<PAGE>
As filed with the Securities and Exchange Commission on February 18, 1994
Registration No. 33-_____________
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
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MORRISON KNUDSEN CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 82-0393735
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
Morrison Knudsen Plaza, Boise, Idaho 83729 (208) 386-5000
(Address, including zip code, and telephone number, including area code,
of registrant's principal executive offices)
DAVID A. CHANNER
Associate General Counsel
Morrison Knudsen Corporation
Morrison Knudsen Plaza, Boise, Idaho 83729 (208) 386-5000
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
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Approximate date of commencement of proposed sale to the public: As soon
as practicable after the effective date of this Registration Statement.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, check the following box.
_____
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. X
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CALCULATION OF REGISTRATION FEE
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Proposed Proposed
maximum maximum
Title of each class Amount offering aggregate Amount of
of securities to be price per offering registration
to be registered registered share (1) price (1) fee
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Common Stock, par value
$1.66-2/3 per share ... 848,252 $ 24.8125 $ 21,047,252.72 $7,257.72
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(1) Estimated solely for the purpose of calculating the registration fee based
on the average of the high and low reported sale prices per share of the
Company's Common Stock on the New York Stock Exchange on February 14,
1994. __________
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission acting pursuant to said Section 8(a),
may determine.
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INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THE PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF ANY OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
Subject to Completion, Dated February 18, 1994
MORRISON KNUDSEN CORPORATION
Common Stock
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This Prospectus relates to 848,252 shares (the "Shares") of Common Stock, par
value $1.66- 2/3 per share ("Common Stock") of Morrison Knudsen Corporation, a
Delaware corporation (the "Company") which may be offered and sold by the
selling stockholders named herein (the "Selling Stockholders") pursuant to this
Prospectus from time to time. The Shares were acquired from the Company under
certain agreements more particularly described herein under the heading "Recent
Developments." The Company will receive no part of the proceeds from the sale
of the Shares.
The distribution of the Shares by the Selling Stockholders shall be effected
directly by means of ordinary brokers' transactions or, in cash or exchange
transactions, to one or more institutional purchasers or through sales agents in
one or more transactions by means of ordinary brokers' transactions, block
transactions (which may involve crosses) on the New York Stock Exchange or the
Pacific Stock Exchange, or fixed price offerings, exchange distributions or
special offerings in accordance with the applicable rules at prices acceptable
to the Selling Stockholders. See "Plan of Distribution." The Company will pay
the expenses of registration of the Shares. The Selling Stockholders will pay
all fees and expenses of their own legal counsel and accountants and all
commissions or transfer taxes, if any. The Company has agreed to indemnify
certain of the Selling Stockholders (more particularly described herein as "The
Touchstone Principals" under the heading "Selling Stockholders") against
certain liabilities, including liabilities under the Securities Act of 1933,
as amended (the "Securities Act"). See "Selling Stockholders."
The Shares are traded on the New York Stock Exchange and the Pacific Stock
Exchange under the symbol MRN.
------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY
THE SECURITIES AND EXCHANGE COMMISSION NOR HAS THE
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
The date of this Prospectus is , 1994
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AVAILABLE INFORMATION
Morrison Knudsen Corporation (the "Company") is subject to the information
requirements of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and in accordance therewith files reports, proxy statements and other
information with the Securities and Exchange Commission (the "Commission").
Reports, proxy statements and other information filed by the Company may be
inspected and copied at the public reference facilities maintained by the
Commission at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and at
the Commission's Regional Offices located at Room 3190, 230 South Dearborn
Street, Chicago, Illinois 60604 and Room 1228, 75 Park Place, New York, New
York 10007. Copies of such materials can be obtained by mail from the Public
Reference Branch of the Commission at 450 Fifth Street, N.W., Washington, D.C.
20549, at prescribed rates. In addition, such material may also be inspected
and copied at the offices of the New York Stock Exchange, Inc., 20 Broad Street,
New York, New York 10005, and the Pacific Stock Exchange, Incorporated, 301 Pine
Street, San Francisco, California 94104.
The Company has filed with the Commission a registration statement on Form S-3
(herein, together with all amendments and exhibits, referred to as the
"Registration Statement") under the Securities Act of 1933, as amended. This
Prospectus does not contain all of the information set forth in the Registration
Statement, certain parts of which are omitted in accordance with the rules and
regulations of the Commission. For further information, reference is hereby
made to the Registration Statement.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed with the Commission by the Company pursuant to
the Exchange Act are incorporated herein by reference.
1. The Company's Annual Report on Form 10-K for the year ended
December 31, 1992;
2. The Company's Quarterly Reports on Form 10-Q for the quarters ended
March 31, 1993, June 30, 1993 and September 30, 1993;
3. The Company's Current Reports on Form 8-K dated February 5, 1993,
February 11, 1993, May 14, 1993 and August 31, 1993, October 15, 1993,
October 19, 1993, November 5, 1993, December 9, 1993, December 15, 1993,
January 10, 1994, January 31, 1994 and February 8, 1994;
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<PAGE>
4. The description of the Common Stock contained in "Business to be
Transacted - 2. Plan of Reorganization - Holding Company Common" in the
Company's Proxy Statement/Prospectus dated March 5, 1985, which is filed as
Exhibit 28.4 to the Company's Registration Statement on Form 8-B filed pursuant
to Section 12(b) of the Exchange Act, dated May 6, 1985;
5. The description of the Company's Common Stock Purchase Rights under
the Company's Stockholder Rights Plan contained under the caption "Description
of Capital Stock-Stockholder Rights Plan" (in the Company's Registration
Statement on Form S-3 (No. 33-33934) filed with the Commission on March 26,
1990); and
6. All other documents filed by the Company pursuant to Section 13(a),
13(c), 14 or 15(d) of the Exchange Act subsequent to the date of this Prospectus
and prior to the termination of the offering.
The Company will provide without charge to each person to whom a copy of this
Prospectus is delivered, upon the request of any such person, a copy of any or
all of the documents which are incorporated herein by reference, other than
exhibits to such documents (unless such exhibits are specifically incorporated
by reference into such documents). Requests for such copies should be directed
to Morrison Knudsen Corporation, Morrison Knudsen Plaza, Boise, Idaho 83729,
Attention: Ms. Suzanne M. Bowman, telephone (208) 386-5000.
THE COMPANY
Morrison Knudsen Corporation is a worldwide organization involved in a broad
range of construction, engineering, mining and manufacturing services. The
Company provides design, engineering, construction, procurement and project
management services, and environmental evaluation and hazardous waste
remediation services, for its private and public sector clients. The Company
operates coal and lignite mines under long-term contracts and holds equity
interests in some of the mines that it operates. It also rebuilds transit rail
cars and locomotives and builds new transit rail cars.
Morrison Knudsen Corporation is a Delaware corporation headquartered in Boise,
Idaho, and has been in business for approximately 80 years. Its principal
executive offices are located at Morrison Knudsen Plaza, Boise, Idaho 83729, and
its telephone number is (208)386-5000. As used in this Prospectus, the terms
"Morrison Knudsen" and the "Company" mean Morrison Knudsen Corporation and its
consolidated subsidiaries, unless the context indicates otherwise.
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<PAGE>
SELLING STOCKHOLDERS
The 848,252 Shares being registered are to be offered for the accounts of
Richard J. Clark, Dennis E. Clark and Richard K. Clark (the "Clark Principals")
and Theodore E. Nelson, Richard L. Jacobs, James L. Fri, Jr. and Ellida S. Fri
(the "Touchstone Principals") (the Clark Principals and the Touchstone
Principals collectively referred to herein as the "Selling Stockholders"). The
Shares are comprised as follows:
(A) 42,519 Shares delivered to the Clark Principals pursuant to the terms
of a Share Exchange Agreement dated as of December 30, 1993, among the Clark
Principals, the Company, Morrison Knudsen Corporation, an Ohio corporation
("MK-Ohio"), and Clark Industries, Inc., an Illinois corporation ("Clark"), (the
"Clark Exchange Agreement"), pursuant to which the Company acquired Clark from
the Clark Principals;
(B) 4,725 Shares that were issued in the names of the Clark Principals and
delivered to Key Trust Company of the West ("Escrow Agent"), pursuant to the
terms of an irrevocable Deposit Escrow Agreement, dated as of December 30, 1993,
among the Clark Principals, the Company, MK-Ohio and the Escrow Agent;
(C) 31,008 Shares that were issued in the names of the Clark Principals
pursuant to the terms of Non-Competition Agreements dated as of December 30,
1993, among each of the Clark Principals, Clark and the Company;
(D) 648,000 Shares delivered to the Touchstone Principals pursuant to the
terms of a Share Exchange Agreement dated as of January 31, 1994, among the
Touchstone Principals, the Company, and Touchstone, Inc., a Tennessee
corporation ("Touchstone"), (the "Touchstone Exchange Agreement"), pursuant to
which the Company acquired Touchstone from the Touchstone Principals;
(E) 72,000 Shares that were issued in the names of the Touchstone
Principals and delivered to Key Trust Company of the West ("Escrow Agent"),
pursuant to the terms of an irrevocable Deposit Escrow Agreement, dated as of
January 31, 1994, among the Touchstone Principals, the Company and the Escrow
Agent; and
(F) 50,000 Shares that were issued in the names of Theodore E. Nelson and
Richard L. Jacobs pursuant to the terms of Non-Competition Agreements dated as
of January 31, 1994, among each of Theodore E. Nelson and Richard L. Jacobs,
Touchstone and the Company.
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<PAGE>
Prior to closing of the Clark acquisition on December 30, 1993, the Clark
Principals did not beneficially hold or own any shares of the Company's Common
Stock. As of such closing, the Clark Principals beneficially owned less than 1%
of the Company's outstanding shares of Common Stock.
Prior to closing of the Touchstone acquisition on January 31, 1994, the
Touchstone Principals did not beneficially hold or own any shares of the
Company's Common Stock. As of such closing, the Touchstone Principals
beneficially owned 2.3% of the Company's outstanding shares of Common Stock.
As of the date of this Prospectus, the Selling Stockholders beneficially owned
2.6% of the Company's outstanding shares of Common Stock.
All of the shares beneficially owned by the Selling Stockholders are being
registered for offer and sale pursuant to this Prospectus. See "Recent
Developments."
PLAN OF DISTRIBUTION
The Shares may be offered and sold by the Selling Stockholders pursuant to
this Prospectus from time to time directly by means of ordinary brokers'
transactions or, in cash or exchange transactions, to one or more institutional
purchasers or through sales agents by means of (i) ordinary brokers'
transactions, (ii) block transactions (which may involve crosses) in accordance
with the rules of the New York Stock Exchange, the Pacific Stock Exchange, or
any other exchange on which the Common Stock is traded (the "Exchanges"), in
which the Selling Stockholders's agents may attempt to sell the Shares as agent
but may position and resell all or a portion of the Shares as principal, (iii)
"fixed price offerings" off the floor of the Exchanges or "exchange
distributions" and "special offerings" of shares in accordance with the rules of
the Exchanges, or (iv) a combination of any such methods of sale, in each case
at market prices prevailing at the time of sale, at prices related to prevailing
market prices or at negotiated prices. In connection therewith, distributors'
or sellers' commissions may be paid or allowed which will not exceed those
customary in the types of transactions involved. If any sales agent of the
Selling Stockholders purchases the Shares as principal, it may resell such
shares by any of the methods of sale described above.
If a "fixed price offering" of Shares off the floor of the Exchanges is made,
a sales agent of the Selling Stockholders would purchase a block of shares from
the Selling Stockholders and may form a group of dealers to participate in the
resale of such shares. Any such transaction would be described in a prospectus
or prospectus supplement filed pursuant to Rule 424 under the Securities Act.
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<PAGE>
DESCRIPTION OF CAPITAL STOCK
CAPITAL STOCK
The following statements with respect to the Company's capital stock are
subject to the detailed provisions of the Company's Restated Certificate of
Incorporation (the "Certificate") and By-laws, as amended (the "By-laws"), and
to the Rights Plan (as defined below). These statements do not purport to be
complete and are qualified in their entirety by reference to the terms of the
Certificate, the By-laws and the Rights Plan, which are incorporated by
reference into this Prospectus.
The Company's authorized capital stock consists of 100,000,000 shares of
common stock, par value $1.66-2/3 per share (the "Common Stock"), and 10,000,000
shares of preferred stock, par value $.10 per share (the "Preferred Stock"). As
of September 30, 1993, 32,112,828 shares of Common Stock were issued and
outstanding (excluding 508,899 shares held in treasury and including 661,138
unallocated shares of Common Stock in the Company's Employee Stock Ownership
Plan Trust, which are accounted for as treasury stock). No shares of Preferred
Stock are issued or outstanding.
COMMON STOCK
The Common Stock does not have any conversion or preemptive rights or
redemption or sinking fund provisions. The holders of Common Stock are entitled
to one vote for each share held on all matters voted on by the stockholders
generally, including the election of directors. The Common Stock does not have
cumulative voting rights. As a result, the holders of more than 50% of Common
Stock can elect 100% of the directors to be elected if they choose to do so
(subject to the voting rights, if any, of any shares of Preferred Stock which
may at the time be outstanding) and, in such event, the holders of the remaining
shares of Common Stock would not be able to elect any directors.
Holders of Common Stock are entitled to receive such dividends as the Board of
Directors of the Company from time to time may declare out of funds legally
available therefor. Subject to the rights of holders of any shares of Preferred
Stock which might at the time be outstanding, in the event of any voluntary or
involuntary liquidation, dissolution or winding up of the Company, holders of
Common Stock are entitled to share equally in the balance of assets, if any,
remaining after payment of all debts and liabilities.
PREFERRED STOCK
The Preferred Stock is issuable in series by action of the Company's Board of
Directors, which may fix the designations, relative powers (including voting
powers), preferences and rights of shares to be included in any such series, and
qualifications, limitations or restrictions thereof as permitted under the
Delaware General Corporation Law. There currently are no shares of Preferred
Stock outstanding. Although there currently are no plans to issue shares of
Preferred Stock, it is contemplated that from time to time the Company may
consider financing, acquisitions or other proposals involving the issuance or
reservation of shares of Preferred Stock.
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<PAGE>
STOCKHOLDER RIGHTS PLAN
On June 12, 1986, the Board of Directors of the Company declared a dividend of
one common stock purchase right (a "Right") for each outstanding share of Common
Stock to the holders of record on June 25, 1986 and authorized and directed the
issuance of one Right with respect to each share of Common Stock that shall
become outstanding prior to the occurrence of certain terminating events. Each
Right entitles the registered holder to purchase from the Company one share of
Common Stock at a price currently equal to $50, subject to adjustment (the
"Purchase Price"). Upon the occurrence of certain events generally associated
with an unsolicited takeover attempt of the Company or certain self-dealing
transactions, the Rights (except for Rights held by an Acquiring Person (as
defined)) will become exercisable and will cease to automatically trade with the
Common Stock. Thereafter, upon the occurrence of certain further triggering
events, each Right (except for Rights held by an Acquiring Person) will become
exercisable, at the then-current exercise price of the Right, to purchase that
number of shares of Common Stock having a market value of two times the exercise
price of the Right.
The Rights have certain anti-takeover effects. The Rights will cause
substantial dilution to a person or group that attempts to acquire the Company
in a manner which causes the Rights to become exercisable. The Company
believes, however, that the Rights should neither affect any prospective offeror
willing to negotiate with the Board of Directors of the Company nor interfere
with any merger or other business combination approved by the Board of Directors
of the Company because the Board of Directors may, at its option, redeem the
Rights. The terms of the Rights may be amended by the Board of Directors of the
Company without the consent of the holders of the Rights.
CERTAIN PROVISIONS OF THE CERTIFICATE AND BY-LAWS
The Certificate provides in Article Sixth that the number of directors shall
be not less than three nor more than twenty and further provides for a
classified Board of Directors with three-year staggered terms of office;
however, the Certificate also provides that if at any time there is issued and
outstanding a series of Preferred Stock, the holders of which have the right,
voting separately as a class to elect one or more directors, the terms of office
of the director or directors elected by such holders of Preferred Stock shall be
for terms of one year. The affirmative vote of the holders of not less than 80%
of the outstanding shares entitled to vote generally in the election of
directors is required to amend, modify or repeal Article Sixth of the
Certificate. Consequently, it could be more difficult to replace directors of
the Company which could make more difficult and, therefore, less likely a
takeover or change in management of the Company.
The Certificate contains provisions relating to corporate governance.
Briefly, those provisions include: (a) prohibiting stockholder action by
written consent without a meeting, which provision may not be amended, modified
or repealed except by the affirmative vote of the holders of not less than 80%
of the outstanding shares of the Company entitled to vote generally in the
election of directors (Article Ninth) and (b) requiring satisfaction of certain
minimum price criteria and certain procedures or alternatively approval by an
affirmative 80% stockholder vote, in the case of certain business combinations
with or initiated by an interested stockholder (defined to include, among
others, a person who beneficially owns 10% or more of the outstanding stock of
the Company), which provisions
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cannot be amended, modified or repealed without an 80% affirmative vote of the
stockholders (Article Eighth).
The Company has 100,000,000 authorized shares of Common Stock. Although it
has no intention to do so, the Company's Board of Directors could cause the
Company to issue, in one or more transactions, additional shares of Common Stock
(within the limits imposed by applicable laws and the rules of the New York
Stock Exchange to the extent that such rules may be observed by the Company) in
amounts which could make more difficult and, therefore, less likely a takeover
or change in management of the Company.
The Company has 10,000,000 authorized shares of Preferred Stock which are
issuable in series by action of the Company's Board of Directors, which may fix
the voting powers, preferences, rights and other terms as permitted under the
Delaware General Corporation Law. Although it currently has no intention to do
so, the Company's Board of Directors could cause the Company to issue, in one or
more transactions, Preferred Stock (within the limits imposed by applicable laws
and the rules of the New York Stock Exchange to the extent that such rules may
be observed by the Company) with voting rights (including rights as a class to
elect additional directors) and other terms, provisions and rights which could
make more difficult and, therefore, less likely a takeover or change in
management of the Company.
Any issuance of Common Stock or Preferred Stock could have the effect of
diluting the earnings per share, book value per share and voting power of shares
held by the Company's stockholders. For example, additional shares of Common
Stock or shares of one or more series of Preferred Stock, or some combination
thereof, could be issued (within the limits imposed by applicable laws and rules
of the New York Stock Exchange to the extent that such rules may be observed by
the Company) to one or more holders who, as a result of the issuance of such
shares, would have sufficient voting power to assure that any proposed
amendments to the Certificate, particularly amendments requiring an 80%
stockholder vote for approval (including among others, any amendment to the
provision for a classified Board of Directors, to the provision requiring
satisfaction of certain minimum price criteria and certain procedures in order
to effect certain business combinations, or to the provision denying
stockholders the right to act by written consent without a meeting), would not
receive the necessary stockholder vote required for such amendment. In
addition, such shares could be privately placed with purchasers who might oppose
a hostile takeover bid or (particularly if the Board authorized holders of a
series of Preferred Stock to vote as a class, either separately or with the
holders of Common Stock) to affect the outcome of any proposal for a merger of
the Company or sale or exchange of assets by the Company or any other
extraordinary corporate transaction. Consequently, although the Board of
Directors has no present intention to issue additional shares of Common Stock or
any shares of Preferred Stock for such purposes, the authorized but unissued
shares of Common Stock and Preferred Stock would be available for such purposes.
These provisions make it more difficult to effect a change in control of the
Company or to obtain approval of any proposal to amend the Certificate or to
effect certain mergers, asset sales or exchanges or other extraordinary
corporate transactions which might be opposed by the incumbent Board of
Directors.
The By-laws of the Company contain provisions requiring that any stockholder
desiring to bring an item of business before an annual meeting of stockholders
or to nominate a person for election as a director must provide written notice
thereof to the Company not less
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than 50 days nor more than 75 days prior to the meeting unless notice of the
meeting is given less than 65 days in advance, in which case the stockholder's
notice must be received not later than 15 days following the date on which
notice of the meeting was given (Sections 4 and 12(b)). In addition, the By-laws
provide that special meetings of the stockholders may be called only by the
Chairman of the Board or by a majority of the Board of Directors (Section 9).
These provisions make it more difficult for a stockholder to bring stockholder
action not supported by management or to effect a change in management.
The provisions of the Certificate and By-laws described above may in certain
circumstances make more difficult or discourage a takeover of the Company and,
thus, the removal of incumbent management. Management has no knowledge of any
specific effort to accumulate shares of Common Stock or to obtain control of the
Company by means of a merger, tender offer, solicitation or otherwise. These
provisions are designed to assist the Company in carrying out its long-term
strategy for enhancement of stockholder value and to encourage persons
interested in business combinations to negotiate with the Company. The Company
has no present intention to adopt other anti-takeover measures, although it is
possible that circumstances could arise which would cause the Company to do so.
RECENT DEVELOPMENTS
The Shares were issued by the Company to the Selling Stockholders in
connection with the acquisition of Clark Industries, Inc. ("Clark") and
Touchstone, Inc. ("Touchstone") pursuant to the Clark Exchange Agreement and the
Touchstone Exchange Agreement, respectively, and other related side agreements.
As a result of such acquisitions, Clark became a wholly owned subsidiary of a
wholly owned subsidiary of the Company and Touchstone became a wholly owned
subsidiary of the Company. Clark, headquartered in Gilman, Illinois, is a
leading manufacturer of cylinder heads, pistons and liner assemblies for
railroad locomotives. Touchstone, headquartered in Jackson, Tennessee, is a
leading supplier of new and remanufactured locomotive cooling systems. See
"Selling Stockholders."
LEGAL MATTERS
The validity of the Common Stock offered by this Prospectus will be passed
upon for the Company by David A. Channer, Associate General Counsel to the
Company.
EXPERTS
The consolidated financial statements and the related financial statement
schedule incorporated in this Prospectus by reference from the Company's Annual
Report on Form 10-K for the year ended December 31, 1992, have been audited by
Deloitte & Touche, independent auditors, as stated in their report, which is
incorporated herein by reference (which report expresses an unqualified opinion
and includes an explanatory paragraph referring to the change in the Company's
method of accounting for post-retirement health care costs in 1992 to conform
with Statement of Financial Accounting Standards No. 106), and have been so
incorporated in reliance upon the report of such firm given upon their authority
as experts in accounting and auditing.
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No person has been authorized to give any information or to make any
representations other than those contained in this Prospectus, and, if given or
made, such information or representations must not be relied upon as having been
authorized. This Prospectus does not constitute an offer to sell or the
solicitation of an offer to buy any securities other than the securities to
which it relates or any offer to sell or the solicitation of an offer to buy
such securities in any circumstances in which such offer or solicitation is
unlawful. Neither the delivery of this Prospectus nor any sale made hereunder
shall, under any circumstances, create any implication that there has been no
change in the affairs of the Company since the date hereof or that the
information contained herein is correct as of any time subsequent to its date.
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PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The registrant estimates that expenses in connection with the offering
described in the Registration Statement will be as follows:
<TABLE>
<CAPTION>
Item Amount
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<S> <C>
Securities and Exchange Commission Registration Fee $ 7,258
Printing and Engraving Expenses 200
Accountants' Fees and Expenses 2,000
Legal Fees and Expenses 5,000
Miscellaneous 542
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Total $ 15,000
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145(a) of the Delaware General Corporation Law (the "DGCL")
provides in relevant part that "a corporation may indemnify any person who was
or is a party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the corporation), by
reason of the fact that he is or was a director, officer, employee or agent of
the corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding if he acted
in good faith and in a manner he reasonably believed to be in or not opposed to
the best interests of the corporation, and, with respect to any criminal action
or proceeding, had no reasonable cause to believe his conduct was unlawful."
With respect to derivative actions, Section 145(b) of the DGCL provides in
relevant part that "[a] corporation may indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action or suit by or in the right of the corporation to procure a
judgment in its favor . . . [by reason of his service in one of the capacities
specified in the preceding sentence] against expenses (including attorneys'
fees) actually and reasonably incurred by him in connection with the defense or
settlement of such action or suit if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation and except that no indemnification shall be made in respect of any
claim, issue or matter as to which such person shall have been adjudged to be
liable to the corporation unless and only to the extent that the Court of
Chancery or the court in which such action or suit was brought shall determine
upon application that, despite the adjudication of liability but in view of all
the circumstances of the case, such person is fairly and reasonably entitled to
indemnify for such expenses which the Court of Chancery or such other court
shall deem proper."
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The Company's Restated Certificate of Incorporation, Article Eleventh,
provides that each person who is or was or who had agreed to become a director
or officer of the Company or who had agreed at the request of the Company's
Board of Directors or an officer of the Company to serve as an employee or agent
of the Company or as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, shall be
indemnified by the Company to the full extent permitted by the DGCL or any other
applicable laws. Such article also provides that the Company may enter into one
or more agreements with any person which provides for indemnification greater or
different than that provided in such Article Eleventh, and that no amendment or
repeal of Article Eleventh shall apply to or have any effect on the right to
indemnification permitted or authorized thereunder for or with respect to claims
asserted before or after such amendment or repeal arising from acts or omissions
occurring in whole or in part before the effective date of such amendment or
repeal.
Section 45 of the Company's by-laws provides that the Company shall
indemnify to the full extent authorized by law any person made or threatened to
be made a party to an action or a proceeding, whether criminal, civil,
administrative or investigative, by reason of the fact that he, his testator or
intestate was or is a director, officer, or employee of the Company or any
predecessor of the Company or serves or served any other enterprise as a
director, officer or employee at the request of the Company or any predecessor
of the Company.
The Company has entered into indemnification agreements with its directors
and certain of its officers.
The Company has purchased and maintains insurance on behalf of any person
who is or was a director or officer against any loss arising from any claim
asserted against him and incurred by him in any such capacity, subject to
certain exclusions.
ITEM 16. EXHIBITS.
4.1 Restated Certificate of Incorporation of the Registrant (filed as
Exhibit 4.1 to the Company's Registration Statement on Form S-3
(No. 33-55402) filed on December 4, 1992, and incorporated herein
by reference).
4.2 Restated By-laws of the Registrant, as amended (filed as Exhibit
3.2 to Form 10-K Annual Report for the year ended December 31,
1992, and incorporated herein by reference).
4.3 Specimen Common Stock Certificate (filed as Exhibit 4.5 to the
Company's Registration Statement on Form S-3 (No. 33-40502) filed
on May 10, 1991 and incorporated herein by reference).
II-2
<PAGE>
4.4 Rights Agreement dated as of June 12, 1986 (the "Rights
Agreement") between the Company and Chemical Trust Company of
California as Rights Agent (filed as Exhibit 1 to the Company's
Registration Statement on Form 8-A filed on June 23, 1986, and
incorporated herein by reference), and Amendment to the Rights
Agreement dated July 7, 1988 (filed as Exhibit 3 to the Company's
Current Report on Form 8-K dated July 7, 1988, and incorporated
herein by reference).
4.5* Share Exchange Agreement dated as of December 30, 1993, among
Richard J. Clark, Dennis E. Clark and Richard K. Clark, the
Company, Morrison Knudsen Corporation, an Ohio corporation, and
Clark Industries, Inc.
4.6* Share Exchange Agreement dated as of January 31, 1994, among
Theodore E. Nelson, Richard L. Jacobs, James L. Fri, Jr. and
Ellida S. Fri, the Company and Touchstone, Inc.
5.1* Opinion of David A. Channer, Associate General Counsel to the
Company.
23.1* Consent of David A. Channer (included in Exhibit 5.1).
23.2* Consent of Deloitte & Touche.
24.1* Powers of Attorney of certain Directors and Officers of the
Company (Ms. Peden, Messrs. Agee, Arrillaga, Fox, Gorman,
Hemmeter, Howland, Lynch, McCabe, Roche, Rogers, Sarsten and
Ueberroth).
* Filed herewith.
ITEM 17. UNDERTAKINGS.
The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 that is incorporated by reference in this
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling person of the
registrant, the registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public policy
as expressed in the Securities Act of 1933 and is, therefore, unenforceable. In
the event that a claim for indemnification against such liabilities (other than
the payment by the registrant of expenses incurred or paid by a director,
officer or controlling person of the registrant in the successful defense of
any action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the matter
II-3
<PAGE>
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made of
the securities registered hereby, a post-effective amendment to this
Registration Statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the Prospectus any facts or events arising after
the effective date of the Registration Statement (or the most recent post-
effective amendment thereof) which, individually or in the aggregate, represent
a fundamental change in the information set forth in the Registration Statement;
and
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the Registration Statement or any
material change to such information in the Registration Statement;
PROVIDED, HOWEVER, that the undertakings set forth in paragraphs (i) and (ii)
above do not apply if the Registration Statement is on Form S-3 or Form S-8, and
the information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed by the Registrant pursuant to
Section 13 or Section 15(d) of the Securities Exchange Act of 1934 that are
incorporated by reference in the Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.
(4) That, for purposes of determining any liability under the Securities
Act of 1933, each filing of the registrant's annual report pursuant to Section
13(a) or Section 15(d) of the Securities Exchange Act of 1934 that is
incorporated by reference in this Registration Statement shall be deemed to be a
new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this registration
statement, or amendment thereto, to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Boise, State of Idaho, on February 18,
1994.
MORRISON KNUDSEN CORPORATION
/s/ Stephen G. Hanks
By:
---------------------------------
Stephen G. Hanks
Executive Vice President -
Administration and Finance
Pursuant to the requirements of the Securities Act of 1933, this
registration statement, or amendment thereto, has been signed by the following
persons in the capacities and on the date indicated.
Signature Title Date
--------- ----- ----
WILLIAM J. AGEE * Chairman and Chief Executive February 18, 1994
- ---------------------- Officer (Principal Executive
(William J. Agee) Officer and Director)
EDMUND J. GORMAN * Senior Vice President and February 18, 1994
- ---------------------- Chief Financial Officer
(Edmund J. Gorman) (Principal Financial Officer)
MARK E. HOWLAND* Controller February 18, 1994
- ---------------------- (Principal Accounting Officer)
(Mark E. Howland)
JOHN ARRILLAGA * Director February 18, 1994
- ----------------------
(John Arrillaga)
Director
- ---------------------- -----------------
(Zbigniew Brzezinski)
LINDSAY E. FOX * Director February 18, 1994
- ----------------------
(Lindsay E. Fox)
II-5
<PAGE>
C. B. HEMMETER * Director February 18, 1994
- ----------------------
(C. B. Hemmeter)
PETER S. LYNCH * Director February 18, 1994
- ----------------------
(Peter S. Lynch)
ROBERT A. McCABE * Director February 18, 1994
- ----------------------
(Robert A. McCabe)
IRENE C. PEDEN * Director February 18, 1994
- ----------------------
(Irene C. Peden)
GERARD R. ROCHE * Director February 18, 1994
- ----------------------
(Gerard R. Roche)
JOHN W. ROGERS, JR. * Director February 18, 1994
- ----------------------
(John W. Rogers, Jr.)
GUNNAR E. SARSTEN * Director February 18, 1994
- ----------------------
(Gunnar E. Sarsten)
PETER V. UEBERROTH * Director February 18, 1994
- ----------------------
(Peter V. Ueberroth)
* Stephen G. Hanks, by signing his name hereto, does hereby sign this
Registration Statement on behalf of each of the above-named officers and
directors of Morrison Knudsen Corporation on this 18th day of February, 1994,
pursuant to powers of attorney executed on behalf of each such officer and
director.
/s/ Stephen G. Hanks
By:
-------------------------------------------
Stephen G. Hanks
Attorney-in-Fact
II-6
<PAGE>
EXHIBIT INDEX
SEQUENTIAL
NUMBER AND DESCRIPTION OF EXHIBIT PAGE NUMBER
- --------------------------------- -----------
4.1 Restated Certificate of Incorporation of the Registrant
(filed as Exhibit 4.1 to the Company's Registration
Statement on Form S-3 (No. 33-55402) filed on December 4,
1992, and incorporated herein by reference).
4.2 Restated By-laws of the Registrant, as amended (filed as
Exhibit 3.2 to Form 10-K Annual Report for the year ended
December 31, 1992, and incorporated herein by reference).
4.3 Specimen Common Stock Certificate (filed as Exhibit 4.5 to
the Company's Registration Statement on Form S-3 (No. 33-
40502) filed on May 10, 1991 and incorporated herein by
reference).
4.4 Rights Agreement dated as of June 12, 1986 (the "Rights
Agreement") between the Company and Chemical Trust Company
of California as Rights Agent (filed as Exhibit 1 to the
Company's Registration Statement on Form 8-A filed on June
23, 1986, and incorporated herein by reference), and
Amendment to the Rights Agreement dated July 7, 1988 (filed
as Exhibit 3 to the Company's Current Report on Form 8-K
dated July 7, 1988, and incorporated herein by reference).
4.5* Share Exchange Agreement dated as of December 30, 1993,
among Richard J. Clark, Dennis E. Clark and Richard K.
Clark, the Company, Morrison Knudsen Corporation, an Ohio
corporation, and Clark Industries, Inc.
4.6* Share Exchange Agreement dated as of January 31, 1994, among
Theodore E. Nelson, Richard L. Jacobs, James L. Fri, Jr. and
Ellida S. Fri, the Company and Touchstone, Inc.
5.1* Opinion of David A. Channer, Associate General Counsel to
the Company.
23.1* Consent of David A. Channer (included in Exhibit 5.1).
23.2* Consent of Deloitte & Touche.
24.1* Powers of Attorney of certain Directors and Officers of the
Company (Ms. Peden, Messrs. Agee, Arrillaga, Fox, Gorman,
Hemmeter, Howland, Lynch, McCabe, Roche, Rogers, Sarsten and
Ueberroth).
_______________________
* Filed herewith.
<PAGE>
Exhibit 4.5
SHARE EXCHANGE AGREEMENT
This Exchange Agreement ("Agreement") dated as of December 30, 1993, is
entered into by and among Richard J. Clark, Dennis E. Clark and Richard K.
Clark (hereinafter individually "Shareholder" and collectively
"Shareholders"), Clark Industries, Inc., an Illinois Corporation (the
"Company"), Morrison Knudsen Corporation, a Delaware corporation ("MK") and
Morrison Knudsen Corporation, an Ohio Corporation ("Buyer"). In consideration
of the mutual promises and covenants contained in this Agreement, the parties
hereto agree as follows:
SECTION L STRUCTURE OF SHARE EXCHANGE
1.1 Subject to the terms and conditions of this Agreement, Shareholders will
transfer to Buyer, and Buyer will receive from Shareholders, seven (7)
shares of the Company's common stock representing all of the issued and
outstanding shares of stock in the Company. The consideration received
by each Shareholder shall be the equivalent of $400,000 in shares of the
common stock of MK (as determined by using the average NYSE closing
price of MK shares for the ten (10) days prior to the signing of this
Agreement). The common stock of MK is sometimes referred to hereafter
as "MK Common". MK, on behalf of Buyer, shall deliver to Shareholders
stock certificates in accordance with Schedule 1 representing said
number of shares, and representing the consideration less the amount to
be held in escrow as provided in Section 3 hereof, in exchange for the
delivery by Shareholders of stock certificates representing 100% of the
issued shares of the Company (7 shares) and result in the Company as a
100 % owned subsidiary of Buyer.
1.2 All shares received from Shareholders by Buyer shall be free from any
restrictions, liens, encumbrances, claims (including any "adverse claim"
as such term is defined in the Uniform Commercial Code), options, calls,
pledges, trusts and other commitments, agreements or arrangements.
1.3 MK shares delivered to Shareholders will be in whole shares (rounded to
the nearest whole share) in amounts most nearly proportionate to each
Shareholders ownership of the Company shares as set forth in Schedule 1.
No cash payments in lieu of fractional shares will be delivered for
partial shares.
SECTION 2 CLOSING
2.1 The closing of the transactions contemplated by this Agreement (the
"Closing") shall take place at the offices of MK at One Morrison Knudsen
Plaza Boise, Idaho, within five (5) business days following the
satisfaction of the conditions precedent set forth in Sections 9 and 10
hereof, or at such other place, date and time as the parties hereto may
agree in writing, but in no event later than December 31, 1993.
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<PAGE>
2.2 For the purpose of determining the amount of the net worth of the
Company as of the time of Closing, the net worth as of the month-end
immediately preceding the date of Closing shall be deemed the net worth
as of the date of Closing for all purposes of this Agreement. Such
financial statements will be prepared in accordance with Generally
Accepted Accounting Principles ("GAAP"), consistently applied.
SECTION 3 ESCROW
At closing, MK shall deliver to Key Trust Company of the West, Boise Idaho
("Escrow Agent"), the equivalent of $120,000 in shares of MK common stock,
valued as in Section 1 above and issued to the Shareholders. At Shareholders'
option, exercisable at any time on or after the date Shareholders may sell
their Shares pursuant to Section 4.3 of the Share Exchange Agreement,
Shareholders may deliver cash to Escrow Agent in the amount of $120,000 and
immediately receive all MK shares then held in escrow or direct Escrow Agent
to sell MK shares whereby all proceeds from sale will be held in escrow as
herein provided. Whether the escrow fund consists of MK shares or cash, the
escrow fund shall be held by Escrow Agent until the expiration of one year
following the Closing date pursuant to the terms of an escrow agreement in
substantially the form of Exhibit "A" attached hereto. At the expiration of
such period, the escrow agent shall deliver to Shareholders such shares of MK
common stock (which shall be fully transferable and freely tradeable by
Shareholders) less any amounts paid or owed to the Company or Buyer pursuant
to Sections 5 and 11 hereof, if cash is then on deposit as the escrow fund,
the Escrow Agent shall deliver such cash as is then remaining in the escrow
fund to Shareholders.
SECTION 4 REGISTRATION AND RESALE OF SHARES OF MK COMMON
4.1 Each Shareholder hereby represents that he is acquiring the shares of MK
Common pursuant to this Agreement for his own account and not with a
view to, or for the resale in connection with, any distribution of
public offering thereof within the meaning of the Securities Act of 1933
(the "1933 Act"). Each of Richard J. Clark, Dennis E. Clark and Richard
K. Clark represents that he is a sophisticated investor for the purposes
of the 1933 Act and has such knowledge and expertise in financial and
business matters that he is capable of evaluating the merits and risks
of the shares of MK Common being delivered pursuant to Section 1.1. The
Shareholders have been provided with copies of MK's 1992 Annual Report,
Form 10-K and Proxy Statement, and MK's Quarterly Reports to
Shareholders and Form 10-Q's for the quarters ending March 31, 1993,
June 30, 1993, and September 30, 1993, as amended (collectively, the
"SEC Documents"), and access to MK's executive officers has been
provided to the Shareholders. The Shareholders understand that the
shares of MK Common have not been registered under the 1933 Act by
reason of their contemplated issuance by MK in a transaction exempt from
the registration and prospectus delivery requirements of the 1933 Act
pursuant to Section 4(2) thereof, and that the reliance of MK upon this
exemption is predicated in part upon this representation and warranty by
the Shareholders.
2
<PAGE>
4.2 The Shareholders shall not sell or otherwise transfer any of their
shares of MK Common until (a) such shares of MK Common shall have been
registered under the 1933 Act, or (b) MK shall have received an opinion
of legal counsel or a copy of a letter from the staff of the Division of
Corporation Finance of the Securities and Exchange Commission, in either
case satisfactory to MK, that such shares may be legally sold or
otherwise transferred without such registration. Such restrictions
shall be noted on the certificates for the shares of MK Common issued
pursuant to Section 1.1 hereof, and appropriate stop transfer orders may
be issued by MK with respect to such shares of MK Common.
4.3 As soon as practicable following the Closing, MK shall take such steps
as shall be necessary to cause such shares of MK Common to be issued to
the Shareholders pursuant to this Agreement to be registered to the
extent necessary to permit their public sale or other disposition
following the Closing. The parties acknowledge that MK intends to
accomplish such registration by (i) filing a Form S-3 Registration
Statement with the Securities and Exchange Commission, and MK using its
best efforts to cause such registration to be effective on or before
February 15, 1994, and (2) filing a Form 8-K reporting the closing of
the transactions contemplated by this Agreement and the issuance of
shares of MK pursuant hereto as soon as practicable after the Closing.
Notwithstanding the compliance with the securities laws as described in
this section, the Shareholders agree not to sell any of their shares of
MK Common until MK has publicly reported consolidated earning of the
Company and MK for a period of at least 30 days, however all dividends
declared on such shares after the Closing Date shall be payable to
Shareholders. Assuming effectiveness of the Form S-3 Registration
Statement, Shareholders shall be able to sell shares of MK Common Stock
after such publication which will occur by May 1, 1994. MK or Buyer
shall notify the Shareholders upon the later of (1) the effectiveness of
the S-3 Registration Statement, (2) the filing of the 8-K or (3) MK's
public reporting of consolidated earnings of the Company and MK for a
period of at least 30 days.
SECTION 5 GENERAL REPRESENTATIONS, WARRANTIES AND COVENANTS
Shareholders, jointly and severally, represent and warrant as follows:
5.1. The Company is an organization duly organized, validly existing and in
good standing under the laws of Illinois. The Company has the corporate
power and authority to carry on its business as presently conducted.
5.2 (a) The authorized capital stock of the Company consists of
twenty-five (25) shares of common stock (no par value), of which
seven (7) shares are issued and outstanding, fully-paid and
nonassessable, and no shares of preferred stock are issued and
outstanding.
3
<PAGE>
(b) Shareholders, in accordance with Schedule 1, own all the
outstanding shares of the Company's capital stock, free and clear
of all liens, claims, options, charges or encumbrances of
whatsoever nature.
(c) There are no outstanding options, warrants, or other agreements of
any nature whatsoever relating to the issuance of any shares of
capital stock of the Company.
5.3 The copies of the Certificate of Incorporation, and all amendments
thereto, of the Company, certified by the appropriate authorities of the
jurisdiction of incorporation, and of the By-Laws, as amended to date,
of the Company, certified by its Secretary, which have heretofore been
delivered to Buyer, are complete and correct.
5.4 The Company is duly licensed or qualified to do business as a foreign
corporation in each of the jurisdictions set forth on Schedule 5.4
hereto, which are the only jurisdictions wherein the character of the
properties owned or the nature of the business transacted by it makes
such licensing or qualification necessary.
5.5 At the Closing, Shareholders will deliver to Buyer certificates of good
standing with respect to the Company, certified (as of the latest
practicable date prior to the Closing) by the appropriate authorities of
Illinois and of each jurisdiction in which it is qualified to do
business as a foreign corporation.
5.6 Shareholders have no direct or indirect interest in any corporation or
business with which the Company competes and do not conduct any business
similar to any business conducted by the Company or Buyer, except for
the possible ownership of not more than one percent (1%) of the
outstanding equity securities of any corporation whose shares are
regularly traded on any stock exchange or in the over-the-counter
market. Shareholders have no direct or indirect interest in any
corporation or business which supplies materials or parts to the
Company, except for the possible ownership of not more than one percent
(1%) of the outstanding equity securities of any corporation whose
shares are regularly traded on any stock exchange or over-the-counter
market.
5.7 The execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby does not and will not violate any
provisions of any material agreement or violate or conflict with any
other restrictions of any kind or character to which the Company or any
shareholder is a party or by which either of them is bound.
Shareholders have the unqualified right to sell, assign and deliver the
Company Shares to Buyer, and the unqualified right upon consummation of
the transactions contemplated by this Agreement, to pass to Buyer good
and valid title to such shares, free and clear of all liens, claims,
options, charges or encumbrances of whatsoever nature.
5.8 (a) Company has delivered to Buyer unaudited financial statements
(containing balance sheets and related statements of income,
shareholders' equity and cash flows, and accompanying notes) for
the years-ended December 31, 1989-1992
4
<PAGE>
(Schedule 5.8(a)). Such financial statements fairly present the
financial position of the Company and the results of their
operations and their cash flows for the years then ended in
conformity with GAAP applied on a consistent basis, and include no
material misstatements or omissions.
(b) Schedule 5.8(b) is a balance sheet and statement of income of the
Company as of and for the eleven (11) months ended, November 30,
1993. Such financial statements fairly present the financial
condition and assets and liabilities (whether accrued, absolute,
contingent or otherwise) of the Company as of November 30, 1993,
and the results of its operations for the period then ended, in
accordance with GAAP applied on a consistent basis, and include no
material misstatements or omissions. The November 30, 1993
balance sheet is referred to herein as the "Balance Sheet."
(c) The Company's Balance Sheet consists of a consolidated tangible
net book value of not less than $325,000 (Three Hundred Twenty
Five Thousand Dollars) and all accounts receivable therein will be
collectable by November 30, 1994. With respect to any receivables
not so collected by November 30, 1994, if either MK or Buyer makes
a claim for such account receivable and: (i) Shareholders agree
to the allowance of the claim; or, (ii) a legal determination
allowing the claim for MK or Buyer; then after payment of the
receivable from the escrow or from the Shareholders the remainder
of the account receivable, if any, shall revert to the
Shareholders as their sole property free of any right, title,
interest or claim of MK or Buyer.
(d) Company shall deliver to Buyer updated balance sheets, statements
of income and changes in financial condition and summary of
accounts receivable of the Company within fifteen days of the
close of each month until Closing.
(e) The Company has delivered to Buyer Proforma Income Statement
Forecasts for 1994, 1995 and 1996 (Schedule 5.8.(e)). The
Projected Financial Statements are reasonable and mathematically
accurate, and to the best knowledge of the Shareholders and the
Company, the assumptions underlying such projections provide a
reasonable basis for such projections. To the best knowledge of
the Shareholders and the Company, the factual data used to prepare
the Projected Financial Statements are true and correct in all
material respects and do not fail to represent known events
existing which may have a material adverse effect on the Company's
expected financial performance. The Projected Financial
Statements do not represent a guarantee of the future performance
of the Company.
5.9 Except as and to the extent reflected or reserved against in the Balance
Sheet or in any of the schedules attached hereto, and except for
purchase or sales contracts or, commitments in the ordinary course of
business and not required to be disclosed in any
5
<PAGE>
schedule hereto by reason of specific exclusions in this Agreement, the
Company as of the date of such Balance Sheet had no liabilities or
obligations of any nature, whether absolute, accrued, contingent or
otherwise and whether due or to become due (including, without
limitation, liabilities for taxes in respect of or measured by the
income of the Company, and liabilities for taxes arising out of any
transaction of the Company entered into prior to such date or out of any
state of facts existing prior thereto).
5.10 Except as disclosed in Schedule 5.10 or disclosed in this Agreement or
any other schedule hereto, from the date of the Balance Sheet, the
Company has not:
(a) Suffered any material adverse change in its financial conditions,
assets, liabilities or business;
(b) Incurred any obligation or liability (whether absolute, accrued or
contingent) other than in the ordinary course of its business and
consistent with past practice;
(c) Paid any claim or discharged or satisfied any lien encumbrance or
obligation, or paid or satisfied any lien or liability (whether
absolute, accrued or contingent), other than liabilities shown or
reflected in the Balance Sheet or incurred subsequent to the date
of the Balance Sheet in the ordinary course of business and
consistent with past practice;
(d) Permitted or allowed any of its assets, tangible or intangible, to
be mortgaged, pledged or subjected to any liens or encumbrances;
(e) Written down the value of any inventory or written off as
uncollectible any notes or accounts receivable or any portion
thereof, except for write-offs and write-downs of such items in
the ordinary course of business and at a rate no greater than
during the fiscal year ended December 31, 1992;
(f) Canceled any other debts or claims or waived any rights of
substantial value or sold or transferred any of its assets except
in the ordinary course of business and consistent with past
practice;
(g) Granted any general uniform increase in the compensation of
employees (including any such increase pursuant to any bonus,
pension, profit sharing or other plan or commitment) or any
substantial increase in any such compensation payable or to become
payable by it to any officer or employee;
(h) Made any capital expenditures or commitments in excess of an
aggregate of $10,000 for the Company for additions to property,
plant or equipment;
(i) Except in the ordinary course of business, declared, paid or set
aside for payment to its stockholders any dividend or other
distribution in respect of its capital stock
6
<PAGE>
or redeemed or purchased or otherwise acquired any of its capital
stock or any options relating thereto or agreed to take any such
action;
(j) Made any material change in any method of accounting or accounting
practice;
(k) Paid any amounts to or in respect of, or sold or transferred any
assets to, any company, a substantial portion of the capital stock
of which is owned by the Company;
(l) Experienced any material labor difficulty;
(m) Paid, accrued or incurred any management fees to any related party
or affiliated company or made any other payment or incurred any
other liability to a related party;
(n) Incurred any property damage, whether or not covered by insurance.
5.11 The Company has duly filed all tax reports and returns required to be
filed by it and has duly paid all taxes and other charges due or claimed
to be due from it by foreign, federal, state or local taxing authorities
(including, without limitation, those due in respect of its properties,
income, franchises, licenses, sales, assets, and customs duties). All
taxes determined or claimed to be due have been paid; and reserves for
taxes contained in the Balance Sheet and carried on the books of the
Company as of the Closing Date are adequate to cover its tax
liabilities; and, except as may be noted on the Balance Sheet, there are
no pending questions relating to, or claims asserted for, taxes or
assessments against the Company.
5.12 The Company has good and marketable title to all of its properties and
assets, real and personal, tangible and intangible, including, without
limitation, the properties and assets reflected in the Balance Sheet.
Schedule 5.12 hereof contains a summary listing of all owned real
property and equipment including that reflected in such Balance Sheet,
together with the leased property identified in Section 5.14 hereof,
comprise all the tangible assets used by the Company which are necessary
to its
7
<PAGE>
operation. Except as disclosed in Schedule 5.12, such properties and
assets (as well as any other properties and assets used in the
businesses of the Company) are subject to no mortgage, pledge, lien,
conditional sale agreement, encumbrance or charge of whatsoever nature.
Liens for current taxes not yet due, and minor imperfections of title
and encumbrances, if any, which are not in the aggregate substantial in
amount, do not materially detract from the value of the property subject
thereto or materially impair the operations of the Company, and have
arisen only in the ordinary course of business and are consistent with
past practice.
(a) Except as disclosed on Schedule 5.12(a), all equipment and
property on the premises (other than the Las Casiana equipment
described below and the Las Casiana patterns) of material
significance in the operation of the Company, is owned or leased
by the Company. Company and Shareholders represent and MK and
Buyer understand that though Company is currently using a certain
CNC lathe and automatic multiple drill with tooling, which
equipment is currently located on the real estate leased by
Company from Richard J. Clark, that title to said CNC lathe and
automatic multiple drill with tooling is claimed by Las Casiana, a
Mexican Corporation ("Las Casiana"); that Shareholders reserve the
right to make claims against said CNC lathe and automatic multiple
drill with tooling in the event the contingencies specified in
5.8(c) arise; that Company and Shareholders are not selling or
transferring title to said CNC lathe or automatic multiple drill
with tooling to MK or Buyer nor are Company or Shareholders in a
legal position to transfer title or sell said CNC lathe and
automatic multiple drill with tooling to MK or Buyer; that MK and
Buyer will only make a claim against said CNC lathe and automatic
multiple drill with tooling in the event that the account
receivable from Las Casiana is not paid within 12 months of the
date of this Agreement and that in the event said account
receivable is paid, neither MK nor Buyer will make any claim upon
or to said CNC lathe and automatic multiple drill with tooling.
5.13 Schedule 5.13 entitled "Plant and Equipment" describes all plant and all
physical assets having a value of $2,000 or more. The plant, structures
and equipment of the Company are structurally sound (with no known
defects material to the suitability thereof to present operations) and
in good operating condition and repair, ordinary wear and tear excepted,
and are in compliance with all applicable safety laws and regulations;
zoning laws and building codes.
5.14 Schedule 5.14 annexed hereto identifies all leases, and the duration
thereof, pursuant to which the Company leases or intends to lease real
or personal property, and sets forth the major terms and conditions of
such leases, including terms and lease payments. All such leases are
valid and in full force and effect.
5.15 Except as set forth on the Schedule 5.15, entitled "Intellectual
Property", attached hereto, Company does not own or use and has not
applied for, or licensed any patents, patent applications, trademarks,
service marks, trade names or copyrights (or any applications for or
extensions or reissuance of, any of the foregoing). True, correct and
complete copies of the items identified on such Schedule have been
delivered to Buyer. The Company solely owns or has the exclusive right
to use, free and clear of any payment,
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restriction or encumbrance, all patents, trademarks, service marks,
trade names and copyrights (or any applications for or extensions or
reissuance of, any of the foregoing) set forth on such Schedule and all
are, or will at the Closing Date have been assigned to Company. There
is no claim or demand of any person pertaining to, or any proceedings
which are pending or, to the best of the Shareholders' and Principal's
knowledge, threatened, which challenge (i) the rights of the Company in
respect of any patents, trademarks, service marks, trade names or
copyrights (or applications for, or extensions or reissuance of, any of
the foregoing) which are or have been used in the conduct of, or which
relate to, its respective business or which are owned by it, or (ii) the
rights of the Company in respect of any processes, formulas,
confidential information, trade secrets, know-how, engineering data,
technology or other intellectual property which are or have been used in
the conduct of, or which relate to, the Company's business or which are
owned by the Company's (collectively "Intellectual Property"). No
Intellectual Property is subject to any outstanding order, ruling,
decree, judgment or stipulation by or with any Governmental Authority or
any contract, agreement, commitment or undertaking with any person, or
infringes or, to the best of the Shareholders' and Principal's
knowledge, is being infringed by others or is used by others (whether or
not such use constitutes infringement). To the best of the
Shareholders' and Principal's knowledge, the Company's business does not
involve employment of any person in a manner which violates any
non-competition or non-disclosure agreement which such person entered
into in connection with any former employment. All Intellectual
Property owned or held, directly or indirectly, by any officer,
director, shareholder, or employee of the Company has been, or prior to
the Closing Date will have been, duly and effectively transferred to the
Company. All Intellectual Property and assets used by the Company or
being developed with Company funds are in Company possession. Set forth
on the Schedule entitled "Intellectual Property" is a description of all
litigation, actions, suits, investigations, claims and proceedings,
asserted, brought or threatened against the Company within the ten years
preceding the date hereof, together with a description of the outcome
thereof, relating to any Intellectual Property. Schedule 5.15 also
includes a complete and accurate list of all engineering drawings, dies,
molds and other tooling or equipment used in the Company's business,
whether located at the Company or at its customers and suppliers and the
Company has good and marketable title to all such tooling, free and
clear of any and all liens.
5.16 Except as set forth on Schedule 5.16 annexed hereto, there are no
actions, proceedings, or investigations pending or threatened against
the Company, nor is there any basis for any such action, proceeding, or
investigation that may materially adversely affect the business or
assets of the Company. There is no event or condition of any kind or
character pertaining to the business or assets of the Company that may
materially adversely affect any such business or assets, except for the
impact of future general economic conditions.
5.17 (a) Schedule 5.17 sets forth a complete and accurate list of all
policies of fire, liability, and other forms of insurance. The
policies described in Schedule 5.17 annexed hereto are in effect
with respect to the Company and are valid,
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outstanding and enforceable policies. The amount of coverage for
each policy has been at least equal to the amount required by
contracts entered into by the Company; and they provide adequate
insurance coverage for the assets and operations of the Company;
and such policies or comparable policies will by their terms
(absence cancellation after the Closing) remain in full force and
effect for at least 30 days after the Closing. Neither
Shareholders nor the Company have been notified of any proposed
increase in the premiums relating to such policies nor of any
facts or events which could give rise to an increase, and know of
no reason why the premiums might increase as a result of this
transaction. Neither the Company nor any of the Shareholders have
any knowledge of any facts or events which may form the basis for
a claim against the above policies or forms of insurance.
(b) The reserves for workers compensation liability as disclosed in
the Balance Sheet are adequate to pay or settle all workers
compensation claims for injuries and illness that occurred prior
to the Balance Sheet date, including attorneys' fees and related
and incidental expenses related thereto.
5.18 Schedule 5.18 annexed hereto sets forth the names and locations of all
banks in which the Company has accounts and the names of all persons
authorized to draw thereon.
5.19 Except as set forth in Schedule 5.19 annexed hereto or in this Agreement
and the schedules hereto:
(a) The Company has no contracts or commitments which are material to
the business, operations or financial condition of the Company
other than those described in this Agreement or any of the
schedules annexed hereto or pursuant hereto by reason of a
specific exclusion contained herein;
(b) There are no purchase commitments by the Company in excess of the
normal, ordinary and usual requirements of the business of the
Company or at any excessive price;
(c) There are no outstanding contracts or commitments which in the
aggregate will result in any material loss to the Company upon
completion of performance thereof, after allowance for direct
distribution expenses. Neither the Company nor Shareholders have
any reason to believe that there are any outstanding contracts,
bid or sales or service proposals quoting prices which in the
aggregate will not result in a normal profit to the Company.
Schedule 5.19(c) identifies all outstanding bids and proposals;
(d) Schedule 5.19(d) sets forth a true and correct aged listing by
customer of the accounts receivable as of the Balance Sheet date,
and all accounts receivable as set forth on the Balance Sheet are
current and collectible net of any reserves set
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forth on the Balance Sheet. There is no claim or right of off-set
to any such accounts receivables;
(e) There are no product liability claims (other than fully insured)
of which the Company or Shareholders have received notice, and
neither knows or have any reason to believe that any such claims
are threatened;
(f) The Company has no outstanding contracts with officers, employees,
agents, consultants, advisors, salesmen, sales representatives,
distributors or dealers that are not cancelable by it on notice of
not longer than 30 days and without liability, penalty or premium;
(g) The Company has given no irrevocable power of attorney to any
person, firm or corporation for any purpose whatsoever;
(h) The Company has no employment agreements, or any agreements that
contain any severance or termination pay liabilities or
obligations;
(i) Neither the Company nor Shareholders have received any notice that
the Company is in default under any contracts made or obligations
owed by it, and neither knows or has any reason to believe that
there is any basis for any valid claim of default;
(j) The Company is not restricted by agreement from carrying on its
business anywhere in the world;
(k) Schedule 5.19(k) hereof identifies the compensation of the five
highest paid employees of the Company for the 1992 calendar year
and first nine months of 1993; and
(l) Neither the Company nor Shareholders has received any notice of
any claim that the Company is under any liability or obligation
with respect to the return of any products.
5.20 The aggregate fair market value of the inventory of the Company is not
less than the aggregate book value of the inventory as reflected in the
Balance Sheet, and on the books of the Company. Schedule 5.20 hereof
contains a complete listing of inventory by class and stage of
completion as of the date stated thereon. Such inventory consists of a
quality and quantity usable and salable in the ordinary course of
business, except for items of obsolete materials or below standard
quality, all of which have been written down in the Balance Sheet and on
such books to realizable market value, or for which adequate reserves
have been provided in such Balance Sheet and on such books.
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5.21 All contracts or legally binding commitments for the purchase of raw
materials and supplies by the Company were made in the ordinary or
normal course of business, and all commitments in excess of $10,000 are
as shown on Schedule 5.21.
5.22 Except as set forth in Schedule 5.22 annexed hereto, the Company has not
experienced any material labor difficulties within the five years
preceding the date hereof.
5.23 The Company is not a party to or is bound by any labor or collective
bargaining agreement.
5.24 Neither the execution nor delivery of this Agreement nor the
consummation of the transactions contemplated hereby will constitute a
violation of any rule, regulation, order judgment or decree of any court
or of any local government.
5.25 Except as disclosed on Schedule 5.25, Shareholders provide no material
services to Company.
5.26 Except as disclosed on Schedule 5.26, Company has no contracts to
provide goods and services to Shareholders, or any business in which
Shareholders own more than 1% of the stock.
5.27 Neither the Company, nor any of its Shareholders, has incurred on behalf
of Company any liability to any broker, finder or agent for any
brokerage fees, finders' fees or commissions related to this
transaction.
5.28 Neither the Company nor any Shareholders, nor any officer or director of
Company, its employees, agents or representatives has made any illegal
contributions, payments, falsely recorded payments, bribes, or illegal
payments from corporate funds to obtain or retain business nor has any
Shareholder of the Company been convicted of bribes, defalcation or
embezzlement.
5.29 The amount of any and all product warranty claims relating to sales
occurring on or prior to Closing Date, shall not exceed the amount of
the product warranty reserve included on the Balance Sheet of the
Company, which reserve was prepared in conformity with the GAAP,
consistently applied. Schedule 5.29 contains a complete and accurate
list of all warranties, oral or written, made by the Company or its
Shareholders with respect to the Company's products.
5.30 Except as to Richard J. Clark's ownership of the real property leased to
the Company, no executive officer or director of the Company or any
"associate" (as such terms are defined in Rule 12b-2 under the
Securities Exchange Act of 1934) of any such executive officer or
director, has any material interest in any material contract or property
(real or personal), tangible or intangible, used in or pertaining to the
business of the Company.
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5.31 The Company has not guaranteed the debt or any other obligation of any
third party, or any Shareholder debt.
5.32 Schedule 5.32 entitled "Indebtedness" describes all indebtedness
(excluding accounts payable) of the Company (including description of
the amount, term, payment obligations, interest rate and payee) and none
of the agreements relating thereto allow modification of such terms as a
result of the Closing.
5.33 Except as set forth on Schedule 5.33, the Company has no foreign
representatives or agents.
5.34 Set forth on Schedule 5.34 entitled "Customers" is a complete and
accurate list of the Company's annual sales to each customer from
January 1992 through November 1993 and the Shareholders know of no
reason why any customer of the Company will cease or reduce its business
with the Company after the Closing.
5.35 Set forth on Schedule 5.35 hereto entitled "Backlog" is a complete and
accurate description of all backlog orders, including the customer
identification, value of order and expected delivery date.
5.36 Except as disclosed on Schedule 5.36 entitled "Litigation," there is no
pending or threatened litigation, action, suit, proceeding or
investigation against or involving the Company and, to the best
knowledge of Company and Shareholders there is no basis for any
litigation, action, suit, proceeding or investigation.
5.37 The Company is and has been in material compliance with all laws,
ordinances, regulations, orders, licenses, franchises and permits
applicable to it, its properties and assets, and to the operation of its
business, including, but not limited to such laws and regulations
relating to protection of the public health or environment, waste
disposal, hazardous substances or wastes and occupational health and
safety and neither the Company nor any Officer or Shareholder has made
any illegal payments, illegal political contributions or non recorded
payments to secure or retain any of the business of the Company.
5.38 Neither this Agreement, nor any Schedule or other document furnished by
or on behalf of Shareholders or the Company in connection with this
Agreement contains any untrue statement of a material fact or omits to
state any material fact necessary to make the statements contained
herein or therein not misleading. There is no fact or circumstance
known to any of the Shareholders which is likely to materially adversely
affect the condition (financial or other), properties, assets,
liabilities, business, operations or prospects of the Company which have
not been set forth in this Agreement or the Schedules hereto.
5.39 The Company has no terminated pension benefit plans.
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5.40 The Shareholders agree to take no action that would preclude treatment
of this transaction as a pooling of interest by MK. These actions
include:
(a) Company does not change the equity interest of the voting common stock
in contemplation of effecting the combination either within two years
before the plan of combination is initiated or between the dates the
combination is initiated and consummated; changes in contemplation of
effecting the combination may include distributions to stockholders and
additional issuances, exchanges and retirements of securities.
(b) The ratio of the interest of an individual common stockholder to those
of other common stockholders in the Company remains the same as a result
of the exchange of stock to effect the combination.
(c) The sale of significant assets of Company prior to consummation of a
business combination is a pooling of interests violation.
(d) The Company shareholders must hold the stock they receive for a minimum
period of thirty days of combined operations. The results of combined
operations must be published in a posteffective amendment to a
registration statement, a Form 10-Q or 8K, a quarterly report, or any
other public statement that includes sales or net income for at least
the minimum period.
5.41 There has been no change in stock ownership of the Company since
inception.
5.42 Shareholders will provide MK with a calculation of their tax basis in
the stock of the Company sufficient to meet the needs of income tax
reporting requirements of the Internal Revenue Service. Such stock
basis calculation shall be delivered to MK within 60 days of the Closing
Date.
5.43 Schedule 5.43 attached hereto sets forth a list of consents, novations,
approvals, authorizations, waivers and all other requirements which must
be obtained or satisfied by any of the Shareholders or the Company for
the consummation of the transactions contemplated by this Agreement.
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SECTION 6 EMPLOYEE BENEFIT REPRESENTATIONS AND WARRANTIES
6.1 Shareholders represent and warrant that the following is a complete and
accurate list of all the employee welfare and pension benefit plans (as
such terms are defined in Sections 3(1) and 3(2), respectively of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"),
employment practices, and policies which are either embodied in written
documents available to employees or are material to the operation of the
Company's business and which are applicable to the Company's employees
who are presently engaged in the business:
(a) Pension Benefit Plans:
NONE
(b) Benefit Plans:
HMO PROGRAM
SECTION 7 ENVIRONMENTAL REPRESENTATIONS, WARRANTIES AND COVENANTS
7.1 For purposes of this Section 7, the term "Hazardous Material" means any
substance:
(a) the presence of which requires investigation or remediation under
any federal, state or local statute, regulation, ordinance, order,
action, policy or common law; or
(b) which is or has been identified as a potential "hazardous waste,"
"hazardous substance," pollutant or contaminant under any federal,
applicable state or local statute, regulation, rules or ordinance
or amendments thereto including, without limitation, the
Comprehensive Environmental Response, Compensation and Liability
Act (42 U.S.C. section 9601 et seq.) and/or the Resource
Conservation and Recovery Act (42 U.S.C. section 6901 et seq.); or
(c) which is toxic, explosive, corrosive, flammable, infectious,
radioactive, carcinogenic, mutagenic, or otherwise hazardous and
has been identified as regulated by any governmental authority,
agency, department, commission, board, agency or instrumentality
of the United States, the State of Illinois or any political
subdivision thereof;
7.2 For purposes of this Section 7, the term "Environmental Requirements"
means all applicable statutes, regulations, rules, ordinances, codes,
licenses, permits, orders, and similar items, of all governmental
agencies, departments, commissions, boards, bureaus, or
instrumentalities of the United States, states and political
subdivisions thereof and all applicable judicial, administrative, and
regulatory decrees, judgments, and orders relating to the protection of
human health or the environment, including, without limitation:
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(a) All requirements pertaining to reporting, licensing, permitting,
investigation, and remediation of emissions, discharges, releases,
or threatened releases of Hazardous Materials; and
(b) All requirements pertaining to the protection of the health and
safety or employees or the public.
7.3 For purposes of this Section 7, the term "Environmental Damages" means
all claims, judgments, damages, losses, penalties, fines, liabilities
(including strict liability), encumbrances, liens, costs, and expense of
investigation and defense of any claim, whether or not such claim is
ultimately defeated, and of any good faith settlement or judgment, of
whatever kind or nature, contingent or otherwise, matured or unmatured,
foreseeable or unforeseeable, including without limitation reasonable
attorneys' fees and disbursements and consultants' fees, any of which
are incurred at any time as a result of the existence prior to Closing
of Hazardous Material upon, about, beneath the Property or migrating or
threatening to migrate to or from the Property, or the existence of a
violation of Environmental Requirements pertaining to the Property,
regardless of whether the existence of such Hazardous Material or the
violation of Environmental Requirements arose prior to the present
ownership or operation of the Property, and including without
limitation:
(a) Damages for personal injury, or injury to property or natural
resources occurring upon or off the Property, foreseeable or
unforeseeable, including, without limitation, lost profits,
consequential damages, the cost of demolition and rebuilding of
any improvements on real property, interest and penalties;
(b) Fees incurred for the services of attorneys, consultants,
contractors, experts, laboratories and all other costs incurred in
connection with the investigation or remediation of such Hazardous
Materials or violation of Environmental Requirements including,
but not limited to, the preparation of any feasibility studies or
reports or the performance of any cleanup, remediation, removal,
response, abatement, containment, closure, restoration or
monitoring work required by any federal, state or local
governmental agency or political subdivision, or reasonably
necessary to make full economic use of the Property or any other
property in a manner consistent with its intended use or otherwise
expended in connection with such conditions, and including without
limitation any attorneys' fees, costs and expenses incurred in
enforcing this agreement or collecting any sums due hereunder; and
(c) Liability to any third person or governmental agency to indemnify
such person or agency for costs expended in connection with the
items referenced in subparagraph (b) of this Section 7.3;
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(d) Diminution of the value of the Property, and damages for the loss
of business and restriction on the use of or adverse impact on the
marketing of rentable or usable space or of any amenity of the
Property.
7.4 "Property" shall mean all real property utilized by Company in
conjunction with its day to day business activities.
7.5 Shareholders represent and warrant that neither the Company nor to the
best of Shareholders knowledge that any other previous owner, tenant,
occupant or user of the Property nor to the best of Shareholders
knowledge that any other person, has engaged in or permitted any
operations or activities upon, or any use or occupancy of the Property,
or any portion thereof, resulting in the emission, release, discharge,
dumping or disposal of any Hazardous Materials on, under, in or about
the Property, nor have any Hazardous Materials migrated from the
Property upon or beneath other properties, nor have any Hazardous
Materials migrated or threatened to migrate from other properties upon,
about or beneath the Property.
(a) There is not constructed, placed, deposited, stored, disposed of
nor located on the Property any asbestos in any form which has
become friable.
(b) No underground improvements, including but not limited to
treatment or storage tanks, sumps, or water, gas or oil wells are
or have ever been located on the Property.
(c) There is not constructed, placed, deposited, stored, disposed of
nor located on the Property any polychlorinated biphenyls (PCBs)
nor transformers, capacitors, ballasts, or other equipment which
contains dielectric fluid containing PCBs.
(d) The Property and its existing uses and activities and of its prior
uses and activities, comply and have at all times complied in all
material respects with all Environmental Requirements.
(e) Neither Company nor Shareholders, nor any prior owner or occupant
of the Property, has received notice or other communication
concerning any alleged material violation of Environmental
Requirements, whether or not corrected to the satisfaction of the
appropriate authority, nor notice or other communication
concerning alleged material liability for Environmental Damages in
connection with the Property, and there exists no writ,
injunction, decree, order or judgement outstanding, nor any
lawsuit, claim, proceeding, citation, directive, summons or
investigation, pending or to their knowledge threatened, relating
to the ownership, use, maintenance or operation of the Property by
any person, or from alleged material violation of Environmental
Requirements, or from the suspected presence of material
quantities of Hazardous Material thereon.
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(f) The Company has all permits and licenses required to be issued to
it by any governmental authority on account of any or all of their
present activities on the Property, and is in full compliance with
the terms and conditions of such permits and licenses. No change
in the facts or circumstances reported or assumed in the
application for or granting of such permits or licenses exists,
and such permits and licenses are in full force and effect.
7.6 (a) Shareholders jointly, and severally agree to indemnify, defend,
reimburse and hold harmless:
(i) Buyer and MK;
(ii) any other person who acquires a portion of the Property in
any manner, including but not limited to through purchase,
at a foreclosure sale or otherwise through the exercise of
the rights and remedies of Buyer under this Agreement; and
(iii) the directors, officers, shareholders, employees, partners,
agents, contractors, subcontractors, experts, licenses,
affiliates, lessees, mortgages, trustees, heirs, devices,
successors, assigns and invites of such persons;
from and against any and all Environmental Damages arising from
the presence of Hazardous Materials upon, about or beneath the
Property or migrating to or from the Property, or arising in any
manner whatsoever out of the violation of any Environmental
Requirements pertaining to the Property and the activities
thereon, either of which conditions exist at Closing, or the
breach of any warranty or covenant or the inaccuracy of any
representation of Company or Shareholder contained in this
Agreement.
(b) This obligation shall include, but not be limited to, the burden
and expense of defending all claims, suits and administrative
proceedings (with counsel reasonably approved by the indemnified
parties), even if such claims, suits or proceedings are
groundless, false or fraudulent, and conducting all negotiations
of any description, and paying and discharging, when and as the
same become due, any and all judgements, penalties or other sums
due against such indemnified persons. Buyer, at its sole expense,
may employ additional counsel of its choice to associate with
counsel representing Shareholders.
(c) The obligations of Shareholders under this paragraph shall not be
affected by any investigation by or on behalf of MK or Buyer or by
any information which MK or Buyer may have or obtain with respect
thereto.
(d) Shareholders shall have no obligations of indemnity under Section
7, however, as to any conditions not existing as of the Closing
Date.
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SECTION 8 REPRESENTATIONS, WARRANTIES AND COVENANTS OF BUYER AND MK
Buyer and MK represents, warrants and covenants as follows:
8.1 Buyer is a corporation duly organized, validly existing and in good
standing under the laws of the State of Ohio. Buyer has the corporate
power and authority to carry on its business as presently conducted.
8.2 The execution, delivery and performance of this Agreement by Buyer has
been duly authorized by its Board of Directors, and will not result in
any breach of or violate or constitute a default under the Articles of
Incorporation or Bylaws of Buyer or any indenture, mortgage or other
agreement or instrument to which it is a party.
8.3 Neither the execution or delivery of this Agreement nor the consummation
of the transactions contemplated hereby will constitute a violation of
any rule, regulation, order, judgment or decree of any court or of any
government agency, or require the consent, approval or authorization of
any person, business entity, court or governmental agency.
8.4 MK is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware. MK has the corporate
power and authority to carry on its business as presently conducted.
8.5 The execution, delivery and performance of this agreement by MK has been
duly authorized by its Board of Directors, and will not result in any
breach of or violate or constitute a default under the Articles of
Incorporation or Bylaws of MK or any indenture, mortgage or other
agreement or instrument to which it is a party.
8.6 Neither the execution or delivery of this agreement nor the consummation
of the transactions contemplated hereby will constitute a violation of
any rule, regulation, order, judgment or decree of any court or of any
government agency, or require the consent, approval or authorization of
any person, business entity, court or governmental agency.
8.7 MK represents that the MK Common Stock to be provided to Shareholders
pursuant to this Agreement will be registered with the Securities and
Exchange Commission by filing a Form S-3 Registration Statement and that
MK will make its best efforts to file this registration on or before
February 15, 1994.
SECTION 9 CONDITIONS PRECEDENT TO THE OBLIGATIONS OF BUYER AND MK
The obligations of Buyer and MK under this Agreement are subject to the
fulfillment, at or prior to the Closing Date, of the following conditions:
9.1 The representations and warranties of Company and Shareholders set forth
in this Agreement shall be true and correct in all material respects on
and as of the Closing Date
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with the same force and effect as though all such representations and
warranties had been made on and as of such date.
9.2 There shall have been delivered to Buyer an opinion, dated as of the
Closing Date, of Counsel for the Shareholders, satisfactory in form
and substance to Buyer, to the effect that: (i) the Company is duly
organized, validly existing and in good standing under the laws of the
State of Illinois, with full corporate power and authority to carry on
their businesses as now being conducted; (ii) the Company is duly
qualified to do business and in good standing in each jurisdiction where
ownership of its properties or the conduct of its business required such
qualifications; (iii) this Agreement constitutes the legal, valid and
binding obligation of the Company and the Shareholders in accordance
with its terms; (iv) all assignments and other documents necessary to
effect the transfer and assignment of the Company shares to Buyer as
contemplated herein have been duly executed and delivered and are
adequate to transfer and assign such shares to Buyer; (v) such Counsel
is not aware of any litigation, proceeding or controversy pending or
threatened against the Company; and (vi) neither the execution nor the
performance of this Agreement will violate any applicable law of any
jurisdiction, or any order, judgment or decree of any court or
governmental agency, or any agreement, indenture or instrument known to
such Counsel.
9.3 From the date hereof to the Closing Date, the Company shall not have
suffered any loss on account of fire, flood, accident, strike, war, or
any other calamity which had a material adverse effect on its
operations.
9.4 The Company shall have entered into the following additional Agreements:
(a) Noncompetition agreements by R. J. Clark, D. E. Clark, and R. K.
Clark in the form attached hereto as Exhibit B.
(b) Employment agreements by R. J. Clark, D. E. Clark and R. K.
Clark in the form attached as Exhibit C.
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SECTION 10 CONDITIONS PRECEDENT TO THE OBLIGATIONS OF SHAREHOLDERS
The obligations of Shareholders under this Agreement are subject to the
fulfillment, on or before the Closing Date, of the following conditions:
10.1 All representations and warranties of Buyer and MK contained herein
shall be true on the Closing Date with the same force and effect as
though such representations and warranties had been made on the Closing
Date.
10.2 All corporate and other actions necessary to authorize and effectuate
the consummation of the transactions contemplated hereby by Buyer and MK
shall have been duly taken prior to the Closing.
SECTION 11SURVIVAL OF REPRESENTATIONS, WARRANTIES, COVENANTS;
INDEMNIFICATIONS; SET OFF
11.1 All representations, warranties, covenants and agreements made by any
party in this Agreement or pursuant hereto shall survive the Closing
hereunder for a period of two years, except that the representations,
warranties, covenants and agreements contained in Section 5.11, Section
5.42 and Section 7 shall survive the Closing for a period of seven years
based on actions or omissions of the Company prior to the Closing Date.
The intent of this survival provision is for the Shareholders and the
Company to be responsible and liable for claims that arose out of facts
occurring prior to the Closing Date regardless of when the tax or
environmental claim may arise, but no later than seven years after the
Closing.
11.2 Shareholders, jointly and severally, agree to indemnify, defend and hold
Buyer harmless from and against all demands, claims, actions or causes
of action, assessments, losses, damages, liabilities, costs and
reasonable expenses, including, without limitation, interest, penalties
and reasonable attorneys' fees and expenses asserted against or imposed
upon or incurred by Buyer resulting from, or by reason of any facts
constituting a breach of any representation or warranty of Company or
Shareholders contained in or made pursuant to this Agreement.
11.3 Buyer agrees to indemnify, defend and hold Shareholders harmless from
and against all demands, claims, actions or causes of action,
assessments, losses, damages, liabilities, costs and reasonable
expenses, including, without limitation, interest, penalties and
reasonable attorneys' fees and expenses asserted against or imposed upon
or incurred by Shareholders resulting from, or by reason of any facts
constituting, a breach of any representation, warranty, covenant, or
agreement of Buyer contained in or made pursuant to this Agreement.
11.4 Buyer shall have the right to set off the amount of any indemnity claim
to the extent Shareholders shall be liable therefore against any sums
of money at any time or from time to time payable to Shareholders,
including the escrowed stock described in
21
<PAGE>
Section 3, but not including any escrowed stock in respect to
non-competition agreements.
11.5 In the event any action, suit or proceeding is brought against a party
indemnified, the Indemnified Party shall give prompt written notice to
the party providing the indemnity (the "Indemnifying Party"). The
Indemnifying Party shall have full responsibility and authority with
respect to any such action, suit or proceeding. The Indemnified Party
shall have the right, without prejudice to the rights of the
Indemnifying Party, at the Indemnified Party's sole expense, to be
represented by counsel of its own choosing. The Indemnified Party shall
make available to the Indemnifying Party and its counsel and accountants
all books, records and other information of the Indemnified Party
relating to such action, suit or proceeding and the parties agree to
render to each other such assistance as may be reasonably requested in
order to ensure the prompt and adequate defense of any such action, suit
or proceeding.
11.6 (a) Buyer shall give written notice of its intention to set off the
amount of any indemnity claim (the "Indemnity Claim"), such notice
to be given in the manner provided below for the giving of
notices. Shareholders may object to the proposed set off, in
which event Buyer and Shareholders shall promptly endeavor to
agree upon the resolution of the Indemnity Claim. In the event
that a written agreement determining the Indemnity Claim has not
been reached within 30 calendar days after receipt by Buyer of
Shareholders notice of objection, then either Buyer or
Shareholders may, by notice to the other, submit for determination
by arbitration in accordance with this section the question of
Buyer's right to the Indemnity Claim under this section.
(b) Any determination by arbitration shall be made by and under the
rules of the American Arbitration Association using an arbitrator
(the "Arbitrator") agreed upon by Buyer and Shareholders, or, if
an agreement choosing the Arbitrator has not been reached in
writing within 10 calendar days after written request therefor by
one such party to the other, then the Arbitrator shall be chosen
by the American Arbitration Association. Any such
determination made by the Arbitrator shall be conclusive and
binding on Buyer and Shareholders.
(c) The fee of the Arbitrator associated with such determination shall
be shared equally by Buyer and Shareholders:
(d) Nothing herein shall be construed to authorize or permit the
Arbitrator to determine any question or matter whatever under or
in connection with this Agreement except the determination of the
Indemnity Claim.
22
<PAGE>
11.7 Buyer agrees that it will not seek any indemnity claim until Buyer has
claims totalling at least $10,000, and then the claims shall be only as
to the claimed amounts in excess of $10,000.
SECTION 12 FINDERS FEES; BROKERS
Shareholders and the Company represent and warrant to Buyer that they have not
authorized any person to act as broker, finder or in any other similar
capacity in connection with the transactions contemplated by this Agreement
and the negotiations leading to it.
SECTION 13 MISCELLANEOUS
13.1 This Agreement is binding upon and is for the benefit of the parties
hereto and their respective successors and permitted assigns.
13.2 No party to this Agreement shall, prior to the Closing, convey, assign
or otherwise transfer any of its rights or obligations under this
Agreement without the express written consent of the other party hereto
in its sole and absolute discretion. No assignment of this Agreement
shall relieve the assigning party of its obligations hereunder.
13.3 All notices or other written communications required or permitted to be
given hereunder shall be in writing and shall be delivered by hand or by
telecopy, or sent, postage prepaid, by registered, certified or express
mail, or reputable overnight courier service, and shall be deemed given
when so delivered by hand or telecopy, or if mailed, three days after
mailing (one business day in the case of express mail or overnight
courier service) as follows:
If to Shareholders:
c/o Clark Industries, Inc.
104 East Butterfield Trail
P. O. Box 287
Gilman, Illinois 60938
If to Buyer and MK:
Morrison Knudsen Corporation
Rail Systems Group
P. O. Box 73
Boise, ID 83729
Attention: T. J. Smith -- President
Copy to: Legal Department
Morrison Knudsen Corporation
P. O. Box 73
Boise, ID 83729
23
<PAGE>
or to such other addresses as may hereinafter be furnished by any party
to the other parties hereto.
13.4 No delay on the part of any party hereto in exercising any right, power
or privilege hereunder shall operate as a waiver, nor shall any waiver
on the part of any party of any right, power or privilege operate as a
waiver of any other right, power or privilege hereunder, nor shall any
single or partial exercise of any right, power or privilege preclude any
other or further exercise thereof or the exercise of any other right,
power or privilege hereunder. The rights and remedies herein provided
are cumulative and are not exclusive of any rights or remedies which the
parties hereto may otherwise have at law or in equity.
13.5 This Agreement shall constitute the entire agreement between the parties
with respect to the subject matter hereof and shall supersede all prior
agreements, understandings, statements or representations, oral or in
writing, of the parties relating thereto. This Agreement may be modified
or amended only by written agreement of the parties.
13.6 This Agreement may be executed in any number of counterparts, each of
which shall be deemed an original but all of which together shall
constitute a single instrument.
13.7 This Agreement shall be governed and construed in accordance with the
laws of the State of Illinois applicable to contracts made and to be
performed entirely within such state.
13.8 All agreements and schedules annexed hereto or referred to herein are
hereby incorporated in and made a part of this Agreement as if set forth
in full herein.
13.9 Any provision of this Agreement which is invalid or unenforceable shall
be ineffective to the extent of such invalidity or unenforceability,
without affecting in any 'way the remaining provisions hereof.
24
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first above written.
MORRISON KNUDSEN CORPORATION,
a Delaware corporation (MK)
/s/ Stephen G. Hanks
By: ______________________________
Its: Senior Vice President, Secretary
and General Counsel
MORRISON KNUDSEN CORPORATION,
an Ohio corporation (Buyer)
/s/ Stephen G. Hanks
By: ______________________________
Its: Senior Vice President, Secretary
and General Counsel
/s/ Richard J. Clark
____________________________________
Richard J. Clark
/s/ Dennis E. Clark
____________________________________
Dennis E. Clark
/s/ Richard K. Clark
____________________________________
Richard K. Clark
CLARK INDUSTRIES, INC.
(Company)
/s/ Richard J. Clark
By:
Its: President
25
<PAGE>
LIST OF SCHEDULES
1 Company Shareholders and Shareholdings
5.4 States in Which Company Does Business
5.8(a) Financial Statements
5.8(b) November 30, 1993 Balance Sheet
5.8(e) Financial Matters
5.10 Other Obligations
5.12 Real Property and Equipment
5.12(a) Real Property and Equipment Not Owned or Leased
5.13 Plant and Equipment
5.14 Leases and Subleases
5.15 Intellectual Property
5.16 Actions, Proceedings and Investigations
5.17 Insurance Policies
5.18 Bank Accounts
5.19 Material Agreements and Contracts
5.19(c) Outstanding Bids and Proposals
5.19(d) Accounts Receivable
5.19(k) Five Highest Paid Employees
5.20 Inventory
5.21 Purchase Orders
5.22 Material Labor Difficulties
5.25 Material Services Provided by Shareholders
5.26 Contracts to Provide Goods and Services to
Shareholders
5.29 Warranties
5.32 Indebtedness
5.33 Foreign Representatives and Agents
5.34 Customers
5.35 Backlog
5.36 Litigation
5.43 Consents, Approval and Authorizations
List of Schedules
s:\smb\trans\agr.cii
26
<PAGE>
SCHEDULE 1
Number of
Shares of % Ownership in MK Shares Exchanged *
Number of MK
SHAREHOLDERS CLARK INDUSTRIES, INC. CLARK INDUSTRIES, INC. (INCLUDING
ESCROWED SHARES)
SHARES ESCROWED*
Richard J. Clark 2-1/3 33 l/3% 15,748
1,575
Dennis E. Clark 2-1/3 33 1/3% 15,748
1,575
Richard K. Clark 2-1/3 33 1/3% 15,748
1,575
Shareholders represent that the above seven (7) shares of stock in Clark
Industries, Inc. encompass all of the issued shares of Clark Industries,
Inc.
*$25.40 per share - Based upon the average NYSE closing price of MK
shares for the ten (10) days prior to the signing of this Agreement.
Schedule 1
s:\smb\trans\agr.cii
27
<PAGE>
EXHIBIT A
DEPOSIT ESCROW AGREEMENT
This Deposit Escrow Agreement made and executed as of this 30th day of
December, 1993, by and among Richard J. Clark, Dennis E. Clark and Richard K.
Clark (the "Principals"), Morrison Knudsen Corporation, a Delaware corporation
("MK"), Morrison Knudsen Corporation, an Ohio corporation, ("Buyer") and Key
Trust Company of the West ("Escrow Agent").
WITNESSETH:
WHEREAS, pursuant to a Share Exchange Agreement dated December 30,
1993 (the "Agreement") by and among the Principals, MK and Buyer, the
Principals have agreed to exchange all of the outstanding stock of Clark
Industries, Inc. ("Clark") for shares of common stock of MK; and
WHEREAS, pursuant to Section 3 of the Agreement, MK, Buyer and the
Principals have agreed to place into escrow the equivalent of $120,000 in
shares of MK common stock to be held by Escrow Agent in accordance with the
terms and conditions set forth below; and
WHEREAS, MK, Buyer and the Principals have selected Key Trust Company
of the West to serve as Escrow Agent under the terms and conditions of this
Deposit Escrow Agreement (the "Escrow Agreement"); and
WHEREAS, Escrow Agent is willing to serve as escrow agent under the
terms and conditions of this Escrow Agreement.
NOW, THEREFORE, in consideration of the premises and agreements
hereinafter made and intending to be legally bound hereby, the parties hereto
agree as follows:
1. ACKNOWLEDGEMENT BY ESCROW AGENT OF RECEIPT
Escrow Agent acknowledges the receipt from MK, Buyer and the Principals of the
equivalent of $120,000 in shares of MK Common Stock calculated in accordance
with the method described in Section 1 of the Agreement.
2. AGREEMENT TO ACT AS ESCROW AGENT
By the execution of this Escrow Agreement, Escrow Agent hereby agrees to act
as escrow agent under the terms and conditions hereof.
28
<PAGE>
3. INVESTMENT OF ESCROW FUND
The Principals, MK and Buyer hereby direct Escrow Agent to hold the Deposit
Escrow in accordance with this Agreement. Dividends, interest and other
earnings earned on account of the Deposit Escrow shall be paid to the
Principals. Dividends shall be payable quarterly to Principals when dividends
are declared by the Board of Directors of MK. Principals shall vote any
shares held by the Escrow Agent. Any stock held in escrow shall be
registered in the name of the Principals during the period of the escrow.
Any cash held in escrow shall be invested by the Escrow Agent in United States
Treasury Bills, United States Treasury Notes and other short-term obligations
of the United States Government backed by the full faith and credit of the
United States Government, unless otherwise directed in writing by MK and
Principals. Principals shall be responsible for reimbursement of all
transaction costs incurred by Escrow Agent relating to all investment and sale
transactions of Escrow Agent.
4. DISPOSITION OF ESCROW FUND
The Escrow Agent shall hold the Deposit Escrow for 12 months from the Closing
Date of the Agreement. If no claims are made by MK or Buyer against such
Deposit Escrow during such period, the Deposit Escrow shall be delivered to
the Principals. However, if during such 12-month period MK or Buyer makes a
claim against the Deposit Escrow, the Principals shall be notified in writing
as to the nature and amount of such claim. Within 10 business days after
receipt of such claim, the Principals shall notify the Escrow Agent in writing
whether the claim is valid and due. If the Principals consent to payment, the
Escrow Agent shall satisfy the claim by transferring to MK or Buyer such
portion of the Deposit Escrow as shall be necessary, considering the value of
MK common stock determined by averaging its closing price on the New York
Stock Exchange during the ten trading days preceding such transfer, to satisfy
the claim. If the Principals dispute the claim, the Escrow Agent shall notify
MK or Buyer and shall not disburse any of the Deposit Escrow in connection
with the disputed item until the Escrow Agent receives written direction with
respect to it, signed by the Principals, Buyer and MK. If any disputed claim
is unresolved when the term of this Escrow Agreement expires, the Escrow Agent
shall continue to hold the Deposit Escrow until such claim is disposed of to
the satisfaction of MK or Buyer and the Principals. Such unresolved claims
shall be finally resolved by arbitration under the auspices of, and in
accordance with, the rules of the American Arbitration Association.
5. LIABILITY OF ESCROW AGENT
The Escrow Agent shall be liable only for its own willful conduct, default or
gross negligence and shall not be liable for any error of judgment made in
good faith by it or its agents or employees. MK, Buyer and the Principals
agree to defend, indemnify and hold harmless the Escrow Agent and its agents
and employees from any and all loss, liability, claims, damages and expenses
whatsoever arising out of its activity as Escrow Agent under this Escrow
Agreement and in connection with any payment contemplated herein. All such
costs and fees shall be ultimately borne by the non-prevailing party.
29
<PAGE>
6. IRREVOCABLE ESCROW
This Escrow Agreement shall be irrevocable and shall continue to remain
effective until the Deposit Escrow has been paid in its entirety, whereupon
Escrow Agent shall, after making the payments contemplated in this Escrow
Agreement be under no further obligation or liability hereunder.
7. BINDING EFFECT
This Escrow Agreement shall be binding upon and shall inure to the benefit of
the parties hereto and their heirs, personal representatives, successors and
assigns.
8. NOTICE
All notices, requests, instructions, demands and other communications
hereunder shall be in writing and shall be deemed to have been given if
delivered or sent by first class registered or certified mail, postage
prepaid, with return receipt requested as follows:
If to the Escrow Agent:
Pam Wallis
Key Trust Company of the West
P. O. Box 2557
Boise, ID 83701
If to the Principals:
c/o Clark Industries, Inc.
104 East Butterfield Trail
P. O. Box 287
Gilman, Illinois
30
<PAGE>
If to MK and Buyer:
Morrison Knudsen Corporation
Rail Systems Group
P. O. Box 73
Boise, ID 83729
Attention:T. J. Smith - President
Copy to: Legal Department
Morrison Knudsen Corporation
P. O. Box 73
Boise, ID 83729
9. FEES
All fees and expenses of the Escrow Agent of $750.00 annually for services
performed by Escrow Agent under this Escrow Agreement shall be paid in equal
measure by the Principals and Buyer.
10. NO ENCUMBRANCE
The Escrow Agent acknowledges and agrees that the Deposit Escrow shall be held
separate and apart from all other funds, and no part thereof is or shall be
subject to any security agreements, guarantees, liens, encumbrances, or any
other security instruments or financing statements of any kind whatsoever.
11. COUNTERPARTS
This Escrow Agreement may be executed in several counterparts, each of which
shall be deemed an original, but all of which together shall constitute one
and the same instrument.
12. CAPTIONS
The section and other headings contained in this Escrow Agreement are for
reference purposes only and shall not affect the meaning or interpretation of
this Escrow Agreement.
13. GOVERNING LAW
This Agreement and any disputes thereunder shall be governed by the laws of
the State of Illinois.
31
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this Escrow
Agreement the day and year first written above.
MORRISON KNUDSEN CORPORATION,
a Delaware corporation
By: __________________________________
Its:__________________________________
MORRISON KNUDSEN CORPORATION,
an Ohio corporation
By: __________________________________
Its: __________________________________
_________________________________
RICHARD J. CLARK
_________________________________
DENNIS E. CLARK
_________________________________
RICHARD K. CLARK
KEY TRUST COMPANY OF THE WEST
By: __________________________________
Its: __________________________________
32
<PAGE>
EXHIBIT B-1
NON-COMPETITION AGREEMENT
This Agreement is entered into this 30th day of December, 1993, by and
between Richard J. Clark, Clark Industries, Inc. ("Company"), and Morrison
Knudsen Corporation, a Delaware corporation ("MK").
WHEREAS, the parties hereto desire to establish a continuing,
confidential relationship in connection with the business of the Company; and
WHEREAS, as a part of that relationship Richard J. Clark is willing to
agree to a limitation upon his ability to compete with the Company and the
Company is willing to make the payments provided herein.
NOW, THEREFORE, in consideration of the premises and covenants contained
herein, the parties agree as follows:
SECTION 1
Richard J. Clark agrees that for a period of seven years following the
closing date (the "Closing Date") of the transactions contemplated in the
Share Exchange Agreement dated December 30, 1993, among MK, Morrison Knudsen
Corporation, an Ohio corporation, Richard J. Clark, Dennis E. Clark, Richard
K. Clark, and the Company (the "Share Exchange Agreement"), he shall not
compete, either directly or indirectly (as a shareholder, partner, employee,
trustee or otherwise any person, firm corporation, association, partnership or
other entity), with the Company by engaging through operations or sales
anywhere in the United States, in any of the following businesses:
remanufacture, manufacture or design of transit cars, locomotives, freight
cars, or components, subassemblies or engineered systems for transit cars,
locomotives or freight cars; engineering or manufacturing of transit or
freight rail signalling or communication systems; operations and maintenance
of transit systems, freight railroads or passenger railroads; emergency repair
and maintenance of railroad track, tunnels and other infrastructure; marketing
or distribution of railroad products to the rail and transit industries;
environmental cleanup of railroad track and yards. In the event this
limitation is considered by a court of competent jurisdiction to be excessive
in its duration or in the area to which it applies, it shall be considered
modified and valid for the duration for such area as said court may deem
reasonable under the circumstances.
33
<PAGE>
SECTION 2 - CONSIDERATION
In consideration of the covenant contained in Section 1 hereof, Company agrees
to compensate Richard J. Clark by providing, on the Closing Date a number of
MK shares equivalent to $262,500 as determined by the method and procedures
set forth in Sections 1 and 4 of the Share Exchange Agreement. Said shares
shall be issued and registered in the name of Richard J. Clark, and shall be
held by MK in Escrow to be distributed to Richard J. Clark over a ten (10)
year period for the following schedule:
END OF YEAR
One 14%
Two 14%
Three 14%
Four 14%
Five 14%
Six 8%
Seven 8%
Eight 8%
Nine 3%
Ten 3%
Richard J. Clark shall be entitled to dividends paid on all shares whether
owned or escrowed.
SECTION 3 - INJUNCTIVE RELIEF
It is understood and agreed by and between the parties that the covenant not
to compete contained herein is a property right of a special, unique,
extraordinary and intellectual character, which gives it a peculiar value, the
loss of which cannot be reasonably or adequately compensated in damages in any
action at law, and that a breach by Richard J. Clark of any of the provisions
contained in this Agreement will cause the Company and MK great and
irreparable injury and damage. Richard J. Clark expressly agrees that MK and
the Company shall be entitled to the remedies of injunction, specific
performance and other equitable relief to prevent a breach of this Agreement
by Richard J. Clark. This provision shall not, however, be construed as a
waiver of any of the rights which the Company or MK may have for damages or
otherwise.
If MK and the Company are granted injunctive relief and as a result Richard J.
Clark does not compete against MK or the Company in the scope of businesses
previously defined, MK shall provide the consideration specified in Section 2,
less any amounts for attorney's fees or costs expended by MK or the Company to
obtain such injunctive relief.
34
<PAGE>
SECTION 4 - MISCELLANEOUS
4.1 This Agreement is binding upon and is for the benefit of the parties
hereto and their respective successors and permitted assigns.
4.2 No party to the Agreement shall, prior to the Closing, convey, assign or
otherwise transfer any of its rights or obligations under this Agreement
without the express written consent of the other party hereto in its
sole and absolute discretion. No assignment of this Agreement shall
relieve the assigning party of its obligations hereunder.
4.3 All notices or other communications required or permitted to be given
hereunder shall be in writing and shall be delivered by hand or by
telecopy, or sent, postage prepaid, by registered, certified or express
mail, or reputable overnight courier service, and shall be deemed given
when so delivered by hand or telecopy, or if mailed, three days after
mailing (one business day in the case of express mail or overnight
courier service) as follows:
If to the Company:
Clark Industries, Inc.
104 East Butterfield Trail
P. O. Box 287
Gilman, Illinois 60938
If to Richard J. Clark:
Richard J. Clark
c/o Clark Industries, Inc.
104 East Butterfield Trail
P. O. Box 287
Gilman, Illinois 60938
If to MK:
Morrison Knudsen Corporation
Rail Systems Group
P.O. Box 73
Boise, ID 83729
Attention:T.J. Smith -- President
35
<PAGE>
Copy to: Legal Department
Morrison Knudsen Corporation
P.O. Box 73
Boise, ID 83729
or to such other addresses as may hereinafter be furnished by any party to the
other parties hereto.
4.4 No delay on the part of any party hereto in exercising any right, power
or privilege hereunder shall operate as a waiver, nor shall any waiver
on the part of any party of any right, power or privilege operate as a
waiver of any other right, power or privilege hereunder, nor shall any
single or partial exercise of any right, power or privilege preclude any
other or further exercise thereof or the exercise of any other right,
power or privilege hereunder. The rights and remedies herein provided
are cumulative and are not exclusive of any rights or remedies which the
parties hereto may otherwise have at law or in equity.
4.5 This Agreement may be executed in any number of counterparts, each of
which shall be deemed an original but all of which together shall
constitute a single instrument.
4.6 This Agreement shall be governed and construed in accordance with the
laws of the State of Illinois applicable to contracts made and to be
performed entirely within such state.
4.7 All agreements and schedules annexed hereto or referred to herein are
hereby incorporated in and made a part of this Agreement as if set forth
in full herein.
4.8 Any provision of this Agreement which is invalid or unenforceable shall
be ineffective to the extent of such invalidity or unenforceability,
without affecting in any way the remaining provisions hereof.
4.9 This Agreement shall be governed and construed in accordance with the
laws of the State of Illinois applicable to contracts made and to be
performed entirely within such State.
36
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first above written.
MORRISON KNUDSEN CORPORATION,
a Delaware corporation
By: ______________________________
Its: ______________________________
CLARK INDUSTRIES, INC.
By: _______________________________
Its: _______________________________
_____________________________________
RICHARD J. CLARK
37
<PAGE>
EXHIBIT B-2
NON-COMPETITION AGREEMENT
This Agreement is entered into this 30th day of December, 1993, by and
between Dennis E. Clark, Clark Industries, Inc. ("Company"), and Morrison
Knudsen Corporation, a Delaware corporation ("MK").
WHEREAS, the parties hereto desire to establish a continuing,
confidential relationship in connection with the business of the Company; and
WHEREAS, as a part of that relationship, Dennis E. Clark is willing to
agree to a limitation upon his ability to compete with the Company and the
Company is willing to make the payments provided herein;
NOW, THEREFORE, in consideration of the premises and covenants contained
herein, the parties agree as follows:
SECTION 1
Dennis E. Clark agrees that for a period of seven years following the closing
date (the "Closing Date") of the transactions contemplated in the Share
Exchange Agreement dated December 30, 1993, among MK, Morrison Knudsen
Corporation, an Ohio corporation, Richard J. Clark, Dennis E. Clark, Richard
K. Clark, and the Company (the "Share Exchange Agreement"), he shall not
compete, either directly or indirectly (as a shareholder, partner, employee,
trustee or otherwise any person, firm corporation, association, partnership or
other entity), with the Company by engaging through operations or sales
anywhere in the United States, in any of the following businesses:
remanufacture, manufacture or design of transit cars, locomotives, freight
cars, or components, subassemblies or engineered systems for transit cars,
locomotives or freight cars; engineering or manufacturing of transit or
freight rail signalling or communication systems; operations and maintenance
of transit systems, freight railroads or passenger railroads; emergency repair
and maintenance of railroad track, tunnels and other infrastructure; marketing
or distribution of railroad products to the rail and transit industries;
environmental cleanup of railroad track and yards. In the event this
limitation is considered by a court of competent jurisdiction to be excessive
in its duration or in the area to which it applies, it shall be considered
modified and valid for the duration for such area as said court may deem
reasonable under the circumstances.
38
<PAGE>
SECTION 2 - CONSIDERATION
In consideration of the covenant contained in Section 1 hereof, Company agrees
to compensate Dennis E. Clark by providing, on the Closing Date, a number of
MK shares equivalent to $262,500 as determined by the method and procedures
set forth in Sections 1 and 4 of the Share Exchange Agreement. Said shares
shall be issued and registered in the name of Dennis E. Clark, and shall be
held by MK in Escrow to be distributed to Dennis E. Clark over a ten (10) year
period for the following schedule:
END OF YEAR
One 14%
Two 14%
Three 14%
Four 14%
Five 14%
Six 8%
Seven 8%
Eight 8%
Nine 3%
Ten 3%
Dennis E. Clark shall be entitled to dividends paid on all shares whether
owned or escrowed.
If MK offers Dennis E. Clark employment under substantially the same terms and
conditions as the Employment Agreement after the Employment Agreement has
expired, Dennis E. Clark will be bound by this Non-Competition Agreement,
whether Dennis E. Clark elects to accept MK's offer of employment or elects
not to accept MK's offer of employment.
If, after the expiration of the Employment Agreement, MK does not offer Dennis
E. Clark employment under substantially the same terms and conditions as the
Employment Agreement, Dennis E. Clark will be bound by the provisions of this
Non-Competition Agreement for one year after expiration of the Employment
Agreement and MK will provide the consideration specified in Section 2.
SECTION 3 - INJUNCTIVE RELIEF
It is understood and agreed by and between the parties that the covenant not
to compete contained herein is a property right of a special, unique,
extraordinary and intellectual character, which gives it a peculiar value, the
loss of which cannot be reasonably or adequately compensated in damages in any
action at law, and that a breach by Dennis E. Clark of any of the provisions
contained in this Agreement will cause the Company and MK great and
irreparable injury and damage. Dennis E. Clark expressly agrees that MK and
the Company shall be entitled to the remedies of injunction, specific
performance and other equitable relief to prevent a breach of this Agreement
by Dennis E. Clark. This provision shall not, however, be construed as a
waiver of any of the rights which the Company or MK may have for damages or
otherwise.
39
<PAGE>
If MK and the Company are granted injunctive relief and as a result Dennis E.
Clark does not compete against MK or the Company in the scope of businesses
previously defined, MK shall provide the consideration specified in Section 2,
less any amounts for attorney's fees or costs expended by MK or the Company to
obtain such injunctive relief.
SECTION 4 - MISCELLANEOUS
4.1 This Agreement is binding upon and is for the benefit of the parties
hereto and their respective successors and permitted assigns.
4.2 No party to the Agreement shall, prior to the Closing, convey, assign or
otherwise transfer any of its rights or obligations under this Agreement
without the express written consent of the other party hereto in its
sole and absolute discretion. No assignment of this Agreement shall
relieve the assigning party of its obligations hereunder.
4.3 All notices or other communications required or permitted to be given
hereunder shall be in writing and shall be delivered by hand or by
telecopy, or sent, postage prepaid, by registered, certified or express
mail, or reputable overnight courier service, and shall be deemed given
when so delivered by hand or telecopy, or if mailed, three days after
mailing (one business day in the case of express mail or overnight
courier service) as follows:
If to the Company:
Clark Industries, Inc.
104 East Butterfield Trail
P. O. Box 287
Gilman, Illinois 60938
If to Dennis E. Clark:
Dennis E. Clark
c/o Clark Industries, Inc.
104 East Butterfield Trail
P. O. Box 287
Gilman, Illinois 60938
If to MK:
Morrison Knudsen Corporation
Rail Systems Group
P.O. Box 73
Boise, ID 83729
Attention:T.J. Smith -- President
40
<PAGE>
Copy to: Legal Department
Morrison Knudsen Corporation
P.O. Box 73
Boise, ID 83729
or to such other addresses as may hereinafter be furnished by any party to the
other parties hereto.
4.4 No delay on the part of any party hereto in exercising any right, power
or privilege hereunder shall operate as a waiver, nor shall any waiver
on the part of any party of any right, power or privilege operate as a
waiver of any other right, power or privilege hereunder, nor shall any
single or partial exercise of any right, power or privilege preclude any
other or further exercise thereof or the exercise of any other right,
power or privilege hereunder. The rights and remedies herein provided
are cumulative and are not exclusive of any rights or remedies which the
parties hereto may otherwise have at law or in equity.
4.5 This Agreement may be executed in any number of counterparts, each of
which shall be deemed an original but all of which together shall
constitute a single instrument.
4.6 This Agreement shall be governed and construed in accordance with the
laws of the State of Illinois applicable to contracts made and to be
performed entirely within such state.
4.7 All agreements and schedules annexed hereto or referred to herein are
hereby incorporated in and made a part of this Agreement as if set forth
in full herein.
4.8 Any provision of this Agreement which is invalid or unenforceable shall
be ineffective to the extent of such invalidity or unenforceability,
without affecting in any way the remaining provisions hereof.
4.9 This Agreement shall be governed and construed in accordance with the
laws of the State of Illinois applicable to contracts made and to be
performed entirely within such State.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first above written.
MORRISON KNUDSEN CORPORATION,
a Delaware corporation
By: _________________________________
Its: _________________________________
CLARK INDUSTRIES, INC.
By: _________________________________
Its: _________________________________
_____________________________________
DENNIS E. CLARK
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EXHIBIT B-3
NON-COMPETITION AGREEMENT
This Agreement is entered into this 30th day of December, 1993, by and
between Richard K. Clark, Clark Industries, Inc. ("Company"), and Morrison
Knudsen Corporation, a Delaware corporation ("MK").
WHEREAS, the parties hereto desire to establish a continuing,
confidential relationship in connection with the business of the Company; and
WHEREAS, as a part of that relationship, Richard K. Clark is willing to
agree to a limitation upon his ability to compete with the Company and the
Company is willing to make the payments provided herein;
NOW, THEREFORE, in consideration of the premises and covenants contained
herein, the parties agree as follows:
SECTION 1
Richard K. Clark agrees that for a period of seven years following the
closing date (the "Closing Date") of the transactions contemplated in the
Share Exchange Agreement dated December 30, 1993, among MK, Morrison Knudsen
Corporation, an Ohio corporation, Richard J. Clark, Dennis E. Clark, Richard
K. Clark, and the Company (the "Share Exchange Agreement"), he shall not
compete, either directly or indirectly (as a shareholder, partner, employee,
trustee or otherwise any person, firm corporation, association, partnership or
other entity), with the Company by engaging through operations or sales
anywhere in the United States, in any of the following businesses:
remanufacture, manufacture or design of transit cars, locomotives, freight
cars, or components, subassemblies or engineered systems for transit cars,
locomotives or freight cars; engineering or manufacturing of transit or
freight rail signalling or communication systems; operations and maintenance
of transit systems, freight railroads or passenger railroads; emergency repair
and maintenance of railroad track, tunnels and other infrastructure; marketing
or distribution of railroad products to the rail and transit industries;
environmental cleanup of railroad track and yards. In the event this
limitation is considered by a court of competent jurisdiction to be excessive
in its duration or in the area to which it applies, it shall be considered
modified and valid for the duration for such area as said court may deem
reasonable under the circumstances.
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SECTION 2 - CONSIDERATION
In consideration of the covenant contained in Section 1 hereof, Company agrees
to compensate Richard K. Clark by providing on the Closing Date, a number of
MK shares equivalent to $262,500 as determined by the method and procedures
set forth in Sections 1 and 4 of the Share Exchange Agreement. Said shares
shall be issued and registered in the name of Richard K. Clark, and shall be
held by MK in Escrow to be distributed to Richard K. Clark over a ten (10)
year period for the following schedule:
END OF YEAR
One 14%
Two 14%
Three 14%
Four 14%
Five 14%
Six 8%
Seven 8%
Eight 8%
Nine 3%
Ten 3%
Richard K. Clark shall be entitled to dividends paid on all shares whether
owned or escrowed.
If MK offers Richard K. Clark employment under substantially the same terms
and conditions as the Employment Agreement after the Employment Agreement has
expired, Richard K. Clark will be bound by this Non-Competition Agreement,
whether Richard K. Clark elects to accept MK's offer of employment or elects
not to accept MK's offer of employment.
If, after the expiration of the Employment Agreement, MK does not offer
Richard K. Clark employment under substantially the same terms and conditions
as the Employment Agreement, Richard K. Clark will be bound by the provisions
of this Non-Competition Agreement for one year after expiration of the
Employment Agreement and MK will provide the consideration specified in
Section 2.
SECTION 3 - INJUNCTIVE RELIEF
It is understood and agreed by and between the parties that the covenant not
to compete contained herein is a property right of a special, unique,
extraordinary and intellectual character, which gives it a peculiar value, the
loss of which cannot be reasonably or adequately compensated in damages in any
action at law, and that a breach by Richard K. Clark of any of the provisions
contained in this Agreement will cause the Company and MK great and
irreparable injury and damage. Richard K. Clark expressly agrees that MK and
the Company shall be entitled to the remedies of injunction, specific
performance and other equitable relief to prevent a breach of this Agreement
by Richard K. Clark. This provision
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shall not, however, be construed as a waiver of any of the rights which the
Company or MK may have for damages or otherwise.
If MK and the Company are granted injunctive relief and as a result Richard K.
Clark does not compete against MK or the Company in the scope of businesses
previously defined, MK shall provide the consideration specified in Section 2,
less any amounts for attorney's fees or costs expended by MK or the Company to
obtain such injunctive relief.
SECTION 4 - MISCELLANEOUS
4.1 This Agreement is binding upon and is for the benefit of the parties
hereto and their respective successors and permitted assigns.
4.2 No party to the Agreement shall, prior to the Closing, convey, assign or
otherwise transfer any of its rights or obligations under this Agreement
without the express written consent of the other party hereto in its
sole and absolute discretion. No assignment of this Agreement shall
relieve the assigning party of its obligations hereunder.
4.3 All notices or other communications required or permitted to be given
hereunder shall be in writing and shall be delivered by hand or by
telecopy, or sent, postage prepaid, by registered, certified or express
mail, or reputable overnight courier service, and shall be deemed given
when so delivered by hand or telecopy, or if mailed, three days after
mailing (one business day in the case of express mail or overnight
courier service) as follows:
If to the Company:
Clark Industries, Inc.
104 East Butterfield Trail
P. O. Box 287
Gilman, Illinois 60938
If to Richard K. Clark:
Richard K. Clark
c/o Clark Industries, Inc.
104 East Butterfield Trail
P. O. Box 287
Gilman, Illinois 60938
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If to MK:
Morrison Knudsen Corporation
Rail Systems Group
P.O. Box 73
Boise, ID 83729
Attention:T.J. Smith -- President
Copy to: Legal Department
Morrison Knudsen Corporation
P.O. Box 73
Boise, ID 83729
or to such other addresses as may hereinafter be furnished by any party to the
other parties hereto.
4.4 No delay on the part of any party hereto in exercising any right, power
or privilege hereunder shall operate as a waiver, nor shall any waiver
on the part of any party of any right, power or privilege operate as a
waiver of any other right, power or privilege hereunder, nor shall any
single or partial exercise of any right, power or privilege preclude any
other or further exercise thereof or the exercise of any other right,
power or privilege hereunder. The rights and remedies herein provided
are cumulative and are not exclusive of any rights or remedies which the
parties hereto may otherwise have at law or in equity.
4.5 This Agreement may be executed in any number of counterparts, each of
which shall be deemed an original but all of which together shall
constitute a single instrument.
4.6 This Agreement shall be governed and construed in accordance with the
laws of the State of Illinois applicable to contracts made and to be
performed entirely within such state.
4.7 All agreements and schedules annexed hereto or referred to herein are
hereby incorporated in and made a part of this Agreement as if set forth
in full herein.
4.8 Any provision of this Agreement which is invalid or unenforceable shall
be ineffective to the extent of such invalidity or unenforceability,
without affecting in any way the remaining provisions hereof.
4.9 This Agreement shall be governed and construed in accordance with the
laws of the State of Illinois applicable to contracts made and to be
performed entirely within such State.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first above written.
MORRISON KNUDSEN CORPORATION,
a Delaware corporation
By: __________________________________
Its: _________________________________
CLARK INDUSTRIES, INC.
By: _________________________________
Its: _________________________________
_______________________________________
RICHARD K. CLARK
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EXHIBIT C-1
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT, dated as of December 30, 1993, (the "Closing
Date") between Richard J. Clark (the "Employee") and Clark Industries, Inc.,
an Illinois Corporation (the "Company").
WHEREAS, the Company desires to assure itself of the benefit of the
Employee's services and experience for a period of time; and
WHEREAS, the Employee is willing to enter into an agreement to that end
with the Company upon the terms and conditions herein set forth;
NOW, THEREFORE, in consideration of the premises and covenants herein
contained, the parties hereto agree as follows:
1. TERM OF AGREEMENT
Subject to the terms and conditions hereof, the term of employment of the
Employee under this Employment Agreement shall be for the period commencing on
the date hereof and terminating five years hereafter (the "Initial Employment
Period"). After the Initial Employment Period, this Employment Agreement
shall automatically continue in force and effect on a month-to-month basis
("Renewal Period") unless either party shall give the other written notice of
such party's intent to terminate this Agreement at least thirty (30) days
prior to the expiration of the Initial Employment Period or any Renewal
Period, as the case may be.
2. SERVICES TO BE RENDERED
The Company hereby agrees to employ the Employee as an executive officer of
the Company, subject to terms, conditions and provisions of this Employment
Agreement. The Employee hereby accepts such employment and agrees to devote
his full time and attention exclusively to rendering services to the Company
under this Employment Agreement. Employee shall be subject to the terms and
provisions of the Morrison Knudsen Corporation's ("MK") 1993 Handbook for
Salaried Employees. In general MK's work week is defined as a minimum of
forty hours per week, eight hours a day, Monday through Friday.
Employee's services shall be limited to locomotive, transit car and other rail
related activities in which MK is engaged. In connection with the rendition
of such services, the Employee shall report to and be subject to the direction
of the Board of Directors of the Company and he shall perform such services as
shall be designated by it.
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3. BASE COMPENSATION AND BENEFITS
(a) In payment for services rendered during the Initial Employment Period
and the Renewal Period to the Company under this Employment Agreement,
the Company shall pay the Employee a base salary of $100,000 per year.
All compensation shall be paid in accordance with the Company's normal
payroll practice and is payable on a bi-weekly basis.
(b) The Employee shall, during the term of this Employment Agreement, be
entitled to vacations and fringe benefits consistent with the Company's
policies for all other executive personnel. Employee will be credited
with vacation benefits in accordance with the number of years of
employment at Company and its predecessor entity, when the MK vacation
and fringe benefits are implemented for Company.
(c) The employee's salary shall be reviewed annually for possible merit
increases. Compensation may not be reduced.
(d) Nothing contained in this Employment Agreement shall be deemed to
preclude the Board of Directors of the Company, in its sole discretion,
from increasing the amounts payable to the Employee hereunder.
(e) In the event the Company is relocated, Employee will not be required to
relocate, and may continue to work for Company at his present location,
however Employee may be required to travel occasionally.
(f) Employee will be required to submit to and pass a substance abuse test,
and comply with the Company's Substance Abuse Prevention Program, when
the testing program is implemented in Employee's area.
(g) Anytime after two years after execution of this Agreement, Employee may
terminate his status as an employee of the Company and may thereafter
for the remainder of the five year term of this Agreement continue to
serve the Company as a Consultant. The Employee in his capacity as a
Consultant, will continue to receive his then annual compensation
through the end of the five year term; however, he will not be eligible
for merit raises nor shall he be entitled to any bonuses. In order to
receive the Consultant's annual payment, Consultant shall also be
required to work at least half-time for the Company - a rate equal to at
least two-hundred and forty hours in each ninety day period; however,
Consultant shall not be required to relocate in the event that Company
relocates and Consultant may perform his services either on or off
Company premises.
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4. BONUSES
(a) For each fiscal year ending on December 31, 1994 and on each December 31
thereafter through 1998 the Employee shall, if employed pursuant to the
terms of this Agreement at the end of such fiscal year, be eligible to
receive an annual bonus (the "Annual Bonus") under the Rail Systems
Group Project Incentive Plan as it may be amended from time to time
based upon (i) the Company's financial performance for such fiscal year
relative to the Company's approved annual budget (to be determined by
performance targets to be established by Morrison Knudsen Corporation,
an Ohio corporation, the Company's parent, for each fiscal year) and
(ii) the performance of Employee as evaluated by the Vice President,
Locomotive Division, of MK's Rail Systems Group and approved by the
President of MK's Rail Systems Group. The Annual Bonus, if any, for any
particular fiscal year, shall be paid in a single lump sum no later than
ten weeks following the closing of such fiscal year.
(b) INCENTIVE BONUS
In addition to the annual bonus provided by for in Section 4(a) above,
the employee, if employed pursuant to the terms of this agreement on
December 31, 1996 shall be entitled to an incentive bonus equal to 6
2/3% of the amount by which earnings before interest and taxes for the
years 1994, 1995 and 1996 exceed $3 million. The three-year incentive
bonus payment shall not exceed $333,333. For purposes of this
computation, Earnings before interest and taxes includes all direct and
indirect operating costs and selling, general and administrative costs
associated with the Clark operation. There is no allocation of
additional overhead or other costs from MK or the Rail Systems Group to
Clark's operation.
If during this three year period Company is down for any length of time
due to the relocation of Company operations, then that amount of down
time shall be added to the three year incentive bonus period in the
calculation of the bonus.
5. DISABILITY AND DEATH
(a) In the event the Employee is permanently disabled from substantially
performing his full services hereunder due to a physical or mental
disability and such disability shall continue for a period of more than
one year, or should the Employee at any time become permanently disabled
(as determined under the terms of the Long Term Disability Plan
established by MK, a shareholder of the Company), and as a result
thereof be unable to render his full services hereunder, then the
Company may, at its election, terminate this Employment Agreement. In
the event this Employment Agreement is terminated pursuant to this
Section 6(a), the Employee shall have no further rights hereunder except
to be paid an amount equal to any base salary or bonus earned under the
terms of this Employment Agreement which remains unpaid at the time of
disability.
(b) Upon the death of the Employee, this Employment Agreement shall
terminate and neither the Employee nor his estate shall have any further
rights hereunder, except
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to be paid an amount equal to any base salary or bonus earned under the
terms of this Employment Agreement which remains unpaid at the time of
death.
6. TERMINATION
(a) In the event the Employee is terminated for "Cause" (as defined in
Section 6(b) below), this Employment Agreement shall terminate and the
Employee shall have no rights hereunder.
(b) For purposes of Section 6(a) above, "Cause" shall mean Employee's: (i)
conviction of any felony involving dishonest, fraud or breach of trust;
(ii) willful engagement in any misconduct in the performance of his
duties that materially injures Company, monetarily or otherwise; (iii)
performance of any act which, if known to Company's customers, clients
or stockholders would materially and adversely affect Company's
business; or (iv) substantial nonperformance of assigned duties (other
than any such failure resulting from Employee's incapacity due to
physical or mental illness under Section 6(a) above) which has continued
for thirty days after Company's Board of Directors has given written
notice of such nonperformance to Employee. For purposes of clause (ii)
of this Section 7(a), no act or omission on Employee's part shall be
deemed "willful" if committed or omitted in good faith and with a
reasonable belief his action was in the best interest of the Company.
(c) If Employee is terminated for convenience, Employee shall be entitled to
Base Compensation as defined in this Agreement for the remaining term of
this Agreement.
7. INVENTIONS
For purposes of this Employment Agreement, "Invention" shall mean any and all
machines, apparatuses, compositions of matter, method, know-how, processes,
designs, configurations, uses, ideas, concepts, or writings of any kind,
discovered, conceived, developed, made, or produced, or any improvements to
them, and shall not be limited to the definition of an invention contained in
the United States Patent Laws.
The Employee understands and agrees that all Inventions, or trademarks or
copyrights relating thereto, which reasonably relate to the business of the
Company (as described in Section 1 of the Non-Competition Agreement) and which
are conceived or made by him during the period and scope of his employment,
either alone or with others, are the sole and exclusive property of the
Company. The Employee understands and agrees that all Inventions, trademarks,
or copyrights described above in this paragraph are the sole and exclusive
property of the Company whether or not they are conceived or made during
regular working hours.
The Employee agrees that he will disclose promptly and in writing to the
Company all Inventions within the scope of this Employment Agreement, whether
he considers them to be patentable or not, which he, either alone or with
others, conceives or makes (whether or not during regular working hours). The
Employee hereby assigns and agrees to assign all
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his right, title, and interest in and to those Inventions which reasonably
relate to the business of the Company and agrees not to disclose any of these
to others without written consent of the Company, except as required by the
conditions of his employment.
The Employee agrees that he will at any time during his employment hereunder,
or after this Employment Agreement terminates, on the request of the Company,
(i) execute specific assignments in favor of the Company, or its nominee, of
any of the Inventions covered by this Employment Agreement (ii) execute all
papers and perform all lawful acts the Company considers necessary or
advisable for the preparation, applications, procurement, maintenance,
enforcement, and defense of patent applications and patents of the United
States and foreign countries for these inventions, for the perfection or
enforcement of any trademarks or copyrights relating to such inventions, and
for the transfer of any interest Employee may have, and (iii) execute any and
all papers and lawful documents required or necessary to vest sole right,
title, and interest in the Company or its nominee of the above inventions,
patent applications, patents, or any trademarks or copyrights relating
thereto. The Employee will, at the Company's expense, execute all documents
(including those referred to above) and do all other acts necessary to assist
in the preservation of all the Company's interests.
8. CONFIDENTIALITY
For purposes of the Employment Agreement, "proprietary information" shall mean
any information relating to the business of the Company that has not
previously been publicly released by duly authorized representatives of the
Company and shall include (but shall not be limited to) Company information
encompasses in all drawings, designs, plans, proposals, marketing and sales
plans, financial information, costs, pricing information, customer
information, and all methods, concepts, or ideas in or reasonably related to
the business of the Company.
The Employee agrees to regard and preserve as confidential all proprietary
information pertaining to the Company's business that has been or may be
obtained by Employee in the course of his employment with the Company, whether
he has such information in his memory or in writing or other physical form.
The Employee will not, without written authority from the Company to do so,
use for his benefit or purposes, nor disclose to others, either during the
term of his employment hereunder or thereafter, except as required by the
conditions of his employment hereunder, any proprietary information connected
with the business or developments of the Company. This provision shall not
apply after the proprietary information has been voluntarily disclosed to the
public, independently developed and disclosed by others, or otherwise enters
the public domain through lawful means.
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9. REMOVAL OF DOCUMENTS OR OBJECTS
The Employee agrees not to remove from the premises of the Company, except as
an employee of the Company, in pursuit of the business of the Company or any
of its subsidiaries, or except as specifically permitted in writing by the
Company, any document or object containing or reflecting any proprietary
information of the Company. The Employee recognizes that all such documents
and objects, whether developed by him or by someone else, are the exclusive
property of the Company.
10. CORPORATE OPPORTUNITIES
The Employee agrees that during his employment hereunder he will not take any
action which might divert from the Company or any subsidiary of the Company
any opportunity which would be within the scope of any of the present or
future businesses, described in Section 1 of the Non-Competition Agreement,
thereof.
11. INJUNCTIVE RELIEF
It is understood and agreed by and between the parties hereto that the
services to be rendered by the Employee hereunder, and the rights and
privileges granted to the Company by the Employee hereunder, are of a special,
unique, extraordinary and intellectual character, which gives them a peculiar
value, the loss of which cannot be reasonably or adequately compensated in
damages in any action at law, and that a breach by the Employee of any of the
provisions contained in this Employment Agreement will cause the Company great
and irreparable injury and damage. The Employee hereby expressly agrees that
the Company shall be entitled to the remedies of injunction, specific
performance and other equitable relief to prevent a breach of this Employment
Agreement by the Employee. This provision shall not, however, be construed as
a waiver of any of the rights which the Company may have for damages or
otherwise. It is agreed that the prevailing party of any action shall be
entitled to attorneys fees and costs incurred in such action.
12. WARRANTY
The Employee hereby warrants that he is free to enter this Employment
Agreement and to render his services pursuant hereto. The Company agrees to
maintain such accounting records and practices needed to reflect the financial
performance of the Company.
13. NON-ASSIGNABILITY
Except as otherwise provided herein, this Employment Agreement may not be
assigned by either the Company or the Employee.
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14. MERGER OR CONSOLIDATION
In the event of a merger or consolidation of the Company with any other
corporation or corporations, or of the sale by the Company of a major portion
of its assets or of its business and good will, this Employment Agreement may
be assigned and transferred to such successor in interest as an asset of the
Company upon such assignee assuming the Company's obligations hereunder, in
which event the Employee agrees to continue to perform his duties and
obligations according to the terms and conditions hereof for such assignee or
transferee this Employment Agreement. With the exception that if such
assignment and transfer of this Agreement is made three years after the
effective date of this Agreement, to a successor of which MK owns less than
50% and MK is not the single largest remaining shareholder, then Employee may
elect to receive the balance of his salary for the unexpired portion of the
term and to treat the Agreement as ended, provided that Employee does not work
for successor company in any capacity following such election by the Employee.
15. NOTICES
All notices and other communications which are required or may be given under
this Employment Agreement shall be in writing and shall be deemed to have been
given if delivered personally or sent by registered or certified mail, return
receipt requested, postage prepaid:
(a) If to the Company, to:
Clark Industries, Inc.
104 East Butterfield Trail
P. O. Box 287
Gilman, Illinois 60938
Attn: Corporate Secretary
(b) If to the Employee, to:
Richard J. Clark
c/o Clark Industries, Inc.
104 East Butterfield Trail
P. O. Box 287
Gilman, Illinois 60938
or to such other place as either party shall have specified by notice in
writing to the other.
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16. GOVERNMENTAL REGULATION
Nothing contained in this Employment Agreement shall be construed so as to
require the commission of any act contrary to law and wherever there is any
conflict between any provision of this Employment Agreement and any statute,
law, ordinance, order of regulation, the latter shall prevail, but in such
event any such provision of this Employment Agreement shall be curtailed and
limited only to the extent necessary to bring it within the legal
requirements.
17. GOVERNING LAW
This Employment Agreement and any litigation thereof shall be governed by and
construed in accordance with the laws of the State of Illinois.
18. ENTIRE AGREEMENT; AMENDMENT
This Employment Agreement sets forth the entire understanding of the parties
in respect of the subject matter contained herein. This Employment Agreement
supersedes and replaces all prior agreements, arrangements and understandings
relating to the subject matter and may only be amended by a written agreement
signed by both parties hereto or their duly authorized representatives.
IN WITNESS WHEREOF, the parties hereto have executed this Employment
Agreement as of the date first above written.
Witness: EMPLOYEE:
____________________ __________________________
Richard J. Clark
COMPANY:
Attest: CLARK INDUSTRIES, INC.
_______________________ By:_____________________________
Its:_____________________________
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EXHIBIT C-2
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT, dated as of December 30, 1993, (the "Closing
Date") between Dennis E. Clark (the "Employee") and Clark Industries, Inc. an
Illinois Corporation (the "Company").
WHEREAS, the Company desires to assure itself of the benefit of the
Employee's services and experience for a period of time; and
WHEREAS, the Employee is willing to enter into an agreement to that end
with the Company upon the terms and conditions herein set forth;
NOW, THEREFORE, in consideration of the premises and covenants herein
contained, the parties hereto agree as follows:
1. TERM OF AGREEMENT
Subject to the terms and conditions hereof, the term of employment of the
Employee under this Employment Agreement shall be for the period commencing on
the date hereof and terminating five years hereafter (the "Initial Employment
Period"). After the Initial Employment Period, this Employment Agreement
shall automatically continue in force and effect on a month-to-month basis
("Renewal Period") unless either party shall give the other written notice of
such party's intent to terminate this Agreement at least thirty (30) days
prior to the expiration of the Initial Employment Period or any Renewal
Period, as the case may be.
2. SERVICES TO BE RENDERED
The Company hereby agrees to employ the Employee as an executive officer of
the Company, subject to terms, conditions and provisions of this Employment
Agreement. The Employee hereby accepts such employment and agrees to devote
his full time and attention exclusively to rendering services to the Company
under this Employment Agreement. Employee shall be subject to the terms and
provisions of the Morrison Knudsen Corporation's ("MK") 1993 Handbook for
Salaried Employees. In general MK's work week is defined as a minimum of
forty hours per week, eight hours a day, Monday thru Friday.
Employee's services shall be limited to locomotive, transit car and other rail
related activities in which MK is engaged. In connection with the rendition
of such services, the Employee shall report to and be subject to the direction
of the Board of Directors of the Company and he shall perform such services as
shall be designated by it.
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3. BASE COMPENSATION AND BENEFITS
(a) In payment for services rendered during the Initial Employment Period
and the Renewal Period to the Company under this Employment Agreement,
the Company shall pay the Employee a base salary of $75,000 per year.
All compensation shall be paid in accordance with the Company's normal
payroll practice and is payable on a bi-weekly basis.
(b) The Employee shall, during the term of this Employment Agreement, be
entitled to vacations and fringe benefits consistent with the Company's
policies for all other executive personnel. Employee will be credited
with vacation benefits in accordance with the number of years of
employment at Company and its predecessor entity, when the MK vacation
and fringe benefits are implemented for Company.
(c) The Employee's salary shall be reviewed annually for possible merit
increases. Compensation may not be reduced.
(d) Nothing contained in this Employment Agreement shall be deemed to
preclude the Board of Directors of the Company, in its sole discretion,
from increasing the amounts payable to the Employee hereunder.
(e) In the event the Company is relocated more than 50 miles from Gilman,
Illinois, Employee shall be entitled to an additional 20% salary
increase as compensation for his personal relocation.
(f) Employee will be required to submit to and pass a substance abuse test,
and comply with the Company's Substance Abuse Prevention Program, when
the testing program is implemented in Employee's area.
4. BONUSES
(a) For each fiscal year ending on December 31, 1994 and on each December 31
thereafter through 1998 the Employee shall, if employed pursuant to the
terms of this Agreement at the end of such fiscal year, be eligible to
receive an annual bonus (the "Annual Bonus") under the Rail Systems
Group Project Incentive Plan as it may be amended from time to time
based upon (i) the Company's financial performance for such fiscal year
relative to the Company's approved annual budget (to be determined by
performance targets to be established by Morrison Knudsen Corporation,
an Ohio corporation, the Company's parent, for each fiscal year) and
(ii) the performance of Employee as evaluated by the Vice President,
Locomotive Division, of MK's Rail Systems Group and approved by the
President of MK's Rail Systems Group. The Annual Bonus, if any, for any
particular fiscal year, shall be paid in a single lump sum no later than
ten weeks following the closing of such fiscal year.
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(b) INCENTIVE BONUS
In addition to the annual bonus provided by for in Section 4(a) above,
the Employee, if employed pursuant to the terms of this agreement on
December 31, 1996 shall be entitled to an incentive bonus equal to 6
2/3% of the amount by which earnings before interest and taxes for the
years 1994, 1995 and 1996 exceed $3 million. The three-year incentive
bonus payment shall not exceed $333,333. For purposes of this
computation, Earnings before interest and taxes includes all direct and
indirect operating costs and selling, general and administrative costs
associated with the Clark operation. There is no allocation of
additional overhead or other costs from MK or the Rail Systems Group to
Clark's operation.
If during this three year period Company is down for any length of time
due to the relocation of Company operations, then that amount of down
time shall be added to the three year incentive bonus period in the
calculation of the bonus.
5. DISABILITY AND DEATH
(a) In the event the Employee is not reasonably able to render his full
services hereunder due to a physical or mental disability and such
disability shall continue for a period of more than one year, or should
the Employee at any time become permanently disabled (as determined
under the terms of the long Term Disability Plan established by MK, a
shareholder of the Company), and as a result thereof be unable to render
his full services hereunder, then the Company may, at its election,
terminate this Employment Agreement. In the event this Employment
Agreement is terminated pursuant to this Section 6(a), the Employee
shall have no further rights hereunder except to be paid an amount equal
to any base salary or bonus earned under the terms of this Employment
Agreement which remains unpaid at the time of disability.
(b) Upon the death of the Employee, this Employment Agreement shall
terminate and neither the Employee nor his estate shall have any further
rights hereunder, except to be paid an amount equal to any base salary
or bonus earned under the terms of this Employment Agreement which
remains unpaid at the time of death.
6. TERMINATION
(a) In the event the Employee is terminated for "Cause" (as defined in
Section 6(b) below), this Employment Agreement shall terminate and the
Employee shall have no rights hereunder.
(b) For purposes of Section 6(a) above, "Cause" shall mean Employee's: (i)
conviction of any felony involving dishonest, fraud or breach of trust;
(ii) willful engagement in any misconduct in the performance of his
duties that materially injures Company, monetarily or otherwise; (iii)
performance of any act which, if known to Company's customers, clients
or stockholders would materially and adversely affect Company's
business; or (iv) substantial nonperformance of assigned duties (other
than any such failure resulting from Employee's incapacity due to
physical or mental illness under
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Section 6(a) above) which has continued for thirty days after Company's
Board of Directors has given written notice of such nonperformance to
Employee. For purposes of clause (ii) of this Section 7(a), no act or
omission on Employee's part shall be deemed "willful" if committed or
omitted in good faith and with a reasonable belief his action was in the
best interest of the Company.
(c) If Employee is terminated for convenience, Employee shall be entitled to
Base Compensation as defined in this Agreement for the remaining term of
this Agreement.
7. INVENTIONS
For purposes of this Employment Agreement, "Invention" shall mean any and all
machines, apparatuses, compositions of matter, method, know-how, processes,
designs, configurations, uses, ideas, concepts, or writings of any kind,
discovered, conceived, developed, made, or produced, or any improvements to
them, and shall not be limited to the definition of an invention contained in
the United States Patent Laws.
The Employee understands and agrees that all Inventions, or trademarks or
copyrights relating thereto, which reasonably relate to the business of the
Company (as described in Section 1 of the Non-Competition Agreement) and which
are conceived or made by him during the period and scope of his employment,
either alone or with others, are the sole and exclusive property of the
Company. The Employee understands and agrees that all Inventions, trademarks,
or copyrights described above in this paragraph are the sole and exclusive
property of the Company whether or not they are conceived or made during
regular working hours.
The Employee agrees that he will disclose promptly and in writing to the
Company all Inventions within the scope of this Employment Agreement, whether
he considers them to be patentable or not, which he, either alone or with
others, conceives or makes (whether or not during regular working hours). The
Employee hereby assigns and agrees to assign all his right, title, and
interest in and to those Inventions which reasonably relate to the business of
the Company and agrees not to disclose any of these to others without written
consent of the Company, except as required by the conditions of his
employment.
The Employee agrees that he will at any time during his employment hereunder,
or after this Employment Agreement terminates, on the request of the Company,
(i) execute specific assignments in favor of the Company, or its nominee, of
any of the Inventions covered by this Employment Agreement (ii) execute all
papers and perform all lawful acts the Company considers necessary or
advisable for the preparation, applications, procurement, maintenance,
enforcement, and defense of patent applications and patents of the United
States and foreign countries for these inventions, for the perfection or
enforcement of any trademarks or copyrights relating to such inventions, and
for the transfer of any interest Employee may have, and (iii) execute any and
all papers and lawful documents required or necessary to vest sole right,
title, and interest in the Company or its nominee of the above inventions,
patent applications, patents, or any trademarks or copyrights relating
thereto. The Employee will, at the Company's expense, execute all documents
(including those
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referred to above) and do all other acts necessary to assist in the
preservation of all the Company's interests.
8. CONFIDENTIALITY
For purposes of the Employment Agreement, "proprietary information" shall mean
any information relating to the business of the Company that has not
previously been publicly released by duly authorized representatives of the
Company and shall include (but shall not be limited to) Company information
encompasses in all drawings, designs, plans, proposals, marketing and sales
plans, financial information, costs, pricing information, customer
information, and all methods, concepts, or ideas in or reasonably related to
the business of the Company.
The Employee agrees to regard and preserve as confidential all proprietary
information pertaining to the Company's business that has been or may be
obtained by Employee in the course of his employment with the Company, whether
he has such information in his memory or in writing or other physical form.
The Employee will not, without written authority from the Company to do so,
use for his benefit or purposes, nor disclose to others, either during the
term of his employment hereunder or thereafter, except as required by the
conditions of his employment hereunder, any proprietary information connected
with the business or developments of the Company. This provision shall not
apply after the proprietary information has been voluntarily disclosed to the
public, independently developed and disclosed by others, or otherwise enters
the public domain through lawful means.
9. REMOVAL OF DOCUMENTS OR OBJECTS
The Employee agrees not to remove from the premises of the Company, except as
an employee of the Company, in pursuit of the business of the Company or any
of its subsidiaries, or except as specifically permitted in writing by the
Company, any document or object containing or reflecting any proprietary
information of the Company. The Employee recognizes that all such documents
and objects, whether developed by him or by someone else, are the exclusive
property of the Company.
10. CORPORATE OPPORTUNITIES
The Employee agrees that during his employment hereunder he will not take any
action which might divert from the Company or any subsidiary of the Company
any opportunity which would be within the scope of any of the present or
future businesses, as described in Section 1 of the Non-Competition Agreement,
thereof.
11. INJUNCTIVE RELIEF
It is understood and agreed by and between the parties hereto that the
services to be rendered by the Employee hereunder, and the rights and
privileges granted to the Company by the Employee hereunder, are of a special,
unique, extraordinary and intellectual character, which gives them a peculiar
value, the loss of which cannot be reasonably or
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adequately compensated in damages in any action at law, and that a breach by
the Employee of any of the provisions contained in this Employment Agreement
will cause the Company great and irreparable injury and damage. The Employee
hereby expressly agrees that the Company shall be entitled to the remedies of
injunction, specific performance and other equitable relief to prevent a
breach of this Employment Agreement by the Employee. This provision shall
not, however, be construed as a waiver of any of the rights which the Company
may have for damages or otherwise. It is agreed that the prevailing party of
any action shall be entitled to attorneys fees and costs incurred in such
action.
12. WARRANTY
The Employee hereby warrants that he is free to enter this Employment
Agreement and to render his services pursuant hereto. The Company agrees to
maintain such accounting records and practices needed to reflect the financial
performance of the Company.
13. NON-ASSIGNABILITY
Except as otherwise provided herein, this Employment Agreement may not be
assigned by either the Company or the Employee.
14. MERGER OR CONSOLIDATION
In the event of a merger or consolidation of the Company with any other
corporation or corporations, or of the sale by the Company of a major portion
of its assets or of its business and good will, this Employment Agreement may
be assigned and transferred to such successor in interest as an asset of the
Company upon such assignee assuming the Company's obligations hereunder, in
which event the Employee agrees to continue to perform his duties and
obligations according to the terms and conditions hereof for such assignee or
transferee this Employment Agreement. With the exception that if such
assignment and transfer of this Agreement is made three years after the
effective date of this Agreement, to a successor of which MK owns less than
50% and it is not the single largest remaining shareholder, then Employee may
elect to receive the balance of his salary for the unexpired portion of the
term and to treat the Agreement as ended, provided that Employee does not work
for successor company in any capacity following such election by the Employee.
15. NOTICES
All notices and other communications which are required or may be given under
this Employment Agreement shall be in writing and shall be deemed to have been
given if delivered personally or sent by registered or certified mail, return
receipt requested, postage prepaid:
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(a) If to the Company, to:
Clark Industries, Inc.
104 East Butterfield Trail
P. O. Box 287
Gilman, Illinois 60938
Attn: Corporate Secretary
(b) If to the Employee, to:
Dennis E. Clark
c/o Clark Industries, Inc.
104 East Butterfield Trail
P. O. Box 287
Gilman, Illinois 60938
or to such other place as either party shall have specified by notice in
writing to the other.
16. GOVERNMENTAL REGULATION
Nothing contained in this Employment Agreement shall be construed so as to
require the commission of any act contrary to law and wherever there is any
conflict between any provision of this Employment Agreement and any statute,
law, ordinance, order of regulation, the latter shall prevail, but in such
event any such provision of this Employment Agreement shall be curtailed and
limited only to the extent necessary to bring it within the legal
requirements.
17. GOVERNING LAW
This Employment Agreement and any litigation thereof shall be governed by and
construed in accordance with the laws of the State of Illinois.
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18. ENTIRE AGREEMENT; AMENDMENT
This Employment Agreement sets forth the entire understanding of the parties
in respect of the subject matter contained herein. This Employment Agreement
supersedes and replaces all prior agreements, arrangements and understandings
relating to the subject matter and may only be amended by a written agreement
signed by both parties hereto or their duly authorized representatives.
IN WITNESS WHEREOF, the parties hereto have executed this Employment
Agreement as of the date first above written.
Witness: EMPLOYEE:
____________________ __________________________
Dennis E. Clark
COMPANY:
Attest: CLARK INDUSTRIES, INC.
_______________________ By:_____________________________
Its:_____________________________
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EXHIBIT C-3
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT, dated as of December 30, 1993, (the "Closing
Date") between Richard K. Clark (the "Employee") and Clark Industries, Inc. an
Illinois Corporation (the "Company").
WHEREAS, the Company desires to assure itself of the benefit of the
Employee's services and experience for a period of time; and
WHEREAS, the Employee is willing to enter into an agreement to that end
with the Company upon the terms and conditions herein set forth;
NOW, THEREFORE, in consideration of the premises and covenants herein
contained, the parties hereto agree as follows:
1. TERM OF AGREEMENT
Subject to the terms and conditions hereof, the term of employment of the
Employee under this Employment Agreement shall be for the period commencing on
the date hereof and terminating five years hereafter (the "Initial Employment
Period"). After the Initial Employment Period, this Employment Agreement
shall automatically continue in force and effect on a month-to-month basis
("Renewal Period") unless either party shall give the other written notice of
such party's intent to terminate this Agreement at least thirty (30) days
prior to the expiration of the Initial Employment Period or any Renewal
Period, as the case may be.
2. SERVICES TO BE RENDERED
The Company hereby agrees to employ the Employee as an executive officer of
the Company, subject to terms, conditions and provisions of this Employment
Agreement. The Employee hereby accepts such employment and agrees to devote
his full time and attention exclusively to rendering services to the Company
under this Employment Agreement. Employee shall be subject to the terms and
provisions of the Morrison Knudsen Corporation's ("MK") 1993 Handbook for
Salaried Employees. In general MK's work week is defined as a minimum of
forty hours per week, eight hours a day, Monday thru Friday.
Employee's services shall be limited to locomotive, transit car and other rail
related activities in which MK is engaged. In connection with the rendition
of such services, the Employee shall report to and be subject to the direction
of the Board of Directors of the Company and he shall perform such services as
shall be designated by it.
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3. BASE COMPENSATION AND BENEFITS
(a) In payment for services rendered during the Initial Employment Period
and the Renewal Period to the Company under this Employment Agreement,
the Company shall pay the Employee a base salary of $75,000 per year.
All compensation shall be paid in accordance with the Company's normal
payroll practice and is payable on a bi-weekly basis.
(b) The Employee shall, during the term of this Employment Agreement, be
entitled to vacations and fringe benefits consistent with the Company's
policies for all other executive personnel. Employee will be credited
with vacation benefits in accordance with the number of years of
employment at Company and its predecessor entity, when the MK vacation
and fringe benefits are implemented for Company.
(c) The Employee's salary shall be reviewed annually for possible merit
increases. Compensation may not be reduced.
(d) Nothing contained in this Employment Agreement shall be deemed to
preclude the Board of Directors of the Company, in its sole discretion,
from increasing the amounts payable to the Employee hereunder.
(e) In the event the Company is relocated more than 50 miles from Gilman,
Illinois, Employee shall be entitled to an additional 20% salary
increase as compensation for his personal relocation.
(f) Employee will be required to submit to and pass a substance abuse test,
and comply with the Company's Substance Abuse Prevention Program, when
the testing program is implemented in Employee's area.
4. BONUSES
(a) For each fiscal year ending on December 31, 1994 and on each December 31
thereafter through 1998 the Employee shall, if employed pursuant to the
terms of this Agreement at the end of such fiscal year, be eligible to
receive an annual bonus (the "Annual Bonus") under the Rail Systems
Group Project Incentive Plan as it may be amended from time to time
based upon (i) the Company's financial performance for such fiscal year
relative to the Company's approved annual budget (to be determined by
performance targets to be established by Morrison Knudsen Corporation,
an Ohio corporation, the Company's parent, for each fiscal year) and
(ii) the performance of Employee as evaluated by the Vice President,
Locomotive Division, of MK's Rail Systems Group and approved by the
President of MK's Rail Systems Group. The Annual Bonus, if any, for any
particular fiscal year, shall be paid in a single lump sum no later than
ten weeks following the closing of such fiscal year.
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(b) INCENTIVE BONUS
In addition to the annual bonus provided by for in Section 4(a) above,
the Employee, if employed pursuant to the terms of this agreement on
December 31, 1996 shall be entitled to an incentive bonus equal to 6
2/3% of the amount by which earnings before interest and taxes for the
years 1994, 1995 and 1996 exceed $3 million. The three-year incentive
bonus payment shall not exceed $333,333. For purposes of this
computation, Earnings before interest and taxes includes all direct and
indirect operating costs and selling, general and administrative costs
associated with the Clark operation. There is no allocation of
additional overhead or other costs from MK or the Rail Systems Group to
Clark's operation.
If during this three year period Company is down for any length of time
due to the relocation of Company operations, then that amount of down
time shall be added to the three year incentive bonus period in the
calculation of the bonus.
5. DISABILITY AND DEATH
(a) In the event the Employee is not reasonably able to render his full
services hereunder due to a physical or mental disability and such
disability shall continue for a period of more than one year, or should
the Employee at any time become permanently disabled (as determined
under the terms of the long Term Disability Plan established by MK, a
shareholder of the Company), and as a result thereof be unable to render
his full services hereunder, then the Company may, at its election,
terminate this Employment Agreement. In the event this Employment
Agreement is terminated pursuant to this Section 6(a), the Employee
shall have no further rights hereunder except to be paid an amount equal
to any base salary or bonus earned under the terms of this Employment
Agreement which remains unpaid at the time of disability.
(b) Upon the death of the Employee, this Employment Agreement shall
terminate and neither the Employee nor his estate shall have any further
rights hereunder, except to be paid an amount equal to any base salary
or bonus earned under the terms of this Employment Agreement which
remains unpaid at the time of death.
6. TERMINATION
(a) In the event the Employee is terminated for "Cause" (as defined in
Section 6(b) below), this Employment Agreement shall terminate and the
Employee shall have no rights hereunder.
(b) For purposes of Section 6(a) above, "Cause" shall mean Employee's: (i)
conviction of any felony involving dishonest, fraud or breach of trust;
(ii) willful engagement in any misconduct in the performance of his
duties that materially injures Company, monetarily or otherwise; (iii)
performance of any act which, if known to Company's customers, clients
or stockholders would materially and adversely affect Company's
business; or (iv) substantial nonperformance of assigned duties (other
than any such failure resulting from Employee's incapacity due to
physical or mental illness under
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Section 6(a) above) which has continued for thirty days after Company's
Board of Directors has given written notice of such nonperformance to
Employee. For purposes of clause (ii) of this Section 7(a), no act or
omission on Employee's part shall be deemed "willful" if committed or
omitted in good faith and with a reasonable belief his action was in the
best interest of the Company.
(c) If Employee is terminated for convenience, Employee shall be entitled to
Base Compensation as defined in this Agreement for the remaining term of
this Agreement.
7. INVENTIONS
For purposes of this Employment Agreement, "Invention" shall mean any and all
machines, apparatuses, compositions of matter, method, know-how, processes,
designs, configurations, uses, ideas, concepts, or writings of any kind,
discovered, conceived, developed, made, or produced, or any improvements to
them, and shall not be limited to the definition of an invention contained in
the United States Patent Laws.
The Employee understands and agrees that all Inventions, or trademarks or
copyrights relating thereto, which reasonably relate to the business of the
Company (as described in Section 1 of the Non-Competition Agreement) and which
are conceived or made by him during the period and scope of his employment,
either alone or with others, are the sole and exclusive property of the
Company. The Employee understands and agrees that all Inventions, trademarks,
or copyrights described above in this paragraph are the sole and exclusive
property of the Company whether or not they are conceived or made during
regular working hours.
The Employee agrees that he will disclose promptly and in writing to the
Company all Inventions within the scope of this Employment Agreement, whether
he considers them to be patentable or not, which he, either alone or with
others, conceives or makes (whether or not during regular working hours). The
Employee hereby assigns and agrees to assign all his right, title, and
interest in and to those Inventions which reasonably relate to the business of
the Company and agrees not to disclose any of these to others without written
consent of the Company, except as required by the conditions of his
employment.
The Employee agrees that he will at any time during his employment hereunder,
or after this Employment Agreement terminates, on the request of the Company,
(i) execute specific assignments in favor of the Company, or its nominee, of
any of the Inventions covered by this Employment Agreement (ii) execute all
papers and perform all lawful acts the Company considers necessary or
advisable for the preparation, applications, procurement, maintenance,
enforcement, and defense of patent applications and patents of the United
States and foreign countries for these inventions, for the perfection or
enforcement of any trademarks or copyrights relating to such inventions, and
for the transfer of any interest Employee may have, and (iii) execute any and
all papers and lawful documents required or necessary to vest sole right,
title, and interest in the Company or its nominee of the above inventions,
patent applications, patents, or any trademarks or copyrights relating
thereto. The Employee will, at the Company's expense, execute all documents
(including those
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referred to above) and do all other acts necessary to assist in the
preservation of all the Company's interests.
8. CONFIDENTIALITY
For purposes of the Employment Agreement, "proprietary information" shall mean
any information relating to the business of the Company that has not
previously been publicly released by duly authorized representatives of the
Company and shall include (but shall not be limited to) Company information
encompasses in all drawings, designs, plans, proposals, marketing and sales
plans, financial information, costs, pricing information, customer
information, and all methods, concepts, or ideas in or reasonably related to
the business of the Company.
The Employee agrees to regard and preserve as confidential all proprietary
information pertaining to the Company's business that has been or may be
obtained by Employee in the course of his employment with the Company, whether
he has such information in his memory or in writing or other physical form.
The Employee will not, without written authority from the Company to do so,
use for his benefit or purposes, nor disclose to others, either during the
term of his employment hereunder or thereafter, except as required by the
conditions of his employment hereunder, any proprietary information connected
with the business or developments of the Company. This provision shall not
apply after the proprietary information has been voluntarily disclosed to the
public, independently developed and disclosed by others, or otherwise enters
the public domain through lawful means.
9. REMOVAL OF DOCUMENTS OR OBJECTS
The Employee agrees not to remove from the premises of the Company, except as
an employee of the Company, in pursuit of the business of the Company or any
of its subsidiaries, or except as specifically permitted in writing by the
Company, any document or object containing or reflecting any proprietary
information of the Company. The Employee recognizes that all such documents
and objects, whether developed by him or by someone else, are the exclusive
property of the Company.
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10. CORPORATE OPPORTUNITIES
The Employee agrees that during his employment hereunder he will not take any
action which might divert from the Company or any subsidiary of the Company
any opportunity which would be within the scope of any of the present or
future businesses, described in Section 1 of the Non-Competition Agreement,
thereof.
11. INJUNCTIVE RELIEF
It is understood and agreed by and between the parties hereto that the
services to be rendered by the Employee hereunder, and the rights and
privileges granted to the Company by the Employee hereunder, are of a special,
unique, extraordinary and intellectual character, which gives them a peculiar
value, the loss of which cannot be reasonably or adequately compensated in
damages in any action at law, and that a breach by the Employee of any of the
provisions contained in this Employment Agreement will cause the Company great
and irreparable injury and damage. The Employee hereby expressly agrees that
the Company shall be entitled to the remedies of injunction, specific
performance and other equitable relief to prevent a breach of this Employment
Agreement by the Employee. This provision shall not, however, be construed as
a waiver of any of the rights which the Company may have for damages or
otherwise. It is agreed that the prevailing party of any action shall be
entitled to attorneys fees and costs incurred in such action.
12. WARRANTY
The Employee hereby warrants that he is free to enter this Employment
Agreement and to render his services pursuant hereto. The Company agrees to
maintain such accounting records and practices needed to reflect the financial
performance of the Company.
13. NON-ASSIGNABILITY
Except as otherwise provided herein, this Employment Agreement may not be
assigned by either the Company or the Employee.
14. MERGER OR CONSOLIDATION
In the event of a merger or consolidation of the Company with any other
corporation or corporations, or of the sale by the Company of a major portion
of its assets or of its business and good will, this Employment Agreement may
be assigned and transferred to such successor in interest as an asset of the
Company upon such assignee assuming the Company's obligations hereunder, in
which event the Employee agrees to continue to perform his duties and
obligations according to the terms and conditions hereof for such assignee or
transferee this Employment Agreement. With the exception that if such
assignment and transfer of this Agreement is made three years after the
effective date of this Agreement, to a successor of which MK owns less than
50% and it is not the single largest remaining shareholder, then Employee may
elect to receive the balance of his salary for the unexpired portion of the
term and to treat the Agreement as ended, provided that Employee
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does not work for successor company in any capacity following such election by
the Employee.
15. NOTICES
All notices and other communications which are required or may be given under
this Employment Agreement shall be in writing and shall be deemed to have been
given if delivered personally or sent by registered or certified mail, return
receipt requested, postage prepaid:
(a) If to the Company, to:
Clark Industries, Inc.
104 East Butterfield Trail
P. O. Box 287
Gilman, Illinois 60938
Attn: Corporate Secretary
(b) If to the Employee, to:
Richard K. Clark
c/o Clark Industries, Inc.
104 East Butterfield Trail
P. O. Box 287
Gilman, Illinois 60938
or to such other place as either party shall have specified by notice in
writing to the other.
16. GOVERNMENTAL REGULATION
Nothing contained in this Employment Agreement shall be construed so as to
require the commission of any act contrary to law and wherever there is any
conflict between any provision of this Employment Agreement and any statute,
law, ordinance, order of regulation, the latter shall prevail, but in such
event any such provision of this Employment Agreement shall be curtailed and
limited only to the extent necessary to bring it within the legal
requirements.
17. GOVERNING LAW
This Employment Agreement and any litigation thereof shall be governed by and
construed in accordance with the laws of the State of Illinois.
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18. ENTIRE AGREEMENT; AMENDMENT
This Employment Agreement sets forth the entire understanding of the parties
in respect of the subject matter contained herein. This Employment Agreement
supersedes and replaces all prior agreements, arrangements and understandings
relating to the subject matter and may only be amended by a written agreement
signed by both parties hereto or their duly authorized representatives.
IN WITNESS WHEREOF, the parties hereto have executed this Employment
Agreement as of the date first above written.
Witness: EMPLOYEE:
____________________ __________________________
Richard K. Clark
COMPANY:
Attest: CLARK INDUSTRIES, INC.
_______________________ By:_____________________________
Its:_____________________________
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Exhibit 4.6
SHARE EXCHANGE AGREEMENT
This Share Exchange Agreement ("Agreement") dated as of January 31,
1994, is entered into by and among Theodore E. Nelson, Richard L. Jacobs,
James L. Fri, Jr. and Ellida S. Fri (hereinafter individually "Shareholder"
and collectively "Shareholders"), Touchstone, Inc., a Tennessee corporation
("Company") and Morrison Knudsen Corporation, a Delaware corporation ("MK"
or "Buyer"). In consideration of the mutual promises and covenants
contained in this Agreement, the parties hereto agree as follows:
SECTION L STRUCTURE OF SHARE EXCHANGE
1.1 Subject to the terms and conditions of this Agreement, Shareholders
will transfer to Buyer and Buyer will receive from Shareholders 1,000
shares of the common stock of the Company representing all of the
issued and outstanding shares of stock in the Company (the "Company
Shares"). The consideration received by all Shareholders shall be the
equivalent of $18,000,000 in shares of MK common stock, subject to the
provisions of Section 3, Section 4 and Addendum I hereof, and each
Shareholder shall receive shares of common stock of MK valued at a per
share price of $25.00 per share as set forth and defined in SCHEDULE 1
attached hereto (the "MK Shares"). The common stock of MK is sometimes
referred to hereafter as "MK Common." MK shall deliver to Shareholders
stock certificates in accordance with SCHEDULE 1 representing the
share consideration, less the amount to be held in escrow as provided
in Section 3 hereof, in exchange for the delivery by Shareholders of
stock certificates representing 100 percent of the issued shares of
the Company (1,000 shares of common stock) and result in the Company
as a 100 percent owned subsidiary of Buyer.
1.2 In the event that MK undertakes any action or actions, or fails to do
so, that would cause or result in the share exchange referenced in
Section 1.1 to no longer be a tax free exchange to Shareholders, MK
agrees to make an additional cash payment to Shareholders in the
aggregate amount of $3,900,000. MK covenants and warrants to
Shareholders that any affirmative action on its part that would cause
the share exchange to be a taxable exchange to Shareholders will take
place on or prior to the close of business on March 31, 1994, and
thereafter, MK will take no action, or fail to take action, that would
cause the share exchange to become or treated as a taxable exchange to
Shareholders without the prior written consent of Shareholders. In the
event MK shall elect to take any action to cause the share exchange to
become a taxable exchange to Shareholders, Shareholders shall also
agree to join with MK in making any such election pursuant to Section
338(h)(10) of the Internal Revenue Code (for so long as the request
for such election is made on or prior to March 31, 1994) and agree
that this transaction shall then be treated as an asset purchase for
income tax purposes. MK further covenants and agrees that in the
event the share exchange is treated as a taxable transaction, then,
in such event, MK shall deliver to Shareholders the cash sum of
$3,900,000, by wire transfer, on or prior to April 8, 1994 at 2:30
p.m. (Central Standard Time) to the trust account of counsel for
Shareholders, as follows:
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Spragins, Barnett, Cobb & Butler, Trust Account
Volunteer Bank, 301 East Main Street, Jackson, TN 38301
ABA #084300603
Account #3821528
(with instructions to notify Larry A. Butler upon receipt-
901-424-0461)
Upon delivery of the above described funds, MK shall have no
responsibility or liability for seeing to the disbursement of the
funds to the Shareholders as that will be the sole responsibility and
liability of Spragins, Barnett, Cobb & Butler, attorneys.
1.3 All shares received from Shareholders by Buyer shall be free from any
restrictions, liens, encumbrances, claims (including any "adverse
claim" as such term is defined in the Uniform Commercial Code),
options, calls, pledges, trusts and other commitments, agreements or
arrangements. Each Shareholder shall pay any and all State and/or
Federal Transfer Taxes and Governmental charges assessable against
such Shareholder regarding the transfer of such Shareholder's shares
to Buyer.
1.4 MK Shares delivered to Shareholders will be in whole shares (rounded
to the nearest whole share) in amounts most nearly proportionate to
each Shareholders ownership of the Company shares as set forth in
SCHEDULE 1. No cash payments in lieu of fractional shares will be
delivered for partial shares.
SECTION 2 CLOSING
2.1 The closing of the transactions contemplated by this Agreement (the
"Closing") shall take place at the offices of MK at One Morrison
Knudsen Plaza Boise, Idaho, within five (5) business days following
the satisfaction of the conditions precedent set forth in Sections 9
and 10 hereof, or at such other place, date and time as the parties
hereto may agree in writing, but in no event later than February 28,
1994. Tentative execution of this Agreement is established as January
26, 1994, with closing to be effective at midnight (12:00 p.m.) on
January 31, 1994 (the "Closing Date").
2.2 For purposes of consummation of the transactions hereunder, the Net
Worth (as hereinafter defined) of the Company as of the date of
Closing, and as to be determined as of immediately prior to the
Closing, shall be a minimum of $5,600,000. As used herein, the phrase
"Net Worth" means the tangible net worth of the Company as reflected
on its financial statements prepared in accordance with Generally
Accepted Accounting Principles ("GAAP"), consistently applied,
applicable to S corporations. The Company's unaudited financial
statements for the period ending November 30, 1993 are attached hereto
as SCHEDULE 2.2 (the "Interim Balance Sheet"). Further, except as
disclosed in SCHEDULE 5.10 or as otherwise disclosed elsewhere in this
Agreement, from the date of such Interim Balance Sheet until Closing,
there will be no material adverse change in the financial condition,
assets or liabilities of the Company (as reflected on the Interim
Balance Sheet). As soon as practicable following Closing, the Company
shall deliver and furnish to Buyer and Shareholders the financial
statements of the Company in sufficient form to disclose the actual
Net Worth of the Company as of the Closing Date, as outlined
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above (the "Final Balance Sheet"). In the event that the Net Worth of
the Company as of the Closing Date is determined by the parties to be
less than $5,600,000, but more than $5,200,000, or, failing such
mutual determination, a final determination thereof is made pursuant
to Section 11 hereof, then, in either such event, the deficiency in
Net Worth shall be satisfied as a liquidated indemnity claim and paid
or satisfied in accordance with the terms of the Escrow Agreement (as
defined in Section 3 hereof). If the Net Worth is determined to be
less than $5,200,000, the deficiency (being the amount below
$5,200,000) shall be satisfied on the basis of $3.00 for each $1.00 of
deficiency. It shall be satisfied from the Escrow Shares (defined
herein), but to the extent such Escrow Shares are inadequate, it shall
then be reimbursed immediately to Buyer by Shareholders.
SECTION 3 ESCROW
At closing, MK shall deliver to Key Trust Company of Idaho, Boise, Idaho
("Escrow Agent"), the equivalent of $1,800,000 in MK shares, valued as in
Section 1 above and as stated on SCHEDULE 1 hereto (the "Escrow Shares"), to
be held by Escrow Agent for a period of one year from the closing date
pursuant to the terms of an escrow agreement in substantially the form of
EXHIBIT A attached hereto (the "Escrow Agreement"). At the expiration of
such period, the Escrow Agent shall deliver to Shareholders the Escrow
Shares less any amounts paid or owed to the Company or MK pursuant to
Sections 2, 5 and 11 hereof. Such shares are subject to the provisions of
Section 4 and Addendum I hereof.
SECTION 4 REGISTRATION AND RESALE OF SHARES OF MK COMMON
4.1 Each Shareholder hereby represents that he or she is acquiring the MK
Shares for his or her own account and not with a view to, or for the
resale in connection with, any distribution of public offering thereof
within the meaning of the Securities Act of 1933 (the "1933 Act"),
except as contemplated by Section 4.3 of this Agreement. Each of
Theodore E. Nelson, James L. Fri, Jr., Richard L. Jacobs and Ellida S.
Fri represents that he/she is a sophisticated investor for the
purposes of the 1933 Act and has such knowledge and expertise in
financial and business matters that he/she is capable of evaluating
the merits and risks of the MK Shares being delivered pursuant to
Section 1.1. The Shareholders have been provided with copies of MK's
1992 Annual Report, Form 10-K and Proxy Statement, and MK's Quarterly
Reports to Shareholders and Form 10-Q's for the quarters ending March
31, 1993, June 30, 1993, and September 30, 1993 (collectively, the
"SEC Documents"), and access to MK's executive officers has been
provided to the Shareholders. The Shareholders understand that the MK
Shares have not been registered under the 1933 Act by reason of their
contemplated issuance by MK in a transaction exempt from the
registration and prospectus delivery requirements of the 1933 Act
pursuant to Section 4(2) thereof, and that the reliance of MK upon
this exemption is predicated in part upon this representation and
warranty by the Shareholders.
4.2 The Shareholders shall not sell or otherwise transfer any of the MK
Shares until (a) such shares shall have been registered under the 1933
Act, or (b) MK shall have received an
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opinion of legal counsel or a copy of a letter from the staff of the
Division of Corporation Finance of the Securities and Exchange
Commission, in either case satisfactory to MK, that such shares may be
legally sold or otherwise transferred without such registration. Such
restrictions shall be noted on the certificates for MK Shares, and
appropriate stop transfer orders may be issued by MK with respect to
such shares.
4.3 As soon as practicable following the Closing, MK shall take such steps
as shall be necessary to cause the MK Shares to be registered to the
extent necessary to permit their public sale or other disposition
following the Closing. The parties acknowledge that MK intends to
accomplish such registration by (i) filing a Form S-3 Registration
Statement with the Securities and Exchange Commission, and MK using
its best efforts to cause such registration to be effective on or
before March 15, 1994, and (ii) filing a Form 8-K reporting the
closing of the transactions contemplated by this Agreement and the
issuance of shares of MK pursuant hereto as soon as practicable after
the Closing. Notwithstanding the compliance with the securities laws
as described in this section, the Shareholders agree not to sell any
of the MK Shares until MK has publicly reported consolidated earnings
of the Company and MK for a period of at least 30 days after Closing.
Assuming effectiveness of the Form S-3 Registration Statement,
Shareholders should be able to sell their MK Shares after such
publication which is anticipated to be made approximately on or about
April 15, 1994. MK or Buyer shall notify the Shareholders upon the
later of (1) the effectiveness of the S-3 Registration Statement, (2)
the filing of the 8-K or (3) MK's public reporting of consolidated
earnings of the Company and MK for a period of at least 30 days after
Closing.
SECTION 5 GENERAL REPRESENTATIONS, WARRANTIES AND COVENANTS
Shareholders, jointly and severally, represent and warrant as follows:
5.1. The Company is an organization duly organized, validly existing and in
good standing under the laws of Tennessee. The Company has the
corporate power and authority to carry on its business as presently
conducted.
5.2 (a) The authorized capital stock of the Company consists of 1,000
shares of common stock (no par value), of which 1,000 shares are
issued and outstanding, fully-paid and nonassessable at and
immediately prior to the Closing, and no shares of preferred
stock will be issued and outstanding prior to Closing.
(b) Shareholders, in accordance with SCHEDULE 1, own all the
presently outstanding shares of the Company's capital stock ,
free and clear of all liens, claims, options, charges or
encumbrances of whatsoever nature.
(c) There are no outstanding options, warrants, or other agreements
of any nature whatsoever relating to the issuance of any shares
of capital stock of the Company.
5.3 The copies of the Certificate of Incorporation, and all amendments
thereto, of the Company, certified by the appropriate authorities of
the jurisdiction of incorporation, and
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of the By-Laws, as amended to date, of the Company, certified by its
Secretary, which have heretofore been delivered to Buyer, are complete
and correct .
5.4 The Company is duly licensed or qualified to do business as a foreign
corporation in each of the jurisdictions set forth on SCHEDULE 5.4
hereto, which are the only jurisdictions wherein the character of the
properties owned or the nature of the business transacted by it makes
such licensing or qualification necessary.
5.5 At the Closing, Shareholders will deliver to Buyer certificates good
standing with respect to the Company, certified (as of the latest
practicable date prior to the Closing) by the appropriate authorities
of Tennessee and of each jurisdiction in which it is qualified to do
business as a foreign corporation.
5.6 Except as disclosed on SCHEDULE 5.6 hereof, Shareholders have no
direct or indirect interest in any corporation or business with which
the Company competes and do not conduct any business similar to any
business conducted by the Company or Buyer, except for the possible
ownership of not more than one percent (1%) of the outstanding equity
securities of any corporation whose shares are regularly traded on any
stock exchange or in the over-the-counter market. Except as disclosed
on SCHEDULE 5.6 hereof, Shareholders have no direct or indirect
interest in any corporation or business which supplies materials or
parts to the Company, except for the possible ownership of not more
than one percent (1%) of the outstanding equity securities of any
corporation whose shares are regularly traded on any stock exchange or
over-the-counter market.
5.7 Except as disclosed on SCHEDULE 5.43 hereof, the execution and
delivery of this Agreement and the consummation of the transactions
contemplated hereby does not and will not violate any provisions of
any material agreement or violate or conflict with any other
restrictions of any kind or character to which the Company or any
shareholder is a party or by which either of them is bound.
Shareholders have the unqualified right to sell, assign and deliver
the Company shares to Buyer, and the unqualified right upon
consummation of the transactions contemplated by this Agreement, to
pass to Buyer good and valid title to such shares, free and clear of
all liens, claims, options, charges or encumbrances of whatsoever
nature.
5.8 (a) Company has delivered to Buyer audited financial statements
(containing balance sheets and related statements of income,
shareholders' equity and cash flows, and accompanying notes) for
fiscal years-ended June 30, 1989 through 1993. Such financial
statements fairly present the financial position of the Company
and the results of their operations and their cash flows for the
years then ended in conformity with GAAP and include no
material misstatements or omissions.
(b) Company has delivered to Buyer an unaudited balance sheet and
statement of income of the Company as of and for the five (5)
months ended November 30, 1993. Such financial statements fairly
present the financial condition and assets and liabilities of
the Company as of November 30, 1993, and the results of its
operations for the period then ended, in accordance with GAAP
applicable to S corporations, applied on a consistent basis, and
include no material misstatements
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or omissions. The November 30, 1993 balance sheet is referred
to herein as the "Interim Balance Sheet."
(c) The Company's Final Balance Sheet will consist of a Net Worth of
not less than $5,600,000 and all accounts receivable therein
will be collectable except for the loss reserve amounts for
receivables as depicted on the Interim Balance Sheet.
(d) Company shall deliver to Buyer updated balance sheets,
statements of income and cash flows and summary of accounts
receivable of the Company within twenty days of the close of
each month until Closing, including the December 31 financial
statement.
(e) The Company has delivered to Buyer Proforma Income Statement
Forecast for fiscal year 1994 and revenue projections for 1995,
1996, 1997, 1998 and 1999 (SCHEDULE 5.8(E)). These projections
are reasonable and mathematically accurate, and to the best
knowledge of the Shareholders and the Company, the assumptions
underlying such projections provide a reasonable basis for such
projections. To the best knowledge of the Shareholders and the
Company, the factual data used to prepare the Projected
Financial Statements are true and correct in all material
respects and do not fail to represent known events existing
which may have a material adverse effect on the Company's
expected financial performance. The Projected Financial
Statements do not represent a guarantee of the future
performance of the Company.
(f) SCHEDULE 5.8(F) sets forth true and accurate calculations of
earnings before taxes and reconciliation of reported and
adjusted amounts for unusual, non-recurring or stockholder
expenses for the fiscal years 1991 through 1993 and for the
interim period of five months ended November 30, 1993.
5.9 Except as and to the extent reflected or reserved against in the Final
Balance Sheet or in any of the schedules attached hereto, and except
for purchase or sales contracts or, commitments in the ordinary
course of business and not required to be disclosed in any schedule
hereto by reason of specific exclusions in this Agreement, the Company
as of the date of such Final Balance Sheet had no material liabilities
or obligations of any nature, whether absolute, accrued, contingent or
otherwise and whether due or to become due (including, without
limitation, liabilities for taxes in respect of or measured by the
income of the Company, and liabilities for taxes arising out of any
transaction of the Company entered into prior to such date or out of
any state of facts existing prior thereto).
5.10 Except as disclosed in SCHEDULE 5.10 or disclosed in this Agreement or
any other schedule hereto, from the date of the Interim Balance Sheet,
the Company has not:
(a) Suffered any material adverse change in its financial
conditions, assets, liabilities or business;
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(b) Incurred any obligation or liability (whether absolute, accrued
or contingent) other than in the ordinary course of its business
and consistent with past practice;
(c) Paid any claim or discharged or satisfied any lien encumbrance
or obligation, or paid or satisfied any lien or liability
(whether absolute, accrued or contingent), other than
liabilities shown or reflected in the Balance Sheet or incurred
subsequent to the date of the Balance Sheet in the ordinary
course of business and consistent with past practice;
(d) Permitted or allowed any of its assets, tangible or intangible,
to be mortgaged, pledged or subjected to any liens or
encumbrances;
(e) Written down the value of any inventory or written off as
uncollectible any notes or accounts receivable or any portion
thereof, except for write-offs and write-downs of such items in
the ordinary course of business and at a rate no greater than
during the fiscal year ended June 30, 1993;
(f) Canceled any other debts or claims or waived any rights of
substantial value or sold or transferred any of its assets
except in the ordinary course of business and consistent with
past practice;
(g) Granted any general uniform increase in the compensation of
employees (including any such increase pursuant to any bonus,
pension, profit sharing or other plan or commitment) or any
substantial increase in any such compensation payable or to
become payable by it to any officer or employee;
(h) Made any capital expenditures or commitments in excess of an
aggregate of $10,000.00 for the Company for additions to
property, plant or equipment;
(i) Except in the ordinary course of business, declared, paid or set
aside for payment to its stockholders any dividend or other
distribution in respect of its capital stock or redeemed or
purchased or otherwise acquired any of its capital stock or any
options relating thereto or agreed to take any such action;
(j) Made any material change in any method of accounting or
accounting practice;
(k) Paid any amounts to or in respect of, or sold or transferred any
assets, including any assets to, any company, a substantial
portion of the capital stock of which is owned by the Company;
(l) Experienced any material labor difficulty;
(m) Paid, accrued or incurred any management fees to any related
party or affiliated company or made any other payment or
incurred any other liability to a related party;
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(n) Incurred any property damage, whether or not covered by
insurance; and
(o) Paid or incurred obligations for bonus or incentive compensation
to employees or consultants of the Company.
5.11 The Company has duly filed all tax reports and returns required to be
filed by it and has duly paid all taxes and other charges due or
claimed to be due from it by foreign, federal, state or local taxing
authorities (including, without limitation, those due in respect of
its properties, income, franchises, licenses, sales, assets, and
customs duties). All taxes determined or claimed to be due have been
paid; and reserves for taxes contained in the Final Balance Sheet and
carried on the books of the Company as of the Closing Date are
adequate to cover its tax liabilities; and, except as may be noted on
the Final Balance Sheet and on SCHEDULE 5.11, there are no pending
questions relating to, or claims asserted for, taxes or assessments
against the Company.
5.12 The Company has good and marketable title to all of its properties and
assets, real and personal, tangible and intangible, including, without
limitation, the properties and assets reflected in the Interim Balance
Sheet. SCHEDULE 5.12 hereof contains a summary listing of all owned
real property and equipment including that reflected in such Interim
Balance Sheet, which together with the leased property identified in
SECTION 5.14 hereof, comprise all the tangible assets used by the
Company which are necessary to its operation. Except as disclosed in
SCHEDULE 5.12, such properties and assets (as well as any other
properties and assets used in the businesses of the Company) are
subject to no mortgage, pledge, lien, conditional sale agreement,
encumbrance or charge of whatsoever nature. Liens for current taxes
not yet due, and minor imperfections of title and encumbrances, if
any, which are not in the aggregate substantial in amount, do not
materially detract from the value of the property subject thereto or
materially impair the operations of the Company, and have arisen only
in the ordinary course of business and are consistent with past
practice.
(a) Except as disclosed on SCHEDULE 5.12.(A), all equipment and
property on the premises utilized by Company is owned or leased
by the Company and the Company has a legal right to possess and
use all property set forth on SCHEDULE 5.12(A) in the Company's
operations.
5.13 SCHEDULE 5.12 describes all plant and all tangible assets, including
assets having a value of $5,000 or more. The plant, structures and
all items of equipment material to the operations of the Company,
including the Touchstone Lodge Property (defined in Section 13.2
herein), as of the Closing Date, are structurally sound (with no known
defects material to the suitability thereof to present operations) and
in good operating condition and repair, ordinary wear and tear
excepted, and are in compliance with all applicable safety laws and
regulations, zoning laws and building codes.
5.14 SCHEDULE 5.14 annexed hereto identifies all leases, and the duration
thereof, pursuant to which the Company leases or intends to lease real
or personal property, and sets forth the major terms and conditions of
such leases, including terms and lease payments. All such leases are
valid and in full force and effect.
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5.15 Except as set forth on the SCHEDULE 5.15, entitled "Intellectual
Property", attached hereto, the Company does not own, use, has not
applied for, nor licenses any patents, patent applications,
trademarks, service marks, trade names or copyrights (nor any
applications for or extensions or reissuance of, any of the
foregoing). True, correct and complete copies of the items identified
on such Schedule have been delivered to Buyer. Except as disclosed on
SCHEDULE 5.15, the Company solely owns or has the exclusive right to
use, free and clear of any payment, restriction or encumbrance, all
patents, trademarks, service marks, trade names and copyrights (or any
applications for or extensions or reissuance of, any of the foregoing)
set forth on such Schedule. Except as disclosed on SCHEDULES 5.15 AND
5.16, there is no claim or demand of any person pertaining to, or any
proceedings which are pending or, to the best of the Shareholders'
knowledge, threatened, which challenge (i) the rights of the Company
in respect of any patents, trademarks, service marks, trade names or
copyrights (or applications for, or extensions or reissuance of, any
of the foregoing) which are or have been used in the conduct of, or
which relate to, its respective business or which are owned by it, or
(ii) the rights of the Company in respect of any processes, formulas,
confidential information, trade secrets, know-how, engineering data,
technology or other intellectual property which are or have been used
in the conduct of, or which relate to, the Company's business or which
are owned by the Company (collectively "Intellectual Property").
Except as disclosed on SCHEDULE 5.15, no Intellectual Property is
subject to any outstanding order, ruling, decree, judgment or
stipulation by or with any Governmental Authority or any contract,
agreement, commitment or undertaking with any person, or, to the best
of the Shareholders' knowledge, infringes upon, or is being infringed
by others or is used by others (whether or not such use constitutes
infringement). To the best of the Shareholders' knowledge, the
Company's business does not involve employment of any person in a
manner which violates any non-competition or non-disclosure agreement
which such person entered into in connection with any former
employment. All Intellectual Property owned or held, directly or
indirectly, by any officer, director, shareholder, or employee of the
Company has been, or prior to the Closing Date will have been, duly
and effectively transferred to the Company. All Intellectual Property
and assets used by the Company or being developed with Company funds
are in Company possession. Also, set forth on SCHEDULES 5.15 OR 5.16,
is a description of all litigation, actions, suits, investigations,
claims and proceedings, asserted, brought or threatened against the
Company within the ten years preceding the date hereof, together with
a description of the outcome thereof, relating to any Intellectual
Property. The Company has possession of and title to all engineering
drawings, dies, molds and other tooling or equipment necessary and
appropriate to manufacture and produce the Company's products and the
Company has good and marketable title to all such tooling, engineering
drawings, dies, molds and other similar property, free and clear of
any and all liens except as disclosed in this Agreement or any
schedule affixed hereto.
5.16 Except as set forth on SCHEDULE 5.16 annexed hereto, there are no
actions, proceedings, or investigations pending or, to Shareholders'
knowledge, threatened against the Company, nor is there any basis for
any such action, proceeding, or investigation that may materially
adversely affect the business or assets of the Company. Shareholders
have no knowledge of any event or condition of any kind or character
pertaining to the business
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or assets of the Company that may materially adversely affect any such
business or assets, except for the impact of future general economic
conditions.
5.17 (a) SCHEDULE 5.17 sets forth a complete and accurate list of all
policies of fire, liability, and other forms of insurance. The
policies described in SCHEDULE 5.17 annexed hereto are in effect
with respect to the Company and are valid, outstanding and
enforceable policies. The amount of coverage for each policy has
been at least equal to the amount required by contracts entered
into by the Company; and they provide adequate insurance
coverage for the assets and operations of the Company; and such
policies or comparable policies will by their terms (absence
cancellation after the Closing) remain in full force and effect
for at least 30 days after the Closing. Neither Shareholders nor
the Company have been notified of any proposed non-ordinary
increase in the premiums relating to such policies nor of any
facts or events which could give rise to an increase, and know
of no reason why the premiums might incur any extraordinary
increase as a result of this transaction. Except as disclosed on
SCHEDULE 5.17(A), neither the Company nor any of the
Shareholders have any knowledge of any facts or events which may
form the basis for a claim against the above policies or forms
of insurance.
(b) The reserves for workers compensation liability as disclosed in
the Interim Balance Sheet, together with insurance benefits
under the policies described in SCHEDULE 5.17(A), are adequate
to pay or settle all workers compensation claims for injuries
and illness that occurred prior to the Interim Balance Sheet
date, including attorneys' fees and related and incidental
expenses related thereto.
5.18 SCHEDULE 5.18 annexed hereto sets forth the names and locations of all
banks in which the Company has accounts and the names of all persons
authorized to draw thereon.
5.19 Except as set forth in SCHEDULE 5.19 annexed hereto or in this
Agreement and the schedules hereto:
(a) The Company has no contracts or commitments which are material
to the business, operations or financial condition of the
Company other than those described in this Agreement or any of
the schedules annexed hereto or pursuant hereto by reason of a
specific exclusion contained herein;
(b) There are no purchase commitments by the Company in excess of
the normal, ordinary and usual requirements of the business of
the Company or at any excessive price;
(c) There are no outstanding contracts or commitments which in the
aggregate will result in any material loss to the Company upon
completion of performance thereof, after allowance for direct
distribution expenses. Neither the Company nor Shareholders
have any reason to believe that there are any outstanding
contracts, bid or sales or service proposals quoting prices
which in the aggregate will not result in a normal profit to the
Company. SCHEDULE 5.19(C) identifies all outstanding bids and
proposals.
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(d) SCHEDULE 5.19(D) sets forth a true and correct aged listing by
customer of the accounts receivable as of the Interim Balance
Sheet date, and all accounts receivable as set forth on the
Interim Balance Sheet are current and collectible net of any
reserves set forth on the Interim Balance Sheet. Except as
shown on SCHEDULE 5.19(D), there is no claim or right of off-set
to any such accounts receivables;
(e) There are no product liability claims of which the Company or
Shareholders have received notice, and neither knows or have any
reason to believe that any such claims are threatened;
(f) The Company has no outstanding contracts with officers,
employees, agents, consultants, advisors, salesmen, sales
representatives, distributors or dealers that are not cancelable
by it on notice of not longer than 30 days and without
liability, penalty or premium;
(g) The Company has given no irrevocable power of attorney to any
person, firm or corporation for any purpose whatsoever;
(h) The Company has no employment agreements or policies, or any
other agreements or policies that contain any severance or
termination pay liabilities or obligations;
(i) Neither the Company nor Shareholders have received any notice
that the Company is in default under any contracts made or
obligations owed by it, and neither knows or has any reason to
believe that there is any basis for any valid claim of default;
(j) The Company is not restricted by agreement from carrying on its
business anywhere in the world;
(k) Schedule 5.19(k) hereof identifies the compensation of the ten
highest paid employees of the Company for the 1992 and 1993
fiscal years;
(l) Neither the Company nor Shareholders has received any notice of
any claim that the Company is under any liability or obligation
with respect to the return of any products.
5.20 The aggregate fair market value of the inventory of the Company is not
less than the aggregate book value of the inventory as reflected in
the Interim Balance Sheet, and on the books of the Company. SCHEDULE
5.20 hereof contains a complete listing of inventory by class and
stage of completion as of the date stated thereon. Such inventory
consists of a quality and quantity usable and salable in the ordinary
course of business, except for items of obsolete materials or below
standard quality, all of which have been written down in such Interim
Balance Sheet and on such books to realizable market value, or for
which adequate reserves have been provided in such Interim Balance
Sheet and on such books.
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5.21 All contracts or legally binding commitments for the purchase of raw
materials and supplies by the Company were made in the ordinary or
normal course of business, and all present commitments in excess of
$10,000 are as shown on SCHEDULE 5.21.
5.22 The Company has not experienced any material labor difficulties within
the five years preceding the date hereof.
5.23 The Company is not a party to or is bound by any labor or collective
bargaining agreement.
5.24 Neither the execution nor delivery of this Agreement nor the
consummation of the transactions contemplated hereby will constitute a
violation of any rule, regulation, order judgment or decree of any
court or of any local government.
5.25 Except for the full time employment of Theodore E. Nelson, and the
part time consultant work of Richard L. Jacobs and James L. Fri, Jr.,
Shareholders provide no material services to Company.
5.26 Company has no contracts to provide goods and/or services to
Shareholders, or any business in which Shareholders own more than 1%
of the stock.
5.27 Neither the Company, nor any of its Shareholders, has incurred on
behalf of Company any liability to any broker, finder or agent for any
brokerage fees, finders' fees or commissions related to this
transaction.
5.28 Neither the Company nor any Shareholders, nor any officer or director
of Company, its employees, agents or representatives has made any
illegal contributions, payments, falsely recorded payments, bribes, or
illegal payments from corporate funds to obtain or retain business nor
has any Shareholder of the Company been convicted of bribes,
defalcation or embezzlement or other illegal use of Company funds or
resources.
5.29 The amount of any and all product warranty claims relating to sales
occurring on or prior to Closing Date, shall not exceed the amount of
the product warranty reserve included on the Final Balance Sheet of
the Company, which reserve was prepared in conformity with GAAP,
consistently applied. SCHEDULE 5.29 contains a complete and accurate
list of all warranties, oral or written, made by the Company or its
Shareholders with respect to the Company's products.
5.30 Except as disclosed in SCHEDULE 5.30, no executive officer or director
of the Company or any "associate" (as such terms are defined in Rule
12b-2 under the Securities Exchange Act of 1934) of any such executive
officer or director, has any material interest in any material
contract or property (real or personal), tangible or intangible,
including patents, used in or pertaining to the business of the
Company.
5.31 Except as disclosed in SCHEDULE 5.31, the Company has not guaranteed
the debt or any other obligation of any third party, or any
Shareholder debt.
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5.32 SCHEDULE 5.32 entitled "Indebtedness" describes all indebtedness
(excluding accounts payable) of the Company as of November 30, 1993
(including description of the amount, term, payment obligations,
interest rate and payee) and none of the agreements relating thereto
allow modification of such terms as a result of the Closing.
5.33 Except as set forth on SCHEDULE 5.33, the Company has no foreign
representatives or agents.
5.34 Set forth on SCHEDULE 5.34 entitled "Customers" is a complete and
accurate list of the Company's annual sales to each customer from 1990
through November 1993 and the Shareholders know of no reason why any
customer of the Company will cease or reduce its business with the
Company after the Closing, except as disclosed on SCHEDULE 5.34.
5.35 Set forth on SCHEDULE 5.35 hereto entitled "Backlog" is a complete and
accurate description of all backlog orders as of December 15, 1993,
including the customer identification, value of order and expected
delivery date.
5.36 Except as disclosed on SCHEDULE 5.36 entitled "Litigation," there is
no pending or threatened litigation, action, suit, proceeding or
investigation against or involving the Company and, to the best
knowledge of Company and Shareholders there is no basis for any
litigation, action, suit, proceeding or investigation.
5.37 The Company is and has been in material compliance with all laws,
ordinances, regulations, orders, licenses, franchises and permits
applicable to it, its properties and assets, and to the operation of
its business, including, but not limited to such laws and regulations
relating to protection of the public health or environment, waste
disposal, hazardous substances or wastes and occupational health and
safety and neither the Company nor any Officer or Shareholder has made
any illegal payments, illegal political contributions or non recorded
payments to secure or retain any of the business of the Company.
5.38 Neither this Agreement, nor any Schedule or other document furnished
by or on behalf of Shareholders or the Company in connection with this
Agreement contains any untrue statement of a material fact or omits to
state any material fact necessary to make the statements contained
herein or therein not materially misleading. There is no fact or
circumstance known to any of the Shareholders which is likely to
materially adversely affect the condition (financial or other),
properties, assets, liabilities, business, operations or prospects of
the Company which have not been set forth in this Agreement or the
Schedules hereto.
5.39 The Company has no terminated pension benefit plans as such term is
defined in Section 3(2) of the Employee Retirement Income Security Act
of 1974, as amended.
5.40 The Shareholders agree to take no action that would preclude treatment
of this transaction as a pooling of interest by MK. The Shareholders
agree or confirm that:
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(a) The Company has not changed the equity interest of the Company's
voting common stock in contemplation of effecting the
combination either within two years before the plan of
combination was initiated or between the dates the combination
was initiated and consummated. Changes in contemplation of
effecting the combination may include distributions to
stockholders and additional issuances, exchanges and retirements
of securities.
(b) The ratio of the interest of an individual common stockholder to
those of other common stockholders in the Company is not changed
as a result of the exchange of stock to effect the combination.
(c) The sale of significant assets of Company prior to consummation
of a business combination is a pooling of interests violation.
(d) The Shareholders must hold the MK Stock they receive for a
minimum period of thirty days of combined operations. The
results of combined operations must be published in a
post-effective amendment to a registration statement, a Form
10-Q or 8K, a quarterly report, or any other public statement
that includes sales or net income for at least the minimum
period.
5.41 Except as disclosed in SCHEDULE 5.41, there has been no change in
stock ownership of the Company since inception.
5.42 Shareholders will provide MK with a calculation of their tax basis in
the stock of the Company sufficient to meet the needs of income tax
reporting requirements of the Internal Revenue Service. Such stock
basis calculation shall be delivered to MK within 60 days of the
Closing Date.
5.43 SCHEDULE 5.43 attached hereto sets forth a list of consents,
novations, approvals, authorizations, waivers and all other
requirements which must be obtained or satisfied by any of the
Shareholders or the Company for the consummation of the transactions
contemplated by this Agreement, including, without limitation, all
consents, approvals, authorizations, waivers or other requirements
which must be obtained or satisfied for the assignment of the Company
Shares (collectively, "Consent"). All Consents prescribed by any law,
rule or regulation or any contract, agreement, commitment or
undertaking, and which must be obtained or satisfied by any of the
Shareholders or the Company for the consummation of the transactions
contemplated by this Agreement, or for the continued performance by
them of their rights and obligations thereunder, have been, or shall
by the Closing have been made, obtained and satisfied and shall be
attached hereto as part of SCHEDULE 5.43.
SECTION 6 EMPLOYEE BENEFIT REPRESENTATIONS AND WARRANTIES
6.1 Shareholders represent and warrant that the following is a complete
and accurate list of all the employee welfare and pension benefit
plans (as such terms are defined in Sections 3(1) and 3(2),
respectively of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA")), employment practices, and policies which are
either embodied in
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written documents available to employees or are material to the
operation of the Company's business and which are applicable to the
Company's employees who are presently engaged in the business:
(a) Pension Benefit Plans:
(i) Touchstone, Inc. Profit Sharing Plan
(ii) Touchstone, Inc. 401"k" Profit Sharing Plan
(b) Welfare Benefit Plans:
Employee disability provisions, vacation pay benefits, life and
health insurance benefits, and other employee welfare or fringe
benefits as described in that certain TOUCHSTONE, INC. HUMAN
RESOURCE MANUAL dated November 1, 1990, a copy of which has been
previously furnished to MK.
6.2 With respect to the Pension Benefit Plans, Shareholders jointly and
severally represent and warrant:
(a) That the Company is in material compliance with the requirements
provided by any and all statutes, orders or governmental rules
or regulations currently in effect, including but not limited to
ERISA and the Internal Revenue Code of 1986, as amended
(hereinafter referred to as the "Code") and applicable the
plans;
(b) That the plans and their related trusts, if any, are qualified
under Code 401(a) and Code section501(a) and have been
determined by the IRS to qualify, and nothing has since occurred
from the time of the last favorable determination to cause the
loss of the plans' qualification;
(c) That all required reports and descriptions of the plans
(including IRS For 5500 Annual Reports, Summary Annual Reports
and Summary Plan Descriptions) have been timely filed and
distributed;
(d) That any notices required by ERISA or the Code or any other
state or federal law or any ruling or regulation of any state or
federal administrative agency with respect to the plans have
been appropriately given;
(e) That all required contributions for all periods ending prior to
closing (including periods from the first day of the current
plan year to closing) will be made prior to the Closing Date by
the Company in accordance with past practice and the recommended
contribution in any applicable actuarial report;
(f) That all insurance premiums (including premiums to the Pension
Benefit Guaranty Corporation (hereinafter referred to as the
"PBGC") have been paid in full, subject only to normal
retrospective adjustments in the ordinary course, with regard to
the plans for policy years or other applicable policy periods
ending on or before closing;
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(g) That as of the Closing Date, the actuarial present value of
accumulated plan benefits under each plan does not exceed the
net assets available for benefits;
(h) That no accumulated funding deficiency within the meaning of
ERISA section 302 or Codesection412 has been incurred, whether
or not waived;
(i) That with respect to all plans:
(i) neither the Company nor any of the Shareholders has
engaged in prohibited transactions (as defined in ERISA
section406 or Code section4975),
(ii) no action, suit, grievance, arbitration or other manner
of litigation, or claim with respect to the assets of
the plans (other than routine claims for benefits made in
the ordinary course of plan administration for which
plan administrative review procedures have not been
exhausted) are pending, or to the best knowledge of
Shareholders, threatened or imminent against or with
respect to the plan, Company or any fiduciary (as
defined in ERISA section3[21]) of the plans (including
any action, suit, grievance, arbitration or other manner
of litigation, or claim regarding conduct which allegedly
interferes with the attainment of rights under the
plans), and
(iii) neither the Company nor, to the best knowledge of
Shareholders, any fiduciary with respect to the plans has
any knowledge of any facts which would give rise to or
could give rise to any action, suit, grievance,
arbitration or other manner of litigation, or claim;
(j) That neither the Company nor any of its directors, officers,
employees or, to the best knowledge of Shareholders, any other
fiduciary has any liability for failure to comply with ERISA or
the Code for any action or failure to act in connection with the
administration or investment of the plans;
(k) That none of the plans has been completely or partially
terminated;
(l) That none of the plans has been the subject of a reportable
event (as defined in ERISA section4043) as to which a notice
would be required to be filed with the PBGC;
(m) That the PBGC has not instituted or threatened a proceeding to
terminate the plans pursuant to Subtitle 1 of Title IV of ERISA;
(n) That there is no pending or threatened legal action, proceeding
or investigation against or involving the plans, and
Shareholders have no information to indicate that there is any
threatened legal action, proceeding or investigation or basis
for any legal action, proceeding or investigation;
(o) That the actuarial reports relating to the plans which have
heretofore been delivered to MK are accurate and complete copies
of the most recent actuarial reports received by the Company
from the actuaries.
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6.3 With respect to the Company's Welfare Benefit Plans, Shareholders
jointly and severally represent and warrant:
(a) That the Welfare Benefit Plans have been operated and maintained
incompliance in all material respects with the provisions of
ERISA, the Code, and the rules and regulations promulgated
thereunder.
(b) There are no pending or threatened claims, actions or suits
against any of the Welfare Benefit Plans, the Company or, to the
best knowledge of Shareholders, any fiduciaries of such plans
other than benefit claims in the ordinary course of business.
(c) That the Company has not incurred, does not expect to incur, and
has no knowledge of any facts pursuant to which the Company
might incur any excise tax imposed by Section 4980B of the Code.
SECTION 7 ENVIRONMENTAL REPRESENTATIONS, WARRANTIES AND COVENANTS
7.1 For purposes of this Section 7, the term "Hazardous Material" means
any substance:
(a) the presence of which requires investigation or remediation
under any federal, state or local statute, regulation,
ordinance, order, action, policy or common law; or
(b) which is or has been identified as a potential "hazardous
waste," "hazardous substance," pollutant or contaminant under
any federal, applicable state or local statute, regulation,
rules or ordinance or amendments thereto including, without
limitation, the Comprehensive Environmental Response,
Compensation and Liability Act (42 U.S.C. section 9601 et seq.)
and/or the Resource Conservation and Recovery Act (42 U.S.C.
section 6901 et seq.); or
(c) which is toxic, explosive, corrosive, flammable, infectious,
radioactive, carcinogenic, mutagenic, or otherwise hazardous and
has been identified as regulated by any governmental authority,
agency, department, commission, board, agency or instrumentality
of the United States, the State of Tennessee or any political
subdivision thereof.
7.2 For purposes of this Section 7, the term "Environmental Requirements"
means all presently existing applicable statutes, regulations, rules,
ordinances, codes, licenses, permits, orders, and similar items, of
all governmental agencies, departments, commissions, boards, bureaus,
or instrumentalities of the United States, states and political
subdivisions thereof and all presently existing applicable judicial,
administrative, and regulatory decrees, judgments, and orders relating
to the protection of human health or the environment, including,
without limitation:
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(a) All requirements pertaining to reporting, licensing, permitting,
investigation, and remediation of emissions, discharges,
releases, or threatened releases of Hazardous Materials; and
(b) All requirements pertaining to the protection of the health and
safety or employees or the public.
7.3 For purposes of this Section 7, the term "Environmental Damages" means
all claims, judgments, damages, losses, penalties, fines, liabilities
(including strict liability), encumbrances, liens, costs, and expense
of investigation and good faith defense of any claim, and of any good
faith settlement or judgment, of whatever kind or nature, including
without limitation reasonable attorneys' fees and disbursements and
consultants' fees, any of which are incurred at any time as a result
of the existence due to Company's use or activities on the Property
prior to Closing of Hazardous Material upon, or , beneath the Property
or migrating or threatening to migrate from the Property, or the
existence of a violation of Environmental Requirements pertaining to
the Property due to Company's use or activities on the Property,
regardless of whether the existence of such Hazardous Material or the
violation of Environmental Requirements arose prior to the present
ownership or operation of the Property, and including without
limitation:
(a) Damages for personal injury, or injury to property or natural
resources occurring upon or off the Property, foreseeable or
unforeseeable, including, without limitation, lost profits,
consequential damages, the cost of demolition and rebuilding of
any improvements on real property, interest and penalties, but
not including diminution of value;
(b) Fees incurred for the services of attorneys, consultants,
contractors, experts, laboratories and all other costs incurred
in connection with the investigation or remediation of such
Hazardous Materials or violation of Environmental Requirements
including, but not limited to, the preparation of any
feasibility studies or reports or the performance of any
cleanup, remediation, removal, response, abatement, containment,
closure, restoration or monitoring work required by any federal,
state or local governmental agency or political subdivision, and
including without limitation any attorneys' fees, costs and
expenses incurred in enforcing this agreement or collecting any
sums due hereunder, but not including diminution of value;
(c) Liability to any third person or governmental agency to
indemnify such person or agency for costs expended in connection
with the items referenced in subparagraph (b) of this Section
7.3; and
Provided, however, in each such event, that Buyer shall maintain in the
ordinary course of business, at Buyer's cost and expense, an on-going
environmental monitoring, compliance and remediation program at least equal
to the financial levels heretofore conducted by Company and providing
further that Shareholders shall not be responsible herein for defense costs
and attorney fees in any action which is successfully defended by Company.
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7.4 "Property" shall mean all real property owned or leased by the Company
in conjunction with its day to day business activities and the Lodge
Property (defined in Section 13.2 herein).
7.5 Shareholders represent and warrant, to the best of their actual
knowledge, that, except as set forth in the report of AccuLab
Environmental Services, Inc., a copy of which is attached hereto as
SCHEDULE 7.5, that neither the Company nor any other previous owner,
tenant, occupant or user of the Property nor any other person, has
engaged in or permitted any operations or activities upon, or any use
or occupancy of the Property, or any portion thereof, resulting in the
emission, release, discharge, dumping or disposal of any Hazardous
Materials on, under, in or about the Property, nor have any Hazardous
Materials migrated from the Property upon or beneath other properties,
nor have any Hazardous Materials migrated or threatened to migrate
from other properties upon, about or beneath the Property.
Except as set forth in the report of AccuLab Environmental Services,
Inc., a copy of which is attached hereto as SCHEDULE 7.5:
(a) There is not constructed, placed, deposited, stored, disposed of
nor located on the Property any asbestos in any form which has
become friable.
(b) No underground improvements, including but not limited to
treatment or storage tanks, sumps, or water, gas or oil wells
are or have ever been located on the Property.
(c) There is not constructed, placed, deposited, stored, disposed of
nor located on the Property any polychlorinated biphenyls (PCBs)
nor transformers, capacitors, ballasts, or other equipment which
contains dielectric fluid containing PCBs.
(d) The Company and its existing uses and activities materially
comply and have at all times materially complied with all
applicable Environmental Requirements.
(e) Neither Company nor Shareholders has received notice or other
communication concerning any alleged material violation of
Environmental Requirements, whether or not corrected to the
satisfaction of the appropriate authority, nor notice or other
communication concerning alleged material liability for
Environmental Damages in connection with the Property, and there
exists no writ, injunction, decree, order or judgement
outstanding, nor is there any lawsuit, claim, proceeding,
citation, directive, summons or investigation, pending or to
their knowledge threatened, relating to the ownership, use,
maintenance or operation of the Property by any person, or from
alleged material violation of Environmental Requirements, or
from the suspected presence of material quantities of Hazardous
Material thereon.
(f) The Company has all permits and licenses required to be issued
to it by any governmental authority on account of any or all of
their present activities on the Property, and is in full
compliance with the terms and conditions of such permits
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and licenses. No change in the facts or circumstances reported or
assumed in the application for or granting of such permits or licenses
exists, and such permits and licenses are in full force and effect.
7.6 (a) Shareholders jointly, and severally agree to indemnify, defend,
reimburse and hold harmless:
(i) MK,
(ii) the directors, officers, shareholders, employees,
partners, agents, contractors, subcontractors, experts,
licenses, affiliates, lessees, mortgages, trustees, heirs,
devisees, successors, assigns and invitees of Buyer,
from and against any and all Environmental Damages arising from
the presence, as a result of the actions or omissions of the
Company, of Hazardous Materials upon, about or beneath the
Property or migrating from the Property, or arising in any
manner whatsoever out of the violation of any Environmental
Requirements pertaining to the Property and the Company's
activities thereon, either of which conditions exist at Closing
as a result of the actions or omissions of the Company, or the
breach of any warranty or covenant or the inaccuracy of any
representation of Company or Shareholder contained in this
Agreement.
(b) This obligation shall include, but not be limited to, the burden
and reasonable expense of defending all claims, suits and
administrative proceedings (with counsel reasonably approved by
the indemnified parties), and conducting all negotiations of any
description, and paying and discharging, when and as the same
become due, any and all judgements, penalties or other sums due
against such indemnified persons. MK, at its sole expense, may
employ additional counsel of its choice to associate with
counsel representing Shareholders.
(c) The obligations of Shareholders under this paragraph shall not
be affected by any investigation by or on behalf of Buyer or by
any information which Buyer may have or obtain with respect
thereto, except as to any actual knowledge possessed by Buyer as
result of Buyer's inspection.
(d) The obligations, if any, of Shareholders under this Section 7
shall be satisfied during the 12 months following Closing by use
of Escrow Shares or by cash payments from Shareholders, at the
sole option of Shareholders; provided that such cash payments
shall be made prior to termination of the escrow. If such
obligations exceed the value of the escrowed shares, or if the
obligations arise more than 12 months after Closing,
Shareholders shall have up to one year after the date the
amount of such obligation becomes certain to make such cash
payments.
(e) Shareholders' obligations of indemnity pursuant to this Section
7.6 shall only apply to the extent that Environmental Damages
exceed $100,000 in the aggregate and are asserted within five
(5) years from the date of this Agreement.
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SECTION 8 REPRESENTATIONS, WARRANTIES AND COVENANTS OF MK
MK represents, warrants and covenants as follows:
8.1 MK is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware. MK has the
corporate power and authority to carry on its business as presently
conducted.
8.2 The execution, delivery and performance of this Agreement by MK has
been duly authorized by its Board of Directors, and will not result in
any breach of or violate or constitute a default under the Articles of
Incorporation or Bylaws of MK or any indenture, mortgage or other
agreement or instrument to which it is a party.
8.3 Neither the execution or delivery of this Agreement nor the
consummation of the transactions contemplated hereby will constitute a
violation of any rule, regulation, order, judgment or decree of any
court or of any government agency, or require the consent, approval or
authorization of any person, business entity, court or governmental
agency.
8.4 MK represents that the MK Shares will be registered with the
Securities and Exchange Commission by filing a Form S-3 Registration
Statement and that MK will make its best efforts to complete filing
thereof on or before , March 15, 1994, but in any event same will be
completed prior to April 1, 1994.
8.5 All information and financial data as set forth in the 1992 Annual
Report, and the SEC documents are fairly presented and, since October
1, 1993, there has been no material adverse change in the financial
conditions, assets, liabilities or business prospects of MK, except
those changes which have been publicly disclosed as required under the
Securities Exchange Act of 1934 and Rule 15d-11 promulgated
thereunder.
8.6 Except as disclosed on SCHEDULE 8.6 hereto, MK has not asserted any
indemnity claims in connection with the three most recent acquisitions
of companies or businesses.
8.7 Following the Closing, MK shall hold harmless and indemnify the
Shareholders from and against any claims, suits, actions or
liabilities in connection with the personal guaranties by the
individual shareholders of the Company's promissory note and line of
credit indebtedness and related obligations to Nations Bank and under
the Touchstone Revenue Bonds dated December 27, 1982.
8.8 The registration of the MK Shares with the Securities and Exchange
Commission ("SEC") pursuant to 8.7 above, shall be at the sole cost
and expense of MK.
8.9 MK is qualified to use, in connection with the registration of the MK
Shares, Form S-3 (as identified in Section 8.4 hereof) and it has made
all necessary SEC filings and currently is qualified under the
requirements of Form S-3.
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SECTION 9 CONDITIONS PRECEDENT TO THE OBLIGATIONS OF MK
The obligations of Buyer under this Agreement are subject to the
fulfillment, at or prior to the Closing Date, of the following conditions:
9.1 The representations and warranties of Company and Shareholders set
forth in this Agreement shall be true and correct in all material
respects on and as of the Closing Date with the same force and effect
as though all such representations and warranties had been made on and
as of such date.
9.2 There shall have been delivered to Buyer an opinion, dated as of the
Closing Date, of Spragins, Barnett, Cobb & Butler, Counsel for the
Shareholders, satisfactory in form and substance to, Buyer to the
effect that: (i) the Company is duly organized, validly existing and
in good standing under the laws of the State of Tennessee, with full
corporate power and authority to carry on their businesses as now
being conducted; (ii) the Company is duly qualified to do business and
in good standing in each jurisdiction where ownership of its
properties or the conduct of its business required such
qualifications; (iii) this Agreement constitutes the legal, valid and
binding obligation of Shareholders in accordance with its terms; (iv)
all assignments and other documents necessary to effect the transfer
and assignment of the Company Shares to Buyer as contemplated herein
have been duly executed and delivered and are adequate to transfer and
assign such shares to Buyer; (v) such Counsel is not aware of any
litigation, proceeding or controversy pending or threatened against
the Company, except as disclosed in this Agreement; and (vi) neither
the execution nor the performance of this Agreement will violate any
applicable law of any jurisdiction, or any order, judgment or decree
of any court or governmental agency, or any agreement, indenture or
instrument known to such Counsel. Such opinion shall be affixed hereto
as EXHIBIT D.
9.3 From the date hereof to the Closing Date, the Company shall not have
suffered any loss on account of fire, flood, accident, strike, war, or
any other calamity which had a material adverse effect on its
operations.
9.4 The Company shall have entered into the following additional
Agreements:
(a) Non-Competition Agreements by Theodore E. Nelson, James L. Fri,
Jr., Richard L. Jacobs and Ellida S. Fri in the form attached
hereto as EXHIBIT B.
(b) An Employment Agreement with Theodore E. Nelson in the form
attached hereto as EXHIBIT C.
SECTION 10 CONDITIONS PRECEDENT TO THE OBLIGATIONS OF SHAREHOLDERS
The obligations of Shareholders under this Agreement are subject to the
fulfillment, on or before the Closing Date, of the following conditions:
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10.1 All representations and warranties of MK contained herein shall be
true on the Closing Date with the same force and effect as though such
representations and warranties had been made on the Closing Date.
10.2 All corporate and other actions or consents necessary to authorize and
effectuate the consummation of the transactions contemplated hereby by
MK (including the Consents) shall have been duly taken or received
prior to the Closing.
10.3 All conditions precedent under Section 9 have been satisfied.
10.4 There shall have been delivered to Shareholders an opinion, dated as
of the Closing Date, of David A. Channer, Associate General Counsel
for MK, in the form attached hereto as EXHIBIT E.
SECTION 11SURVIVAL OF REPRESENTATIONS, WARRANTIES, COVENANTS;
INDEMNIFICATIONS; SET OFF
11.1 All representations, warranties, covenants and agreements made by any
party in this Agreement or pursuant hereto shall survive the Closing
hereunder for a period of four years, except that the representations,
warranties, covenants and agreements contained in Section 5.11 shall
survive the Closing for a period ending 180 days after the expiration
of any statute of limitations giving rise to a tax related suit or
claim against the Company based on actions or omissions of the Company
prior to the Closing Date. The intent of this survival provision is
for the Shareholders and the Company to be responsible and liable for
claims that arose out of facts occurring prior to the Closing Date
regardless of when the tax claim may arise.
11.2 Shareholders, jointly and severally, agree to indemnify, defend and
hold MK harmless from and against all demands, claims, actions or
causes of action, assessments, losses, damages, liabilities, costs and
reasonable expenses, including, without limitation, interest,
penalties and reasonable attorneys' fees and expenses asserted against
or imposed upon or incurred by MK resulting from, or by reason of any
facts constituting a breach of any representation or warranty of
Company or Shareholders contained in or made pursuant to this
Agreement.
11.3 Buyer agrees to indemnify, defend and hold Shareholders harmless from
and against all demands, claims, actions or causes of action,
assessments, losses, damages, liabilities, costs and reasonable
expenses, including, without limitation, interest, penalties and
reasonable attorneys' fees and expenses asserted against or imposed
upon or incurred by Shareholders resulting from, or by reason of any
facts constituting, a breach of any representation, warranty,
covenant, or agreement of Buyer contained in or made pursuant to this
Agreement.
11.4 Buyer shall have the right to set off the amount of any indemnity
claim to the extent Shareholders shall be determined to be liable
therefore, in accordance with the provisions of Section 11.6 hereof,
against any sums of money at any time or from time to time payable to
Shareholders, including delivery of the Escrow Shares.
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11.5 In the event any action, claim, suit or proceeding is brought or
asserted against a party indemnified, the Indemnified Party shall give
prompt written notice to the party providing the indemnity (the
"Indemnifying Party"). The Indemnifying Party shall have full
responsibility and authority with respect to any such action, claim,
suit or proceeding. The Indemnified Party shall have the right,
without prejudice to the rights of the Indemnifying Party, at the
Indemnified Party's sole expense, to be represented by counsel of its
own choosing. The Indemnified Party shall make available to the
Indemnifying Party and its counsel and accountants all books, records
and other information of the Indemnified Party relating to such
action, suit or proceeding and the parties agree to render to each
other such assistance as may be reasonably requested in order to
ensure the prompt and adequate defense of any such action, suit or
proceeding.
11.6 (a) Buyer shall give written notice of its intention to set off the
amount of any indemnity claim (the "Indemnity Claim"), such
notice to be given in the manner provided below for the giving
of notices. Shareholders may object to the proposed set off, in
which event Buyer and Shareholders shall promptly endeavor to
agree upon the resolution of the Indemnity Claim. In the event
that a written agreement determining the Indemnity Claim has not
been reached within 30 calendar days after receipt by Buyer of
Shareholders notice of objection, then either Buyer or
Shareholders may, by notice to the other, submit for
determination by arbitration in accordance with this section the
question of Buyer's right to the Indemnity Claim under this
section.
(b) Any determination by arbitration shall be made by and under the
rules of the American Arbitration Association using an
arbitrator (the "Arbitrator") agreed upon by Buyer and
Shareholders, or, if an agreement choosing the Arbitrator has
not been reached in writing within 10 calendar days after
written request therefor by one such party to the other, then
the Arbitrator shall be chosen by the American Arbitration
Association. Any such determination made by the Arbitrator shall
be conclusive and binding on Buyer and Shareholders.
(c) The fee of the Arbitrator associated with such determination
shall be shared equally by Buyer and Shareholders.
(d) Nothing herein shall be construed to authorize or permit the
Arbitrator to determine any question or matter whatever under or
in connection with this Agreement except the determination of
the Indemnity Claim.
SECTION 12 FINDERS FEES; BROKERS
Shareholders and the Company represent and warrant to Buyer that they have
not authorized any person to act as broker, finder or in any other similar
capacity in connection with the transactions contemplated by this Agreement
and the negotiations leading to it.
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SECTION 13 OPTION TO ACQUIRE CERTAIN ASSETS
13.1 For a period of 30 days following the Closing Date, each individual
Shareholder shall have the right and option to purchase and acquire
any policy of life insurance on the life of such Shareholder, owned by
the Company, by payment to the Company of an amount equal to the "Cash
Surrender Value" applicable to such policy, determined as of the day
preceding the date such policy is purchased by said Shareholder.
Further, to the extent that any such purchase by a Shareholder shall
result in any part of the purchase price being treated as taxable
income to the Company, then, in such event, the purchasing Shareholder
shall be responsible for payment or reimbursement to the Company of
the amount of any such additional income tax, same to be payable
within 10 days following submission of an invoice of statement from
the Company to such Shareholder identifying the tax, and the amount
thereof, along with a description of the method and/or manner of how
the tax was calculated, same to be duly confirmed, in writing, by a
qualified, certified public accountant. Any Shareholder desiring to
purchase or acquire his or her policy under this Section, shall have
the right to do so by giving at least five days written notice to the
Company, but in any event, such notice must be given within the 30 day
period described above, an must tender to the Company, within 5 days
following such notice, a cash amount equal to the Cash Surrender Value
of such policy, and the Company will execute and deliver to such
Shareholder an unconditional assignment of the Company's ownership and
interest in such policy. Pending exercise of this option by any
Shareholder, the Company will continue to pay any premiums due on such
policies (unless the Company has been notified that a policy will not
be purchased); however, in addition to the Cash Surrender Value
payable by such Shareholder, the Shareholder will also reimburse the
Company for the pro rata premium on such policy to the extent same was
paid by the Company subsequent to the date of Closing and through the
date of the actual purchase of the policy by said Shareholder. A
schedule of all such existing policies are attached hereto as SCHEDULE
13.1. The tax liability for any policies not purchased by Shareholders
shall also remain as a tax liability collectable from Shareholders
under the Escrow and otherwise.
13.2 For a period of six months following the Closing Date, Richard L.
Jacobs and Theodore E. Nelson shall have the option, to be exercised
jointly, to purchase and acquire from the Company the Company's
interest and title in and to the real estate and personal property
(through "quit claim" from Company) constituting the recreational
facility known as the "Touchstone Lodge" situated on Crawford Springs
Road in Jackson, Tennessee (the "Lodge Property"). The option price
for the Lodge Property shall be the book value thereof as reflected on
the financial statements of Company for the last day of the calendar
month preceding the month that the option is exercise and closed. As
of November 30, 1993, the approximate book value of the Lodge Property
is $340,000. The option to purchase ("Option") may be exercised by
either Mr. Jacobs or Mr. Nelson giving written notice to the Company
of intent to exercise the Option, such notice to be given within the
aforedescribed six month period. The closing thereof shall take place
within 20 days following the date that the notice of exercise is
given. At the closing thereof, Mr. Nelson, Mr. Jacobs, or either of
them, shall tender to the Company the purchase price as computed
above, and the Company shall execute and deliver to Mr. Nelson, Mr.
Jacobs, or their respective designees, a quitclaim deed, and/or bill
of sale to Company's
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<PAGE>
interests in the Lodge Property. All real estate taxes and assessments
shall be prorated as of the date of closing. The Company shall have no
liability for closing costs except the expense of the deed
preparation. For purposes of determining the respective rights of Mr.
Nelson and/or Mr. Jacobs hereunder, the Company shall be entitled to
rely upon any writing submitted to the Company by either of them in
connection with the exercise of the Option and the closing of the
purchase of the Lodge Property.
SECTION 14 MISCELLANEOUS
14.1 This Agreement is binding upon and is for the benefit of the parties
hereto and their respective successors and permitted assigns.
14.2 No party to this Agreement shall, prior to the Closing, convey, assign
or otherwise transfer any of its rights or obligations under this
Agreement without the express written consent of the other party
hereto in its sole and absolute discretion. No assignment of this
Agreement shall relieve the assigning party of its obligations
hereunder.
14.3 All notices or other written communications required or permitted to
be given hereunder shall be in writing and shall be delivered by hand
or by telecopy, or sent, postage prepaid, by registered, certified or
express mail, or reputable overnight courier service, and shall be
deemed given when so delivered by hand or telecopy, or if mailed,
three days after mailing (one business day in the case of express mail
or overnight courier service) as follows:
If to Shareholders:
Theodore E. Nelson
115 Redfield Dr.
Jackson, TN 38305
Richard L. Jacobs
1010 Prospect Ave.
Jackson, TN 38301
James L. Fri, Jr.
465 Cherry Road
Memphis, TN 38117
Ellida S. Fri
465 Cherry Road
Memphis, TN 38117
Copy to: Spragins, Barnett, Cobb & Butler
Attn: Larry A. Butler, Esq.
110 E. Baltimore, Elks Building
Jackson, TN 38301
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If to MK :
Morrison Knudsen Corporation
P. O. Box 73
Boise, ID 83729
Attention: Corporate Secretary
or to such other addresses as may hereinafter be furnished by any
party to the other parties hereto.
14.4 No delay on the part of any party hereto in exercising any right,
power or privilege hereunder shall operate as a waiver, nor shall any
waiver on the part of any party of any right, power or privilege
operate as a waiver of any other right, power or privilege hereunder,
nor shall any single or partial exercise of any right, power or
privilege preclude any other or further exercise thereof or the
exercise of any other right, power or privilege hereunder. The rights
and remedies herein provided are cumulative and are not exclusive of
any rights or remedies which the parties hereto may otherwise have at
law or in equity.
14.5 This Agreement shall constitute the entire agreement between the
parties with respect to the subject matter hereof and shall supersede
all prior agreements, understandings, statements or representations,
oral or in writing, of the parties relating thereto. This Agreement
may be modified or amended only by written agreement of the parties.
14.6 This Agreement may be executed in any number of counterparts, each of
which shall be deemed an original but all of which together shall
constitute a single instrument.
14.7 This Agreement shall be governed and construed in accordance with the
laws of the State of Tennessee applicable to contracts made and to be
performed entirely within such state.
14.8 All agreements and schedules annexed hereto or referred to herein are
hereby incorporated in and made a part of this Agreement as if set
forth in full herein.
14.9 Any provision of this Agreement which is invalid or unenforceable
shall be ineffective to the extent of such invalidity or
unenforceability, without affecting in any way the remaining
provisions hereof.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed as of the date first above written.
SHAREHOLDERS:
/s/ Theodore E. Nelson
________________________________
THEODORE E. NELSON
/s/ James L. Fri, Jr.
________________________________
JAMES L. FRI, JR.
/s/ Ellida S. Fri
________________________________
ELLIDA S. FRI
/s/ Richard L. Jacobs
________________________________
RICHARD L. JACOBS
TOUCHSTONE, INC. (COMPANY)
By: /S/ THEODORE E. NELSON
Its: PRESIDENT
MORRISON KNUDSEN CORPORATION
By: /S/ STEPHEN G. HANKS
Its: SR. VICE PRESIDENT, SECRETARY
and General Counsel
28
<PAGE>
EXHIBITS AND SCHEDULES
Addendum I Registration of MK Common Stock
Exhibit A Form of Deposit Escrow Agreement
Exhibit B-1 Form of Non-Competition Agreement with Theodore E. Nelson
Exhibit B-2 Form of Non-Competition Agreement with Richard L. Jacobs
Exhibit B-3 Form of Non-Competition Agreement with James L. Fri, Jr.,
Exhibit B-4 Form of Non-Competition Agreement with Ellida S. Fri
Exhibit C Form of Employment Agreement with Theodore E. Nelson
Exhibit D Form of Opinion for Shareholders
Exhibit E Form of Opinion for MK
Schedule 1 Identity of Shareholders and Share Exchange Summary
Schedule 2.2 November 30, 1993 Financial Statements
Schedule 5.4 States or Jurisdictions of Qualification
Schedule 5.6 Shareholders' Interest in Related Corporations or
Businesses Schedule 5.8(e) Proformas
Schedule 5.8(f) Calculations of Earnings
Schedule 5.10 Specific Disclosures Regarding Post-November 30, 1993
Operations
Schedule 5.11 Taxes
Schedule 5.12 Summary of Real Estate and Equipment and Encumbrances
Schedule 5.12(a) Non-Owned Property - Consignments
Schedule 5.14 Leases
Schedule 5.15 Intellectual Property
Schedule 5.16 Actions - Investigations Pending
Schedule 5.17 Schedule of Insurance
Schedule 5.17(a) Claims - Insurance
Schedule 5.18 Bank Accounts
Schedule 5.19 Material Contracts - Claims
Schedule 5.19(c) Outstanding Bids - Proposals
Schedule 5.19(d) Accounts Receivable
Schedule 5.19(k) Highest Paid Employees
Schedule 5.20 Inventory
Schedule 5.21 Raw Materials Commitments
Schedule 5.29 Product Warranties
Schedule 5.30 Interests in Material Contracts
Schedule 5.31 Guarantees
Schedule 5.32 Indebtedness
Schedule 5.33 Foreign Representatives
Schedule 5.34 Customers - Sales
Schedule 5.35 Backlog
Schedule 5.36 Litigation
Schedule 5.41 Changes in Stock Ownership
Schedule 5.43 Consents
Schedule 7.5 AccuLab Report
Schedule 8.6 MK Acquisition Indemnity Claims
Schedule 13.1 Life Insurance Policies
29
<PAGE>
ADDENDUM I
REGISTRATION OF MK COMMON STOCK
1. MK will use its best efforts to keep the Form S-3 continuously
in effect for a period of two years from the Closing by means of filing
Forms 10-K, 10-Q and 8-K and annual reports under the Securities Exchange
Act of 1934 (the "1934 Act") and/or by amendment of the Prospectus included
in the Form S-3 (the "Prospectus"), or for such shorter period of time as is
necessary to complete the sale by Shareholders of such number of the Shares
as they desire to sell. MK will advise Shareholders if, at any time during
such two-year period, sales by means of the Prospectus must be suspended
pending the filing of additional documents under the 1934 Act and/or
amendment of the Prospectus. Shareholders understand that there may be
periods of time within such two-year period when it is in the best interests
of MK and its stockholders to defer disclosure of pending corporate
transactions until they have reached a more advanced stage and that during
such periods sales of the Shares by means of the Prospectus will have to be
suspended.
2. If, during the time that the Form S-3 is effective, Shareholders
should propose to sell any or all of the Shares in an organized secondary
offering (with the assistance of an underwriter or underwriters if deemed
necessary by Shareholders), MK will amend the Form S-3 so as to describe
such offering and will use its best efforts to cause such amendment to
become effective. In the event of the involvement of underwriters, MK shall
also enter into an underwriting agreement with such underwriters in the
customary form and cooperate with such underwriters in whatever due
diligence examination of MK that they wish to perform.
3. If the proposed manner of sale of the Shares shall require that
MK register or qualify such Shares for sale under state securities or blue
sky laws, MK will use its best efforts to effect such registration or
qualification; provided, however, that MK shall not be required to qualify
generally to do business, subject itself to general taxation or consent to
general service of process in any jurisdiction where it would not otherwise
be required to do so but for this Paragraph 3.
4. MK will furnish to Shareholders: (a) two complete copies of the
Form S-3, with all exhibits; and (b) two copies of all documents
incorporated by reference therein, and as reasonable quantities of the
Prospectus as amended from time to time.
5. Shareholders shall be responsible for notifying brokers through
whom sales of the Shares are effected by means of the S-3 that such Shares
have been registered on Form S-3 and for supplying copies of the Prospectus
to such brokers.
6. Shareholders expenses incurred by MK in complying with
Paragraphs 1 through 5 above including, without limiting the generality of
the foregoing, registration and filing fees, transfer agents' fees and
expenses, fees and expenses of complying with state securities or blue sky
laws (including, in the case of organized secondary offerings conducted
through underwriters, the fees and expenses of underwriters' counsel in that
connection), fees and expenses of MK's attorneys and accountants, and
printing expense, shall be paid by MK; provided, however, that all brokerage
fees and commissions arising from the sale of the Shares by Shareholders
shall be born by them.
7. In connection with the registration of any Shares under the 1993
Act pursuant to this Agreement, MK shall indemnify and hold harmless
Shareholders, each underwriter,
30
<PAGE>
broker or any other person acting on behalf of Shareholders and each other
person, if any, who controls any of the foregoing persons within the meaning
of the 1933 Act against any losses, claims, damages or liabilities, joint or
several (or actions in respect thereof), to which any of the foregoing
persons may become subject under the 1933 Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise
out of or are based upon an untrue statement or alleged untrue statement of
a material fact obtained in the registration statement under which the
Shares were registered under the 1933 Act, any preliminary prospectus or
final prospectus contained therein or otherwise filed with the Commission,
any amendment or supplement thereto or any document incident to registration
or qualification of any Shares, or arise out of or are based upon the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading
or, with respect to any prospectus, necessary to make the statements therein
in light of the circumstances under which they were made not misleading, or
any violation by MK of the 1933 Act or state securities or blue sky laws
applicable to MK and relating to action or inaction required of MK in
connection with such registration or qualification under such state
securities or blue sky laws; and shall reimburse the Shareholders, such
underwriter, such broker or such other person acting on behalf of the
Shareholders and each such controlling person for any legal or other
expenses reasonably incurred by any of them in connection with investigating
or defending any such loss, claims, damage, liability or action; PROVIDED,
HOWEVER, that MK shall not be liable in any such case to the extent that any
such loss, claim, damage, liability or action arises out of or is based upon
an untrue statement or alleged untrue statement or omission or alleged
omission made in said registration statement, preliminary prospectus, final
prospectus, amendment, supplement or document incident to registration or
qualification of any Shares in reliance upon and in conformity with written
information furnished to MK through an instrument duly executed by
Shareholders or underwriter specifically for use in the preparation thereof.
If the indemnification provided for in this Paragraph 7 is held by a
court of competent jurisdiction to be unavailable to an indemnified party
with respect to any loss, claim, damage, liability or action referred to
herein, then the indemnifying party, in lieu of indemnifying such
indemnified party hereunder, shall contribute to the amounts paid or payable
by such indemnified party as a result of such loss, claim, damage, liability
or acting in such proportion as is appropriate to reflect fault of the
indemnifying party on the one hand and of the indemnified party on the other
in connection with the statements or omissions which resulted in such loss,
claim, damage, liability or action as well as any other relevant equitable
considerations. The relative fault of the indemnifying party and of the
indemnified party shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by the indemnifying party or by thee indemnified party and the
parties' relative intent, knowledge, access to information and opportunity
to correct or prevent such statement or omission.
8. As of the Closing, MK shall cause the shares to be listed on the
New York Stock Exchange upon official notice of issuance pursuant to this
Agreement.
9. Shareholders shall not sell the Shares unless such sale is
effected in compliance with the 1933 Act and any applicable state securities
laws.
31
<PAGE>
EXHIBIT A
DEPOSIT ESCROW AGREEMENT
This Deposit Escrow Agreement made and executed as of this 31st day of
January, 1994, by and among Theodore E. Nelson, Richard L. Jacobs, James L.
Fri, Jr. and Ellida S. Fri (the "Principals"), Morrison Knudsen Corporation,
a Delaware corporation ("MK" or "Buyer") and Key Trust Company of the West
("Escrow Agent").
WITNESSETH:
WHEREAS, pursuant to a Share Exchange Agreement dated January 31,
1994, by and among the Principals, MK and Touchstone, Inc. ("Company") (the
"Share Exchange Agreement), the Principals have agreed to exchange all of
the outstanding stock of the Company for shares of common stock of MK; and
WHEREAS, pursuant to Section 3 of the Agreement, MK, Buyer and the
Principals have agreed to place into escrow the equivalent of $1,800,000 in
shares of MK common stock to be held by Escrow Agent in accordance with the
terms and conditions set forth below; and
WHEREAS, MK and the Principals have selected Key Trust Company of the
West to serve as Escrow Agent under the terms and conditions of this Deposit
Escrow Agreement (the "Escrow Agreement"); and
WHEREAS, Escrow Agent is willing to serve as escrow agent under the
terms and conditions of this Escrow Agreement.
NOW, THEREFORE, in consideration of the premises and agreements
hereinafter made and intending to be legally bound hereby, the parties
hereto agree as follows:
1. ACKNOWLEDGEMENT BY ESCROW AGENT OF RECEIPT
Escrow Agent acknowledges the receipt from MK and the Principals of the
equivalent of $1,800,000 in shares of MK Common Stock (the "Escrow Deposit")
calculated in accordance with the method described in Section 1 of the Share
Exchange Agreement.
2. AGREEMENT TO ACT AS ESCROW AGENT
By the execution of this Escrow Agreement, Escrow Agent hereby agrees to act
as escrow agent under the terms and conditions hereof.
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<PAGE>
3. INVESTMENT OF ESCROW FUND
The Principals and MK hereby direct Escrow Agent to hold the Deposit Escrow
in accordance with this Agreement. Dividends, interest and other earnings
earned on account of the Deposit Escrow shall be paid to the Principals.
Principals shall vote any shares held by the Escrow Agent. During escrow,
the stock shall be registered in the name of the Escrow Agent.
4. DISPOSITION OF ESCROW FUND
The Escrow Agent shall hold the Deposit Escrow for 12 months from the
Closing Date of the Agreement. If no claims are made by MK against such
Deposit Escrow during such period, the Deposit Escrow shall be delivered to
the Principals. However, if during such 12-month period MK makes a claim
against the Deposit Escrow, the Principals shall be notified in writing as
to the nature and amount of such claim. Within 10 business days after
receipt of such claim, the Principals shall notify the Escrow Agent in
writing whether the claim is valid and due. If the Principals consent to
payment, the Escrow Agent shall, within 5 business days following receipt of
such consent, satisfy the claim by transferring to MK such portion of the\
Deposit Escrow as shall be necessary, considering the value of MK common
stock determined by averaging its closing price on the New York Stock
Exchange during the ten trading days preceding such transfer, to satisfy the
claim. If the Principals dispute the claim, the Escrow Agent shall notify
MK and shall not disburse any of the Deposit Escrow in connection with the
disputed item until the Escrow Agent receives written direction with respect
to it, signed by the Principals and MK. If any disputed claim is unresolved
when the term of this Escrow Agreement expires, the Escrow Agent shall
continue to hold the Deposit Escrow until such claim is disposed of to the
satisfaction of MK and the Principals. Such unresolved claims shall be
finally resolved by arbitration under the auspices of, and in accordance
with, the rules of the American Arbitration Association, as set forth in
Section 11 of the Share Exchange Agreement.
5. LIABILITY OF ESCROW AGENT
The Escrow Agent shall be liable only for its own willful default or gross
negligence and shall not be liable for any error of judgment made in good
faith by it or its agents or employees. MK and the Principals agree to
defend, indemnify and hold harmless the Escrow Agent and its agents and
employees from any and all loss, liability, claims, damages and expenses
whatsoever, except for the willful default or gross negligence of Escrow
Agent, arising out of its activity as Escrow Agent under this Escrow
Agreement and in connection with any payment contemplated herein.
6. IRREVOCABLE ESCROW
This Escrow Agreement shall be irrevocable and shall continue to remain
effective until the Deposit Escrow has been paid in its entirety, whereupon
Escrow Agent shall, after making the payments contemplated in this Escrow
Agreement be under no further obligation or liability hereunder.
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<PAGE>
7. BINDING EFFECT
This Escrow Agreement shall be binding upon and shall inure to the benefit
of the parties hereto and their heirs, personal representatives, successors
and assigns.
8. NOTICE
All notices, requests, instructions, demands and other communications
hereunder shall be in writing and shall be deemed to have been given if
delivered or sent by first class registered or certified mail, postage
prepaid, with return receipt requested as follows:
If to the Escrow Agent:
Pam Wallis
Key Trust Company of the West
P. O. Box 2557
Boise, ID 83701
If to the Principals:
Theodore E. Nelson:
115 Redfield Dr.
Jackson, TN 38305
Richard L. Jacobs:
1010 Prospect Ave.
Jackson, TN 38301
James L. Fri, Jr.:
465 Cherry Road
Memphis, TN 38117
Ellida S. Fri:
465 Cherry Road
Memphis, TN 38117
Copy to: Spragins, Barnett, Cobb & Butler
Attn: Larry A. Butler, Esq.
110 E. Baltimore
Elks Building
Jackson, TN 38301
If to MK:
Morrison Knudsen Corporation
P. O. Box 73
Boise, ID 83729
Attention: Corporate Secretary
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<PAGE>
9. FEES
All fees and expenses of the Escrow Agent for services performed by Escrow
Agent under this Escrow Agreement shall be paid in equal measure by the
Principals and MK, however, the liability of Principals shall not exceed the
aggregate sum of $500.
10. NO ENCUMBRANCE
The Escrow Agent acknowledges and agrees that the Deposit Escrow shall be
held separate and apart from all other funds, and no part thereof is or
shall be subject to any security agreements, guarantees, liens,
encumbrances, or any other security instruments or financing statements of
any kind whatsoever.
11. COUNTERPARTS
This Escrow Agreement may be executed in several counterparts, each of which
shall be deemed an original, but all of which together shall constitute one
and the same instrument.
12. CAPTIONS
The section and other headings contained in this Escrow Agreement are for
reference purposes only and shall not affect the meaning or interpretation
of this Escrow Agreement.
13. GOVERNING LAW
This Agreement and any disputes thereunder shall be governed by the laws of
the State of Tennessee.
35
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this Escrow
Agreement the day and year first written above.
MORRISON KNUDSEN CORPORATION
By: ____________________________ Its:____________________________
_________________________________
THEODORE E. NELSON
_________________________________
RICHARD L. JACOBS
_________________________________
JAMES L. FRI, JR.
_________________________________
ELLIDA S. FRI
KEY TRUST COMPANY OF THE WEST
By:______________________________
Its:_____________________________
36
<PAGE>
EXHIBIT B-1
NON-COMPETITION AGREEMENT
This Agreement is entered into this 31st day of January, 1994, by and
between Theodore E. Nelson, Touchstone, Inc. ("Company"), and Morrison
Knudsen Corporation, a Delaware corporation ("MK").
WHEREAS, the parties hereto desire to establish a continuing,
confidential relationship in connection with the business of the Company;
and
WHEREAS, as a part of that relationship, Theodore E. Nelson is willing
to agree to a limitation upon his ability to compete with the Company and
the Company is willing to make the payments provided herein.
NOW, THEREFORE, in consideration of the premises and covenants
contained herein, the parties agree as follows:
SECTION 1
Theodore E. Nelson agrees that for a period of ten (10) years following the
closing date (the "Closing Date") of the transactions contemplated in the
Share Exchange Agreement dated January 31, 1994, among Theodore E. Nelson,
Richard L. Jacobs, James L. Fri, Jr., Ellida S. Fri, MK, and Touchstone,
Inc. (the "Share Exchange Agreement"), he shall not compete, either directly
or indirectly (as a shareholder, partner, employee, trustee or otherwise any
person, firm corporation, association, partnership or other entity), with
the Company by engaging through operations or sales anywhere in the United
States, in a business in which MK or any of its subsidiaries or affiliates
(collectively referred to herein as "MK"), or the Company is now engaged
(including, but not limited to, the remanufacture, manufacture or design of
transit cars, locomotives, freight cars, or components, subassemblies or
engineered systems for transit cars, locomotives or freight cars;
engineering or manufacturing of transit or freight rail signalling or
communication systems; operations and maintenance of transit systems,
freight railroads or passenger railroads; emergency repair and maintenance
of railroad track, tunnels and other infrastructure; marketing or
distribution of railroad products to the rail and transit industries;
environmental cleanup of railroad track and yards) or such other businesses
as MK or the Company may be engaged during such period. In the event this
limitation is considered by a court of competent jurisdiction to be
excessive in its duration or in the area to which it applies, it shall be
considered modified and valid for the duration for such area as said court
may deem reasonable under the circumstances.
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<PAGE>
Nothing herein contained, however, shall prohibit Theodore E. Nelson from
owning, as a passive investment, shares or securities in any publicly traded
corporation or entity, to the extent that such investment shall constitute
less than one percent of the total issued and outstanding shares or
securities of such publicly traded corporation or entity. Theodore E.
Nelson may also maintain his investment and participation in Mill Masters
Incorporated as set forth in Nelson's employment agreement with the Company
and such investment and participation shall be deemed in compliance with
this Non-Competition Agreement.
SECTION 2 - CONSIDERATION
In consideration of the covenant contained in Section 1 hereof, Company
agrees to compensate Theodore E. Nelson by providing on the Closing Date, a
number of shares of MK common stock equivalent to $1,000,000 as determined
by the method and procedures set forth in Sections 1 and 4 of the Share
Exchange Agreement. Said shares shall be issued and registered in the name
of Theodore E. Nelson, and shall be held in Escrow to be distributed to
Theodore E. Nelson over a ten (10) year period for the following schedule:
END OF YEAR
One 10%
Two 10%
Three 10%
Four 10%
Five 10%
Six 10%
Seven 10%
Eight 10%
Nine 10%
Ten 10%
Theodore E. Nelson shall be entitled to dividends paid on all shares whether
owned or escrowed. Further, the distribution of shares shall not be
impaired by the death of Mr. Nelson prior to the end of the 10 year period,
and, in the event of his death, such shares shall be distributed to his
estate.
SECTION 3 - INJUNCTIVE RELIEF
It is understood and agreed by and between the parties that the covenant not
to compete contained herein is a property right of a special, unique,
extraordinary and intellectual character, which gives it a peculiar value,
the loss of which cannot be reasonably or adequately compensated in damages
in any action at law, and that a breach by Theodore E. Nelson of any of the
provisions contained in this Agreement will cause the Company and MK great
and irreparable injury and damage. Theodore E. Nelson expressly agrees that
MK and the Company shall be entitled to the remedies of injunction, specific
performance and other equitable relief
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<PAGE>
to prevent a breach of this Agreement by Theodore E. Nelson. This provision
shall not, however, be construed as a waiver of any of the rights which the
Company or MK may have for damages or otherwise.
SECTION 4 - MISCELLANEOUS
4.1 This Agreement is binding upon and is for the benefit of the parties
hereto and their respective successors, heirs, representatives,
executors and permitted assigns.
4.2 No party to the Agreement shall, prior to the Closing, convey, assign
or otherwise transfer any of its rights or obligations under this
Agreement without the express written consent of the other party
hereto in its sole and absolute discretion. No assignment of this
Agreement shall relieve the assigning party of its obligations
hereunder.
4.3 All notices or other communications required or permitted to be given
hereunder shall be in writing and shall be delivered by hand or by telecopy,
or sent, postage prepaid, by registered, certified or express mail, or
reputable overnight courier service, and shall be deemed given when so
delivered by hand or telecopy, or if mailed, three days after mailing (one
business day in the case of express mail or overnight courier service) as
follows:
If to the Company:
Touchstone, Inc.
P. O. Box 7568
321 Bellevue Street
Jackson, Tennessee 38301
If to Theodore E. Nelson:
115 Redfield Dr.
Jackson, TN 38305
If to MK:
Morrison Knudsen Corporation
P.O. Box 73
Boise, ID 83729
Attention: Corporate Secretary
or to such other addresses as may hereinafter be furnished by any party to
the other parties hereto.
4.4 No delay on the part of any party hereto in exercising any right,
power or privilege hereunder shall operate as a waiver, nor shall any
waiver on the part of any party of any right, power or privilege
operate as a waiver of any other right, power or privilege hereunder,
nor shall any single or partial exercise of any right, power or
privilege preclude
39
<PAGE>
any other or further exercise thereof or the exercise of any other
right, power or privilege hereunder. The rights and remedies herein
provided are cumulative and are not exclusive of any rights or
remedies which the parties hereto may otherwise have at law or in
equity.
4.5 This Agreement may be executed in any number of counterparts, each of
which shall be deemed an original but all of which together shall
constitute a single instrument.
4.6 This Agreement shall be governed and construed in accordance with the
laws of the State of Tennessee applicable to contracts made and to be
performed entirely within such state.
4.7 All agreements and schedules annexed hereto or referred to herein are
hereby incorporated in and made a part of this Agreement as if set
forth in full herein.
4.8 Any provision of this Agreement which is invalid or unenforceable
shall be ineffective to the extent of such invalidity or
unenforceability, without affecting in any way the remaining
provisions hereof.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed as of the date first above written.
MORRISON KNUDSEN CORPORATION
By: ____________________________
Its: ____________________________
TOUCHSTONE, INC.
By: ____________________________
Its: ____________________________
__________________________________
THEODORE E. NELSON
40
<PAGE>
EXHIBIT B-2
NON-COMPETITION AGREEMENT
This Agreement is entered into this 31st day of January, 1994, by and
between Richard L. Jacobs, Touchstone, Inc. ("Company"), and Morrison
Knudsen Corporation, a Delaware corporation ("MK").
WHEREAS, the parties hereto desire to establish a continuing,
confidential relationship in connection with the business of the Company;
and
WHEREAS, as a part of that relationship, Richard L. Jacobs is willing
to agree to a limitation upon his ability to compete with the Company and
the Company is willing to make the payments provided herein.
NOW, THEREFORE, in consideration of the premises and covenants
contained herein, the parties agree as follows:
SECTION 1
Richard L. Jacobs agrees that for a period of ten (10) years following the
closing date (the "Closing Date") of the transactions contemplated in the
Share Exchange Agreement dated January 31, 1994, among Theodore E. Nelson,
Richard L. Jacobs, James L. Fri, Jr., Ellida S. Fri, MK, and Touchstone,
Inc. (the "Share Exchange Agreement"), he shall not compete, either
directly or indirectly (as a shareholder, partner, employee, trustee or
otherwise any person, firm corporation, association, partnership or other
entity), with the Company by engaging through operations or sales anywhere
in the United States, in a business in which MK or any of its subsidiaries
or affiliates (collectively referred to herein as "MK"), or the Company is
now engaged (including, but not limited to, the remanufacture, manufacture
or design of transit cars, locomotives, freight cars, or components,
subassemblies or engineered systems for transit cars, locomotives or freight
cars; engineering or manufacturing of transit or freight rail signalling or
communication systems; operations and maintenance of transit systems,
freight railroads or passenger railroads; emergency repair and maintenance
of railroad track, tunnels and other infrastructure; marketing or
distribution of railroad products to the rail and transit industries;
environmental cleanup of railroad track and yards) or such other businesses
as MK or the Company may be engaged during such period. In the event this
limitation is considered by a court of competent jurisdiction to be
excessive in its duration or in the area to which it applies, it shall be
considered modified and valid for the duration for such area as said court
may deem reasonable under the circumstances.
41
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Nothing herein contained, however, shall prohibit Richard L. Jacobs from
owning, as a passive investment, shares or securities in any publicly traded
corporation or entity, to the extent that such investment shall constitute
less than one percent of the total issued and outstanding shares or
securities of such publicly traded corporation or entity.
SECTION 2 - CONSIDERATION
In consideration of the covenant contained in Section 1 hereof, Company
agrees to compensate Richard L. Jacobs by providing on the Closing Date, a
number of shares of MK common stock equivalent to $250,000 as determined by
the method and procedures set forth in Sections 1 and 4 of the Share
Exchange Agreement. Said shares shall be issued and registered in the name
of Richard L. Jacobs, and shall be held in Escrow to be distributed to
Richard L. Jacobs over a ten (10) year period for the following schedule:
END OF YEAR
One 10%
Two 10%
Three 10%
Four 10%
Five 10%
Six 10%
Seven 10%
Eight 10%
Nine 10%
Ten 10%
Richard L. Jacobs shall be entitled to dividends paid on all shares whether
owned or escrowed. Further, the distribution of shares shall not be
impaired by the death of Mr. Jacobs prior to the end of the 10 year period,
and, in the event of his death, such shares shall be distributed to his
estate.
SECTION 3 - INJUNCTIVE RELIEF
It is understood and agreed by and between the parties that the covenant not
to compete contained herein is a property right of a special, unique,
extraordinary and intellectual character, which gives it a peculiar value,
the loss of which cannot be reasonably or adequately compensated in damages
in any action at law, and that a breach by Richard L. Jacobs of any of the
provisions contained in this Agreement will cause the Company and MK great
and irreparable injury and damage. Richard L. Jacobs expressly agrees that
MK and the Company shall be entitled to the remedies of injunction, specific
performance and other equitable relief to prevent a breach of this Agreement
by Richard L. Jacobs. This provision shall not, however, be construed as a
waiver of any of the rights which the Company or MK may have for damages or
otherwise.
42
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SECTION 4 - MISCELLANEOUS
4.1 This Agreement is binding upon and is for the benefit of the parties
hereto and their respective successors, heirs, personal
representatives, executors and permitted assigns.
4.2 No party to the Agreement shall, prior to the Closing, convey, assign
or otherwise transfer any of its rights or obligations under this
Agreement without the express written consent of the other party
hereto in its sole and absolute discretion. No assignment of this
Agreement shall relieve the assigning party of its obligations
hereunder.
4.3 All notices or other communications required or permitted to be given
hereunder shall be in writing and shall be delivered by hand or by
telecopy, or sent, postage prepaid, by registered, certified or
express mail, or reputable overnight courier service, and shall be
deemed given when so delivered by hand or telecopy, or if mailed,
three days after mailing (one business day in the case of express mail
or overnight courier service) as follows:
If to the Company:
Touchstone, Inc.
P. O. Box 7568
321 Bellevue Street
Jackson, Tennessee 38301
If to Richard L. Jacobs:
1010 Prospect Ave.
Jackson, TN 38301
If to MK:
Morrison Knudsen Corporation
P.O. Box 73
Boise, ID 83729
Attention: Corporate Secretary
or to such other addresses as may hereinafter be furnished by any party to
the other parties hereto.
4.4 No delay on the part of any party hereto in exercising any right,
power or privilege hereunder shall operate as a waiver, nor shall any
waiver on the part of any party of any right, power or privilege
operate as a waiver of any other right, power or privilege hereunder,
nor shall any single or partial exercise of any right, power or
privilege preclude
43
<PAGE>
any other or further exercise thereof or the exercise of any other
right, power or privilege hereunder. The rights and remedies herein
provided are cumulative and are not exclusive of any rights or
remedies which the parties hereto may otherwise have at law or in
equity.
4.5 This Agreement may be executed in any number of counterparts, each of
which shall be deemed an original but all of which together shall
constitute a single instrument.
4.6 This Agreement shall be governed and construed in accordance with the
laws of the State of Tennessee applicable to contracts made and to be
performed entirely within such state.
4.7 All agreements and schedules annexed hereto or referred to herein are
hereby incorporated in and made a part of this Agreement as if set
forth in full herein.
4.8 Any provision of this Agreement which is invalid or unenforceable
shall be ineffective to the extent of such invalidity or
unenforceability, without affecting in any way the remaining
provisions hereof.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed as of the date first above written.
MORRISON KNUDSEN CORPORATION
By: ___________________________
Its: ___________________________
TOUCHSTONE, INC.
By: ___________________________
Its: ___________________________
_________________________________
RICHARD L. JACOBS
44
<PAGE>
EXHIBIT B-3
NON-COMPETITION AGREEMENT
This Agreement is entered into this 31st day of January, 1994, by and
between James L. Fri, Jr., Touchstone, Inc. ("Company"), and Morrison
Knudsen Corporation, a Delaware corporation ("MK").
WHEREAS, the parties hereto desire to establish a continuing,
confidential relationship in connection with the business of the Company;
and
WHEREAS, as a part of that relationship, James L. Fri, Jr. is willing
to agree to a limitation upon his ability to compete with the Company and
the Company is willing to make the payments provided herein.
NOW, THEREFORE, in consideration of the premises and covenants
contained herein, the parties agree as follows:
SECTION 1
James L. Fri, Jr. agrees that for a period of ten (10) years following the
closing date (the "Closing Date") of the transactions contemplated in the
Share Exchange Agreement dated January 31, 1994, among Theodore E. Nelson,
Richard L. Jacobs, James L. Fri, Jr., Ellida S. Fri, MK, and Touchstone,
Inc. (the "Share Exchange Agreement"), he shall not compete, either directly
or indirectly (as a shareholder, partner, employee, trustee or otherwise any
person, firm corporation, association, partnership or other entity), with
the Company by engaging through operations or sales anywhere in the United
States, in a business in which MK or any of its subsidiaries or affiliates
(collectively referred to herein as "MK"), or the Company is now engaged
(including, but not limited to, the remanufacture, manufacture or design of
transit cars, locomotives, freight cars, or components, subassemblies or
engineered systems for transit cars, locomotives or freight cars;
engineering or manufacturing of transit or freight rail signalling or
communication systems; operations and maintenance of transit systems,
freight railroads or passenger railroads; emergency repair and maintenance
of railroad track, tunnels and other infrastructure; marketing or
distribution of railroad products to the rail and transit industries;
environmental cleanup of railroad track and yards) or such other businesses
as MK or the Company may be engaged during such period. In the event this
limitation is considered by a court of competent jurisdiction to be
excessive in its duration or in the area to which it applies, it shall be
considered modified and valid for the duration for such area as said court
may deem reasonable under the circumstances.
45
<PAGE>
Nothing herein contained, however, shall prohibit James L. Fri, Jr. from
owning, as a passive investment, shares or securities in any publicly traded
corporation or entity, to the extent that such investment shall constitute
less than one percent of the total issued and outstanding shares or
securities of such publicly traded corporation or entity.
SECTION 2 - CONSIDERATION
In consideration of the covenant contained in Section 1 hereof, Company
agrees to compensate James L. Fri, Jr. by payment at the Closing Date of One
Hundred Dollars ($100.00), receipt of which is hereby acknowledged.
SECTION 3 - INJUNCTIVE RELIEF
It is understood and agreed by and between the parties that the covenant not
to compete contained herein is a property right of a special, unique,
extraordinary and intellectual character, which gives it a peculiar value,
the loss of which cannot be reasonably or adequately compensated in damages
in any action at law, and that a breach by James L. Fri, Jr. of any of the
provisions contained in this Agreement will cause the Company and MK great
and irreparable injury and damage. James L. Fri, Jr. expressly agrees that
MK and the Company shall be entitled to the remedies of injunction, specific
performance and other equitable relief to prevent a breach of this Agreement
by James L. Fri, Jr.. This provision shall not, however, be construed as a
waiver of any of the rights which the Company or MK may have for damages or
otherwise.
SECTION 4 - MISCELLANEOUS
4.1 This Agreement is binding upon and is for the benefit of the parties
hereto and their respective successors and permitted assigns.
4.2 No party to the Agreement shall, prior to the Closing, convey, assign
or otherwise transfer any of its rights or obligations under this
Agreement without the express written consent of the other party
hereto in its sole and absolute discretion. No assignment of this
Agreement shall relieve the assigning party of its obligations
hereunder.
4.3 All notices or other communications required or permitted to be given
hereunder shall be in writing and shall be delivered by hand or by
telecopy, or sent, postage prepaid, by registered, certified or
express mail, or reputable overnight courier service, and shall be
deemed given when so delivered by hand or telecopy, or if mailed,
three days after mailing (one business day in the case of express mail
or overnight courier service) as follows:
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<PAGE>
If to the Company:
Touchstone, Inc.
P. O. Box 7568
321 Bellevue Street
Jackson, Tennessee 38301
If to James L. Fri, Jr.:
465 Cherry Road
Memphis, TN 38117
If to MK:
Morrison Knudsen Corporation
P.O. Box 73
Boise, ID 83729
Attention: Corporate Secretary
or to such other addresses as may hereinafter be furnished by any party to
the other parties hereto.
4.4 No delay on the part of any party hereto in exercising any right,
power or privilege hereunder shall operate as a waiver, nor shall any
waiver on the part of any party of any right, power or privilege
operate as a waiver of any other right, power or privilege hereunder,
nor shall any single or partial exercise of any right, power or
privilege preclude any other or further exercise thereof or the
exercise of any other right, power or privilege hereunder. The rights
and remedies herein provided are cumulative and are not exclusive of
any rights or remedies which the parties hereto may otherwise have at
law or in equity.
4.5 This Agreement may be executed in any number of counterparts, each of
which shall be deemed an original but all of which together shall
constitute a single instrument.
4.6 This Agreement shall be governed and construed in accordance with the
laws of the State of Tennessee applicable to contracts made and to be
performed entirely within such state.
4.7 All agreements and schedules annexed hereto or referred to herein are
hereby incorporated in and made a part of this Agreement as if set
forth in full herein.
4.8 Any provision of this Agreement which is invalid or unenforceable
shall be ineffective to the extent of such invalidity or
unenforceability, without affecting in any way the remaining
provisions hereof.
47
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed as of the date first above written.
MORRISON KNUDSEN CORPORATION
By: ____________________________
Its: ____________________________
TOUCHSTONE, INC.
By: ____________________________
Its: ____________________________
__________________________________
JAMES L. FRI, JR.
48
<PAGE>
EXHIBIT B-4
NON-COMPETITION AGREEMENT
This Agreement is entered into this 31st day of January, 1994, by and
between Ellida S. Fri, Touchstone, Inc. ("Company"), and Morrison Knudsen
Corporation, a Delaware corporation ("MK").
WHEREAS, the parties hereto desire to establish a continuing,
confidential relationship in connection with the business of the Company;
and
WHEREAS, as a part of that relationship, Ellida S. Fri is willing to
agree to a limitation upon his ability to compete with the Company and the
Company is willing to make the payments provided herein.
NOW, THEREFORE, in consideration of the premises and covenants
contained herein, the parties agree as follows:
SECTION 1
Ellida S. Fri agrees that for a period of ten (10) years following the
closing date (the "Closing Date") of the transactions contemplated in the
Share Exchange Agreement dated January 31, 1994, among Theodore E. Nelson,
Richard L. Jacobs, James L. Fri, Jr., and Ellida S. Fri, MK, and
Touchstone, Inc. (the "Share Exchange Agreement"), he shall not compete,
either directly or indirectly (as a shareholder, partner, employee, trustee
or otherwise any person, firm corporation, association, partnership or other
entity), with the Company by engaging through operations or sales anywhere
in the United States, in a business in which MK or any of its subsidiaries
or affiliates (collectively referred to herein as "MK"), or the Company is
now engaged (including, but not limited to, the remanufacture, manufacture
or design of transit cars, locomotives, freight cars, or components,
subassemblies or engineered systems for transit cars, locomotives or freight
cars; engineering or manufacturing of transit or freight rail signalling or
communication systems; operations and maintenance of transit systems,
freight railroads or passenger railroads; emergency repair and maintenance
of railroad track, tunnels and other infrastructure; marketing or
distribution of railroad products to the rail and transit industries;
environmental cleanup of railroad track and yards) or such other businesses
as MK or the Company may be engaged during such period. In the event this
limitation is considered by a court of competent jurisdiction to be
excessive in its duration or in the area to which it applies, it shall be
considered modified and valid for the duration for such area as said court
may deem reasonable under the circumstances.
49
<PAGE>
Nothing herein contained, however, shall prohibit Ellida S. Fri from owning,
as a passive investment, shares or securities in any publicly traded
corporation or entity, to the extent that such investment shall constitute
less than one percent of the total issued and outstanding shares or
securities of such publicly traded corporation or entity.
SECTION 2 - CONSIDERATION
In consideration of the covenant contained in Section 1 hereof, Company
agrees to compensate Ellida S. Fri by payment at the Closing Date of One
Hundred Dollars ($100.00), receipt of which is hereby acknowledged.
SECTION 3 - INJUNCTIVE RELIEF
It is understood and agreed by and between the parties that the covenant not
to compete contained herein is a property right of a special, unique,
extraordinary and intellectual character, which gives it a peculiar value,
the loss of which cannot be reasonably or adequately compensated in damages
in any action at law, and that a breach by Ellida S. Fri of any of the
provisions contained in this Agreement will cause the Company and MK great
and irreparable injury and damage. Ellida S. Fri expressly agrees that MK
and the Company shall be entitled to the remedies of injunction, specific
performance and other equitable relief to prevent a breach of this Agreement
by Ellida S. Fri. This provision shall not, however, be construed as a
waiver of any of the rights which the Company or MK may have for damages or
otherwise.
SECTION 4 - MISCELLANEOUS
4.1 This Agreement is binding upon and is for the benefit of the parties
hereto and their respective successors and permitted assigns.
4.2 No party to the Agreement shall, prior to the Closing, convey, assign
or otherwise transfer any of its rights or obligations under this
Agreement without the express written consent of the other party
hereto in its sole and absolute discretion. No assignment of this
Agreement shall relieve the assigning party of its obligations
hereunder.
4.3 All notices or other communications required or permitted to be given
hereunder shall be in writing and shall be delivered by hand or by
telecopy, or sent, postage prepaid, by registered, certified or
express mail, or reputable overnight courier service, and shall be
deemed given when so delivered by hand or telecopy, or if mailed,
three days after mailing (one business day in the case of express mail
or overnight courier service) as follows:
50
<PAGE>
If to the Company:
Touchstone, Inc.
P. O. Box 7568
321 Bellevue Street
Jackson, Tennessee 38301
If to Ellida S. Fri:
465 Cherry Road
Memphis, TN 38117
If to MK:
Morrison Knudsen Corporation
P.O. Box 73
Boise, ID 83729
Attention: Corporate Secretary
or to such other addresses as may hereinafter be furnished by any party to
the other parties hereto.
4.4 No delay on the part of any party hereto in exercising any right,
power or privilege hereunder shall operate as a waiver, nor shall any
waiver on the part of any party of any right, power or privilege
operate as a waiver of any other right, power or privilege hereunder,
nor shall any single or partial exercise of any right, power or
privilege preclude any other or further exercise thereof or the
exercise of any other right, power or privilege hereunder. The rights
and remedies herein provided are cumulative and are not exclusive of
any rights or remedies which the parties hereto may otherwise have at
law or in equity.
4.5 This Agreement may be executed in any number of counterparts, each of
which shall be deemed an original but all of which together shall
constitute a single instrument.
4.6 This Agreement shall be governed and construed in accordance with the
laws of the State of Tennessee applicable to contracts made and to be
performed entirely within such state.
4.7 All agreements and schedules annexed hereto or referred to herein are
hereby incorporated in and made a part of this Agreement as if set
forth in full herein.
4.8 Any provision of this Agreement which is invalid or unenforceable
shall be ineffective to the extent of such invalidity or
unenforceability, without affecting in any way the remaining
provisions hereof.
51
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed as of the date first above written.
MORRISON KNUDSEN CORPORATION
By: ___________________________
Its: ___________________________
TOUCHSTONE, INC.
By: ___________________________
Its: ___________________________
_________________________________
ELLIDA S. FRI
52
<PAGE>
EXHIBIT C
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT, dated as of January 31, 1994, (the "Closing
Date") between Theodore E. Nelson (the "Employee"), Touchstone, Inc., a
Tennessee Corporation (the "Company"), and Morrison Knudsen Corporation, a
Delaware corporation ("MK").
WHEREAS, the Company desires to assure itself of the benefit of the
Employee's services and experience for a period of time; and
WHEREAS, the Employee is willing to enter into an agreement to that
end with the Company upon the terms and conditions herein set forth;
NOW, THEREFORE, in consideration of the premises and covenants herein
contained, the parties hereto agree as follows:
1. TERM OF AGREEMENT
Subject to the terms and conditions hereof, the term of employment of the
Employee under this Employment Agreement shall be for the period commencing
on the date hereof and terminating five years hereafter (the "Initial
Employment Period"). After the Initial Employment Period, this Employment
Agreement shall automatically continue in force and effect on a
month-to-month basis ("Renewal Period") unless either party shall give the
other written notice of such party's intent to terminate this Agreement at
least thirty (30) days prior to the expiration of the Initial Employment
Period or any Renewal Period, as the case may be.
2. SERVICES TO BE RENDERED
The Company hereby agrees to employ the Employee as President of the
Company, subject to the terms, conditions, and provisions of this Employment
Agreement. Employee hereby accepts such employment and agrees to devote his
primary time and attention to rendering services to the Company under this
Employment Agreement. The services described in the preceding sentence on
behalf of the Company shall not prohibit Employee from investing in,
devoting a limited amount of time to, and otherwise being involved in
business interests, business ventures, and investments that do not interfere
with his duties as President of the Company. Further, the services
described in the first sentence of this section shall not prohibit Employee
from participating in, engaging in, and involvement in charitable, civic,
and religious functions, events, and activities as he desires, so long as
such events do not prevent Employee from performing his duties as President
of the Company. Additionally, the services described in the first sentence
of this section shall not prohibit Employee from investing his assets in
such form and manner as will not interfere with or inhibit his services as
President of the Company, and not otherwise violate any other agreements to
which Employee is bound to the Company.
53
<PAGE>
3. BASE COMPENSATION AND BENEFITS
(a) In payment for services rendered during the Initial Employment Period
and the Renewal Period to the Company under this Employment Agreement,
the Company shall pay the Employee a base salary of $150,000 per year.
All compensation shall be paid in accordance with the Company's normal
payroll practice and is payable on a bi-weekly basis.
(b) During the term of this Employment Agreement, Employee shall be
entitled to vacations and fringe benefits consistent with the
Company's policies for all executive personnel. Additionally, the
Employee shall be entitled to the following benefits:
(i) The continued use of the Audi automobile currently used by
Employee, consistent with past Company practices; or at the
Company's election, the Company may transfer title and ownership
of the Audio vehicle to Employee;
(ii) Provide for Employee, at Company's expense, the dues and related
expenses for a membership at Jackson Country Club; and
(iii) An increase in Employee's base salary sufficient to allow
Employee to pay for disability insurance coverage under MK's
Premium Disability Insurance Program.
(c) The Employee's salary shall be reviewed annually for possible merit
increases. Compensation may not be reduced.
(d) Nothing contained in this Employment Agreement shall be deemed to
preclude the Board of Directors of the Company, in its sole
discretion, from increasing the amounts payable to the Employee
hereunder.
(e) Employee will be required to submit to and pass a substance abuse
test, and comply with the Company's Substance Abuse Prevention
Program, when the testing program is implemented in Employee's area.
4. BONUSES
(a) Annual Bonus.
For each fiscal year ending on December 31, 1994 through 1998 the
Employee shall, if employed pursuant to the terms of this Agreement at the
end of such fiscal year, be eligible to receive an annual bonus (the "Annual
Bonus") under the Rail Systems Group Project Incentive Plan as it may be
amended from time to time based upon (i) the Company's financial performance
for such fiscal year relative to the Company's parent, for each fiscal year)
and (ii) the performance of Employee as evaluated by the Vice President,
Locomotive Division, of MK's Rail Systems Group, and approved by the
President of MK's Rail Systems Group. The Annual Bonus, if any, for any
particular fiscal year, shall be paid in a single lump sum no later than ten
weeks following the closing of such fiscal year.
54
<PAGE>
(b) Incentive Bonus.
The Company recognizes the past and present efforts of Employee in
contributing significantly to the Company's success and good will in
its market. Therefore in consideration of these efforts, and subject
to Sections 5 and 6 herein, Employee shall be eligible for the
incentive bonuses described herein, regardless of whether he is
employed by the Company. Employee, or Employee's estate as
appropriate, shall receive a copy of Company's annual audited
statement.
In addition to the annual bonus provided for in Section 4 (a) above,
the Employee shall be entitled to an incentive bonus in cash equal to
twenty-five percent (25%) of the amount by which the Company's
Earnings Before Interest and Taxes for the years 1994, 1995, and 1996
exceed an aggregate of $15,000,000.00 (the "Three Year Bonus Plan").
If the Three Year Bonus Plan results in a bonus to Employee of less
than $1,500,000.00, then in addition to the Three Year Bonus Plan,
Employee also shall be entitled to a five (5) year incentive bonus in
cash equal to twenty percent (20%) of the amount by which the
Company's Earnings Before Interest and Taxes for the years 1994, 1995,
1996, 1997, and 1998 exceed an aggregate of $25,000,000.00 (the "Five
Year Bonus Plan"). Under either or both the Three Year Bonus Plan or
the Five Year Bonus Plan, the total bonus payments shall not exceed
$6,500,000.00.
For purposes of the Three Year Bonus Plan and Five Year Bonus Plan
computation, the Company's Earnings Before Interest and Taxes shall
include only expenses for direct and indirect operating costs and
selling, general, and administrative costs associated with the
Company's operation. Revenues shall be based upon generally accepted
accounting principles. There shall be no allocation to Company
expenses of additional overhead or other costs from MK or the Rail
Systems Group to the Company operation.
The following set forth examples of the calculation of the Three Year
Bonus Plan and the Five Year Bonus Plan and are not intended to be
exclusive of all situations:
EXAMPLE 1:
If the Earnings Before Interest and Taxes of the Company for 1994,
1995, and 1996 are $21,000,000.00, then Employee shall be entitled to
an incentive bonus of $1,500,000.00, and Employee shall not be
entitled to participate in the Five Year Bonus Plan. The Three Year
Bonus Plan calculation is as follows:
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<PAGE>
Earnings Before Interest and Taxes $ 21,000,000.00
Less "Earnings Floor" $-15,000,000.00
Earnings Eligible for Bonus Calculation $ 6,000,000.00
Bonus Percentage X .25
Amount of Bonus $ 1,500,000.00
EXAMPLE 2:
If Company has earnings in 1994, 1995, and 1996 of $20,000,000.00,
Employee shall be entitled to a bonus of $1,250,000.00, and shall be
entitled to participate in the Five Year Bonus Plan. The Three Year
Bonus Plan calculations are as follows:
Earnings Before Interest and Taxes $ 20,000,000.00
Less "Earnings Floor" $-15,000,000.00
Earnings Eligible for Bonus Calculation $ 5,000,000.00
Bonus Percentage X .25
Amount of Bonus $ 1,250,000.00
EXAMPLE 3:
Assuming the same facts in Example 2 above, and then the earnings for
the Company for the years 1994, 1995, 1996, 1997 and 1998 total
$35,000,000.00, Employee shall be entitled to a bonus under the Five
Year Bonus Plan (in addition to the Three Year Bonus Plan) of
$2,000,000.00. The Five Year Bonus Plan calculations are as follows:
Earnings Before Interest and Taxes $ 35,000,000.00
Less "Earnings Floor" $-25,000,000.00
Earnings Eligible for Bonus Calculation $ 10,000,000.00
Bonus Percentage X .20
Amount of Bonus $ 2,000,000.00
The bonus shall be paid to Employee in cash within thirty (30) days
after the completion of Company's "year end" Financial Statement for
the year 1996 and/or 1998, as the case may be.
5. DISABILITY AND DEATH
(a) In the event the Employee is not reasonably able to render his full
services hereunder due to a physical or mental disability and such
disability shall continue for a period of more than one year, or
should the Employee at any time become permanently disabled (as
determined under the terms of the Long Term Disability Plan
established by MK, a shareholder of the Company), and as a result
thereof be unable to render his full services hereunder, then the
Company may, at its election, terminate this Employment Agreement. In
the event this Employment Agreement is terminated pursuant to this
Section 5(a), the Employee shall have no further rights hereunder
except to be paid an amount equal to any base salary or bonus earned
under the terms of this Employment Agreement which remains unpaid at
the time of disability and Employee shall be entitled to the incentive
bonuses of Section 4(b) as if he remained an Employee.
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<PAGE>
(b) Upon the death of the Employee, this Employment Agreement shall
terminate and neither the Employee nor his estate shall have any
further rights hereunder, except to be paid an amount equal to any
base salary or annual bonus earned under the terms of this Employment
Agreement which remains unpaid at the time of death. Employee's estate
shall be paid the incentive bonus of Section 4(b) as if Employee were
still employed by Company.
6. TERMINATION
(a) In the event the Employee is terminated for "Cause" (as defined in
Section 6(b) below), this Employment Agreement shall terminate and the
Employee shall have no rights hereunder, except that Employee shall
still be entitled to full incentive bonuses under Section 4(b) herein
if termination under this Section 6 occurs within one year of the
completion of employment necessary for eligibility to participate in
either the 3-Year or 5-Year Bonus Plan.
(b) For purposes of Section 6(a) above, "Cause" shall mean Employee's: (i)
conviction of any felony involving dishonest, fraud or breach of
trust; (ii) willful engagement in any misconduct in the performance of
his duties that materially injures Company, monetarily or otherwise;
(iii) performance of any act which, if known to Company's customers,
clients or stockholders would materially and adversely affect
Company's business; or (iv) substantial nonperformance of assigned
duties (other than any such failure resulting from Employee's
incapacity due to physical or mental illness under Section 6(a) above)
which has continued after Company's Board of Directors has given
notice of such nonperformance to Employee. For purposes of clause
(ii) of this Section 7(a), no act or omission on Employee's part shall
be deemed "willful" if committed or omitted in good faith and with a
reasonable belief his action was in the best interest of the Company.
7. INVENTIONS
For purposes of this Employment Agreement, "Invention" shall mean any and
all machines, apparatuses, compositions of matter, method, know-how,
processes, designs, configurations, uses, ideas, concepts, or writings of
any kind, discovered, conceived, developed, made, or produced, or any
improvements to them, and shall not be limited to the definition of an
invention contained in the United States Patent Laws.
The Employee understands and agrees that all Inventions, or trademarks or
copyrights relating thereto, which reasonably relate to the business of the
Company and which are conceived or made by him during the period of his
employment, either alone or with others, are the sole and exclusive property
of the Company. The Employee understands and agrees that all Inventions,
trademarks, or copyrights described above in this paragraph are the sole and
exclusive property of the Company whether or not they are conceived or made
during regular working hours.
57
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The Employee agrees that he will disclose promptly and in writing to the
Company all Inventions within the scope of this Employment Agreement,
whether he considers them to be patentable or not, which he, either alone or
with others, conceives or makes (whether or not during regular working
hours). The Employee hereby assigns and agrees to assign all his right,
title, and interest in and to those Inventions which reasonably relate to
the business of the Company and agrees not to disclose any of these to
others without written consent of the Company, except as required by the
conditions of his employment. Inventions of Employee unrelated to the
business of the Company are not covered by this paragraph of this Agreement.
The Employee agrees that he will at any time during his employment
hereunder, or after this Employment Agreement terminates, on the request of
the Company, (i) execute specific assignments in favor of the Company, or
its nominee, of any of the Inventions covered by this Employment Agreement
(ii) execute all papers and perform all lawful acts the Company considers
necessary or advisable for the preparation, applications, procurement,
maintenance, enforcement, and defense of patent applications and patents of
the United States and foreign countries for these inventions, for the
perfection or enforcement of any trademarks or copyrights relating to such
inventions, and for the transfer of any interest Employee may have, and
(iii) execute any and all papers and lawful documents required or necessary
to vest sole right, title, and interest in the Company or its nominee of the
above inventions, patent applications, patents, or any trademarks or
copyrights relating thereto. The Employee will, at the Company's expense,
execute all documents (including those referred to above) and do all other
acts necessary to assist in the preservation of all the Company's interests.
8. CONFIDENTIALITY
For purposes of the Employment Agreement, "proprietary information" shall
mean any information relating to the business of the Company that has not
previously been publicly released by duly authorized representatives of the
Company and shall include (but shall not be limited to) Company information
encompasses in all drawings, designs, plans, proposals, marketing and sales
plans, financial information, costs, pricing information, customer
information, and all methods, concepts, or ideas in or reasonably related to
the business of the Company.
The Employee agrees to regard and preserve as confidential all proprietary
information pertaining to the Company's business that has been or may be
obtained by Employee in the course of his employment with the Company,
whether he has such information in his memory or in writing or other
physical form. The Employee will not, without written authority from the
Company to do so, use for his benefit or purposes, nor disclose to others,
either during the term of his employment hereunder or thereafter, except as
required by the conditions of his employment hereunder, any proprietary
information connected with the business or developments of the Company.
This provision shall not apply after the proprietary information has been
voluntarily disclosed to the public, independently developed and disclosed
by others, or otherwise enters the public domain through lawful means.
58
<PAGE>
9. REMOVAL OF DOCUMENTS OR OBJECTS
The Employee agrees not to remove from the premises of the Company, except
as an employee of the Company, in pursuit of the business of the Company or
any of its subsidiaries, or except as specifically permitted in writing by
the Company, any document or object containing or reflecting any proprietary
information of the Company. The Employee recognizes that all such documents
and objects, whether developed by him or by someone else, are the exclusive
property of the Company.
10. CORPORATE OPPORTUNITIES
The Company recognizes and acknowledges that Employee is a shareholder,
officer, and director in a company known as Mill Masters Incorporated. Mill
Masters Incorporated is engaged in the business of parts for tube mills,
servicing mills, and possibly manufacturing and sales of tube mills and
tubes used in the heat transfer business. Employee agrees to negotiate in
good faith with MK and Company the determination of which part, if any, of
Mill Masters' proposed work might constitute a corporate opportunity of
Company. If any Mill Masters work is determined to be a Company opportunity,
Employee shall have a reasonable time, not to exceed eighteen (18) months,
to phase out or diverst his interest in Mill Masters. Employee agrees that
during his employment hereunder he will not take any action which might
divert from the Company or any subsidiary of the Company any opportunity
which would be within the scope of any present or future business of the
Company.
11. INJUNCTIVE RELIEF
It is understood and agreed by and between the parties hereto that the
services to be rendered by the Employee hereunder, and the rights and
privileges granted to the Company by the Employee hereunder, are of a
special, unique, extraordinary and intellectual character, which gives them
a peculiar value, the loss of which cannot be reasonably or adequately
compensated in damages in any action at law, and that a breach by the
Employee of any of the provisions contained in this Employment Agreement
will cause the Company great and irreparable injury and damage. The
Employee hereby expressly agrees that the Company shall be entitled to the
remedies of injunction, specific performance and other equitable relief to
prevent a breach of this Employment Agreement by the Employee. This
provision shall not, however, be construed as a waiver of any of the rights
which the Company may have for damages or otherwise.
12. WARRANTY
The Employee hereby warrants that he is free to enter this Employment
Agreement and to render his services pursuant hereto. The Company agrees to
maintain such accounting records and practices needed to reflect the
financial performance of the Company.
59
<PAGE>
13. NON-ASSIGNABILITY
Except as otherwise provided herein, this Employment Agreement may not be
assigned by either the Company or the Employee.
14. MERGER OR CONSOLIDATION
In the event of a merger or consolidation of the Company with any other
corporation or corporations, or of the sale by the Company of a major
corportion of its assets or of its business and good will, this Employment
Agreement may be assigned and transferred to such successor in interest as
an asset of the Company upon such assignee assuming the Company's
obligations hereunder, in which event the Employee agrees to continue to
perform his duties and obligations according to the terms and conditions
hereof for such assignee or transferee this Employment Agreement.
In the event of a merger or consolidation of the Company with any other
corporation or corporations, or the sale by the Company of a major portion
of its assets or of its business and good will (a "Transfer"), the
calculation and determination of Employee's Incentive bonus under paragraph
4 (b) will be difficult or impossible to determine. Therefore, if a
Transaction occurs between January 1 and December 31, 1994, the Company will
pay to the Employee an incentive bonus of $500,000.00, and have no further
obligation to Employee for an incentive bonus. If a Transfer occurs between
January 1, 1995 and January 31, 1995, Employee will pay Employee an
incentive bonus of $1,000,000.00, and have no further obligation to Employee
for an incentive bonus. If a Transfer occurs between January 1, 1996, and
December 31, 1998, Employee shall be entitled for consideration for the
incentive bonus under paragraph 4 (b), but the calculation shall be prorated
for the period of time from January 1, 1994 through the date the Transfer
occurs.
By way of example, if a Transfer occurs on June 30, 1996, the "floor"
for calculation of the bonus shall be $12,500,000.00 for such period
of time.
Alternatively, Employee shall have the option to decline the incentive/bonus
alternative set forth in this section 14, and Employee may elect to continue
under the terms of paragraph 4 (b), provided Employee is satisfied that the
Earnings Before Interest and Taxes of the Company can be segregated from
whatever merged or consolidated company exists after a transaction.
15. NOTICES
All notices and other communications which are required or may be given
under this Employment Agreement shall be in writing and shall be deemed to
have been given if delivered personally or sent by registered or certified
mail, return receipt requested, postage prepaid:
60
<PAGE>
(a) If to the Company, to:
Touchstone, Inc.
P. O. Box 7568
321 Bellevue Street
Jackson, Tennessee 38301
Attn: President
(b) If to the Employee, to:
Theodore E. Nelson
115 Redfield Dr.
Jackson, TN 38305
or to such other place as either party shall have specified by notice in
writing to the other.
16. GOVERNMENTAL REGULATION
Nothing contained in this Employment Agreement shall be construed so as to
require the commission of any act contrary to law and wherever there is any
conflict between any provision of this Employment Agreement and any statute,
law, ordinance, order of regulation, the latter shall prevail, but in such
event any such provision of this Employment Agreement shall be curtailed and
limited only to the extent necessary to bring it within the legal
requirements.
17. GOVERNING LAW
This Employment Agreement shall be governed by and construed in accordance
with the laws of the State of Tennessee.
18. ENTIRE AGREEMENT; AMENDMENT
This Employment Agreement sets forth the entire understanding of the parties
in respect of the subject matter contained herein. This Employment
Agreement supersedes and replaces all prior agreements, arrangements and
understandings relating to the subject matter and may only be amended by a
written agreement signed by both parties hereto or their duly authorized
representatives.
19. At the time of the execution of this Agreement, substantially all of
Touchstone's plant, equipment, and offices are in Jackson, Tennessee.
Company and Employee contemplate that Employee's services as President will
be rendered in Jackson, Tennessee. For some reason, should Company require
that Employee be required to perform the primary responsibilities as
President of the Company in some location other than Jackson, Tennessee,
Employee shall have the opportunity to terminate this Employment Agreement,
without breach thereof, and the obligations of Company and Employee to each
other shall terminate, except as to the incentive bonus in paragraph 4 (b).
61
<PAGE>
20. MK enters into this Agreement as the sole shareholder/majority
shareholder of Company in order to obligate itself to the terms and
conditions hereof as being the entity that will control the Board of
Directors of the Company. Therefore, MK agrees to take no action on its
part as controlling the Board of Directors or otherwise having control over
Company that would cause or create the inability of the Company to perform
under this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Employment
Agreement as of the date first above written.
Witness: EMPLOYEE:
________________________ ____________________________________
Theodore E. Nelson
COMPANY:
Attest: TOUCHSTONE, INC.
________________________ By: ______________________________
Its: ______________________________
Attest: MORRISON KNUDSEN CORPORATION
________________________ By: ______________________________
Its: ______________________________
62
<PAGE>
EXHIBIT D
LAW OFFICES
SPRAGINS, BARNETT, COBB & BUTLER
ELKS BUILDING
P. O. BOX 2004
JACKSON, TENNESSEE 38302-2004
901/424-0461
SIDNEY W. SPRAGINS TELECOPIER NUMBER R. HEARN SPRAGINS
(1902-1970) CHARLES H. BARNETT III 901/424/0562 CARMACK
MURCHISON (1902-1983) LEWIS L. COBB
LARRY A. BUTLER ALSO
LICENSED IN: CATHERINE B. CLAYTON
K. DON BISHOP* *KENTUCKY,
LOUISIANA C. MARK DONAHOE**
**MISSISSIPPI, LOUISIANA TERESA G. COBB
JERRY P. SPORE LICENSED
ONLY IN: GEORGE G. BOYTE, JR.
JONATHAN O. STEEN*** ***MINNESOTA,
WISCONSIN
January 31, 1994
Morrison Knudsen Corporation
Morrison Knudsen Plaza
Boise, Idaho 83729
Re:Share Exchange Agreement by and among the
Shareholders of Touchstone, Inc. and
Morrison Knudsen Corporation, a Delaware corporation
Ladies and Gentlemen:
I have acted as legal counsel to Theodore E. Nelson, Richard L.
Jacobs, James L. Fri, Jr. and Ellida S. Fri (collectively the
"Shareholders") in connection with the execution and delivery of the Share
Exchange Agreement (the "Exchange Agreement") dated January ___, 1994, by
and among the Shareholders and Morrison Knudsen Corporation ("MK").
Further, in connection with the Exchange Agreement, I have performed certain
representative services on behalf of Touchstone, Inc. As counsel for the
Shareholders and Touchstone, Inc., I have examined the corporate records and
documents of Touchstone, certificates of Tennessee public officials and have
made such further investigations as I deemed necessary to express the
opinions hereinafter set forth. I have assumed the genuineness of all
signatures of, and the authority of, persons signing the Exchange Agreement
other than MKRC; the authenticity of all documents submitted to me as
originals, and, to the extent represented by photostatic, facsimile or
certified copies, same conform to the respective originals thereof.
Based upon the foregoing, I am of the opinion that:
1. Touchstone, Inc. is duly organized, validly existing and in good
standing under the laws of the State of Tennessee, with full corporate power
and authority to carry on its business as now being conducted; and
2. Touchstone, Inc. is duly qualified to do business and in good
standing in each jurisdiction where ownership of its properties or the
conduct of its business requires such qualifications; and
63
<PAGE>
Page 2
January ____, 1994
3. The Exchange Agreement constitutes the legal, valid and binding
obligation of the Shareholders in accordance with its terms, except as
enforcement may be limited by bankruptcy, insolvency, or other similar laws
affecting enforcement and except that enforceability may be limited by
general principles of equity; and
4. All assignments and other documents necessary to effect the
transfer and assignment of the "Company Shares" (as defined in the Exchange
Agreement) to MKRC have been duly executed and delivered and are adequate to
transfer and assign the Company Shares to MKRC; and
5. I am unaware of any litigation, proceeding or controversy
pending or threatened against Touchstone, Inc., except as disclosed in the
Exchange Agreement and schedules or exhibits affixed thereto; and
6. Neither the execution nor the performance of this Agreement by
Shareholders will violate any applicable law of any jurisdiction, or any
order, judgment or decree of any court or governmental agency, or any
agreement, indenture or instrument known to us.
This letter is furnished by me solely for your benefit, and the
benefit of Morrison Knudsen Corporation, in connection with the transactions
referred to in the Exchange Agreement, and may not be otherwise reproduced,
referred to, quoted, in whole or in part, filed publicly, or circulated to
or relied upon by any other person or used in connection with any other
transaction. This letter addresses the law as of the date hereof, and we do
not undertake any obligation to inform you of any changes in the law
occurring after the date hereof. I am admitted to practice law in the State
of Tennessee, and I express no opinion as to matters under or involving the
laws of any jurisdiction other than the State of Tennessee and its political
subdivisions.
Very truly yours,
SPRAGINS, BARNETT, COBB & BUTLER
BY ____________________________
LARRY A. BUTLER
LAB:sh
64
<PAGE>
EXHIBIT E
January 31, 1994
Theodore E. Nelson
Richard L. Jacobs
James L. Fri, Jr.
Ellida S. Fri
RE: SHARE EXCHANGE AGREEMENT BY AND AMONG THE SHAREHOLDERS OF TOUCHSTONE,
INC., MORRISON KNUDSEN CORPORATION, A DELAWARE CORPORATION AND
TOUCHSTONE, INC.
Ladies and Gentlemen:
I have acted as legal counsel to Morrison Knudsen Corporation, a
Delaware corporation ("Buyer") in connection with the execution and delivery
of the Shares Exchange Agreement ("Exchange Agreement") dated January 31,
1994, by and among the Shareholders of Touchstone, Inc., Morrison Knudsen
Corporation, a Delaware corporation, and Touchstone, Inc., a Tennessee
corporation.
I have examined executed copies of the Exchange Agreement and such
corporate records and documents of Buyer and certificates of public
officials and officers of Buyer, and have made such further investigations
as I deemed necessary to express the opinions hereinafter set forth. I have
assumed the genuineness of all signatures, and the authority of the persons
signing the Exchange Agreement on behalf of parties thereto other than
Buyer, the authenticity of all documents submitted to me as originals and
the conformity to authentic original documents of all documents submitted to
me as certified, conformed or photostatic copies.
Based upon and subject to the foregoing, I am of the opinion that:
1. Buyer is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware and has
all the requisite corporate power and authority to carry on the
businesses as now being conducted.
2. The Exchange Agreement and the transactions contemplated thereby
have been duly authorized on behalf of Buyer by all requisite
corporate action and the Exchange Agreement constitutes a legal,
valid and binding obligation of Buyer.
65
<PAGE>
January 31, 1994
Page Two
3. Neither the execution nor the performance of the Exchange
Agreement will violate any applicable law of any jurisdiction, or any order,
judgment or decree of any court or governmental agency, or any agreement,
indenture or instrument known to such Counsel.
I am a member of the Bar of the State of Idaho, and I do not express
any opinion herein concerning other than the law of the State of Idaho.
This opinion is provided solely to you and shall not be relied upon by
any person or entity other than you for any reason.
Very truly yours,
David A. Channer
DAC:smb
66
<PAGE>
SCHEDULE 1
Shareholders Shares of
Touchstone, Inc.% Ownership in
Touchstone, Inc. Shares of MK Common
Stock
Exchanged (@$25.00 per
Share)
To be held
in Escrow To be Delivered at
Closing
Total
T. E. Nelson 510 51 % 36,720 330,480 367,200
R. L. Jacobs 171 17.1% 12,312 110,808 123,120
J. L. Fri, Jr. 160 16 % 11,520 103,680 115,200
E. S. Fri 159 15.9 % 11,448 103,032 114,480
Totals 1000 100% 72,000 648,000 720,000
67
<PAGE>
EXHIBIT 5.1
MORRISON KNUDSEN CORPORATION
MORRISON KNUDSEN CORPORATION
P. O. BOX 73/BOISE, IDAHO U.S.A. 83729
PHONE: (208)386-5395/TELEX:368439
FAX: (208)3866421
DAVID A. CHANNER
ASSOCIATE GENERAL COUNSEL
February 18, 1994
Morrison Knudsen Corporation
Morrison Knudsen Plaza
Boise, ID 83707
Re: FORM S-3 REGISTRATION STATEMENT RELATING TO 848,252 SHARES OF COMMON STOCK,
PAR VALUE $1.66-2/3 PER SHARE OF MORRISON KNUDSEN CORPORATION
Ladies and Gentlemen:
I am Associate General Counsel and Assistant Secretary of Morrison Knudsen
Corporation, a Delaware corporation (the "Company"), and have acted as counsel
to the Company in connection with the registration statement on Form S-3 (the
"Registration Statement") to be filed by the Company with the Securities and
Exchange Commission in connection with 848,252 shares of the Company's Common
Stock, par value $1.66-2/3 per share (the "Shares"), issuable pursuant to a
Share Exchange Agreement dated as of December 30, 1993, among Richard J. Clark,
Dennis E. Clark and Richard K. Clark (the "Clark Principals"), the Company,
Morrison Knudsen Corporation, an Ohio corporation, and Clark Industries, Inc.,
an Illinois corporation; Non-Competition Agreements dated December 30, 1993,
among each of the Clark Principals, respectively, Clark Industries, Inc. and
the Company; a Share Exchange Agreement dated January 31, 1994, among Theodore
E. Nelson, Richard L. Jacobs, James L. Fri, Jr. and Ellida S. Fri, the Company,
and Touchstone, Inc., a Tennessee corporation; and Non-Competition Agreements
dated January 31, 1994 among each of Theodore E. Nelson and Richard L. Jacobs,
respectively, Touchstone, Inc. and the Company (collectively the "Transaction
Agreements").
As counsel for the Company, I have examined and relied upon such records,
documents, certificates and other instruments as in my judgment are necessary
and appropriate to form the basis of the opinions hereinafter set forth. In
making the foregoing examinations, I have assumed the genuineness of all
signatures, the authenticity of all documents submitted to me as originals and
the conformity to original documents of all documents submitted to me as
certified or photostatic copies.
<PAGE>
Morrison Knudsen Corporation
February 18, 1994
Page Two
Based upon the foregoing, I am of the opinion that:
(1) The Company is a corporation duly incorporated and validly existing in
good standing under the laws of the State of Delaware.
(2) The Shares issuable in connection with the Transaction Agreements when
issued in accordance with the terms set forth in the Transaction
Agreements, and as described in the Registration Statement, and upon
official notice of issuance from the New York Stock Exchange, will be
validly issued and outstanding, fully paid and nonassessable.
I hereby consent to the filing of this opinion as an Exhibit to the Registration
Statement and to the references to me under the caption "Legal Matters" in the
Prospectus which is included in the Registration Statement.
Very truly yours,
/s/ David A. Channer
David A. Channer
DAC:smb
<PAGE>
INDEPENDENT AUDITORS' CONSENT
To the Stockholders and Board of Directors of
Morrison Knudsen Corporation
We consent to the incorporation by reference in this Registration Statement of
Morrison Knudsen Corporation on Form S-3 of our report dated February 8, 1993
appearing in the Annual Report on Form 10-K for the year ended December 31,
1992 and to the reference to us under the heading "Experts" in the Prospectus
which is part of this Registration Statement.
Deloitte & Touche
Boise, Idaho
February 16, 1994
<PAGE>
Exhibit 24.1
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned hereby constitutes and
appoints Edmund J. Gorman, Stephen G. Hanks and Mark E. Howland, and each of
them, his true and lawful attorney and attorneys-in-fact, with full power of
substitution and resubstitution, for him and in his name, place and stead, to
sign on his behalf as a director or officer or both, as the case may be, of
Morrison Knudsen Corporation, a Delaware corporation (the "Company"), a
Registration Statement on Form S-3, or any other appropriate form, for the
purpose of registering, pursuant to the Securities Act of 1933, as amended, for
resale 848,252 shares of the Company's common stock, par value $1.66-2/3 per
share, of which 770,000 shares shall be issued to the shareholders of
Touchstone, Inc. and 78,252 shares shall be issued to the shareholders of Clark
Industries, Inc., and to sign any and all amendments and any and all post-
effective amendments to such Registration Statement, and to deliver and file the
same, with all exhibits thereto and other documents in connection therewith,
with the Securities and Exchange Commission, granting unto said attorney or
attorneys-in-fact, and each of them with or without the others, full power and
authority to do and perform each and every act and thing requisite and necessary
to be done in and about the premises, as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all that said
attorney or attorneys-in-fact, or any of them or their substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney the
8th day of February, 1994.
/s/ William J. Agee
____________________________
William J. Agee
Chairman and Chief Executive Officer
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned hereby constitutes and
appoints Edmund J. Gorman, Stephen G. Hanks and Mark E. Howland, and each of
them, his true and lawful attorney and attorneys-in-fact, with full power of
substitution and resubstitution, for him and in his name, place and stead, to
sign on his behalf as a director or officer or both, as the case may be, of
Morrison Knudsen Corporation, a Delaware corporation (the "Company"), a
Registration Statement on Form S-3, or any other appropriate form, for the
purpose of registering, pursuant to the Securities Act of 1933, as amended, for
resale 848,252 shares of the Company's common stock, par value $1.66-2/3 per
share, of which 770,000 shares shall be issued to the shareholders of
Touchstone, Inc. and 78,252 shares shall be issued to the shareholders of Clark
Industries, Inc., and to sign any and all amendments and any and all post-
effective amendments to such Registration Statement, and to deliver and file the
same, with all exhibits thereto and other documents in connection therewith,
with the Securities and Exchange Commission, granting unto said attorney or
attorneys-in-fact, and each of them with or without the others, full power and
authority to do and perform each and every act and thing requisite and necessary
to be done in and about the premises, as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all that said
attorney or attorneys-in-fact, or any of them or their substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney the
8th day of February, 1994.
/s/ John Arrillaga
____________________________________
John Arrillaga
Director
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned hereby constitutes and
appoints Edmund J. Gorman, Stephen G. Hanks and Mark E. Howland, and each of
them, his true and lawful attorney and attorneys-in-fact, with full power of
substitution and resubstitution, for him and in his name, place and stead, to
sign on his behalf as a director or officer or both, as the case may be, of
Morrison Knudsen Corporation, a Delaware corporation (the "Company"), a
Registration Statement on Form S-3, or any other appropriate form, for the
purpose of registering, pursuant to the Securities Act of 1933, as amended, for
resale 848,252 shares of the Company's common stock, par value $1.66-2/3 per
share, of which 770,000 shares shall be issued to the shareholders of
Touchstone, Inc. and 78,252 shares shall be issued to the shareholders of Clark
Industries, Inc., and to sign any and all amendments and any and all post-
effective amendments to such Registration Statement, and to deliver and file the
same, with all exhibits thereto and other documents in connection therewith,
with the Securities and Exchange Commission, granting unto said attorney or
attorneys-in-fact, and each of them with or without the others, full power and
authority to do and perform each and every act and thing requisite and necessary
to be done in and about the premises, as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all that said
attorney or attorneys-in-fact, or any of them or their substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney the
8th day of February, 1994.
/s/ Lindsay E. Fox
____________________________________
Lindsay E. Fox
Director
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned hereby constitutes and
appoints Stephen G. Hanks and Mark E. Howland, and each of them, his true and
lawful attorney and attorneys-in-fact, with full power of substitution and
resubstitution, for him and in his name, place and stead, to sign on his behalf
as a director or officer or both, as the case may be, of Morrison Knudsen
Corporation, a Delaware corporation (the "Company"), a Registration Statement on
Form S-3, or any other appropriate form, for the purpose of registering,
pursuant to the Securities Act of 1933, as amended, for resale 848,252 shares of
the Company's common stock, par value $1.66-2/3 per share, of which 770,000
shares shall be issued to the shareholders of Touchstone, Inc. and 78,252 shares
shall be issued to the shareholders of Clark Industries, Inc., and to sign any
and all amendments and any and all post-effective amendments to such
Registration Statement, and to deliver and file the same, with all exhibits
thereto and other documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorney or attorneys-in-fact, and each
of them with or without the others, full power and authority to do and perform
each and every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorney or
attorneys-in-fact, or any of them or their substitute or substitutes, may
lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney the
8th day of February, 1994.
/s/ Edmund J. Gorman
____________________________________
Edmund J. Gorman
Senior Vice President
and Chief Financial Officer
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned hereby constitutes and
appoints Edmund J. Gorman, Stephen G. Hanks and Mark E. Howland, and each of
them, his true and lawful attorney and attorneys-in-fact, with full power of
substitution and resubstitution, for him and in his name, place and stead, to
sign on his behalf as a director or officer or both, as the case may be, of
Morrison Knudsen Corporation, a Delaware corporation (the "Company"), a
Registration Statement on Form S-3, or any other appropriate form, for the
purpose of registering, pursuant to the Securities Act of 1933, as amended, for
resale 848,252 shares of the Company's common stock, par value $1.66-2/3 per
share, of which 770,000 shares shall be issued to the shareholders of
Touchstone, Inc. and 78,252 shares shall be issued to the shareholders of Clark
Industries, Inc., and to sign any and all amendments and any and all post-
effective amendments to such Registration Statement, and to deliver and file the
same, with all exhibits thereto and other documents in connection therewith,
with the Securities and Exchange Commission, granting unto said attorney or
attorneys-in-fact, and each of them with or without the others, full power and
authority to do and perform each and every act and thing requisite and necessary
to be done in and about the premises, as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all that said
attorney or attorneys-in-fact, or any of them or their substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney the
8th day of February, 1994.
/s/ Christopher B. Hemmeter
____________________________________
Christopher B. Hemmeter
Director
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned hereby constitutes and
appoints Edmund J. Gorman and Stephen G. Hanks, and each of them, his true and
lawful attorney and attorneys-in-fact, with full power of substitution and
resubstitution, for him and in his name, place and stead, to sign on his behalf
as a director or officer or both, as the case may be, of Morrison Knudsen
Corporation, a Delaware corporation (the "Company"), a Registration Statement on
Form S-3, or any other appropriate form, for the purpose of registering,
pursuant to the Securities Act of 1933, as amended, for resale 848,252 shares of
the Company's common stock, par value $1.66-2/3 per share, of which 770,000
shares shall be issued to the shareholders of Touchstone, Inc. and 78,252 shares
shall be issued to the shareholders of Clark Industries, Inc., and to sign any
and all amendments and any and all post-effective amendments to such
Registration Statement, and to deliver and file the same, with all exhibits
thereto and other documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorney or attorneys-in-fact, and each
of them with or without the others, full power and authority to do and perform
each and every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorney or
attorneys-in-fact, or any of them or their substitute or substitutes, may
lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney the
8th day of February, 1994.
/s/ Mark E. Howland
____________________________________
Mark E. Howland
Controller
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned hereby constitutes and
appoints Edmund J. Gorman, Stephen G. Hanks and Mark E. Howland, and each of
them, his true and lawful attorney and attorneys-in-fact, with full power of
substitution and resubstitution, for him and in his name, place and stead, to
sign on his behalf as a director or officer or both, as the case may be, of
Morrison Knudsen Corporation, a Delaware corporation (the "Company"), a
Registration Statement on Form S-3, or any other appropriate form, for the
purpose of registering, pursuant to the Securities Act of 1933, as amended, for
resale 848,252 shares of the Company's common stock, par value $1.66-2/3 per
share, of which 770,000 shares shall be issued to the shareholders of
Touchstone, Inc. and 78,252 shares shall be issued to the shareholders of Clark
Industries, Inc., and to sign any and all amendments and any and all post-
effective amendments to such Registration Statement, and to deliver and file the
same, with all exhibits thereto and other documents in connection therewith,
with the Securities and Exchange Commission, granting unto said attorney or
attorneys-in-fact, and each of them with or without the others, full power and
authority to do and perform each and every act and thing requisite and necessary
to be done in and about the premises, as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all that said
attorney or attorneys-in-fact, or any of them or their substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney the
8th day of February, 1994.
/s/ Peter S. Lynch
____________________________________
Peter S. Lynch
Director
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned hereby constitutes and
appoints Edmund J. Gorman, Stephen G. Hanks and Mark E. Howland, and each of
them, his true and lawful attorney and attorneys-in-fact, with full power of
substitution and resubstitution, for him and in his name, place and stead, to
sign on his behalf as a director or officer or both, as the case may be, of
Morrison Knudsen Corporation, a Delaware corporation (the "Company"), a
Registration Statement on Form S-3, or any other appropriate form, for the
purpose of registering, pursuant to the Securities Act of 1933, as amended, for
resale 848,252 shares of the Company's common stock, par value $1.66-2/3 per
share, of which 770,000 shares shall be issued to the shareholders of
Touchstone, Inc. and 78,252 shares shall be issued to the shareholders of Clark
Industries, Inc., and to sign any and all amendments and any and all post-
effective amendments to such Registration Statement, and to deliver and file the
same, with all exhibits thereto and other documents in connection therewith,
with the Securities and Exchange Commission, granting unto said attorney or
attorneys-in-fact, and each of them with or without the others, full power and
authority to do and perform each and every act and thing requisite and necessary
to be done in and about the premises, as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all that said
attorney or attorneys-in-fact, or any of them or their substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney the
8th day of February, 1994.
/s/ Robert A. McCabe
____________________________________
Robert A. McCabe
Director
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned hereby constitutes and
appoints Edmund J. Gorman, Stephen G. Hanks and Mark E. Howland, and each of
them, her true and lawful attorney and attorneys-in-fact, with full power of
substitution and resubstitution, for her and in her name, place and stead, to
sign on her behalf as a director or officer or both, as the case may be, of
Morrison Knudsen Corporation, a Delaware corporation (the "Company"), a
Registration Statement on Form S-3, or any other appropriate form, for the
purpose of registering, pursuant to the Securities Act of 1933, as amended, for
resale 848,252 shares of the Company's common stock, par value $1.66-2/3 per
share, of which 770,000 shares shall be issued to the shareholders of
Touchstone, Inc. and 78,252 shares shall be issued to the shareholders of Clark
Industries, Inc., and to sign any and all amendments and any and all post-
effective amendments to such Registration Statement, and to deliver and file the
same, with all exhibits thereto and other documents in connection therewith,
with the Securities and Exchange Commission, granting unto said attorney or
attorneys-in-fact, and each of them with or without the others, full power and
authority to do and perform each and every act and thing requisite and necessary
to be done in and about the premises, as fully to all intents and purposes as
she might or could do in person, hereby ratifying and confirming all that said
attorney or attorneys-in-fact, or any of them or their substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney the
8th day of February, 1994.
/s/ Irene C. Peden
____________________________________
Irene C. Peden
Director
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned hereby constitutes and
appoints Edmund J. Gorman, Stephen G. Hanks and Mark E. Howland, and each of
them, his true and lawful attorney and attorneys-in-fact, with full power of
substitution and resubstitution, for him and in his name, place and stead, to
sign on his behalf as a director or officer or both, as the case may be, of
Morrison Knudsen Corporation, a Delaware corporation (the "Company"), a
Registration Statement on Form S-3, or any other appropriate form, for the
purpose of registering, pursuant to the Securities Act of 1933, as amended, for
resale 848,252 shares of the Company's common stock, par value $1.66-2/3 per
share, of which 770,000 shares shall be issued to the shareholders of
Touchstone, Inc. and 78,252 shares shall be issued to the shareholders of Clark
Industries, Inc., and to sign any and all amendments and any and all post-
effective amendments to such Registration Statement, and to deliver and file the
same, with all exhibits thereto and other documents in connection therewith,
with the Securities and Exchange Commission, granting unto said attorney or
attorneys-in-fact, and each of them with or without the others, full power and
authority to do and perform each and every act and thing requisite and necessary
to be done in and about the premises, as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all that said
attorney or attorneys-in-fact, or any of them or their substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney the
8th day of February, 1994.
/s/ Gerard R. Roche
____________________________________
Gerard R. Roche
Director
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned hereby constitutes and
appoints Edmund J. Gorman, Stephen G. Hanks and Mark E. Howland, and each of
them, his true and lawful attorney and attorneys-in-fact, with full power of
substitution and resubstitution, for him and in his name, place and stead, to
sign on his behalf as a director or officer or both, as the case may be, of
Morrison Knudsen Corporation, a Delaware corporation (the "Company"), a
Registration Statement on Form S-3, or any other appropriate form, for the
purpose of registering, pursuant to the Securities Act of 1933, as amended, for
resale 848,252 shares of the Company's common stock, par value $1.66-2/3 per
share, of which 770,000 shares shall be issued to the shareholders of
Touchstone, Inc. and 78,252 shares shall be issued to the shareholders of Clark
Industries, Inc., and to sign any and all amendments and any and all post-
effective amendments to such Registration Statement, and to deliver and file the
same, with all exhibits thereto and other documents in connection therewith,
with the Securities and Exchange Commission, granting unto said attorney or
attorneys-in-fact, and each of them with or without the others, full power and
authority to do and perform each and every act and thing requisite and necessary
to be done in and about the premises, as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all that said
attorney or attorneys-in-fact, or any of them or their substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney the
8th day of February, 1994.
/s/ John W. Rogers, Jr.
____________________________________
John W. Rogers, Jr.
Director
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned hereby constitutes and
appoints Edmund J. Gorman, Stephen G. Hanks and Mark E. Howland, and each of
them, his true and lawful attorney and attorneys-in-fact, with full power of
substitution and resubstitution, for him and in his name, place and stead, to
sign on his behalf as a director or officer or both, as the case may be, of
Morrison Knudsen Corporation, a Delaware corporation (the "Company"), a
Registration Statement on Form S-3, or any other appropriate form, for the
purpose of registering, pursuant to the Securities Act of 1933, as amended, for
resale 848,252 shares of the Company's common stock, par value $1.66-2/3 per
share, of which 770,000 shares shall be issued to the shareholders of
Touchstone, Inc. and 78,252 shares shall be issued to the shareholders of Clark
Industries, Inc., and to sign any and all amendments and any and all post-
effective amendments to such Registration Statement, and to deliver and file the
same, with all exhibits thereto and other documents in connection therewith,
with the Securities and Exchange Commission, granting unto said attorney or
attorneys-in-fact, and each of them with or without the others, full power and
authority to do and perform each and every act and thing requisite and necessary
to be done in and about the premises, as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all that said
attorney or attorneys-in-fact, or any of them or their substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney the
8th day of February, 1994.
/s/ Gunnar E. Sarsten
____________________________________
Gunnar E. Sarsten
Director
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned hereby constitutes and
appoints Edmund J. Gorman, Stephen G. Hanks and Mark E. Howland, and each of
them, his true and lawful attorney and attorneys-in-fact, with full power of
substitution and resubstitution, for him and in his name, place and stead, to
sign on his behalf as a director or officer or both, as the case may be, of
Morrison Knudsen Corporation, a Delaware corporation (the "Company"), a
Registration Statement on Form S-3, or any other appropriate form, for the
purpose of registering, pursuant to the Securities Act of 1933, as amended, for
resale 848,252 shares of the Company's common stock, par value $1.66-2/3 per
share, of which 770,000 shares shall be issued to the shareholders of
Touchstone, Inc. and 78,252 shares shall be issued to the shareholders of Clark
Industries, Inc., and to sign any and all amendments and any and all post-
effective amendments to such Registration Statement, and to deliver and file the
same, with all exhibits thereto and other documents in connection therewith,
with the Securities and Exchange Commission, granting unto said attorney or
attorneys-in-fact, and each of them with or without the others, full power and
authority to do and perform each and every act and thing requisite and necessary
to be done in and about the premises, as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all that said
attorney or attorneys-in-fact, or any of them or their substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney the
8th day of February, 1994.
Peter V. Ueberroth
____________________________________
Peter V. Ueberroth
Director
