilities.
Amounts
due to affiliates
As of December 31, 2005, net amounts due to affiliates were
$23.5 million relating to the above referenced transactions
and included:
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an amount payable to ACF of $3.1 million;
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an amount payable of $7.6 million to Arnos Corp., a company
beneficially owned and controlled by Mr. Icahn,
representing the principal and interest due under a demand note
in the principal amount of $7.0 million that we issued in
connection with a working capital loan from Arnos Corp.; and
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an amount payable of $12.8 million to ACF Industries
Holding Corp., a company beneficially owned and controlled by
Mr. Icahn, representing the principal and interest due
under a demand note in the principal amount of
$12.0 million that we issued in connection with our
purchase of Castings LLC from ACF Industries Holding Corp.
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We used a portion of the net proceeds of our initial public
offering to repay in full the notes to Arnos Corp. and ACF
Industries Holding Corp.
CERTAIN
TRANSACTIONS WITH ACF INDUSTRIES LLC
1994 ACF
asset transfer
On October 1, 1994, under an asset transfer agreement with
ACF, we acquired properties and assets used in ACFs
railcar components manufacturing business and its railcar
servicing business at specified locations,
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and certain intellectual property rights associated with the
transferred assets and businesses, as well as specified assets
used in the manufacture and sale of industrial size mixing
bowls. We refer to this transaction as the 1994 ACF asset
transfer. The properties covered by this agreement included the
following:
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Component Manufacturing
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Repair Plants
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Plant and Warehouse
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Mobile Units
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Bude, Mississippi
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Jackson, Missouri
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Addis, Louisiana
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Milton, Pennsylvania
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Convent, Louisiana
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Tennille, Georgia
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Ingleside, Texas
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North Kansas City, Missouri
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Deer Park, Texas
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Longview, Texas
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Taft, Louisiana
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Pursuant to the 1994 ACF asset transfer, ACF retained and agreed
to indemnify us for certain liabilities and obligations relating
to ACFs conduct of business and ownership of the assets at
these locations prior to their transfer to us, including
liabilities relating to employee benefit plans, subject to
exceptions for transferred employees described below, workers
compensation, environmental contamination and third-party
litigation. As part of the 1994 ACF asset transfer, we agreed
that the ACF employees transferred to us would continue to be
permitted to participate in ACFs employee benefit plans
for so long as we remained a part of ACFs controlled
group, and we further agreed to assume the ongoing expense for
such employees continued participation in those plans. In
the event that we cease to be a member of ACFs controlled
group, ACF is required to terminate the further accrual of
benefits by our transferred employees under its benefit plans,
and we and ACF are required to cooperate to achieve an
allocation of the assets and liabilities of the benefits plans
accrued after the 1994 ACF asset transfer with respect to each
of our and ACFs employees as we and ACF deem appropriate.
Upon completion of our initial public offering, we ceased to be
a part of ACFs controlled group. As of December 31,
2004, we estimate that the total retained liabilities of ACF
under the asset transfer agreement were $11.1 million,
primarily relating to pension and postretirement liabilities. In
2002, 2003 and 2004, ACF paid $0.7 million,
$0.6 million and $1.4 million, respectively, relating
to the retained liabilities. This liability was reduced to
$0.3 million as of December 31, 2005 consisting mainly
of environmental liabilities, as a result of the pension plan
swap discussed below.
In anticipation of our no longer being a part of ACFs
controlled group and the completion of our initial public
offering, we entered into a retirement benefit separation
agreement, effective December 1, 2005, with ACF for
allocating the assets and liabilities of the pension benefit
plans retained by ACF in the 1994 ACF asset transfer in which
some of our employees were participants, and which has relieved
us of our further employee benefit reimbursement obligations to
ACF under the 1994 ACF asset transfer agreement. The principal
employee benefit plans affected by this arrangement are two ACF
sponsored pension plans, known as the ACF Employee Retirement
Plan and the ACF Shippers Car Line Pension Plan, and certain ACF
sponsored retiree medical and retiree life insurance plans.
Under the arrangement, in exchange for our agreement to pay ACF
approximately $9.2 million and to become the sponsoring
employer under the ACF Shippers Car Line Pension Plan, including
the assumption of all obligations for our and ACFs
employees under that plan, we have ceased to be a participating
employer under the ACF Employee Retirement Plan and have been
relieved of all further reimbursement obligations, including for
our employees, under that plan. We estimate that as of
December 1, 2005, the ACF Shippers Car Line Pension Plan
had $4.0 million of unfunded liabilities on an accounting
basis, that were assumed by us in connection with this
arrangement. The payment of approximately $9.2 million
which was made by us to ACF represents our and ACFs
estimate of the payment required to be made by us to achieve an
appropriate allocation of the assets and liabilities of the
benefit plans accrued after the 1994 ACF asset transfer, with
respect to each of our and ACFs employees in connection
with the two plans. This allocation was determined in accordance
with actuarial calculations consistent with those that would be
required to used by us and ACF in allocating plan assets and
liabilities at such time as we cease to be a member of
ACFs controlled group.
As part of this arrangement, we also assumed sponsorship of a
retiree medical and retiree life insurance plan for active and
identified former ARI employees that were covered by the ACF
sponsored medical and retiree life insurance plans, and ACF was
relieved of all further liability under those plans with respect
to
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those employees. We estimate that as of December 1, 2005,
the post-retirement liability related to this obligation was
approximately $3.9 million. ACF paid us $2.9 million
to assume the
pre-1994
portion of this liability.
The total amount of the obligations we assumed is estimated to
be $14.2 million. We previously accrued an estimated
liability related to this settlement of $3.2 million. In
December 2005, we recorded an increase in the estimated
liability of $10.9 million and a loss on the settlement of
the same amount, of which we recorded $2.0 million in cost
of railcar services with the remaining amount being shown on our
statement of operations as pension settlement expense.
In connection with the 1994 ACF asset transfer, certain of our
employees, including Mr. Unger, our President and Chief
Executive Officer, continued to participate in the ACF
supplemental executive retirement plan, or SERP. The SERP
benefit is generally equal to the benefit that would be provided
under the Employees Retirement Plan of ACF Industries LLC,
if certain Internal Revenue Code limits and exclusions from
compensation under the retirement plan did not apply, less the
actual benefit payable under the ACF retirement plan. ACF
remained responsible for payment of that portion of those
employees SERP benefit related to service with ACF prior
to the 1994 ACF asset transfer and we are responsible for
payment of that portion of the benefit related to service with
us after that transfer. The SERP benefits were frozen effective
as of March 31, 2004. As a result, no further benefits are
accruing under the SERP. In anticipation of our no longer being
a part of ACFs control group and our initial public
offering, we adopted a separate SERP to cover our allocable
portion of the SERP obligations to those of our employees who
participated in ACFs SERP. ACF remains obligated to pay
that portion of any liability associated with the SERP related
to service of those employees performed prior to the 1994 ACF
asset transfer. For a description of this SERP, see
Executive Compensation Retirement
Plans Supplemental Executive Retirement
Plan.
Also in connection with the 1994 ACF asset transfer, we entered
into the following administrative and operating agreements with
ACF, effective as of October 1, 1994:
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manufacturing services agreement;
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license agreement from ACF;
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license agreement to ACF;
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administration agreement;
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railcar servicing agreement; and
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supply agreement.
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Only the manufacturing services agreement and the two license
agreements remain in effect. The other agreements were all
terminated as of April 1, 2005.
Manufacturing Services Agreement. Under the
manufacturing services agreement, ACF has agreed to manufacture
and, upon our instruction, to distribute various railcar
components and industrial size mixing bowls, using assets that
we acquired pursuant to the 1994 ACF asset transfer, but were
retained by ACF at its Milton, Pennsylvania and Huntington, West
Virginia manufacturing facilities. This equipment included
presses and related equipment that were impracticable to move to
our premises. ACF transferred its Milton, Pennsylvania repair
facility, but not its Milton, Pennsylvania manufacturing
facility, to us under the 1994 asset transfer. Under our
manufacturing services agreement, ACF is required to maintain
and insure the equipment during the term of the manufacturing
services agreement and is permitted to use the equipment for its
own purposes in the ordinary course of business, provided that
it does not interfere with ACFs timely performance of the
manufacturing services under this agreement. Upon termination of
the agreement, ACF is required, at our expense, to remove and
deliver the equipment to any site designated by us in the
continental U.S. As payment for these services, we agreed
to pay ACF its direct costs, including the cost of all raw
materials not supplied by us, and a reasonable allocation of
overhead expenses attributable to the services, including the
cost of maintaining employees to provide the services. We
believe that payments to ACF under this arrangement are
comparable to the cost we would have paid to an independent
third party to manufacture such
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components. This agreement remains in effect and automatically
renews on an annual basis unless we provide six months prior
written notice of termination. There is no right of termination
for ACF under this agreement.
License Agreement from ACF. Under a license
agreement with ACF, ACF granted us a non-exclusive, perpetual,
royalty-free license to the patents and other intellectual
property owned by it, which could be used by us in the conduct
of our business, but did not exclusively relate to our business,
including the 12 patents and one patent application, now issued
as a patent, listed in that agreement. Of these patents, ten
patents have expired and the remaining three patents have
expiration dates ranging from 2012 to 2013. These remaining
patents primarily relate to pneumatic outlets and railcar hopper
gaskets. Under this agreement, we could not use the licensed
patents for the production of railcar components for third
parties without the consent of ACF. In 1997, ACF transferred the
patents covered by this license to us. This license is not
assignable by either party, without the prior consent of the
other, except in connection with the sale of substantially all
of either partys business. This agreement remains in
effect.
License Agreement to ACF. Under a license
agreement with ACF, we granted ACF a non-exclusive, perpetual,
royalty-free license to the intellectual property exclusively
relating to our business that was transferred to us in the 1994
asset transfer. There are no restrictions on ACFs use of
the information licensed under this agreement. This license is
not assignable by either party, without the prior consent of the
other, except in connection with the sale of substantially all
of either partys business. This agreement remains in
effect.
Administration Agreement. Under an
administration agreement with ACF, ACF agreed to provide us
information technology services and other administrative
services. We agreed to pay ACF its direct costs, including a
reasonable allocation of overhead expenses attributable to
providing the services, including the cost of maintaining
employees to provide the services. Until October 2004, under
this agreement, ACF received the majority of our cash receipts
and disbursed our cash on our behalf. We maintained a
receivable/payable from affiliates bearing interest at
ACFs internal cost of funds. Under this arrangement, ACF
provided financing to us based upon our cash flow needs. We also
subleased our headquarters facility in St. Charles Missouri from
ACF under this agreement. This agreement was terminated on
April 1, 2005.
Railcar Servicing Agreement. Under a railcar
servicing agreement with ACF, we agreed to provide railcar
repair and maintenance services for railcars owned or managed by
ACF and leased or held for lease by ACF, to provide ACF with
fleet management services, and to provide ACF with consulting
services on safety and environmental matters. For maintenance
services, ACF paid us for components at our actual costs plus
15% and for our labor at a fixed rate that has been adjusted
from time to time to reflect market conditions. Painting, lining
and cleaning services were billed at current market rates, and
fleet management services were billed at a monthly fee per
railcar serviced. Other services were billed at our direct costs
plus 5.0%. Our direct costs included a reasonable allocation of
overhead expenses attributable to providing the services,
including the cost of maintaining employees to provide the
services. This agreement was terminated on April 1, 2005.
Supply Agreement. Under a supply agreement
with ACF, we agreed to manufacture and sell to ACF specified
components. In addition, under this agreement, we agreed to sell
ACF other components manufactured by us on terms not less
favorable than the terms on which we sell those products to
third parties. We sold specified components under the agreement
for a price equal to the then current market price or our cost
plus a gross profit percentage. This gross profit percentage has
been revised annually and has ranged from 5.0% to 25.0%,
depending upon the component and which one of our facilities
manufactured the product. This agreement was terminated on
April 1, 2005.
2005
consulting agreements
On April 1, 2005, we entered into two business consultation
agreements with ACF, whereby each of us has agreed to provide
services to the other. ACF has agreed to assist us in labor
litigation, labor relations support and consultation, and labor
contract interpretation and negotiation. In 2005, we required
the services of at least one ACF employee for no more than
20 hours a week under this agreement. We pay $150 per
hour for these services. We have agreed to provide ACF with
engineering consultation and advice. In 2005, ACF required the
services of at least one of our employees for no more than
20 hours a week under this
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agreement. ACF is required to pay $150 per hour for these
services. We do not believe that either party will be required
to pay more than $60,000 per year under either of these
agreements. These agreements remain in effect through March
2015, subject to the right of either party to terminate the
agreement on 30 days notice.
1998 loan
to ACF
In October 1998, we loaned $57.2 million to ACF. This loan
accrued interest at a variable rate, adjusted quarterly, equal
to LIBOR plus 3.0% or the base rate of the Industrial Bank of
Japan plus 1.5%, as elected by ACF. This loan was repaid in full
in 2004 in connection with the formation and capitalization of
ARL. See Certain transactions involving American Railcar
Leasing LLC Formation of ARL and related
contributions. In 2002, 2003 and 2004, we recorded
interest income relating to this loan of $2.8 million,
$2.5 million and $1.8 million, respectively.
Guarantees
of indebtedness by ACF and other related parties
Industrial Revenue Bonds. ACF and ACF
Industries Holding Corp., an indirect parent of ACF, guaranteed
our obligations under our industrial revenue bonds. As of
December 31, 2005, $8.3 million was outstanding under
these bonds. These bonds were payable through 2011 and, as of
December 31, 2005, bore interest at rates ranging from
6.75% to 8.5%. We used a portion of the net proceeds of our
initial public offering to repay these bonds in full. ACF and
ACF Industries Holding Corp. were released from their guarantees
upon the repayment of the bonds.
Senior Secured Credit Facility. In 1998, we
obtained a senior secured credit facility from the Industrial
Bank of Japan, as administrative agent, with a total
availability of $150 million. This facility was guaranteed
by ACF, ACF Industries Holding Corp., an indirect parent of ACF,
and NMI Holding Corp., a wholly owned subsidiary of ACF
Industries Holding Corp. This facility was repaid in full in
July 2004.
Subordinated Note. In 1998, we obtained a
$10.0 million loan from Boeing Financial under a promissory
note. This note was guaranteed by ACF and ACF Industries Holding
Corp. and was repaid in full in July 2004.
CIT Equipment Lease. In 1999, we entered into
a master equipment lease agreement with CIT that was guaranteed
by ACF. This lease relates to equipment that we use to
manufacture railcars and railcar components at our Paragould,
Marmaduke, Jackson and Kennett facilities. The interest rate on
the lease is LIBOR plus 2.75% (7.0% at December 31, 2005).
As of December 31, 2005, a balance of $6.7 million was
outstanding under this lease, including amounts subject to our
purchase option at the expiration of the lease term. On
January 31, 2006, we exercised an option to purchase all
equipment under this equipment lease. The lease allowed for the
purchase of all the equipment at estimated fair value. We paid
$5.8 million to purchase the lease equipment.
Interest
rate swap contract
In 2001, we entered into a derivative instrument in the form of
an interest rate swap contract with an underlying notional
amount of $49.0 million. We assigned this contract to ACF,
effective as of the date of its execution, and all rights and
obligations of this contract were passed through to ACF. This
contract expired on February 28, 2005.
Raw
material and other product purchase agreements
We, together with ACF, have entered into agreements for the
purchase of products by each of us, including steel and gas.
Under these agreements, we and ACF are entitled to favorable
pricing based upon the aggregate amount of our purchases. We
allocate the benefits under these purchase agreements
proportionally based upon the amount of products that each of us
purchases during the applicable period.
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Corbitt
equipment lease and purchase
We leased from ACF, leasehold improvements and equipment that we
placed in service at our Corbitt manufacturing facility in St.
Charles, Missouri from July 1, 2001 through June 1,
2003. During 2002, 2003 and 2004, we paid ACF $0.3 million,
$0.3 million and $0.4 million, respectively, for the
use of these leasehold improvements and equipment. We did not
pay any rent for these assets in 2005. Rather, on March 31,
2005, we purchased these assets from ACF for $2.8 million.
CERTAIN
TRANSACTIONS INVOLVING AMERICAN RAILCAR LEASING LLC
Formation
of ARL and related contributions
We formed ARL as our wholly owned subsidiary in June 2004. As
part of the formation of ARL and its further capitalization, ACF
and certain of its subsidiaries transferred to us and ARL
railcars and related leases, as well as equity in certain of
ACFs subsidiaries that supported ACFs leasing
business, in exchange for shares of our new preferred stock and
preferred interests of ARL. We, in turn, contributed the assets
we so received to ARL and made a cash investment in ARL of
$25.0 million.
In connection with these transactions, all of which occurred in
2004:
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we were issued all of the common interests in ARL;
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ACF and its subsidiaries were issued all of ARLs B-1
preferred interests;
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Vegas Financial Subsidiary Corp., a company beneficially owned
and controlled by Mr. Icahn, was issued all of ARLs
B-2 preferred interests in exchange for an investment of
$40 million;
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we issued 34,500 shares of our new preferred stock to ACF
and its subsidiaries; and
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our $57.2 million loan to ACF was repaid in full.
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The B-1 and B-2 preferred interests of ARL were convertible into
shares of our new preferred stock. On June 30, 2005, the
terms of these interests were modified, among other things, to
eliminate this conversion feature.
The ARL
exchange
On June 30, 2005, we transferred all our interest in ARL,
consisting of all its outstanding common A units, pro rata, to
the holders of our new preferred stock in exchange for the
redemption of 116,116 shares of our new preferred stock
held by them, including all dividends accumulated on those
shares. The value of the total liquidation preference and
accumulated dividends on the shares of new preferred stock
redeemed in this transaction was $125.0 million. All of the
shares of our new preferred stock were held by companies
beneficially owned and controlled by Mr. Icahn. As
described above, we redeemed all of our new preferred stock at
the closing of our initial public offering. We refer to this
transaction as the ARL exchange.
Agreements
relating to ARL and its subsidiaries
In 2004 and 2005, we entered into the following agreements
relating to ARL and its subsidiaries:
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railcar management agreements with ARI First LLC and ARI Third
LLC;
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ACF administration agreement;
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ARL railcar services agreement;
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ARL railcar servicing agreement;
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ARL services agreement;
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guarantee of ARI Second LLC loan agreement; and
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ARL trademark license agreement.
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The ARL railcar servicing agreement and the ARL services
agreement remain in effect. All other agreements were terminated
or assigned to ARL at various times during 2005, as described
below.
Railcar Management Agreements with ARI First LLC and ARI
Third LLC. On July 20, 2004, we entered into
a railcar management agreement with ARI First LLC and on
October 7, 2004, we entered into a railcar management
agreement with ARI Third LLC. ARI First LLC and ARI Third LLC
are wholly owned subsidiaries of ARL that hold railcars forming
a portion of the railcar lease fleet owned by ARL and its
subsidiaries. Under these railcar management agreements, we
provided ARI First and ARI Third with marketing, leasing,
administration, maintenance, recordkeeping and insurance
services for the railcars owned by ARI First and ARI Third. ARI
First and ARI Third paid us a monthly management fee, based upon
the number of railcars covered, and reimbursed us for all costs
incurred in performing these services. We assigned this
agreement to ARL effective June 30, 2005.
ACF Administration Agreement. On July 20,
2004, we entered into an ACF administration agreement with ACF
and ARL. Under this agreement, ACF agreed to provide us with
railcar management services which we were required to provide
under the management agreements with ARI First LLC and ARI Third
LLC described above (except maintenance, insurance and risk
management services). In addition, ACF provided us with lease
administration services for the railcars owned by ARI First LLC
and ARI Third LLC, respectively. Under this agreement, we were
required to pay ACF a per railcar monthly fee equal to the per
railcar fee that we were receiving under our railcar management
agreements with ARI First LLC and ARI Third LLC. This Agreement
terminated on March 31, 2005.
ARL Railcar Services Agreement. On
April 1, 2005, we entered into a railcar services agreement
with ARL. Under this agreement, ARL provided us with railcar
services which we were required to provide to ARI First LLC and
ARI Third LLC under our railcar management agreements with ARI
First LLC and ARI Third LLC. Under this agreement, we were
required to pay ARL all compensation that we received from ARI
First LLC and ARI Third LLC under our railcar management
agreements with them. This agreement was terminated July 1,
2005 when we assigned our railcar management agreements with ARI
First LLC and ARI Third LLC to ARL.
ARL Railcar Servicing Agreement. On
April 1, 2005, we entered into a railcar servicing
agreement with ARL. Under this agreement, we provide ARL with
substantially the same services that we had previously provided
to ACF under our 1994 railcar servicing agreement with ACF
described above under Certain transactions with ACF
Industries, LLC 1994 ACF asset
transfer Railcar servicing agreement, for
railcars that ARL or its affiliates own or manage. Under the
agreement with ARL, ARL is required to pay us a monthly fee,
based upon the number of railcars covered, plus a charge for
labor, components and materials. For materials and components we
manufacture, ARL pays us our current market price, and for
materials and components we purchase, ARL pays us our purchasing
costs plus 15%. For painting, lining and cleaning services, ARL
pays the then current market rate. For other labor costs, ARL
pays us a fixed hourly fee. We have further agreed that the
charges for our services will be on at least as favorable terms
as our terms with any other party for similar purposes. The per
railcar fees paid to us through September 30, 2005 under
the railcar management agreements for ARI First LLC and ARI
Third LLC are credited against the amounts due us under the ARL
railcar servicing agreement. This agreement extends through
June 30, 2006, and is automatically renewable for
additional one year periods unless either party gives at least
six months prior notice of termination. If we elect to terminate
this agreement, we must pay a termination fee of
$0.5 million.
ARL Services Agreement. On April 1, 2005,
we entered into a services agreement with ARL. Under this
agreement, ARL has agreed to provide us certain information
technology services, rent and building services and limited
administrative services. The rent and building services includes
our use of our headquarters space which is leased by ARL from an
affiliate of James J. Unger, our President and Chief Executive
Officer. See Certain transactions involving James J.
Unger. Also under this agreement, we have agreed to
provide purchasing and engineering services to ARL. Each party
is required to pay the other a fixed annual fee for
27
each of the listed services under this agreement. The total
annual fees that we are required to pay ARL for all services
that ARL is providing us under this agreement is
$2.2 million, and the total annual fees that ARL is
required to pay us for all services that we are providing ARL
under this agreement is $0.2 million. The annual fees under
our services agreements with ARI and ARL were determined in the
following manner: first, we allocated for the cost of each
department of ARL providing services to us; second, we
calculated these costs based on the number of employees
providing these services and the attendant cost associated with
them; third, we applied the same formula to value the services
we provided to ARL; and finally, we calculated the fee
allocations relating to rent and building services using an
agreed upon percentage of space utilized and headcount between
the two companies. Either party may terminate any of these
services, and the associated costs for those services, on at
least six months prior notice at any time prior to the
termination of the agreement on December 31, 2007.
Guarantee of ARI Second LLC Loan Agreement. On
July 20, 2004, ARI Second LLC, a subsidiary of ARL, entered
into a loan agreement with HSH Nordbank AG, under which ARI
Second borrowed $64.3 million. We guaranteed ARI Second
LLCs obligations under this loan agreement. This loan was
repaid in full in October 2004.
ARL Trademark License Agreement. Effective
June 30, 2005, we entered into a trademark license
agreement with ARL. Under this agreement, for an annual fee of
$1,000, we have granted a nonexclusive, perpetual, worldwide
license to ARL to use our common law trademarks American
Railcar and the diamond shape of our ARI logo.
ARL may only use the licensed trademarks in connection with the
railcar leasing business.
Health
and welfare benefit plans
Employees of ARL participate in our 401(k) plan and certain of
our health and welfare benefit plans. ARL is responsible for the
costs and benefits for its employees under these plans. As part
of the ARL Exchange, ARL is in the process of establishing its
own 401(k) and health and welfare benefit plans.
CERTAIN
TRANSACTIONS INVOLVING OHIO CASTINGS
In February 2003, Castings LLC, a wholly owned subsidiary of ACF
Industries Holding Corp., a company beneficially owned and
controlled by Mr. Icahn, acquired a one-third ownership
interest in Ohio Castings Company, LLC, a joint venture with
affiliates of two established railcar industry companies, Amsted
Industries, Inc. and The Greenbrier Companies, Inc. Ohio
Castings operates two foundries that produce heavy castings.
Effective as of January 1, 2005, ACF Industries Holding
Corp. transferred its interest in Castings LLC to us for total
consideration of $12.0 million, represented by a promissory
note bearing an interest rate equal to the prime rate plus 0.5%,
payable on demand. In connection with this transfer, we agreed
to assume certain, and indemnify all liabilities related to and
arising from ACF Industries Holding Corp.s investment in
Castings LLC, including the guarantee of Castings LLCs
obligations to Ohio Castings, the guarantee of bonds in the
amount of $10.0 million issued by the State of Ohio to one
of Ohio Castings subsidiaries, of which $8.0 million
was outstanding as of December 31, 2005, and the guarantee
of a $2.0 million state loan that provides for purchases of
capital equipment, of which $0.8 million was outstanding as
of December 31, 2005. The two other partners of Ohio
Castings have made similar guarantees of these obligations.
We have entered into supply agreements with an affiliate of
Amsted Industries, Inc., an affiliate of one of our Ohio
Castings joint venture partners, to purchase up to 25% and 33%,
respectively, of the products produced at each of two foundries
being operated by Ohio Castings. We pay Castings LLC a fee in
connection with those purchases. Our purchases and payments
relating to these purchases and fees are set forth above under
Certain transactions with ACF Industries LLC
and American Railcar Leasing LLC Manufacturing
operations.
28
CERTAIN
TRANSACTIONS WITH MR. ICAHN AND OTHER RELATED ENTITIES
Contribution
following 2006 storm damage
Effective April 10, 2006, Mr. Icahn contributed
approximately $275,000 of personal funds to us to pay the weekly
payroll and fringe benefits of all of our employees working at
our Marmaduke, Arkansas facility. This contribution followed the
tornado and storm damage that caused us to halt operations at
this facility and was intended to cover the period of time
before our insurance provided funds for us to continue to pay
full wages and benefits to all such employees.
Carl C.
Icahn and ARL loans
In October 2004, we advanced Mr. Icahn $165.0 million
under a secured promissory note due in 2007 and bearing interest
at the prime rate plus 1.75%. At the same time, we borrowed
$130.0 million from ARL represented by a promissory note
due in 2007 and bearing interest at the prime rate plus 1.5%. In
January 2005, we transferred our entire interest in the Icahn
note to ARL in exchange for additional common interests in ARL
and in satisfaction of our obligations under the ARL note. In
2004 and 2005, we recorded interest income of $2.0 million
and $0.8 million, respectively, and interest expense of
$1.5 million and $0.6 million, respectively, relating
to these notes.
Arnos
Corp. note payable
In December 2004, we borrowed $7.0 million from Arnos
Corp., a company beneficially owned and controlled by
Mr. Icahn, under a promissory note. The note bears interest
at the prime rate plus 1.75% (9.0% at December 31,
2005) and is payable on demand. We used a portion of the
net proceeds of our initial public offering to repay this loan
in full.
Transactions
with Vegas Financial Corp.
Purchase of Mandatorily Redeemable
Payment-in-Kind
Preferred Stock. We issued to Vegas Financial
Corp., a company beneficially owned and controlled by
Mr. Icahn, 15,000 shares of our mandatorily redeemable
payment-in-kind
preferred stock, known as PIK preferred stock, for
$15.0 million in June 2002, and 10,000 shares of PIK
preferred stock for $10.0 million in June 2003.
Conversion into and Purchase of New Preferred
Stock. In July 2004, Vegas Financial Corp.
converted all of its PIK preferred stock, consisting of
95,517.04 shares of PIK preferred stock, representing all
of the shares of PIK preferred stock outstanding, into
96,171 shares of our new preferred stock. In addition,
Vegas Financial Corp. simultaneously purchased an additional
67,500 shares of new preferred stock for
$67.5 million. We used a portion of the net proceeds of our
initial public offering to, among other things, redeem all of
the outstanding shares and pay all accumulated dividends on our
new preferred stock, including those held by Vegas Financial
Corp. As a result, Vegas Financial Corp. received
$89.2 million of the net proceeds of our initial public
offering. See Transactions with Carl C. Icahn
and entities affiliated with Carl C.
Icahn Redemption of new preferred stock.
Transactions
with Hopper Investments LLC
In 2004, Hopper Investments LLC, a company beneficially owned
and controlled by Mr. Icahn, paid $42.5 million for
1,818,976 shares of our Common Stock.
Transactions
with Philip Environmental Services Corp.
We engaged Philip Environmental Services Corp., an environmental
consulting company beneficially owned and controlled by
Mr. Icahn, to provide environmental consulting services to
us. In the year ended December 31, 2005 we incurred
$0.2 million of expenses associated with that engagement.
We have continued to use Philip Environmental Services Corp. to
assist us in our environmental compliance.
29
CERTAIN
TRANSACTIONS INVOLVING JAMES J. UNGER
Facilities
leasing arrangements
Our headquarters facilities and our Corbitt manufacturing
facilities in St. Charles, Missouri are owned by St. Charles
Properties, an entity controlled by James J. Unger, our
President and Chief Executive Officer. Under two leases dated
May 1, 1995 and March 1, 2001, St. Charles Properties
leased these facilities to ACF. We reimbursed ACF for our
proportionate share of the cost of renting these facilities
through April 1, 2005. On that date, ACF assigned the
March 1, 2001 lease, covering our Corbitt manufacturing
facilities, to us and the May 1, 1995 lease, covering our
and ARLs headquarters facility, to ARL. We continue to
maintain our headquarters in the space that has been leased to
ARL. Under our services agreement with ARL, we pay ARL
$0.5 million per year, which represents the estimate of our
proportionate share of ARLs costs for the space that we
use under the lease, including rent and building services. The
terms of the underlying leases are as follows.
Under the terms of the lease agreement assigned to ARL, ARL has
leased approximately 78,000 square feet of office space.
The lease expires on December 31, 2010. Rent is payable
monthly in the amount of $25,000. Under the terms of the lease,
ARL pays one-tenth of the property tax and insurance expenses
levied upon the property. In addition, ARL must pay 17% and 54%
of any increase in taxes and property insurances costs,
respectively. ARL is also required to repair and maintain the
facility at its costs and expense. We use approximately 46% of
the office space leased by ARL under this agreement.
Under the terms of the lease agreement assigned to us, we occupy
approximately 128,000 square feet of space which we use for
our Corbitt manufacturing facility. The lease expires on
February 28, 2011 with an option to renew the lease for one
successive five-year term. Rent is payable monthly in the amount
of $29,763. The maximum monthly rent for the renewal period is
$32,442 per month. We are required to pay 27% of all tax
increases assessed or levied upon the property and the cost of
the utilities we use, as well as repair and maintain the
facility at our expense.
In 2002, 2003 and 2004, we incurred $0.8 million of costs
to affiliates in each of 2002, 2003 and 2004, under these two
leasing arrangements, and in the year ended December 31,
2005, we incurred $0.8 million of such costs.
Industrial
revenue bonds
Mr. Unger and his wife owned $0.4 million of the
industrial revenue bonds issued by Paragould, Arkansas.
Mr. Unger and his wife purchased these bonds at the time of
their original issuance on the same terms that all
non-affiliated entities purchased the bonds. We used the net
proceeds of our initial public offering to repay in full the
amounts due under all of our industrial revenue bonds.
Mr. Unger and his wife received approximately
$0.4 million upon our repayment of the amounts due under
the industrial revenue bonds.
Registration
Rights
We entered into a registration rights agreement, effective upon
the completion of our initial public offering, with certain of
our existing stockholders. The stockholders that are party to
the new registration rights agreement will have the right to
require us, subject to certain terms and conditions, to register
their shares of our Common Stock under the Securities Act at any
time following expiration of the
lock-up
period applicable to them. These stockholders collectively will
have an aggregate of five demand registration rights, three of
which relate solely to registration on a short-form registration
statement, such as a
Form S-3.
In addition, if we propose to register any additional shares of
our capital stock under the Securities Act, these stockholders
will be entitled to customary piggyback registration
rights, which will entitle them to include their shares of
Common Stock in a registration of our securities for sale by us
or by other security holders. In addition, in our letter
agreement with James Unger, we have agreed to use commercially
reasonable efforts to file a registration statement on
Form S-8
with the SEC to cover the registration of 114,286 shares of
our Common Stock. We have agreed to include the balance of
Mr. Ungers shares in any registration statement we
file on behalf of
30
Mr. Icahn with regard to the registration for sale of our
shares held by Mr. Icahn, provided the contractual
restrictions and applicable
lock-up
period of Mr. Ungers shares have lapsed. The
registration rights granted under the registration rights
agreement and Mr. Ungers letter agreement are subject
to customary exceptions and qualifications and compliance with
certain registration procedures. Approximately 11.4 million
shares of our Common Stock are entitled to the benefits of these
registration rights.
Shares
Purchased By Certain Related Parties In Our Initial Public
Offering
The underwriters reserved up to 5% of the shares of our Common
Stock for sale in our initial public offering for purchase by
certain related parties through a directed share program. In
connection with the directed share program, any of our
directors, officers, nominees for election as director or an
immediate family member of any of these individuals may have
purchased shares of our Common Stock with a value in excess of
$60,000.
31
PERFORMANCE
GRAPH
The following graph illustrates the cumulative total stockholder
return on our Common Stock during the period from
January 20, 2006, the date our Common Stock began trading
on the Nasdaq Global Market, through March 31, 2006 and
compares it with the cumulative total return on the NASDAQ
Composite Index and DJ Transportation Index. The comparison
assumes $100 was invested on January 20, 2006 in our Common
Stock and in each of the foregoing indices and assumes
reinvestment of dividends, if any. The performance shown is not
necessarily indicative of future performance.
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1/20/2006
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1/31/2006
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2/28/2006
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3/31/2006
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ARII
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$
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100.00
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$
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130.14
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$
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146.34
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$
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152.87
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Nasdaq Composite Index
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$
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100.00
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$
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102.59
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$
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101.50
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$
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104.10
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DJ Transportation Index
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$
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100.00
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$
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105.03
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$
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106.68
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$
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109.85
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OTHER
MATTERS
Stockholder
Proposals and Recommendations for Director
Stockholder proposals for inclusion in the Companys proxy
materials for the Companys 2007 Annual Meeting of
Stockholders must be received by the Company no later than
December 31, 2006. These proposals must also meet the other
requirements of the rules of the Securities and Exchange
Commission and the Companys By-laws relating to
stockholder proposals.
Stockholders who wish to make a proposal at the Companys
2007 Annual Meeting other than one that will be
included in the Companys proxy
materials should notify the Company no later
than March 21, 2007. If a stockholder who wishes to present
such a proposal fails to notify the Company by this date, the
proxies that management solicits for the meeting will have
discretionary authority to vote on the stockholders
proposal if it is properly brought before the meeting. If a
stockholder makes a timely notification, the proxies
32
may still exercise discretionary voting authority under
circumstances consistent with the proxy rules of the Securities
and Exchange Commission.
Stockholders may make recommendations to the Board of Directors
of candidates for its consideration as nominees for director at
the Companys 2007 Annual Meeting of Stockholders by
submitting the name, qualifications, experience and background
of such person, together with a statement signed by the nominee
in which he or she consents to act as such, to the Board of
Directors, c/o Secretary, American Railcar Industries,
Inc., 100 Clark Street, St. Charles, Missouri 63301.
Notice of such recommendations should be submitted in writing
not later than 90 days prior to the anniversary date of the
immediately preceding annual meeting and must contain specified
information and conform to certain requirements set forth in the
Companys Bylaws. The letter of recommendation from one or
more stockholders should state whether or not the person(s)
making the recommendation has beneficially owned 5% or more of
the Companys Common Stock for at least one year. The Board
of Directors may refuse to acknowledge the nomination of any
person not made in compliance with these procedures or in the
Companys Bylaws.
Stockholder
Communications With Directors
Stockholders may contact the Board of Directors of the Company
by writing to them c/o Investor Relations, American Railcar
Industries, Inc., 100 Clark Street, St. Charles,
Missouri 63301. All communications addressed to the Board of
Directors will be delivered to the Board of Directors. If
stockholders desire, they may contact individual members of the
Board of Directors, our independent directors as a group, or a
particular committee of the Board of Directors by appropriately
addressing their correspondence to the same address. In each
case, such correspondence will be delivered to the appropriate
Director(s).
Section 16(a)
Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act requires our executive
officers, directors and persons who own more than
10 percent of our Common Stock to file initial reports of
their ownership and changes in ownership of our Common Stock
with the SEC.
To the best of the Companys knowledge, based solely on a
review of reports furnished to it and written representations
from reporting persons, each person who was required to file
such reports complied with the applicable filing requirements
during 2005.
Report On
Form 10-K
The Companys Annual Report on
Form 10-K
for the fiscal year ended December 31, 2005, as filed with
the Securities and Exchange Commission, including financial
statements, was included with the Annual Report mailed to each
stockholder with this Proxy Statement. Stockholders may obtain
without charge another copy of the
Form 10-K,
excluding certain exhibits, by writing to the Secretary,
American Railcar Industries, Inc., 100 Clark Street,
St. Charles, Missouri 63301.
Incorporation
by Reference
To the extent that this proxy statement has been or will be
specifically incorporated by reference into any filing by the
Company under the Securities Act or the Exchange Act, the
sections of the proxy statement entitled Report of the
Audit Committee and Performance Graph shall
not be deemed to be so incorporated, unless specifically
otherwise provided in any such filing.
33
Other
Business
Management knows of no other matters that will be presented for
action at the Annual Meeting. However, the enclosed proxy gives
discretionary authority to the persons named in the proxy in the
event that any other matters should be properly presented to the
meeting.
It is important that proxies be returned promptly. Therefore,
stockholders are urged, regardless of the number of shares
owned, to date, sign and return the enclosed proxy in the
enclosed business reply envelope.
By Order of the Board of Directors
Michael Obertop,
Secretary
May 5, 2006
St. Charles, Missouri
34
Appendix A
AMERICAN
RAILCAR INDUSTRIES, INC.
AUDIT COMMITTEE CHARTER
ADOPTED ON JANUARY 12, 2006
The primary functions of the Audit Committee (the
Committee) are to assist the Board of Directors of
American Railcar Industries, Inc. (the Company) with
the oversight of (i) the Companys accounting and
financial reporting processes and audits of the Companys
financial statements and (ii) the qualifications,
independence, appointment, retention, compensation and
performance of the Companys registered public accounting
firm.
The term registered public accounting firm as used
herein shall mean any public accounting firm registered with the
Public Company Accounting Oversight Board (the Accounting
Board) under Section 102 of the Sarbanes-Oxley Act of
2002 that performs the auditing function for the Company.
Although the Committee has the powers and responsibilities set
forth in this Charter, the role of the Committee is oversight.
It is not the duty of the Committee to conduct audits, to
establish and maintain disclosure controls and procedures and
internal controls over financial reporting, or to determine that
the Companys financial statements and disclosures are
complete and accurate and are in accordance with generally
accepted accounting principles and applicable rules and
regulations. These are the responsibilities of Company
management, and subject to audit by the Companys
registered public accounting firm.
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II.
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EFFECTIVE
DATE, COMPOSITION AND INDEPENDENCE
|
This Charter shall become effective upon the effective date (the
Effective Date) of the Companys registration
statement of its Common Stock on
Form 8-A
filed pursuant to Section 12 of the Securities Exchange Act
of 1934, as amended (the Exchange Act). Subject to
any permitted exceptions, exemptions and phase-in compliance
periods of the stock exchange or stock market on which the
Companys shares of common stock are traded or quoted, the
Committee shall consist of three or more directors of the
Company, as the Board of Directors may determine, each of whom
shall meet the independence and other qualification requirements
of the Exchange Act, the rules and regulations thereunder and
the applicable rules of the stock exchange or stock market on
which the Companys securities are traded or quoted.
Consistent with the applicable exceptions, exemptions and
phase-in periods, the Committee only shall be required to
include: (i) one independent director during the
90 day period following the Effective Date; and (ii) a
majority of independent directors thereafter until the first
anniversary of the Effective Date. At least one of the Committee
members must satisfy the financial sophistication requirements
of the listing standards of the Nasdaq Stock Market, and the
Committee shall use diligent efforts to assure that at least one
member qualifies as an audit committee financial
expert, as defined by rules of the Securities and Exchange
Commission (SEC).
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III.
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MEETINGS
AND PROCEDURES
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The Audit Committee shall meet at least once every fiscal
quarter. The Committee may request that members of management,
representatives of the registered public accounting firm and
others attend meetings and provide pertinent information, as
necessary. In order to foster open communications, the Committee
shall meet at such times as it deems appropriate or as otherwise
required by applicable law, rules or regulations in separate
executive sessions to discuss any matters that the Committee
believes should be discussed privately.
Committee meetings will be governed by the quorum and other
procedures generally applicable to meetings of the Board under
the Companys By-laws, unless otherwise stated by
resolution of the Board of Directors.
A-1
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IV.
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RESPONSIBILITIES
AND DUTIES
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1. The Committee, in its capacity as a committee of the
Board of Directors, shall be directly responsible for the
appointment, compensation, retention (including termination) and
oversight of the work of the registered public accounting firm
(including resolution of disagreements between management and
the registered public accounting firm regarding financial
reporting) engaged for the purpose of preparing or issuing an
audit report or performing other audit, review or attest
services for the Company. The registered public accounting firm
shall report directly to and be accountable to the Committee.
2. To the extent required by applicable law, rules and
regulations, the Committee shall pre-approve all auditing
services and non-audit services (including the fees and terms
thereof) permitted to be provided by the Companys
registered public accounting firm contemporaneously with the
audit, subject to certain de minimus exceptions for
permitted non-audit services described in
Section 10A(i)(1)(B) of the Exchange Act, which shall be
approved by the Committee prior to the completion of the audit.
3. The Committee shall have the authority to engage
independent counsel and other advisers, as it determines
necessary to carry out its duties. The Committee shall determine
the extent of funding to be provided by the Company for payment
of (i) compensation to any registered public accounting
firm engaged for the purpose of preparing or issuing an audit
report or performing other audit, review or attest services for
the Company, (ii) compensation to any independent counsel
and other advisers retained to advise the Committee, and
(iii) ordinary administrative expenses of the Committee
that are necessary or appropriate in carrying out its duties.
4. The Committee may form subcommittees consisting of one
or more members and delegate to such subcommittees authority to
perform specific functions, including without limitation
pre-approval of audit and non-audit services, to the extent
permitted by applicable law, rules and regulations.
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B.
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Oversight
of the Companys Relationship with the
Auditors
|
With respect to any registered public accounting firm that
proposes to perform audit services for the Company, the
Committee shall:
1. On an annual basis, review and discuss all relationships
the registered public accounting firm has with the Company in
order to consider and evaluate the registered public accounting
firms continued independence. In connection with its
review and discussions, the Committee shall: (i) ensure
that the registered public accounting firm submits to the
Committee a formal written statement (consistent with the
Accounting Board independence standards as then in effect)
delineating all relationships and services that may impact the
objectivity and independence of the registered public accounting
firm; (ii) discuss with the registered public accounting
firm any disclosed relationship, services or fees (audit and
non-audit related) that may impact the objectivity and
independence of the registered public accounting firm;
(iii) review the registered public accounting firms
statement of the fees billed for audit and non-audit related
services, which statement shall specifically identify those fees
required to be disclosed in the Companys annual proxy
statement; (iv) satisfy itself as to the registered public
accounting firms independence; and (v) obtain and
review a report by the registered public accountants describing
their internal quality control procedures and any material
issues raised by the most recent internal quality review, or
peer review, of the firm, or by any inquiry or investigation by
governmental or professional authorities, within the preceding
five years and any steps taken to deal with such issues.
2. Ensure the rotation of the lead (or coordinating) audit
partner and other significant audit partners as required by
applicable law, rules and regulations.
3. Establish clear hiring policies for employees or former
employees of the registered public accounting firm proposed to
be hired by the Company that meet applicable SEC regulations and
stock exchange listing standards. In addition, on an annual
basis, confirm that the registered public accounting firm is not
disqualified from performing any audit service for the Company
due to the fact that any of the
A-2
Companys chief executive officer, chief financial officer,
controller, chief accounting officer (or a person serving in an
equivalent position) was employed by that registered public
accounting firm and participated in any capacity in the audit of
the Company during the one-year period preceding the date of the
initiation of the audit of the current years financial
statements.
4. Establish with the registered public accounting firm the
scope and plan of the work to be performed by the registered
public accounting firm as part of the audit for the fiscal year.
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C.
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Financial
Statements and Disclosure Matters
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With respect to the Companys financial statements and
other disclosure matters, the Committee shall:
1. Review and discuss with management and the registered
public accounting firm the Companys quarterly financial
statements.
2. Review and discuss with management and the registered
public accounting firm the Companys annual audited
financial statements and the report of the registered public
accounting firm thereon.
3. Review and discuss all material correcting adjustments
identified by the registered public accounting firm in
accordance with generally accepted accounting principles and SEC
rules and regulations that are reflected in each annual and
quarterly report that contains financial statements, and that
are required to be prepared in accordance with (or reconciled
to) generally accepted accounting principles under
Section 13(a) of the Exchange Act and filed with the SEC.
4. Review and discuss all material off-balance sheet
transactions, arrangements, obligations (including contingent
obligations) and other relationships of the Company with
unconsolidated entities or other persons, that have or are
reasonably likely to have a current or future effect on
financial condition, revenues or expenses, results of
operations, liquidity, capital expenditures, or capital
resources, which are required to be disclosed in response to
Item 303, Managements Discussion and Analysis of
Financial Condition and Results of Operation, of
Regulation S-K.
5. Discuss with management and the registered public
accounting firm significant financial reporting issues and
judgments made in connection with the preparation of the
Companys financial statements, including any judgments
about the quality, appropriateness and acceptability of the
Companys accounting principles, significant changes in the
Companys selection or application of accounting principles
and any other significant changes to the Companys
accounting principles and financial disclosure practices that
are suggested by the registered public accounting firm or
management.
6. Review with management, the registered public accounting
firm and the Companys counsel, as appropriate, any legal,
regulatory or compliance matters that could have a significant
impact on the Companys financial statements, including
significant changes in accounting standards or rules as
promulgated by the Financial Accounting Standards Board, the SEC
or other regulatory authorities with relevant jurisdiction.
7. The review and discussions hereunder with respect to
audits performed by the registered public accounting firm shall
include the matters required to be discussed by the Accounting
Board auditing standards then in effect. These matters would
include the auditors responsibility under generally
accepted auditing standards, the Companys significant
accounting policies, managements judgments and accounting
estimates, significant audit adjustments, the auditors
responsibility for information in documents containing audited
financial statements (e.g., MD&A), disagreements with
management, consultation by management with other accountants,
major issues discussed with management prior to retention of the
auditor and any difficulties encountered in the course of the
audit work.
8. Receive and review all other reports required under the
Exchange Act to be provided to the Committee by the registered
public accounting firm including, without limitation, reports on
(i) all critical accounting policies and practices used by
the Company, (ii) all alternative treatments of financial
information within generally accepted accounting principles that
have been discussed with management, ramifications of the use of
such alternative disclosures and treatments, and the treatment
preferred by the
A-3
registered public accounting firm, and (iii) all other
material written communications between the registered public
accounting firm and management, such as any management letter or
schedule of unadjusted differences.
9. Following completion of its review of the annual audited
financial statements, recommend to the Board of Directors, if
appropriate, that the Companys annual audited financial
statements and the report of the registered public accounting
firm thereon be included in the Companys annual report on
Form 10-K
filed with the SEC.
10. Prepare the Audit Committee report required by the SEC
to be included in the Companys annual proxy statement and
any other Committee reports required by applicable laws, rules
and regulations.
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Internal
Controls and Compliance Matters
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With respect to the Companys internal controls over
financial reporting and compliance matters:
1. When applicable, review and assess any disclosures made
to the Committee by the Companys Chief Executive Officer
and Chief Financial Officer during their certification process
for the Companys
Forms 10-K
and
Forms 10-Q
about any significant deficiencies in the design or operation of
internal controls over financial reporting or material
weaknesses therein and any fraud involving management or other
employees who have a significant role in the Companys
internal controls over financial reporting.
2. When applicable, review and discuss with management and
the registered public accounting firm any major issues as to the
adequacy of the design or operation of the Companys
internal controls over financial reporting, any special steps
adopted in light of significant deficiencies or material
weaknesses therein and the adequacy of disclosures about changes
in internal controls over financial reporting.
3. When applicable, review and discuss with management and
the registered public accounting firm managements annual
assessment of the Companys internal controls over
financial reporting and the registered public accounting
firms attestation report thereon.
4. Establish and review procedures within the time period
required by applicable law, rules and regulations for
(i) the receipt, retention and treatment of complaints
received by the Company regarding accounting, internal
accounting controls or auditing matters, and (ii) the
confidential, anonymous submission by employees of the Company
of concerns regarding questionable accounting or auditing
matters.
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E.
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Other
Miscellaneous Matters
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The Committee shall also have responsibility to:
1. Review and discuss the Companys practices
regarding earnings press releases, as well as financial
information and earnings guidance provided to analysts and
rating agencies.
2. Review and discuss all corporate attorneys reports
of evidence of a material violation of securities laws or
breaches of fiduciary duty.
3. Review and approve all related-party transactions (i.e.,
those transactions required to be disclosed in response to
Item 404, Certain Relationships and Related Transactions,
of
Regulation S-K)
for potential conflict of interest situations on an ongoing
basis, unless otherwise delegated to another committee of the
Board of Directors consisting solely of independent directors.
4. If required by applicable law, rules or regulations,
review and approve (i) the adoption of, and any change to
or waiver of, the Companys code(s) of business conduct and
ethics applicable to directors, senior financial officers
(including the principal executive officer, principal financial
officer, principal accounting officer, controller, or persons
performing similar functions) or employees, and (ii) any
disclosure made in the manner permitted by SEC rules that is
required to be made regarding such change or waiver, unless
these duties are otherwise delegated to another committee of the
Board of Directors.
A-4
5. Review and discuss with management and the registered
public accounting firm the Companys major financial risk
exposures and the steps management has taken to monitor and
control such exposures (including managements risk
assessment and risk management policies).
6. Review with management and the registered public
accounting firm the sufficiency in number and the quality of
financial and accounting personnel of the Company.
7. Review and reassess the adequacy of this Charter
annually and recommend to the Board any changes or amendments
the Committee deems appropriate.
8. Perform any other activities consistent with this
Charter, the Companys By-laws and governing law as the
Committee or the Board deems necessary or appropriate.
A-5
AMERICAN RAILCAR INDUSTRIES, INC.
100 CLARK STREET
ST. CHARLES, MISSOURI 63301
ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON JUNE 8, 2006
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned stockholder of American Railcar Industries, Inc., a Delaware corporation (the
Company), hereby appoints Vincent J. Intrieri and Michael F. Obertop, and each of them acting singly, with full power of substitution, attorneys and proxies to represent the undersigned at the Annual Meeting of Stockholders of the Company
to be held at the Doubletree Guest Suites, Times Square, 1568
Broadway (47th Street and 7th Avenue), New York, NY 10036, on Thursday, June 8, 2006 at 1:00 P.M., local time, and at any adjournment or postponement thereof, with all power which the undersigned would possess if personally
present, and to vote all shares of stock that the undersigned may be entitled to vote at said meeting upon the matters set forth in the Notice of Annual Meeting of Stockholders in accordance with
the following instructions and with discretionary authority upon such other matters as may come before the meeting. All previous proxies are hereby revoked.
(Continued
and to be signed on the reverse side.)
ANNUAL MEETING OF STOCKHOLDERS OF
AMERICAN RAILCAR INDUSTRIES, INC.
June 8, 2006
Please date, sign and mail
your proxy card in the
envelope provided as soon
as possible.
â Please detach along perforated line and mail in the envelope provided. â
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PLEASE SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE. PLEASE MARK YOUR VOTE IN BLUE OR BLACK INK AS SHOWN HERE
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The Board of Directors recommends a vote FOR the election of the nominees as directors. |
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1. The election as directors of all nominees listed below: |
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2. The transaction of such other business as may properly
come before the Annual Meeting or adjournment thereof.
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NOMINEES: |
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FOR ALL NOMINEES
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¡ ¡
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Carl C. Icahn James J. Unger |
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THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
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Vincent J. Intrieri |
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WITHHOLD AUTHORITY |
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Keith Meister |
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This proxy will be voted as specified or, where no direction is given, will be voted FOR all nominees listed in Proposal No. 1. |
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FOR ALL NOMINEES |
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Jon F. Weber |
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James M. Laisure |
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FOR ALL EXCEPT
(See instructions below)
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James C. Pontious |
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The undersigned stockholder hereby acknowledges receipt of a copy of the accompanying Notice of Annual Meeting of Stockholders
and Proxy Statement and hereby revokes any proxy or proxies previously given. This proxy may be revoked at anytime prior to its exercise. |
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INSTRUCTION: To withhold authority to vote for any individual nominee(s), mark
FOR ALL EXCEPT and fill in the circle next to each nominee
you wish to withhold, as shown here: l |
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Please complete, date, sign and mail this proxy promptly in the enclosed postage-prepaid envelope.
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To change the address on your account, please check the box at right and
indicate your new address in the address space above. Please note that
changes to the registered name(s) on the account may not be submitted via
this method. |
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Signature of Stockholder |
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Date: |
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Signature of Stockholder |
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Date: |
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Note:
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Please sign exactly as your name or names appear on this Proxy. When shares are held
jointly, each holder should sign. When signing as executor, administrator, attorney, trustee or guardian, please give full title as such.
If the signer is a corporation, please sign full corporate name by duly authorized
officer, giving full title as such. If signer is a partnership, please sign in partnership name by authorized person.
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