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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the Quarter Ended
JUNE 30, 1994
Commission File Number 1-8889
MORRISON KNUDSEN CORPORATION
A Delaware Corporation
IRS Employer Identification No. 82-0393735
MORRISON KNUDSEN PLAZA, BOISE, IDAHO 83729
208/386-5000
The registrant's common stock is registered on the New York and Pacific Stock
Exchanges.
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At June 30, 1994, 32,649,415 shares of the registrant's common stock were
outstanding (excluding 420,663 shares held in treasury and including 417,181
unallocated shares of common stock in the Employee Stock Ownership Plan Trust,
accounted for as treasury stock).
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The registrant has filed all reports required to be filed by Section 13 or 15(d)
of the Securities Exchange Act of 1934 during the preceding 12 months and has
been subject to such filing requirements for the past 90 days.
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MORRISON KNUDSEN CORPORATION
QUARTERLY REPORT FORM 10-Q FOR THE
THREE AND SIX MONTHS ENDED JUNE 30, 1994
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements PAGE
Statements of Operations for the Three and Six Months
Ended June 30, 1994 and 1993 I-1
Balance Sheets at June 30, 1994 and
December 31, 1993 I-2-3
Condensed Statements of Cash Flows for the
Three and Six Months Ended June 30, 1994 and 1993 I-4
Notes to Financial Statements I-5-10
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations I-11-13
PART II. OTHER INFORMATION
Item 1. Legal Proceedings II-1
Item 4. Results of Votes of Security Holders II-1-2
Item 6. Exhibits and Reports on Form 8-K II-2
Signatures II-2
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
MORRISON KNUDSEN CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
THREE AND SIX MONTHS ENDED JUNE 30, 1994 AND 1993 (UNAUDITED)
(THOUSANDS OF DOLLARS EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
1994 1993 1994 1993
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<S> <C> <C> <C> <C>
Revenue
Engineering and construction $499,070 $554,915 $ 955,191 $1,025,913
Rail systems 92,374 100,477 177,554 189,674
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Total revenue $591,444 $655,392 $1,132,745 $1,215,587
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Operating income (loss)
Engineering and construction $ (8,664) $14,023 $ 1,760 $29,791
Rail systems (56,165) 3,820 (52,417) 5,928
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Total operating income (loss) (64,829) 17,843 (50,657) 35,719
General and administrative expenses (8,249) (9,669) (16,974) (17,656)
Research and development expenses (1,827) - (1,827) -
Interest expense (2,438) (422) (3,794) (611)
Other income (expense), net (3,695) 6,429 (571) 15,308
Equity in net income (loss) of unconsolidated 4,774 (824) 4,887 (4,290)
Gains on subsidiaries sales of stock 24,029 - 25,284 -
Gain (loss) on disposition of investments in
unconsolidated affiliates, net (13,828) - (8,951) -
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Income (loss) before income taxes and minority (66,063) 13,357 (52,603) 28,470
Income tax (expense) benefit 26,432 (5,062) 21,048 (12,051)
Minority interests in net (income) loss of
subsidiaries (835) (88) 741 (329)
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Net income (loss) $(40,466) $ 8,207 $(30,814) $16,090
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Weighted average number of common shares 32,550,792 30,762,989 32,363,527 30,711,123
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Earnings (loss) per common share $(1.24) $.27 $(.95) $.52
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Dividends per share $.20 $.20 $.40 $.40
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</TABLE>
The accompanying notes are an integral part of the financial statements.
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MORRISON KNUDSEN CORPORATION
CONSOLIDATED BALANCE SHEETS
AT JUNE 30, 1994 (UNAUDITED) AND DECEMBER 31, 1993 (AUDITED)
(THOUSANDS OF DOLLARS EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
ASSETS 1994 1993
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<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 135,868 $ 91,879
Short-term investments, at cost thatapproximates market 6,059 --
Accounts receivable including retentions of $ 77,108 and $ 62,800 261,835 231,021
Refundable federal income taxes 7,363 21,096
Inventories 182,905 133,350
Costs and earnings in excess of billings on uncompleted contracts 230,172 185,221
Investments in construction joint ventures 56,329 83,116
Deferred income taxes 39,574 25,019
Other 16,797 22,519
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Total current assets 936,902 793,221
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INVESTMENTS AND OTHER ASSETS
Marketable securities, at cost, market 18,544 51,143
Investments in unconsolidated affiliates 56,249 62,649
Goodwill and other intangibles, net 55,674 36,284
Other investments and assets 72,830 68,984
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Total investments and other assets 203,297 219,060
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PROPERTY AND EQUIPMENT, AT COST
Land and mineral rights 21,259 21,131
Buildings and improvements 167,592 153,252
Machinery and equipment 72,184 67,187
Construction equipment 205,884 226,221
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Total property and equipment 466,919 467,791
LESS ACCUMULATED DEPRECIATION (261,532) (254,122)
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Property and equipment, net 205,387 213,669
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TOTAL ASSETS $1,345,586 $1,225,950
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</TABLE>
The accompanying notes are an integral part of the financial statements.
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<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY 1994 1993
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<S> <C> <C>
CURRENT LIABILITIES
Short-term and current portion of long-term debt $ 160,439 $ 37,238
Accounts payable including retentions of $38,218 and $ 45,951 302,794 293,746
Accrued salaries, wages and benefits 55,753 46,507
Other accrued expenses 48,435 53,372
Billings in excess of costs and earnings on uncompleted contracts 105,803 104,460
Advances from customers 125,279 147,788
Dividends payable 240 6,423
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Total current liabilities 798,743 689,534
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NON-CURRENT LIABILITIES
Deferred income taxes 14,309 24,189
Deferred compensation and income 24,532 13,671
Accrued workers' compensation 6,315 46,597
Accrued postretirement benefit obligation 27,496 26,506
Debt due after one year 22,611 9,768
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Total non-current liabilities 95,263 120,731
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COMMITMENTS AND CONTINGENCIES (Note 9)
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MINORITY INTERESTS IN SUBSIDIARIES 65,092 8,718
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STOCKHOLDERS' EQUITY
Preferred stock, par value $.10, authorized 10,000,000 shares
Common stock, par value $1.67, authorized
100,000,000 shares, issued 33,487,259 and 32,698,179 shares 55,780 54,494
Capital in excess of par value 273,679 252,250
Retained earnings 83,860 127,466
Treasury stock, 837,844 and 1,080,184 shares, at cost (16,323) (19,435)
Deferred compensation for restricted stock awards (7,129) (5,837)
Cumulative translation adjustments (3,379) (1,971)
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Total stockholders' equity 386,488 406,967
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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $1,345,586 $1,225,950
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</TABLE>
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MORRISON KNUDSEN CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED JUNE 30, 1994, AND 1993 (UNAUDITED)
(THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
1994 1993
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<S> <C> <C>
OPERATING ACTIVITIES
Net cash provided (used) by operating activities $(130,197) $(52,912)
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INVESTING ACTIVITIES
Short-term investments 11,028
Property and equipment acquisitions (30,153) (21,662)
Property and equipment disposals 15,085 9,417
Investments in unconsolidated affiliates and other non- (7,861) (11,947)
Purchase of business assets (3,900) -
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Net cash provided (used) by investing activities (26,829) (13,164)
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FINANCING ACTIVITIES
Borrowing (payments) of short-term debt, net 122,947 45,367
Borrowings of long-term debt 10,739 -
Payments of long-term debt (2,317) (3,657)
Proceeds from subsidiary sale of stock 88,365 -
Proceeds from stock issued 496 -
Dividends paid (19,215) (18,264)
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Net cash provided (used) by financing activities 201,015 23,446
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Increase (decrease) in cash and cash equivalents 43,989 (42,630)
Cash and cash equivalents at beginning of period 91,879 134,011
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Cash and cash equivalents at end of period $ 135,868 $91,381
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OTHER CASH FLOW INFORMATION
Interest paid $ 3,965 $1,375
Income taxes paid (refunded), net (12,096) (5,204)
Acquisition of business for stock:
Property and equipment and other assets 9,128 --
Goodwill and other intangibles 19,215 --
Long-term debt (4,675) --
Other liabilities assumed (4,005) --
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</TABLE>
The accompanying notes are an integral part of the financial statements.
I-4
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MORRISON KNUDSEN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All dollar amounts in thousands)
1. BASIS OF PRESENTATION
The accompanying consolidated financial statements include the accounts of
Morrison Knudsen Corporation and its majority-owned subsidiaries. The
Corporation's investments in 20 percent to 50 percent owned affiliates and
joint ventures are accounted for on the equity method.
The consolidated financial statements have been prepared without audit,
pursuant to the rules and regulations of the Securities and Exchange
Commission. Certain financial information and footnote disclosures
normally included in financial statements prepared in accordance with
generally accepted accounting principles have been condensed or omitted
pursuant to such rules and regulations. These consolidated financial
statements should be read in conjunction with the audited consolidated
financial statements and notes thereto included in the Corporation's Annual
Report on Form 10-K for the year ended December 31, 1993.
The unaudited consolidated financial statements included herein reflect all
adjustments consisting of normal recurring adjustments which are, in the
opinion of management, necessary to a fair presentation of the results of
operations and cash flows for the interim periods. The results of
operations for the three and six month periods ended June 30, 1994 are not
necessarily indicative of the results to be expected for the full year.
2. SUBSIDIARIES SALES OF STOCK
MK GOLD COMPANY: Under an option granted by MK Gold Company ("MK Gold") to
the underwriters of its initial public offering ("IPO") to purchase
additional shares of common stock to cover over-allotments, 1,350,000
shares of MK Gold's common stock at $6.00 a share were sold on January 14,
1994. The sale decreased the Corporation's proportionate interest in MK
Gold from 50% to 46.5%. The net proceeds to MK Gold, after deducting
commissions and offering expenses, were $7,458. The Corporation recorded a
pre-tax gain of $1,255 in recognition of the net increase in value of the
Corporation's investment in MK Gold. Beginning December 1993 the
Corporation has accounted for its investment in MK Gold by the equity
method.
MK RAIL CORPORATION: On May 3, 1994, MK Rail Corporation, ("MK Rail") then
a wholly-owned subsidiary of the Corporation, completed an IPO of 6,000,000
shares of its common stock at an offering price of $16.00 a share which
decreased the Corporation's proportionate interest in MK Rail to 65%. MK
Rail remanufactures locomotives, manufactures high-technology locomotives,
designs, manufactures and distributes locomotive components parts, and
provides locomotive fleet maintenance services to the railroad industry.
The net proceeds to MK Rail from the IPO, after deducting underwriters'
discounts, commissions and estimated issuance costs, were $88,365. The
Corporation recorded a pre-tax gain of $24,029 on the IPO in recognition of
the net increase in value of the Corporation's investment in MK Rail.
3. GAIN (LOSS) ON DISPOSITION OF INVESTMENTS IN UNCONSOLIDATED AFFILIATES, NET
WRITE OFF OF INVESTMENT IN TEXAS TGV CORPORATION: Texas TGV Corporation
("Texas TGV") was awarded a franchise in May 1991 to finance, construct and
operate a high speed rail system in Texas.
I-5
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Through June 30, 1994, the high speed rail project has been funded by its
shareholders, including the Corporation, which had a 38.2% equity
investment in Texas TGV at June 30, 1994. The Texas High Speed Rail
Authority (the agency created to oversee the high speed rail project)
("Authority") had asserted that Texas TGV was in technical default because
it failed to provide the equity financing commitment by December 31, 1993
as required under the franchise agreement. Texas TGV had challenged the
authority's assertions because it believed that delays outside its control
had extended the deadline for providing the equity financing. Prior to
June 30, 1994, the Corporation did not provide for any loss of diminution
in value of its investment in Texas TGV since the ultimate outcome was not
predictable. Texas TGV's recent efforts to extend the deadline or to
negotiate amendments to the franchise agreement with the Authority have
been unsuccessful. The Corporation has decided to abandon the project and
accordingly recognized a $13,828 pre-tax charge to income in the second
quarter of 1994 related to the write-off of its investment in Texas TGV.
SALE OF INTEREST IN STRAIGHT CROSSING DEVELOPMENT, INC.: On October 7,
1993, Straight Crossing Development, Inc., a 45% owned unconsolidated
subsidiary ("SCDI"), entered into a development agreement with the
government of Canada to design, construct and operate for 35 years an 8.4
mile long toll bridge linking the Canadian provinces of New Brunswick and
Prince Edward Island. On March 31, 1994, the Corporation entered into an
agreement to sell a portion of its common stock investment in SCDI to a
third party for $1,301 cash and a $3,576 note receivable with interest at
7% per annum. The cash is due upon legal close and the note receivable is
due and payable on the earlier of the date of final completion of the toll
bridge or May 31, 1998. The sale decreased the Corporation's
proportionate interest in SCDI from 45% to 36%. The Corporation recorded a
pre-tax gain of $4,877 on the stock sale in the first quarter of 1994. See
Note 7.
4. ACQUISITION
Effective January 1, 1994, the Corporation and its partners acquired
majority ownership of Mitteldeutsche Braunkohlengesellschaft mbH ("MIBRAG")
from the German government, subject to several contingencies. Because of
the existing contingencies at March 31, 1994 the Corporation did not
reflect its share of equity in the net income of MIBRAG for the three
months ended March 1994 in its 1994 first quarter results of operations.
During the second quarter of 1994, the contingencies were favorably
resolved and accordingly, the Corporation recorded its $5,600 share of
equity in the net income of MIBRAG for the six months ended June 1994 in
its 1994 second quarter results of operations. MIBRAG is a private company
formed by the German government to own and operate lignite coal mines,
power and process plants in Germany. Before political unification and its
transition to a private business, MIBRAG was a portion of a larger state-
owned enterprise. MIBRAG's operations, employee base and production
techniques before January 1, 1994 were not generally the same and therefore
comparability of financial information for periods prior to January 1, 1994
would not be meaningful. The Corporation, in addition to holding a 33%
participating interest in MIBRAG, has an agreement to provide mine
planning, engineering and related services to MIBRAG.
5. INVENTORIES
Rail systems inventories at June 30, 1994 and December 31, 1993 are
summarized as follows:
<TABLE>
<CAPTION>
(Unaudited) (Audited)
June 30, 1993 December 31, 1994
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<S> <C> <C>
Finished goods $ 9,546 $ 4,267
Work in progress 292,667 240,097
Raw materials 187,113 120,481
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Total inventories 489,326 364,845
Payments on account of work in progress (306,421) (231,495)
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<PAGE>
Net inventories $182,905 $133,350
</TABLE>
6. CONSTRUCTION JOINT VENTURES
The Corporation has entered into a number of partnership arrangements
commonly referred to as "joint ventures". Generally, each construction
joint venture is formed to accomplish a specific project and is dissolved
upon completion of the project. The number of joint ventures in which the
Corporation participates and the size, scope and duration of the projects
vary between periods. Specific joint ventures change from period to
period, and the comparability of the following group financial statements
between periods may not be meaningful. Summary joint venture financial
information at June 30, 1994 and December 31, 1993 and for the six months
ended June 30, 1994 and 1993 follows:
<TABLE>
<CAPTION>
(Unaudited) (Audited)
FINANCIAL POSITION AT JUNE 30, 1994 DECEMBER 31, 1993
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<S> <C> <C>
Cash and cash equivalents $142,540 $161,084
Other current assets 128,592 197,448
Noncurrent assets 7,349 5,989
Property and equipment, net 48,068 37,776
Advances from customers (84,396) (87,777)
Other current liabilities (168,769) (208,100)
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Net assets $ 73,384 $106,420
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CORPORATION'S INVESTMENT IN
CONSTRUCTION JOINT VENTURES $56,329 $83,116
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RESULTS OF OPERATIONS (Unaudited) (Unaudited)
SIX MONTHS ENDED JUNE 30, 1994 1993
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Combined joint ventures, net
Revenue $584,623 $327,636
Cost of revenue (590,033) (307,350)
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Operating income (loss) $ (5,410) $ 20,286
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Corporation's share, net
Revenue $169,938 $166,116
Cost of revenue (179,154) (154,880)
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Operating income (loss) $ (9,216) $ 11,236
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</TABLE>
The Corporation recognized a net operating loss greater than the net
operating loss of the combined joint ventures for the six months ended June
30, 1994 because its proportionate share(s) of joint ventures reporting
operating losses was greater than its proportionate share(s) of joint
ventures reporting operating income.
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7. INVESTMENTS IN UNCONSOLIDATED AFFILIATES
The following table presents summarized financial information of the
unconsolidated affiliates at June 30, 1994 and December 31, 1993 and for
the six months ended June 30, 1994 and 1993, on a combined 100 percent
basis. The Corporation accounts for investments in 50% or less owned
companies by the equity method. Amounts presented include the accounts of
the following individually significant investees: MK Gold Company (46.5%);
Straight Crossing Development, Inc. (36%); AmerBank (30.2%); Westmoreland
Resources, Inc. (24%); and MIBRAG (33%). Results of operations presented
for the six months ended June 30, 1993 and 1994 include the accounts of
Texas TGV Corporation. On June 30, 1994, the Corporation wrote-off its
investment in Texas TGV Corporation. MK Gold holds interests in two
producing gold mining projects in California and provides contract mining
services. AmerBank (a joint stock company) is a licensed bank operating in
Poland. The $6,059 stock investment in AmerBank is classified as a short-
term investment in the accompanying balance sheet reflecting the
Corporation's intent to sell its interest therein. Westmoreland Resources,
Inc. is a mining company that operates a surface coal mine in Montana. See
Notes 2, 3 and 4.
<TABLE>
<CAPTION>
(Unaudited) (Audited)
FINANCIAL POSITION AT JUNE 30, 1994 DECEMBER 31, 1993
<S> <C> <C>
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Current assets $418,817 $ 91,775
Non-current assets 360,798 125,762
Long-term debt (94,322) (22,401)
Current liabilities (133,870) (46,168)
Non-current liabilities (417,207) (17,058)
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Net assets $134,216 $131,910
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CORPORATION'S INVESTMENT IN $56,249 $62,649
UNCONSOLIDATED AFFILIATES
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RESULTS OF OPERATIONS (Unaudited) (Unaudited)
SIX MONTHS ENDED JUNE 30, 1994 1993
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Revenue $335,540 $117,788
Operating income (loss) 20,499 (1,537)
Net income (loss) 17,504 (5,221)
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CORPORATION'S EQUITY IN NET INCOME
(LOSS) OF UNCONSOLIDATED AFFILIATES $4,887 $(4,290)
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</TABLE>
The Corporation recognized a loss from its investee's operations in the
first half of 1993 primarily because of the net loss of Joy MK Projects
Company, then a 50% owned unconsolidated affiliate. Joy MK Projects
Company became a wholly-owned subsidiary in April 1993.
The Corporation's investment in MK Gold at June 30, 1994 was $31,600. The
aggregate market value of MK Gold's common stock held by the Corporation at
June 30, 1994 was $42,750.
I-8
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8. OTHER INCOME (EXPENSE), NET
Other income and expense items for the three and six month periods ended
June 30, 1994 and 1993 are as follows:
<TABLE>
<CAPTION>
(Unaudited) (Unaudited)
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
1994 1993 1994 1993
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<S> <C> <C> <C> <C>
Interest and dividends $ 509 $3,807 $2,330 $ 9,315
Gains (losses) on sales of (165) 2,686 1,399 7,251
marketable securities, net
Gains (losses) on sales of (1,446) (836) (3,102) (1,530)
assets, net
Underwriting income (expense) of
insurance subsidiary, net 344 (587) 3,323 (1,340)
Write-down of assets (1,000) - (1,000) -
Miscellaneous income (expense), (1,937) 1,359 (3,521) 1,612
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Other income (expense), net $(3,695) $6,429 $ (571) $15,308
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</TABLE>
9. COMMITMENTS AND CONTINGENCIES
VERTAC SITE CONTRACTORS, A JOINT VENTURE, ("VERTAC"): The Corporation has
a 50% participating interest in VERTAC. VERTAC is a subcontractor under a
prime contract with the Federal Environmental Protection Agency ("EPA"),
to process hazardous waste at an Arkansas site. Based on information
presently available, the Corporation recognized a $5,000 pre-tax charge to
income in the second quarter of 1994 in connection with the write-down of
its investment in VERTAC to its estimated net recoverable value. The
Corporation's investment in VERTAC at December 31, 1993 and June 30, 1994
was $21,950 and $10,901, respectively. The Corporation will not recover
its investment under the subcontract but anticipates, based upon
information presently available, that VERTAC will receive additional
contracts to incinerate hazardous waste at the Arkansas site to allow the
Corporation to fully recover its investment.
CF SYSTEMS: The Corporation acquired a processing facility and a solvent
extraction processing technology in 1990 and subsequently deferred
additional design and engineering costs in modifying the processing
facility for commercial application. Based on information presently
available, the Corporation recognized a $6,000 pre-tax charge to income in
the second quarter of 1994 related to the write-down of the carrying value
of the processing facility to its estimated net recoverable value. The
Corporation is currently negotiating a "sole source" contract with a
state agency for remediation of contaminated soil. The contract should
begin in the third quarter of 1994, be of approximately 36 months duration
and will be principally funded by the EPA. The Corporation's investment
in CF Systems at December 31, 1993 and June 30, 1994 was $13,896 and
$8,286, respectively. The Corporation does not anticipate it will fully
recover its investment under this contract but anticipates, based upon
information presently available, that it will receive additional contracts
to fully recover its investment.
LETTERS OF CREDIT: The Corporation was contingently liable, in the normal
course of business, for $429,458 in standby letters of credit not
reflected in the accompanying financial statements at June 30, 1994 for
contract performance guarantees on a number of construction, rail and
transit contracts.
DISCONTINUED OPERATIONS: At June 30, 1994, the Corporation was
contingently liable for $42,000 in connection with the shipbuilding
operations of National Steel and Shipbuilding Company ("NASSCO"),
discontinued in 1988. In April 1989, the Corporation sold its interest in
NASSCO and in June 1994, the
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<PAGE>
Corporation renegotiated and amended the April 1989 sale agreement with
NASSCO. Under the terms of the amended agreement the Corporation will
provide NASSCO a $21,000 credit facility continuing for a period of 3
years after completion of a U.S. Navy contract, expected in mid 1996, and
NASSCO will relinquish its right to require the Corporation to accept
repayment in NASSCO preferred stock for any balance outstanding under the
credit facility. At June 30, 1994, NASSCO had no balance outstanding
under the Corporation's credit facility. The Corporation is contingently
liable up to a maximum of $21,000 on a bank credit facility obtained by
NASSCO. The balance outstanding under NASSCO's bank credit facility at
June 30, 1994 was $8,500. The Corporation's credit facility is reduced by
the amount of funds NASSCO borrows under its bank credit facility. In
addition, the Corporation has guaranteed $21,000 of NASSCO's port facility
bonds until not later than December 2002. NASSCO's floating drydock is
pledged as collateral for the bonds. At June 30, 1994, the Corporation
was contingently liable for $30,980 in connection with commercial real
estate operations discontinued in 1987. Certain real estate assets
collateralize the bank debt. The Corporation is of the opinion, based
upon informatin presently available, that no payments will be required and
no losses will be incurred under such contingencies.
AFFILIATE GUARANTEES: At June 30, 1994, the Corporation was contingently
liable for $26,000, (i) $20,000 borrowed by MK Gold under it's bank credit
facility and (ii) $6,000 borrowed by data-Cache and Beacon Light under
their bank credit facilities. Data-Cache is a development stage computer
software company and Beacon Light is a manufacturer and marketer of
lighting enhancement products. The Corporation has participating
interests in data-Cache and Beacon Light.
OTHER GUARANTEES: At June 30, 1994, the Corporation has also guaranteed
$4,523 of obligations of third parties under borrowing arrangements.
Where possible, the Corporation has obtained security interests and
guarantees by the principals.
LOAN AGREEMENT COVENANTS: At June 30, 1994, the Corporation was not in
technical compliance with all of the financial covenants imposed by its
lenders under its loan arrangements. By August 12, 1994 the Corporation
had received from its lenders appropriate waivers and amendments to its
loan agreements. The Corporation is currently in compliance with the
financial covenants of its loan agreements.
10. SUBSEQUENT EVENT - LEGAL PROCEEDINGS
On July 28, 1994, the Corporation and several of its officers were named
as defendants in a complaint filed in federal district court in Idaho by a
stockholder who claims to represent a class of stockholders that purchased
shares of the Corporation's common stock between October 15, 1993 and July
19, 1994. The complaint is based on provisions of securities laws and
seeks equitable relief and unspecified damages for losses allegedly
resulting from improper disclosure.
Although the securities litigation is in a preliminary stage and the
Corporation has not had an opportunity to study the complaint in detail,
it intends to contest it vigorously.
I-10
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Revenue and operating income of the engineering and construction segment
decreased for the three and six month periods of 1994 compared to the same
periods of 1993. Excluding the effects of the provisions for write-down of
assets and anticipated losses on uncompleted contracts, operating income of the
engineering and construction segment for the three and six month periods of 1994
decreased $5.1 million and $10.4 million, respectively, from the same periods of
1994. This decline was principally due to the execution and completion of
profitable contracts during the first half of 1993, contrasted with delays in
anticipated contract awards and start-up of major new infrastructure contracts
during the same 1994 period. In addition, operating income for the three and
six month periods of 1994 was adversely impacted by provisions for write-downs
of assets and anticipated losses on uncompleted contracts. Based on information
presently available, the Corporation recognized a $17.6 million pre-tax charge
to income in the second quarter of 1994 consisting of an $11.0 million write-
down of its investments in two waste disposal projects to their estimated net
recoverable values, a $4.3 million write-down of the carrying values of certain
surplus tunnel boring equipment to their estimated net realizable values and a
$2.3 million provision for an anticipated loss on an uncompleted contract. See
Note 9 of Notes to Consolidated Financial Statements.
Revenue and operating income of the Rail Systems segment decreased for the three
and six month periods of 1994, compared to the same periods of 1993. In the
second quarter of 1994, estimated costs and earnings at completion on four
transit division contracts were revised, resulting in the provision of $59.4
million for anticipated losses on the uncompleted contracts. The losses were
due principally to (i) delays in testing and delivery of new transit cars under
contract with the Metro North Commuter Railroad (MTA), which resulted in higher
direct labor, manufacturing overhead and estimated costs for liquidated damages
and (ii) for the other three contracts which are in early stages of
production, higher than expected labor and overhead costs during the start-up of
production activities at the Corporation's two new manufacturing facilities as
well as anticipated overruns for labor and overhead due to delivery schedule
delays.
General and administrative expenses for the three and six month periods of 1994,
decreased $1.4 million and $.7 million, respectively from the same periods of
1993 due principally to the allocation of certain costs and expenses previously
retained at the corporate level to the operating segments.
The Corporation's majority-owned subsidiary MK Rail Corporation incurred
research and development costs of $1.0 million in the second quarter of 1994,
related to MK Rail's program to develop two new railroad locomotives. In
addition, $.8 million of costs for research and development of new products and
processes relating to the rail systems industry were expensed in the second
quarter.
Interest expense for the three and six month periods ended June 30, 1994,
increased $2.0 million and $3.2 million, respectively from the same periods of
1993. The increase reflects the rise in both short and long-term debt
outstanding from $47.0 million at December 31, 1993, to $183.0 million at
June 30, 1994, including $4.7 million assumed debt of Touchstone, acquired
January 31, 1994.
Other income for the three and six month periods ended June 30, 1994, decreased
from $6.4 million income to $3.7 million loss, and $15.3 million income to $.6
million loss, respectively. The declines are due to (i) the absence of non-
operating investment earnings (interest and dividends) and (ii) incurred losses
on asset sales and asset write-downs. See Note 8 of Notes to Consolidated
Financial Statements.
The Corporation's share of investee income increased from an $.8 million loss in
the second quarter of 1993 to $4.8 million income in the same 1994 period. The
increase was primarily due to the recognition by the Corporation of its $5.6
million share of equity in the net income of MIBRAG. The $5.6 million
represents the Corporation's share of MIBRAG's net income for the full six month
period ended June 30, 1994. The $3.5 million loss in the first quarter of 1993
was due primarily to the recognition by the Corporation of its share of the net
loss of Joy MK Projects Company, then a 50% owned unconsolidated affiliate. Joy
MK Projects Company has been a wholly-owned subsidiary since April 1993. See
Notes 4 and 7 of Notes to Consolidated Financial Statements.
I-11
<PAGE>
In May 1994, MK Rail completed an IPO of 6,000,000 shares of its common stock.
The Corporation recognized a $24.0 million pre-tax gain because MK Rail's public
offering price per share exceeded the Corporation's carrying value per share.
In January 1994, 1,350,000 shares of MK Gold's common stock were sold under an
option granted by MK Gold to its IPO underwriters to cover over-allotments. The
Corporation recognized a $1.3 million pre-tax gain because MK Gold's public
offering price per share exceeded the Corporation's carrying value per share.
See Note 2 of Notes to Consolidated Financial Statements.
The net loss on disposition of investments in unconsolidated affiliates consists
of a $13.8 million charge to income in the second quarter of 1994 related to the
write-off of the Corporation's investment in Texas TGV and a $4.9 gain in the
first quarter of 1994 on the sale of a portion of its stock holdings in SCDI.
See Note 3 of Notes to Consolidated Financial Statements.
Income taxes provided in the first half of 1994 and 1993 were based upon
estimated annual effective tax rates of 40.0% and 42%, respectively. The 42%
effective rate in the first half of 1993 was higher than the Corporation's
blended statutory tax rate of 40.85% due in large part to the recognition of
taxes on foreign-source income. The 40.0% effective rate in the first half of
1994 was slightly lower than the blended statutory rate because of anticipated
utilization of foreign tax credits to offset U.S. income taxes.
FINANCIAL CONDITION
<TABLE>
<CAPTION>
Liquidity and capital resources
(thousands of dollars)
June 30,
--------------------
1994 1993
-------- --------
<S> <C> <C>
CASH AND CASH EQUIVALENTS:
Beginning of period $ 91,879 $134,011
End of period 135,868 91,381
Total debt 183,050 47,924
<CAPTION>
Six Months Ended
June 30,
------------------
1994 1993
-------- --------
<S> <C> <C>
NET CASH PROVIDED (USED) BY:
Operating activities $(130,197) $(52,912)
Investing activities (26,829) (13,164)
Financing activities 201,015 23,446
</TABLE>
Total capitalization at June 30, 1994 was $569.5 million, composed of $183.0
million debt and $386.5 million equity compared to total capitalization at
December 31, 1993 of $454.0 million, composed of $47.0 million debt and $407.0
equity.
Net cash used for operating activities in the first half of 1994 was primarily
due to increases in rail systems segment inventories, trade receivables and
unbilled receivables. Net cash used for operating activities in the first half
of 1993, was the result of increases in trade receivables, unbilled receivables
and a significant increase in rail system's transit division inventories.
Net cash used for investing activities in the first half of 1994 included
acquisitions of property and equipment, the acquisition of certain Touchstone
intangible assets and other non-current assets. Net cash used for investing
activities in the first half of 1993 included purchases of capital assets,
marketable securities and other non-current assets offset by cash generated from
the sales of short-term investments and fixed assets.
I-12
<PAGE>
Net cash provided by financing activities in the first half of 1994 included
$133.7 million borrowings of short and long-term debt, $88.4 million net
proceeds from MK Rail's IPO, partially offset by the payment of $19.2 million
dividends. Financing activities in the first half of 1993 included $45.4
million borrowings of short term debt, the $3.7 million repayment of assumed
short-term debt of previously acquired businesses and the payment of $18.3
million dividends. During the last quarter of 1993 and especially the first
half of 1994, the Corporation borrowed, net of repayments, $22.1 million and
$131.4 million, respectively on a short-term basis to finance working capital
needs. The Corporation and its consolidated subsidiaries expect that they will
continue to borrow short-term to finance working capital requirements, absent
sufficient funds generated from operations and from customer advances and cash
on hand. At June 30, 1994, the Corporation was not in technical compliance with
all of the financial covenants imposed by its lenders under its loan
arrangements. By August 12, 1994 the Corporation had received from its lenders
appropriate waivers and amendments to its loan agreements. The Corporation is
currently in compliance with the financial covenants of its loan agreements.
The Corporation believes that its balance of cash, cash equivalents and short-
term investments, and existing short-term and potential long-term borrowing
capabilities, will be sufficient to meet its operating cash requirements in the
foreseeable future.
The Corporation and its subsidiaries had available from domestic and foreign
banks $209.3 million of committed unsecured credit lines of which approximately
$175.9 million was unused at June 30, 1994.
I-13
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On July 28, 1994, a complaint in an action entitled Garbulinski v. Morrison
Knudsen Corporation was filed in the United States District Court in the
district of Idaho. The Corporation, its chairman and certain other of its
officers are named as defendants in the action. The complaint seeks
unspecified damages and other relief under the federal securities laws based
on allegations that the Corporation made misleading disclosures regarding its
transit business. The complaint seeks relief on behalf of a purported class
of persons and entities who acquired the Corporation's common stock between
October 15, 1993 and July 19, 1994. The Corporation has not had an
opportunity to study the complaint in detail and it has referred the complaint
to its outside legal counsel for review. The Corporation intends to defend
vigorously against the charges.
ITEM 4. RESULTS OF VOTES OF SECURITY HOLDERS
(a) The annual meeting of stockholders of Morrison Knudsen Corporation was
held May 12, 1994 at the Four Seasons Hotel, Chicago, Illinois.
(b) The Board of Directors of the Corporation solicited proxies pursuant to
Regulation 14 of the Securities Exchange Act of 1934. There were no
solicitations in opposition to the nominees listed in the Corporation's
proxy statement and all of such nominees were elected to the
directorships indicated in the proxy statement pursuant to the vote of
stockholders. Stockholders of record on March 18, 1994 were entitled to
vote 33,022,099 shares of the Corporation's common stock.
(1) Nominees for terms of office to continue until 1997.
For Withheld
William J. Agee 27,647,171 692,008
Zbigniew Brzezinski 27,722,415 616,764
Peter S. Lynch 27,763,588 575,591
Gerard R. Roche 27,758,030 581,149
Directors whose terms of office continue after the meeting:
John Arrillaga Robert A. McCabe
Lindsay E. Fox John W. Rogers, Jr.
Christopher B. Hemmeter Peter V. Ueberroth
Irene C. Peden
(2) Approval of the Morrison Knudsen Corporation Chief Executive
Officer Incentive Plan.
For 24,733,826
Against 2,668,445
Abstained 937,912
(3) Approval of the Morrison Knudsen Corporation Stock Compensation
Plan
For 19,894,213
Against 7,519,653
Abstained 926,352
II-1
<PAGE>
(4) Ratification of the selection of Deloitte & Touche as independent
auditors of the Corporation for the fiscal year ending December
31, 1994.
For ratification 27,846,828
Against 292,609
Abstained 200,376
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
FILED IN PART I
None
FILED IN PART II
THE PART II EXHIBITS ARE LISTED IN THE EXHIBIT INDEX CONTAINED
ELSEWHERE IN THIS QUARTERLY REPORT
(b) Reports on Form 8-K
The Registrant filed current reports on Form 8-K to report (i) the
initial public offering on April 26, 1994 of 6,000,000 shares of
MK Rail Corporation, then a wholly-owned subsidiary of the
Registrant, at an offering price of $16.00 a share, and (ii) the
election of William P. Clark on May 13, 1994 as a director of the
Registrant.
All other items required under Part II are omitted because they are not
applicable.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
MORRISON KNUDSEN CORPORATION
/S/ M.E. Howland
---------------------------------------------------
Vice President and Controller and Principal
Accounting Officer, in his respective capacities
as such
Date: August 15, 1994
II-2
<PAGE>
MORRISON KNUDSEN CORPORATION
EXHIBIT INDEX
EXHIBIT
NUMBER EXHIBITS
- - ------- --------
10.1 Form of registrant's Indemnification Agreement (filed as Exhibit B
to Proxy Statement dated March 23, 1987, and incorporated herein
by reference.) A schedule listing the individuals with whom the
registrant has entered into such agreements is filed herewith.
10.2 Form of registrant's Supplemental Retirement Benefit Agreement
(filed as Exhibit 10.6 to Form 10-K Annual Report for year ended
December 31, 1988 and incorporated herein by reference.) A
schedule listing the individuals with whom the registrant has
entered into such agreements is filed herewith.
10.3 Form of registrant's Employment Agreement (filed as Exhibit 10.2
to Form 10-Q Quarterly Report for quarter ended June 30, 1993 and
incorporated herein by reference.) A schedule listing the
individuals with whom the registrant has entered into such
agreements is filed herewith.
10.4 Transfer Agreement between the registrant and MK Rail Corporation.
10.5 Environmental Liability Transfer Agreement between the registrant
and MK Rail Corporation.
10.6 Tax Matters Agreement between the registrant and MK Rail
Corporation.
10.7 Employee Transfer and Benefits Agreement between the registrant
and MK Rail Corporation.
<PAGE>
Schedule to Exhibit 10.1
MORRISON KNUDSEN CORPORATION
SCHEDULE OF INDEMNIFICATION AGREEMENTS
Name Date of Agreement
---- -----------------
Agee, William J. February 13, 1987
Arrillaga, John October 10, 1990
Brandon, Brent D. November 5, 1993
Brigham, Douglas L. August 6, 1993
Brzezinski, Zbigniew February 8, 1994
Clark, William P. May 13, 1994
Cleary, James F. (Jr.) August 6, 1993
Fox, Lindsay E. February 28, 1992
Grant, Stephen R. May 5, 1989
Hanks, Stephen G. February 9, 1990
Hemmeter, C. B. May 5, 1989
Howland, Mark E. February 8, 1994
Lynch, Peter S. May 5, 1989
McCabe, Robert A. February 13, 1987
Peden, Irene C. August 3, 1990
Roche, Gerard R. August 3, 1990
Rogers, John W. February 5, 1993
Ueberroth, Peter V. August 3, 1989
<PAGE>
Schedule to Exhibit 10.2
MORRISON KNUDSEN CORPORATION
SCHEDULE OF SUPPLEMENTAL RETIREMENT BENEFIT AGREEMENTS
Name Date of Agreement
---- -----------------
Agee, William J. April 2, 1991
Grant, Stephen R. April 13, 1989
Tinstman, Robert A. August 3, 1990
<PAGE>
Schedule to Exhibit 10.3
MORRISON KNUDSEN CORPORATION
SCHEDULE OF EMPLOYMENT AGREEMENTS
Name Date of Agreement
---- -----------------
Hanks, Stephen G. January 1, 1993
Tinstman, Robert A. January 1, 1993
Zarges, Thomas H. January 1, 1994
<PAGE>
EXHIBIT 10.4
________________________________________________________________________________
TRANSFER AGREEMENT
BY AND BETWEEN
MORRISON KNUDSEN CORPORATION
AND
MK RAIL CORPORATION
________________________________________________________________________________
Dated as of February 25, 1994
<PAGE>
TABLE OF CONTENTS
PAGE
----
ARTICLE 1. DEFINITIONS 1
Section 1.1. General 1
Section 1.2. Certain Other Definitions 6
ARTICLE 2. TRANSFERS; ASSUMPTION OF LIABILITIES, EXCLUDED CONTRACTS 6
Section 2.1. Transfers 6
Section 2.2. Consideration; Assumption of Liabilities 7
Section 2.3. The Closings 7
Section 2.4. Required Consents 8
Section 2.5. Effective Date. 9
Section 2.6. Excluded Contracts. 9
ARTICLE 3. REPRESENTATIONS AND WARRANTIES 10
Section 3.1. Representations and Warranties of MK Ohio 10
Section 3.2. Representations and Warranties of MK Rail 10
Section 3.3. No Other Representations and Warranties 11
ARTICLE 4. ENVIRONMENTAL MATTERS 11
ARTICLE 5. ACCESS TO INFORMATION AND SERVICES 11
Section 5.1. Provision of Books and Records 11
Section 5.2. Access to Information 11
Section 5.3. Production of Witnesses and Individuals 12
Section 5.4. Confidentiality 12
ARTICLE 6. EMPLOYEE MATTERS; LABOR MATTERS 12
ARTICLE 7. INSURANCE 12
ARTICLE 8. ADDITIONAL COVENANTS OF THE PARTIES 13
Section 8.1. Further Assurances; Subsequent Transfers 13
Section 8.2. Related Agreements 13
Section 8.3. Signs; Use of Morrison Knudsen Name 13
Section 8.4. Plant Closings and Layoffs 14
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<PAGE>
Section 8.5. Non-Competition 14
Section 8.6. Tax Agreement 15
ARTICLE 9. CONDITIONS TO MK OHIO'S OBLIGATIONS 15
ARTICLE 10. CONDITIONS TO MK RAIL'S OBLIGATIONS 15
ARTICLE 11. SURVIVAL, INDEMNIFICATION, CLAIMS AND OTHER MATTERS 15
Section 11.1. Survival of Agreements 15
Section 11.2. Indemnification 16
Section 11.3. Procedure for Indemnification 17
Section 11.4. Other Claims 18
Section 11.5. No Beneficiaries 18
ARTICLE 12. DISPUTE RESOLUTION 19
Section 12.1. Mediation and Binding Arbitration 19
Section 12.2. Initiation 19
Section 12.3. Submission to Mediation 19
Section 12.4. Selection of Mediator 19
Section 12.5. Mediation and Arbitration 19
Section 12.6. Selection of Arbitrator 19
Section 12.7. Cost of Arbitration 20
Section 12.8. Confidentiality 20
ARTICLE 13. MISCELLANEOUS 20
Section 13.1. Complete Agreement 20
Section 13.2. Expenses 20
Section 13.3. Governing Law 20
Section 13.4. Notices 20
Section 13.5. Amendment and Modification 21
Section 13.6. Successors and Assigns 21
Section 13.7. No Third Party Beneficiaries 21
Section 13.8. Counterparts 21
Section 13.9. Interpretation 21
Section 13.10. Annexes, Schedules and Exhibits 22
Section 13.11. Legal Enforceability 22
-ii-
<PAGE>
ANNEX I Transferred Assets
A Real Property
B Personal Property
C Leases
D Contracts
E Intellectual Property
F Stock of Subsidiaries
G Foreign Interests
H Licenses and Permits
I Miscellaneous
ANNEX II Assumed Liabilities
ANNEX III Required Consents
ANNEX IV Continuing Obligations of MK Ohio
ANNEX V Excluded Contracts
EXHIBIT A Corporate Support and Professional Services Agreement
EXHIBIT B Environmental Liability Transfer Agreement
EXHIBIT C Intellectual Property Agreement
EXHIBIT D Tax Agreement
EXHIBIT E Bank Documents
-iii-
<PAGE>
TRANSFER AGREEMENT
TRANSFER AGREEMENT, dated February 25, 1994, by and between
Morrison Knudsen Corporation, an Ohio corporation ("MK Ohio"), as transferor,
and MK Rail Corporation, a Delaware corporation ("MK RAIL"), as transferee.
WHEREAS, MK Ohio has from time to time in the past and is
currently engaged in (i) the contract remanufacturing of railroad locomotives
("Locomotives"), (ii) the design, development and manufacture of new
Locomotives, (iii) the design, manufacture and distribution of Locomotive
component parts, and (iv) the provision of Locomotive fleet maintenance services
to third parties (individually and collectively, the "Business") conducted (A)
at various locations in the United States, Mexico, Argentina and Australia,
including facilities identified in Annex I-A hereto, (B) through various
divisions and subsidiaries, including the following direct subsidiaries
identified in Annex I-F and their wholly-owned subsidiaries (collectively, the
"Subsidiaries"), MK Engine Systems Company, Inc., Clark Industries, Inc., Motor
Coils Manufacturing Co., Power Parts Company, and Touchstone, Inc. and (C)
through investments in certain foreign corporations, partnerships or joint
ventures identified in Annex I-G (the "Foreign Interests");
WHEREAS, the Board of Directors of MK Ohio has determined that
the interests of its shareholders would be best served by a transfer of the
Business to MK Rail on the terms and conditions set forth herein;
WHEREAS, the Board of MK Rail has determined that the interests
of its stockholders would best be served by accepting the transfer of the
Business on the terms and conditions set forth herein;
WHEREAS, MK Ohio desires to transfer, assign, convey and deliver
to MK Rail, and MK Rail desires to acquire and assume from MK Ohio and its
Affiliates (collectively referred to herein as "Transfer") (i) all of the assets
used primarily in the Business, (ii) all Liabilities (as hereinafter defined)
relating to, arising out of or resulting from the Business or the use, ownership
or operation of the assets associated therewith, (iii) all of the issued and
outstanding shares of capital stock (the "Stock") of the Subsidiaries owned by
MK Ohio and (iv) all of the shares or interests owned by MK Ohio in the Foreign
Interests;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements hereinafter set forth, and intending to be legally
bound hereby, the parties hereto agree as follows:
ARTICLE 1. DEFINITIONS
Section 1.1. GENERAL. As used in this Agreement, capitalized
terms defined immediately after their use shall have the respective meanings
thereby provided, and the
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<PAGE>
following terms shall have the following meanings (such meanings to be equally
applicable to both the singular and plural forms of the terms defined):
ACTION: any action, claim, suit, arbitration, inquiry, subpoena,
discovery request, proceeding or investigation by or before any court or grand
jury, any governmental or other regulatory or administrative agency or
commission or any arbitration tribunal related to, arising out of, or resulting
from the conducting of: (i) the Business, (ii) the Stock, (iii) the Assets, (iv)
the Foreign Interests, (v) the Assumed Contracts or (vi) the Assumed
Liabilities.
AFFILIATE: with respect to any specified person, a person that,
directly or indirectly, through one or more intermediaries, controls, or is
controlled by, or is under common control with, such specified person; provided
that MK Ohio and MK Rail shall not be deemed to be Affiliates of each other for
purposes of this Agreement.
ASSETS: collectively, all of the assets of MK Ohio described or
identified in Annexes I-A, I-B, I-C, I-D, I-G and I-I.
ASSUMED CONTRACTS: shall mean (i) those contracts and other
agreements listed in Annex I-D annexed hereto and made a part hereof, and (ii)
all oral agreements and understandings primarily related to the Business.
ASSUMED LIABILITIES: collectively, all of the Liabilities of MK
Ohio or its Affiliates described or identified in Annex II.
ASSUMPTION AGREEMENT AND CONSENT: the Assumption Agreement and
Consent, dated as of February 25, 1994, among MK Ohio,MKD, MK Rail, and CIBC
INC., pursuant to which MK Rail will assume the obligations of MK Ohio under the
Credit Agreement.
BANK DOCUMENTS: the Credit Agreement, the Assumption Agreement
and Consent, the Guaranty and the First Limited Waivers, substantially in the
form of such documents contained in Exhibit E hereto.
BOOKS AND RECORDS: the books and records of MK Ohio (or true and
complete copies thereof), including all computerized books and records owned by
MK Ohio, that relate primarily to the Business and are necessary for MK Rail to
operate the Business, including, without limitation, (i) all such books and
records relating to the purchase of materials, supplies and services for the
Business, the manufacture and sale of products by the Business or dealings with
customers of the Business, (ii) all files relating to any Action in respect of
any Assumed Liability, (iii) all filings with government agencies primarily
relating to the Business, and (iv) original corporate minute books, stock
ledgers and certificates and corporate seals of MK Rail, the subsidiaries and
the Foreign Interests; provided, however that there shall be excluded from the
foregoing the Books and Records relating to the Excluded Contracts.
-2-
<PAGE>
CIBC INC.: CIBC INC., a banking corporation that acts as lender
under the Credit Agreement.
CODE: the Internal Revenue Code of 1986, as amended.
CONTINUING OBLIGATIONS: all Liabilities of MK Ohio or its
Affiliates relating to, arising out of or resulting from the Business that shall
continue after the First Closing Date, as further described on Annex IV.
CORPORATE SERVICES AGREEMENT: the Corporate Support and
Professional Services Agreement, substantially in the form of Exhibit A,
pursuant to which MK Ohio will provide certain corporate services to MK Rail
after the First Closing Date.
CREDIT AGREEMENT: Credit Agreement, dated as of February 18,
1994, among MK Ohio, MKD and CIBC INC.
EMPLOYEE: any active employee of MK Ohio or a Subsidiary, as
applicable, (including any employee on authorized leave of absence, sick pay
leave or short-term disability) who has been designated by MK Ohio as being
employed with respect to the Business as of January 29, 1994.
EMPLOYEE TRANSFER AND BENEFITS AGREEMENT: The Employee Transfer
and Benefits Agreement referred to in Article VI hereof relating to the transfer
of Employees and Employee Benefit Plans.
EMPLOYEE BENEFIT PLANS: all pension, profit sharing, bonus, stock
purchase, stock option, insurance, health care, severance, welfare benefit,
vacation and other employee, fringe benefit, incentive compensation or deferred
salary plans, that is maintained by MK Ohio or by a Subsidiary, as applicable,
including each plan sponsored by MK Ohio or a Subsidiary which is governed by
the terms and provisions of ERISA, or with respect to which MK Ohio or a
Subsidiary, as applicable, makes contributions or incurs costs and in which any
Employee is a participant.
ENVIRONMENTAL LIABILITIES: as defined in the Environmental
Liability Transfer Agreement.
ENVIRONMENTAL LIABILITY TRANSFER AGREEMENT: the Environmental
Liability Transfer Agreement substantially in the form of Exhibit B relating to
the assignment to MK Rail of the Idaho Department of Environmental Quality Post
Closure Permit and the assumption by MK Rail of the Environmental Liabilities.
ERISA: the Employee Retirement Income Security Act of 1974, as
amended.
- 3 -
<PAGE>
EXCLUDED CONTRACTS: those certain purchase orders and locomotive
cores relating to that portion of the SP Contract relating to the remanufacture
of approximately 43 locomotives to be completed by MK Ohio at its Hornell, New
York Plant as more particularly described on Annex V.
FIRST CLOSING: the closing of the Transfer of the Assets, as
provided in Section 2.3.
FIRST CLOSING DATE: the date and time on which First Closing
occurs.
FOREIGN INTERESTS: interests in certain foreign partnerships,
corporations and joint ventures, further described in Annex I-G.
FIRST LIMITED WAIVERS: MK Rail Limited Waiver, Joy MK Limited
Waiver and MK Gold Limited Waiver, pursuant to which CIBC INC. consents to the
Transfers.
GUARANTY: Guaranty, dated as of February 22, 1994, from MK Ohio
to CIBC INC., pursuant to which MK Ohio will guaranty the obligations of MK Rail
under the Credit Agreement that MK Rail has assumed pursuant to the Assumption
Agreement and Consent.
INSURANCE PROGRAM: collectively, the series of insurance policies
pursuant to which various insurance carriers provide insurance coverage to MK
Ohio in respect of claims or occurrences relating to, arising out of, or
resulting from the Business, including, without limitation, property damage,
manufacturer's output, business interruption, transit, fire, extended coverage,
fiduciary, fidelity, environmental impairment, employee crime, general
liability, products' liability, automobile liability and employer's liability
insurance coverage, but excluding any insurance policy providing benefits to
Employees pursuant to an Employee Benefit Plan.
INTELLECTUAL PROPERTY AGREEMENT: Service Mark and Trademark
License Agreement substantially in the form of Exhibit C, pursuant to which MK
Ohio and MK Rail will provide for certain matters involving intellectual
property.
JOY MK LIMITED WAIVER: First Limited Waiver Regarding Transfer of
Assets to MK Rail Corporation among CIBC INC., Joy MK Projects Company, MK Ohio
and MKD.
LIABILITIES: any and all debts, liabilities, warranties and
obligations (of any nature or type whatsoever regardless of when arising),
whether accrued, contingent or reflected on a balance sheet, including, without
limitation, those related to, arising out of or resulting from (i) any law,
rule, regulation, Action, order or consent decree of any governmental entity,
(ii) any judgment or award of any court, arbitrator or other governmental or
non-governmental tribunal, or (iii) any lease, contract, commitment or
undertaking.
LEASES: the leases described in Annex I-C.
- 4 -
<PAGE>
LOSS: any loss, Liability, claim, damage, obligation, payment,
cost or expense (including, without limitation, the costs and expenses of any
Action, any demand, assessment, judgment, settlement or compromise related
thereto and reasonable attorneys' fees, disbursements and other charges in
connection therewith).
MKD: Morrison Knudsen Corporation, a Delaware Corporation.
MK GOLD LIMITED WAIVER: First Limited Waiver Regarding Transfer
of Assets to MK Rail Corporation among CIBC INC., MK Gold Company, MK Ohio and
MKD.
MK RAIL LIMITED WAIVER: First Limited Waiver Regarding Transfer
of Assets to MK Rail Corporation among CIBC INC., MK Rail, MK Ohio and MKD.
PERMITTED EXCEPTIONS:
(a) all liens for taxes, assessments, both general and
special, and other governmental charges and assessments that are not due and
payable as of the First Closing Date or are being contested in good faith by MK
Ohio;
(b) all building codes and zoning ordinances and other
laws, ordinances, regulations, rules, orders or determinations of any federal,
state, county, municipal, foreign or other governmental authority affecting the
Real Property as to which the existing structures on the Real Property are not
in material violation;
(c) all recorded easements, rights-of-way, covenants,
conditions, restrictions, reservations, licenses and agreements and other
matters of record;
(d) all encroachments, overlaps, boundary line disputes,
shortages in area, drainage and other easements and other matters not of record
that would be disclosed by an accurate survey or inspection of the Real
Property, including, without limitation, any of the foregoing which are
disclosed by the Surveys defined in Section 8.2;
(e) all electrical power, telephone, gas, sanitary sewer,
storm sewer, water and other utility lines, pipelines, service lines and
facilities of any nature now located on, over or under the Real Property, and
all licenses, easements, rights-of-way and other agreements relating thereto;
and
(f) all existing public and private roads and streets
(whether dedicated or not dedicated) and all railroad lines and rights-of-way
affecting the Real Property.
REAL PROPERTY: collectively, the real property on which MK Ohio
conducts the Business in Boise, Idaho, Mountaintop, Pennsylvania and Latham, New
York, including in each
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case, the offices, buildings, structures and other improvements located thereon,
the fixtures contained therein and the easements and other rights and
appurtenances relating thereto, as more particularly described in Annex I-A.
REGISTRATION STATEMENT: The Registration Statement filed with the
Securities and Exchange Commission on February 24, 1994, relating to the
offering to the public by MK Rail of shares of its common stock.
REGISTRATION STATEMENT EFFECTIVE DATE: the date the Securities
and Exchange Commission declares effective the Registration Statement.
RELATED AGREEMENTS: the Corporate Services Agreement, the
Environmental Liability Transfer Agreement, the Intellectual Property Agreement
and the Tax Agreement.
SECOND CLOSING: the closing of the purchase and sale of the Stock
and the Foreign Interests, as provided in Section 2.3.
SECOND CLOSING DATE: the date and time on which the Second
Closing occurs, which shall not be later than one day prior to the Registration
Statement Effective Date.
SP CONTRACT: that certain firm commitment order from Southern
Pacific Transportation Company for the remanufacture and delivery by the Company
of 133 locomotives.
Section 1.2. CERTAIN OTHER DEFINITIONS.
(a) The words "hereof," "herein" and "hereunder," and words
of like import, refer to this Agreement as a whole and not to any particular
Section or Article hereof. References herein to any Section, Article, Annex or
Exhibit are, except as otherwise specified, to such Section or Article of, or
such Annex or Exhibit to, this Agreement.
(b) Except as otherwise specified, all dollar amounts
referred to herein are stated in United States dollars.
(c) The term "person" shall mean and include an
individual, a partnership, a joint venture, a corporation, a trust, a limited
liability company, an unincorporated organization and a government or any
department or agency thereof.
ARTICLE 2. TRANSFERS; ASSUMPTION OF LIABILITIES; EXCLUDED CONTRACTS
Section 2.1. TRANSFERS. Subject to the terms and conditions
set forth herein and in exchange for the consideration set forth in Section 2.2
below, MK Ohio agrees to Transfer to MK Rail, and MK Rail agrees to accept from
MK Ohio, the Assets (including the Assumed
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Contracts, the Leases, the Real Property, the Licenses and Permits and the
Intellectual Property), the Stock and the Foreign Interests.
Section 2.2. CONSIDERATION; ASSUMPTION OF LIABILITIES. In
consideration of the Transfer hereunder and of the covenant not to compete set
forth in Section 8.5, (i) MK Rail shall issue to MK Ohio 2,000 shares of MK Rail
Common Stock and (ii) MK Rail shall assume from MK Ohio the Assumed Liabilities
and shall assume, pay and discharge all of MK Ohio's liabilities relating to,
arising out of or resulting from all of the Assumed Contracts and the Leases.
Section 2.3. THE CLOSINGS. The Closings shall take place at
the offices of MK Ohio.
(a) The First Closing shall take place on February 25,
1994. At the First Closing:
(i) MK Ohio shall execute and deliver to MK Rail:
(A) a special warranty or grant deed to each
parcel of Real Property identified in Annex I-A (subject to Permitted
Exceptions), executed in accordance with the requirements of applicable state
law, in recordable form and otherwise in a form reasonably satisfactory to MK
Ohio and MK Rail, which shall convey all of MK Ohio's right, title and interest
in and to each parcel of Real Property identified in Annex I-A;
(B) a bill of sale relating to the Assets
described or identified in Annex I-B in a form reasonably satisfactory to MK
Ohio and MK Rail;
(C) assignments of the Leases identified in Annex
I-C in a form reasonably satisfactory to MK Ohio and MK Rail;
(D) assignments of the intellectual property
identified in Annex I-E in a form reasonably satisfactory to MK Ohio and MK
Rail;
(E) the Related Agreements;
(F) such other instruments of conveyance as MK
Rail shall reasonably request to effect the transfer of the Assets hereunder;
(b) MK Rail shall execute and deliver to MK Ohio:
(ii) the related Agreements; and
(iii) such instruments of assumption as MK Ohio shall
reasonably request to effect the assumption of the Assumed Liabilities
hereunder;
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(iv) MK Rail shall deliver to MK Ohio a duly
executed stock certificate or certificates representing 1000 fully paid and
nonassessable shares of MK Rail Common Stock;
(v) MK Ohio, MK Rail and the other parties thereto
shall execute and deliver the Bank Documents.
(c) The Second Closing shall take place not later than one
day prior to the Registration Statement Effective Date. At the Second Closing:
(i) MK Ohio shall deliver certificates representing
all of the Stock of the Subsidiaries, as described in Annex I-F, and
certificates or interests representing MK Ohio's interest in the Foreign
Interests described in Annex I-G in good delivery form and duly endorsed for
transfer to MK Rail or accompanied by duly executed stock powers enclosed to MK
Rail evidencing such shares of Stock and such Foreign Interests; and
(ii) MK Rail shall deliver to MK Ohio a duly executed
stock certificate representing 1,000 fully paid and nonassessable shares of MK
Rail Common Stock.
Section 2.4. REQUIRED CONSENTS. To the extent that the
assignment of any Assumed Contract or Lease shall require the consent of the
other party thereto, this Agreement shall not constitute an agreement to assign
the same if an attempted assignment would constitute a breach thereof, and the
provisions of this Section 2.4 shall apply. The parties hereto shall use their
best efforts to obtain any consent, approval or amendment required to novate, or
to assign to MK Rail, the Assumed Contracts and the Leases. The parties have
caused to be prepared Annex III hereto which contains a description of all
consents, approvals or amendments known to the parties on the date hereof to be
required. The parties will amend Annex III from time to time prior to the
Second Closing Date to identify any further such consents (collectively, the
"Required Consents").
Neither MK Ohio nor any of its Affiliate shall be obligated to
pay any consideration for obtaining a Required Consent (except for filing fees
and other administrative charges) to the third party from which such Required
Consent is requested. In the event and to the extent that MK Ohio is unable to
obtain any such Required Consent, (i) MK Ohio shall continue to be bound thereby
and (ii) unless prohibited by law or the terms thereof, MK Rail shall pay,
perform and discharge fully all the obligations of MK Ohio thereunder and
indemnify MK Ohio and its Affiliates against any Losses relating to, arising out
of, or resulting from such performance by MK Rail. MK Ohio shall, without
further consideration therefor, pay and remit to MK Rail promptly all monies,
rights and other consideration received to the extent of such performance. MK
Ohio shall exercise or exploit its rights and options under all such agreements,
leases, licenses and other rights and commitments referred to in this Section
2.4 only as
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reasonably directed by MK Rail and at MK Rail's expense. If and when any such
Required Consent shall be obtained or such agreement, lease, license, claim or
other right shall otherwise become assignable, MK Ohio shall promptly assign all
of its rights and obligations thereunder to MK Rail without payment of further
consideration and MK Rail shall, without the payment of any further
consideration therefor, assume such rights and obligations. To the extent that
the assignment of any agreement (or the proceeds thereof) pursuant to this
Agreement is prohibited by law, the assignment provisions of this Agreement
shall operate to create a subcontract with MK Rail to perform the obligations of
MK Ohio under each unassignable agreement at a subcontract price equal to the
monies, rights and other considerations received by MK Ohio with respect to the
performance by MK Rail under such agreement, and MK Rail shall indemnify MK Ohio
and its Affiliates against any losses relating to, arising out of or resulting
from such performance by MK Rail.
Section 2.5. EFFECTIVE DATE.
(a) Results of operations of the portion of the Business
comprised of the Assets, subject to the Assumed Liabilities, through the
accounting period at 11:59 p.m. on January 28, 1994 shall be included in the
consolidated results of operations of MK Ohio; and, after such time, operations
of such portion of the Business shall be conducted and the results thereof shall
be for the account of MK Rail.
(b) Results of operations of the portion of the Business
comprised of the Stock and the Foreign Interests up to the day immediately
preceding the Second Closing Date shall be included in the consolidated results
of operations of MK Ohio; and, after such time, operations of such portions of
the Business shall be conducted and the results thereof shall be for the account
of MK Rail.
(c) Until the execution and delivery of the Employee
Transfer and Benefit Agreement, Employees shall continue to be employees of MK
Ohio, or of a Subsidiary as applicable, for all purposes including without
limitation participation in Employee Benefit Plans; PROVIDED, HOWEVER, that MK
Rail shall pay to MK Ohio or to a Subsidiary as applicable all charges for
payroll, fringe benefits and other expenses relating to, arising out of, or
resulting from such Employees, and shall indemnify and hold MK Ohio harmless
from all other Liabilities relating to, arising out of, or resulting from such
Employees for the period beginning after (i) 11:59 p.m. on January 28, 1994
with respect to Employees of MK Ohio and (ii) 11:59 on the day immediately
preceding the Second Closing Date with respect to Employees of a Subsidiary.
(d) MK Ohio shall maintain the Insurance Program in
accordance with Article 7.
Section 2.6. EXCLUDED CONTRACTS. There shall be excluded from
the transfers contemplated by this Agreement all rights and obligations of MK
Ohio in and to the Excluded Contracts. MK Ohio shall perform its obligations
under the purchase orders identified in Annex
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V and shall own, continue to possess and be entitled to the products and
proceeds of sale of all inventory and work in process of locomotive cores
remanufactured from materials, goods and supplies provided to MK Ohio under such
purchase orders.
ARTICLE 3. REPRESENTATIONS AND WARRANTIES
Section 3.1. REPRESENTATIONS AND WARRANTIES OF MK OHIO. MK
Ohio represents and warrants to MK Rail as follows:
(a) MK Ohio is a corporation duly organized, validly
existing and in good standing under the laws of its jurisdiction of
incorporation and has all requisite corporate power and authority to enter into
this Agreement and to carry out its obligations hereunder. The execution and
delivery of this Agreement and the consummation of the transactions contemplated
hereby have been duly authorized by the Board of Directors of MK Ohio, and no
other corporate proceeding on the part of MK Ohio necessary to authorize this
Agreement and the transactions contemplated hereby.
(b) The execution, delivery and performance by MK Ohio of
this Agreement or any other agreement or instrument contemplated hereby will not
constitute a breach or violation of MK Ohio's Articles of Incorporation or other
charter documents or Bylaws.
(c) The authorized capital stock of each Subsidiary, and
the number of shares issued and outstanding in each case, are set forth in Annex
I-F. All of the shares of Stock are validly issued, fully paid and
nonassessable. All of the shares of Stock are owned of record and beneficially
by MK Ohio and are owned thereby free and clear of all liens, pledges, charges,
encumbrances, security interests, restrictions or other rights or interests of
any nature. None of the Subsidiaries has any securities outstanding which are
convertible into or exchangeable or exercisable for shares of its capital stock,
and there are no contracts, options, subscription agreements, commitments,
understandings, arrangements or restrictions by which any Subsidiary is
obligated to issue shares of its capital stock.
(d) Each Subsidiary is a corporation duly incorporated,
validly existing and in good standing under the laws of the jurisdiction of its
incorporation as set forth in Annex I-F, has corporate power to own all of its
property and assets and to carry on its business as now conducted. Each
Subsidiary is duly qualified to do business as a foreign corporation in each
jurisdiction in which the conduct of its business or its ownership or leasing of
property requires such qualification, and each such jurisdiction is shown in
Annex I-F.
Section 3.2. REPRESENTATIONS AND WARRANTIES OF MK RAIL. MK
Rail represents and warrants to MK Ohio as follows:
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(a) MK Rail is a corporation duly organized, validly
existing and in good standing under the laws of its jurisdiction of
incorporation and has all requisite corporate power and authority to enter into
this Agreement and to carry out its obligations hereunder. The execution and
delivery of this Agreement and the consummation of the transactions contemplated
hereby have been duly authorized by the Board of Directors of MK Rail, and no
other corporate proceeding on the part of MK Rail is necessary to authorize this
Agreement or the transactions contemplated hereby.
(b) The execution, delivery and performance by MK Rail of
this Agreement or any other agreement or instrument contemplated hereby will not
constitute a breach or violation of, or require any consent or approval of any
person under, MK Rail's Articles of Incorporation or other charter documents or
Bylaws.
Section 3.3. NO OTHER REPRESENTATIONS AND WARRANTIES. Except
as set forth in this Article 3, neither party hereto has made any additional
representations and warranties to the other, and no party hereto has relied on
any representations and warranties except as specifically set forth herein. In
addition, the parties acknowledge that MK Ohio is hereby transferring the Assets
to MK Rail in an "as is, where is" condition, and MK Ohio hereby disclaims any
representations or warranties, direct or implied, with respect to such Assets,
including any warranty of merchantability or fitness for a particular purpose.
ARTICLE 4. ENVIRONMENTAL MATTERS
Certain environmental matters relating to the assumption by MK
Rail of Environmental Liabilities shall be governed by the terms and conditions
of the Environmental Liability Transfer Agreement, substantially in the form
attached as Exhibit B hereto, which is incorporated herein by this reference.
ARTICLE 5. ACCESS TO INFORMATION AND SERVICES
Section 5.1. PROVISION OF BOOKS AND RECORDS. As soon as
practicable after the First Closing Date, MK Ohio shall deliver to MK Rail all
Books and Records. Such Books and Records shall be the property of MK Rail but
shall be retained and made available readily to MK Ohio for review and
duplication until the earlier of (i) notice from MK Ohio that such records are
no longer needed by MK Ohio and (ii) the fifth anniversary of the First Closing
Date.
Section 5.2. ACCESS TO INFORMATION. From and after the First
Closing Date, MK Ohio and MK Rail shall afford to each other and to each other's
authorized accountants, counsel and other designated representatives reasonable
access and duplicating rights (with copying costs to be borne by the requesting
party) during normal business hours to all Books and Records and documents,
communications, items and matters (collectively, "Information") within each
other's knowledge, possession or control relating to the Assets, the Stock, the
Business and the
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Transferred Employees, insofar as such access is reasonably required by MK Ohio
or MK Rail, and each party hereto shall use reasonable efforts to cause other
persons or entities possessing Information to give similar access. Information
may be requested under this Article 5 for, without limitation, audit,
accounting, claims, Actions, litigation and tax purposes, as well as for
purposes of fulfilling disclosure and reporting obligations, but not for
competitive purposes.
Section 5.3. PRODUCTION OF WITNESSES AND INDIVIDUALS. From and
after the First Closing Date, MK Ohio and MK Rail shall use reasonable efforts
to make available to each other, upon written request, any of their respective
officers, directors, employees or agents for fact finding, consultation and
interviews and as witnesses to the extent that any such person may reasonably be
required in connection with any Actions in which the requesting party may from
time to time be involved relating to the conduct of the Business prior to the
Closing Date. Any party requesting the provision of individuals or witnesses
pursuant to this Section 5.3 shall reimburse the party to which such request is
directed for reasonable out-of-pocket expenses (but not labor charges or salary
payments) incurred by it in connection with such request.
Section 5.4. CONFIDENTIALITY. MK Ohio and MK Rail each shall
hold, and shall cause their respective officers, employees, agents, consultants
and advisors to hold, in strict confidence, unless compelled to disclose by
judicial or administrative process or, in the opinion of legal counsel, by other
requirements of law, all confidential information concerning any other party
hereto furnished and designated as confidential by such other party or its
representatives pursuant to this Agreement (except to the extent that such
information can be shown to have been (i) available to such party on a non-
confidential basis prior to its disclosure by such other party, (ii) in the
public domain through no fault of such party or (iii) later lawfully acquired
from other sources by such party), and no party shall release or disclose such
information to any other person, except its auditors, attorneys, financial
advisors, bankers and other consultants and advisors who shall be advised of the
provisions of this Section 5.4. Each party shall be deemed to have satisfied its
obligation to hold confidential information concerning or supplied by any other
party if it exercises the same care as it takes to preserve confidentiality for
its own similar information.
ARTICLE 6. EMPLOYEE MATTERS; LABOR MATTERS
Following the First Closing Date, MK Ohio and MK Rail shall
prepare, execute and deliver an Employee Transfer and Benefits Agreement which
shall govern all matters relating to the Transfer of Employees and of related
Employee Benefit Plans to MK Rail and the participation, if any, by Employees in
any Employee Benefit Plans.
ARTICLE 7. INSURANCE
MK Ohio shall keep in effect all policies under the Insurance
Program in effect as of the date hereof insuring (i) the operations of the
Business comprised of the Assets until the
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end of the day on the First Closing Date and (ii) the operations of the Business
comprised of the Stock and the Foreign Interests until the end of the day on the
Second Closing Date ("Insurance Termination Date"), unless MK Rail shall have
earlier obtained appropriate coverage and notified MK Ohio in writing to that
effect. MK Rail acknowledges that MK Ohio is terminating all coverage under the
Insurance Program as of the Insurance Termination Date and that it is the
responsibility of MK Rail to obtain insurance policies which will allow MK Rail
to make claims for any occurrence (as defined in the applicable insurance policy
or policies comprising the Insurance Program), whether prior to or after the
First Closing Date, or Second Closing Date, as the case may be. MK Ohio shall,
if so requested by MK Rail, use reasonable efforts to assist MK Rail in
obtaining initial insurance coverage, but shall not be obligated to obtain or
pay for such insurance.
ARTICLE 8. ADDITIONAL COVENANTS OF THE PARTIES
Section 8.1. FURTHER ASSURANCES; SUBSEQUENT TRANSFERS.
Each party hereto shall execute and deliver such further
instruments of Transfer and shall take such other actions, as the other party
may reasonably request in order to effectuate the purposes of this Agreement and
to consummate the transactions contemplated hereby. Without limiting the
generality of the foregoing, at any time and from time to time after the First
Closing Date, at the request of MK Rail and without further consideration, MK
Ohio shall execute and deliver such other instruments of Transfer and take such
action as MK Rail may reasonably deem necessary or desirable in order to more
effectively Transfer to MK Rail, and to confirm MK Rail's title to, all of the
Assets, Stock and Foreign Interests, and MK Rail shall execute and deliver to MK
Ohio all instruments, undertakings or other documents and take such other action
as MK Ohio may reasonably deem necessary or desirable in order to have MK Rail
fully assume the Assumed Liabilities and relieve MK Ohio of any Liabilities with
respect thereto and to evidence the same to third parties. Notwithstanding the
foregoing, no party shall be obligated, in connection with the foregoing, to
expend monies other than reasonable out-of-pocket expenses and attorneys' fees.
Section 8.2. RELATED AGREEMENTS. On or prior to the First
Closing Date, MK Ohio and MK Rail shall execute and deliver the Intellectual
Property Agreement, the Corporate Services Agreement and the Environmental
Liability Transfer Agreement with such amendments and modifications as the
parties may mutually agree.
Section 8.3. SIGNS: USE OF MORRISON KNUDSEN NAME. After the
First Closing Date, MK Rail shall not use or display the name "Morrison
Knudsen" or "MK," or other trademarks, trade names or their identifiers owned by
or licensed to MK Ohio that have not been assigned or licensed to MK Rail
pursuant to the Intellectual Property Agreement ("Non-Permitted Names"), except
pursuant to the Intellectual Property Agreement or except with the prior written
consent of MK Ohio.
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Section 8.4. PLANT CLOSINGS AND LAYOFFS. MK Rail shall have
the responsibility for compliance with the Worker Adjustment and Retraining
Notification Act of 1988 (the "WARN Act") affecting any site of employment or
operating units within any site of employment of the Business. MK Rail agrees
to indemnify MK Ohio against any and all Losses that MK Ohio may incur in
connection with any suit or claim of violation brought against MK Ohio under the
WARN Act that relates, in whole or in part, to actions taken by MK Rail with
regard to any site of employment or operating units within any site of
employment of the Business.
Section 8.5. NON-COMPETITION.
(a) For a period of ten years from the First Closing Date,
MK Ohio shall not, directly or indirectly, and shall cause its Affiliates (other
than MK Rail and persons controlled, directly or indirectly through one or more
intermediaries, by MK Rail) to engage in the conduct of the Business anywhere in
the world; PROVIDED, HOWEVER, notwithstanding anything to the contrary in this
Section 8.5, MK Ohio and its Affiliates shall be expressly permitted, directly
or indirectly, to engage in any of the following:
(i) continue all activities presently conducted by
MK Ohio and its Affiliates which are not included in the Business and to perform
the Excluded Contracts;
(ii) own any equity securities of MK Rail;
(iii) own less than 5% of the outstanding equity
securities of a person which derives more than 10% of its total revenue or gross
profit from the conduct of the Business;
(iv) owning any equity securities of any person that
derives less than 10% of its total revenues or gross profit from the conduct of
the Business;
(v) making any acquisition of any person that is
engaged in the Business, if Morrison Knudsen will hold separate the affected
part of the acquired person and will dispose of such affected part to an
independent third party within a reasonable period of time (not to exceed two
years); and
(vi) perform its obligations under any of the
agreements between MK Ohio and MK Rail, including services performed by MK Ohio
for or on behalf of MK Rail.
(b) In the event that, as a result of the arrangements
described in Section 8.5(a)(iii) or (iv), MK Ohio or its Affiliates acquires or
controls, directly or indirectly, any Competing Business, MK Ohio shall use its
best efforts to dispose or cause its Affiliates to dispose of such Competing
Business to an independent third party within a reasonable period of time (not
to exceed two years) following such acquisition.
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(c) In the event the restrictions against engaging in a
competitive activity contained in this Section 8.5 shall be determined by any
court of competent jurisdiction to be unenforceable by reason of their extending
for too great a period of time or over too great a geographical area or by
reason of their being too extensive in any other respect, such restrictions
shall be interpreted to extend only over the maximum period of time for which
they may be enforceable, and over the maximum geographical area as to which they
may be enforceable, all as determined by such court in such action.
(d) MK Ohio acknowledges that a breach of the restrictions
against engaging in a competitive activity contained in this Section 8.5 will
cause irreparable damage to MK Rail, the precise quantification of which will be
difficult to ascertain, and that the remedies at law for any such breach will be
inadequate. Accordingly, MK Ohio and MK Rail agree that if MK Ohio breaches the
restrictions against engaging in a competitive activity contained in this
Section 8.5, then MK Rail shall be entitled to injunctive relief, without
posting bond or other security.
Section 8.6. TAX AGREEMENT. On or prior to the Second Closing
Date the Parties will enter into a "Tax Agreement" that shall set forth the tax
consequences of the Transfers contemplated by this Agreement and the allocation
of responsibilities for Liabilities for taxes relating to, arising out of or,
resulting from the Business.
ARTICLE 9. CONDITIONS TO MK OHIO'S OBLIGATIONS
INTENTIONALLY DELETED
ARTICLE 10. CONDITIONS TO MK RAIL'S OBLIGATIONS
INTENTIONALLY DELETED
ARTICLE II. SURVIVAL, INDEMNIFICATION, CLAIMS AND OTHER MATTERS
Section 11.1. SURVIVAL OF AGREEMENTS.
(a) All covenants and agreements of the parties contained
in this Agreement other than this Article 11 relating to the portion of the
Business comprised of the Assets shall expire on the First Closing Date and all
other covenants and agreements of the parties contained in this Agreement other
than this Article 11 relating to the Subsidiaries and the Foreign Interests
shall expire upon the occurrence of the Second Closing. After each such
Closing, the sole and exclusive remedy of either party hereunder shall be the
indemnities
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contained in Section 11.2 hereof, and the parties hereby waive all other
remedies, legal or equitable.
(b) The obligations of the parties under this Article 11
shall survive the sale or other transfer by either of them of any securities,
assets or businesses or the subsequent assignment by either of them of any
Assumed Liabilities. To the extent that MK Rail transfers to another person,
other than a subsidiary of MK Rail, any of the Assumed Liabilities (except for
such amounts of Assumed Liabilities which are not material individually or in
the aggregate), MK Rail shall (i) cause the transferee of such Assumed
Liabilities to assume specifically MK Rail's obligations with respect thereto
under this Agreement and (ii) indemnify MK Ohio against any Losses arising from
the failure of the transferee to fulfill such obligations.
Section 11.2. INDEMNIFICATION.
(a) MK Rail agrees to indemnify, defend and hold harmless
MK Ohio, Affiliates of MK Ohio and the directors, officers, employees and agents
of MK Ohio and Affiliates of MK Ohio from and against any and all Losses
relating to, arising out of or resulting from (i) any of the Assumed Liabilities
or (ii) the breach of any representation, warranty, covenant or agreement of MK
Rail contained in this Agreement or any Related Agreement.
(b) MK Ohio agrees to indemnify, defend and hold harmless
MK Rail and its respective directors, officers, employees and agents from and
against any and all Losses relating to, arising out of or resulting from the
Excluded Contracts.
(c) Any Loss for which any party hereto (an "Indemnifying
Party") is required under this Agreement, to indemnify any other party hereto
(an "Indemnitee") is sometimes hereinafter referred to as an "Indemnifiable
Loss," and any amount required to be paid by an Indemnifying Party to an
Indemnitee pursuant to any such section is sometimes hereinafter referred to as
an "Indemnity Payment." The amount of any Indemnity Payment shall be reduced
(including, without limitation, retroactively) by any insurance proceeds or
other amounts actually recovered by such Indemnitee in reduction of the related
Indemnifiable Loss. If an Indemnitee shall have received an Indemnity Payment
in respect of an Indemnifiable Loss and shall subsequently actually receive
insurance proceeds or other amounts in respect of such Indemnifiable Loss, then
such Indemnitee shall pay to such Indemnifying Party a sum equal to the lesser
of the amount of such insurance proceeds or other amounts actually received or
the net amount of Indemnity Payments actually received previously. The
Indemnitee agrees that the Indemnifying Party shall be subrogated to the rights
of such Indemnitee under any insurance policy.
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Section 11.3. PROCEDURE FOR INDEMNIFICATION.
(a) If any party shall receive notice of any claim or
Action brought, asserted, commenced or pursued by any person not a party to this
Agreement with respect to which any other party is or may be obligated to
indemnify such party (a "Third Party Claim"), the Indemnitee shall give the
Indemnifying Party prompt notice thereof (including any pleadings relating
thereto) after becoming aware of such Third Party Claim, specifying in
reasonable detail the nature of such Third Party Claim and the amount or
estimated amount thereof to the extent then feasible (which estimate shall not
be conclusive of the final amount of such claim); PROVIDED, HOWEVER, that the
failure of a Party to give notice as provided in this Section 11.3 shall not
relieve the Indemnifying Party of its indemnification obligations hereunder,
except to the extent that the Indemnifying Party is actually prejudiced by such
failure to give notice.
(b) In addition to the notification requirements of
subparagraph (a) of this Section 11.3, MK Rail shall notify MK Ohio, in the
manner specified in such subparagraph (a), of (i) any material Third Party Claim
outside the ordinary course of business which relates in any way to the Business
prior to the First Closing Date, (ii) any Third Party Claim in respect of which
there is a reasonable likelihood that based on the outcome of such Third Party
Claim the reputation of MK Ohio could be adversely affected in any material
respect or the ability of MK Ohio to conduct its business could be impaired in
any material respect as a result of any injunctive relief sought and (iii) any
Third Party Claim in respect of which MK Ohio could be liable for the payment of
monetary damages not subject to indemnification by MK Rail hereunder.
(c) The Indemnifying Party may elect to compromise or
defend, at its own expense and by its own counsel, any Third Party Claim. If
the Indemnifying Party elects to compromise or defend such Third Party Claim, it
shall within 30 days (or sooner, if the nature of the Third Party Claim so
requires) notify the Indemnitee of its intent to do so, and the Indemnitee shall
cooperate, at the expense of the Indemnifying Party, in the compromise of, or
defense against, such Third Party Claim. If the Indemnifying Party elects not
to compromise or defend the Third Party Claim, fails to notify the Indemnitee of
its election as herein provided or contests its obligation to indemnify under
this Agreement, the Indemnitee may pay, compromise or defend such Third Party
Claim. Notwithstanding the foregoing, neither the Indemnifying Party nor the
Indemnitee may settle or compromise any claim over the objection of the other;
PROVIDED, HOWEVER, that consent to settlement or compromise shall not be
unreasonably withheld. In any event, the Indemnitee and the Indemnifying Party
may participate, at their own expense, in the defense of such Third Party Claim.
(d) Notwithstanding anything to the contrary in Section
11.3(c), unless MK Rail and MK Ohio otherwise agree in writing, MK Ohio shall
have the exclusive right at its option to defend any Third Party Claim described
in clauses (ii) or (iii) of Section 11.3(b), subject to the duty of MK Ohio to
consult with the Indemnitee and its attorneys in connection with such defense
and provided that no such matter shall be compromised or settled by MK Ohio
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without the prior consent of the Indemnitee, which consent shall not be
unreasonably withheld. The parties agree to cooperate fully with one another in
the defense, compromise or settlement of any such Third Party Claim.
(e) Regardless of the party that defends a Third Party
Claim, each other party shall make available all employees, Books and Records,
communications, documents, items or matters within its knowledge, possession or
control that are necessary or appropriate or reasonably deemed relevant with
respect to such defense; PROVIDED, HOWEVER, that nothing in this subparagraph
(e) shall be deemed to require the waiver of any privilege relating to the
attorney-client relationship.
(f) With respect to any Third Party Claim, no party shall
enter into any compromise or settlement or consent to the entry of any judgment
that does not include, as an unconditional term thereof, the giving by the third
party of a release from all further liability concerning such Third Party Claim.
(g) The provisions of this Section 11.3 shall survive in
perpetuity.
Section 11.4. OTHER CLAIMS. Any claim on account of an
Indemnifiable Loss which does not result from a Third Party Claim shall be
asserted by written notice from the Indemnitee to the Indemnifying Party, which
notice shall be given by registered mail, return receipt requested, to each of
the chief executive officer, the chief financial officer and the general counsel
of the Indemnifying Party. Such Indemnifying Party shall have a period of 60
days (or such shorter time period as may be required due to applicable law and
as indicated by the Indemnitee in the written notice) within which to respond
thereto. If such Indemnifying Party does not respond within such 60-day (or
lesser) period, such Indemnifying Party shall be deemed to have accepted
responsibility to make payment and shall have no further right to contest the
validity of such claim. If such Indemnifying Party does respond within such 60-
day (or lesser) period and rejects such claim in whole or in part, such
Indemnitee shall be free to pursue resolution as provided in Article 12.
Section 11.5. NO BENEFICIARIES. Except to the extent expressly
provided otherwise in this Article 11 with respect to Affiliates, officers,
directors and employees, the indemnification provided for by this Article 11
shall not inure to the benefit of any third party or parties and shall not
relieve any insurer who would otherwise by obligated to pay any claim of the
responsibility with respect thereto or, solely by virtue of the indemnification
provisions hereof, provide any subrogation rights with respect thereto and each
party agrees to waive such rights against the other to the fullest extent
permitted.
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<PAGE>
ARTICLE 12. DISPUTE RESOLUTION
Section 12.1. MEDIATION AND BINDING ARBITRATION. If a dispute
arises between the parties hereto as to the interpretation of, or otherwise
relating to, this Agreement, any Related Agreement or any other agreement
entered into pursuant hereto, including, without limitation, any matter
involving an Indemnifiable Loss, the parties agree to use the following
procedures, as the sole remedy and in lieu of any other available remedies, to
resolve such dispute.
Section 12.2. INITIATION. A party seeking to initiate the
procedures set forth in this Article 12 shall give written notice to the other
party to the dispute, describing briefly the nature of such dispute. A meeting
shall be held between the parties within 10 days of the receipt of such notice,
attended by individuals with decision-making authority regarding the dispute, to
attempt in good faith to negotiate a resolution of the dispute.
Section 12.3. SUBMISSION TO MEDIATION. If, within 30 days after
such meeting, the parties have not succeeded in negotiating a resolution of the
dispute, they shall submit the dispute to mediation in accordance with the
Center for Public Resources Model ADR Procedure-Mediation of Business Disputes,
as modified herein, and shall bear equally the costs of mediation.
Section 12.4. SELECTION OF MEDIATOR. The parties shall jointly
appoint a mutually acceptable mediator, seeking assistance in such regard from
the Center for Public Resources or another mutually agreed-upon organization, if
they have been unable to agree upon such appointment within 20 days after the
conclusion of the negotiation period.
Section 12.5. MEDIATION AND ARBITRATION. The parties shall
participate in good faith in the mediation and negotiation related thereto for a
period of 30 days following the initial mediation session. If the parties are
not successful in resolving the dispute through the mediation by the end of such
30-day period, then the parties shall submit the matter to binding arbitration
in accordance with the Center for Public Resources Rules for Non-Administered
Arbitration of Business Disputes, as modified herein, by a sole arbitrator, in
Boise, Idaho, selected in accordance with the provisions of Section 12.6 hereof.
The arbitration shall be governed by the United States Arbitration Act, 9 U.S.C.
Section 1-16, and judgment upon the award rendered by the arbitrator may be
entered by any court having jurisdiction thereof.
Section 12.6. SELECTION OF ARBITRATOR. The parties shall have
10 days from the end of the mediation period to agree upon a mutually acceptable
neutral person not affiliated with the parties to act as arbitrator. If no
arbitrator has been selected within such time, the parties shall jointly request
the Center for Public Resources or another mutually agreed-upon organization to
supply within 10 days a list of potential arbitrators, with qualifications as
specified by the parties in the joint request. Within 5 days of receipt of the
list, the parties shall independently rank the proposed candidates, shall
simultaneously exchange rankings, and shall select as the arbitrator the
individual receiving the highest combined ranking who is available to serve.
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<PAGE>
Section 12.7. COST OF ARBITRATION. The costs of arbitration
shall be apportioned between the parties as determined by the arbitrator in such
manner as the arbitrator deems reasonable, taking into account the circumstances
of the case, the conduct of the parties during the proceeding and the result of
the arbitration.
Section 12.8. CONFIDENTIALITY. Except as otherwise required by
law, the parties shall not disclose to any third party (other than professional
advisers to the parties) the existence, nature or content of any dispute
settlement proceedings pursuant to this Article 12 and shall hold in strict
confidence any and all documents relating thereto.
ARTICLE 13. MISCELLANEOUS
Section 13.1. COMPLETE AGREEMENT. This Agreement, including the
Annexes, Schedules and Exhibits and the agreements and other documents referred
to herein, shall constitute the entire agreement among the parties with respect
to the subject matter hereof and shall supersede all previous negotiations,
commitments and writing with respect to such subject matter.
Section 13.2. EXPENSES. Except as otherwise provided in this
Agreement, any Related Agreement or any other agreement being entered pursuant
to this Agreement, MK Ohio shall pay the costs and expenses incurred in
connection with the transactions contemplated by this Agreement.
Section 13.3. GOVERNING LAW. This Agreement shall be governed
by and construed and enforced in accordance with the laws of the State of
Delaware (regardless of the laws that might otherwise govern under applicable
principles of conflicts law) as to all matters, including, without limitation,
matters of validity, construction, effect, performance and remedies.
Section 13.4. NOTICES. Except as otherwise specifically
provided herein, all notices, requests, demands and other communications under
this Agreement shall be in writing and shall be deemed to have been duly given
(i) on the date of service if served personally on the party to whom notice is
given, (ii) on the date of transmission if sent via facsimile transmission to
the facsimile number set forth below, provided telephonic confirmation of
receipt is obtained promptly after completion of transmission, (iii) on the
business day after delivery to an overnight courier service, provided receipt of
delivery has been confirmed or (iv) on the fifth day after mailing, provided
receipt of delivery is confirmed, if mailed to the party to whom notice is to be
given, by first class mail, registered or certified, postage prepaid, properly
addressed and return-receipt requested, to the party as follows:
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<PAGE>
If to MK Ohio: Morrison Knudsen Corporation
720 Park Boulevard
Boise, Idaho 83729
Attn: Executive Vice President for
Financial Administration
If to MK Rail: Rail Corporation
720 Park Boulevard
Boise,Idaho 83729
Attn: Vice President for Finance
and Administration
Any party may change its address or telephone or facsimile number by giving the
other party written notice of its new address or telephone or facsimile number
in the manner set forth above.
Section 13.5. AMENDMENT AND MODIFICATION. This Agreement may be
amended, modified or supplemented only by written agreement of the parties. In
addition, on and after the Registration Statement Effective Date, any amendment
to this Agreement must, in the case of MK Rail, be approved by a committee of
the Board of Directors of MK Rail comprised solely of directors who are not
officers or employees of MK Rail or any of its Affiliates (including MK Ohio).
Section 13.6. SUCCESSORS AND ASSIGNS. This Agreement and all of
the provisions hereof shall be binding upon and inure to the benefit of the
parties and their respective successors and permitted assigns; PROVIDED,
HOWEVER, neither this Agreement nor any of the rights, interests or obligations
hereunder shall be assigned by any party without the prior written consent of
the other parties hereto.
Section 13.7. NO THIRD PARTY BENEFICIARIES. Except as set forth
in Article 9, this Agreement is solely for the benefit of the parties hereto and
is not intended to confer upon any other person any rights or remedies
hereunder.
Section 13.8. COUNTERPARTS. This Agreement may be executed in
two or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
Section 13.9. INTERPRETATION. The Article and Section headings
contained in this Agreement are solely for the purpose of reference, are not
part of the agreement of the parties and shall not in any way affect the meaning
or interpretation of this Agreement.
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<PAGE>
Notwithstanding any other provisions of this Agreement to the contrary, in the
event and to the extent that there shall be a conflict between the provisions of
this Agreement and the provisions of any other agreement entered into by the
parties hereto pursuant to this Agreement (including, without limitation the
Related Agreements), the provisions of such other agreement shall control.
Section 13.10. ANNEXES, SCHEDULES AND EXHIBITS. The Annexes,
Schedules and Exhibits hereto shall be construed with and as an integral part of
this Agreement to the same extent as if the same had been set forth verbatim
herein.
Section 13.11. LEGAL ENFORCEABILITY. Any provision of this
Agreement which is prohibited or unenforceable in any jurisdiction shall, as to
such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof. Any such
prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed and delivered as of the day and year first above
written.
MORRISON KNUDSEN CORPORATION
By:____________________________________
Name: Stephen G. Hanks
Title: Executive Vice President
MK RAIL CORPORATION
By_____________________________________
Name: John P. Herbots
Title: Senior Vice President
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<PAGE>
ANNEX I-A
REAL PROPERTY
ASSETS: The following assets and property as of the Closing Date:
I-A Real Property. The real properties owned by MK Ohio and
primarily used in the Business and referred to in the Transfer Agreement,
including buildings, structures and improvements (including construction in
progress) located thereon, fixtures contained therein and appurtenances thereto
more particularly described on the attached continuation pages I-A(i) through I-
A(iv).
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<PAGE>
ANNEX I-A(i)
All of Lot 3 and the following described part of Lot 2 in
Block 4 of GOWEN INDUSTRIAL PARK NO. 1, according to the
Plat thereof, filed in Book 30 of Plats at Pages 1882 and
1883 and amended by Affidavits Recorded under Nos. 862391,
862392,862393 and 7632408, and as shown on Record of Survey
No. 1507, Recorded NOVEMBER 01, 1989 as Instrument No.
8954358, Official Records. Located in Section 36, Township 3
North, Range 2 East, Boise Meridian, Ada County, Idaho;
BEGINNING at the Southwest corner of Lot 3 in Block 4 of
GOWEN INDUSTRIAL PARK NO. 1, as the same is recorded in the
records of Ada County, Idaho, said corner being to North
Right-of-way line of Braniff Street and Lot 2 of the
aforementioned Subdivision, thence
North 89 degrees 13'06" West 296.29, thence
North 10 degrees 31'23" West 438.17 feet, thence
North 70 degrees 34'11" East 163.00 feet, thence
South 00 degrees 21'29" West 62.57 feet, thence
South 89 degrees 03'00" East 230.00 feet, thence
South 00 degrees 56'58" West 422.75 feet to the POINT
OF BEGINNING.
<PAGE>
ANNEX I-A(ii)
PARCEL I
A tract of land in the North one-half, Northwest Quarter of Section 36, Township
3 North, Range 2 East, Boise Meridian, Ada County, Idaho, being more
particularly described as follows:
BEGINNING at a brass cap at the Northwest corner of said Section 36 and running
thence
South 0 degrees 17'10" East 175.0 feet along the centerline
of Apple Street; thence
South 89 degrees 05'30" East 25.00 feet to a steel pin being
the REAL POINT OF BEGINNING; thence
South 0 degrees 17'10" East along the East line of Apple
Street 100.00 feet; thence
South 89 degrees 05'30" East 400.00 feet; thence
South 0 degrees 17'10" East 1065 feet more or less to the one-sixteenth
line; thence
South 89 degrees 18'00" East along the one-sixteenth line 250.00 feet; thence
North 0 degrees 17'10" West 130.00 feet; thence
South 89 degrees 18'00" East 170.00 feet; thence
South 0 degrees 17'10" East 130.00 feet; thence
South 89 degrees 18'00" East along the one-sixteenth line 1600.75 feet to a
steel pin on the right-of-way line of the Union Pacific
Railroad; thence Northwesterly along said railroad right-of-
way line to a point which bears
South 89 degrees 05'30" East 530.98 feet from the REAL POINT OF BEGINNING;
thence
North 89 degrees 05'30" West 530.98 feet to the REAL POINT OF BEGINNING.
PARCEL II
A tract of land in the North one-half Northwest Quarter of Section 36, Township
3 North, Range 2 East, Boise Meridian, Ada County, Idaho, being more
particularly described as follows:
BEGINNING at a brass cap at the Northwest corner of said Section 36 and running
thence
South 0 degrees 17'10" East 175.0 feet along the centerline of Apple Street;
thence
South 89 degrees 05'30" East 25.00 feet to a steel pin; thence
South 0 degrees 17'10" East along the East line of Apple Street 100.00 feet;
thence
South 89 degrees 05'30" East 400.00 feet; thence
South 0 degrees 17'10" East 1065 feet more or less to the
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<PAGE>
Continuation - ANNEX I-A(ii)
one-sixteenth line; thence
South 89 degrees 18'00" East along the one-sixteenth line 250.00 feet to the
REAL POINT OF BEGINNING; thence
North 0 degrees 17'10" West 130.00 feet; thence
South 89 degrees 18'00" East 170.00 feet; thence
South 0 degrees 17'10" East 130.00 feet; thence
North 89 degrees 18'00" West 170.00 feet to the REAL POINT OF BEGINNING.
and also
PARCEL III
Northwest Quarter Northwest Quarter Section 36, Township 3 North, Range 2 East,
Boise Meridian, Ada County, Idaho, EXCEPT the North 175 feet, and EXCEPT a strip
100 feet in width acquired by the Oregon Short Line Railroad Company, and EXCEPT
part North of Railroad deeded to Boise Iron Works described as follows:
That portion of the Northwest Quarter of the Northwest Quarter of Section 36,
Township 3 North, Range 2 East, Boise Meridian, Ada County, Idaho, described as
follows:
BEGINNING at the Northwest corner of said Section 36, thence
North 89 degrees 43' East along North Section line 1320 feet to the one-
sixteenth corner of said Section 36; thence
South 0 degrees 17' East along North and South centerline of Northwest
Quarter of said Section 36, a distance of 175 feet to the
true place of beginning; thence
South 89 degrees 43' West parallel with and 175 feet distant South from North
section line of Section 36, a distance of 443 feet to the
North boundary of the Union Pacific Railroad right-of-way,
thence
Southeasterly along said right-of-way boundary 465 feet, more or less, to the
North and South centerline of the Northwest Quarter of said
Section 36; thence
North 0 degrees 17' West at right angles to said North line of Section 36, a
distance of 141 feet to the place of beginning.
AND FURTHER EXCEPTING THE FOLLOWING PARCELS:
A tract of land in the North one-half, Northwest Quarter of Section 36, Township
3 North, Range 2 East, Boise Meridian, Ada County, Idaho, being more
particularly described as follows:
BEGINNING at a brass cap at the Northwest corner of said Section 36 and running
thence
South 0 degrees 17'10" East 175.0 feet along the centerline of Apple Street;
thence
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<PAGE>
Continuation - ANNEX I-A(ii)
South 89 degrees 05'30" East 25.00 feet to a steel pin being the REAL POINT
OF BEGINNING; thence
South 0 degrees 17'10" East along the East line of Apple Street 100.00 feet;
thence
South 89 degrees 05'30" East 400.00 feet; thence
South 0 degrees 17'10" East 1065 feet more or less to the one-sixteenth
line; thence
South 89 degrees 18'00" East along the one-sixteenth line 250.00 feet; thence
North 0 degrees 17'10" West 130.00 feet; thence
South 89 degrees 18'00" East 170.00 feet; thence
South 0 degrees 17'10" East 130.00 feet; thence
South 89 degrees 18'00" East along the one-sixteenth line 1600.75 feet to a
steel pin on the right-of-way line of the Union Pacific
Railroad; thence Northwesterly along said railroad right-of-
way line to a point which bears
South 89 degrees 05'30" East 530.98 feet from the REAL POINT OF BEGINNING;
thence
North 89 degrees 05'30" West 530.98 feet to the REAL POINT OF BEGINNING.
and
A tract of land in the North one-half Northwest Quarter of Section 36, Township
3 North, Range 2 East, Boise Meridian, Ada County, Idaho, being more
particularly described as follows:
BEGINNING at a brass cap at the Northwest corner of said Section 36 and running
thence
South 0 degrees 17'10" East 175.0 feet along the centerline of Apple Street;
thence
South 89 degrees 05'30" East 25.00 feet to a steel pin; thence
South 0 degrees 17'10" East along the East line of Apple Street 100.00 feet;
thence
South 89 degrees 05'30" East 400.00 feet; thence
South 0 degrees 17'10" East 1065 feet more or less to the one-sixteenth
line; thence
South 89 degrees 18'00" East along the one-sixteenth line 250.00 feet to the
REAL POINT OF BEGINNING; thence
North 0 degrees 17'10" West 130.00 feet; thence
South 89 degrees 18'00" East 170.00 feet; thence
South 0 degrees 17'10" East 130.00 feet; thence
North 89 degrees 18'00" West 170.00 feet to the REAL POINT OF BEGINNING.
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<PAGE>
ANNEX I-A(iii)
PARCEL I
All that piece or parcel of land with the buildings and improvements thereon
situate, lying and being in the Town of Colonie, County of Albany and State of
New York, more particularly bounded and described as follows:
Beginning at a point on the northwesterly line of wolf Road, at the
northeasterly corner of lands now or formerly of 1260 Broadway Albany Corp.
(Liber 2305 cp 397) ; running thence N 73 deg. 00' 00" W along said lands now or
formerly of 1260 Broadway Albany Corp., 744.19 feet to a point; running thence N
17 deg. 00' 00" E along lands now or formerly of HMD Properties, Inc. and
Debaron Associates, 308.61 feet to a point on the southerly line of Northway
Lane; running thence S 73 deg. 00' 00" E along the same, 144.00 feet to a point;
running thence along lands now or formerly of HMD Properties, Inc. and Debaron
Associates (Liber 2376 cp 117): (1) S 17 deg. 00' 00" W, 183.61 feet to a point;
thence (2) S 73 deg. 00' 00" E, 624.56 feet to a point on the northwesterly line
of Wolf Road; running thence S 28 deg. 02' 00" W along the same, 127.35 feet to
the point or place of beginning.
PARCEL II
All that piece or parcel of land with the buildings and improvements thereon
situate, lying and being in the Town of Colonie, County of Albany and State of
New York, more particularly bounded and described as follows:
Beginning at a point on the southerly line of Northway Lane, at the
northwesterly corner of lands now or formerly of Debaron Associates (Liber 2396
cp 419) ; running thence S 17 deg. 00' 00" W along said lands now or formerly of
Debaron Associates, 308.61 feet to a point; running thence N 73 deg. 00' 00" W
along lands now or formerly of Engle (Liber 2022 cp 601), 400.51 feet to a
point; running thence N 17 deg. 00' 00" E along lands now or formerly of Central
Transport, Inc. (Liber 2356 cp 623), 308.61 feet to a point on the southerly
line of Northway Lane; running thence S 73 deg. 00' 00" E along the same, 400.51
feet to the point or place of beginning.
1
<PAGE>
ANNEX I-A(iv)
ALL that certain piece or parcel or tract of land situate in the
Township of Wright, County of Luzerne and Commonwealth of Pennsylvania, bounded
and described in accordance with a field survey thereof conducted August 17, 18,
1989, by Thomas E. Dilley, R.P.L.S., as follows:
BEGINNING at a point in the northerly right-of-way line of lands now
or formerly of the Consolidated Rail Corporation and in the southwesterly side
line of lands now or formerly of the Luzerne County Industrial Development
Authority, said beginning point being also 40.00 feet measured northwesterly
from and at right angles to the monumented center line of said Consolidated Rail
Corporation lands and opposite to said railroad station no. 4259 - 06.39 which
is also 133.39 feet northeasterly from railroad Mile Post 153.
THENCE from said beginning point and along the aforesaid southwesterly
side line of lands of the Luzerne County Industrial Development Authority, North
48 DEG. - 45' West, 186.95 feet to an angle point in said line.
THENCE along the southerly line of said lands, and lands of the Glen
Summit Springs Water Company, Inc., the same being for part of its length in the
center line of the 50.00 foot wide County Road known as Crestwood Drive, South
88 DEG. - 06' West, 1881.32 feet to a point.
THENCE passing out of said County Road and along the easterly side
line of other lands of the Luzerne County Industrial Development Authority,
South 1 DEG. - 54' East, 1006.00 feet to a point.
THENCE along the southerly line of said lands, South 88 DEG. -06'
West, 665.44 feet to a point.
THENCE along the westerly line of said lands, and lands of the
American Tobacco Company, South 1 DEG. - 54' East, 1952.55 feet to a point in
the northerly line of a 50.00 foot wide railroad siding easement.
THENCE along said easement, North 88 DEG. - 06' East, 1266.74 feet
to a point in the aforesaid westerly right-of-way line of lands now or formerly
of Consolidated Rail Corporation.
THENCE along said right-of-way line by the thirteen following
described lines:
<PAGE>
CONTINUATION - ANNEX I-A(iv)
(1) by a curve to the left in a northerly direction for an arc
distance of 140.01 feet to a point of jog, said curve having a radius
of 3739.83 feet and a chord with a course of North 10 DEG.- 06' East
for a distance of 140.00 feet;
(2) South 80 DEG.-58'-30" East, 38.25 feet to a point;
(3) North 08 DEG.-22' East, 691.95 feet to a point;
(4) North 12 DEG.-22-30" East, 100.24 feet to a point;
(5) North 08 DEG.-43' East, 327.11 feet to a point;
(6) North 10 DEG.-53'-30" East, 176.60 feet to a point;
(7) North 16 DEG.-16' East, 204.56 feet-to a point;
(8) North 21 DEG.-18' East, 97.95 feet to a point;
(9) North 22 DEG.-33' East, 98.27 feet to a point;
(10 North 32 DEG.-33' East, 92.30 feet to a point;
(11 North 36 DEG.-22' East, 96.66 feet to a point;
(12) North 40 DEG.-46' East, 165.74 feet to a point; and
(13) North 41 DEG.-15' East, 1082.59 feet to a point, the place of
beginning
CONTAINING 105.736 acres of land be the same more or less.
<PAGE>
ANNEX I-B
---------
MACHINERY, EQUIPMENT AND PERSONAL PROPERTY
I-B Machinery, Equipment and Personal Property. All machinery, equipment
and other items of tangible personal property (including inventory, raw
materials and work in progress) owned by MK Ohio and utilized primarily in the
Business.
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<PAGE>
ANNEX I-C
---------
LEASES
I-C Leases. All of MK Ohio's right and interest in, to and under all
Real Property leases primarily relating to the Business, including but not
limited to the following leases:
1. Lease dated 12/01/93 between Pacific Associates, a partnership dba Vista
Station (Lessor) and Morrison Knudsen Corporation (Lessee). Premises: 1916
sq. ft. office space within Vista Station, Boise, Idaho.
2. Lease Agreement dated 09/02/92 between Skyline Development Corporation, an
Idaho corporation (Lessor) and Morrison Knudsen Corporation (Lessee).
Environmental Monitoring Use Permit to investigate, survey, test subsurface
conditions on property situate in Ada County, Idaho. Subject to Amendment
No. 1 dated 09/25/92.
3. Lease Agreement dated 08/11/92 between Bill and Colleen Mullins, husband
and wife (Lessor) and Morrison Knudsen Corporation (Lessee). Environmental
Use Permit to investigate, monitor, survey, well-drill and test subsurface
conditions on property situate in Ada County, Idaho.
4. Lease Agreement dated 06/26/92 between Officenter/Oak Brook, Inc., an
Illinois corporation (Lessor) and Morrison Knudsen Corporation (Lessee).
Subject to First Amendment to Office Lease Agreement dated 06/26/92.
Premises: Office space no. 39 located at 17W755 Butterfield Rd., Oakbrook
Terrace, Illinois.
5 . Lease dated 11/26/92 between Daniel Michael d/b/a Horizon Group (Lessor)
and Morrison-Knudsen Co., Inc. (Lessee). Premises: 3000 sq. ft.
office/storage located at 4656 W. Oakton, Skokie, Illinois.
- 25 -
<PAGE>
ANNEX I-D
---------
CONTRACTS
I-D Contracts. All of MK Ohio's right and interest in, to and under all
contracts primarily relating to the Business, including but not limited to the
contracts described on the attached continuation page of this Annex I-D,
PROVIDED, HOWEVER, that there shall be excluded from the foregoing any Excluded
Contract.
- 26 -
<PAGE>
DEED OF ASSIGNMENT OF PATENTS
AND PATENT APPLICATIONS
-----------------------
WHEREAS MORRISON KNUDSEN CORPORATION, a corporation organized and existing
under and by virtue of the laws of the State of Ohio, having a principal
business address of P.O. Box 73, Boise, Idaho 83729 (ASSIGNOR) is the owner of
record of the inventions set forth in the following patents and patent
applications:
(1) Patent No. 4,009,664, issued, March 1, 1977 for "CLOSURE ACTUATING
DEVICE FOR RAILWAY HOPPER CAR DOORS" (Named Inventor: Fearon, Joseph G.),
(2) Patent No. 4,230,045, issued October 28, 1980 for "METHOD AND
SYSTEM FOR INCREASING THE TRACK-TO-WHEEL FRICTION OF THE WHEELS OF A LOCOMOTIVE
FOR MOTIVE POWER AND DECREASING THE ROLLING RESISTANCE FOR TRAILING LOADS"
(Named Inventor: Fearon, Joseph G.),
(3) Patent No. 4,295,427, issued October 20, 1981 for "CAR REPAIR
APPARATUS" (Named Inventors: McCleery, Jerry E.; McKie, Robert T; Waterman, Fred
W.),
(4) Patent No. 4,325,308, issued April 20, 1982 for "CONTROLLED-
DISCHARGE DOOR FOR PARTICULATE MATERIALS AND LIQUIDS" (Named Inventor: Erfurth,
Frank R.),
(5) Patent Application Serial No. 08/165,336, filed December 13, 1993
for "FABRICATING AND MACHINING PROCEDURES FOR CRANKCASES FOR LOCOMOTIVE DIESEL
ENGINES" (Named Inventors: Lucier, Gregory T. and Allen, Edward C.), and
(6) Patent Application Serial No. 08/165,414, filed December 13, 1993
for "CYLINDER CONVERSION FABRICATION OF
<PAGE>
CRANKCASES FOR TWO-CYCLE V-TYPE LOCOMOTIVE DIESEL ENGINES" (Named Inventors:
Lucier, Gregory T. and Allen, Edward C.).
AND WHEREAS MK RAIL CORPORATION, a corporation organized and existing under
and by virtue of the laws of the State of Delaware, and having its principal
place of business at 720 Park Blvd., Boise, Idaho 83729 (ASSIGNEE) is desirous
of acquiring the entire right, title and interest in said Inventions and in and
to said Letters Patents and Patent Applications of the United States and of all
foreign countries.
NOW, therefore, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged.
ASSIGNOR does hereby assign to ASSIGNEE all right, title and interest for
the United States, its territories and possessions and all foreign countries, in
and to said inventions and said U.S. Letters Patents and foreign patents which
may be granted thereon, and all corresponding patent applications, divisions,
reissues, continuations and extensions thereof, and authorize and request the
U.S. Commissioner of Patents and Trademarks and all patent granting authorities
to issue all patents on said inventions or resulting therefrom to said MK RAIL
CORPORATION as ASSIGNEE of the entire interest therein;
ASSIGNOR covenants that it has the full right so to make such assignment,
and
ASSIGNOR agrees that it and its employees will communicate to ASSIGNEE or
its representatives any facts known to ASSIGNOR or its
-2-
<PAGE>
employees relating to said inventions, testify in any legal proceeding, sign
all lawful papers, execute all divisional, continuing and reissue applications,
make all rightful oaths, and perform all reasonable acts necessary to assist
ASSIGNEE to obtain and enforce proper protection for said inventions in the
United States and in all foreign countries.
MORRISON KNUDSEN CORPORATION
By ________________________________
Stephen G. Hanks, Esq.
Executive Vice President,
Finance and Administration
Date: February 22, 1994
------------------
-3-
<PAGE>
SERVICE MARK AND TRADEMARK LICENSE AGREEMENT
--------------------------------------------
This AGREEMENT between:
MORRISON KNUDSEN CORPORATION (referred to herein as "MK CORP"), an
Ohio Corporation, located at P.O. Box 73, Boise, Idaho 83729
and
MK RAIL CORPORATION (referred to herein as "MK RAIL"), a Delaware
Corporation, located at 720 Park Boulevard, Boise, Idaho 83729
has an effective date of February 14, 1994.
PREMISES
- - --------
It is recognized:
(A) that MK CORP is the owner of a family of trademarks, service marks,
and U.S. and foreign trademark and service mark registrations and applications
for registration in which MORRISON KNUDSEN and "MK" are used in various scripts
and/or associated with logo designs;
(B) that MK CORP, with its predecessors in interest, has continuously used
MORRISON KNUDSEN for over seventy five years as a tradename in connection with
providing goods and services to various industries including civil engineering
and construction, industrial plant engineering and construction, mining
exploration, and facility construction, equipment manufacture and repair in the
transportation industry including rail locomotive manufacture and repair;
(C) that MK CORP, with its predecessors in interest, has continuously used
MORRISON KNUDSEN and "MK" in plain lettering or
<PAGE>
in logo form for over seventy five years as a trademark and as a service mark in
connection with goods and services of the various industries of paragraph (B)
above;
(D) that MK CORP is the owner of U.S. applications to register:
MORRISON KNUDSEN
(1) as a trademark for "railway locomotives and parts therefor"
(International Class 12 -- U.S. Serial No. ____________, filed in the
United States Patent and Trademark Office on February 14, 1994),
(2) as a service mark for "manufacture of locomotives and parts
therefor", (International Class 40 -- U.S. Serial No. ____________,
filed in the United States Patent and Trademark Office on February
14, 1994); and
(2) as a service mark for "remanufacture and repair of locomotives
and parts therefor" (International Class 37 -- U.S. Serial No.
____________, filed in the United States Patent and Trademark
Office on February 14, 1994);
(E) that MK CORP is the owner of U.S. applications to register the
following mark, referred to as the "MK logo":
2
<PAGE>
(1) as a trademark for "railway locomotives and parts therefor"
(International Class 12 -- U.S. Serial No. ____________, filed in the
United States Patent and Trademark Office on February 14, 1994),
(2) as a service mark for "manufacture of locomotives and parts therefor",
(International Class 40 -- U.S. Serial No. ____________, filed in the
United States Patent and Trademark Office on February 14, 1994); and
(3) as a service mark for "remanufacture and repair of locomotives
and parts therefor" (International Class 37 -- U.S. Serial No. __________,
filed in the United States Patent and Trademark Office on
February 14, 1994);
(F) that MK CORP is the owner of the U.S. Application to register:
MK FASTRAIN
as a trademark for "railway transit cars" (International Class 12 -
- U.S. Serial No. 74/424,781, filed in the United States Patent and
Trademark Office on August 13, 1993);
(G) that MK RAIL is interested in an exclusive royalty-free license from
MK CORP to use MORRISON KNUDSEN, MK, and the "MK logo" as a trademark for
railway locomotives and parts therefor and as a service mark for manufacture,
remanufacture, and repair of locomotives and parts therefor; and
(H) that MK RAIL is interested in a non-exclusive royalty-free license
from MK CORP to use MK FASTRAIN for railway locomotives and
3
<PAGE>
parts therefor.
NOW THEREFORE, in consideration of mutual promises and other consideration
of the Parties, acknowledged as adequate, MK CORP and MK RAIL agree to the above
premises and the following provisions:
1. MK CORP grants to MK RAIL an exclusive, royalty-free right to use
MORRISON KNUDSEN, MK, and the "MK logo" as a trademark for railway locomotives
and parts therefor, and as a service mark for manufacturing, remanufacturing and
repair of locomotives and parts therefor.
2. MK CORP grants to MK RAIL a non-exclusive, royalty-free right to use
MK FASTRAIN in connection with railway locomotives and parts therefor.
3. The trademark rights of paragraphs 1 and 2 above, granted as of the
effective date of this Agreement, shall be for perpetual use, as designated, of
MORRISON KNUDSEN, MK, the "MK logo", and MK FASTRAIN (also referred to herein as
THE LICENSED MARKS); subject, however, to MK RAIL complying with quality control
standards and trademark usage provisions required as a matter of law for
protection of trademark rights.
4. In rendering and promoting the named manufacturing, remanufacturing,
and repair services or distributing and promoting railway locomotives and parts
therefor under THE LICENSED MARKS, MK RAIL shall continue to maintain the
standards of quality previously established and maintained by MK CORP. As a
part thereof, MK RAIL agrees (a) to notify MK CORP of customer complaints which
relate to whether such standards are being met, and (b) that such standards
4
<PAGE>
of quality may be reviewed and/or modified at reasonable intervals as MK CORP
determines to be necessary.
5. MK RAIL agrees to use THE LICENSED MARKS solely in the form(s) set
forth above or as otherwise designated by MK CORP. Any proposed modification by
MK RAIL to any of THE LICENSED MARKS requires prior written approval by MK CORP,
and if approved, such modified mark shall be subject to registration by MK CORP
and licensed to MK RAIL under the terms of this Agreement or as otherwise
mutually agreed by the Parties.
6. MK RAIL agrees to notify MK CORP of usage, or planned usage, of THE
LICENSED MARKS internationally. Any of THE LICENSED MARKS to be used in
countries other than the United States of America shall be subject to
registration by MK CORP with appropriate Trademark Offices of individual
countries or of countries which have been grouped for registration purposes.
Further, where required by law, an application for registration shall identify
MK RAIL as a registered user of THE LICENSED MARKS. Any such international
registration(s) shall be licensed to MK RAIL under the terms of this Agreement
or as otherwise mutually agreed by the Parties.
7. MK RAIL agrees, upon request, to reimburse MK CORP for government fees
and legal costs associated with registration or maintenance of registration of
THE LICENSED MARKS used by MK RAIL.
8. Use of THE LICENSED MARKS by MK RAIL shall be in accordance with
customary trademark usage requirements, and shall include proper notices of
trademark registration rights on the goods and in
5
<PAGE>
connection with the services offered under or associated with THE LICENSED
MARKS. MK CORP shall have the right to monitor use of THE LICENSED MARKS by MK
RAIL in order to verify compliance with customary trademark usage requirements
and provisions of this Agreement.
9. MK RAIL agrees that MK CORP is the rightful owner of THE LICENSED
MARKS and MK RAIL agrees to avoid any action or practice tending to impair the
interests of MK CORP in THE LICENSED MARKS or in any MK CORP mark which
comprises MORRISON KNUDSEN or MK.
10. MK RAIL agrees to assist in maintaining the rights of MK CORP in THE
LICENSED MARKS by providing dates and examples of use and/or by executing any
document which may reasonably be required by MK CORP from time to time for
purposes of obtaining or maintaining registration and/or ownership rights in THE
LICENSED MARKS.
11. If MK RAIL learns of any use by a third-party of a mark similar to any
of THE LICENSED MARKS, MK RAIL shall immediately notify MK CORP which shall have
the right, in its sole discretion, to determine whether either Party should take
action to abate such third-party usage.
12. This Agreement shall not limit the right of MK CORP to continue to use
or to expand use and/or registration of its MORRISON KNUDSEN or MK-related
marks.
13. Use of THE LICENSED MARKS by MK RAIL inures exclusively to the benefit
of MK CORP with such continued ownership rights in MK CORP being unaffected in
the event of:
6
<PAGE>
(a) receivership or bankruptcy procedures being undertaken, or papers
being filed, for purposes of voluntary or involuntary receivership or bankruptcy
of MK RAIL, or
(b) MK RAIL being adjudicated bankrupt or insolvent, or
(c) MK RAIL discontinuing its business.
14. MK CORP shall have the right to immediately terminate this
license, by giving written notice, if MK RAIL uses any of THE LICENSED MARKS in
any manner, or for any purpose, not previously authorized in writing by MK CORP.
15. Upon termination of this Agreement for any reason, MK RAIL shall cease
to use THE LICENSED MARKS and shall return, upon request by MK CORP, all unused
written materials which include THE LICENSED MARKS.
16. Due to (a) the special responsibilities placed on each Party to this
Agreement for purposes of maintaining the goodwill of THE LICENSED MARKS and the
goodwill of the business associated therewith, and (b) the special trademark
usage requirements to avoid loss of trademark rights, license rights granted by
this Agreement shall not be assignable, in whole or in part by MK RAIL, or by
any action at law, without the prior written consent of MK CORP. The rights
granted herein shall immediately terminate in the event of unauthorized
assignment or attempt to assign THE LICENSED MARKS and/or registrations thereof
without prior written authorization by MK CORP.
17. This Agreement shall be governed by and construed in accordance with
federal trademark and unfair competition law, or by
7
<PAGE>
the laws of the State of Idaho where applicable.
18. This Agreement constitutes the entire understanding between the
Parties with respect to its subject matter and supersedes any and all previous
representations, understandings and verbal or written agreements between the
Parties with respect to the subject matter of this Agreement.
MORRISON KNUDSEN CORPORATION MK RAIL CORPORATION
/s/ Stephen G. Hanks /s/ John Herbots
- - ------------------------- ----------------------------
Stephen G. Hanks, Esq. Name: John Herbots
Executive Vice President, Title: Senior Vice President
Finance and Administration
Date: 2-22-94 Date: 2-22-94
-------------------- -----------------------
8
<PAGE>
DEED OF ASSIGNMENT
------------------
WHEREAS Morrison Knudsen Corporation of Boise, Idaho 83729 (ASSIGNOR) is
the owner of the mark:
[LOGO]
WHEREAS MK Rail Corporation of Boise, Idaho 83729 (ASSIGNEE) is desirous of
acquiring the mark shown above, any applications to register the mark as a
trademark or service mark, and the goodwill associated therewith;
NOW, therefore, for good and valuable consideration, receipt of which is
hereby acknowledged, ASSIGNOR does hereby assign to ASSIGNEE all right, title
and interest in the mark shown above, all applications to register the mark as a
trademark or service mark, and the goodwill of the business associated with such
mark and applications to register such mark.
MORRISON KNUDSEN CORPORATION
By /s/ Stephen G. Hanks
------------------------------
Stephen G. Hanks, Esq.
Executive Vice President,
Finance and Administration
Date: February 22, 1994
<PAGE>
ANNEX I-F
STOCK OF SUBSIDIARIES
<TABLE>
<CAPTION>
Total Shares Issued/
Subsidiary/ Authorized Outstanding States Qualified
Jurisdiction Shares/Type Owned by MK Ohio To Do Business
- - ------------ ----------- -------------------- ----------------
<S> <C> <C> <C>
1. MK Engine
Systems
Company, Inc.
(New York) 4,050,000 common 1,409,418 CA, NY
2. Power Parts
Company (Nevada) 50,050 common 50,050 IL, NY
1,000/10% Cum. 1,000
Preferred 49,995
49,995/13% Noncum.
Preferred
3. Motor Coils
Manufacturing Co.
(Pennsylvania) 1,000 common 1,000 AZ, AR, CA,
CO, DE, FL,
GA, ID, IA,
LA, MD, MI,
MN, MO, NE,
NY, PA, SC,
SD, TX, UT,
WV
4. Clark Industries, 25 common 7 IL
Inc. (Illinois)
5. Touchstone, Inc. 1,000 common 1,000 TN
(Tennessee)
</TABLE>
- 28 -
<PAGE>
ANNEX I-G
FOREIGN INTERESTS
1. All rights of MK Ohio under the Joint Venture Agreement dated May 7, 1993,
between MK Ohio, Cometrans, S.A. and IDESA, S.A.
2. All rights of MK Ohio under a Passenger Railway Service Joint Venture
Agreement, dated as of June 1, 1992 among MK Ohio, Benito Roggio e Hijos,
S.A., Cometrans, S.A. and Burlington Northern Railroad Company.
3. All rights of MK Ohio under a Concession Contract, dated as of November 25,
1993 between the Argentine Government-Ministry of Economy and Public Works
and Services and Metrovias, S.A., various other parties and MK Ohio.
4. All rights of MK Ohio under a letter of Understanding Privatization of
Mexico National Railway Maintenance Shops dated September 18, 1993, between
MK Ohio and Grupo Automotrit e Industrial del Norte S.A. de C.V. ("GAIN").
5. The shares of stock of Metrovias, S.A. owned by MK Ohio.
6. The shares of stock of Talleres Sudamericanos, S.A. owned by MK Ohio.
7. The shares of stock of MK Rail Systems of Argentina, S.A. owned by MK Ohio.
8. 96 shares of the capital stock of MK Australia Ltd. (Prior to the Second
Closing Date, subsidiaries of MK Rail became the owners of the remaining 4
shares of MK Australia Ltd.)
- 29 -
<PAGE>
ANNEX I-H
---------
LICENSES AND PERMITS
I-H Licenses and Permits. All permits, licenses, approvals and
authorizations held by MK Ohio which can be transferred without the payment of
money or incurrence of any Liability by MK Ohio or any of its Affiliates and
relate primarily to the Business, including without limitation as set forth
below:
- 30 -
<PAGE>
ANNEX I-I
---------
I-I Miscellaneous:
(a) all assets and properties primarily related to the Business
including, without limitation, accounts receivable and prepaid expenses;
(b) all of the Books and Records;
(c) all inventories of raw materials, work-in-process, finished
products, supplies and spare parts which on February 1, 1994 are owned by MK
Ohio and relate primarily to the Business, and any property under bailment
relating primarily to the Business;
(d) all petty cash funds in the possession of the Business and all
prepayments and deposits;
(e) all supplies, purchase orders, forms, labels, shipping material,
catalogues, sales brochures, operating manuals, instructional documents and
advertising material held for use primarily in the Business; and
(f) all trucks, automobiles and other vehicles which are owned by MK
Ohio and used primarily in the Business.
Provided, however, that there shall be excluded from the foregoing any
such described item that shall relate to an Excluded Contract.
- 31 -
<PAGE>
ANNEX II
--------
ASSUMED LIABILITIES
All Liabilities of MK Ohio and its Affiliates (including their
predecessors) relating to, arising out of or resulting from the conduct of the
Business or the use, ownership or operation of the Assets, the Assumed
Contracts, the Leases, the Real Property, the Subsidiaries and the Foreign
Interests, whether arising or accruing before or after February 1, 1994,
including but not limited to:
(a) all Liabilities which are set forth, reflected, disclosed or reserved
for on the balance sheet of the Business (or that is not so reflected (as a
result of the nature of such liability or otherwise) could be reflected in
accordance with applicable accounting standards at any time prior to or after
the date of such balance sheet.
(b) all Liabilities and obligations of MK Ohio relating to, arising out of
or resulting from the Assumed Contracts and the Leases of MK Ohio relating to,
arising out of or resulting from the conduct of the Business;
(c) all warranty, performance and similar obligations whether arising
under contract, implied by law or otherwise, entered into or made in the
ordinary course of the Business with respect to its products or services
including, without limitation, warranty obligations under the contracts
described on the attached continuation pages of this Annex II;
(d) the Liabilities and obligations being assumed by or agreed to be
performed by MK Rail pursuant to any other agreement being entered into in
connection with the Agreement, including, without limitation, the Related
Agreements;
(e) the Liabilities relating to all Actions relating to, arising out of or
resulting from the operations of the Business, including without limitation the
litigation described on the attached continuation pages of this Annex II.
(f) the Environmental Liabilities as described and set forth in the
Environmental Liability Transfer Agreement.
(g) Liabilities assumed by MK Rail pursuant to the Bank Documents.
Provided, however, that there shall be excluded from the foregoing any
Liabilities of MK Ohio relating to, arising out of or resulting from an Excluded
Contract.
- 32 -
<PAGE>
Continuation page - ANNEX II
Pursuant to Annex II, subparagraph (c), the following list represents
expired MK Ohio contracts containing warranty obligations to be assumed by MK
Rail:
CDOT
- - ----
Six (6) FL-9 Locomotives Remanufacture
Total Contract Value: $8,232,155.00
KCS
- - ---
Fifteen (15) GP40-2 Locomotives Overhaul
Total Contract Value: $3,726,399.00
SOUTHERN PACIFIC
- - -----------------
One hundred thirty-three (133) Locomotives Remanufacture
Total Contract Value: $90,263,110.00
MWAA
- - ----
Nineteen (19) Mobile Lounge Vehicles Rehabilitate
Total Contract Value: $10,720,246.00
NJT
- - ---
Fifteen (15) Locomotive Blended Brake Systems
Total Contract Value: $1,736,707.00
NJT
- - ---
Six (6) GP40PH-2 Locomotives Remanufacture
Total Contract Value: $6,075,000.00
NVTC
- - ----
Two (2) RP40-2C Locomotives Remanufacture
Total Contract Value: $2,350,000.00
- 33 -
<PAGE>
TRI-COUNTY RAIL
- - ---------------
Three (3) F40PHM-2C Locomotives Remanufacture
Total Contract Value: $4,434,000.00
- 34 -
<PAGE>
continuation pages - ANNEX II
LITIGATION SUMMARY
<PAGE>
CONTINUATION -- ANNEX I-D:
- - ---------------------------
MK-RAIL SCHEDULE OF CONTRACTS AND AGREEMENTS
------------------------------------------------------
<TABLE>
<CAPTION>
TYPE DATE PARTY ADDRESS DOC TYPE
AMOUNT REMARKS/ASSIGNMENT PROVISIONS
- - ------------------------------------------------------------------------------------------------------------------------------------
Search strategy: 02-25-94 13:11:29
GET DN: =00001:00088
No. of Records: 71
- - ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
SALE/LEASEBACK 12/29/93 MetLife Capital 10900 N.E 4th St., Suite 500 Master Lease Purchase Lessor consent required
(FINANCING) Corporation Bellevue, Washington 98004 Agreement No. 18627 to assignment; [Paragraph
AGREEMENTS (Lessor) Attn: David Sislowski 26(a)]; 60-month term;
reorganization is "even of
10 SD40-2 Locomotives default" if it has materially
$5,500,000 adverse effect on Lessor's
position [Paragraph
18.A.(ix)]
SALE/LEASEBACK 12/10/93 Pitney Bowes 201 Merritt Seven Master Equipment Lessor's prior written
(FINANCING) Credit Corporation Norwalk, Connecticut 06856 Lease Agreement consent necessary for
AGREEMENTS (Lessor) Attn: Vice President/ No. 7746324 assignment [Paragraph 20];
Operations 180-month term
25 SD40M-2s
$29,819,877
SALE/LEASEBACK 12/21/91 Pitney Bowes 201 Merritt Seven Master Equipment Lessor's prior written
(FINANCING) Credit Corporation Norwalk, Connecticut 06856 Lease Agreement consent necessary for
AGREEMENTS (Lessor) Attn: Vice President/ assignment [Paragraph 20];
Operations 180-month term
11 SD40M
$7,949,680
SALE/LEASEBACK 12/27/91 Caterpillar 3322 West End Avenue, Railroad Lease Lessor's consent necessary
(FINANCING) Financial Services Suite 610 Agreement to assign [Paragraph 18];
AGREEMENTS Corporation Nashville, Tennessee 37203 unauthorized assignment is
(Lessor) Attn: Treasurer event of default [Paragraph
16.1(b)]; 15-year term
20 SD40-2s
$13,200,000
</TABLE>
Page: 1
<PAGE>
<TABLE>
<CAPTION>
TYPE DATE PARTY ADDRESS DOC TYPE
AMOUNT REMARKS/ASSIGNMENT PROVISIONS
- - ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
SALE/LEASEBACK 12/17/93 Caterpillar 3322 West End Avenue, Railroad Lease Lessor's consent necessary
(FINANCING) Financial Services Suite 610 Agreement to assign [Paragraph 18];
AGREEMENTS Corporation Nashville, Tennessee 37203 unauthorized assignment is
(Lessor) Attn: Treasurer event of default [Paragraph
2 MK1200G (LNG) 16.1(b)]; 240-month term
Locomotives
$2,400,000
SALE/LEASEBACK 01/24/92 CIT Group/Equipment 1620 W. Fountainhead Equipment Lease Five year term; Lessor's
(FINANCING) Leasing, Inc. Parksway, #600 New Pacific Model consent to assignment
AGREEMENTS (Lessor) Tempe, Arizona 85282 K400-4 required [Paragraph 20]
$200,221
PUBLIC TRANSIT 10/04/90 Massachusetts Bay Materials Department Formal Contract MBTA consent required for
CONTRACTS Transportation Ten Park Plaza No. 532 assignment [Paragraph 5.12]
(LOCOMOTIVE) Authority (Buyer) Boston, Massachusetts 02116 (Project No. Assignment will not release
Attn: Michael T. Burns, MA-23-9013) original contractor of
Director of Railroad Liability under contract and
Operations bond; contract substantially
Attn: Robert W. Pittman, complete (all deliveries
Asst. General Manager, made); in close-out mode
Purchasing and Administration
12 remanufactured
Diesel Electric
Passenger Locomotives
$19,486,476
</TABLE>
Page: 2
<PAGE>
<TABLE>
<CAPTION>
TYPE DATE PARTY ADDRESS DOC TYPE
AMOUNT REMARKS/ASSIGNMENT PROVISIONS
- - ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PUBLIC TRANSIT 1991 State of Department of Administrative State Project State may recognize
CONTRACTS Connecticut Services No. 170-747 assignment where incident to
(LOCOMOTIVE) Department of 460 Silver Street (Bid No. transfer of assets, based on
Transportation P.O. Box 1411 901-A-13-2165-P) facts/circumstances and
(Buyer) Middleton, Connecticut 06457 Remanufacture of written concurrence of Surety
Attn: Mr. Anthony Fappiano Six (6) [Paragraph 8.01A]
Department of Transportation EMD
Office of Purchasing & Store Model FL-9 Passenger
Bid Unit Locomotives
P.O. Box Drawer A
24 Wolcott Hill Road
Wethersfield, Connecticut 06109
Attn: Mr. Brian J. Robertson
$8,232,155
PUBLIC TRANSIT 09/03/92 NJ Transit One Penn Plaza East Agreement for Need consent of purchaser
CONTRACTS Corporation Newark, New Jersey 07105 Application of for assignment [Paragraph 7];
(LOCOMOTIVE) (Buyer) GP40FH-2 Blended contract is substantially
Dynamic Brake complete; finished in 3-4
Systems (Bid No. months)
92-D-239)
$1,736,707
PUBLIC TRANSIT 08/12/93 North San Diego 311 South Tremont Street Agreement (for supply Need consent of Board for
CONTRACTS County Transit Oceanside, California of 5 diesel electric assignment [Part II]
(LOCOMOTIVE) Development Board passenger Locomotives)
(Buyer) $10,369,262
</TABLE>
Page: 3
<PAGE>
<TABLE>
<CAPTION>
TYPE DATE PARTY ADDRESS DOC TYPE
AMOUNT REMARKS/ASSIGNMENT PROVISIONS
- - ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PUBLIC TRANSIT 09/17/93 State of Maryland Mass Transit Administration Contract MTA Consent of MTA and Surety
CONTRACTS Department of Contract Administration Dept. 3-57-2/Procurement of required for assignment/MDOT
LOCOMOTIVE Transportation/ One Market Center (19) General Provisions for
Mass Transit 300 W. Lexington Street Remanufactured Purchase Contracts
Administration Baltimore, Maryland 21201 GP-40WCH-2 [Paragraph 39]
(Buyer) Attn: Richard A. Wolfe, Locomotives
Manager Procurement &
Operations Contracts
$19,388,018
MISCELLANEOUS 09/03/91 Metropolitan 44 Canal Center Plaza Contract No. No specific assignment
PUBLIC CONTRACTS -Phase I Washington Alexandria, Virginia 1-91-C113, Phase I provisions
04/15/92 Airports Authority 22314-1562 and II, Mobile Lounge
-Phase II (Buyer) Rehabilitation
$10,720,246
MISCELLANEOUS 04/27/93 Ada County Highway License Agreement Grant right-of-way upon Ada
CONTRACTS/ District County, ID, property.
INVOICES
LOCOMOTIVE 10/27/93 Southern Pacific Southern Pacific Building Committment Letter Definitive agreement is still
LEASE/SALE Lines (Buyer) One Market Plaza for sale or lease of being prepared
AGREEMENTS San Francisco, California 133 SD40M-2
94105 Locomotives
$678,000 per
Locomotive
$90,174,000
</TABLE>
Page: 4
<PAGE>
<TABLE>
<CAPTION>
TYPE DATE PARTY ADDRESS DOC TYPE
AMOUNT REMARKS/ASSIGNMENT PROVISIONS
- - ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
LOCOMOTIVE Southern Pacific Southern Pacific Building Locomotive Lease Six-month lease, commencing
LEASE/SALE Transportation One Market Plaza Agreement 01/94; Lessor may assign its
AGREEMENTS Company (Lessee) San Francisco, California interest in the contract
94105 50 SD40M-2 [Paragraph 19] [Document at
locomotives at SP for execution]
$2,250,000
[Subject to two 3-
month extensions)
LOCOMOTIVE Southern Pacific Southern Pacific Building Locomotive Lease Six-month lease commencing
LEASE/SALE Transportation One Market Plaza Agreement 01/94; Lessor may assign its
AGREEMENTS Company (Lessee) San Francisco, California interest in the contract
94105 20 SD40M-2 [Paragraph 19] [Document at
locomotives SP for execution]
$1,035,000
[Subject to two 3-
month extensions]
LOCOMOTIVE 08/10/93 Carland 1055 Broadway, Suite 990 Agreement to provide Contract may not be assigned
LEASE/SALE Incorporated (as Kansas City, Missouri 64105 15 upgraded GP40-2 without consent [Paragraph
AGREEMENTS agent for The Locomotives 12.2]
Kansas City $228,047 per
Southern Railway Locomotive
Company) (Buyer) $3,755,955
LOCOMOTIVE 08/03/93 The Kansas City 4601 Blanchard Road Locomotive Lease Lease may be assigned without
LEASE/SALE Southern Railway Shreveport, Louisiana 71107 Agreement (1-year) approval/consent
AGREEMENTS Company (Lessee) 6 SD40-2 Locomotives
LOCOMOTIVE 08/04/93 Burlington Northern 2800 Continental Plaza Locomotive Lease MKC as lessor may assign
LEASE/SALE Railroad Company 777 Main Street Agreement without consent [Paragraph
AGREEMENTS (Lessee) Fort Worth, Texas 76102 18]
Lease of 25 MPI
SD40M-2 Locomotives
</TABLE>
Page: 5
<PAGE>
<TABLE>
<CAPTION>
TYPE DATE PARTY ADDRESS DOC TYPE
AMOUNT REMARKS/ASSIGNMENT PROVISIONS
- - ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
LOCOMOTIVE 05/01/91 Utah Railway 970 University Club Building Locomotive Lease MKC as lessor may assign
LEASE/SALE Company (Lessee) 136 East South Temple Agreement contract without consent
AGREEMENTS Salt Lake City, Utah 84111 [Paragraph XVII]
Lease for 12 SD40
Locomotives
LOCOMOTIVE 05/01/91 Utah Railway 970 University Club Building Locomotive Contract provides for 5 MKC
LEASE/SALE as Company (Lessee) 136 East South Temple Maintenance Agreement employees to maintain leased
AGREEMENTS amended Salt Lake City, Utah 84111 locomotives; cannot be
02/01/93 assigned without consent
[Paragraph XV]
LOCOMOTIVE 12/28/93 Grand Trunk 700 Pershing Street Locomotive Lease MKC as lessor may assign
LEASE/SALE Western Railroad Pontiac, Michigan 48340 Agreement contract without consent
AGREEMENTS Incorporated Attn: Eugene E. Shepard [Paragraph 18]
(Lessee) Lease of 5 MK SD40M-2
Locomotives
LOCOMOTIVE 08/16/93 Union Pacific 1416 Dodge Street, Room 200 Equipment Lease No assignment provisions in
LEASE/SALE Railroad Company Omaha, Nebraska 68179 contract
AGREEMENTS (Lessee) Attn: Larry Anderson,
Manager Leases
Lease for 2 MK1200G
natural gas fueled
Caterpillar powered
switched Locomotives
LOCOMOTIVE 08/03/93 The Kansas City 4601 Blanchard Road Locomotive Lease Six-month term, with 2-year
LEASE/SALE Southern Railway Shreveport, Louisiana 71107 Agreement extension option; MKC as
AGREEMENTS Company (Lessee) Lease of 6 SD40-2 lessor may assign without
Locomotives consent [Paragraph 18]
</TABLE>
Page: 6
<PAGE>
<TABLE>
<CAPTION>
TYPE DATE PARTY ADDRESS DOC TYPE
AMOUNT REMARKS/ASSIGNMENT PROVISIONS
- - ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
JOINT VENTURE 03/09/93 Caterpillar 100 N.E. Adams Street Professional Joint venture for development
AGREEMENTS Logistics Peoria, Illinois 61629 Services of logistics strategy for
Services, Inc. Agreement distribution in North
America; no assignment
provisions
JOINT VENTURE 03/31/92 Caterpillar, 100 N.E. Adams Street Marketing and Supply Requirements contract for CAT
AGREEMENTS Inc. Peoria, Illinois 61629 Agreement engines to use in MKC
Attn: Richard L. Thompson, locomotives; agreement to
Vice President joint market; need CAT assent
to assignment [Paragraph
13(e)]
JOINT VENTURE 03/31/92 Caterpillar, 100 N.E. Adams Street Joint Development Agreement to develop
AGREEMENTS Inc. Peoria, Illinois 61629 Agreement prototypes of locomotive
models; need CAT consent to
assignment [Paragraph 9]
JOINT VENTURE 03/09/93 Northwest Signals 8911 Santa Anita Drive Exclusivity Gives MKC exclusive right to
AGREEMENTS & Systems Boise, Idaho 83704 Agreement purchase and market Train
Service Monitor (Odometer);
requires prior written
consent for assignment
[Paragraph 18]
JOINT VENTURE 12/06/93 Harnischfeger P.O. Box 310 Agreement Exclusive requirements
AGREEMENTS Corporation Milwaukee, Wisconsin 53201 contract for AC Propulsion
Attn: Michael Salsieder System components; 5-year
term; consent for assignment
required [Paragraph 8.4]
JOINT VENTURE 09/10/93 Nomba, Inc. 4477 Emerald, Suite B-200 Memorandum of MKC has exclusive rights to
AGREEMENTS Boise, Idaho 83706 Understanding market Maxitrax System
worldwide (with exception of
U.S. and Canada); no
assignment provisions
</TABLE>
Page: 7
<PAGE>
<TABLE>
<CAPTION>
TYPE DATE PARTY ADDRESS DOC TYPE
AMOUNT REMARKS/ASSIGNMENT PROVISIONS
- - ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
INTERNATIONAL 06/14/91 Equiptec, S.A. Calle 56 Agent Agreement MKC may assign to successor
CONTRACTS/ Urbanizacion Obanria, (to represent entity within its corporate
AGREEMENTS Edificio MKC in Panama) structure without consent
Carmela [Paragraph 9]
Planta Baja
Cirdad de Panama,
Republic de Panama
Attn: Antonia J. Alfaro
INTERNATIONAL 10/12/93 Torque Sociedade Av. Angelica, 501, Agreement for No specific assignment
CONTRACTS/ Anonima 16th Floor Technical-Industrial provisions; contract is
AGREEMENTS Sao Paulo Cooperation and on-going
Federal Republic of Brazil License to Use
Attn: Mr. Aroldo B. Fuschini Technology (MKC will
assist Torque in
pursing locomotive
remanufacturing
in Brazil)
INTERNATIONAL 09/22/93 Egyptian National ENR Railways Building Contract No. 22/733 General Conditions for
CONTRACTS/ Railways "Over Shoubra Subway" for Clean and Repair Foreign and Local Contracts,
AGREEMENTS Shoubra, Cairo (Egypt) of 20 Crankcases Article VII, requires
Arab Republic of Egypt consent to assignment
$394,000
INTERNATIONAL 09/22/92 MK Corporation Level 6 Technical Services Agreement has expired; MKC is
CONTRACTS/ of Australia, 65 Berry Street Agreement in negotiations for renewal
AGREEMENTS Ltd. North Sydney NSW 2060
Australia
INTERNATIONAL 08/30/93 Ferrocarriles Agreement for repair Contract is substantially
CONTRACTS/ Nacionales De of 52 traction motor complete; close-out expected
AGREEMENTS Mexico frames mid-February 1994
$365,400
</TABLE>
Page: 8
<PAGE>
<TABLE>
<CAPTION>
TYPE DATE PARTY ADDRESS DOC TYPE
AMOUNT REMARKS/ASSIGNMENT PROVISIONS
- - ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
INTERNATIONAL 06/29/92 National Railways Avenida Jesus Garcia Leasing Agreement Contract substantially
CONTRACTS/ of Mexico No. 140, 4th Floor No. 80-5-9013-92 complete, with close-out by
AGREEMENTS Colonia Buenavista mid-February 1994; contract
Mexico Distrito Federal provides it shall not be
Codigo Postal 06538 assigned [Paragraph
13 General Motors Fourteenth]
SD40-2 diesel
electric
locomotives
INTERNATIONAL 07/29/93 National Railways Avenida Jesus Garcia Supply and Contract substantially
CONTRACTS/ of Mexico No. 140, 4th Floor Remanufacture complete; no assignment
AGREEMENTS Colonia Buenavista Agreement No. clause
Mexico Distrito Federal 80-5-9003-93 (for
Codigo Postal 06358 traction motors and
cooling fans)
INTERNATIONAL 07/06/93 International Monticello Arcade, Suite 204 Agent Agreement MKC may assign its interest
CONTRACTS/ Advanced 208 E. Plume St. (representing MKC to a successor entity within
AGREEMENTS Technology, Inc. Norfolk, Virginia 23510 in Israel) its corporate structure
[Paragraph 9]
INTERNATIONAL 03/01/91 Ronsco Supply 1440 Quest, Representative MKC may assign its interest
CONTRACTS/ Company, Ltd. Rue Ste-Cathering Agreement (to to a successor entity within
AGREEMENTS St. W. represent MKC with its corporate structure
Suite 712 Canadian rail [Paragraph 7]
Montreal, Quebec H3G IRS transport companies)
INTERNATIONAL 07/30/92 Mendes Junior Av. Prof. Mario Wernek Memorandum of MKC to assist MJI in
CONTRACTS/ Industrial Ltda. 1685 B. Estoril Understanding developing locomotive
AGREEMENTS Belo Horizonte remanufacturing business in
Brazil 30430 Brazil; terminates 07/13/94;
no assignment provisions
</TABLE>
Page: 9
<PAGE>
<TABLE>
<CAPTION>
TYPE DATE PARTY ADDRESS DOC TYPE
AMOUNT REMARKS/ASSIGNMENT PROVISIONS
- - ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
INTERNATIONAL 03/20/92 GEC ALSTHOM N.V. World Trade Center Memorandum of Understanding for MKC to
CONTRACTS/ Strawinskylaan 343/1077 Understanding acquire 6% minority interest
AGREEMENTS XX Amsterdam in Mexican corporation for
The Netherlands up to $3 million to
Attn: Mr. Bernard Lebrum privatize Mexican railway;
contract expired 06/30/92;
confidentiality provisions in
force for 3 years
PROCUREMENT/ 11/30/93 National Railway 14400 S. Robey Purchase Agreement Supply contract to provide
SUPPLY CONTRACTS Company P.O. Box 2270 MKC with core locomotive
AND LEASES (Supplier) Dixmoor, Illinois 60426 engines for rebuilding
$8,901,000
PROCUREMENT/ Sent VMV Enterprises, 1500 Kentucky Avenue Agreement to Provide MKC agrees to purchase 25
SUPPLY CONTRACTS 01/18/94 Inc. (Supplier) Padricah, Kentucky 42003 Locomotives, Engines, remanufactured EMD SD45
AND LEASES for Compressors locomotives and 25 EMD SD45
signature cores; no assignment clause;
VMV is a competitor
$22,000,000
PROCUREMENT/ 05/01/93 Intermountain Gas IGC Natural Gas Firm Fixed Price locked in through
SUPPLY CONTRACTS (IGC) Company (IGC) 555 South Cole Road Service Contract 08/31/94
AND LEASES 11/20/85 IGI Resources, P.O. Box 7608 (IGC)
and Inc. (IGI) Boise, Idaho 83707 Agency Agreement
09/01/93 IGI and Natural Gas
(IGI) Lakepointe Central Delivery Agreement
300 Mallard Drive, Suite 350
Boise, Idaho 83706
PROCUREMENT/ 08/16/93 Union Pacific 1416 Dodge Street, Room 200 Equipment Lease Contract expires 02/28/94;
SUPPLY CONTRACTS Railroad Company Omaha, Nebraska 68179 need Lessor's consent to
AND LEASES (Lessor) assignment [Paragraph 15]
Lease of one UPP400
Test Caboose
</TABLE>
Page: 10
<PAGE>
<TABLE>
<CAPTION>
TYPE DATE PARTY ADDRESS DOC TYPE
AMOUNT REMARKS/ASSIGNMENT PROVISIONS
- - ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NONDISCLOSURE/ 02/17/93 Caterpillar 100 N.E. Adams Street Confidentiality Protection of information re:
CONFIDENTIALITY Logistics Peoria, Illinois 61629 Agreement warehousing, transportation,
AGREEMENTS Services, Inc. logistics and consulting
support; mutual
confidentiality provisions;
no provision on assignment
NONDISCLOSURE/ 09/03/93 Hadady 17506 Chicago Avenue Exchange of Hadady involved in design and
CONFIDENTIALITY Corporation Lansing, Illinois 60438 Confidential manufacture of brake rigging
AGREEMENTS Attn: Mr. Gary A. Wagner Information components installed in new
V.P. Sales and Marketing Agreement MK5000C locomotives; mutual
confidentiality provisions;
consent to assignment
required [Paragraph 6.2]
NONDISCLOSURE/ 04/02/93 Harnischfeger 4107 W. Orchard Street Exchange of Mutual confidentiality
CONFIDENTIALITY Corporation Milwaukee, Wisconsin 53215 Confidential provisions re: supply of AC
AGREEMENTS Attn: Robert Hale, V.P. Disclosure propulsion system components
Material Handling Division Agreement for use in MKC's Locomotive
Retrofit Program; consent to
assignment required
[Paragraph 6.2]
NONDISCLOSURE/ 02/10/93 Minnesota Valley Two Appletree Square Exchange of Mutual confidentiality re:
CONFIDENTIALITY Engineering, Inc. Suite 100 Confidential design/development program
AGREEMENTS 8011-34th Avenue So. Information for liquid natural gas and/or
Bloomington, Minnesota 55425 Disclosure liquid methane storage
Attn: C.J. Schoenbauer, Agreement delivery and fuel system for
Executive V.P. MK12G Switcher Locomotive;
consent to assignment
required [Paragraph 6.2]
NONDISCLOSURE/ 06/30/92 Advanced Rail 114 Greenfield Place Exchange of Consultant for design and
CONFIDENTIALITY Car, Inc. Los Gatos, California 95030 Confidential production of steerable
AGREEMENTS Attn: Mr. Paul Wike, Information railway trucks for use on
President Agreement new Caterpillar powered MKC
locomotives; consent to
assignment required
[Paragraph 6.2]
</TABLE>
Page: 11
<PAGE>
<TABLE>
<CAPTION>
TYPE DATE PARTY ADDRESS DOC TYPE
AMOUNT REMARKS/ASSIGNMENT PROVISIONS
- - ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NONDISCLOSURE/ 07/15/91 Rockwell 400 Collins Road N.E. Exchange of Sharing of proprietary
CONFIDENTIALITY and International Cedar Rapids, Iowa 52498 Confidential information relating to
AGREEMENTS 03/03/93 Corporation Attn: Keith A. Halverson, Disclosure railroad electronics for
Manager, Contracts and Information, locomotives; consent to
Subcontracts as amended by assignment required
Supplemental [Paragraph 4.4]
Agreement No. 1
NONDISCLOSURE/ 09/02/93 Zeta-Tech 900 Kings Highway N. Letter Agreement Confidentiality re: marketing
CONFIDENTIALITY Associates, Inc. P.O. Box 8407 study for MK5000C Locomotive;
AGREEMENTS Cherry Hill, New Jersey 08002 no assignment provisions
ATTN: Randolph R. Resor
NONDISCLOSURE/ 01/27/93 Air Products and 7201 Hamilton Boulevard Exchange of Consultant re: design and
CONFIDENTIALITY Chemicals, Inc. Allentown, Pennsylvania 18195 Confidential manufacturing of liquid
AGREEMENTS Attn: Robert N. Davis Information natural gas and/or liquid
Agreement methane fueled switcher
locomotives (MK1200G);
consent to assignment
required [Paragraph 6.2]
NONDISCLOSURE/ 05/01/93 General Atomics 3550 General Atomics Court Exchange of Confidentiality re: A.C.
CONFIDENTIALITY San Diego, California 92121 Confidential Propulsion Inverters; consent
AGREEMENTS Information to assignment required
Agreement [Paragraph 6.2]
NONDISCLOSURE/ 09/26/93 Motorola, Inc. 1911 N.E. First Street, Proprietary MKC required to sign to
CONFIDENTIALITY acting through Suite 304 Information receive MVME 167-611
AGREEMENTS its Govt. Bellevue, Washington 98005 Non-Disclosure computer; two year term; no
Electronics Group Attn: Ann Fortney Agreement assignment provisions
NONDISCLOSURE/ 03/29/93 ENTECH 555 N. Meridian Road Non-Disclosure and Re: 6-month testing of
CONFIDENTIALITY Corporation Meridian, Idaho 83642 Confidentiality Entech's "Energy Release"
AGREEMENTS Agreement metal conditioner in Utah
locomotives; consent to
assignment required
[Paragraph 6.2]; 3 year
confidentiality term
</TABLE>
Page: 12
<PAGE>
<TABLE>
<CAPTION>
TYPE DATE PARTY ADDRESS DOC TYPE
AMOUNT REMARKS/ASSIGNMENT PROVISIONS
- - ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NONDISCLOSURE/ 01/10/91 EG&G Idaho, Inc. 1955 Fremont Drive Non-Disclosure Agreement binds MKC re:
CONFIDENTIALITY Idaho Falls, Idaho 83402 Agreement disclosure of EG&G CyberTran
AGREEMENTS system; term ends 02/01/95;
no assignment provisions
NONDISCLOSURE/ 03/20/92 GEC Alsthom N.V. World Trade Center Confidential Relates to proposed Mexican
CONFIDENTIALITY Strarvinskylaan 343/1077 Non-Disclosure privitization joint venture;
AGREEMENTS XX Amsterdam Agreement five-year term; agreement
The Netherlands binding upon successors and
assigns
NONDISCLOSURE/ 09/20/93 Elettromeccica via C. Romani 10 Exchange of For provision of North
CONFIDENTIALITY Parizzi S.p.A. 20091 Bresso Confidential America service proven
AGREEMENTS Milano Disclosure propulsion system for use on
Italy Agreement MK5000AC Program; requires
Attn: Dr. Ing. Massimo consent to assignment
Maggioni [Paragraph 6.2]
0039-2-665231
MISCELLANEOUS 10/19/93 MK Rail Systems Chicago, Illinois Memorandum of CTO borrowed from Boise
CONTRACTS/ Group Center Understanding Locomotive Buff Test View
INVOICES Transit Operations Liner Shell equipment; to be
(CTO) returned no later than
06/01/94
MISCELLANEOUS Union Pacific 605 N. 13th Street Purchase Order No. Invoiced 12/93; delivery
CONTRACTS/ Railroad (Buyer) Omaha, Nebraska 68179 10553020-for MGS promised 1st quarter 94
INVOICES Attn: Mr. Kent Carter Portable Load Box
$188,430
MISCELLANEOUS 06/30/92, Union Pacific 1416 Dodge Street, Room 1100 Test Agreement UP grants MKC license to use
CONTRACTS/ renewed Railroad Company Omaha, Nebraska 68179 its trackage on "Boise
INVOICES 04/02/93 (Licensor) (402) 271-3753 Cutoff" between Boise and
for 1 year Orchard to test rebuilt
locomotives; consent to
assignment required
[Paragraph 6]
</TABLE>
Page: 13
<PAGE>
<TABLE>
<CAPTION>
TYPE DATE PARTY ADDRESS DOC TYPE
AMOUNT REMARKS/ASSIGNMENT PROVISIONS
- - ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
MISCELLANEOUS 12/01/92 Food Service 4632 Aeronca Street Equipment Lease Term ends 12/01/95; no
CONTRACTS/ Technology Boise, Idaho 83705 (MKC Less or payments have been made under
INVOICES Corporation drilling equipment) lease; no assignment
(Lessee) provisions in lease
MISCELLANEOUS 09/03/93 Climax P.O. Box 68 Engineering Services (MKC provided engineering
CONTRACTS/ Molybdenum Empire, Colorado 80438 Agreement Contract feasibility study re: mining
INVOICES Company No. H-685 case) 12/22/93 invoice for
$17,500, representing 80%
completion of work; contract
terminates 01/31/94; future
business "on hold"
MISCELLANEOUS 04/16/92 Envirosafe P.O. Box 16217 Waste Disposal No assignment provisions
CONTRACTS/ Services of Boise, Idaho 83715 Agreement
INVOICES Idaho, Inc. Attn: Rob Ellin, Western
Sales Manager
MISCELLANEOUS 10/01/93 David J. Joseph P.O. Box 1078 Purchase Order No.
CONTRACTS/ Company Cincinnati, Ohio 45201 23614 for repair by
INVOICES MKC on RLMX-1211
Rail Car
$5,900
MISCELLANEOUS Randy Re, 6190 Shorewood Court MK performed engineer rebuild
CONTRACTS/ Incorporated Lisle, Illinois 60532
INVOICES $15,000
MISCELLANEOUS 12/21/79 Union Pacific 1416 Dodge Street Agreement (License) Testing of MK Locomotives by
CONTRACTS/ - until Railroad Company, Omaha, Nebraska 68179 Railroad over Nampa branch
INVOICES termina- a Utah File #416 lines and main line between
ted w/ corporation CD. No. 51973-10 Hinkle, Oregon and Pocatello,
10-day Idaho
notice
</TABLE>
Page: 14
<PAGE>
<TABLE>
<CAPTION>
TYPE DATE PARTY ADDRESS DOC TYPE
AMOUNT REMARKS/ASSIGNMENT PROVISIONS
- - ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
MISCELLANEOUS 06/14/93 Railsoft, Inc. 1805 S. Ponce Deleon Software Development Contract for development of
CONTRACTS/ Ave. N.E. Agreement Train Performance Simulation
INVOICES Atlanta, Georgia 30307 Model (TrainSim) Software;
MKC can assign with prior
written approval (Paragraph
9.03)
NON-COMPETITION 10/05/91 Zero Defects, 615 East 43rd Street NonCompetition 5-year term; MKC agrees to
AGREEMENTS Incorporated Boise, Idaho 83714 Agreement purchase electronic control
Attn: Julie Bertoni modules and components; any
assignment without prior
written consent is void
[Paragraph 7]
UNION 06/30/92 International 5105 S. Apple Agreement Contract term ends 06/03/95,
CONTRACTS Union of Boise, Idaho 83705 with automatic one-year
Operating (208) 344-8414 renewals unless 60-day notice
Engineers, given; MKC required to
Local No. 370 contribute $0.70 per hour
worked into Idaho Operating
Engineers - Employers Pension
Trust Fund (any MultiEmployer
Pension Plan Withdrawal
liability?)
</TABLE>
Page: 15
<PAGE>
ANNEX I-E
---------
INTELLECTUAL PROPERTY
I-E Intellectual Property. All rights and interests of MK Ohio in, to and
with respect to the intellectual property rights, trademarks, trade secrets,
inventions whether patentable or unpatentable, and know-how being transferred,
assigned or licensed to MK Rail pursuant to, and in accordance with, (i) the
Deed of Assignment of Patents and Patent Applications attached hereto, (ii) the
Service Mark, and Trademark License Agreement attached hereto; (iii) the Deed of
Assignment relating to the mark "Mountaintop Locomotive Division"; and (iv) all
intangible assets, other than intellectual property rights, of MK Ohio used
solely in the Business, including customer lists, marketing and other data.
-27-
<PAGE>
ANNEX III
REQUIRED CONSENTS
Consents are required to the assignment and/or transfer of MK Ohio's right,
title and interest in the contracts and leases listed on the attached
continuation pages to this Annex III.
- 35 -
<PAGE>
CONTINUATION -- ANNEX III:
1. Consent of Cometrans and IDESA to the assignment of the Joint Venture
Agreement dated May 7, 1993.
2. Consent by other parties to assignment of Passenger Railway Service Joint
Venture Agreement (Consent not required if MK Ohio guarantees MK Rail's
obligations).
3. Consent of Argentine Government to transfer by MK Ohio of the Metrovias
shares and to the assignment by MK Ohio of its rights under the Concession
Agreement.
4. Consent of Argentine Government to Release MK Ohio from guarantee of
Metrovias under Section 6.1.6 of the Concession Agreement.
5. Consent by IDESA and Cometrans to waive right of first refusal in relation
to transfer of MK Ohio's shares in Talleres Sudamericanos S.A.
6. Consent by IDESA and Cometrans to waive right of first refusal in relation
to transfer of MK Ohio's shares in MK Rail Systems of Argentina.
7. Consent of "GAIN" to substitution of MK Rail for MK Ohio under letter of
Understanding dated September 18, 1993 (Mexico).
- 36 -
<PAGE>
CONTINUATION -- ANNEX III:
1. Lease dated 11/01/92 between Permanent Trustee Company Limited (Lessor) and
Morrison Knudsen Corporation of Australia Limited (Lessee). Premises:
Commercial offices located at Level 12 of the Pastoral Exchange Building, 4
O'Connell Street, Sydney, New South Wales.
2. Lease dated 10/15/92 between Heather Marjorie Cundy (Lessor) and Morrison
Knudsen Corporation of Australia Limited (Lessee). Premises: Offices of
record in Certificate of Title Register Book, Volume 4178 Folio 544,
Australia.
3. Agreement dated 10/19/92 between The Broken Hill Proprietary Company
Limited, dba BHP Steel Long Products Division (Lessor) and Morrison Knudsen
Corporation of Australia Limited (Lessee). Premises: industrial building
commonly known as NEI Building on Portion of Section 26 Hundred Cultana
County of York Whyalla, S. Australia.
4. Lease dated 12/01/93 between Pacific Associates, a partnership dba Vista
Station (Lessor) and Morrison Knudsen Corporation (Lessee). Premises: 1916
sq. ft. office space within Vista Station, Boise, Idaho.
5. Lease Agreement dated 09/02/92 between Skyline Development Corporation, an
Idaho corporation (Lessor) and Morrison Knudsen Corporation (Lessee).
Environmental Monitoring Use Permit to investigate, survey, test subsurface
conditions on property situate in Ada County, Idaho. Subject to Amendment
No. I dated 09/25/92.
6. Lease Agreement dated 08/11/92 between Bill and Colleen Mullins, husband
and wife (Lessor) and Morrison Knudsen Corporation (Lessee). Environmental
Use Permit to investigate, monitor, survey, well-drill and test subsurface
conditions on property situate in Ada County Idaho.
7. Lease Agreement dated 06/26/92 between Officenter/Oak Brook, Inc., an
Illinois corporation (Lessor) and Morrison Knudsen Corporation (Lessee).
Subject to First Amendment to Office Lease Agreement dated 06/26/92.
Premises: Office space no. 39 located at 17W755 Butterfield Rd., Oakbrook
Terrace, Illinois.
8. Lease dated 11/26/92 between Daniel Michael d/b/a Horizon Group (Lessor)
and Morrison-Knudsen Co., Inc. (Lessee). Premises: 3000 sq. ft.
office/storage located at 4656 W. Oakton, Skokie, Illinois.
- 37 -
<PAGE>
9. Consent to release MK Ohio from guarantee of Contract of Location between
Marcos Jorge Harari and Mahmood Ullah Mir dated October 26, 1993, relating
to property located in Buenos Aires, Argentina
10. Consent to release MK Ohio from guarantee of Contract of Location between
Alejandro Roberto Roca and Paul David Bartles dated April 13, 1993,
relating to property located in Buenos Aires, Argentina
11. Consent to release MK Ohio from guarantee of Contract of Location between
Gloria Ines Corna and Bernardo Aceves Ramirez dated September 6, 1993,
relating to property located in Buenos Aires, Argentina
12. Consent to release MK Ohio from guarantee of Contract of Location between
Ubaldo Horacio Insua and Beth Kincaid dated April, 1993, relating to
property located in Buenos Aires, Argentina
- 38 -
<PAGE>
ANNEX IV
CONTINUING OBLIGATIONS OF MK OHIO
AFTER THE CLOSING DATE
1. The obligations set forth in Section 2.5(c) of the Agreement with respect
to Employees.
2. The obligations of MK Ohio under any Related Agreement.
3. The obligations of MK Ohio with respect to any Excluded Contract.
4. The obligations of MK Ohio under the Bank Documents.
- 39 -
<PAGE>
ANNEX V
EXCLUDED CONTRACTS
1. The purchase orders listed on Attachment I to this Annex V.
2. All purchase orders, to the extent not included in I, which related in
whole or in part to materials or supplies to be utilized in the
remanufacture of the 43 Locomotive cores listed on Attachment II to this
Annex V.
3. All contracts, invoices or other documents relating to the sale and
delivery of the locomotives remanufactured with materials and supplies
provided pursuant to the purchase orders shown above.
- 40 -
<PAGE>
CONTINUATION -- ANNEX V:
PURCHASE ORDER DETAIL
ALL PURCHASES GOING TO HORNELL
Order Extended
Number Price
------ --------
14841 2,296.50
120712 4,225.00
530000 420,000.00
530001 3,438,000.00
530004 331,606.85
530005 27,387.33
530006 1,233.00
530007 1,717.85
530008 3,437.85
530009 3,203.50
530010 2,128.50
530011 5,482.50
530012 4,998.75
530013 12,775.26
530014 1,182.50
530015 42.85
530016 3,051.28
530017 29,730.40
530018 9,643.98
530019 8,032.02
530020 21.90
530021 52,190.82
530022 639.84
530023 250.60
530024 6,359.70
530025 4,797.93
530026 3,721,664.80
530027 39,868.74
530028 7,650.13
530029 294.98
530030 2,138.53
530031 15,222.00
530032 940.75
530033 12,933.54
530034 4,788.48
530035 642.85
-1-
<PAGE>
Order Extended
Number Price
------ --------
530036 22,587.90
530037 4,194.59
530038 4,654.32
530040 110,238.24
530041 6,547.44
530042 35,659.51
530043 1,912.45
530045 4,282.80
530046 56,889.00
530047 2,679.95
530048 1,892.00
530049 13,370.72
530050 1,276.67
530051 95,847.00
530052 1,182.50
530053 1,505.00
530054 513.42
530065 554.27
530066 1,283.55
530067 3,282.02
530068 497.80
530069 1,451.97
530070 2,945.28
530071 819.00
530072 81.90
530073 161.50
530074 3,852.20
530075 25,664.94
530076 27.52
530077 20,793.05
530078 513.00
530079 1,278.90
530080 3,619.75
530081 131.25
530082 389.16
530083 102.50
530084 73,529.22
530085 7,150.63
530086 20,702.82
530087 34,683.56
-2-
<PAGE>
Order Extended
Number Price
------ --------
530088 335.40
530089 1,762.72
530090 2,318.20
530091 19,734.60
530092 268.75
530094 757.86
530095 3,520.84
530104 1,485.22
530105 2,205.71
530106 9,543.11
530107 20,150.66
530108 3,909.13
530110 459.67
530111 731.00
530112 360.00
530113 666.50
530114 270.90
530115 535.35
530116 70.20
530117 981.77
530119 925.79
530120 8,271.90
530121 2,158.60
530123 26.25
530130 744.44
530131 152,390.00
530132 433.40
530134 403,748.75
530135 13,007.50
530136 335,400.00
530137 146.63
530138 4,978.51
530139 1,548.00
530140 37,723.04
530141 3,750.40
530142 4,102.20
530143 3,362.60
530144 57,374.19
530145 2,296.50
530147 102,894.52
-3-
<PAGE>
Order Extended
Number Price
------ --------
530148 7,965.00
530149 48,149.25
530150 442.90
530151 392.30
530152 104.49
530153 468.70
530154 11,997.00
530155 39,775.00
530156 163,100.00
530157 9,899.55
530158 76.80
530159 8,179.20
530160 16,416.00
530161 2,912.00
503162 15,270.10
530163 1,505.00
530164 5,590.00
530165 18,823.25
530166 16,666.83
530167 754.36
530168 369.80
530169 2,574.84
530170 2,979.90
530172 61,425.00
530173 21,396.10
530174 516.00
530175 8,268.90
530176 2,768.34
530177 1,277.96
530179 1,913.50
530180 59,750.00
530181 76,110.00
530182 2,141.40
530183 253.70
530184 4,085.00
530185 4,229.48
530186 1,612.50
530187 909.13
530188 1,376.00
530189 134.59
-4-
<PAGE>
Order Extended
Number Price
------ -------------
530190 313.47
530191 11,985.55
530192 1,760.85
530193 3,904.83
530194 3,665.32
530195 3,876.00
530196 849.25
530197 1,559.80
530198 265.20
530199 58.87
530200 1,037.16
530201 15,187.01
530202 46,314.40
530203 2,170.08
530204 135.50
530215 312.61
530229 2,408.00
-------------
10,676,034.87
-------------
-------------
-5-
<PAGE>
CONTINUATION -- ANNEX III:
<TABLE>
<CAPTION>
MK-RAIL SCHEDULE OF CONTRACTS AND AGREEMENTS
--------------------------------------------
TYPE DATE PARTY ADDRESS DOC TYPE
AMOUNT REMARKS/ASSIGNMENT PROVISIONS
- - ------------------------------------------------------------------------------------------------------------------------------------
Search Strategy: 02-25-94 13:15:23
GET CN:Y
No. of Records: S1 - Consent Required
- - ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
SALE/LEASEBACK 12/29/93 MetLife Capital 10900 N.E. 4th St., Master Lease Purchase Lessor consent required to
(FINANCING) Corporation Suite 500 Agreement No. 18627 assignment; [Paragraph
AGREEMENTS (Lessor) Bellevue, Washington 98004 26(a)]; 60-month term;
Attn: David Sislowski reorganization is "event of
10 SD40-2 Locomotives default" if it has materially
$5,500,000 adverse effect on Lessor's
position [Paragraph
18.A.(ix)]
SALE/LEASEBACK 12/10/93 Pitney Bowes 201 Merritt Seven Master Equipment Lessor's prior written
(FINANCING) Credit Corporation Norwalk, Connecticut 06856 Lease Agreement No. consent necessary for
AGREEMENTS (Lessor) Attn: Vice President/ 7746324 assignment [Paragraph 20];
Operations 180-month term
SALE/LEASEBACK 12/21/93 Pitney Bowes 201 Merritt Seven Master Equipment Lessor's prior written
(FINANCING) Credit Corporation Norwalk, Connecticut 06856 Lease Agreement consent necessary for
AGREEMENTS (Lessor) Attn: Vice President/ assignment [Paragraph 20];
Operations 180-month term
11 SD40M
$7,949,680
SALE/LEASEBACK 12/27/91 Caterpillar 3322 West End Avenue, Railroad Lease Lessor's consent necessary to
(FINANCING) Financial Services Suite 610 Agreement assign [Paragraph 18];
AGREEMENTS Corporation Nashville, Tennessee 37203 unauthorized assignment is
(Lessor) Attn: Treasurer event of default [Paragraph
20 SD40-2s 16.1(b)]; 15-year term
$13,200,000
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
TYPE DATE PARTY ADDRESS DOC TYPE
AMOUNT REMARKS/ASSIGNMENT PROVISIONS
- - ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
SALE/LEASEBACK 12/17/93 Caterpillar 3322 West End Avenue, Railroad Lease Lessor's consent necessary to
(FINANCING) Financial Services Suite 610 Agreement assign [Paragraph 18];
AGREEMENTS Corporation Nashville, Tennessee 37203 unauthorized assignment is
(Lessor) Attn: Treasurer event of default [Paragraph
2 MK1200G (LNG) 16.1(b)]; 240-month term
Locomotives
$2,400,000
SALE/LEASEBACK 01/24/92 CIT Group/ 1620 W. Fountainhead Equipment Lease Five year term; Lessor's
(FINANCING) Equipment Leasing, Parksway, #600 New Pacific consent to assignment
AGREEMENTS Inc. (Lessor) Tempe, Arizona 85282 Model K400-4 required [Paragraph 20]
$200,221
PUBLIC TRANSIT 10/04/90 Massachusetts Bay Materials Department Formal Contract MBTA consent required for
CONTRACTS Transportation Ten Park Plaza No. 532 assignment [Paragraph 5.12]
(LOCOMOTIVE) Authority Boston, Massachusetts 02116 (Project No. Assignment will not release
(Buyer) Attn: Michael T. Burns, MA-23-9013) original contractor of
Director of Railroad Liability under contract and
Operations bond; contract substantially
Attn: Robert W. Pittman, complete (all deliveries
Asst. General Manager, made); in close-out mode
Purchasing and
Administration
12 Remanufactured
Diesel Electric
Passenger Locomotives
$19,486,476
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
TYPE DATE PARTY ADDRESS DOC TYPE
AMOUNT REMARKS/ASSIGNMENT PROVISIONS
- - ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PUBLIC TRANSIT 1991 State of Department of Administrative State Project State may recognize
CONTRACTS Connecticut Services No. 170-747 assignment where incident to
(LOCOMOTIVE) Department of 460 Silver Street (Bid No. transfer of assets, based on
Transportation P.O. Box 1411 901-A-13-2165-P) facts/circumstances and
(Buyer) Middleton, Connecticut 06457 Remanufacture of written concurrence of
Attn: Mr. Anthony Fappiano Six (6) EMD Model Surety [Paragraph 8.01A]
Department of Transportation FL-9 Passenger
Office of Purchasing & Store Locomotives
Bid Unit
P.O. Box Drawer A
24 Wolcott Hill Road
Wethersfield, Connecticut 06109
Attn: Mr. Brian J. Robertson
$8,232,155
PUBLIC TRANSIT 09/03/92 NJ Transit One Penn Plaza East Agreement for Need consent of purchaser for
CONTRACTS Corporation Newark, New Jersey 07105 Application of assignment [Paragraph 7];
(LOCOMOTIVE) (Buyer) GP40FH-2 Blended contract is substantially
Dynamic Brake Systems complete; finished in 3-4
(Bid No. 92-D-239) months
$1,736,707
PUBLIC TRANSIT 08/12/93 North San Diego 311 South Tremont Street Agreement (for Need consent of Board for
CONTRACTS County Transit Oceanside, California supply of 5 diesel assignment [Part II]
(LOCOMOTIVE) Development electric passenger
Board (Buyer) locomotives)
$10,369,262
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
TYPE DATE PARTY ADDRESS DOC TYPE
AMOUNT REMARKS/ASSIGNMENT PROVISIONS
- - ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PUBLIC TRANSIT 09/17/93 State of Maryland Mass Transit Administration Contract MTA Consent of MTA and Surety
CONTRACTS Department of Contract Administration Dept. 3-57-2/Procurement required for assignment/MDOT
(LOCOMOTIVE) Transportation/ One Market Center of (19) General Provisions for
Mass Transit 300 W. Lexington Street Remanufactured Purchase Contracts [Paragraph
Administration Baltimore, Maryland 21201 GP-40WCH-2 39]
(Buyer) Attn: Richard A. Wolfe, Locomotives
Manager Procurement &
Operations
Contracts
$19,388,018
MISCELLANEOUS 09/03/91 Metropolitan 44 Canal Center Plaza Contract No. No specific assignment
PUBLIC - Phase I Washington Alexandria, Virginia 1-91-C113, provisions
CONTRACTS 04/15/92 Airports Authority 22314-1562 Phase I and II,
- Phase II (Buyer) Mobile Lounge
Rehabilitation
$10,720,246
MISCELLANEOUS 04/27/93 Ada County License Agreement Grant right-of-way upon Ada
CONTRACTS/ Highway District County, ID, property
INVOICES
LOCOMOTIVE 10/27/93 Southern Pacific Southern Pacific Building Committment letter Definitive agreement is still
LEASE/SALE Lines (Buyer) One Market Plaza for sale or lease being prepared
AGREEMENTS San Francisco, California of 133 SD40M-2
94105 Locomotives
$678,000 per
Locomotive
$90,174,000
LOCOMOTIVE 08/10/93 Carland 1055 Broadway, Suite 990 Agreement to provide Contract may not be assigned
LEASE/SALE Incorporated (as Kansas City, Missouri 64105 15 upgraded GP40-2 without consent [Paragraph
AGREEMENTS agent for The Locomotives 12.2]
Kansas City $228,047 per
Southern Railway Locomotive
Company) (Buyer) $3,755,955
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
TYPE DATE PARTY ADDRESS DOC TYPE
AMOUNT REMARKS/ASSIGNMENT PROVISIONS
- - ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
LOCOMOTIVE 05/01/91, Utah Railway 970 University Club Building Locomotive Contract provides for 5 MKC
LEASE/SALE as Company 136 East South Temple Maintenance employees to maintain leased
AGREEMENTS amended (Lessee) Salt Lake City, Utah 84111 Agreement locomotives; cannot be
02/01/93 assigned without consent
[Paragraph XV]
LOCOMOTIVE 08/16/93 Union Pacific 1416 Dodge Street, Room 200 Equipment Lease No assignment provisions in
LEASE/SALE Railroad Company Omaha, Nebraska 68179 contract
AGREEMENTS (Lessee) Attn: Larry Anderson, Manager
Leases
Lease for 2 MK1200G
natural gas fueled
Caterpillar powered
switcher Locomotives
JOINT VENTURE 03/09/93 Caterpillar 100 N.E. Adams Street Professional Services Joint venture for development
AGREEMENTS Logistics Peoria, Illinois 61629 Agreement of logistics strategy for
Services, Inc. distribution in North
America; no assignment
provisions
JOINT VENTURE 03/31/92 Caterpillar, Inc. 100 N.E. Adams Street Marketing and Supply Requirements contract for CAT
AGREEMENTS Peoria, Illinois 61629 Agreement engines to use in MKC
Attn: Richard L. Thompson, locomotives; agreement to
Vice President joint market; need CAT assent
to assignment [Paragraph
13(e)]
JOINT VENTURE 03/31/92 Caterpillar, Inc. 100 N.E. Adams Street Joint Development Agreement to develop
AGREEMENTS Peoria, Illinois 61629 Agreement prototypes of locomotive
models; need CAT consent to
assignment [Paragraph 9]
JOINT VENTURE 03/09/93 Northwest Signals 8911 Santa Anita Drive Exclusivity Gives MKC exclusive right to
AGREEMENTS & Systems Boise, Idaho 83704 Agreement purchase and market Train
Service Monitor (Odometer);
requires prior written
consent for assignment
[Paragraph 18]
</TABLE>
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
MK-RAIL SCHEDULE OF CONTRACTS AND AGREEMENTS
--------------------------------------------
TYPE DATE PARTY ADDRESS DOC TYPE
AMOUNT REMARKS/ASSIGNMENT PROVISIONS
- - ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
JOINT VENTURE 12/06/93 Harnischfeger P.O. Box 310 Agreement Exclusive requirements
AGREEMENTS Corporation Milwaukee, Wisconsin 53201 contract for AC Propulsion
Attn: Michael Salsieder System components; 5-year
term; consent for assignment
required [Paragraph 8.4]
JOINT VENTURE 09/10/93 Nomba, Inc. 4477 Emerald, Suite B-200 Memorandum of MKC has exclusive rights to
AGREEMENTS Boise, Idaho 83706 Understanding market Maxitrax System
worldwide (with exception of
U.S. and Canada); no
assignment provisions
INTERNATIONAL 10/12/93 Torque Av. Angelica, 501, Agreement for No specific assignment
CONTRACTS/ Sociedade 16th Floor Technical-Industrial provisions; contract is
AGREEMENTS Anonima Sao Paulo Cooperation and on-going
Federal Republic of Brazil License to Use
Attn: Mr. Aroldo B. Fuschini Technology (MKC will
assist Torque in
pursing locomotive
remanufacturing in
Brazil)
INTERNATIONAL 09/22/93 Egyptian ENR Railways Building Contract No. 22/733 General Conditions for
CONTRACTS/ National "Over Shoubra Subway" for Clean and Repair Foreign and Local Contracts,
AGREEMENTS Railways Shoubra, Cairo (Egypt) of 20 Crankcases Article VII, requires consent
Arab Republic of Egypt to assignment
$394,000
INTERNATIONAL 09/22/92 MK Corporation of Level 6 Technical Services Agreement has expired; MKC is
CONTRACTS/ Australia, Ltd. 65 Berry Street Agreement in negotiations for renewal
AGREEMENTS North Sydney NSW 2060
Australia
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
TYPE DATE PARTY ADDRESS DOC TYPE
AMOUNT REMARKS/ASSIGNMENT PROVISIONS
- - ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
INTERNATIONAL 08/30/93 Ferrocarriles Agreement for repair Contract is substantially
CONTRACTS/ Nacionales De of 52 traction motor complete; close-out expected
AGREEMENTS Mexico frames mid-February 1994
$365,400
INTERNATIONAL 06/29/92 National Railways Avenida Jesus Garcia Leasing Agreement Contract substantially
CONTRACTS/ of Mexico No. 140, 4th Floor No. 80-5-9013-92 complete, with close-out by
AGREEMENTS Colonia Buenavista mid-February 1994; contract
Mexico Distrito Federal provides it shall not be
Codigo Postal 06358 assigned [Paragraph
Fourteenth]
13 General Motors
SD40-2
diesel electric
locomotives
INTERNATIONAL 07/29/93 National Railways Avenida Jesus Garcia Supply and Contract substantially
CONTRACTS/ of Mexico No. 140, 4th Floor Remanufacture complete; no assignment
AGREEMENTS Colonia Buenavista Agreement No. clause
Mexico Distrito Federal 80-5-9003-93 (for
Codigo Postal 06358 traction motors and
cooling fans)
INTERNATIONAL 07/30/92 Mendes Junior Av. Prof. Mario Wernek Memorandum of MKC to assist MJI in
CONTRACTS/ Industrial Ltda. 1685 B. Estoril Understanding developing locomotive
AGREEMENTS Belo Horizonte remanufacturing business in
Brazil 30430 Brazil; terminates 07/13/94;
no assignment provisions
INTERNATIONAL 03/20/92 GEC ALSTHOM N.V. World Trade Center Memorandum of Understanding for MKC to
CONTRACTS/ Strawinskylaan 343/1077 Understanding acquire 6% minority interest
AGREEMENTS XX Amsterdam in Mexican corporation for up
The Netherlands to $3 million to privatize
Attn: Mr. Bernard Lebrum Mexican railway; contract
expired 06/30/92;
confidentiality provisions in
force for 3 years
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
TYPE DATE PARTY ADDRESS DOC TYPE
AMOUNT REMARKS/ASSIGNMENT PROVISIONS
- - ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PROCUREMENT/ 11/30/93 National Railway 14400 S. Robey Purchase Agreement Supply contract to provide
SUPPLY CONTRACTS Company P.O. Box 2270 MKC with core locomotive
AND LEASES (Supplier) Dixmoor, Illinois 60426 $8,901,000 engines for rebuilding
PROCUREMENT/ Sent VMV Enterprises, 1500 Kentucky Avenue Agreement to Provide MKC agrees to purchase 25
SUPPLY CONTRACTS 01/18/94 Inc. (Supplier) Padricah, Kentucky 42003 Locomotives, Engines, remanufactured EMD SD45
AND LEASES for Compressors locomotives and 25 EMD SD45
signature cores; no assignment clause;
VMV is a competitor
$22,000,000
PROCUREMENT/ 05/01/93 Intermountain Gas IGC Natural Gas Firm Fixed price locked in through
SUPPLY CONTRACTS (IGC) Company (IGC) 555 South Cole Road Service Contract 08/31/94
AND LEASES 11/20/85 IGI Resources, P.O. Box 7608 (IGC) Agency
and Inc. (IGI) Boise, Idaho 83707 Agreement and Natural
09/01/93 IGI Gas Delivery
(IGI) Lakepointe Central Agreement
300 Mallard Drive, Suite 350
Boise, Idaho 83706
PROCUREMENT/ 08/16/93 Union Pacific 1416 Dodge Street, Room 200 Equipment Lease Contract expires 02/28/94;
SUPPLY CONTRACTS Railroad Company Omaha, Nebraska 68179 need Lessor's consent to
AND LEASES (Lessor) assignment [Paragraph 15]
Lease of one
UPP400 Test
Caboose
NONDISCLOSURE/ 02/17/93 Caterpillar 100 N.E. Adams Street Confidentiality Protection of information re:
CONFIDENTIALITY Logistics Peoria, Illinois 61629 Agreement warehousing, transportation,
AGREEMENTS Services, Inc. logistics and consulting
support; mutual
confidentiality provisions;
no provision on assignment
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
TYPE DATE PARTY ADDRESS DOC TYPE
AMOUNT REMARKS/ASSIGNMENT PROVISIONS
- - ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NONDISCLOSURE/ 09/03/93 Hadady 17506 Chicago Avenue Exchange of Hadady involved in design and
CONFIDENTIALITY Corporation Lansing, Illinois 60438 Confidential manufacture of brake rigging
AGREEMENTS Attn: Mr. Gary A. Wagner Information components installed in new
V.P. Sales and Marketing Agreement MK5000C locomotives; mutual
confidentiality provisions;
consent to assignment
required [Paragraph 6.2]
NONDISCLOSURE/ 04/02/93 Harnischfeger 4107 W. Orchard Street Exchange of Mutual confidentiality
CONFIDENTIALITY Corporation Milwaukee, Wisconsin 53215 Confidential provisions re: supply of AC
AGREEMENTS Attn: Robert Hale, V.P. Disclosure propulsion system components
Material Handling Division Agreement for use in MKC's Locomotive
Retrofit Program; consent to
assignment required
[Paragraph 6.2]
NONDISCLOSURE/ 02/10/93 Minnesota Valley Two Appletree Square Exchange of Mutual confidentiality re:
CONFIDENTIALITY Engineering, Inc. Suite 100 Confidential design/development program
AGREEMENTS 8011-34th Avenue So. Information for liquid natural gas and/or
Bloomington, Minnesota 55425 Disclosure liquid methane storage
Attn: C.J. Schoenbauer, Agreement delivery and fuel system for
Executive V.P. MK12G Switcher Locomotive;
consent to assignment
required [Paragraph 6.2]
NONDISCLOSURE/ 06/30/92 Advanced Rail 114 Greenfield Place Exchange of Consultant for design and
CONFIDENTIALITY Car, Inc. Los Gatos, California 95030 Confidential production of steerable
AGREEMENTS Attn: Mr. Paul Wike, Information railway trucks for use on
President Agreement new Caterpillar powered MKC
locomotives; consent to
assignment required
[Paragraph 6.2]
NONDISCLOSURE/ 07/15/91 Rockwell 400 Collins Road N.E. Exchange of Sharing of proprietary
CONFIDENTIALITY and International Cedar Rapids, Iowa 52498 Confidential information relating to
AGREEMENTS 03/03/93 Corporation Attn: Keith A. Halverson, Disclosure railroad electronics for
Manager, Contracts and Information; as locomotives; consent to
Subcontracts amended by assignment required
Supplemental [Paragraph 4.4]
Agreement No. 1
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
TYPE DATE PARTY ADDRESS DOC TYPE
AMOUNT REMARKS/ASSIGNMENT PROVISIONS
- - ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NONDISCLOSURE/ 09/02/93 Zeta-Tech 900 Kings Highway N. Letter Agreement Confidentiality re: marketing
CONFIDENTIALITY Associates, Inc. P.O. Box 8407 study for MK5000C Locomotive;
AGREEMENTS Cherry Hill, New Jersey 08002 no assignment provisions
Attn: Randolph R. Resor
NONDISCLOSURE/ 01/27/93 Air Products 7201 Hamilton Boulevard Exchange of Consultant re: design and
CONFIDENTIALITY and Chemicals, Allentown, Pennsylvania Confidential manufacturing of liquid
AGREEMENTS Inc. 18195 Information natural gas and/or liquid
Attn: Robert N. Davis Agreement methane fueled switcher
locomotives (MK1200G);
consent to assignment
required [Paragraph 6.2]
NONDISCLOSURE/ 05/01/93 General Atomics 3550 General Atomics Court Exchange of Confidentiality re: A.C.
CONFIDENTIALITY San Diego, California 92121 Confidential Propulsion Inverters; consent
AGREEMENTS Information to assignment required
Agreement [Paragraph 6.2]
NONDISCLOSURE/ 03/29/93 ENTECH Corporation 555 N. Meridian Road Non-Disclosure and Re: 6-month testing of
CONFIDENTIALITY Meridian, Idaho 83642 Confidentiality Entech's "Energy Release"
AGREEMENTS Agreement metal conditioner in Utah
locomotives; consent to
assignment required
[Paragraph 6.2]; 3 year
confidentiality term
NONDISCLOSURE/ 09/20/93 Elettromeccica via C. Romani 10 Exchange of For provision of North
CONFIDENTIALITY Parizzi S.p.A. 20091 Bresso Confidential America service proven
AGREEMENTS Milano Disclosure propulsion system for
Italy Agreement use on MK5000AC Program;
Attn: Dr. Ing. Massimo requires consent to
Maggioni assignment [Paragraph 6.2]
0039-2-665231
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
TYPE DATE PARTY ADDRESS DOC TYPE
AMOUNT REMARKS/ASSIGNMENT PROVISIONS
- - ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
MISCELLANEOUS 06/30/92, Union Pacific 1416 Dodge Street Test Agreement UP grants MKC license to use
CONTRACTS/ renewed Railroad Company Omaha, Nebraska 68179 its trackage on "Boise
INVOICES 04/02/93 (Licensor) (402) 271-3753 Cutoff" between Boise and
for 1 Orchard to test rebuilt
year locomotives; consent to
assignment required
[Paragraph 6]
MISCELLANEOUS 12/21/79 Union Pacific 1416 Dodge Street Agreement [License] Testing of MK locomotives by
CONTRACTS/ - until Railroad Company, Omaha, Nebraska 68179 Railroad over Nampa branch
INVOICES termina- a Utah File #416 lines and main line between
ted w/ corporation CD. No. 51973-10 Hinkle, Oregon and Pocatello,
10-day Idaho
notice
MISCELLANEOUS 06/14/93 Railsoft, Inc. 1805 S. Ponce Deleon Software Development Contract for development of
CONTRACTS/ Ave. N.E. Agreement Train Performance Simulation
INVOICES Atlanta, Georgia 30307 Model (TrainSim) Software;
MKC can assign with prior
written approval (Paragraph
9.03)
NON-COMPETITION 10/05/91 Zero Defects, 615 East 43rd Street NonCompetition 5-year term; MKC agrees to
AGREEMENTS Incorporated Boise, Idaho 83714 Agreement purchase electronic control
Attn: Julie Bertoni modules and components; any
assignment without prior
written consent is void
[Paragraph 7]
UNION 06/30/92 International 5105 S. Apple Agreement Contract term ends 06/03/95,
CONTRACTS Union of Boise, Idaho 83705 with automatic one-year
Operating (208) 344-8414 renewals unless 60-day notice
Engineers, given; MKC required to
Local No. 370 contribute $0.70 per hour
worked into Idaho Operating
Engineers - Employers Pension
Trust Fund (any MultiEmployer
Pension Plan Withdrawal
liability?)
</TABLE>
<PAGE>
LITIGATION SUMMARY
<TABLE>
<CAPTION>
- - ------------------------------------------------------------------------------------------------------------------------------------
- - ------------------------------------------------------------------------------------------------------------------------------------
Matter Contract No./ Amt. of MK
No. Case No. State Plaintiff Defendant Claim Type Atty Misc.
- - ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
93-26 A-0193-2666 Idaho Blair, Alan R. Morrison Knudsen $124,084 Employment EVA No Insurance.
Corp. Claim
- - ------------------------------------------------------------------------------------------------------------------------------------
92-63 3068 New York Shalom, Ellyahu Herbert J. Baldwin $1,006,000 Personal HEW Covered by
and Morrison-Knudsen Injury Insurance
Company, Inc. Litigation
- - ------------------------------------------------------------------------------------------------------------------------------------
93-14 Pennsylvania Delandro Power Parts $15,000 Personal EVA No Insurance.
(See 93-13) Company (max) Injury
Litigation
- - ------------------------------------------------------------------------------------------------------------------------------------
93-20 2584 Idaho Skyline Properties Morrison Knudsen Environ- EVA No Insurance.
Corp. mental
- - ------------------------------------------------------------------------------------------------------------------------------------
93-13 Pennsylvania Matyko (See 93-14) Power Parts $15,000 Personal EVA No Insurance.
Company (max) Injury
Litigation
- - ------------------------------------------------------------------------------------------------------------------------------------
93-2 1990 CF 2471 Illinois Benhaddou, Bellabas Alert $160,000 Employment EVA No Insurance.
Manufacturing (Plaintiff's Claim
Supply Co. Offer)
- - ------------------------------------------------------------------------------------------------------------------------------------
93-75 Argentina Misc. JES MK Rail of
Collections Argentina.
- - ------------------------------------------------------------------------------------------------------------------------------------
93-77 Argentina Misc. DAC Rail-Cormine
Collection Contract.
- - ------------------------------------------------------------------------------------------------------------------------------------
93-72 7043 Pennsylvania JES Rail-Motor Coils
General Contract.
- - ------------------------------------------------------------------------------------------------------------------------------------
93-107 Illinois Carpenter, Robert Power Parts Employment EVA
Company Claim
- - ------------------------------------------------------------------------------------------------------------------------------------
93-112 63512/2584 Illinois Matya, Douglas M. Chicago & $400,000 Personal HEW Includes $100,000
and Marla Northwestern (max) Injury loss of
Transportation Co. Litigation consortium claim.
& MK Corporation Covered by Insur-
ance.
- - ------------------------------------------------------------------------------------------------------------------------------------
93-128 3366 Misc. JMR Rail-Traction
Collections Motor, Locomotive
(LNG Fuels), LNG
Vaporizin; Rail
Systems Overhead
- - ------------------------------------------------------------------------------------------------------------------------------------
93-130 Misc. JMR Rail-Locomotive
Collection Shop (patents).
- - ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
- 1 -
<PAGE>
<TABLE>
<CAPTION>
- - ------------------------------------------------------------------------------------------------------------------------------------
- - ------------------------------------------------------------------------------------------------------------------------------------
Matter Contract No./ Amt. of MK
No. Case No. State Plaintiff Defendant Claim Type Atty Misc.
- - ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
93-127 3366 Idaho General JMR Rail-Alert Manu-
facturing/Power
Parts (general);
Rail Systems
Overhead.
- - ------------------------------------------------------------------------------------------------------------------------------------
93-219 Idaho Misc. SGH Rail-general.
Collections
- - ------------------------------------------------------------------------------------------------------------------------------------
93-283 Pennsylvania Motor Coils United $25,000 Contract EVA
Manufacturing Co. Transportation Dispute
Corporation
- - ------------------------------------------------------------------------------------------------------------------------------------
93-326 M-93-08177 Idaho State of Idaho Dan Kirkright and Criminal RDP ?
Kenneth W. Hawk litigation
- - ------------------------------------------------------------------------------------------------------------------------------------
93-330 Idaho John Cooley Morrison Knudsen Employment RDP
Corporation litigation
- - ------------------------------------------------------------------------------------------------------------------------------------
93-345 Illinois William Stewart Morrison Knudsen Personal HEW ?
Injury
Claim
- - ------------------------------------------------------------------------------------------------------------------------------------
93-349 California Morrison Knudsen Little, David $800,000 Fraud RDP No Insurance. ?
Corporation litigation
- - ------------------------------------------------------------------------------------------------------------------------------------
- - ------------------------------------------------------------------------------------------------------------------------------------
- - ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
HORNELL SP CORE PURCHASES
- - ------------------------------------------------------------------------------------------------------------------------------------
- - ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
LINE UNIT ROAD SUPPLIER UNIT UNIT UNIT MISSING MAJOR
ITEM MODEL NUMBER LOCATION DESTINATION COST MATERIAL COMMENTS
- - ------------------------------------------------------------------------------------------------------------------------------------
- - ------------------------------------------------------------------------------------------------------------------------------------
1 SD45 6520 NATIONAL VMV HORNELL $65,000.00 COMPLETE REMAN
- - ------------------------------------------------------------------------------------------------------------------------------------
2 SD45 6550 NATIONAL SILVIS HORNELL $75,000.00 COMPLETE REMAN
- - ------------------------------------------------------------------------------------------------------------------------------------
3 SD45 6659 NATIONAL SILVIS HORNELL $75,000.00 COMPLETE REMAN
- - ------------------------------------------------------------------------------------------------------------------------------------
4 SD45 6534 NATIONAL VMV HORNELL $65,000.00 AR10's T. MOTORS REMAN
- - ------------------------------------------------------------------------------------------------------------------------------------
5 SD45 6583 NATIONAL VMV HORNELL $65,000.00 AR10's T. MOTORS REMAN
- - ------------------------------------------------------------------------------------------------------------------------------------
6 SD45 9058 NATIONAL SILVIS HORNELL $75,000.00 AR10's T. MOTORS REMAN
- - ------------------------------------------------------------------------------------------------------------------------------------
7 SD45 9130 NATIONAL SILVIS HORNELL $40,000.00 AR10's T. MOTORS REMAN
- - ------------------------------------------------------------------------------------------------------------------------------------
8 SD45 6492 NATIONAL SILVIS HORNELL $65,000.00 AR10's T. MOTORS REMAN
- - ------------------------------------------------------------------------------------------------------------------------------------
9 SD45 9140 NATIONAL SILVIS HORNELL $40,000.00 AR10's T. MOTORS REMAN
- - ------------------------------------------------------------------------------------------------------------------------------------
10 SD45 9020 NATIONAL SILVIS HORNELL $40,000.00 AR10's T. MOTORS REMAN
- - ------------------------------------------------------------------------------------------------------------------------------------
11 SD45 9058 NATIONAL SILVIS HORNELL $40,000.00 AR10's T. MOTORS REMAN
- - ------------------------------------------------------------------------------------------------------------------------------------
12 SD45 9074 NATIONAL SILVIS HORNELL $40,000.00 AR10's T. MOTORS REMAN
- - ------------------------------------------------------------------------------------------------------------------------------------
13 SD45 6196 VMV PADUCAH KY. HORNELL $65,000.00 COMPLETE REMAN
- - ------------------------------------------------------------------------------------------------------------------------------------
14 SD45 8900 VMV PADUCAH KY. HORNELL $65,000.00 COMPLETE REMAN
- - ------------------------------------------------------------------------------------------------------------------------------------
15 SD45 8909 VMV PADUCAH KY. HORNELL $65,000.00 COMPLETE REMAN
- - ------------------------------------------------------------------------------------------------------------------------------------
16 SD45 8913 VMV PADUCAH KY. HORNELL $65,000.00 COMPLETE REMAN
- - ------------------------------------------------------------------------------------------------------------------------------------
17 SD45 8915 VMV PADUCAH KY. HORNELL $65,000.00 COMPLETE REMAN
- - ------------------------------------------------------------------------------------------------------------------------------------
18 SD45 8916 VMV PADUCAH KY. HORNELL $65,000.00 COMPLETE REMAN
- - ------------------------------------------------------------------------------------------------------------------------------------
19 SD45 8917 VMV PADUCAH KY. HORNELL $65,000.00 COMPLETE REMAN
- - ------------------------------------------------------------------------------------------------------------------------------------
20 SD45 8920 VMV PADUCAH KY. HORNELL $65,000.00 COMPLETE REMAN
- - ------------------------------------------------------------------------------------------------------------------------------------
21 SD45 8923 VMV PADUCAH KY. HORNELL $65,000.00 COMPLETE REMAN
- - ------------------------------------------------------------------------------------------------------------------------------------
22 SD45 8927 VMV PADUCAH KY. HORNELL $65,000.00 COMPLETE REMAN
- - ------------------------------------------------------------------------------------------------------------------------------------
23 SD45 8937 VMV PADUCAH KY. HORNELL $65,000.00 COMPLETE REMAN
- - ------------------------------------------------------------------------------------------------------------------------------------
24 SD45 8939 VMV PADUCAH KY. HORNELL $65,000.00 COMPLETE REMAN
- - ------------------------------------------------------------------------------------------------------------------------------------
25 SD45 8942 VMV PADUCAH KY. HORNELL $65,000.00 COMPLETE REMAN
- - ------------------------------------------------------------------------------------------------------------------------------------
26 SD45 8901 VMV PADUCAH KY. HORNELL $65,000.00 COMPLETE REMAN
- - ------------------------------------------------------------------------------------------------------------------------------------
27 SD45 6589 VMV PADUCAH KY. HORNELL $65,000.00 COMPLETE REMAN
- - ------------------------------------------------------------------------------------------------------------------------------------
28 SD45 6685 VMV PADUCAH KY. HORNELL $65,000.00 COMPLETE REMAN
- - ------------------------------------------------------------------------------------------------------------------------------------
29 SD45 6690 VMV PADUCAH KY. HORNELL $65,000.00 COMPLETE REMAN
- - ------------------------------------------------------------------------------------------------------------------------------------
30 SD45 6693 VMV PADUCAH KY. HORNELL $65,000.00 COMPLETE REMAN
- - ------------------------------------------------------------------------------------------------------------------------------------
31 SD45 6694 VMV PADUCAH KY. HORNELL $65,000.00 COMPLETE REMAN
- - ------------------------------------------------------------------------------------------------------------------------------------
32 SD45 6696 VMV PADUCAH KY. HORNELL $65,000.00 COMPLETE REMAN
- - ------------------------------------------------------------------------------------------------------------------------------------
33 SD45 6697 VMV PADUCAH KY. HORNELL $65,000.00 COMPLETE REMAN
- - ------------------------------------------------------------------------------------------------------------------------------------
34 SD45 6699 VMV PADUCAH KY. HORNELL $65,000.00 COMPLETE REMAN
- - ------------------------------------------------------------------------------------------------------------------------------------
35 SD45 909 BLO BLO HORNELL $81,666.00 COMPLETE REMAN
- - ------------------------------------------------------------------------------------------------------------------------------------
36 SD45 6206 BLO BLO HORNELL $81,666.00 COMPLETE REMAN
- - ------------------------------------------------------------------------------------------------------------------------------------
37 SD45 6574 BLO BLO HORNELL $81,666.00 COMPLETE REMAN
- - ------------------------------------------------------------------------------------------------------------------------------------
38 SD45 968 BLO BLO HORNELL $81,666.00 COMPLETE REMAN
- - ------------------------------------------------------------------------------------------------------------------------------------
39 SD45 6573 BLO BLO HORNELL $81,666.00 COMPLETE REMAN
- - ------------------------------------------------------------------------------------------------------------------------------------
40 SD45 973 BLO BLO HORNELL $81,666.00 COMPLETE REMAN
- - ------------------------------------------------------------------------------------------------------------------------------------
41 SD45 951 BLO BLO HORNELL $81,666.00 COMPLETE REMAN
- - ------------------------------------------------------------------------------------------------------------------------------------
42 SD45 6553 BLO BLO HORNELL $81,666.00 COMPLETE REMAN
- - ------------------------------------------------------------------------------------------------------------------------------------
43 SD45 958 BLO BLO HORNELL $81,666.00 COMPLETE REMAN
- - ------------------------------------------------------------------------------------------------------------------------------------
TOTALS $2,849,994.00
</TABLE>
<PAGE>
EXHIBIT A
---------
CORPORATE SUPPORT AND PROFESSIONAL SERVICES AGREEMENT
THIS CORPORATE SUPPORT AND PROFESSIONAL SERVICES AGREEMENT ("Corporate
Services Agreement"), is made as of the 25th day of February 1994. The parties
("Parties") to this Corporate Services Agreement are MK RAIL CORPORATION, a
Delaware corporation ("MK Rail"), and MORRISON KNUDSEN CORPORATION, an Ohio
corporation ("Morrison Knudsen").
RECITALS
WHEREAS, MK Rail is a wholly-owned subsidiary of Morrison Knudsen;
WHEREAS, Morrison Knudsen intends to transfer certain assets relating
to its locomotive division operations to MK Rail, effective as of February 1,
1994 ("Closing Date") pursuant to the terms of that certain Transfer Agreement
between the Parties of even date herewith ("Transfer Agreement");
WHEREAS, prior to the Closing Date, Morrison Knudsen has provided (i)
certain support services, including accounting, reporting, tax preparation, risk
management and human resources and related support services (individually and
collectively, "Support Services"), and (ii) certain research and development,
technical, engineering, environmental, scientific, legal and related services
(individually and collectively, "Professional Services"), that are used or shall
be useful in the day-to-day
CORPORATE SUPPORT AND PROFESSIONAL SERVICES AGREEMENT - 1
<PAGE>
operations of MK Rail after the Closing Date (such Support Services and
Professional Services are sometimes referred to collectively hereinafter as the
"Services"); and
WHEREAS, from and after the Closing Date, MK Rail may desire from time
to time to purchase certain Support and Professional Services from Morrison
Knudsen and Morrison Knudsen desires to provide and sell such Support and
Professional Services to MK Rail, all upon the terms and subject to the
conditions set forth in this Corporate Services Agreement.
NOW, THEREFORE, in consideration of the foregoing and other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the Parties agree as follows:
ARTICLE I
SUPPORT SERVICES
Subject to the provisions of this Corporate Services Agreement,
Morrison Knudsen is prepared to provide to MK Rail, at the request of MK Rail,
the following Support Services:
1.1 ACCOUNTING SERVICES.
1.1.1 SERVICES TO BE PERFORMED. "Accounting Services" shall
include (a) preparation of consolidated financial statements, preparation of
monthly statements, including income and cash flow statements and balance sheets
with customary supporting documentation and any related data collection
CORPORATE SUPPORT AND PROFESSIONAL SERVICES AGREEMENT - 2
<PAGE>
(including monthly MK Rail home office business activity) and processing
necessary for the preparation of such financial statements, and (b) upon the
request of MK Rail, such other accounting and related data processing services
as have been customarily provided by Morrison Knudsen to MK Rail or its
predecessor in interest prior to the Closing Date. Accounting Services shall
not include SEC Reporting Services or Tax Preparation Services.
1.1.2 MAXIMUM TIME PERIODS. Morrison Knudsen shall not be
required to provide Accounting Services requiring more than an average of 50
hours per month or a maximum of 600 hours per year, it being understood by the
Parties that the amount of Accounting Services required will vary from month to
month.
1.2 SEC REPORTING SERVICES.
1.2.1 SERVICES TO BE PERFORMED. "SEC Reporting Services"
shall include assistance in the preparation of (a) Quarterly Reports on Form 10-
Q and (b) Annual Reports on Form 10-K to be filed with the Securities and
Exchange Commission.
1.2.2 MAXIMUM TIME PERIODS. Morrison Knudsen shall not be
required to provide SEC Reporting Services requiring more than an average of 40
hours per month or a maximum of 480 hours per year, it being understood by the
Parties that the amount of SEC Reporting Services required will vary from month
to month.
CORPORATE SUPPORT AND PROFESSIONAL SERVICES AGREEMENT - 3
<PAGE>
1.3 TAX PREPARATION SERVICES.
1.3.1 SERVICES TO BE PERFORMED. "Tax Preparation Services"
shall include assistance in the preparation and filing of federal, state and
local tax returns and statements for MK Rail.
1.3.2 MAXIMUM TIME PERIODS. Morrison Knudsen shall not be
required to provide Tax Preparation Services requiring more than an average of
30 hours per month or a maximum of 360 hours per year, it being understood by
the Parties that the amount of Tax Preparation Services required will vary from
month to month.
1.4 RISK MANAGEMENT SERVICES.
1.4.1 SERVICES TO BE PERFORMED. "Risk Management Services"
shall include assistance with regular insurance and bonding issues, obtaining
insurance and assessing future insurance requirements for MK Rail.
1.4.2 MAXIMUM TIME PERIODS. Morrison Knudsen shall not be
required to provide Risk Management Services requiring more than 25 hours per
month, it being understood by the Parties that the amount of Risk Management
Services required will vary from month to month.
1.5 HUMAN RESOURCES SERVICES.
1.5.1 SERVICES TO BE PERFORMED. "Human Resources Services"
shall include assistance in the human resources area, review of existing
employee plans and policies, administration of
CORPORATE SUPPORT AND PROFESSIONAL SERVICES AGREEMENT - 4
<PAGE>
benefit plans, administration of executive compensation and other plans and
assistance with ERISA filings.
1.5.2 MAXIMUM TIME PERIODS. Morrison Knudsen shall not be
required to provide Human Resources Services requiring more than 30 hours per
month, it being understood by the Parties that the amount of Human Resources
Services required will vary from month to month.
1.6 PROCEDURES. Each request for a Support Service made by MK Rail
will be made in writing accompanied by a detailed scope of work and a
description of any applicable deadlines ("Service Request"). Morrison Knudsen
will review the submitted Service Request and, using the rates and conditions
established herein, determine if the Service Request conforms to the terms set
forth in this Article 1. If the Service Request so conforms, Morrison Knudsen
shall perform the requested Support Service at the rate specified in Section 1.7
hereof. Morrison Knudsen shall not be obligated to perform in respect of any
Service Request that does not conform to the terms set forth in this Article 1.
1.7 RATES. The rate for any Support Services to be provided
hereunder shall be equal to the lowest rate charged by Morrison Knudsen at any
time within the same calendar year to any independent third party for such
services; PROVIDED, however, that in the event no such service is provided by
Morrison Knudsen to a third party, the hourly rate for such Support Service
shall be the direct hourly rate (which in the case of salaried
CORPORATE SUPPORT AND PROFESSIONAL SERVICES AGREEMENT - 5
<PAGE>
employees shall equal their then-current annual salary divided by 2,080 and, in
the case of hourly employees, shall equal their hourly rate) for the Morrison
Knudsen employee actually supplying such Support Service multiplied by 1.8. MK
Rail will also promptly reimburse Morrison Knudsen for any incidental expenses
incurred by Morrison Knudsen in providing the Support Services.
ARTICLE 2
PROFESSIONAL SERVICES
2.1 SERVICES TO BE PERFORMED. Morrison Knudsen agrees to furnish
personnel and supporting computer and related services in order to provide
Professional Services in support of various MK Rail projects and operations,
including research and development services performed by its Advanced Systems
division, environmental, engineering, legal and other Professional Services, all
on a task by task basis. Each task ("Approved Task") will be authorized by a
specific letter of authorization ("Letter of Authorization") from MK Rail, such
Letter of Authorization providing a detailed scope of work and the amount of
funding or rate basis for such task in accordance with the cost schedules
(Attachments I, II and III) attached to this Corporate Services Agreement ("Cost
Schedules"). Upon agreement by Morrison Knudsen to the terms of the Letter of
Authorization, MK Rail will issue a notice to proceed ("Notice to Proceed") to
Morrison Knudsen for the agreed upon scope of work. Each Notice
CORPORATE SUPPORT AND PROFESSIONAL SERVICES AGREEMENT - 6
<PAGE>
to Proceed shall include the agreed upon scope of work and time and, subject to
Section 2.2 hereof, cost of the Service for which it is being issued. MK Rail
shall not issue a Notice to Proceed in relation to, and Morrison Knudsen shall
not be obligated to perform, any scope of work upon which no agreement has been
reached.
2.2 RATES. For each Approved Task, MK Rail agrees to pay Morrison
Knudsen for the Professional Services rendered in accordance with the Cost
Schedules. Notwithstanding anything in this Corporate Services Agreement to the
contrary, the rates for any Professional Services to be provided hereunder shall
be adjusted so that rates charged to MK Rail for any Professional Services are
at least as favorable as those charged by Morrison Knudsen to any other third
party for Professional Services.
ARTICLE 3
BILLING AND PAYMENT
3.1 SUPPORT SERVICES. On or before the 15th day of each January,
March, June and September, Morrison Knudsen shall present MK Rail with an
invoice listing the total hours of Support Service performed and the charges,
computed as set forth herein, for each Support Service rendered during the
preceding three-month period plus an itemization in reasonable detail of the
applicable incidental expenses incurred in connection with the delivery of such
Support Services, together with unbilled
CORPORATE SUPPORT AND PROFESSIONAL SERVICES AGREEMENT - 7
<PAGE>
charges for the prior three-month period, and such invoice shall be due and
payable by the 30th day of that January, March, June and September.
3.2 PROFESSIONAL SERVICES. Every three months during the performance
of Professional Services, Morrison Knudsen shall furnish to MK Rail a statement
prepared in accordance with Section 2.1 hereof of all costs incurred by Morrison
Knudsen in connection with rendering the Professional Services for the preceding
three-month period ("Quarterly Statement"). MK Rail will pay the amount of the
Quarterly Statement within 15 days after MK Rail's receipt of the Quarterly
Statement. Morrison Knudsen shall maintain accurate accounting records of all
reimbursable expenses paid or incurred by Morrison Knudsen in connection with
Professional Services performed and shall permit MK Rail to have access at all
reasonable times to all records, account books, vouchers, invoices and payrolls
relating to direct costs of Professional Services. In case MK Rail desires to
make an audit of Morrison Knudsen's records, it shall be completed within 30
days after final billing is presented to MK Rail.
ARTICLE 4
TERM AND TERMINATION
4.1 TERMINATION DATE. Unless earlier terminated pursuant to Section
4.2 below, this Corporate Services Agreement
CORPORATE SUPPORT AND PROFESSIONAL SERVICES AGREEMENT - 8
<PAGE>
shall remain in effect for a period of two years after the Closing Date
("Termination Date").
4.2 TERMINATION BY MK RAIL. If MK Rail wishes to terminate any of
the Support or Professional Services, it may do so at any time by providing
Morrison Knudsen not less than 10 days' prior written notice specifying the
Support or Professional Services to be terminated by reference to the
appropriate Section of Article 1 or Article 2, as applicable, of this Corporate
Services Agreement.
4.3 EFFECT OF TERMINATION. Upon a valid termination of any of the
Support or Professional Services pursuant to Section 4.2 hereof or upon the
occurrence of the Termination Date, Morrison Knudsen shall no longer have any
obligation to provide any Support or Professional Services to MK Rail. Morrison
Knudsen shall be paid for Services rendered and for all expenditures made,
obligations incurred, and expenses incurred prior to termination of this
Corporate Services Agreement. Upon any termination, all files and records
maintained by Morrison Knudsen relating solely to the terminated Support or
Professional Services shall be turned over to MX Rail.
ARTICLE 5
CONFIDENTIALITY
Each of Morrison Knudsen and MK Rail shall hold, and shall cause its
consultants and advisors to hold, in strict
CORPORATE SUPPORT AND PROFESSIONAL SERVICES AGREEMENT - 9
<PAGE>
confidence, all confidential information concerning the other in its possession
or furnished by the other or the other's representatives at any time, and each
Party shall not release or disclose such confidential information to any other
person except its auditors, attorneys, financial advisors, bankers, other
consultants and advisors or persons with whom a Party has a valid existing
obligation to disclose such confidential information and which such third party
is bound to maintain such confidentiality, except to the extent that such
confidential information (a) is in the public domain through no fault of such
Party, (b) has been lawfully acquired from other sources by such Party or (c)
such confidential information is required by law to be disclosed.
Notwithstanding anything to the contrary contained herein, no Party shall be
liable for the inadvertent or accidental disclosure of any confidential
information, if such disclosure occurs despite the exercise of the same degree
of care as such Party normally takes to preserve and safeguard its own
confidential information.
ARTICLE 6
LIMITATION OF LIABILITY
In providing Services hereunder, Morrison Knudsen shall not be liable
to MK Rail for, and MK Rail shall hold Morrison Knudsen harmless from, any and
all claims arising from errors or omissions, except to the extent that such
errors and omissions
CORPORATE SUPPORT AND PROFESSIONAL SERVICES AGREEMENT - 10
<PAGE>
result from the gross negligence or willful misconduct of Morrison Knudsen
employees or agents. In no event shall Morrison Knudsen be liable (a) for any
consequential damages, including lost profits, loss of use or injury to good
will of MK Rail or any other indirect consequential damages or (b) any damages
in excess of the sum of the payments made by MK Rail to Morrison Knudsen
hereunder, and MK Rail hereby agrees to hold Morrison Knudsen harmless from any
liability in excess of that amount. Morrison Knudsen shall have no obligation
to preserve any of its areas of expertise or to maintain in its employ any
person whatsoever even though such person may be uniquely qualified to render
Services hereunder to MK Rail.
ARTICLE 7
DRAWINGS AND SPECIFICATIONS
Morrison Knudsen shall maintain a record set of reproductions of any
or all drawings and specifications prepared in connection with any Professional
Services provided to MK Rail during the term of this Corporate Services
Agreement. Unless directed by MK Rail in writing to do otherwise, Morrison
Knudsen may retain one record set of any or all drawings and specifications
prepared for MK Rail at the conclusion of any Professional Services or upon
termination of this Corporate Services Agreement.
CORPORATE SUPPORT AND PROFESSIONAL SERVICES AGREEMENT - 11
<PAGE>
ARTICLE 8
COMPLIANCE WITH LAWS
Morrison Knudsen agrees to comply with all applicable state, federal
and local laws and regulations ("Laws") pertaining to its performance under this
Corporate Services Agreement. MK Rail shall not request, and Morrison Knudsen
shall not be required to perform, any Services that violate any Laws.
ARTICLE 9
INDEPENDENT CONTRACTOR
The relationship of Morrison Knudsen to MK Rail under this Corporate
Services Agreement shall be that of independent contractor.
ARTICLE 10
MISCELLANEOUS
10.1 COMPLETE AGREEMENT. This Corporate Services Agreement, the
Transfer Agreement and the other agreements and documents referred to herein and
therein, shall constitute the entire agreement between the Parties with respect
to the subject matter hereof and shall supersede all previous negotiations,
commitments and writings with respect to such subject matter.
10.2 GOVERNING LAW. This Corporate Services Agreement shall be
governed by and construed in accordance with the laws of
CORPORATE SUPPORT AND PROFESSIONAL SERVICES AGREEMENT - 12
<PAGE>
the State of Delaware, without regard to the principles of conflicts of laws
thereof.
10.3 NOTICES. All notices and other communications hereunder shall be
in writing and shall be delivered by hand, mailed by registered or certified
mail (return receipt requested) or sent by courier or other express delivery
that provides for independent delivery verification to the Parties at the
following addresses (or at such other addresses for a Party as shall be
specified by like notice) and shall be deemed given on the date on which such
notice or communication is delivered to the addresses at the address specified
below:
(a) If to Morrison Knudsen:
Morrison Knudsen Corporation
Morrison Knudsen Plaza
720 Park Blvd.
Boise, Idaho 83729
Attention: Stephen G. Hanks
(b) If to MK Rail:
MK Rail Corporation
Morrison Knudsen Plaza
720 Park Blvd.
Boise, Idaho 83707
Attention: President
10.4 AMENDMENTS. This Corporate Services Agreement may not be modified
or amended except by an agreement in writing signed by the Parties hereto. on
and after the effective date of the Registration Statement on Form S-1 as filed
in the Securities and Exchange Commission on February 24, 1994, relating to the
sale to the public of shares of common stock of MK Rail, any
CORPORATE SUPPORT AND PROFESSIONAL SERVICES AGREEMENT - 13
<PAGE>
amendment to this Agreement must, in the case of MK Rail, be approved by a
committee of the Board of Directors of MK Rail comprised solely of directors who
are not officers or employees of MK Rail or any of its affiliates (including
Morrison Knudsen).
10.5 SUCCESSORS AND ASSIGNS. This Corporate Services Agreement and
all of the provisions hereof shall be binding upon and inure to the benefit of
the Parties and their respective successors and assigns; PROVIDED, however, that
no Party may assign or delegate any of its rights or obligations under this
Corporate Services Agreement (except to a majority-owned subsidiary) without the
consent of the other Party, which consent shall not be unreasonably withheld.
10.6 NO THIRD-PARTY BENEFICIARIES. This Corporate Services Agreement
is solely for the benefit of the Parties hereto and shall not be deemed to
confer upon any third parties any remedy, claim, liability, reimbursement, claim
of action or other right in excess of those existing without reference to this
Agreement.
10.7 TITLES AND HEADINGS. Titles and headings to sections herein are
inserted for the convenience of reference only and are not intended to be part
of or to affect the meaning or interpretation of this Corporate Services
Agreement.
10.8 EXECUTION IN COUNTERPARTS. This Corporate Services Agreement may
be executed in counterparts, each of which
CORPORATE SUPPORT AND PROFESSIONAL SERVICES AGREEMENT - 14
<PAGE>
shall be deemed an original, but which together shall constitute one and the
same agreement.
10.9 SURVIVAL. All covenants and agreements of the Parties contained
in Article 3, 4, 5, 6, 7 and 9 hereof shall survive termination of this
Corporate Services Agreement.
* * *
CORPORATE SUPPORT AND PROFESSIONAL SERVICES AGREEMENT - 15
<PAGE>
IN WITNESS WHEREOF, the Parties have caused this Corporate Support and
Professional Services Agreement to be duly executed as of the day and year first
above written.
MK RAIL CORPORATION
By:________________________________
Title:________________________
MORRISON KNUDSEN CORPORATION
By:_______________________________
Title:_______________________
CORPORATE SUPPORT AND PROFESSIONAL SERVICES AGREEMENT - 16
<PAGE>
ATTACHMENT I
COST SCHEDULE
The cost of the Professional Services rendered by Morrison Knudsen under
this Corporate Support and Professional Services Agreement shall include
specifically, but not necessarily exclusively, the following:
1. DIRECT LABOR
(a) Actual costs of salaries and wages of managers, supervisors,
engineering personnel, research and development personnel, estimators,
planning and scheduling personnel, attorneys, accountants, human
resources specialists, stenographers, clerks and other home office and
field personnel, as required, for their time devoted to Professional
Services.
(b) Premium portion of overtime.
2. MARKUP ON DIRECT LABOR: The lowest percentage of Item 1(a) above charged to
any client of Morrison Knudsen to cover the cost of payroll burden
(vacation, holiday, sick leave, company portion and payroll taxes, group
insurance, savings plan and retirement plan); general overhead expenses
(office furniture, maintenance of organization ready to serve, and all
other expenses incurred by Morrison Knudsen in conducting its business that
are not created by or properly chargeable to a specific job); and for
profit.
3. OTHER DIRECT COSTS: MK Rail will reimburse Morrison Knudsen for the
following other direct costs incurred in the performance of Professional
Services:
(a) TRAVEL AND LIVING EXPENSES: Travel and living expenses for Morrison
Knudsen personnel engaged in the performance of Professional Services
while away from their home office.
(b) PRINTING AND REPRODUCTION: The costs of blueprints, photostats, and
other reproductions in accordance with Morrison Knudsen's standard
rates (Attachment II Reprographics Cost Schedule).
(c) TAXES: Any sales, use, or gross receipts taxes payable by Morrison
Knudsen on purchases for Professional Services or on receipts under
this Corporate Services Agreement.
CORPORATE SUPPORT AND PROFESSIONAL SERVICES AGREEMENT - 17
<PAGE>
(d) COMMUNICATIONS: The costs of toll telephone and telegraph service
incurred in the performance of Professional Services.
(e) INSURANCE: The costs of Morrison Knudsen's package policy insurance
coverage applicable to this Agreement. The rate is $1.69 per $100 of
project revenue, effective 8/l/89.
(f) COMPUTER COSTS: The cost of Morrison Knudsen's Home Office computer
center for the time directly devoted to Professional Services, in
accordance with Morrison Knudsen's standard rates (Attachment III-
Computing Cost Schedule Commercial Client).
(G) MISCELLANEOUS COSTS: Any other costs not described above which are
proper charges to Professional Services and approved by MK Rail.
CORPORATE SUPPORT AND PROFESSIONAL SERVICES AGREEMENT - 18
<PAGE>
ATTACHMENT II
REPROGRAPHICS COST SCHEDULE
(as of December 20, 1993)*
Document Reproduction Costs
- - --------------------- -----
Specifications $0.12 Per Sheet
Correspondence $0.12 Per Sheet
Other $0.12 Per Sheet
Drawing Reproduction Costs
- - -------------------- -----
Black and White Prints $0.20 Per Square Foot
Sepias $0.50 Per Square Foot
Mylar $1.35 Per Square Foot
1860 Xerox Printer $1.00 Per Linear Foot Paper
$1.50 Linear Foot Vellum
- - --------------------
* Subject to revision at any time prior to issuance of applicable Letter of
Authorization.
CORPORATE SUPPORT AND PROFESSIONAL SERVICES AGREEMENT - 19
<PAGE>
ATTACHMENT III
COMPUTING COST SCHEDULE
COMMERCIAL CLIENT
(as of December 20, 1993)*
A. VAX 8600
1. UNIT RATES
(CT) connect Time $12.35 Per Hour
(SRU) System Resource Unit .238 Per Hour
(DS) Disk Storage .00052 Per Block
Per Day
The SRU charge includes CPU time, pages printed, page faults, buffered
I/O, and direct I/O.
Total Systems Charges = CT + SRU + DS
SRU Processor Differential VAX 8600 = 1.0
Microvax II = 0.25
B. IBM 3090
1. MVS BATCH
Service Units $0.18 Per Thousand
Tape Mounts 2.95 Each
Shift Differential 0601 to 1800 MST =
1.00
1801 to 0600 MST =
.70
Job Cost = Shift Differential (Service Units + Tape Mounts)
2. CMS: Service Units $0.20 Per Thousand
3. CICS: Service Units $0.40 Per Thousand
- - --------------------
* Subject to revision at any time prior to issuance of applicable Letter of
Authorization.
CORPORATE SUPPORT AND PROFESSIONAL SERVICES AGREEMENT - 20
<PAGE>
4. STORAGE CHARGE
Magnetic Tape Rental $2.15 Per Month
Permanent Removal of Magnetic Current Replacement
Tape from Library Cost x 1.35
Disk storage charge is included in service unit rate.
C. CAD SYSTEM
Microstation $25.00 Per Connect
Hour
D. PERSONAL COMPUTER
Engineering $15.00 Per Hour
project Controls/Estimating $30.00 Per Hour
E. RATES FOR ADDITIONAL SERVICES
Pen Plotters $100.00 Per Hour
Electrostatic Plotters 6.00 Per Linear Ft
Digital Image Display 50.00 Per Hour
Digitizer 20.00 Per Hour
Data Entry 10.00 Per Hour
Special Backup Tapes 25.00 Per Tape
Tape Storage 5.00 Per Month
Word Processing (Machine/System Costs) 7.50 Per Hour
Hardware IBM 3178 CRT 65.00 Per Month
F. SYSTEM DESIGN AND PROGRAMMING
When Morrison Knudsen's personnel are required to initiate specific
programs, to create new programs, or to modify existing programs, their
services shall be reimbursed at actual cost plus applicable markup.
G. MATERIALS COSTS
The price of stock paper on the VAX 8600 is included in the billing
algorithm. Special preprinted forms, cards, etc., will be charged at cost.
H. EFFECTIVE DATE
The Computing Cost Schedule is subject to revision with 30 days' prior
written notification.
CORPORATE SUPPORT AND PROFESSIONAL SERVICES AGREEMENT - 21
<PAGE>
EXHIBIT B
ENVIRONMENTAL LIABILITY TRANSFER AGREEMENT
THIS ENVIRONMENTAL LIABILITY TRANSFER AGREEMENT ("Agreement") is made
and entered into as of the 25th day of February, 1994. The parties ("Parties")
to this Agreement are MORRISON KNUDSEN CORPORATION, an Ohio corporation
("Morrison Knudsen"), and MK RAIL CORPORATION, a Delaware corporation ("MK
Rail").
RECITALS
WHEREAS, MK Rail is a wholly-owned subsidiary of Morrison Knudsen;
WHEREAS, MK Rail intends to sell shares of its Common Stock to the
public ("Public Offering");
WHEREAS, pursuant to the terms of that certain Transfer Agreement
between the Parties of even date herewith ("Transfer Agreement"), Morrison
Knudsen is (i) transferring certain assets relating to its locomotive division
operations to MK Rail, effective as of February 1, 1994 (the "First Closing
Date"), and (ii) transferring to MK Rail 100% of the issued and outstanding
capital stock of its locomotive-related component parts subsidiaries as well as
its interest in certain foreign joint venture operations and properties, to be
effective not later than one day prior to the effective date of the Public
Offering (the "Second Closing Date");
WHEREAS, in connection with such asset and stock transfers, MK Rail
has agreed to assume certain Environmental Liabilities (as hereinafter defined)
of Morrison Knudsen, and the Parties desire to set forth the terms and
conditions pursuant to which MK Rail shall assume such Environmental
Liabilities.
NOW, THEREFORE, in consideration of the foregoing and other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the Parties agree:
ARTICLE 1
DEFINITIONS
1.1 GENERAL. As used in this Agreement, capitalized terms defined
immediately after their use shall have the respective meanings thereby provided,
and the following terms shall have the following meanings (such meanings to be
equally applicable to both the singular and plural forms of the terms defined):
ACTION: any action, claim, suit, arbitration, inquiry, subpoena,
discovery request, proceeding or investigation by or before any court or grand
jury, any governmental or other
ENVIRONMENTAL LIABILITY TRANSFER AGREEMENT - 1
<PAGE>
regulatory or administrative agency or commission or any arbitration tribunal
related to, arising out of or resulting from any Environmental Liability.
BUSINESS: the operations and business of Morrison Knudsen being
transferred to MK Rail pursuant to the Transfer Agreement relating to (a) the
remanufacturing of railroad locomotives, (b) the design, development and
manufacture of new high-technology locomotives, (c) the design, manufacture,
distribution and sale of locomotive component parts, and (d) the provision of
locomotive fleet maintenance services, all as more particularly described in the
Transfer Agreement.
ENVIRONMENT: any indoor or outdoor ambient air, surface water, ground
water, drinking water, building surface, material surface, land surface or
subsurface station.
ENVIRONMENTAL LAW: any federal, foreign, state, provincial, local, or
municipal law (including common law), statute, ordinance, regulation, order,
decree, judgment, decision, ruling, permit or authorization (each as may be in
effect from time to time) relating or applicable to pollution or protection of
health or the environment, including, without limitation, any of the foregoing
relating or applicable to emissions, discharges, spills, releases or threatened
releases of any Materials of Environmental Concern upon or into the Environment,
or human or natural resource exposure to any Material of Environmental Concern,
or otherwise relating to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport or handling of any Material of
Environmental Concern.
ENVIRONMENTAL LIABILITY: any and all debts, liabilities, warranties
and obligations (of any nature or type whatsoever regardless of when arising),
whether accrued, contingent or reflected on a balance sheet, including, without
limitation, liability for investigatory costs, oversight costs, remediation and
cleanup costs, governmental or private response costs and cost recovery actions,
natural resource damages, property damages, personal injuries, consequential
economic damages, administrative, civil or criminal penalties or forfeitures,
and attorneys' fees or other costs of defending an Action or a claim of
Environmental Liability under any Environmental Law.
EPA: the United States Environmental Protection Agency.
FOREIGN INTERESTS: those certain interests in foreign partnerships,
corporations, joint ventures and properties of Morrison Knudsen, as identified
and described in the Transfer Agreement.
ENVIRONMENTAL LIABILITY TRANSFER AGREEMENT - 2
<PAGE>
IDEO: the Division of Environmental Quality, Idaho Department of
Health and Welfare.
LOSS: any loss, liability, claim, damage, obligation, payment, cost or
expense (including, without limitation, the costs and expenses of any Action,
any demand, assessment, judgment, settlement or compromise related thereto and
reasonable attorneys' fees, disbursements and other charges in connection
therewith).
MATERIAL OF ENVIRONMENTAL CONCERN: any chemical or its derivatives,
pollutant, contaminant, hazardous waste, toxic substance, hazardous substance,
hazardous material, petroleum, petroleum product or petroleum derivatives.
POST CLOSURE PERMIT: that certain Post Closure Permit dated January
18, 1991, issued by the Idaho Department of health and Welfare, EPA
Identification No. lDD980976831, relating to the ownership and operation by
Morrison Knudsen of its Boise locomotive shop.
REAL PROPERTY: collectively, the real property on which Morrison
Knudsen and the Subsidiaries conduct the Business, whether such real property is
owned or leased.
SITE: the Morrison Knudsen Boise Industrial Complex property located
at 4600 Apple Street, Boise, Idaho, located in Ada County in the northwest
quarter of Section 36, T3N, R2E Boise Meridian, as more particularly described
in the Transfer Agreement and Post Closure Permit.
SUBSIDIARIES: MK Engine Systems Company, Inc., a New York corporation;
Alert Mfg. & Supply Co., an Illinois corporation; Clark Industries, Inc., an
Illinois corporation; MCM Transportation Co., a Pennsylvania corporation; Motor
Coils Manufacturing Co., a Pennsylvania corporation; Power Parts Company, a
Nevada corporation; Power Parts Sign Co., an Illinois corporation; and
Touchstone, Inc., a Tennessee corporation, and their subsidiaries.
1.2 ADDITIONAL DEFINITIONS. Capitalized terms not specifically
defined herein shall have the meanings ascribed thereto in the Transfer
Agreement, which such definitions are incorporated herein by this reference and
made a part hereof.
ARTICLE 2
ASSUMPTION OF ENVIRONMENTAL LIABILITIES
2.1 ASSUMPTION BY MK RAIL OF ENVIRONMENTAL LIABILITIES. With the
exception of the Post Closure Permit, the terms of the assumption and transfer
of which shall be governed by the provisions of Article 3 hereof, MK Rail shall
assume the
ENVIRONMENTAL LIABILITY TRANSFER AGREEMENT - 3
<PAGE>
liability for and perform at its expense all of the obligations of Morrison
Knudsen and MK Rail including, and limited only as provided below in Section
2.3, any investigative or remedial actions required by law or contract, for any
Environmental Liability arising before or after the applicable Closing Dates as
provided in Section 2.2 hereof and resulting from:
(a) The operation (whether or not in the normal course) of the
Business;
(b) The actions or omissions of any employee, agent (including any
contractor or consultant) of Morrison Knudsen or MK Rail while such employee or
agent was employed or performing work or activities in connection with the
Business; and
(c) The presence of any Material of Environmental Concern in, on or
under any Real Property.
2.2 EFFECTIVE DATE. Except as provided in Article 3 below with
respect to the Post Closure Permit, the effective date of this Agreement with
respect to the Business (excluding the operations of the Subsidiaries and the
Foreign Interests) shall be the First Closing Date, and the effective date of
this Agreement with respect to the Subsidiaries and the Foreign Interests shall
be the Second Closing Date.
2.3 EXCEPTIONS TO ASSUMPTION OF ENVIRONMENTAL LIABILITIES.
Notwithstanding any other provision of this Agreement, MK Rail shall not assume
hereunder, and Morrison Knudsen shall indemnify, defend and hold MK Rail
harmless against any and all Losses or Actions arising from or relating to, any
Environmental Liability resulting directly or indirectly from the conduct by
Morrison Knudsen of any activity on any Real Property which is not activity
associated with the Business; PROVIDED, however, that, to the extent MK Rail, as
of and after the First or Second Closing Date, as applicable, affirmatively
contributes to or aggravates the conditions for which Morrison Knudsen otherwise
would be liable hereunder, MK Rail shall be liable for any increase in cost or
liability attributable directly to such contribution or aggravation by MK Rail.
ARTICLE 3
TRANSFER OF POST CLOSURE PERMIT
3.1 APPLICATION FOR TRANSFER. As soon as practical after the First
Closing Date, the Parties shall apply with the EPA and IDEQ for a transfer of
the Post Closure Permit from Morrison Knudsen Company, Inc., a Delaware
corporation and a wholly-owned subsidiary of Morrison Knudsen, to MK Rail. Such
transfer application shall be made in accordance with the requirements relating
to Class 1 permit modifications under 40 C.F.R. Section 270.40 (1992).
ENVIRONMENTAL LIABILITY TRANSFER AGREEMENT - 4
<PAGE>
3.2 EFFECTIVE DATE OF TRANSFER. The effective date of the transfer
of the Post Closure Permit to MK Rail shall be 90 days after the date of
application for transfer provided in Section 3.1 hereof or, if later, the date
on which the transfer of the Post Closure Permit to MK Rail has been approved by
the EPA and IDEQ ("Permit Transfer Date").
3.3 DEMONSTRATION OF FINANCIAL REQUIREMENTS. On and after the First
Closing Date, Morrison Knudsen shall continue to comply with the requirements of
40 C.F.R. parts 264 and 265, subpart H (Financial Requirements) until such time
as MK Rail has demonstrated compliance with such subparts; PROVIDED, however,
that in the event MK Rail fails to demonstrate compliance with such Financial
Requirements within six months of the First Closing Date, Morrison Knudsen shall
issue corporate guarantees for (i) closure and post-closure care and (ii) sudden
and non-sudden accidental occurrences, as specified in subpart H of 40 C.F.R.
parts 264 and 265. Such corporate guarantees shall be in the form attached as
Appendix I and Appendix II hereof, and shall remain in effect until such time as
MK Rail shall demonstrate compliance with the requirements of 40 C.F.R. parts
264 and 265, subpart H, as applicable.
3.4 PERFORMANCE BY MORRISON KNUDSEN. Until the Permit Transfer Date,
Morrison Knudsen shall remain responsible for compliance with all of the terms
and conditions of the Post Closure Permit, and shall have full liability
thereunder as a primary obligor and not as a surety, unless:
(a) an obligation under the Post Closure Permit is contested in good
faith by Morrison Knudsen by dispute resolution under the Post Closure Permit or
in any other administrative or judicial forum having jurisdiction; or
(b) performance is excused or otherwise not required by EPA and IDEQ.
ARTICLE 4
EASEMENT FOR SITE ACCESS
MK Rail agrees that, so long as Morrison Knudsen has any liability or
responsibility under the Post Closure Permit, Morrison Knudsen shall reserve an
easement to and on the Site. This easement shall allow Morrison Knudsen, IDEQ,
EPA and the agents, employees, contractors, subcontractors, consultants and
representatives of any of them access to, entry upon and use of the Site for the
exercise of all rights and performance of all obligations of Morrison Knudsen
under the Permit and this Agreement, including but not limited to:
ENVIRONMENTAL LIABILITY TRANSFER AGREEMENT - 5
<PAGE>
(a) well drilling, water and water table sampling and monitoring, and
water level measuring and monitoring;
(b) surface water and sediment sampling and soil sampling;
(c) geophysical tests or explorations;
(d) establishing, operating and maintaining,
monitoring and treatment facilities; and
(e) conducting such other actions as may be required by EPA or IDEQ.
ARTICLE 5
COOPERATION BY MORRISON KNUDSEN
Morrison Knudsen will cooperate reasonably with MK Rail during
Morrison Knudsen's performance of its obligations under the Post Closure Permit
and this Agreement (subject always to the lawful authority and direction of EPA
and IDEQ), including, but not limited to:
(a) avoiding any unnecessary interference with the operations of MK
Rail at the Site;
(b) complying with MK Rail's applicable health, safety and security
rules;
(c) providing reasonable advance notice of coming on the Site and of
commencement of activities; and
(d) providing reasonable advance notice and opportunity to confer
with Morrison Knudsen, and if necessary EPA and IDEQ, about any activity not
required by the Post Closure Permit that Morrison Knudsen intends to propose to
EPA and IDEQ that would reasonably be anticipated to cause material physical
damage to the Site or any fixture, installation, building or improvement
thereon, or to interfere materially with MK Rail's operations.
ARTICLE 6
RELATIONSHIP WITH AGENCIES
6.1 SUBMISSIONS TO AGENCIES. Each of Morrison Knudsen and MK Rail
agrees to provide the other Party with copies of all correspondence, reports,
plans and validated data pertaining to the Site or any other parcel of Real
Property submitted by or on behalf of Morrison Knudsen or MK Rail to IDEQ, EPA
or any other state, federal, local or foreign environmental regulatory agency.
ENVIRONMENTAL LIABILITY TRANSFER AGREEMENT - 6
<PAGE>
6.2 CONTACT WITH AGENCIES. Morrison Knudsen agrees that until the
Permit Transfer Date it will not report to, notify or otherwise communicate with
IDEQ or EPA regarding any activities or conditions relating to the Post Closure
Permit without either MK Rail being a party to such communication or the prior
knowledge and consent of MK Rail.
6.3 NOTICE OF RELEASES. MK Rail and Morrison Knudsen agree that each
of them will provide notice to the other in the event of any release, spill or
unpermitted discharge of any Material of Environmental Concern at the Site or at
any Real Property that requires notification to EPA, IDEQ or any federal, state,
local or foreign environmental regulatory agency.
ARTICLE 7
INDEMNIFICATION
Except as specifically provided herein, MK Rail agrees to indemnify,
defend and hold harmless Morrison Knudsen, its parents, predecessors,
successors, present and former subsidiaries, related corporations, divisions,
affiliates, shareholders, officers, directors, employees, agents, contractors,
subcontractors, consultants, servants, attorney, assigns and representatives of
any of them ("MK Indemnitees") from and against any and all Losses arising out
of or in any way related to any Environmental Liability assumed by MK Rail
hereunder. The terms of such indemnification shall be governed by and consistent
with the provision of Article 11 of the Transfer Agreement, the terms and
conditions of which are incorporated herein by this reference.
ARTICLE 8
RELEASE OF CLAIMS
MK Rail hereby remises, releases and discharges MK Indemnitees of and
from, waives all rights against MK Indemnitees with respect to, and covenants
not to sue MK Indemnitees for, any and all past, present and future claims,
demands, damages, costs, suits, losses of any kind, liabilities, obligations,
actions and causes of action whatsoever, in law or in equity, whether for
negligence, breach of contract or warranty, strict liability, nuisance or breach
of any duty whatsoever, and the costs, expenses and fees (including without
limitation attorneys' fees) related thereto, which any MK Indemnitee had, has or
ever shall or may have with respect to any and all of the following ("Released
Claim"):
(a) any economic loss, expenses, costs, fees, lost profits,
diminishing of value or marketability of property, loss of customers or revenue,
loss of use of any property due to
ENVIRONMENTAL LIABILITY TRANSFER AGREEMENT - 7
<PAGE>
casualty, inability to obtain financing at competitive rates, breach of contract
of any third party, or any consequential damages whatsoever arising out or
related to the ownership, possession or operations of or at the Site and the
Real Property, this Agreement, the Transfer Agreement, the Post Closure Permit,
any Environmental Liability or the performance or failure to perform any of
Morrison Knudsen's obligations under the Post Closure Permit or this Agreement,
any delay in obtaining possession or occupancy of the Site or any other Real
Property, damage to the Site or any Real Property or any improvements thereon,
or interference, hinderance or interruption in the use by MK Rail of the Site or
any other Real Property; or
(b) any personal injury or death or property damage, caused by or
contributed to by any MK Indemnitee except for personal injury or death or
physical damage to the Site or any building or improvement on the Site caused or
contributed to by the negligence of any MK Indemnitee in the performance of any
of Morrison Knudsen's obligations under the Post Closure Permit or this
Agreement.
In addition, if any insurer indemnities or pays on behalf of MK Rail
all or any part of any Released Claim, then MK Rail agrees to cause any such
insurer to waive any and all subrogation rights against MK Indemnitees.
ARTICLE 9
MISCELLANEOUS
9.1 ASSIGNMENT. This Agreement shall be binding upon MK Rail and
Morrison Knudsen and their respective legal representatives, successors and
assigns. However, except for assignments to corporate subsidiaries or any other
affiliates, or assignments by operation of law, neither MK Rail nor Morrison
Knudsen shall assign any rights, obligations or interest in this Agreement
without prior written notice to and the written approval of the other. In
addition to the foregoing, on and after the effective date of the Public
Offering, any amendment to this Agreement must, in the case of MK Rail, be
approved by a committee of the Board of Directors of MK Rail comprised solely of
directors who are not officers or employees of MK Rail or any of its affiliates
(including Morrison Knudsen).
9.2 GOVERNING LAW. This Agreement shall be governed by the State of
Delaware.
9.3 WAIVER. The failure of any Party to enforce any of the
provisions of this Agreement, or the waiver thereof in any instance shall not be
construed as a general waiver or relinquishment on the part of such Party of any
such provision but the same shall nevertheless be and remain in full force and
effect.
ENVIRONMENTAL LIABILITY TRANSFER AGREEMENT - 8
<PAGE>
9.4 SEVERABILITY. It is the intent of the Parties that the clauses
of this Agreement are severable, and should any part of this Agreement be
declared invalid or unenforceable, all other clauses under this Agreement shall
remain in full force and effect.
9.5 MERGER. This Agreement, the Transfer Agreement, and the Related
Agreements (as defined in the Transfer Agreement) all of even date herewith,
contain the entire agreement between Morrison Knudsen and MK Rail, and there are
no other terms, obligations, covenants, representations, statements or
conditions, oral or otherwise, of any kind whatsoever relating to the
transactions contemplated hereby and thereby. Any changes to this Agreement must
be made in writing and executed by each of the parties hereto.
9.6 NOTICES. All notices or other communications shall be given or
made in writing by certified mail, return receipt requested or by commercial
overnight delivery service addressed as follows:
If to Morrison Knudsen:
Morrison Knudsen Corporation
Morrison Knudsen Plaza
720 Park Blvd.
Boise, Idaho 83729
Attn: Stephen G. Hanks
If to MK Rail:
MK Rail Corporation
Morrison Knudsen Plaza
720 Park Blvd.
Boise, Idaho 83729
Attn: President
9.7 TITLE AND HEADINGS. Titles and headings to sections and articles
herein are inserted for the convenience of reference only and are not intended
to be part of or to affect the meaning or interpretation of this Agreement.
ENVIRONMENTAL LIABILITY TRANSFER AGREEMENT - 9
<PAGE>
9.8 EXECUTION AND COUNTERPARTS. This Agreement may be executed in
counterparts, each of which shall be deemed an original, but which together
shall constitute one and the same agreement.
IN WITNESS WHEREOF, the parties have caused this Agreement and this
Environmental Transfer Agreement to be duly executed as of the day and year
first above written.
MORRISON KNUDSEN CORPORATION,
an Ohio Corporation
By
-----------------------------------
Title:
----------------------------
MK RAIL CORPORATION,
a Delaware corporation
By
-----------------------------------
Title:
----------------------------
ENVIRONMENTAL LIABILITY TRANSFER AGREEMENT - 10
<PAGE>
APPENDIX I
CORPORATE GUARANTEE FOR CLOSURE
OR POST-CLOSURE CARE
Guarantee made this ___________________, 1994 by MORRISON KNUDSEN
CORPORATION, a business corporation organized under the laws of the State of
Ohio (herein referred to as "Guarantor"), to the United States Environmental
Protection Agency ("EPA"), and the State of Idaho, Department of Health and
Welfare, Division of Environmental Quality ("IDEQ"), obligees, on behalf of our
subsidiary MK RAIL CORPORATION, a Delaware corporation ("MK Rail"), whose
business address is Morrison Knudsen Plaza, 720 Park Blvd., Boise, Idaho 83729.
R E C I T A L S
1. Guarantor meets or exceeds the financial test criteria and agrees
to comply with the reporting requirements for guarantors as specified in 40
C.F.R. Section 264.143(f), Section 264.145(f), Section 265.143(e), and Section
265.145(e).
2. MK Rail owns or operates the following facility covered by this
Guarantee:
EPA Identification No. 980976831
Boise Locomotive Shop
4600 Apple Street
Boise, Idaho 83705
This Guarantee is for post-closure care.
3. "Closure plans" and "post-closure plans" as used below refer to
the plans maintained as required by subpart G of 40 C.F.R. parts 264 and 265 of
the closure and post-closure care of the facility identified above.
4. For value received from MK Rail, Guarantor guarantees to EPA and
IDEQ that in the event that MK Rail fails to perform post-closure care of the
above facility in accordance with the closure or post-closure plans and other
permit or interim status requirements whenever required to do so, the Guarantor
shall do so or establish a trust fund as specified in subpart H of 40 C.F.R.
part 264 or 265, as applicable, in the name of MK Rail in the amount of the
current or post-closure cost estimates as specified in subpart H of 40 C.F.R.
parts 264 and 265.
5. Guarantor agrees that if, at the end of any fiscal year before
termination of this Guarantee, the Guarantor fails to meet the financial test
criteria, Guarantor shall send within 90
ENVIRONMENTAL LIABILITY TRANSFER AGREEMENT - 11
<PAGE>
days, by certified mail, notice to the EPA Regional Administrator for the Region
in which the facility is located (with a copy to IDEQ) and to MK Rail that it
intends to provide alternate financial assurance as specified in subpart H of 40
C.F.R. part 264 or 265, as applicable, in the name of MK Rail. Within 120 days
after the end of such fiscal year, the Guarantor shall establish such financial
insurance, unless MK Rail has done so.
6. The Guarantor agrees to notify the EPA Regional Administrator
(with a copy to IDEQ) by certified mail, of a voluntary or involuntary
proceeding under Title 11 (Bankruptcy), U.S. Code, naming Guarantor as debtor,
within 10 days after commencement of the proceeding.
7. Guarantor agrees that within 30 days after being notified by an
EPA Regional Administrator or by IDEQ of a determination that Guarantor no
longer meets the financial test criteria or that it is disallowed from
continuing as a guarantor of closure or post-closure care, it shall establish
alternate financial assurance as specified in subpart H of 40 C.F.R. part 264 or
265, as applicable, in the name of MK Rail, unless MK Rail has done so.
8. Guarantor agrees to remain bound under this Guarantee
notwithstanding any or all of the following: amendment or modification of the
closure or post-closure plan, amendment or modification of the permit, the
extension or reduction of the time of performance of closure or post-closure, or
any other modification or alteration of an obligation of the owner or operator
pursuant to 40 C.F.R. part 264 or 265.
9. Guarantor agrees to remain bound under this Guarantee for so long
as MK Rail must comply with the applicable financial assurance requirements of
subpart H of 40 C.F.R. parts 264 and 265 for the above listed facility, except
that Guarantor may cancel this Guarantee by sending notice by certified mail to
the EPA Regional Administrator for the region in which the facility is located
(with a copy to IDEQ) and to MK Rail, such cancellation to become effective no
earlier than 120 days after receipt of such notice by EPA and IDEQ and MK Rail,
as evidence by the return receipts.
10. Guarantor agrees that if MK Rail fails to provide alternate
financial assurance as specified in subpart H of 40 C.F.R. part 264 or 265, as
applicable, and obtain written approval of such assurance from the EPA Regional
Administrator (and/or IDEQ) within 90 days after a notice of cancellation by the
Guarantor is received by an EPA Regional Administrator and by IDEQ from
Guarantor, Guarantor shall provide alternate financial assurance in the name of
MK Rail.
11. Guarantor expressly waives notice of acceptance of this Guarantee
by the EPA, by IDEQ or by MK Rail. Guarantor also
ENVIRONMENTAL LIABILITY TRANSFER AGREEMENT - 12
<PAGE>
expressly waives notice of amendments or modifications of the closure and/or
post-closure plan and of amendments or modifications of the facility permit.
I hereby certify that the wording of this Guarantee is substantially
identical to the wording specified in 40 C.F.R. Section 264.151(h) as such
regulations were constituted on the date first above written.
Effective Date: ______________________, 1994.
MORRISON KNUDSEN CORPORATION
By
----------------------------------
Name:
----------------------------
Title:
----------------------------
STATE OF IDAHO )
) ss.
County of Ada )
On this ______ day of _____________ 1994, before me,
___________________________________, a Notary Public in and for said State,
personally appeared, ___________________________________, known or identified to
me to be the president of MORRISON KNUDSEN CORPORATION, the corporation that
executed the within instrument or the person who executed the instrument on
behalf of said corporation, and acknowledged to me that such corporation
executed the same.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my
official seal the day and year in this certificate first above written.
-----------------------------------------
Notary Public for Idaho
Residing at______________________________
My commission expires____________________
ENVIRONMENTAL LIABILITY TRANSFER AGREEMENT - 13
<PAGE>
APPENDIX II
GUARANTEE FOR LIABILITY COVERAGE
Guarantee made this _________________________, 1994 by MORRISON
KNUDSEN CORPORATION, a business corporation organized under the laws of the
State of Ohio, the principal place of business of which is Morrison Knudsen
Plaza, 720 Park Blvd., Boise, Idaho 83729 (herein referred to as "Guarantor").
This Guarantee is made on behalf of our subsidiary MK Rail Corporation, a
Delaware corporation ("MK Rail") of Morrison Knudsen Plaza, 720 Park Blvd.,
Boise, Idaho 83729, to any and all third parties who have sustained or may
sustain bodily injury or property damage caused by sudden and/or non-sudden
accidental occurrence arising from operation of the facility covered by this
Guarantee.
R E C I T A L S
1. Guarantor meets or exceeds the financial test criteria and agrees
to comply with the reporting requirements for guarantors as specified in 40
C.F.R. Section 264.147(g) and Section 265.147(g).
2. MK Rail owns or operates the following hazardous waste management
facility covered by this guarantee.
EPA Identification No. 980976831
Boise Locomotive Shop
4600 Apple Street
Boise, Idaho 83705
This corporate guarantee satisfies RCRA third party liability
requirements for both sudden and non-sudden accidental occurrence in the above-
named owner or operator facility for coverage in the amount of $________________
for each occurrence and $___________________ annual aggregate.
3. For value received from MK Rail, Guarantor guarantees to any and
all third parties who have sustained or may sustain bodily injury or property
damage caused by sudden and/or non-sudden accidental occurrence arising from
operations of the facility covered by this guarantee, that in the event that MK
Rail fails to satisfy a judgment or award based upon a determination of
liability for bodily injury or property damage to third parties caused by sudden
and/or non-sudden accidental occurrences, arising from the operation of the
above-named facility, or fails to pay an amount agreed to in settlement of a
claim arising from or alleged to arise from such injury or damage, the Guarantor
will satisfy such judgments) award(s) or settlement agreements) up to the limits
of coverage identified above.
ENVIRONMENTAL LIABILITY TRANSFER AGREEMENT - 14
<PAGE>
4. Such obligation does not apply to any of the following:
(a) Bodily injury or property damage for which MK Rail is
obligated to pay damages by reason of the assumption of liability in the
contract or agreement. This exclusion does not apply to liability for damages
that MK Rail would be obligated to pay in the absence of the contract or
agreement.
(b) Any obligation of MK Rail under a workers' compensation,
disability benefits or unemployment compensation law or any similar law.
(c) Bodily injury to:
(i) An employee of MK Rail arising from, and in the course
of, employment by MK Rail; or
(ii) The spouse, child, parent, brother or sister of that
employee as a consequence of, or arising from, and in the course of employment
by MK Rail. This exclusion applies:
(A) Whether MK Rail may be liable as an employer or
in any other capacity; and
(B) To any obligation to share damages or repay
another person who must pay damages because of the injury to the persons
identified in paragraphs (i) and (ii).
(d) Bodily injury or property damage arising out of the
ownership, maintenance, use or entrustment to others of any aircraft, motor
vehicle or water craft.
(e) Property damage to:
(i) Premises that are sold, given away or abandoned by MK
Rail if the property damage arises out of any part of those premises;
(ii) Any property owned, rented or occupied by MK Rail;
(iii) Property loaned to MK Rail;
(iv) Personal property in the care, custody or control of
MK Rail;
(v) That particular real property in which MK Rail or any
contractors or subcontractors working directly or indirectly on behalf of MK
Rail are performing operations, if the property damage arises out of these
operations.
ENVIRONMENTAL LIABILITY TRANSFER AGREEMENT - 15
<PAGE>
5. Guarantor agrees that if, at the end of any fiscal year before
termination of this Guarantee, the Guarantor fails to meet the financial test
criteria, Guarantor shall send within 30 days, by certified mail, notice to the
EPA Regional Administrator for the region in which the facility is located (with
a copy to IDEQ) and to MK Rail that it intends to provide alternate liability
coverage as specified in 40 C.F.R. Section 264.147 and Section 265.147, as
applicable, in the name of MK Rail. Within 120 days after the end of such fiscal
year, the Guarantor shall establish such liability coverage unless MK Rail has
done so.
6. The Guarantor agrees to notify the EPA Regional Administrator by
certified mail (with a copy to IDEQ) of the voluntary or involuntary proceeding
under Title 11 (Bankruptcy), U.S. Code, naming Guarantor as debtor, within 10
days after commencement of the proceeding.
7. Guarantor agrees that within 30 days after being notified by an
EPA Regional Administrator or by IDEQ of a determination that Guarantor no
longer meets the financial test criteria or that it is disallowed from
continuing as a guarantor, it shall establish alternate liability coverage as
specified in 40 C.F.R. Section 264.146 or Section 265.147 in the name of MK
Rail, unless MK Rail has done so.
8. Guarantor reserves the right to modify this agreement to take
into account amendment or modification of the liability requirements set by 40
C.F.R. Section 264.147 and Section 265.147, provided that such modification
shall become effective only if an EPA Regional Administrator (and/or IDEQ) does
not disapprove the modification within 30 days of receipt of notification of the
modification.
9. Guarantor agrees to remain bound under this guarantee for so long
as MK Rail must comply with the applicable requirements of 40 C.F.R. Section
64.147 and Section 265.147 for the above listed facility, except as provided in
paragraph 10 of this Agreement.
10. Guarantor may terminate this Guarantee by sending notice by
certified mail to the EPA Regional Administrator of the region in which the
facility is located (with a copy to IDEQ) and to MK Rail, provided that this
Guarantee may not be terminated unless and until MK Rail obtains, and the EPA
Regional Administrator (and IDEQ) approve, alternate liability coverage
complying with 40 C.F.R. Section 264.147 and/or Section 265.147.
11. Guarantor hereby expressly waives notice of acceptance of this
Guarantee by any party.
12. Guarantor agrees that this guarantee is in addition to and does
not affect any other responsibility or liability of the Guarantor with respect
to the covered facility.
ENVIRONMENTAL LIABILITY TRANSFER AGREEMENT - 16
<PAGE>
13. The Guarantor shall satisfy a third party liability claim only on
receipt of one of the following documents:
(a) Certification from the Principal and the third party
claimants) that the liability claim should be paid. The certification must be
worded as follows, except that instruction in brackets are to be replaced with
the relevant information and the brackets deleted:
Certification of Valid Claim
The undersigned, as parties [insert Principal] and
[insert name and address of third party claimant(s)], hereby
certify that the claim of bodily injury and/or property
damage caused by a [sudden or non-sudden] accidental
occurrence arising from operating [Principal's] hazardous
waste treatment, storage, or disposal facility should be
paid in the amount of $[___________________].
(Signatures)
-------------------------------------
Principal
(Notary)
(Date)
(Signatures)
-------------------------------------
Claimant(s)
(Notary)
(Date)
(b) A valid final court order establishing a judgment against
the principal for bodily injury or property damage caused by sudden or non-
sudden accidental occurrences arising from the operation of the Principal's
facility or group of facilities.
14. In the event of combination of this guarantee with another
mechanism to meet liability requirements, this guarantee will be considered
["primary" or "excess"] coverage.
I hereby certify that the wording of the guarantee is substantially
identical to the wording specified in 40 C.F.R.
ENVIRONMENTAL LIABILITY TRANSFER AGREEMENT - 17
<PAGE>
Section 264.151(h)(2) as such regulations were constituted on the dates shown
immediately below.
Effective Date:____________________________, 1994.
MORRISON KNUDSEN CORPORATION
By____________________________________
Name:_______________________________
Its:________________________________
STATE OF IDAHO )
) ss.
County of Ada )
On this ______ day of ___________, 1993, before me,
_________________________________, a Notary Public in and for said State,
personally appeared ____, known or identified to me to be the president of
MORRISON KNUDSEN CORPORATION, the corporation that executed the within
instrument or the person who executed the instrument on behalf of said
corporation, and acknowledged to me that such corporation executed the same.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my
official seal the day and year in this certificate first above written.
--------------------------------------
Notary Public for Idaho
Residing at ___________________________
My commission expires__________________
ENVIRONMENTAL LIABILITY TRANSFER AGREEMENT - 18
<PAGE>
EXHIBIT C
SERVICE MARK AND TRADEMARK LICENSE AGREEMENT
This AGREEMENT between:
MORRISON KNUDSEN CORPORATION (referred to herein as "MK CORP"), an
Ohio Corporation, located at P.O. Box 73, Boise, Idaho 83729
and
MK RAIL CORPORATION (referred to herein as "MK RAIL"), a Delaware
Corporation, located at 720 Park Boulevard, Boise, Idaho 83729
has an effective date of February 14, 1994.
PREMISES
It is recognized:
(A) that MK CORP is the owner of a family of trademarks, service marks,
and U.S. and foreign trademark and service mark registrations and applications
for registration in which MORRISON KNUDSEN and "MK" are used in various scripts
and/or associated with logo designs;
(B) that MK CORP, with its predecessors in interest, has continuously used
MORRISON KNUDSEN for over seventy five years as a tradename in connection with
providing goods and services to various industries including civil engineering
and construction, industrial plant engineering and construction, mining
exploration, and facility construction, equipment manufacture and repair in the
transportation industry including rail locomotive manufacture and repair;
(C) that MK CORP, with its predecessors in interest, has continuously used
MORRISON KNUDSEN and "MK" in plain lettering or
<PAGE>
in logo form for over seventy five years as a trademark and as a service mark in
connection with goods and services of the various industries of paragraph (B)
above;
(D) that MK CORP is the owner of U.S. applications to register:
MORRISON KNUDSEN
(1) as a trademark for "railway locomotives and parts therefor"
(International Class 12 U.S. Serial No. ______________, filed in the
United States Patent and Trademark Office on February 14, 1994),
(2) as a service mark for "manufacture of locomotives and parts
therefor", (International Class 40 -- U.S. Serial No. _____________,
filed in the United States Patent and Trademark Office on February 14,
1994); and
(2) as a service mark for "remanufacture and repair of locomotives
and parts therefor" (International Class 37 -- U.S. Serial No.
_____________, filed in the United States Patent and Trademark Office
on February 14, 1994);
(E) that MK CORP is the owner of U.S. applications to register the
following mark, referred to as the "MK logo":
[Logo]
2
<PAGE>
(1) as a trademark for "railway locomotives and parts therefor"
(International Class 12 -- U. S. Serial No. ______________, filed in
the United States Patent and Trademark Office on February 14, 1994),
(2) as a service mark for "manufacture of locomotives and parts
therefor", (International Class 40 -- U.S. Serial No. _____________,
filed in the United States Patent and Trademark Office on February 14,
1994); and
(3) as a service mark for "remanufacture and repair of locomotives
and parts therefor" (International Class 37 -- U.S. Serial No.
____________, filed in the United States Patent and Trademark Office
on February 14, 1994);
(F) that MK CORP is the owner of the U.S. Application to register:
MK FASTRAIN
as a trademark for "railway transit cars" (International Class 12 --
U.S. Serial No. 74/424,781, filed in the United States Patent and
Trademark Office on August 13, 1993);
(G) that MK RAIL is interested in an exclusive royalty-free license from
MK CORP to use MORRISON KNUDSEN, MK, and the "MK logo" as a trademark for
railway locomotives and parts therefor and as a service mark for manufacture,
remanufacture, and repair of locomotives and parts therefor; and
(H) that MK RAIL is interested in a non-exclusive royalty-free license
from MK CORP to use MK FASTRAIN for railway locomotives and
3
<PAGE>
parts therefor.
NOW THEREFORE, in consideration of mutual promises and other consideration
of the Parties, acknowledged as adequate, MK CORP and MK RAIL agree to the above
premises and the following provisions:
1. MK CORP grants to MK RAIL an exclusive, royalty-free right to use
MORRISON KNUDSEN, MK, and the "MK logo" as a trademark for railway locomotives
and parts therefor, and as a service mark for manufacturing, remanufacturing and
repair of locomotives and parts therefor.
2. MK CORP grants to MK RAIL a non-exclusive, royalty-free right to use
MK FASTRAIN in connection with railway locomotives and parts therefor.
3. The trademark rights of paragraphs 1 and 2 above, granted as of the
effective date of this Agreement, shall be for perpetual use, as designated, of
MORRISON KNUDSEN, MK, the "MK logo", and MK FASTRAIN (also referred to herein as
THE LICENSED MARKS); subject, however, to MK RAIL complying with quality control
standards and trademark usage provisions required as a matter of law for
protection of trademark rights.
4. In rendering and promoting the named manufacturing, remanufacturing,
and repair services or distributing and promoting railway locomotives and parts
therefor under THE LICENSED MARKS, MK RAIL shall continue to maintain the
standards of quality previously established and maintained by MK CORP. As a part
thereof, MK RAIL agrees (a) to notify MK CORP of customer complaints which
relate to whether such standards are being met, and (b) that such standards
4
<PAGE>
of quality may be reviewed and/or modified at reasonable intervals as MK CORP
determines to be necessary.
5. MK RAIL agrees to use THE LICENSED MARKS solely in the form(s) set
forth above or as otherwise designated by MK CORP. Any proposed modification by
MK RAIL to any of THE LICENSED MARKS requires prior written approval by MK CORP,
and if approved, such modified mark shall be subject to registration by MK CORP
and licensed to MK RAIL under the terms of this Agreement or as otherwise
mutually agreed by the Parties.
6. MK RAIL agrees to notify MK CORP of usage, or planned usage, of THE
LICENSED MARKS internationally. Any of THE LICENSED MARKS to be used in
countries other than the United States of America shall be subject to
registration by MK CORP with appropriate Trademark Offices of individual
countries or of countries which have been grouped for registration purposes.
Further, where required by law, an application for registration shall identify
MK RAIL as a registered user of THE LICENSED MARKS. Any such international
registration(s) shall be licensed to MK RAIL under the terms of this Agreement
or as otherwise mutually agreed by the Parties.
7. MK RAIL agrees, upon request, to reimburse MK CORP for government fees
and legal costs associated with registration or maintenance of registration of
THE LICENSED MARKS used by MK RAIL.
8. Use of THE LICENSED MARKS by MK RAIL shall be in accordance with
customary trademark usage requirements, and shall include proper notices of
trademark registration rights on the goods and in
5
<PAGE>
connection with the services offered under or associated with THE LICENSED
MARKS. MK CORP shall have the right to monitor use of THE LICENSED MARKS by MK
RAIL in order to verify compliance with customary trademark usage requirements
and provisions of this Agreement.
9. MK RAIL agrees that MK CORP is the rightful owner of THE LICENSED
MARKS and MK RAIL agrees to avoid any action or practice tending to impair the
interests of MK CORP in THE LICENSED MARKS or in any MK CORP mark which
comprises MORRISON KNUDSEN or MK.
10. MK RAIL agrees to assist in maintaining the rights of MK CORP in THE
LICENSED MARKS by providing dates and examples of use and/or by executing any
document which may reasonably be required by MK CORP from time to time for
purposes of obtaining or maintaining registration and/or ownership rights in THE
LICENSED MARKS.
11. If MK RAIL learns of any use by a third-party of a mark similar to any
of THE LICENSED MARKS, MK RAIL shall immediately notify MK CORP which shall have
the right, in its sole discretion, to determine whether either Party should take
action to abate such third-party usage.
12. This Agreement shall not limit the right of MK CORP to continue to use
or to expand use and/or registration of its MORRISON KNUDSEN or MK-related
marks.
13. Use of THE LICENSED MARKS by MK RAIL inures exclusively to the benefit
of MK CORP with such continued ownership rights in MK CORP being unaffected in
the event of:
6
<PAGE>
(a) receivership or bankruptcy procedures being undertaken, or papers
being filed, for purposes of voluntary or involuntary receivership or bankruptcy
of MK RAIL, or
(b) MK RAIL being adjudicated bankrupt or insolvent, or
(c) MK RAIL discontinuing its business.
14. MK CORP shall have the right to immediately terminate this license, by
giving written notice, if MK RAIL uses any of THE LICENSED MARKS in any manner,
or for any purpose, not previously authorized in writing by MK CORP.
15. Upon termination of this Agreement for any reason, MK RAIL shall
cease to use THE LICENSED MARKS and shall return, upon request by MK CORP, all
unused written materials which include THE LICENSED MARKS.
16. Due to (a) the special responsibilities placed on each Party to this
Agreement for purposes of maintaining the goodwill of THE LICENSED MARKS and the
goodwill of the business associated therewith, and (b) the special trademark
usage requirements to avoid loss of trademark rights, license rights granted by
this Agreement shall not be assignable, in whole or in part by MK RAIL, or by
any action at law, without the prior written consent of MK CORP. The rights
granted herein shall immediately terminate in the event of unauthorized
assignment or attempt to assign THE LICENSED MARKS and/or registrations thereof
without prior written authorization by MK CORP.
17. This Agreement shall be governed by and construed in accordance with
federal trademark and unfair competition law, or by
7
<PAGE>
the laws of the State of Idaho where applicable.
18. This Agreement constitutes the entire understanding between the
Parties with respect to its subject matter and supersedes any and all previous
representations, understandings and verbal or written agreements between the
Parties with respect to the subject matter of this Agreement.
MORRISON KNUDSEN CORPORATION MK RAIL CORPORATION
___________________________ _______________________________
Stephen G. Hanks, Esq. Name:
Executive Vice President, Title:
Finance and Administration
Date: _____________________ Date: _________________________
8
<PAGE>
Exhibit 10.5
ENVIRONMENTAL LIABILITY TRANSFER AGREEMENT
THIS ENVIRONMENTAL LIABILITY TRANSFER AGREEMENT ("Agreement") is made and
entered into as of the 22nd day of February, 1994. The parties ("Parties") to
this Agreement are MORRISON KNUDSEN CORPORATION, an Ohio corporation ("Morrison
Knudsen"), and MK RAIL CORPORATION, a Delaware corporation ("MK Rail").
RECITALS
WHEREAS, MK Rail is a wholly-owned subsidiary of Morrison Knudsen;
WHEREAS, MK Rail intends to sell shares of its Common Stock to the public
("Public Offering");
WHEREAS, pursuant to the terms of that certain Transfer Agreement between
the Parties of even date herewith ("Transfer Agreement"), Morrison Knudsen is
(i) transferring certain assets relating to its locomotive division operations
to MK Rail, effective as of February 1, 1994 (the "First Closing Date"), and
(ii) transferring to MK Rail 100% of the issued and outstanding capital stock of
its locomotive-related component parts subsidiaries as well as its interest in
certain foreign joint venture operations and properties, to be effective not
later than one day prior to the effective date of the Public Offering (the
"Second Closing Date");
WHEREAS, in connection with such asset and stock transfers, MK Rail has
agreed to assume certain Environmental Liabilities (as hereinafter defined) of
Morrison Knudsen, and the Parties desire to set forth the terms and conditions
pursuant to which MK Rail shall assume such Environmental Liabilities.
NOW, THEREFORE, in consideration of the foregoing and other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the Parties agree:
ARTICLE 1
DEFINITIONS
1.1 GENERAL. As used in this Agreement, capitalized terms defined
immediately after their use shall have the respective meanings thereby provided,
and the following terms shall have the following meanings (such meanings to be
equally applicable to both the singular and plural forms of the terms defined):
ENVIRONMENTAL LIABILITY TRANSFER AGREEMENT - 1
<PAGE>
ACTION: any action, claim, suit, arbitration, inquiry, subpoena, discovery
request, proceeding or investigation by or before any court or grand jury, any
governmental or other regulatory or administrative agency or commission or any
arbitration tribunal.
BUSINESS: the operations and business of Morrison Knudsen being
transferred to MK Rail pursuant to the Transfer Agreement relating to (a) the
remanufacturing of railroad locomotives, (b) the design, development and
manufacture of new high-technology locomotives, (c) the design, manufacture,
distribution and sale of locomotive component parts, and (d) the provision of
locomotive fleet maintenance services, all as more particularly described in the
Transfer Agreement.
ENVIRONMENT: any indoor or outdoor ambient air, surface water, ground
water, drinking water, building surface, material surface, land surface or
subsurface station.
ENVIRONMENTAL LAW: any federal, foreign, state, provincial, local, or
municipal law (including common law), statute, ordinance, regulation, order,
decree, judgment, decision, ruling, permit or authorization (each as may be in
effect from time to time) relating or applicable to pollution or protection of
health or the environment, including, without limitation, any of the foregoing
relating or applicable to emissions, discharges, spills, releases or threatened
releases of any Materials of Environmental Concern upon or into the Environment,
or human or natural resource exposure to any Material of Environmental Concern,
or otherwise relating to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport or handling of any Material of
Environmental Concern.
ENVIRONMENTAL LIABILITY: any liability or obligation (including, without
limitation, liability for investigatory costs, oversight costs, remediation and
cleanup costs, governmental or private response costs and cost recovery
actions, natural resource damages, property damages, personal injuries,
consequential economic damages, administrative, civil or criminal penalties
or forfeitures, and attorneys' fees or other costs of defending an Action or a
claim of Environmental Liability) under any Environmental Law.
EPA: the United States Environmental Protection Agency.
FOREIGN INTERESTS: those certain interests in foreign partnerships,
corporations, joint ventures and properties of Morrison Knudsen, as identified
and described in the Transfer Agreement.
ENVIRONMENTAL LIABILITY TRANSFER AGREEMENT - 2
<PAGE>
IDEQ: the Division of Environmental Quality, Idaho Department of Health
and Welfare.
LOSS: any loss, liability, claim, damage, obligation, payment, cost or
expense (including, without limitation, the costs and expenses of any Action,
any demand, assessment, judgment, settlement or compromise related thereto and
reasonable attorneys' fees, disbursements and other charges in connection
therewith).
MATERIAL OF ENVIRONMENTAL CONCERN: any chemical or its derivatives,
pollutant, contaminant, hazardous waste, toxic substance, hazardous substance,
hazardous material, petroleum, petroleum product or petroleum derivatives.
POST CLOSURE PERMIT: that certain Post Closure Permit dated January 18,
1991, issued by the Idaho Department of health and Welfare, EPA Identification
No. 1DD980976831, relating to the ownership and operation by Morrison Knudsen of
its Boise locomotive shop.
REAL PROPERTY: collectively, the real property on which Morrison Knudsen
conducts the Business in Boise, Idaho, Mountaintop, Pensylvania and Latham
New York, as more particularly described and identified in the Transfer
Agreement.
SITE: the Morrison Knudsen Boise Industrial Complex property located at
4600 Apple Street, Boise, Idaho, located in Ada County in the northwest quarter
of Section 36, T3N, R2E Boise Meridian, as more particularly described in the
Transfer Agreement and Post Closure Permit.
SUBSIDIARIES: MK Engine Systems Company, Inc., a New York corporation;
Alert Mfg. & Supply Co., an Illinois corporation; Clark Industries, Inc., an
Illinois corporation; MCM Transportation Co., a Pennsylvania corporation; Motor
Coils Manufacturing Co., a Pennsylvania corporation; Power Parts Company, a
Nevada corporation; Power Parts Sign Co., an Illinois corporation; and
Touchstone, Inc., a Tennessee corporation.
1.2 ADDITIONAL DEFINITIONS. Capitalized terms not specifically defined
herein shall have the meanings ascribed thereto in the Transfer Agreement, which
such definitions are incorporated herein by this reference and made a part
hereof.
ENVIRONEMNTAL LIABILITY TRANSFER AGREEMENT - 3
<PAGE>
ARTICLE 2
ASSUMPTION OF ENVIRONMENTAL LIABILITIES
2.1 ASSUMPTION BY MK RAIL OF ENVIRONMENTAL LIABILITIES. With the
exception of the Post Closure Permit, the terms of the assumption and transfer
of which shall be governed by the provisions of Article 3 hereof, MK Rail shall
assume the liability for and perform at its expense all of the obligations of
Morrison Knudsen and MK Rail including, and limited only as provided below in
Section 2.3, any investigative or remedial actions required by law or contract,
for any Environmental Liability arising before or after the applicable Closing
Dates as provided in Section 2.2 hereof and resulting from:
(a) The operation (whether or not in the normal course) of the Business;
(b) The actions or omissions of any employee, agent (including any
contractor or consultant) of Morrison Knudsen or MK Rail while such employee or
agent was employed or performing work or activities in connection with the
Business; and
(c) The presence of any Material of Environmental Concern in, on or under
any Real Property.
2.2 EFFECTIVE DATE. Except as provided in Article 3 below with respect to
the Post Closure Permit, the effective date of this Agreement with respect to
the Business (excluding the operations of the Subsidiaries and the Foreign
Interests) shall be the First Closing Date, and the effective date of this
Agreement with respect to the Subsidiaries and the Foreign Interests shall be
the Second Closing Date.
2.3 EXCEPTIONS TO ASSUMPTION OF ENVIRONMENTAL LIABILITIES.
Notwithstanding any other provision of this Agreement, MK Rail shall not assume
hereunder, and Morrison Knudsen shall indemnify, defend and hold MK Rail
harmless against any and all Losses or Actions arising from or relating to, any
Environmental Liability resulting directly or indirectly from the conduct by
Morrison Knudsen of any activity on any Real Property which is not activity
associated with the Business; PROVIDED, however, that, to the extent MK Rail, as
of and after the First or Second Closing Date, as applicable, affirmatively
contributes to or aggravates the conditions for which Morrison Knudsen otherwise
would be liable hereunder, MK Rail shall be liable for any increase in cost or
liability attributable directly to such contribution or aggravation by MK Rail.
ENVIRONMENTAL LIABILITY TRANSFER AGREEMENT - 4
<PAGE>
ARTICLE 3
TRANSFER OF POST CLOSURE PERMIT
3.1 APPLICATION FOR TRANSFER. As soon as practical after the First
Closing Date, the Parties shall apply with the EPA and IDEQ for a transfer of
the Post Closure Permit from Morrison Knudsen Company, Inc., a Delaware
corporation and a wholly-owned subsidiary of Morrison Knudsen, to MK Rail. Such
transfer application shall be made in accordance with the requirements relating
to Class 1 permit modifications under 40 C.F.R. Section 270.40 (1992).
3.2 EFFECTIVE DATE OF TRANSFER. The effective date of the transfer of the
Post Closure Permit to MK Rail shall be 90 days after the date of application
for transfer provided in Section 3.1 hereof or, if later, the date on which the
transfer of the Post Closure Permit to MK Rail has been approved by the EPA
and/or IDEQ, as applicable ("Permit Transfer Date").
3.3 DEMONSTRATION OF FINANCIAL REQUIREMENTS. On and after the First
Closing Date, Morrison Knudsen shall continue to comply with the requirements of
40 C.F.R. parts 264 and 265, subpart H (Financial Requirements) until such time
as MK Rail has demonstrated compliance with such subparts; PROVIDED, however,
that in the event MK Rail fails to demonstrate compliance with such Financial
Requirements within six months of the First Closing Date, Morrison Knudsen shall
issue corporate guarantees for (i) closure and post-closure care and (ii) sudden
and non-sudden accidental occurrences, as specified in subpart H of 40 C.F.R.
parts 264 and 265. Such corporate guarantees shall be in the form attached as
Appendix I and Appendix II hereof, and shall remain in effect until such time as
MK Rail shall demonstrate compliance with the requirements of 40 C.F.R. parts
264 and 265, subpart H, as applicable.
3.4 PERFORMANCE BY MORRISON KNUDSEN. Until the Permit Transfer Date,
Morrison Knudsen shall remain responsible for compliance with all of the terms
and conditions of the Post Closure Permit, and shall have full liability
thereunder as a primary obligor and not as a surety, unless:
(a) an obligation under the Post Closure Permit is contested in good faith
by Morrison Knudsen by dispute resolution under the Post Closure Permit or in
any other administrative or judicial forum having jurisdiction; or
(b) performance is excused or otherwise not required by EPA and IDEQ.
ENVIRONMENTAL LIABILITY TRANSFER AGREEMENT - 5
<PAGE>
ARTICLE 4
EASEMENT FOR SITE ACCESS
MK Rail agrees that, so long as Morrison Knudsen has any liability or
responsibility under the Post Closure Permit, Morrison Knudsen shall reserve an
easement to and on the Site. This easement shall allow Morrison Knudsen, IDEQ,
EPA and the agents, employees, contractors, subcontractors, consultants and
representatives of any of them access to, entry upon and use of the Site for the
exercise of all rights and performance of all obligations of Morrison Knudsen
under the Permit and this Agreement, including but not limited to:
(a) well drilling, water and water table sampling and monitoring, and
water level measuring and monitoring;
(b) surface water and sediment sampling and soil sampling;
(c) geophysical tests or explorations;
(d) establishing, operating and maintaining, monitoring and treatment
facilities; and
(e) conducting such other actions as may be required by EPA or IDEQ.
ARTICLE 5
COOPERATION BY MORRISON KNUDSEN
Morrison Knudsen will cooperate reasonably with MK Rail during Morrison
Knudsen's performance of its obligations under the Post Closure Permit and this
Agreement (subject always to the lawful authority and direction of EPA and
IDEQ), including, but not limited to:
(a) avoiding any unnecessary interference with the operations of MK Rail
at the Site;
(b) complying with MK Rail's applicable health, safety and security rules;
(c) providing reasonable advance notice of coming on the Site and of
commencement of activities; and
(d) providing reasonable advance notice and opportunity to confer with
Morrison Knudsen, and if necessary EPA and IDEQ, about any activity not required
by the Post Closure Permit that Morrison Knudsen intends to propose to EPA and
IDEQ that would reasonably be anticipated to cause material physical damage to
the Site or any fixture, installation, building or
ENVIRONMENTAL LIABILITY TRANSFER AGREEMENT - 6
<PAGE>
improvement thereon, or to interfere materially with MK Rail's operations.
ARTICLE 6
RELATIONSHIP WITH AGENCIES
6.1 SUBMISSIONS TO AGENCIES. Each of Morrison Knudsen and MK Rail agrees
to provide the other Party with copies of all correspondence, reports, plans and
validated data pertaining to the Site or any other parcel of Real Property
submitted by or on behalf of Morrison Knudsen or MK Rail to IDEQ, EPA or any
other state, federal, local or foreign environmental regulatory agency.
6.2 CONTACT WITH AGENCIES. Morrison Knudsen agrees that until the Permit
Transfer Date it will not report to, notify or otherwise communicate with IDEQ
or EPA regarding any activities or conditions relating to the Post Closure
Permit without either MK Rail being a party to such communication or the prior
knowledge and consent of MK Rail.
6.3 NOTICE OF RELEASES. MK Rail and Morrison Knudsen agree that each of
them will provide notice to the other in the event of any release, spill or
unpermitted discharge of any Material of Environmental Concern at the Site or at
any Real Property that requires notification to EPA, IDEQ or any federal, state,
local or foreign environmental regulatory agency.
ARTICLE 7
INDEMNIFICATION
Except as specifically provided herein, MK Rail agrees to indemnify, defend
and hold harmless Morrison Knudsen, its parents, predecessors, successors,
present and former subsidiaries, related corporations, divisions, affiliates,
shareholders, officers, directors, employees, agents, contractors,
subcontractors, consultants, servants, attorney, assigns and representatives of
any of them ("MK Indemnitees") from and against any and all Losses arising out
of or in any way related to any Environmental Liability assumed by MK Rail
hereunder. The terms of such indemnification shall be governed by and
consistent with the provision of Article 11 of the Transfer Agreement, the terms
and conditions of which are incorporated herein by this reference.
ARTICLE 8
RELEASE OF CLAIMS
MK Rail hereby remises, releases and discharges MK Indemnitees of and from,
waives all rights against MK Indemnitees with respect to, and covenants not to
sue MK Indemnitees for, any
ENVIRONMENTAL LIABILITY TRANSFER AGREEMENT - 7
<PAGE>
and all past, present and future claims, demands, damages, costs, suits, losses
of any kind, liabilities, obligations, actions and causes of action whatsoever,
in law or in equity, whether for negligence, breach of contract or warranty,
strict liability, nuisance or breach of any duty whatsoever, and the costs,
expenses and fees (including without limitation attorneys' fees) related
thereto, which any MK Indemnitee had, has or ever shall or may have with respect
to any and all of the following ("Released Claim"):
(a) any economic loss, expenses, costs, fees, lost profits, diminishing of
value or marketability of property, loss of customers or revenue, loss of use of
any property due to casualty, inability to obtain financing at competitive
rates, breach of contract of any third party, or any consequential damages
whatsoever arising out or related to the ownership, possession or operations of
or at the Site and the Real Property, this Agreement, the Transfer Agreement,
the Post Closure Permit, any Environmental Liability or the performance or
failure to perform any of Morrison Knudsen's obligations under the Post Closure
Permit or this Agreement, any delay in obtaining possession or occupancy of the
Site or any other Real Property, damage to the Site or any Real Property or any
improvements thereon, or interference, hinderance or interruption in the use by
MK Rail of the Site or any other Real Property; or
(b) any personal injury or death or property damage, caused by or
contributed to by any MK Indemnitee except for personal injury or death or
physical damage to the Site or any building or improvement on the Site caused or
contributed to by the negligence of any MK Indemnitee in the performance of any
of Morrison Knudsen's obligations under the Post Closure Permit or this
Agreement.
In addition, if any insurer indemnifies or pays on behalf of MK Rail all or
any part of any Released Claim, then MK Rail agrees to cause any such insurer to
waive any and all subrogation rights against MK Indemnitees.
ARTICLE 9
MISCELLANEOUS
9.1 ASSIGNMENT. This Agreement shall be binding upon MK Rail and Morrison
Knudsen and their respective legal representatives, successors and assigns.
However, except for assignments to corporate subsidiaries or any other
affiliates, or assignments by operation of law, neither MK Rail nor Morrison
Knudsen shall assign any rights, obligations or interest in this Agreement
without prior written notice to and the written approval of the other.
ENVIRONMENTAL LIABILITY TRANSFER AGREEMENT - 8
<PAGE>
9.2 GOVERNING LAW. This Agreement shall be governed by the State of
Delaware.
9.3 WAIVER. The failure of any Party to enforce any of the provisions of
this Agreement, or the waiver thereof in any instance shall not be construed as
a general waiver or relinquishment on the part of such Party of any such
provision but the same shall nevertheless be and remain in full force and
effect.
9.4 SEVERABILITY. It is the intent of the Parties that the clauses of
this Agreement are severable, and should any part of this Agreement be declared
invalid or unenforceable, all other clauses under this Agreement shall remain in
full force and effect.
9.5 MERGER. This Agreement, the Transfer Agreement, and the Related
Agreements (as defined in the Transfer Agreement) all of even date herewith,
contain the entire agreement between Morrison Knudsen and MK Rail, and there are
no other terms, obligations, covenants, representations, statements or
conditions, oral or otherwise, of any kind whatsoever relating to the
transactions contemplated hereby and thereby. Any changes to this Agreement
must be made in writing and executed by each of the parties hereto.
9.6 NOTICES. All notices or other communications shall be given or made
in writing by certified mail, return receipt requested or by commercial
overnight delivery service addressed as follows:
If to Morrison Knudsen:
Morrison Knudsen Corporation
Morrison Knudsen Plaza
720 Park Blvd.
Boise, Idaho 83729
Attn: Stephen G. Hanks
If to MK Rail:
MK Rail Corporation
Morrison Knudsen Plaza
720 Park Blvd.
Boise, Idaho 83729
Attn: ___________________
9.7 TITLE AND HEADINGS. Titles and headings to sections and articles
herein are inserted for the convenience of reference only and are not intended
to be part of or to affect the meaning or interpretation of this Agreement.
ENVIRONMENTAL LIABILITY TRANSFER AGREEMENT - 9
<PAGE>
9.8 EXECUTION AND COUNTERPARTS. This Agreement may be executed in
counterparts, each of which shall be deemed an original, but which together
shall constitute one and the same agreement.
IN WITNESS WHEREOF, the parties have caused this Agreement and this
Environmental Transfer Agreement to be duly executed as of the day and year
first above written.
MORRISON KNUDSEN CORPORATION,
an Ohio Corporation
By /s/ Stephen G. Hanks
-------------------------------
Title: EXECUTIVE VICE PRESIDENT
MK RAIL CORPORATION,
a Delaware corporation
By /s/ John P. Herbots
----------------------------
Title: Senior Vice President
ENVIRONMENTAL LIABILITY TRANSFER AGREEMENT - 10
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APPENDIX I
CORPORATE GUARANTEE FOR CLOSURE
OR POST-CLOSURE CARE
Guarantee made this __________________, 1994 by MORRISON KNUDSEN
CORPORATION, a business corporation organized under the laws of the State of
Ohio (herein referred to as "Guarantor"), to the United States Environmental
Protection Agency ("EPA"), and the State of Idaho, Department of Health and
Welfare, Division of Environmental Quality ("IDEQ"), obligees, on behalf of our
subsidiary MK RAIL CORPORATION, a Delaware corporation ("MK Rail"), whose
business address is Morrison Knudsen Plaza, 720 Park Blvd., Boise, Idaho 83729.
R E C I T A L S
1. Guarantor meets or exceeds the financial test criteria and agrees to
comply with the reporting requirements for guarantors as specified in 40 C.F.R.
Section 264.143(f), Section 264.145(f), Section 265.143(e), and
Section 265.145(e).
2. MK Rail owns or operates the following facility covered by this
Guarantee:
EPA Identification No. 980976831
Boise Locomotive Shop
4600 Apple Street
Boise, Idaho 83705
This Guarantee is for post-closure care.
3. "Closure plans" and "post-closure plans" as used below refer to the
plans maintained as required by subpart G of 40 C.F.R. parts 264 and 265 of the
closure and post-closure care of the facility identified above.
4. For value received from MK Rail, Guarantor guarantees to EPA and IDEQ
that in the event that MK Rail fails to perform post-closure care of the above
facility in accordance with the closure or post-closure plans and other permit
or interim status requirements whenever required to do so, the Guarantor shall
do so or establish a trust fund as specified in subpart H of 40 C.F.R. part 264
or 265, as applicable, in the name of MK Rail in the amount of the current or
post-closure cost estimates as specified in subpart H of 40 C.F.R. parts 264 and
265.
ENVIRONMENTAL LIABILITY TRANSFER AGREEMENT - 11
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5. Guarantor agrees that if, at the end of any fiscal year before
termination of this Guarantee, the Guarantor fails to meet the financial test
criteria, Guarantor shall send within 90 days, by certified mail, notice to the
EPA Regional Administrator for the Region in which the facility is located (with
a copy to IDEQ) and to MK Rail that it intends to provide alternate financial
assurance as specified in subpart H of 40 C.F.R. part 264 or 265, as applicable,
in the name of MK Rail. Within 120 days after the end of such fiscal year, the
Guarantor shall establish such financial insurance, unless MK Rail has done so.
6. The Guarantor agrees to notify the EPA Regional Administrator (with a
copy to IDEQ) by certified mail, of a voluntary or involuntary proceeding under
Title 11 (Bankruptcy), U.S. Code, naming Guarantor as debtor, within 10 days
after commencement of the proceeding.
7. Guarantor agrees that within 30 days after being notified by an EPA
Regional Administrator or by IDEQ of a determination that Guarantor no longer
meets the financial test criteria or that it is disallowed from continuing as a
guarantor of closure or post-closure care, it shall establish alternate
financial assurance as specified in subpart H of 40 C.F.R. part 264 or 265, as
applicable, in the name of MK Rail, unless MK Rail has done so.
8. Guarantor agrees to remain bound under this Guarantee notwithstanding
any or all of the following: amendment or modification of the closure or post-
closure plan, amendment or modification of the permit, the extension or
reduction of the time of performance of closure or post-closure, or any other
modification or alteration of an obligation of the owner or operator pursuant to
40 C.F.R. part 264 or 265.
9. Guarantor agrees to remain bound under this Guarantee for so long as
MK Rail must comply with the applicable financial assurance requirements of
subpart H of 40 C.F.R. parts 264 and 265 for the above listed facility, except
that Guarantor may cancel this Guarantee by sending notice by certified mail to
the EPA Regional Administrator for the region in which the facility is located
(with a copy to IDEQ) and to MK Rail, such cancellation to become effective no
earlier than 120 days after receipt of such notice by EPA and IDEQ and MK Rail,
as evidence by the return receipts.
10. Guarantor agrees that if MK Rail fails to provide alternate financial
assurance as specified in subpart H of 40 C.F.R. part 264 or 265, as applicable,
and obtain written approval of such assurance from the EPA Regional
Administrator (and/or IDEQ) within 90 days after a notice of cancellation by the
Guarantor is received by an EPA Regional Administrator and by
ENVIRONMENTAL LIABILITY TRANSFER AGREEMENT - 12
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IDEQ from Guarantor, Guarantor shall provide alternate financial assurance in
the name of MK Rail.
11. Guarantor expressly waives notice of acceptance of this Guarantee by
the EPA, by IDEQ or by MK Rail. Guarantor also expressly waives notice of
amendments or modifications of the closure and/or post-closure plan and of
amendments or modifications of the facility permit.
I hereby certify that the wording of this Guarantee is substantially
identical to the wording specified in 40 C.F.R. Section 264.151(h) as such
regulations were constituted on the date first above written.
Effective Date: _____________________, 1994.
MORRISON KNUDSEN CORPORATION
By______________________________
Name: ________________________
Title: _______________________
STATE OF IDAHO )
) ss.
County of Ada )
On this _____ day of __________, 1994, before me,
_______________________________, a Notary Public in and for said State,
personally appeared _________________________, known or identified to me to be
the president of MORRISON KNUDSEN CORPORATION, the corporation that executed the
within instrument or the person who executed the instrument on behalf of said
corporation, and acknowledged to me that such corporation executed the same.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal the day and year in this certificate first above written.
_________________________________
Notary Public for Idaho
Residing at ______________________
My commission expires ____________
ENVIRONMENTAL LIABILITY TRANSFER AGREEMENT - 13
<PAGE>
APPENDIX II
GUARANTEE FOR LIABILITY COVERAGE
Guarantee made this __________________, 1994 by MORRISON KNUDSEN
CORPORATION, a business corporation organized under the laws of the State of
Ohio, the principal place of business of which is Morrison Knudsen Plaza, 720
Park Blvd., Boise, Idaho 83729 (herein referred to as "Guarantor"). This
Guarantee is made on behalf of our subsidiary MK Rail Corporation, a Delaware
corporation ("MK Rail") of Morrison Knudsen Plaza, 720 Park Blvd., Boise, Idaho
83729, to any and all third parties who have sustained or may sustain bodily
injury or property damage caused by sudden and/or non-sudden accidental
occurrence arising from operation of the facility covered by this Guarantee.
R E C I T A L S
1. Guarantor meets or exceeds the financial test criteria and agrees to
comply with the reporting requirements for guarantors as specified in 40 C.F.R.
Section 264.147(g) and Section 265.147(g).
2. MK Rail owns or operates the following hazardous waste management
facility covered by this guarantee.
EPA Identification No. 980976831
Boise Locomotive Shop
4600 Apple Street
Boise, Idaho 83705
This corporate guarantee satisfies RCRA third party liability requirements
for both sudden and non-sudden accidental occurrence in the above-named owner or
operator facility for coverage in the amount of $________________ for each
occurrence and $_______________ annual aggregate.
3. For value received from MK Rail, Guarantor guarantees to any and all
third parties who have sustained or may sustain bodily injury or property damage
caused by sudden and/or non-sudden accidental occurrence arising from operations
of the facility covered by this guarantee, that in the event that MK Rail fails
to satisfy a judgment or award based upon a determination of liability for
bodily injury or property damage to third parties caused by sudden and/or non-
sudden accidental occurrences, arising from the operation of the above-named
facility, or fails to pay an amount agreed to in settlement of a claim arising
from or alleged to arise from such injury or damage, the Guarantor will satisfy
such judgment(s) award(s) or
ENVIRONMENTAL LIABILITY TRANSFER AGREEMENT - 14
<PAGE>
settlement agreement(s) up to the limits of coverage identified above.
4. Such obligation does not apply to any of the following:
(a) Bodily injury or property damage for which MK Rail is obligated
to pay damages by reason of the assumption of liability in the contract or
agreement. This exclusion does not apply to liability for damages that MK Rail
would be obligated to pay in the absence of the contract or agreement.
(b) Any obligation of MK Rail under a workers' compensation,
disability benefits or unemployment compensation law or any similar law.
(c) Bodily injury to:
(i) An employee of MK Rail arising from, and in the course of,
employment by MK Rail; or
(ii) The spouse, child, parent, brother or sister of that
employee as a consequence of, or arising from, and in the course of employment
by MK Rail. This exclusion applies:
(A) Whether MK Rail may be liable as an employer or in any
other capacity; and
(B) To any obligation to share damages or repay another
person who must pay damages because of the injury to the persons identified in
paragraphs (i) and (ii).
(d) Bodily injury or property damage arising out of the ownership,
maintenance, use or entrustment to others of any aircraft, motor vehicle or
water craft.
(e) Property damage to:
(i) Premises that are sold, given away or abandoned by MK Rail
if the property damage arises out of any part of those premises;
(ii) Any property owned, rented or occupied by MK Rail;
(iii) Property loaned to MK Rail;
(iv) Personal property in the care, custody or control of MK
Rail;
ENVIRONMENTAL LIABILITY TRANSFER AGREEMENT - 15
<PAGE>
(v) That particular real property in which MK Rail or any
contractors or subcontractors working directly or indirectly on behalf of MK
Rail are performing operations, if the property damage arises out of these
operations.
5. Guarantor agrees that if, at the end of any fiscal year before
termination of this Guarantee, the Guarantor fails to meet the financial test
criteria, Guarantor shall send within 30 days, by certified mail, notice to the
EPA Regional Administrator for the region in which the facility is located (with
a copy to IDEQ) and to MK Rail that it intends to provide alternate liability
coverage as specified in 40 C.F.R. Section 264.147 and Section 265.147, as
applicable, in the name of MK Rail. Within 120 days after the end of such
fiscal year, the Guarantor shall establish such liability coverage unless MK
Rail has done so.
6. The Guarantor agrees to notify the EPA Regional Administrator by
certified mail (with a copy to IDEQ) of the voluntary or involuntary proceeding
under Title 11 (Bankruptcy), U.S. Code, naming Guarantor as debtor, within 10
days after commencement of the proceeding.
7. Guarantor agrees that within 30 days after being notified by an EPA
Regional Administrator or by IDEQ of a determination that Guarantor no longer
meets the financial test criteria or that it is disallowed from continuing as a
guarantor, it shall establish alternate liability coverage as specified in 40
C.F.R. Section 264.146 or Section 265.147 in the name of MK Rail, unless MK Rail
has done so.
8. Guarantor reserves the right to modify this agreement to take into
account amendment or modification of the liability requirements set by 40 C.F.R.
Section 264.147 and Section 265.147, provided that such modification shall
become effective only if an EPA Regional Administrator (and/or IDEQ) does not
disapprove the modification within 30 days of receipt of notification of the
modification.
9. Guarantor agrees to remain bound under this guarantee for so long as
MK Rail must comply with the applicable requirements of 40 C.F.R. Section 64.147
and Section 265.147 for the above listed facility, except as provided in
paragraph 10 of this Agreement.
10. Guarantor may terminate this Guarantee by sending notice by certified
mail to the EPA Regional Administrator of the region in which the facility is
located (with a copy to IDEQ) and to MK Rail, provided that this Guarantee may
not be terminated unless and until MK Rail obtains, and the EPA Regional
Administrator (and IDEQ) approve, alternate liability coverage complying with 40
C.F.R. Section 264.147 and/or Section 265.147.
ENVIRONMENTAL LIABILITY TRANSFER AGREEMENT - 16
<PAGE>
11. Guarantor hereby expressly waives notice of acceptance of this
Guarantee by any party.
12. Guarantor agrees that this guarantee is in addition to and does not
affect any other responsibility or liability of the Guarantor with respect to
the covered facility.
13. The Guarantor shall satisfy a third party liability claim only on
receipt of one of the following documents:
(a) Certification from the Principal and the third party claimant(s)
that the liability claim should be paid. The certification must be worded as
follows, except that instruction in brackets are to be replaced with the
relevant information and the brackets deleted:
Certification of Valid Claim
The undersigned, as parties [insert Principal] and
[insert name and address of third party claimant(s)], hereby
certify that the claim of bodily injury and/or property
damage caused by a [sudden or non-sudden] accidental
occurrence arising from operating [Principal's] hazardous
waste treatment, storage, or disposal facility should be
paid in the amount of $[________________].
(Signatures)
______________________________
Principal
(Notary)
(Date)
(Signatures)
______________________________
Claimant(s)
(Notary)
(Date)
(b) A valid final court order establishing a judgment against
the principal for bodily injury or property damage caused by sudden or non-
sudden accidental occurrences
ENVIRONMENTAL LIABILITY TRANSFER AGREEMENT - 17
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arising from the operation of the Principal's facility or group of facilities.
14. In the event of combination of this guarantee with another mechanism
to meet liability requirements, this guarantee will be considered ["primary" or
"excess"] coverage.
I hereby certify that the wording of the guarantee is substantially
identical to the wording specified in 40 C.F.R. Section 264.151(h)(2) as such
regulations were constituted on the dates shown immediately below.
Effective Date: ______________________, 1994.
MORRISON KNUDSEN CORPORATION
By______________________________
Name:_________________________
Its:__________________________
STATE OF IDAHO )
) ss.
County of Ada )
On this _____ day of __________, 1993, before me,
_______________________________, a Notary Public in and for said State,
personally appeared __, known or identified to me to be the president of
MORRISON KNUDSEN CORPORATION, the corporation that executed the within
instrument or the person who executed the instrument on behalf of said
corporation, and acknowledged to me that such corporation executed the same.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal the day and year in this certificate first above written.
_________________________________
Notary Public for Idaho
Residing at _____________________
My commission expires ___________
ENVIRONMENTAL LIABILITY TRANSFER AGREEMENT - 18
<PAGE>
Exhibit 10.6
TAX MATTERS AGREEMENT
THIS TAX MATTERS AGREEMENT ("Agreement") is made this 22ND day of
FEBRUARY, 1994, by and between MK Rail Corporation, a Delaware corporation ("MK
Rail") on its own behalf and on behalf of its wholly-owned subsidiaries (the
"Subsidiaries"), and Morrison Knudsen Corporation, a Delaware corporation
("Morrison Knudsen").
RECITALS
WHEREAS, MK Rail is a wholly-owned subsidiary of Morrison Knudsen;
WHEREAS, MK Rail intends to sell a minority interest in its Common
Stock, par value $0.01 per share ("Common Stock"), to the public ("Public
Offering");
WHEREAS, following the closing of the Public Offering ("Closing
Date"), Morrison Knudsen will own less than 80% of the outstanding Common Stock
of MK Rail;
WHEREAS, for periods ending on or before the Closing Date, MK Rail and
its Subsidiaries have been or will be included in consolidated income tax
returns filed or to be filed on behalf of Parent's Group (as defined below);
WHEREAS, the parties hereto desire to allocate responsibility for the
payment of federal, state, local, and foreign taxes attributable to the
operations of MK Rail and its Subsidiaries during the taxable period in which
such Public Offering occurs and for taxable periods prior and subsequent to
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such period, and provide for the consequences of post-Closing Date adjustments
of such tax liabilities and related matters;
NOW, THEREFORE, in consideration of the foregoing and other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties agree as follows:
ARTICLE I
DEFINITIONS
As used herein the following terms when capitalized shall have the
following meanings:
1.1 "AFFILIATE" shall mean, with respect to a corporation, any other
corporation that, directly or indirectly, controls, is controlled by, or is
under common control with such first corporation.
1.2 "AFFILIATED GROUP" shall mean an "affiliated group" as defined in
section 1504(a) of the Code.
1.3 "CODE" shall mean the Internal Revenue Code of 1986, as amended
and as in effect from time to time, and any law which shall have been a
predecessor or shall be a successor thereto. A reference to any section of the
Code means such section as in effect from time to time and any comparable
provision of any predecessor or successor law.
1.4 "CONSOLIDATED INCOME TAX RETURNS" shall mean all Tax Returns for
Income Taxes which are or will be required to be filed by Morrison Knudsen on
behalf of Parent's Group; and
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"CONSOLIDATED INCOME TAXES" shall mean the Taxes shown or required to be shown
on such Tax Returns.
1.5 "FINAL DETERMINATION" shall mean, in the context of federal
income taxes, with respect to any issue or item for any Period (i) a final,
unappealable decision by a court of competent jurisdiction; (ii) the expiration
of the time for assessment of Taxes or filing a claim for refund or, if a refund
claim has been timely filed, the expiration of the time for instituting suit in
respect of such refund claim, if no further adjustment to the items of income,
gain, deduction, loss, or credit for such Period may thereafter be made;
(iii) the execution by or on behalf of the taxpayer and the IRS of a closing
agreement under section 7121 of the Code; (iv) the acceptance by the IRS or its
counsel of a tender pursuant to an offer in compromise pursuant to section 7122
of the Code; (v) the execution of a Form 870A; or (vi) any other final and
irrevocable determination of the tax liability of a party to this Agreement (or
an Affiliate of a party) for any Period. In the context of other Taxes, "FINAL
DETERMINATION" shall mean, with respect to any issue or item for any Period, any
final, unappealable and irrevocable determination of the tax liability of a
party to this Agreement (or an Affiliate of a party) for any Period.
1.6 "IRS" shall mean the United States Internal Revenue Service or
any successor thereto.
1.7 "PARENT'S GROUP" shall mean any Affiliated Group including
Morrison Knudsen or any predecessor or successor thereof.
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1.8 "PERIOD" shall mean any taxable year or any other period which is
treated as a taxable year (including the Short Period) for purposes of the Code,
when used in the context of federal income taxes. When used in the context of
any other Taxes, "PERIOD" shall mean any taxable year or other period with
respect to which any such Tax may be imposed under any applicable statute, rule
or regulation.
1.9 "REGULATIONS" shall mean the Treasury regulations in effect from
time to time under the Code.
1.10 "SHORT PERIOD" shall mean the Period beginning on January 1, 1994
and ending on or immediately before the Closing Date.
1.11 "STATE INCOME TAXES" shall mean all taxes measured on or by net
income imposed by any State of the United States of America or political
subdivision thereof, and shall include taxes denominated as franchise taxes.
1.12 "TAX" and "TAXES" shall mean all income taxes (including federal
income taxes, State Income Taxes and foreign income taxes imposed under Subtitle
A of the Code or similar laws of any government or other taxing authority in
effect prior to or on the date hereof) (referred to herein as "INCOME TAXES"),
payroll and employee withholding taxes (imposed under Chapters 21 through 24 of
the Code or any similar or comparable payroll and employee withholding taxes
(including disability withholding taxes) imposed by the laws of any state, local
or foreign government or other taxing authority, as in effect prior to or on the
date hereof), sales and use taxes, and real and personal
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property taxes, whether arising before, on or after the Closing Date. For
purposes of this Agreement, any reference to a particular type of tax enumerated
in this Section 1.12 shall also be deemed to refer to any interest or penalties
that may become payable in respect thereof.
1.13 "TAXES OF MK RAIL" shall mean Taxes for which MK Rail and its
Subsidiaries (or any of them) are directly and primarily liable, which arise out
of or with respect to the operations, income, assets, or other attributes of MK
Rail or its Subsidiaries upon which Taxes are imposed or by which the amount of
Taxes due are measured.
1.14 "TAX RETURNS" shall mean all reports, estimates, information
statements and returns relating to, or required to be filed in connection with,
any Taxes pursuant to the statutes, rules and regulations of any federal, state,
local, or foreign government taxing authority.
1.15 "UNITARY AMOUNT" shall have the meaning set forth in Section
3.2(c).
1.16 "UNITARY OR COMBINED TAX RETURNS" shall mean any State Income Tax
or other Tax Returns which have been or will be filed in a Unitary State by
Morrison Knudsen which compute the Taxes (the "Unitary or Combined Taxes")
payable to such Unitary State in respect of the operations of Morrison Knudsen
and its applicable Affiliates (including MK Rail and/or any of its Subsidiaries)
based on so-called "combined reporting" or apportionment of business income
under the so-called "unitary business" concept.
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1.17 "UNITARY STATE" shall mean any State of the United States of
America which, for the Period in question, shall permit or require the
computation of Taxes payable to it in respect of the operations of Morrison
Knudsen and its applicable Affiliates (including MK Rail and/or any of its
Subsidiaries) based on so-called "combined reporting" or apportionment of
business income under the so-called "unitary business" concept.
ARTICLE II
PREPARATION OF RETURNS, CONTROVERSIES
2.1 RETURNS AND CONTROVERSIES--CONSOLIDATED INCOME TAX AND
INFORMATION RETURNS.
(a) RETURNS AND PAYMENT. Morrison Knudsen shall have exclusive
authority to report for Consolidated Income Tax purposes the operations of
Parent's Group, including the operations of MK Rail and its Subsidiaries for
Periods ending on or before the Closing Date, and shall be responsible for the
correct and timely filing of, and shall be liable, and shall indemnify MK Rail
and its Subsidiaries, for the full and timely payment of all amounts shown to be
due on, the Consolidated Income Tax Returns and consolidated information returns
of Parent's Group; provided, however, that MK Rail shall be responsible for
providing Morrison Knudsen with all information required by Morrison Knudsen
with respect to the operations and assets of MK Rail and its Subsidiaries in
order to file such Consolidated Income Tax Returns and to pay such Consolidated
Income Taxes on a timely basis, as provided in section 4.2(b)
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below, and MK Rail shall be responsible for payment to Morrison Knudsen of the
portion of amounts shown to be due on any Consolidated Income Tax Returns for
Periods ending on or before the Closing Date, but which are not due to be filed
until after the Closing Date, which are allocable to it or its Subsidiaries
under the so-called "Basic Method 2" and "Complementary Method 2" prescribed by
the Regulations. Morrison Knudsen's authority hereunder shall include, but not
be limited to, the determination of the manner in which any items of income,
gain, deduction, loss or credit arising out of the operations of MK Rail and its
Subsidiaries shall be reported or disclosed in such returns.
(b) CONTROVERSIES. Morrison Knudsen, at its expense, shall have
exclusive authority to represent MK Rail and its Subsidiaries before the IRS or
any other governmental agency or authority or any court regarding Consolidated
Income Taxes of MK Rail and its Subsidiaries for Periods ending on or before the
Closing Date, including, but not limited to (i) the exclusive control of any
response to any examination by the IRS or any other taxing authority of
Consolidated Income Tax Returns of Parent's Group and MK Rail and its
Subsidiaries in respect of the operations of MK Rail and its Subsidiaries; and
(ii) the exclusive control over any contest of any issue to the extent included
in any Consolidated Income Tax Return of Parent's Group through a Final
Determination, including, but not limited to (A) whether and in what forum to
conduct such contest, and (B) whether and on what basis to settle such contest.
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Morrison Knudsen shall promptly notify MK Rail of any Tax
controversies and will provide MK Rail with copies of all correspondence
relating to such controversies and will provide MK Rail with notice of, and
permit MK Rail to attend any hearing or other proceedings relating to, such
controversies.
2.2 RETURNS AND CONTROVERSIES -- STATE INCOME TAX AND OTHER TAX
RETURNS IN UNITARY STATES.
(a) TAX RETURNS AND PAYMENTS. Morrison Knudsen shall have exclusive
authority to report, for purposes of Unitary or Combined Tax Returns, the
operations or assets of Morrison Knudsen and any of its Affiliates included in
such Unitary or Combined Returns, including MK Rail and/or any of its
Subsidiaries, for all Periods, whether ending before, on or after the Closing
Date. Morrison Knudsen shall be responsible for the correct and timely filing
of, and shall be liable, and shall indemnify MK Rail and its Subsidiaries, for
the full and timely payment of all amounts shown to be due on, the Unitary or
Combined Tax Returns for such Periods; provided, however, that MK Rail shall be
responsible for providing Morrison Knudsen with all information required by
Morrison Knudsen with respect to the operations and assets of MK Rail and its
Subsidiaries in order to file such Unitary or Combined Tax Returns and to pay
such Unitary or Combined Taxes on a timely basis as provided in section 4.2(c)
below, and MK Rail shall be responsible for payment to Morrison Knudsen of the
portion of amounts shown to be due on any Unitary or Combined Tax Returns which
are attributable to its and its Subsidiaries' operations, as provided in Section
3.2(a) below.
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Morrison Knudsen's authority hereunder shall include, but not be limited to, the
determination of the manner in which any items of income, gain, deduction, loss
or credit arising out of the operation of MK Rail and its Subsidiaries shall be
reported or disclosed in such returns.
(b) CONTROVERSIES. Morrison Knudsen, at its expense, shall have
exclusive authority to represent MK Rail and its Subsidiaries before any
governmental agency or any court regarding Unitary or Combined Tax Returns
including MK Rail and/or any of its Subsidiaries. Morrison Knudsen's authority
under this section includes, but is not limited to (i) the exclusive control of
any response to any examination by any taxing authority of such Unitary or
Combined Tax Returns in respect of the operations or assets of MK Rail and its
Subsidiaries; and (ii) the exclusive control over any contest of any issue to
the extent included in any such Unitary or Combined Tax Returns through a Final
Determination, including, but not limited to (A) whether and in what forum to
conduct such contest, and (B) whether and on what basis to settle such contest.
Morrison Knudsen shall promptly notify MK Rail of any Tax
controversies with respect to Unitary or Combined Tax Returns including MK Rail
and any of its Subsidiaries and will provide MK Rail with notice of, and permit
MK Rail to attend any hearing or other proceedings relating to, such
controversies.
2.3 RETURNS AND CONTROVERSIES--ALL OTHER TAXES.
(a) TAX AND INFORMATION RETURNS. Except as provided in section 2.1
and 2.2 hereof, MK Rail shall have exclusive
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authority with regard to all Taxes of MK Rail. MK Rail shall be responsible for
the correct and timely filing of, and shall be liable for the full and timely
payment of all amounts shown to be due on, all federal income tax and
information returns and all other Tax Returns for Taxes of MK Rail, provided,
however, that Morrison Knudsen shall be liable, and shall indemnify MK Rail, for
the full and timely payment of all amounts shown to be due on, all Tax Returns
which are or will be due on or before the Closing Date, for Taxes of MK Rail for
Periods ending on or before the Closing Date. MK Rail's authority hereunder
shall include, but not be limited to, the determination of the manner in which
any items of income, gain, deduction, loss or credit arising out of operations
of MK Rail and its Subsidiaries shall be reported or disclosed in such returns.
MK Rail shall be entitled to make any elections under the Code or the
Regulations in respect of the operations of MK Rail and its Subsidiaries for all
such Tax Returns.
(b) CONTROVERSIES. MK Rail, at its expense, shall have exclusive
authority to represent itself before the IRS or any other taxing authority or
any court regarding the Tax consequences of the operations of MK Rail and its
Subsidiaries with respect to all Tax Returns and Taxes of MK Rail described in
Section 2.3(a).
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ARTICLE III
COMPUTATIONS AND PAYMENTS OF TAXES; INDEMNIFICATIONS
3.1 CONSOLIDATED INCOME TAXES.
(a) INITIAL RECOMPUTATION. Within 1 year after the Closing Date, MK
Rail shall pay to Morrison Knudsen the amount by which MK Rail's Separate Tax
Liability, as defined below, exceeds MK Rail's Consolidated Net Tax
Contribution/Reimbursement for the Adjustment Period, as defined below; or
Morrison Knudsen shall pay to MK Rail the amount by which MK Rail's Consolidated
Net Tax Contribution/Reimbursement exceeds MK Rail's Separate Tax Liability for
the Adjustment Period. "MK Rail's Separate Tax Liability" shall be the
aggregate amount of Income Taxes MK Rail and its Subsidiaries would have been
liable to pay (in lieu of their allocable shares of Consolidated Income Taxes)
for the taxable years preceding the Closing Date during which any of them was a
member of Parent's Group (including the Short Period as one such taxable year)
(the "Adjustment Period") and with respect to which any of them were included in
Consolidated Income Tax Returns of Parent's Group, if they had not been members
of Parent's Group, taking into account all carryforwards and carrybacks, and all
otherwise deferred items, which MK Rail and its Subsidiaries would have been
entitled or obligated to claim or report if they had not been members of
Parent's Group. "MK Rail's Consolidated Net Tax Contribution/Reimbursement for
the Adjustment Period" shall be: (i) the aggregate amount of Consolidated
Income Taxes paid by or charged to MK Rail and its
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Subsidiaries, less (ii) payments made by or credited to MK Rail and its
Subsidiaries with respect to Consolidated Income Tax savings of Parent's Group
attributable to losses or credits of MK Rail and its Subsidiaries, plus (iii)
the aggregate amount, if any, by which the Consolidated Income Taxes of Parent's
Group (without taking MK Rail and its Subsidiaries into account) were reduced
during the Adjustment Period by the application of any losses or credits
attributable to MK Rail and its Subsidiaries, but only to the extent such losses
or credits of MK Rail and its Subsidiaries would have been available to MK Rail
and its Subsidiaries to carry forward to Periods ending after the Closing Date
if they had not been included in the Consolidated Income Tax Returns of Parent's
Group. The amount of MK Rail's Separate Tax Liability shall be computed by MK
Rail and submitted to Morrison Knudsen for its approval, which approval shall
not be unreasonably withheld. The amount of MK Rail's Consolidated Net Tax
Contribution/ Reimbursement shall be computed by Morrison Knudsen and submitted
to MK Rail for its approval, which approval shall not be unreasonably withheld.
(b) SUBSEQUENT ADJUSTMENTS; INDEMNIFICATIONS. Morrison Knudsen shall
be responsible and liable, and shall indemnify MK Rail, for any and all
increases in Consolidated Income Taxes (plus any interest or penalties that may
be imposed in respect thereof), and shall be entitled to any refund of any and
all decreases in Consolidated Income Taxes (plus any interest that may be
imposed in respect thereof), which may be determined pursuant to a Final
Determination after the Closing Date, and
<PAGE>
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which are attributable to any members of Parent's Group other than MK Rail or
its Subsidiaries, for all Periods ending on or before the Closing Date,
including but not limited to any such Taxes attributable to the inclusion of
Affiliates of Morrison Knudsen for which MK Rail could be liable under
Regulations section 1.1502-6 (relating to several liability of members of a
consolidated group). MK Rail shall be responsible and liable and shall
indemnify Morrison Knudsen for any and all increases, and shall be entitled to
any refunds, of Consolidated Income Taxes for all Periods ending on or before
the Closing Date which are allocable to MK Rail or its Subsidiaries. For
purposes of determining the amount of any Consolidated Income Tax increases or
refunds that are allocable to MK Rail or its Subsidiaries the amounts computed
under Section 3.1(a) shall be recomputed to take into account all adjustments
made in the Final Determination to which the increase or refund of Consolidated
Income Taxes relates.
3.2 UNITARY OR COMBINED TAXES.
(a) RETURNS FILED AFTER THE CLOSING DATE. For any Period during
which MK Rail is includible in a Unitary or Combined Tax Return filed or to be
filed by Morrison Knudsen after the Closing Date, Morrison Knudsen or an
Affiliate thereof shall, based on the apportionment factors and other
information contained in the draft Tax Returns to be supplied by MK Rail as
provided in Section 4.2(c) and other information, compute for each Unitary State
(i) the total or "combined" income, loss or other taxable amounts of Morrison
Knudsen and its applicable
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Affiliates (including MK Rail and/or any of its Subsidiaries) for the Period for
which such Unitary or Combined Tax Return including MK Rail and/or any of its
Subsidiaries is to be filed, (ii) the amount of Tax due with respect to the
amounts computed under (i) above; and (iii) the amount of such Tax as is
properly apportioned to MK Rail and its Subsidiaries for the Period (the
"Unitary Amount"). All such computations shall be made on a basis consistent
with the computations of such amounts by Morrison Knudsen in prior Tax Returns
for the respective states, except to the extent otherwise required by the laws,
rules or regulations of the respective states or other applicable authority, or
as a result of a change in factual circumstances. Morrison Knudsen shall notify
MK Rail of the Unitary Amount, and the computations thereof, for each Unitary
State.
(b) SUBSEQUENT ADJUSTMENTS; INDEMNIFICATIONS. Morrison Knudsen shall
be responsible and liable, and shall indemnify MK Rail, for any and all
increases in Unitary or Combined Taxes (plus any interest or penalties that may
be imposed in respect thereof), and shall be entitled to any refund of any and
all decreases in Unitary or Combined Taxes (plus any interest that may be
imposed in respect thereof), for any Period for which a Unitary or Combined Tax
Return was filed including the operations or assets of MK Rail and/or any of its
Subsidiaries, which may be determined pursuant to a Final Determination after
the Closing Date and which are allocable to Morrison Knudsen or any of its
Affiliates other than MK Rail and its Subsidiaries. MK Rail shall be
responsible and liable, and
<PAGE>
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shall indemnify Morrison Knudsen, for any and all increases, and shall be
entitled to any refunds, of Unitary or Combined Taxes for any Period during
which MK Rail and its Subsidiaries were included in the Unitary or Combined Tax
Return of Morrison Knudsen which is subject to a Final Determination, which are
allocable to MK Rail or its Subsidiaries. For purposes of determining the
amount of any Unitary or Combined Tax increases or refunds that are allocable to
MK Rail and its Subsidiaries, Morrison Knudsen shall recompute the Unitary
Amount for the Period involved in the manner provided in Section 3.2(a) to take
into account all adjustments made in the Final Determination to which the
increase or refund of Unitary or Combined Taxes relates.
(c) POST-UNITARY OR COMBINED PERIODS. If, and to the extent that,
for any Period ending after the Closing Date in which MK Rail or any of its
Subsidiaries is no longer includible in a Unitary or Combined Tax Return filed
by Morrison Knudsen on behalf of itself and its Affiliates in a Unitary State (a
"Post-Unitary or Combined Period"), MK Rail or any such Subsidiary would be
entitled to apply any of its deductions, losses or credits arising in a prior
year ("Tax Benefit Items") to reduce its Tax obligations to such Unitary State
if it had never been included in a Unitary or Combined Tax Return filed by
Morrison Knudsen, but such Tax Benefit Items were used in a prior Unitary or
Combined Tax Return filed by Morrison Knudsen to reduce the taxable income of
Morrison Knudsen or its Affiliates (other than MK Rail or its Subsidiaries),
then for such Post-Unitary or
<PAGE>
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Combined Period Morrison Knudsen shall pay to MK Rail the amount by which the
Unitary or Combined Taxes of Morrison Knudsen and its Affiliates (excluding MK
Rail and its Subsidiaries) were reduced by the use of such Tax Benefit Items in
the prior Period, except to the extent, if any, that Morrison Knudsen or its
Affiliates previously paid MK Rail or its Subsidiary for the use of such Tax
Benefit Items, through intercompany accounts or otherwise. The amount of any
Tax Benefit Items which MK Rail or its Subsidiaries would have been able to use
in any Post-Unitary or Combined Period but for their prior use in a Unitary or
Combined Tax Return shall be computed by MK Rail and submitted to Morrison
Knudsen for its approval, which approval shall not be unreasonably withheld.
The amount by which the Unitary or Combined Taxes of Morrison Knudsen and its
Affiliates (excluding MK Rail and its Subsidiaries) were reduced by the use of
such Tax Benefit Items, and the amount, if any, of prior payments to MK Rail or
its Subsidiaries with respect to the use of such Tax Benefit Items, shall be
computed by Morrison Knudsen and submitted to MK Rail for its approval, which
approval shall not be unreasonably withheld.
3.3 ALL OTHER TAXES. MK Rail shall be responsible and liable for,
and shall indemnify and hold Morrison Knudsen harmless from, any increases in,
and shall be entitled to any refund resulting from any decreases in, any and all
Taxes of MK Rail not described in Sections 3.1 or 3.2 hereof which may be
determined pursuant to a Final Determination after the Closing Date. Morrison
Knudsen shall be responsible and liable for, and
<PAGE>
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shall indemnify and hold MK Rail and its Subsidiaries harmless from, and shall
be entitled to any refunds of, any taxes for any Period for which Morrison
Knudsen or any of its affiliates (other than MK Rail and its Subsidiaries) is
directly and primarily liable but for which MK Rail or its Subsidiaries may be
held secondarily or indirectly liable.
3.4 TIME OF PAYMENT. The amounts of any Consolidated Income Taxes
allocated to MK Rail and its Subsidiaries with respect to Consolidated Income
Tax Returns and the Unitary Amount with respect to Unitary or Combined Tax
Returns filed by Morrison Knudsen after the Closing Date and including the
operations or assets of MK Rail and/or any of its Subsidiaries shall be paid by
MK Rail to Morrison Knudsen within 30 days after receiving written notification
from Morrison Knudsen of the amount of such allocated Taxes. Amounts owed by
either party hereto in respect of tax refunds received by such party to which
the other party is entitled under this Agreement shall be paid by the party
receiving the refund to the other party within 30 days after the receipt of such
refunds from the applicable governmental entity, and amounts owed by either
party under this Agreement in respect of deficiencies shall be paid by such
party to the other party within 30 days after receiving notification from the
other party of a Final Determination with respect to any such deficiency, and
the amount of such deficiency. The amount of any Unitary or Combined Tax
savings arising from the use of Tax Benefit Items of MK Rail and its
Subsidiaries, as described in Section 3.2(c), shall be paid by Morrison Knudsen
to MK Rail within 30 days
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following MK Rail's approval of Morrison Knudsen's computation of the amount of
such Tax savings, as provided in Section 3.2(c).
ARTICLE IV
COOPERATION BY THE PARTIES
4.1 RECORD RETENTION. Morrison Knudsen and MK Rail agree that
following the Closing Date any Tax records shall be subject to Article IV of the
Support Services Agreement, dated the date hereof, between Morrison Knudsen and
MK Rail.
4.2 COOPERATION RE RETURN FILINGS AND CONTROVERSIES.
(a) IN GENERAL. Each party hereto agrees that it will cooperate with
the other and their respective representatives, in a prompt and timely manner,
in connection with (i) the preparation and filing of, and (ii) any
administrative or judicial proceeding involving, any return of tax or
information filed or required to be filed by MK Rail or its Subsidiaries or by
Morrison Knudsen with respect to MK Rail or its Subsidiaries. Such cooperation
shall include, but not be limited to, (i) the execution and delivery to Morrison
Knudsen by MK Rail or its Subsidiaries of any power of attorney required to
allow Morrison Knudsen and its counsel to represent MK Rail or its Subsidiaries
in any controversy which Morrison Knudsen shall have the right to control
pursuant to Section 2.1(b) or Section 2.2(b), and (ii) making available to the
other party, during normal business hours, all books, records (including, but
not limited to, working papers and schedules) and information, officers and
employees
<PAGE>
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(without substantial interruption of employment), reasonably requested and
necessary or useful in connection with any tax inquiry, audit, investigation,
dispute, litigation or any other matter requiring any such books, records,
information, officers or employees for any reasonable business purpose.
Notwithstanding the foregoing, neither party shall be required to furnish to the
other the federal income tax returns or drafts thereof (except as otherwise
expressly provided herein) of Parent's Group or MK Rail or its Subsidiaries, as
the case may be, for any Period, except that each party shall furnish to the
other the applicable portions of such returns reporting the operations of MK
Rail and its Subsidiaries and the applicable portions of all reports relating to
the examination by the IRS or any other governmental agency of such returns.
(b) DRAFT CONSOLIDATED INCOME TAX RETURN. In order to assist
Morrison Knudsen in complying with its obligations pursuant to Section 2.1(a),
as soon as practicable after the Closing Date, but in no event later than 240
days after the Closing Date, MK Rail shall furnish to Morrison Knudsen draft
federal (and, if applicable, state) income tax returns reporting the operations
of MK Rail and its Subsidiaries for the Short Period. Such draft returns shall
be prepared without regard to the items of income, gain, deduction, loss or
credit of the other members of Parent's Group. All items of income, gain,
deduction, loss and credit included in such draft returns shall be reported
therein on a basis consistent with the reporting of such items (or substantially
similar items) by MK Rail and its Subsidiaries
<PAGE>
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in prior reports and draft federal (or state if applicable) income tax returns
of MK Rail and its Subsidiaries which MK Rail or its Subsidiaries have provided
to Parent's Group, except to the extent otherwise required by applicable law or
as a result of a change in factual circumstances. Morrison Knudsen agrees to
consult with MK Rail in good faith prior to the filing of its Consolidated
Income Tax Returns including MK Rail and its Subsidiaries with respect to any
differences between such Tax Returns and the draft returns described in this
Section 4.2(b). In addition to providing such draft tax returns, MK Rail shall
promptly provide to Morrison Knudsen such other information as Morrison Knudsen
may reasonably request in order for the operations of MK Rail and its
Subsidiaries to be properly reported in the Consolidated Income Tax Returns of
Parent's Group.
(c) DRAFT UNITARY OR COMBINED TAX RETURNS. In order to facilitate
the proper reporting of the results of the operations of MK Rail and its
Subsidiaries in the Unitary or Combined Tax Returns to be filed by Morrison
Knudsen for any Period during which MK Rail and any of its Subsidiaries are
includible in such Unitary or Combined Tax Returns, as soon as practicable after
the end of any such Period, and in no event later than 120 days after the end of
such Period, MK Rail shall furnish to Morrison Knudsen draft tax returns for
each Unitary State reporting the operations and assets of MK Rail and its
Subsidiaries for the Period as required for purposes of each such Unitary or
Combined Tax Return. Each such draft return shall be
<PAGE>
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prepared on behalf of MK Rail and its Subsidiaries based on "combined reporting"
or apportionment of business income under the "unitary business" concept, in
accordance with the rules and regulations of the applicable Unitary State, but
without regard to the items of income, gain, deduction, loss or credit of
Morrison Knudsen or any of its other Affiliates. All items of income, gain,
deduction, loss and credit included in such draft tax returns shall be reported
therein on a basis consistent with the reporting of such items (or substantially
similar items) by MK Rail and its Subsidiaries in prior tax returns for the
respective States, except to the extent otherwise required by law or as a result
of a change in factual circumstances. Morrison Knudsen agrees to consult with
MK Rail in good faith prior to the filing of any Unitary or Combined Tax Return
including MK Rail or any of its Subsidiaries with respect to any differences
between such Tax Return and the draft returns described in this Section 4.2(c).
In addition to providing such draft tax returns, MK Rail shall promptly provide
to Morrison Knudsen such other information as Morrison Knudsen may reasonably
request in order for the operations and/or assets of MK Rail and its
Subsidiaries to be properly reported in the Unitary or Combined Tax Returns
filed by Morrison Knudsen; and in order for Morrison Knudsen to timely calculate
and pay estimated taxes with respect to such Unitary or Combined Tax Returns.
<PAGE>
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ARTICLE V
MISCELLANEOUS
5.1 PRIOR TAX SHARING AGREEMENTS. This Agreement terminates and
supersedes any and all other tax sharing or allocation agreements in effect on
the date hereof as between Morrison Knudsen or any predecessor or Affiliate
thereof on the one hand, and MK Rail and/or any of its Subsidiaries on the other
hand, for all Taxes imposed by any federal, state, local, or foreign government
or taxing authority, regardless of the Period for which such Taxes are imposed.
5.2 LIABILITY AND INDEMNITY. Morrison Knudsen shall have full
liability, as a primary obligor and not as a surety, for the performance of any
obligation of Parent's Group, and any member thereof, arising under this
Agreement.
5.3 EFFECTIVENESS OF THIS AGREEMENT; SURVIVAL OF OBLIGATIONS. This
Agreement shall only be effective from and after the Closing Date pursuant to
the Public Offering. With respect to any particular item of Tax liability, the
covenants and obligations contained in this Agreement shall not terminate until
a Final Determination as to such item has been made.
5.4 COMPLETE AGREEMENT. This Agreement and other agreements and
documents referred to herein, shall constitute the entire agreement between the
parties with respect to the subject matter hereof and shall supersede all
previous negotiations, commitments and writings with respect to such subject
matter.
<PAGE>
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5.5 GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the laws of the State of Delaware, without regard to the
principles of conflicts of laws thereof.
5.6 NOTICES. All notices and other communications hereunder shall be
in writing and shall be delivered by hand, mailed by registered or certified
mail (return receipt requested) or sent by courier or other express delivery
that provides for independent delivery verification to the parties at the
following addresses (or at such other addresses for a party as shall be
specified by like notice) and shall be deemed given on the date on which such
notice or communication is delivered to the addressees at the address specified
below:
(a) If to Morrison Knudsen:
if by hand:
-----------------------------
-----------------------------
-----------------------------
Attention:
if by mail:
-----------------------------
-----------------------------
-----------------------------
Attention:
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(b) If to MK Rail:
if by hand:
-----------------------------
-----------------------------
-----------------------------
Attention:
if by mail:
-----------------------------
-----------------------------
-----------------------------
Attention:
5.7 AMENDMENTS. This Agreement may not be modified or amended except
by an agreement in writing signed by the parties hereto.
5.8 SUCCESSORS AND ASSIGNS. This Agreement and all of the provisions
hereof shall be binding upon and inure to the benefit of the parties and their
respective successors and assigns; provided, however, that no party may assign
or delegate any of its rights or obligations under this Agreement (except to a
majority-owned subsidiary) without the consent of the other party, which consent
shall not be unreasonably withheld.
5.9 NO THIRD-PARTY BENEFICIARIES. This Agreement is solely for the
benefit of the parties hereto and shall not be deemed to confer upon any third
parties any remedy, claim, liability, reimbursement, claim of action or other
right in excess of those existing without reference to this Agreement.
<PAGE>
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5.10 TITLES AND HEADINGS. Titles and headings to sections herein are
inserted for the convenience of reference only and are not intended to be part
of or to affect the meaning or interpretation of this Agreement.
5.11 EXECUTION IN COUNTERPARTS. This Agreement may be executed in
counterparts, each of which shall be deemed an original, but which together
shall constitute one and the same agreement.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed as of the day and year first above written.
MK Rail Corporation
By: /s/ James P. O'Donnell
------------------------------------
Title: Senior Vice President, Secretary,
Treasurer and Chief Financial Officer
MORRISON KNUDSEN CORPORATION
By: /s/ Stephen G. Hanks
------------------------------------
Title: Executive Vice President
<PAGE>
Exhibit 10.7
EMPLOYEE TRANSFER AND BENEFITS AGREEMENT
THIS EMPLOYEE TRANSFER AND BENEFITS AGREEMENT ("AGREEMENT") is made as of
April 20, 1994. The parties ("PARTIES") to this Agreement are MORRISON KNUDSEN
CORPORATION, an Ohio corporation ("MORRISON KNUDSEN"), and MK RAIL CORPORATION,
a Delaware corporation ("MK RAIL").
RECITALS
WHEREAS, pursuant to the terms of that certain Transfer Agreement dated
February 25, 1994 ("TRANSFER AGREEMENT"), Morrison Knudsen has transferred to MK
Rail certain assets relating to its locomotive division, effective as of
February 1, 1994 ("ASSET TRANSFER DATE");
WHEREAS, subsequent to the Asset Transfer Date, MK Rail intends to offer
and sell shares of its Common Stock, par value
$0.01 per share to the public ("PUBLIC OFFERING");
WHEREAS, prior to the effective date of the Public Offering, and as part of
the asset transfer referenced above, Morrison Knudsen will transfer to MK Rail
all of the issued and outstanding capital stock of certain wholly-owned,
locomotive component parts-related subsidiaries;
WHEREAS, the Parties desire to set forth the terms and conditions pursuant
to which MK Rail shall employ those employees of Morrison Knudsen and the
subsidiaries who currently are employed in connection with the Business (as
defined in the Transfer Agreement), as well as the terms and conditions of the
employee benefits to be provided to such employees.
NOW, THEREFORE, in consideration of the foregoing and other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the Parties agree as follows:
ARTICLE 1
DEFINITIONS
1.1 GENERAL. As used in this Agreement, capitalized terms defined
immediately after their use shall have the respective meanings thereby provided,
and the following terms shall have the following meanings (such meanings to be
equally applicable to both the singular and plural forms of the terms defined):
EMPLOYEE TRANSFER AND BENEFITS AGREEMENT - 1
<PAGE>
ACTION: any demand, action or cause of action, claim, suit, arbitration,
inquiry, subpoena, discovery request, proceeding or investigation by or before
any court or grand jury, any governmental or other regulatory or administrative
agency or commission or any arbitration tribunal related to, arising out of or
resulting from any Employee Liability.
AFFILIATE: with respect to any specified person, a person that, directly
or indirectly, through one or more intermediaries, controls, or is controlled
by, or is under common control with, such specified person; provided, that
Morrison Knudsen and MK Rail shall not be deemed to be Affiliates of each other
for purposes of this Agreement.
CODE: the Internal Revenue Code of 1986, as it may be amended or
recodified from time to time.
COLLECTIVE BARGAINING AGREEMENT: each collective bargaining agreement,
including any supplemental agreements or letters of understanding, in effect and
covering Employees as of the Asset Transfer Date, as identified on Annex I
hereto.
EMPLOYEE BENEFIT PLANS: (i) any severance, bonus, stock option, stock
appreciation, stock purchase, retirement, insurance, pension, profit-sharing or
deferred compensation plans, agreements or arrangements that currently are
established, maintained or contributed to by Morrison Knudsen or a Subsidiary
for the benefit of any Employees, and (ii) any employee welfare and employee
pension benefit plans (as such terms are defined in Section 3(1) and 3(2),
respectively, of ERISA) which are applicable to former or present Employees that
currently are established, maintained or contributed to by Morrison Knudsen or
any Subsidiary.
EMPLOYEE/LABOR LAW: any federal, state, local or municipal law (including
common law), statute, ordinance, regulation, order, decree, judgment, decision,
ruling, permit or authorization (each as may be in effect from time to time)
relating or applicable to the work place or to the employer/employee
relationship including, without limitation, any of the foregoing relating or
applicable to wage and hour claims, collective bargaining and labor laws, ERISA-
governed employee benefit and welfare plans, federal, state and local tax
withholding and payment rules and regulations, workers' compensation and similar
laws, accrued vacation statutes, and sexual harassment and anti-discrimination
laws.
EMPLOYEE LIABILITY: any and all debts, charges, liabilities, warranties
and obligations (of any nature or type whatsoever regardless of when arising),
whether accrued, contingent or reflected on a balance sheet including, without
limitation, liability for administrative, civil or criminal penalties or
forfeitures, and attorneys' fees or other costs of defending an
EMPLOYEE TRANSFER AND BENEFITS AGREEMENT - 2
<PAGE>
Action or a claim of Employee Liability under any Employee/Labor Law.
EMPLOYEES: the MK Employees and the Subsidiary Employees.
EMPLOYEE TRANSFER EFFECTIVE DATE: the effective date of the transfer of the
Employees to MK Rail, which such date shall be April 23, 1994.
ERISA: the Employee Retirement Income Security Act of 1974, as amended.
INTERIM PERIOD: the period from and after the Asset Transfer Date until
the Employee Transfer Effective Date.
MK DEFERRED COMPENSATION PLANS: the Morrison Knudsen Corporation Deferred
Compensation Plan and the Morrison Knudsen Corporation Supplemental Savings
Plan.
MK EMPLOYEE: any active employee of Morrison Knudsen (including any
employee on authorized leave of absence, sick pay leave or short-term
disability), who (i) is designated by Morrison Knudsen as being employed in
connection with the Business as of the Asset Transfer Date and will be
transferred to MK Rail as of the Employee Transfer Effective Date and (ii)
during the six full calendar months following the Employee Transfer Effective
Date, MK Rail requests (with the consent of Morrison Knudsen) that such active
employee be transferred from Morrison Knudsen to MK Rail. Each MK Employee who
is transferred to MK Rail as of the Employee Transfer Effective Date shall be
identified on Annex II attached hereto. All other MK Employees will be
identified in a separate letter from Morrison Knudsen to MK Rail.
SUBSIDIARY: MK Engine Systems Company, Inc., a New York corporation; Clark
Industries, Inc., an Illinois corporation; Motor Coils Manufacturing Co., a
Pennsylvania corporation; Power Parts Company, a Nevada corporation; Touchstone,
Inc., a Tennessee corporation; and their wholly-owned subsidiaries.
SUBSIDIARY EMPLOYEES: any active employee of a Subsidiary (including any
employee on authorized leave of absence, sick pay leave or short-term
disability), who is employed as of the effective date the stock of the
Subsidiary is transferred from Morrison Knudsen to MK Rail.
1.2 OTHER DEFINITIONS. Capitalized terms not specifically defined herein
shall have the meanings ascribed thereto in the Transfer Agreement.
ARTICLE 2
EMPLOYEE TRANSFER AND BENEFITS AGREEMENT - 3
<PAGE>
INTERIM STATUS OF EMPLOYEES
2.1 EMPLOYEES OF MORRISON KNUDSEN AND SUBSIDIARIES. During the Interim
Period, each Employee shall continue for all purposes as an employee of Morrison
Knudsen or of a Subsidiary, as applicable, and Morrison Knudsen and the
Subsidiaries shall retain all employer authority over their respective Employees
including, without limitation, the power to hire, fire and discipline such
Employees in accordance with their customary practice and procedures.
2.2 PARTICIPATION IN EMPLOYEE BENEFIT PLANS.
Notwithstanding any other provision of this Agreement, each Employee who
as of the Employee Transfer Effective Date participated in any of the Employee
Benefit Plans identified on Annex III hereto shall continue through June 30,
1994 (or such later date as agreed to by Morrison Knudsen and MK Rail), to
participate in and be covered by those Employee Benefit Plans identified on
Annex III hereto.
2.3 OBLIGATIONS OF MK RAIL. During the Interim Period, MK Rail shall
reimburse Morrison Knudsen for payments Morrison Knudsen made to Employees, for
all work performed by such Employees in connection with the Business from and
after the Asset Transfer Date. In addition, MK Rail shall reimburse Morrison
Knudsen for all costs and expenses Morrison Knudsen paid to or on behalf of any
Employee including, without limitation, charges relating to payroll, fringe
benefits, federal, state and local taxes, and any portion of the contributions
to and costs, fees and expenses associated with the Employee's participation in
any Employee Benefit Plans from and after the Asset Transfer Date.
Notwithstanding the foregoing, this Section 2.3 shall not apply to any MK
Employee who is transferred to MK Rail following the Employee Transfer Effective
Date.
ARTICLE 3
TRANSFER OF EMPLOYEES
3.1 TRANSFER OF EMPLOYEES. At the Employee Transfer Effective Date, MK
Rail shall offer to employ, at no less than his or her current salary or wage
rate and grade level, each MK Employee who transfers to MK Rail as of the
Employee Transfer Effective Date. MK Rail shall offer to reinstate any MK
Employee on military leave upon timely application by such MK Employee as
provided by law after cessation of such MK Employee's military duty. MK Rail
shall continue the status of an MK Employee on authorized leave of absence, and
shall recall, reinstate and/or terminate the employment of any MK Employee in
accordance with any applicable Collective Bargaining Agreement or, if no such
Collective Bargaining Agreement applies, in accordance with any
EMPLOYEE TRANSFER AND BENEFITS AGREEMENT - 4
<PAGE>
applicable lay-off or leave of absence policy in effect when such MK Employee's
layoff or leave of absence began.
3.2 TRANSFER OF SUBSIDIARY EMPLOYEES. The Parties acknowledge that
concurrently with the transfer of MK Employees provided hereunder, Morrison
Knudsen shall transfer to MK Rail all of the issued and outstanding capital
stock of the Subsidiaries. Such stock transfers shall result in each Subsidiary
becoming a wholly-owned subsidiary of MK Rail, and shall operate as a transfer
of all of the Subsidiary Employees to MK Rail on a consolidated or controlled
group basis.
3.3 CONDITIONS OF EMPLOYMENT. Notwithstanding anything to the contrary
contained in Section 3.1 hereof, (a) MK Rail may make an offer of employment to
any MK Employee conditional upon execution by such MK Employee of
confidentiality and other similar agreements, (b) MK Rail shall not be required
to employ any person who declines employment with MK Rail, and Morrison Knudsen
shall not be required to employ any such person who declines employment with MK
Rail, and (c) Section 3.1 shall not be interpreted to prohibit or otherwise
restrict MK Rail from terminating the employment of any Employee, or changing
the salary or wage range, grade level or location of employment of any Employee,
in accordance with MK Rail's personnel policies and procedures following the
Employee Transfer Effective Date. Without limiting the generality of Section
6.8 hereof, no Employee or other person shall have any rights as a third party
beneficiary under this Agreement (other than as set forth in Article 5 hereof).
3.4 COLLECTIVE BARGAINING AGREEMENTS. From and after the Employee
Transfer Effective Date, MK Rail shall assume, subject to the agreement of any
collective bargaining representative that is a party to a Collective Bargaining
Agreement and that continues to be the lawful collective bargaining
representative of any Employees covered by such Collective Bargaining Agreement,
each Collective Bargaining Agreement to which Morrison Knudsen is a party
covering Employees.
3.5 MULTIEMPLOYER PENSION PLANS. As part of the assumption of the
Collective Bargaining Agreements provided in Section 3.4 above, MK Rail shall
assume all of Morrison Knudsen's obligation and responsibility to contribute to
any Multiemployer Pension Plans under the Collective Bargaining Agreements,
effective as of the Employee Transfer Effective Date. MK Rail shall indemnify,
defend, reimburse and hold Morrison Knudsen and its Affiliates harmless from and
against any contribution or other costs and expenses including, without
limitation, reasonable attorneys' fees and expenses, related to, arising out of
or resulting from application to Morrison Knudsen or any Affiliate of the
withdrawal liability provisions of the Multiemployer Pension Plan Amendments Act
of 1980 (ERISA Sections 4201 - 4225) in connection with the transfer of
Employees hereunder.
EMPLOYEE TRANSFER AND BENEFITS AGREEMENT - 5
<PAGE>
3.6 PAYROLL ASSISTANCE. Morrison Knudsen and MK Rail shall agree between
themselves the extent to which Morrison Knudsen will process payroll and
employment taxes on behalf of MK Rail and the Subsidiaries following the
Employee Transfer Effective Date.
3.7 CERTAIN PAYROLL DEDUCTIONS. Effective as of the Employee Transfer
Effective Date (or, if later, through the date of an Employee's transfer to MK
Rail), MK Rail will assume Morrison Knudsen's obligation to comply with any
garnishment order applicable to such Employee. Furthermore, MK Rail agrees to
continue any special payroll deduction of an Employee attributable to any
outstanding liability or obligation of such Employee to Morrison Knudsen (for
example, salary advances) which existed on the Employee Transfer Effective Date
(or, if later, through the date of such Employee's transfer to MK Rail). MK
Rail will withhold such amounts from the Employee's compensation and promptly
remit such amount to Morrison Knudsen following the close of each payroll
period. Morrison Knudsen will provide the special payroll deduction information
or garnishment information as of the date MK Rail assumes payroll processing
responsibility for an Employee.
ARTICLE 4
EMPLOYEE BENEFIT PLANS
4.1 WELFARE BENEFIT PLANS. On or before July 1, 1994 (or such later date
as agreed to by Morrison Knudsen and MK Rail), MK Rail shall establish,
effective as of such date, the following welfare benefit plans for Employees who
are salaried or non-union hourly employees: (i) a medical and dental plan, (ii)
flexible spending accounts (FSAs) covering health care and dependent care, (iii)
life and accident insurance plans, (iv) a sick leave and short-term disability
policy, (v) a vacation and holiday plan, and (vi) a Code Section 125 cafeteria
plan. The terms and provisions of such plans including, without limitation,
coverage and co-pay requirements, shall be determined in the sole discretion of
MK Rail; PROVIDED, however, that MK Rail shall use its best efforts to ensure
that any medical plan it adopts shall contain no limitation on coverage for
preexisting conditions of Employees. Employees shall be credited in the MK Rail
medical and dental plans for purposes of any deductibles or "stop loss"
provisions for amounts paid by such Employees under the Morrison Knudsen
medical/dental Employee Benefit Plans on and after the Asset Transfer Date.
4.2 ACCRUED VACATION LIABILITY. MK Rail shall credit all Employees for
any accrued vacation and sick leave earned but not taken by such Employees in
the current year through the Employee Transfer Effective Date or, if later,
through the date of such Employee's transfer to MK Rail. Any such accrued
vacation and sick leave shall be credited in accordance with the paid
EMPLOYEE TRANSFER AND BENEFITS AGREEMENT - 6
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vacation policy and sick leave policy adopted by MK Rail in accordance with
Section 4.1 above; PROVIDED, however, that MK Rail shall be solely responsible
for payment of, and shall indemnify, defend, reimburse and hold Morrison Knudsen
and its Affiliates harmless from and against, any accrued vacation or sick leave
payoff liability to any Employee incurred by or imposed upon Morrison Knudsen
under its current vacation policy or sick leave policy or under any applicable
state or local law or statute.
4.3 401(K) PLAN. MK Rail shall establish, effective as of April 1, 1994,
a defined contribution plan and trust qualified under Sections 401(a) and 501(a)
of the Code and which allows for employee salary deferrals as provided in
Section 401(k) of the Code (the "401(K) PLAN").
4.4 PENSION BENEFIT PLANS.
(a) Employees who, as of the Employee Transfer Effective Date, are
participants in the (i) Morrison Knudsen Retirement Plan, (ii) the Morrison
Knudsen Employee Stock Ownership Plan), and (iii) the Money Purchase Pension
Plan covering Employees at the Mountaintop Plant shall be deemed for all
purposes terminated participants thereunder, and shall receive a distribution of
their vested accrued benefits pursuant to the terms of such plans.
(b) As soon as practicable after the establishment of the MK Rail
401(k) Plan as provided in Section 4.3 above, the vested account balances of all
Employee/participants in the Morrison Knudsen 401(k) Savings Plan shall be
transferred to the MK Rail 401(k) Plan pursuant to a trustee-to-trustee transfer
in accordance with applicable rules and regulations under ERISA and the Code.
(c) MK Rail will, prior to December 31, 1994, apply for an IRS
determination letter stating that the MK Rail 401(k) Plan satisfies the
requirements of qualification under Code Section 401(a) since its inception, and
will take all actions necessary to obtain such determination letter.
4.5 DEFERRED COMPENSATION PLANS. Effective as of the Employee Transfer
Effective Date or, if later, the date of the applicable Employee's transfer to
MK Rail, MK Rail will assume all liabilities of Morrison Knudsen under the MK
Deferred Compensation Plans with respect to Employees who consent in writing to
the substitution of MK Rail for Morrison Knudsen as the employer under such
plans. Morrison Knudsen agrees to transfer to MK Rail assets with a value
sufficient as of the effective date of this Section to satisfy the liabilities
assumed by MK Rail under this Section as of the effective date of this Section.
MK Rail may, in its sole discretion, establish ongoing deferred compensation
plans in forms similar to or different from any one or more of the MK Deferred
EMPLOYEE TRANSFER AND BENEFITS AGREEMENT - 7
<PAGE>
Compensation Plans and may combine its obligations under this Section with its
obligations under such newly established plans, if any; PROVIDED, however, that
MK Rail shall be solely responsible for payment of, and shall indemnify, defend,
reimburse and hold Morrison Knudsen and its Affiliates harmless from and
against, any liability under the MK Deferred Compensation Plans to any Employee
who has consented in writing to the substitution of MK Rail for Morrison Knudsen
as the employer under the MK Deferred Compensation Plans.
4.6 STOCK OPTIONS AND SARS; RESTRICTED STOCK. Any award of restricted
stock granted to Employees as of the Employee Transfer Effective Date under the
Morrison Knudsen Stock Incentive Plan or pursuant to individual non-competition
agreements or any other plan or arrangement shall continue to vest under the
terms of the applicable plan or agreement, and Morrison Knudsen shall continue
to be responsible for its obligations under such plans and arrangements with
respect to such awards of restricted stock. Any stock options and/or stock
appreciation rights (SARs) granted to Employees as of the Employee Transfer
Effective Date under the Morrison Knudsen Stock Incentive Plan or pursuant to
individual non-competition agreements or any other plan or arrangement shall
continue to be exercisable under the terms of the applicable plan or agreement
to the extent vested as of the Employee Transfer Effective Date, and Morrison
Knudsen shall continue to be responsible for its obligations under such plans
and arrangements with respect to such vested stock options and SARs. Morrison
Knudsen intends to request Employees who have been granted stock options and/or
SARs that are not vested as of the Employee Transfer Effective Date to
voluntarily waive their rights to such nonvested stock options and/or SARs in
consideration for a grant of stock options and/or SARs to be granted by MK Rail.
MK Rail shall grant such stock options and/or SARs to Employees who voluntarily
waive their rights to nonvested stock options and/or SARs under the Morrison
Knudsen Stock Incentive Plan or individual non-competition agreements or other
plans or arrangements in amounts to be mutually agreed upon by Morrison Knudsen
and MK Rail. MK Rail shall be under no responsibility or obligation to
reimburse or pay any consideration to Morrison Knudsen as a result of the
vesting of any restricted stock, the exercise of any option for the payment of
any awards granted Employees by Morrison Knudsen prior to the Employee Transfer
Effective Date. However, MK Rail shall be responsible to collect the Employee's
portion of any employment tax and any withholding tax applicable to awards
granted to such Employee under the Morrison Knudsen Stock Incentive Plan (within
the time constraints imposed by applicable law) and shall promptly remit such
withheld taxes to Morrison Knudsen.
4.7 FLEXIBLE SPENDING ACCOUNTS. Effective July 1, 1994 (or such later
date as agreed to by Morrison Knudsen and MK Rail) MK Rail shall establish three
plans substantially in the same form as the following three plans currently
maintained by Morrison
EMPLOYEE TRANSFER AND BENEFITS AGREEMENT - 8
<PAGE>
Knudsen: The Morrison Knudsen Corporation Dependent Care Flexible Spending
Account Plan, The Morrison Knudsen Corporation Health Care Flexible Spending
Account Plan, and The Morrison Knudsen Corporation Flexible Benefits Plan. As
soon as practicable following July 1, 1994 (or such later date as agreed to by
Morrison Knudsen and MK Rail), existing spending account balances for MK
Employees will be transferred from the Morrison Knudsen plans to the MK Rail
plans provided such transfer will not adversely affect the tax status of
benefits provided under the Morrison Knudsen plans and under the MK Rail plans.
4.8 VARIOUS LIABILITIES. Morrison Knudsen and MK Rail agree that the
transaction contemplated by the Transfer Agreement will not result in Morrison
Knudsen's being liable for any severance pay to an Employee. Furthermore, MK
Rail hereby agrees to assume all liabilities under (i) the MK Rail Group Project
Incentive Plan with respect to an Employee's employment with Morrison Knudsen
from January 1, 1994 through the Employee Transfer Effective Date (or, if later,
through the date of such Employee's transfer to MK Rail) and (ii) the self
funded short term disability plan maintained on behalf of the Mountaintop Craft
hourly employees. MK Rail agrees it shall be solely responsible for payment of,
and shall indemnify, defend, reimburse and hold Morrison Knudsen and its
Affiliates harmless from and against, any severance pay liability to an Employee
incurred by or imposed upon Morrison Knudsen under its current severance pay
plans, policies or programs or any liability described above under either the MK
Rail Project Incentive Plan or the short term disability plan for Mountaintop
Craft hourly employees. MK Rail also agrees that it shall be solely responsible
for payment of, and shall indemnify, defend, reimburse and hold Morrison Knudsen
and its Affiliates harmless from and against, any liability to an Employee under
Morrison Knudsen's standard letter agreements with international employees
arising on or after the later of the Employee Transfer Effective Date or the
date such Employee actually is transferred from Morrison Knudsen to MK Rail.
4.9 COBRA. Morrison Knudsen shall be responsible for complying with the
requirement of Code Section 4980B and Part 6 of Title I of ERISA with respect to
any Employee in its group health plan and their "qualified beneficiaries" whose
"qualifying event" (as such terms are defined in Code Section 4980B) occurs on
or prior to the Employee Transfer Effective Date (or, if later, through the date
of such Employee's transfer to MK Rail). MK Rail shall be responsible for
complying with the requirements of Code Section 4980B and Part 6 Title I of
ERISA with respect to any Employee and their "qualified beneficiaries" whose
"qualifying event" (as such terms are defined in Code Section 4980B) occurs
after the Employee Transfer Effective Date (or, if later, through the date of
such Employee's transfer to MK Rail).
EMPLOYEE TRANSFER AND BENEFITS AGREEMENT - 9
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ARTICLE 5
INDEMNIFICATION
5.1 INDEMNIFICATION. In addition to the indemnity obligations set forth
in Sections 3.5, 4.2, 4.5 and 4.8 hereof, MK Rail agrees to indemnify, defend,
reimburse and hold harmless Morrison Knudsen and its Affiliates, and the
officers, directors, employees, agents and representatives of Morrison Knudsen
and its Affiliates (each, an "INDEMNIFIED PARTY"), from and against any and all
Actions, assessments, losses, damages, liabilities, costs and reasonable
expenses including, without limitation, interest, penalties, fines, excise taxes
and reasonable attorneys' fees and expenses, asserted against or imposed upon or
incurred by any Indemnified Party which result from, arise out of or are related
to any Employee Liability applicable to any Employee transferred hereunder on
the Employee Transfer Effective Date (except with respect to certain stock
options, SARs and restricted stock granted to certain Employees as provided in
Section 4.6 hereof).
5.2 PROCEDURE FOR INDEMNIFICATION. In the event any action, suit or
proceeding is brought against an Indemnified Party pursuant to this Article 5 or
Sections 3.5, 4.2, 4.5 or 4.8 hereof, the Parties shall comply with and be
subject to the indemnification procedures set forth in the Transfer Agreement.
ARTICLE 6
MISCELLANEOUS
6.1 BINDING AGREEMENT. This Agreement is binding upon and is for the
benefit of the Parties hereto and their respective successors and permitted
assigns.
6.2 ASSIGNMENT. No Party to this Agreement shall 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.
6.3 NOTICES. All notices or other communications required or permitted to
be given hereunder shall be made pursuant to the notice provisions set forth in
the Transfer Agreement.
6.4 NO WAIVER. 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
EMPLOYEE TRANSFER AND BENEFITS AGREEMENT - 10
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are cumulative and are not exclusive of any rights or remedies which the Parties
hereto may otherwise have at law or in equity.
6.5 ENTIRE AGREEMENT; AMENDMENT. This Agreement, including the Annexes
and the agreements and other documents referred to herein, 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.
In addition to the foregoing, on and after the effective date of the Public
Offering, any amendment to this Agreement must, in the case of MK Rail, be
approved by one of its officers and in the case of Morrison Knudsen, be approved
by one of its officers.
6.6 COUNTERPARTS. 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.
6.7 GOVERNING LAW. This Agreement shall be governed by and construed and
enforced in accordance with the laws of the State of Delaware (regardless of the
laws that might otherwise govern under applicable principles of conflicts of
laws) as to all matters including, without limitation, matters of validity,
construction, effect, performance and remedies.
6.8 NO THIRD PARTY BENEFICIARIES. Except as set forth in Article 5, this
Agreement is solely for the benefit of the Parties hereto and is not intended to
confer upon any other person any rights or remedies hereunder.
6.9 LEGAL ENFORCEABILITY. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof. Any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
6.10 INTERPRETATION. The Article and Section headings contained in this
Agreement are solely for the purpose of reference, are not part of the agreement
of the Parties and shall not in any way affect the meaning or interpretation of
this Agreement.
* * *
EMPLOYEE TRANSFER AND BENEFITS AGREEMENT - 11
<PAGE>
IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be
executed and delivered as of the day and year first above written.
MORRISON KNUDSEN CORPORATION
By: /s/ Stephen G. Hanks
--------------------------------
Its: Executive Vice President -
Finance and Adminstration
MK RAIL CORPORATION
By: /s/ James P. O'Donnell
--------------------------------
Its: Vice President, Secretary
Treasurer and Chief Financial
Officer
EMPLOYEE TRANSFER AND BENEFITS AGREEMENT - 12
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ANNEX I
COLLECTIVE BARGAINING AGREEMENTS
1. Agreement between Morrison Knudsen Corporation and Local 370 of the
International Union of Operating Engineers, effective July 1, 1992
2. Agreement between Motor Coils Manufacturing Company and Local 606 of the
International Union of Electronic, Electrical, Salaried, Machine and
Furniture Workers, AFL-CIO, effective August 1, 1990
3. Agreement between Motor Coils Manufacturing Company and Local 607 of the
International Union of Electronic, Electrical, Salaried, Machine and
Furniture Workers, AFL-CIO, effective November 1, 1990
4. Agreement between Motor Coils Manufacturing Company and Local 823 of the
International Union of Electronic, Electrical, Salaried, Machine and
Furniture Workers, AFL-CIO, effective July 1, 1992
EMPLOYEE TRANSFER AND BENEFITS AGREEMENT - 13
<PAGE>
ANNEX II
LIST OF EMPLOYEES
Attached hereto and incorporated herein by this reference is a list of MK
Employees and Subsidiary Employees who will be transferred
to the employ of MK Rail Corporation pursuant to the terms of this Employee
Transfer and Benefits Agreement.
EMPLOYEE TRANSFER AND BENEFITS AGREEMENT - 14
<PAGE>
ANNEX III
EMPLOYEE BENEFIT PLANS
- - - Morrison Knudsen Corporation Flexible Benefits Plan
- - - Morrison Knudsen Corporation Dependent Care Flexible Spending Account Plan
- - - Morrison Knudsen Corporation Health Care Flexible Spending Account Plan
- - - Morrison Knudsen Corporation Long-Term Disability Plan
- - - Morrison Knudsen Corporation Comprehensive Medical and Dental Benefit Plan
- - - Aetna Life, Accidental Death & Dismemberment and Dependents Life Coverage
Wraparound Contract
- - - Aetna Group Universal Life Trust Agreement and Request for Participation
Aetna Group Life Policy GL-372667
- - - Life Insurance Company of North America Personal Accident OK 10376 and ABL
630012
- - - Idaho Preferred Healthcare Group Contract (Blue Cross)
- - - Blue Cross of North Eastern Pennsylvania Group Policy #12679
- - - Morrison Knudsen Corporation Employee Assistance Programs
EMPLOYEE TRANSFER AND BENEFITS AGREEMENT - 15
