<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
ANNUAL REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the Fiscal Year Ended
DECEMBER 31, 1994
Commission File Number 1-8889
[LOGO]
A Delaware Corporation
IRS Employer Identification No. 82-0393735
MORRISON KNUDSEN PLAZA, BOISE, IDAHO 83729
208/386-5000
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SECURITIES REGISTERED AND NUMBER OF REGISTRANT'S
COMMON SHARES OUTSTANDING
At May 31, 1995, 33,049,100 shares of registrant's $1.67 par value common stock
(registered pursuant to Securities Exchange Act Section 12(b) on the New York
Stock Exchange and the Pacific Stock Exchange, Inc.) were outstanding, excluding
436,286 shares held in treasury. The registrant has no securities registered
under Securities Exchange Act Section 12(g).
COMPLIANCE WITH REPORTING REQUIREMENTS
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.
/ / Yes /X/ No
Disclosure of delinquent filers pursuant to Item 405 of Regulation S-K required
under Item 10, is included in Part III of this Form 10-K.
AGGREGATE MARKET VALUE OF VOTING STOCK HELD BY NONAFFILIATES
At May 31, 1995, the aggregate market value of the registrant's voting common
stock held by nonaffiliates of the registrant, based on the New York Stock
Exchange closing price on May 31, 1995 for shares traded on the exchange, was
approximately $180,942,100, excluding $828,000 market value of 150,537 shares,
which are assumed to be held by affiliates of the registrant for the purposes of
this calculation.
<PAGE>
MORRISON KNUDSEN CORPORATION
ANNUAL REPORT ON FORM 10-K
TABLE OF CONTENTS
DECEMBER 31, 1994
<TABLE>
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PAGE
<S> <C> <C>
PART I
Item 1. Business I-1
Item 2. Properties I-10
Item 3. Legal Proceedings I-10
Item 4. Submission of Matters to a Vote of Security Holders I-12
Additional
Item Executive Officers of the Registrant I-13
PART II
Item 5. Market for the Registrant's Common Stock and Related
Stockholder Matters II-1
Item 6. Selected Financial Data II-2
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations II-3
Item 8. Financial Statements and Supplementary Data II-14
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure II-40
PART III
Item 10. Directors and Executive Officers of the Registrant III-1
Item 11. Executive Compensation III-3
Item 12. Security Ownership of Certain Beneficial Owners and Management III-14
Item 13. Certain Relationships and Related Transactions III-15
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K IV-1
Signatures IV-2
</TABLE>
i
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PART I
ITEM 1. BUSINESS
(All dollar amounts in thousands)
RECENT DEVELOPMENTS
Morrison Knudsen Corporation's (the "Corporation") results of operations and
liquidity have been adversely affected by various factors discussed herein. See
Item 7. "Management's Discussion and Analysis of Financial Condition and Results
of Operations" in Part II of this Annual Report on Form 10-K. See Item 8.
"Financial Statements and Supplementary Data" in Part II of this Annual Report
on Form 10-K. The Corporation's future viability will be dependent upon its
ability to resolve the liquidity problems faced by the Corporation in the near
term. The Corporation anticipates that cash generated by operations will meet
its cash needs until approximately mid-July 1995, at which time it currently
expects such needs to begin to exceed its cash resources. Unless the Corporation
is able to obtain alternative sources of cash, the Corporation may, among other
alternatives, seek protection from its creditors under the United States
Bankruptcy Code. The Corporation believes that, in such circumstances, the
ability, if any, of its stockholders to recover their investments would be
significantly impaired and that any such recovery, if available, would be
substantially delayed.
In February 1995, the Corporation announced that it anticipated incurring
substantial losses as a result of, among other things, losses in connection with
certain construction and transit projects. These losses resulted in defaults
under the Corporation's senior credit facilities. Also in February 1995, Mr.
William J. Agee resigned as Chairman, Chief Executive Officer, President and a
Director of the Corporation. In February 1995, the Corporation's senior lenders
organized a steering committee ("Steering Committee") and retained legal
advisors. The Corporation has been, and continues to be, in negotiations with
its senior lenders. The Corporation has obtained additional interim financing
and waivers of defaults under its senior credit arrangements. Currently, the
Corporation has entered into an agreement with its senior lenders which extends
the terms of existing credit facilities until July 31, 1995. The senior lenders
have not agreed, as of the date of this Annual Report on Form 10-K, to fund any
additional cash flow requirements.
The restructuring of the Corporation will involve a number of stages and is
subject to change. There can be no assurance that the Corporation will be
successful in implementing any restructuring.
The Corporation's restructuring is focused on three primary areas:
management, operations and financial.
- - MANAGEMENT. The management restructuring has been completed with
Robert S. Miller, Jr. (former Vice Chairman of Chrysler Corporation)
being elected Chairman of the Board of Directors, Robert A. Tinstman
being elected Director and Chief Executive Officer and Denis M. Slavich
being elected Chief Financial Officer. The Corporation believes that
this new management team possesses the experience and skill to implement
the other aspects of the Corporation's restructuring.
- - OPERATIONS. The Corporation has embarked on an aggressive strategy to
focus its resources on the Engineering and Construction segment and to
exit its non-core business segments. This operational restructuring
includes the following elements: (i) the sale of non-core businesses,
(ii) containing the losses and cash flow requirements of the Transit
segment and (iii) improving operating performance in the Engineering &
Construction segment.
Decisions were made in the fourth quarter of 1994 and the first quarter
of 1995 to pursue the sale of the Corporation's consolidated
subsidiaries -- MK Rail Corporation, McConnell Dowell Corporation, Ltd.,
and MK Investments, Inc. (North Pacific construction operations), and
the Corporation's unconsolidated affiliate Amerbank. In June 1995, the
Corporation sold its ownership interest in MK Gold Company for $22,500
cash and also entered into an agreement to sell its wholly-owned
subsidiary Western Aircraft, Inc., subject to due diligence and certain
other contingencies. The Corporation expects to recognize a pretax loss
of approximately $10,000 in 1995 in connection with its sale of MK Gold
Company.
The Corporation also is currently pursuing discussions with the bonding
companies, senior lenders and customers related to the Transit segment
in an effort to develop a consensual plan to limit losses generated by
this segment while satisfying customer delivery requirements. The
Corporation is also pursuing the possible sale of the Transit segment.
I-1
<PAGE>
In the case of the Engineering and Construction segment, management is
also establishing stricter criteria for bidding, operating performance
and project reviews. The Corporation intends to reduce emphasis on the
large develop, design and build projects which previously tied up large
amounts of capital and is pursuing teaming relationships to better
spread project risk.
- - FINANCIAL. The financial restructuring efforts are currently centered on
short-term liquidity needs. The Corporation is primarily financed with short-
term loans and lines of credit, most of which mature on July 31, 1995. The
financial restructuring plan includes the establishment of a new longer-term
loan facility and potentially the introduction of a strategic investor. The
Corporation is currently in negotiations with its lenders to extend the terms
of the existing credit facilities and has held discussions with potential
equity investors. The Corporation has reached a preliminary understanding
with the Steering Committee pursuant to which, among other things, the terms
of the Corporation's existing senior debt would be extended, the Corporation
would be provided with approximately $30 million of new financing and the
existing indebtedness of the Corporation to the lenders would be secured.
This understanding is conditioned upon a number of matters, including the
resolution of certain matters relating to liabilities associated with the
Transit segment and approval of the other participating lenders. While
management is encouraged by these developments, there can be no assurance
that the conditions to this understanding will be satisfied or that this
understanding with the Steering Committee will be implemented.
The Corporation continues to face severe liquidity problems, which limit
the strategic alternatives available to the Corporation. The
Corporation's future viability is dependent upon its ability to resolve
these liquidity problems in the near-term. There can be no assurance
that any restructuring can be completed or, if completed, will resolve
the Corporation's liquidity problems. In the event that the Corporation
is unable to implement a successful restructuring in the near-term, it
may, among other alternatives, seek protection under the United States
Bankruptcy Code.
GENERAL
Morrison-Knudsen Company, Inc., the predecessor to the Corporation was
incorporated in Delaware in 1932 to carry on a business founded eighty-three
years ago at Boise, Idaho. The Corporation's principal executive offices are
located at Morrison Knudsen Plaza, Boise, Idaho 83729. The Corporation's
operations involve three principal businesses: Engineering and Construction
("E&C"), MK Rail Corporation ("MK Rail") and Transit.
ENGINEERING AND CONSTRUCTION SEGMENT: The E&C segment engages in all types
of general construction work including industrial, heavy civil and marine,
mechanical, pipeline, building, and underground, for a wide range of public and
private customers. In addition, the Corporation renders design services in
practically all engineering disciplines. Other markets for its services include
nuclear and fossil-fueled power plants, environmental and hazardous waste
abatement and operations and maintenance for military and commercial facilities.
As a general contractor, the Corporation provides construction services in
accordance with the terms and specifications of each contract, including
planning and scheduling, marshalling of manpower, procurement of equipment and
materials, awarding of subcontracts and direction and overall management of the
project. The Corporation is also responsible for any failure to perform on the
part of a subcontractor. In order to minimize the potential for losses caused by
such defaults, the Corporation normally requires performance and payment bonds
or other adequate assurances of operational and financial capacity from
subcontractors. Through this segment, the Corporation also operates, through a
number of domestic and foreign subsidiaries, coal and lignite mines in the U.S.
and Germany under long-term contracts.
The Corporation's ability to obtain new contracts and bonding for such
contracts is severely impacted by its lack of financial flexibility. Partnering
arrangements and strategic alliances are being pursued to help provide bonding
capacity and additional financial support. See Item 7. "Management's Discussion
and Analysis of Financial Condition and Results of Operations -- Operating
Results Outlook" in Part II of this Annual Report on Form 10-K.
MK RAIL SEGMENT: MK Rail completed its initial public offering ("IPO") of
35% of its common stock in May 1994. MK Rail is the successor to certain
operations of the Corporation. MK Rail designs, manufactures and distributes
locomotive component parts; provides locomotive fleet maintenance services to
the railroad industry; and overhauls and remanufactures locomotives. MK Rail has
also designed and produced (on a limited basis) two new locomotive models.
On June 15, 1995, the Corporation entered into an agreement with MK Rail
(subject to the approval of the Corporation's lender banks) regarding the amount
of intercompany indebtedness owed by MK Rail to the Corporation. The agreement
will result in the Corporation reducing the intercompany receivable from MK Rail
through a capital contribution of $29,500 to be recorded in 1995. The $52,200
remaining balance of the intercompany receivable will be converted into a note,
with interest at the prime rate, due in 2000 with earlier repayments under
certain conditions.
The Corporation has engaged CS First Boston Inc. to assist the Corporation
in the sale of its 65% ownership interest in MK Rail. As of the date of this
Annual Report, no definitive agreement exists with respect to the sale of such
ownership interest.
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TRANSIT SEGMENT: The Transit segment is a U.S. based manufacturer of new
transit cars. The Transit segment has manufacturing facilities in Hornell, New
York and Chicago, Illinois, and since early 1994, Pittsburg, California. New
transit cars scheduled for manufacture and used transit cars scheduled for
overhaul included in backlog at December 31, 1994 were as follows:
<TABLE>
<CAPTION>
NUMBER OF TRANSIT CARS
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REMAINING IN BACKLOG AT
NEW TRANSIT CAR CUSTOMER UNDER CONTRACT DECEMBER 31, 1994
<S> <C> <C>
Metro North Commuter Railroad
("Metro North") 48 36
Illinois Metra Authority ("METRA") 173 170
National Railroad Passenger Corporation ("Amtrak") 50 50
Bay Area Rapid Transit District ("BART") 80 79(a)
California Department of Transportation ("Caltrans") 113 113(a)
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Total new transit cars 464 448
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USED TRANSIT CAR OVERHAUL CUSTOMER
METRA 140 85
Metro North 48 16
Other 43 4
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Total used transit cars 231 105
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<FN>
(a) The initial two transit cars for Caltrans and six transit cars for
BART shipped in 1994 remained in year-end backlog at December 31, 1994,
subject to acceptance testing by the customers.
</TABLE>
As evident by the foregoing schedule, very few new transit cars have been
manufactured, delivered and accepted at December 31, 1994. Substantially all new
transit cars under contract were in their very early stages of production, while
other new transit cars under contract were not yet fully designed or prototyped
at year-end 1994. Only the Metro North new car contract was in full production
at December 31, 1994.
As of the date of this Annual Report on Form 10-K, the Transit segment
continues to experience production difficulties with several of its new transit
car contracts. These difficulties are primarily due to (i) failure to achieve
favorable labor productivity levels (ii) failure of a number of material
suppliers to meet delivery schedules and quality assurance tests and (iii)
continuing difficulties in bringing production lines up to efficient levels. The
Corporation received notice on June 5, 1995, that it was in default on the
$215,000 contract with Caltrans to build 113 new transit cars. Among other
problems, the Corporation has experienced production delays and difficulties
with a Brazilian car shell supplier for 47 of the Caltrans cars. The Corporation
also was notified by Amtrak in March 1995 that failure to meet delivery
requirements constituted a failure to perform and that Amtrak was considering
declaring the Corporation in default on the $96,000 contract with Amtrak to
build fifty railroad passenger cars. The terms of the contracts remain in
effect, and the notices are not expected to affect production of transit cars
under either contract.
The Transit segment has recorded significant estimated losses to complete
the new transit car contracts. Funding the losses will require significant
amounts of cash. See Item 7. "Management's Discussion and Analysis of Financial
Condition and Results of Operations" in Part II of this Annual Report on Form
10-K. The Corporation has engaged Bear Stearns & Co., Investment Bankers to
assist the Corporation with respect to possible alternatives for the Transit
segment, including the possible sale of this segment and the possible
renegotiation of contracts, liabilities and obligations related to this segment.
UNCONSOLIDATED AFFILIATES: In addition, the Corporation and its majority-
owned subsidiaries have investments in a number of unconsolidated affiliated
companies at December 31, 1994 accounted for by the equity method including the
following principal unconsolidated affiliates, (the Corporation's ownership
interests therein are shown parenthetically): MK Gold Company ("MK Gold")
(46.4%); Strait Crossing Development, Inc. ("SCDI") (36%); AmerBank (29.5%);
Westmoreland Resources, Inc. (24%) and MIBRAG mbH (33%). MK Gold holds undivided
interests in two producing gold mining projects in California and provides
contract mining services. Strait Crossing Development, Inc. has a contract to
design, build and operate for 35 years an 8.4-mile-long toll bridge in Canada
linking the Atlantic Provinces of New Brunswick and Prince Edward Island.
AmerBank is a licensed bank operating in Poland. Westmoreland Resources, Inc. is
a mining company that operates a surface coal mine in Montana. On June 6, 1995,
the Corporation
I-3
<PAGE>
sold its ownership interest in MK Gold for $22,500 cash. The Corporation is
also pursuing the possible sale of its ownership interest in AmerBank. See
the "Investments in and Advances to Unconsolidated Affiliates" and
"Subsequent Events -- Changes in Business" Notes to Consolidated Financial
Statements in Part II of this Annual Report on Form 10-K for additional
information related to unconsolidated affiliates.
SIGNIFICANT RISKS AND UNCERTAINTIES: In connection with its engineering and
construction business, the Corporation, in order to balance risk with reward,
enters into three basic types of contracts: fixed-price or lump-sum contracts
providing for a single price for the total amount of work to be performed and
unit-price contracts providing for a specified price for each unit of work
performed, under which both risk and anticipated income are the highest; and
cost-type contracts (including cost-plus) providing for reimbursement of
allowable or otherwise defined costs incurred plus a fee, under which risk is
minimal and anticipated income is earned solely from the fee received for
services provided. In connection with its engineering contracts, including
design and program management, the Corporation's compensation is typically on a
cost-plus-fee basis.
Regardless of the type of contract, the construction business always has
been subject to unusual risks, including unforeseen conditions encountered
during construction, the impact of inflation upon costs and financing
requirements of clients, and changes in political and legal circumstances,
particularly since contracts for major projects are performed over extended
periods of time. The Corporation may be exposed to significant risks and
uncertainties in the performance of contracts, particularly fixed-price
contracts. Although the Corporation constantly seeks to minimize and spread the
risks over a large number of contracts, a combination of unusual circumstances
could result in losses on a particular contract or contracts, and the
Corporation may experience significant changes in operating results on a
quarterly or annual basis.
The Transit segment makes significant assumptions concerning cost estimates
for labor productivity rates and material price and usage as well as production
schedules for new transit car contracts in the early stages of production. Due
to uncertainties inherent in the estimation process, it is reasonably possible
that estimated costs to complete some uncompleted long-term contracts will be
further revised in the near term. See Item 7. "Management's Discussion and
Analysis of Financial Condition and Results of Operations" in Part II of this
Annual Report on Form 10-K.
In addition, the Corporation's operations are in part dependent upon
governmental funding of infrastructure and environmental projects. Significant
changes in the level of government funding of these projects could have a
favorable or unfavorable impact on the operating results of the Corporation.
Contract mining services operations may also be adversely affected by weather
conditions, the potential for changes in technology, demand, product
substitution and political factors which effect alternative fuel decisions.
JOINT VENTURES: The Corporation frequently participates (principally as
sponsor and manager of the projects) in entities commonly referred to as
joint ventures. In the construction industry, joint ventures often include
arrangements for pooling equipment, bonding, financing and for sharing skills
such as engineering, design, and construction. Construction joint ventures
vary in their legal forms. They include corporations, and general and limited
partnerships. These entities are often viewed as joint ventures -- even though
one of the investors may have a majority voting interest or may otherwise
have effective control of the entity. The results of operations are shared in
a variety of ways and may not be related to the method of sharing management
or other responsibilities.
Construction joint ventures frequently have a short life span, since they
are designed and created for the sole purpose of bidding on, negotiating for,
and completing one specific project. These single-purpose joint ventures last
only as long as the construction project undertaken, which can be less than one
year, but are frequently longer on major construction projects. See the
"Construction Joint Ventures" Note to Consolidated Financial Statements in Part
II of this Annual Report on Form 10-K for additional summary joint venture
financial information.
CHANGES IN BUSINESS
There were no significant changes in the business of the Corporation or in
the services or products offered during 1994 except for the acquisitions and
dispositions of certain assets and businesses described below.
I-4
<PAGE>
SALES OF NON-CORE BUSINESSES
As discussed above under "Item 1. Business -- General," the Corporation, is
pursuing sales of its consolidated subsidiaries MK Rail Corporation,
McConnell Dowell Corporation, Ltd., MK Investments, Inc. (North Pacific
construction operations), and the unconsolidated affiliate -- Amerbank, as
well as its Transit segment. Any sales of these businesses are expected to
occur in 1995. See the "Subsequent Events -- Changes in Business" Note to
Consolidated Financial Statements in Part II of this Annual Report on Form
10-K.
ACQUISITIONS
TOUCHSTONE, INC.: On January 31, 1994, the Corporation acquired all of the
voting stock of Touchstone, Inc. ("Touchstone"). The acquisition was
accounted for by the purchase method of accounting. Touchstone is a supplier
of new and remanufactured locomotive cooling systems. The Corporation
transferred its investment in Touchstone to MK Rail prior to MK Rail's public
offering in May 1994. The former stockholders of Touchstone have brought suit
against the Corporation with respect to that acquisition. See Item 3. "Legal
Proceedings."
MIBRAG MBH: Effective January 1, 1994, the Corporation and other shareholders
acquired majority ownership of Mitteldeutsche Braunkohlengesellschaft mbH
("MIBRAG mbH"), from the German government. MIBRAG mbH was formed by the
German government to own and operate lignite coal mines, power and process
plants in Germany. The Corporation, in addition to holding a 33%
participating interest in MIBRAG mbH, has an agreement to provide mine
planning, engineering and related services to MIBRAG mbH.
MCCONNELL DOWELL CORPORATION, LTD. ("MDC"): During 1994, the Corporation
acquired additional voting stock of MDC representing 10.8% of the total
issued and outstanding voting stock bringing the total of its ownership
interest to 62.8%. MDC, based in Australia, is a mechanical and commercial
construction company operating in Australia, New Zealand, South East Asia and
the Middle East. MDC relies on the credit support of the Corporation. Under
contractual agreements which expire on March 1, 1996, MDC's bank debt is
guaranteed by the Corporation and the Corporation provides performance and
financial guarantees for certain large MDC off-shore projects.
DISPOSITIONS
MK RAIL CORPORATION: On May 3, 1994, MK Rail, then a wholly-owned subsidiary
of the Corporation, completed an IPO of its common stock which decreased the
Corporation's ownership interest in MK Rail to 65%. The Corporation, MK Rail
and certain other persons have been named in class action litigation with
respect to the IPO. See Item 3. "Legal Proceedings."
TEXAS TGV CORPORATION ("TEXAS TGV"): Texas TGV, a joint venture in which the
Corporation had a 38% ownership interest was awarded a franchise in May 1991
to finance, construct and operate a high speed rail system in Texas. Because
Texas TGV failed to provide equity financing by December 31, 1993 as required
under the franchise agreement and since its efforts in early 1994 to extend
the deadline or to negotiate amendments to the franchise agreement with the
Texas High Speed Rail Authority were unsuccessful, the Corporation abandoned
the project and wrote-off its investment in Texas TGV in June 1994 and sold
substantially all of its ownership interest in Texas TGV in December 1994.
STRAIT CROSSING DEVELOPMENT, INC. ("SCDI"): 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. The sale decreased the Corporation's
ownership interest in SCDI from 45% to 36%.
MK RAIL SYSTEMS OF ARGENTINA, S.A.("MKRSA"), METROVIAS, S.A. AND TALLERES
SUDAMERICANOS, S.A. ("TALLERES"): In December 1994, MK Rail sold its 24%
ownership interest in Talleres. In May 1995, MK Rail sold its 16.7% ownership
interest in Metrovias, S.A. and 32% of its 51% ownership interest in MKRSA.
MK GOLD COMPANY: On June 6, 1995, the Corporation sold its remaining 46.4%
ownership interest in MK Gold Company for $22,500 in cash.
INDUSTRY SEGMENT DATA
The Corporation's revenue and operating income (loss) for each of the three
years in the period ended December 31, 1994 for each of the three business
segments is set forth below.
I-5
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<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
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1994 1993 1992
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
REVENUE
Engineering and Construction $2,036,527 $2,305,680 $1,985,578
MK Rail 368,537 218,160 129,507
Transit 132,558 206,859 169,979
Eliminations and other (33,323) (8,156) (133)
- ------------------------------------------------------------------------------------------
Total revenue $2,504,299 $2,722,543 $2,284,931
- ------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------
OPERATING INCOME (LOSS)
Engineering and Construction $ (82,164) $ 55,419 $40,276
MK Rail (31,104) 10,308 5,464
Transit (224,680) 11,036 5,567
Eliminations (16,946) (301) --
- ------------------------------------------------------------------------------------------
Total operating income (loss) $ (354,894) $ 76,462 $51,307
- ------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------
</TABLE>
Operating income (loss) is the result of revenue less applicable direct and
indirect operating costs and expenses, and excludes, (i) general and
administrative expenses, (ii) research and development expenses (iii) interest
expense, (iv) other non-operating income and expense (v) the Corporation's share
of operating results of unconsolidated affiliates (vi) gains on subsidiaries
sales of stock (vii) loss on disposition of investments in affiliates, net and
(viii) provision for litigation settlement. See the "Industry Segment and
Geographic Information" Note to Consolidated Financial Statements in Part II of
this Annual Report on Form 10-K for additional operating and asset data for each
of the three years in the period ended December 31, 1994.
FOREIGN OPERATIONS
The Corporation operates outside the United States through foreign and
domestic subsidiaries which are qualified to do business in various foreign
countries. In addition, as part of its efforts to expand its presence in
international markets, the Corporation, in the past few years, has entered into
several agreements with foreign joint venture partners for construction and
locomotive remanufacturing abroad. Such foreign joint-venture operations are
subject to uncertain political and economic environments, incompatibility
between the partners, foreign currency controls and fluctuations, civil
disturbances, labor strikes, as well as other uncertainties associated with
operations in foreign countries. Other events may limit or disrupt operations,
restrict the movement of funds, result in deprivation of contract rights,
increase foreign taxation or limit repatriation of earnings.
The Corporation recorded revenues from foreign operations of approximately
$698,000 in 1994, $600,900 in 1993, and $195,300 in 1992. In addition, the
Corporation's equity in the net income of its unconsolidated foreign affiliates
was $15,172 in 1994, $70 in 1993, and $4,896 in 1992. See the "Industry Segment
and Geographic Information" Note to Consolidated Financial Statements in Part II
of this Annual Report on Form 10-K for additional operating and asset data for
each of the three years in the period ended December 31, 1994.
BACKLOG
Backlog consists of uncompleted portions of E&C contracts including the
Corporation's proportionate share of construction joint venture contracts,
uncompleted portions of MK Rail and Transit contracts, and the next five-year
portion of long-term mining services contracts. In anticipation of the early
termination of a mining services contract by a customer in mid-1996, backlog
at December 31, 1994 includes only the next 18-month portion of such
contract. See the "Subsequent Events -- Navasota Mining Services Contract"
Note to Consolidated Financial Statements in Part II of this Annual Report on
Form 10-K.
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<PAGE>
The following table reflects the composition of year-end backlog under firm
contracts, distinguished on the basis of their pricing arrangements for each of
the two years in the period ended December 31, 1994:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------
1994 1993
(DOLLARS IN THOUSANDS)
<S> <C> <C>
COMPOSITION OF YEAR-END BACKLOG
Fee-type contracts $1,320,200 $1,735,100
Fixed-price and unit-price contracts 2,580,100 2,397,500
- ------------------------------------------------------------------------------------
Total backlog $3,900,300 $4,132,600
- ------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------
</TABLE>
See Item 7. "Management's Discussion and Analysis of Financial Condition
and Results of Operations" in Part II of this Annual Report on Form 10-K.
Additional information concerning the Corporation's backlog of uncompleted
contracts is set forth under the caption "New Business and Backlog" in Part
II of this Annual Report on Form 10-K.
U.S. GOVERNMENT CONTRACTS
U.S. Government contracts continue to be an important part of the
Corporation's business. In the three years ended December 31, 1994, 1993 and
1992 revenue of approximately $544,400 (22 percent), $603,900 (22 percent) and
$535,100 (23 percent), respectively, were derived from various U.S. Government
agencies. At December 31, 1994, the Corporation's backlog contained
approximately $845,100 (22 percent) of both fixed-price and fee-type contracts
and subcontracts with various agencies of the U.S. Government which are subject
to unilateral termination at the option of the U.S. Government. Terminations for
convenience of the Government generally provide for payments to a contractor,
for its unrecovered costs and a portion of its profit. The Corporation does not
expect any material portion of its government contracting business to be
terminated.
The Corporation has a number of cost reimbursable contracts with the U.S.
Government, the allowable costs of which are subject to audit by various
agencies of the U.S. Government. As a result of such audits, the government
asserts from time to time that certain costs claimed as reimbursable under
government contracts either were not allowed or not allocated in accordance with
federal government regulations. The resolution of these audits may result in
various sanctions including monetary payments. See the "Commitments and
Contingencies -- Government Audits" Note to Financial Statements in Part II of
this Annual Report on Form 10-K.
COMPETITION
The Corporation's competitive position in the markets it serves has been
adversely impacted by the absence of bonding capacity and its lack of
financial flexibility which among other things inhibits its ability to secure
project financing. The Corporation is engaged in highly competitive
businesses, particularly those portions which relate to Engineering and
Construction contracts obtained by competitive bidding. The Corporation
competes with other general and specialty contractors both foreign and
domestic, including a number of small local contractors. Competition is based
primarily on price, reputation and reliability. There can be no assurance
that competition in one or more of the engineering and construction markets
will not adversely affect the Corporation and its results of operations.
Success or failure in the engineering and construction industry is, in large
measure, based upon the ability to compete successfully for contracts and to
provide the engineering, planning, procurement, management and project
financing skills required to complete them in a timely and cost-efficient
manner. Exact statistical data are not available for determining the relative
size of engineering and construction companies.
MK Rail operates in a highly competitive environment. In the case of
locomotive remanufacturing, it faces competition from AMF Canada, Conrail,
numerous smaller remanufacturers, as well as the in-house shops of certain
railroads. The new locomotive manufacturing market is dominated by the Electro-
Motive Division, General Motors Corporation ("EMD") and GE Transportation
Systems, General Electric Company ("GE"), which collectively accounted for
virtually 100% of the new locomotives delivered in the last five years. The
following factors have been barriers to MK Rail's entry into the new locomotive
manufacturing market: (i) declines in the prices of locomotives produced by the
dominant competitors, GE and EMD, to a level below MK Rail's cost of producing
comparable new locomotives; (ii) the developments by GE and EMD of locomotives
of 5000 or more horsepower, none of which were in production at the time the
MK5000C was developed by MK Rail; (iii) the introduction of alternating current
("AC") locomotive technology into the market, which has reduced sales of direct
current ("DC") locomotives through loss of market share to AC locomotives and
the adoption of a "wait-and-see" attitude by other potential customers and (iv)
MK Rail's need to
I-7
<PAGE>
complete field testing of these new locomotives, as is customary for new
production models, which has taken more time than originally anticipated.
The Transit segment competes for mass transit rail car business primarily
in the U.S. market with approximately five major competitors, all of which are
foreign manufacturers with substantially greater financial resources than the
Corporation at this time. The Transit segment believes that it is the only
domestic designer and manufacturer of new mass transit rail cars. There are
numerous domestic and foreign competitors in the used transit car rebuilding
business, including in some instances, transit authorities themselves. Contracts
for building new and rebuilding used mass transit rail cars are awarded on the
basis of competitive bid and negotiated contracts.
RESEARCH AND DEVELOPMENT ACTIVITIES
MK Rail and Transit segment's periodic expenses for research and development
activities relating to development of new products and improvement of
existing products for the years ended December 31, 1994 and 1993 were $5,168
and $3,701, respectively. MK Rail and Transit did not incur significant
research and development expenses in 1992. MK Rail had been developing
alternating current locomotive propulsion system technology but has delayed
further research and development due to unfavorable market conditions.
Transit's R&D activities are related to improving availability and operations
of transit vehicles and development of communications systems aimed at
improving safety of train operations to comply with federal regulations.
ENVIRONMENTAL MATTERS
MK Rail Corporation is subject to a Post Closure Permit ("Permit") issued
by the EPA and the Idaho Department of Health and Welfare, Division of
Environmental Quality ("IDEQ"), relating to the monitoring and treatment of
groundwater contamination on and adjacent to MK Rail's Boise Locomotive Plant.
MK Rail has estimated expected aggregate undiscounted costs to be incurred over
the next 20 years, adjusted for inflation at 3.5% per annum, to be $4,890, based
on the Permit's corrective action plan. The discounted liability at December 31,
1994, using a discount rate of 6.0%, was $2,652. In addition, MK Rail may be
liable for damages resulting from any contamination of property owned by
adjacent landowners, or from pollution of the regional aquifer system which
serves most of the domestic and industrial uses of groundwater in the area. The
regional aquifer system, however, occurs at a depth which is approximately 190
feet below groundwater levels currently identified as contaminated and, while
management believes there is no evidence that the aquifer system is currently
threatened, no assurance can be given in this regard.
The Comprehensive Environmental Response, Compensation and Liability Act
(also known as "CERCLA" or "Superfund") is a federal law regarding abandoned
hazardous waste sites which imposes joint and several liability, without regard
to fault or the legality of the original act, on certain classes of persons,
including those who contribute to the release of a "hazardous substance" into
the environment. Foster Wheeler Energy Corporation ("FWEC") is named as a
potentially responsible party with respect to MK Rail's Mountaintop,
Pennsylvania plant, which has been listed by the EPA in its data base of
potential hazardous waste sites, the Comprehensive Environmental Response,
Compensation and Liability Information System ("CERCLIS"). FWEC, the seller of
the Mountaintop property to the Corporation in 1989, indemnified the Corporation
against any liabilities associated with this Superfund site. The Corporation
believes that this indemnification arrangement is enforceable and, although such
obligation is unsecured and therefore structurally subordinate to secured
indebtedness of FWEC, that FWEC has the financial resources to honor its
obligations under this indemnification arrangement. This indemnification does
not alter the Corporation's potential liability to third parties (other than
FWEC) or governmental agencies under CERCLA but creates contractual obligations
on the part of FWEC for such liabilities.
Removal of an underground storage tank at the Braddock, Pennsylvania
facility of MK Rail resulted in groundwater contamination involving benzene
concentrations above state groundwater standards. Monitoring of the groundwater
indicates that the concentrations of benzene have decreased below applicable
standards through clean up efforts at the site and natural attenuation.
MK Rail is currently voluntarily remediating groundwater contamination
resulting from a release of xylene in connection with a storage tank leak at its
St. Louis, Missouri facility. The Company notified the relevant state regulatory
agency of its remediation plan and, with the concurrence of the state agency,
has initiated site remediation.
MK Rail believes that its planned expenditures are adequate to meet its
known environmental obligations and liabilities, including those under the
Permit, and under CERCLA and similar legislation. See Item 7. "Management's
Discussion and Analysis of Financial Condition and Results of Operations" in
Part II of this Annual Report on Form
I-8
<PAGE>
10-K. MK Rail's knowledge of its environmental obligations and liabilities
is, for the majority of its facilities, based on assessments and due
diligence conducted by Corporation personnel rather than Phase I and/or Phase
II environmental assessments conducted by third-party consultants. No
assurance can be given, however, that stricter interpretation and enforcement
of existing environmental laws or regulations, the adoption of new laws or
regulations, or the discovery of currently unknown waste or contamination for
which MK Rail may be liable, the inability of MK Rail to enforce the
indemnification with respect to the Mountaintop plant or the continued spread
of the hazardous waste plume through off-site groundwater near MK Rail's
Boise Locomotive plant will not result in significantly higher environmental
costs to MK Rail.
The Corporation also has been the subject of an investigation by the U.S.
Environmental Protection Agency ("EPA") relating to a Superfund site located in
Fresno County, California. In September 1991 the EPA issued an administrative
order under the Comprehensive Environmental Response, Compensation and Liability
Act, naming Morrison Knudsen Engineers, Inc. ("MKE"), a subsidiary of the
Corporation, and eight other entities as respondents. The EPA alleged that MKE
and the other named respondents, among others, generated waste oils and solvents
that were transported to the Fresno site for recycling and were released into
the environment.
Although the Corporation and MKE have denied responsibility for any
contamination at the site, the Corporation has cooperated with the other
respondents in complying with the terms of the administrative order. In
addition, the Corporation has entered into an agreement with two former joint
venture partners (which are not named as respondents) under which these partners
will share 50% of the cost of complying with the order. The Corporation and
these partners have agreed to pay approximately 8.39% of the cost of designing a
groundwater treatment system , which is expected to cost approximately $2,000.
The respondents have not yet agreed on sharing of costs of constructing,
operating and maintaining this system, which is expected to cost approximately
$11,200.
The Corporation also has been notified by the EPA that the EPA believes MKE
may be one of the parties liable for the cost of implementing certain remedial
actions relating to soil contamination at the Fresno site, which could cost
approximately $36,200. As of the date of this Annual Report on Form 10-K, it is
unclear how much of this total cost, if any, the Corporation and/or MKE will be
expected to bear. The Corporation and other respondents have agreed to design
the soil remediation system, pursuant to an Administrative Consent Order with
the EPA, other respondents, and certain other entities identified as potentially
responsible parties.
With the foregoing exceptions, the Corporation to the best of its knowledge
believes that it is presently in substantial compliance with all applicable
federal and state environmental laws and does not anticipate that such
compliance will have a material impact on its future capital expenditures,
earnings or competitive position.
AVAILABILITY OF RAW MATERIALS
Raw materials and components necessary for the fabrication and manufacturing
of MK Rail and Transit segment products and the rendering of construction and
engineering services for the Corporation are generally available from
numerous sources. The Corporation does not foresee any unavailability of
materials and components which would have a material adverse effect on its
overall business or on either of its business segments in the near term.
The Transit segment is currently negotiating with alternative foreign
suppliers of new car shells required to complete a portion of the Caltrans new
car contract. Its previous foreign supplier, Mafersa, a private company owned by
the Brazilian government has notified Transit that due to financial difficulties
it cannot complete its obligation under the supply contract. Transit believes
that the availability and cost of car shells from alternative foreign sources
will not materially effect its overall business.
EMPLOYEES
Total worldwide Corporation employment varies widely since it depends upon
the volume, type and scope of operations under way at any given time, as well as
upon weather conditions and other factors.
Worldwide employment at December 31, 1994, including project direct-hire
craft employees, was approximately 12,819 with 8,984 employed in the E&C
segment, 1,814 employed in the MK Rail segment, 1,863 employed in the Transit
segment and 158 employed at corporate offices in Boise, Idaho.
I-9
<PAGE>
ITEM 2. PROPERTIES
At December 31, 1994, the Corporation and its consolidated subsidiaries owned
a total of 17 principal plants, warehouses, offices and rental properties
located throughout the United States, Canada, Australia, New Zealand, the
Hawaiian Islands, Micronesia and Melanesia.
The approximate major building space utilized by each segment of the
Corporation at December 31, 1994 is as follows:
<TABLE>
<CAPTION>
Area in Square Feet
------------------------
Owned Leased
<S> <C> <C>
Engineering and Construction 181,200 1,164,000
MK Rail 834,400 1,520,300
Transit 133,000 872,500
Corporate offices 57,200 336,300
- --------------------------------------------------------------------------------
Total square feet area 1,205,800 3,893,100
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
Aggregate annual rental payments on real estate and equipment leased by the
Corporation during the year ended December 31, 1994 was approximately $36,900.
For further information on rentals and minimum rental commitments, see the
"Commitments and Contingencies" Note to Consolidated Financial Statements in
Part II of this Annual Report on Form 10-K.
The Corporation considers that its construction, mining and marine
equipment, locomotive remanufacturing and transit car manufacturing facilities
and administrative properties are well maintained and suitable for its current
operations. Maintenance and repair expenses of approximately $41,900 in 1994,
$44,200 in 1993 and $49,500 in 1992, have been charged to operations.
ITEM 3. LEGAL PROCEEDINGS
Lawsuits in the following four general categories are currently pending
against the Corporation and its directors and/or officers: (1) class actions
relating to transactions in the common stock of the Corporation; (2) class
actions relating to the issuance of, and transactions in, the common stock of MK
Rail; (3) derivative actions brought by persons who claim to be stockholders of
the Corporation; and (4) claims brought by the former stockholders of
Touchstone, Inc. The plaintiffs in these actions seek various remedies,
including compensatory and punitive damages and injunctive relief.
1. MK SECURITIES CLASS ACTIONS. Seven separate cases have been consolidated
as IN RE MORRISON KNUDSEN SECURITIES LITIGATION, No. 94-0334-S-EJL (U.S.
District Court, District of Idaho) (first filed July 28, 1994). The
plaintiffs in this consolidated action claim to have purchased shares of the
Corporation's common stock during the period of October 15, 1993 to March 20,
1995, and seek to represent a class consisting of all other parties that
purchased the Corporation's common stock during that period. Defendants
include the Corporation, certain of the Corporation's current and former
officers (William J. Agee, Stephen G. Hanks and James F. Cleary, Jr.), and
the Corporation's auditors. The plaintiffs purport to state claims for
violation of certain federal and state securities laws and certain common law
claims and seek damages in an unspecified amount based upon allegations,
among other things, that the defendants issued false and misleading public
statements relating to the Corporation's business position and future
prospects, and that certain of the Corporation's financial statements were
materially inaccurate and/or failed to reflect all required information. The
plaintiffs further allege that material misstatements were made in connection
with the initial public offering of MK Rail's common stock and thereafter.
2. MK RAIL SECURITIES CLASS ACTIONS. Two cases relating to the issuance of,
and transactions in, the common stock of MK Rail have been consolidated in
the U.S. District Court for the District of Idaho. These are: SUSSER, ET. AL.
V. AGEE, ET. AL., No. CIV 94-0477-S-LMB (U.S.D.C. D. Idaho); and NEWMAN, ET.
AL V. AGEE, ET. AL., No. CIV 94-0478-S-EJL (U.S.D.C. D. Idaho) (both filed
October 20, 1994). The plaintiffs in these consolidated actions claim to have
purchased shares of common stock of MK Rail during the period of April 26,
1994 to September 29, 1994, and seek to represent a class consisting of all
other purchasers of MK Rail's common stock during that period. Defendants
include the Corporation, MK Rail, certain current and former officers and
directors of the Corporation and MK Rail (including William J. Agee, James F.
Cleary, Jr., Michael J. Farrell, Stephen G. Hanks and Gilbert E. Carmichael),
and the managing underwriters of MK Rail's initial public offering. The
plaintiffs purport to state claims for violation of certain federal
securities laws and certain common law claims and seek damages in an
unspecified amount based upon allegations, among other things,
I-10
<PAGE>
that the defendants issued false and misleading public statements relating to
MK Rail's business position and future prospects, and failed to disclose
certain required information.
3. DERIVATIVE ACTIONS. Thirteen derivative actions have been filed in state
courts in Idaho and Delaware, naming as defendants certain of the
Corporation's present and former directors and officers. The Corporation is a
nominal defendant in each of these actions. Five of the cases are pending in
the Idaho Fourth District Court in Ada County, and eight of the cases are
pending in the Delaware Chancery Court in New Castle County. The defendants
in the various cases include all of the Corporation's incumbent directors
other than Mr. Miller; certain of the Corporation's former directors,
including William J. Agee, Zbigniew Brzezinski, William Clark, Peter V.
Ueberroth; certain current and former officers of the Corporation and MK
Rail, including Mr. Agee, Stephen G. Hanks, Robert A. Tinstman, Mark E.
Howland, Stephen R. Grant, Gunnar E. Sarsten, Joseph G. Fearon, Thomas J.
Smith and Michael J. Farrell; and (only in the Florida case described below)
Mary Cunningham Agee, the wife of the Corporation's former Chairman.
The five Idaho derivative cases are as follows: (i) DEKLOTZ, ET. AL. V.
MORRISON KNUDSEN CO., ET. AL., No. CV-00-9500605D (Idaho Dist. Ct., Ada Cty.)
(filed February 13, 1995); (ii) WOHLGELERNTER V. AGEE, ET. AL., No. CV-OC-
9500656D (Idaho Dist. Ct., Ada Cty.) (filed March 24, 1995); (iii) FLINN V.
AGEE, ET. AL., No. CV-OC-9500765D (Idaho Dist. Ct., Ada Cty.) (filed February
21, 1995); (iv) STEINER V. AGEE ET. AL., No. CV-OC-9500745D (Idaho Dist. Ct.,
Ada Cty.) (filed February 17, 1995); and (v) STATE BOARD OF ADMINISTRATION OF
FLORIDA V. MORRISON KNUDSEN CORP., et. al. No. CV-OC-9502463D (Idaho Dist. Ct.,
Ada Cty.) (filed June 2, 1995). The plaintiffs in the DEKLOTZ case allege, among
other things, that the Corporation's former chairman breached fiduciary duties
to the Corporation, and that the remaining defendants authorized or acquiesced
to his allegedly wrongful conduct and failed to properly to supervise his
activities. The plaintiffs seek to prevent the Corporation from making certain
payments, including compensation payments to the Corporation's former chairman
and indemnification payments to the defendants. The plaintiffs purport further
to bring claims on behalf of a class of all stockholders of the Corporation from
January 1988 to the present, alleging that the value of the Corporation's stock
held by members of such class has been diminished by the alleged wrongful acts
of the defendants. In the WOHLGELERNTER case, the plaintiff alleges, among other
things, that the defendants breached fiduciary duties to the Corporation and/or
MK Rail by exposing the Corporation and MK Rail to securities fraud claims and
by artificially inflating the price of the Corporation's and MK Rail's stock,
and further alleges mismanagement of the Corporation through payment of
excessive compensation to the Corporation's former chairman. The plaintiff also
alleges that another party traded in the Corporation's stock on the basis of
material, non-public information which was available to one of the Corporation's
directors. In the FLINN case, the plaintiff alleges, among other things, that
defendant directors breached fiduciary duties by allowing the Corporation's
former chairman to pursue high-risk strategies and manipulate assets without
reasonable inquiry, and by failing to implement effective internal controls
relating to dissemination of certain information relating to the Corporation. In
the STEINER case, the plaintiff alleges, among other things, that defendant
directors breached fiduciary duties by pursuing high-risk ventures, issuing
false and misleading statements regarding the Corporation's financial condition
and wasting corporate assets through payment of excessive compensation. The
plaintiff further alleges that the defendants caused or willfully permitted the
Corporation to issue material misrepresentations in documents filed with the
SEC, resulting in the filing of lawsuits against the Corporation. The
plaintiff's allegations in the FLORIDA case repeat certain of the allegations
made in the other derivative cases pending in Idaho and Delaware.
The eight Delaware derivative cases are as follows: (i) STERN V. AGEE, ET.
AL., Civil Action No. 14032 (Del. Ch.) (filed February 13, 1995); (ii) HAGER V.
AGEE, ET. AL., Civil Action No. 14034 (Del. Ch.) (filed February 14, 1995);
(iii) TROY V. AGEE, ET. AL., Civil Action No. 14167 (Del. Ch.) (filed March 31,
1995); (iv) CAFFREY V. AGEE, ET. AL., Civil Action No. 14033 (Del. Ch.) (filed
February 13, 1995); and (v) HAMMERSLOUGH V. AGEE, ET. AL., Civil Action No.
14042 (Del. Ch.) (filed February 17, 1995); (vi) ROSENN V. AGEE, ET. AL., Civil
Action No. 14106 (Del. Ch.) (filed March 9, 1995); (vii) CITRON V. AGEE, ET.
AL., Civil Action No. 14136 (Del. Ch.) (filed March 22, 1995); and (viii)
ANTONICELLO V. AGEE, ET. AL., Civil Action No. 14182 (Del. Ch.) (filed April 4,
1995). The plaintiff in the STERN case alleges, among other things, that the
Corporation's former chairman breached fiduciary duties to the Corporation, and
that the remaining defendants authorized or acquiesced to allegedly wrongful
conduct on the part of the Corporation's former chairman and failed to properly
supervise his activities. The plaintiff further alleges waste of corporate
assets through payment of excessive compensation. The plaintiff in the CAFFREY
case alleges, among other things, that the defendant directors breached
fiduciary duties by wasting corporate assets through payment of excessive
compensation to the Corporation's former chairman. The plaintiffs' allegations
in the HAGER and TROY, ROSENN, CITRON and ANTONICELLO cases parallel those of
the STERN complaint, and the plaintiffs' allegations in the HAMMERSLOUGH case
parallel those of the CAFFREY complaint.
I-11
<PAGE>
4. TOUCHSTONE LITIGATION. Two cases brought by the former stockholders of
Touchstone are currently pending in U.S. District Court in Tennessee: THEODORE
E. NELSON V. MORRISON KNUDSEN CORP., No. 95-1029 (U.S.D.C. W.D. Tenn.) (filed
February 7, 1995); and RICHARD JACOBS, ET. AL. V. MORRISON KNUDSEN CORP., No.
95-1024 (U.S.D.C. W.D. Tenn.) (filed February 7, 1995). The plaintiffs in these
actions claim to have been all of the stockholders of Touchstone prior to the
Corporation's acquisition of Touchstone through an exchange offer. The
Corporation is the sole defendant. The Plaintiffs allege that certain financial
statements of the Corporation upon which they based their decision to exchange
Touchstone shares were misleading. The plaintiffs purport to state claims for
violation of federal and Tennessee securities laws, and Tennessee common law.
The plaintiffs further allege that the Corporation violated the exchange
agreement under which they exchanged their Touchstone shares. The Corporation
has filed responsive pleadings denying the plaintiffs' claims and the parties
are proceeding with discovery; trial has been set for September of 1996.
Settlement discussions have been held among the Corporation, MK Rail,
certain of their present and former officers and directors, their insurance
carriers, the underwriter defendants and plaintiffs. These discussions have
resulted in preliminary agreements as to the principal economic terms of
settlement of the MK Securities Class Actions, the MK Rail Securities Class
Actions, and the Derivative Actions (other than the FLORIDA case pending in
Idaho) as to all defendants in those cases other than the Corporation's
auditors. As of the date of this Annual Report on Form 10-K discussions are
continuing between certain of the plaintiffs and defendants with respect to
certain open issues. It is anticipated that the preliminary agreements will be
followed by formal settlement documentation; the settlement then will be
submitted for and be subject to approval by the appropriate courts. The
settlement terms will require the Corporation, as its share of the settlement,
to (i) issue 2,976,923 shares of Common Stock in connection with the settlement
of the MK Securities Class Actions, (ii) issue 869,231 shares of Common Stock in
connection with the settlement of the MK Rail Securities Class Actions, and
(iii) pay the net (after plaintiffs' attorneys fees and related expenses)
insurance proceeds received by the Corporation in connection with the settlement
of the Derivative Actions into a settlement fund to be created in connection
with the settlement of the MK Securities Class Actions. The settlement terms
would also require MK Rail, as its share of the settlement of the MK Rail
Securities Class Actions, to issue 413,793 shares of Common Stock and shares of
a new class of Preferred Stock with a redemption value of $1,000. The
Corporation's insurance carriers will pay $35,000 (including the amounts
referred to in clause (iii) above) on behalf of the individual defendants in the
MK Securities Class Actions and the Derivative Actions, and MK Rail's insurance
carrier will pay $6,000 into a settlement fund to be created in connection with
the settlement of the MK Rail Securities Class Actions, such payment to be made
with respect to the individual defendants in those cases. The funds paid by MK
Rail's insurance carrier will include the purchase from the settlement fund of
the MK Rail Preferred Stock referred to above for $1,000. See the "Commitments
and Contingencies -- Legal Proceedings" and "Subsequent Events -- Litigation
Settlement" Notes to Consolidated Financial Statements in Part II of this Annual
Report on Form 10-K.
In connection with the preliminary agreements as to the principal economic
terms of settlement of the MK Securities Class Actions, the MK Rail Securities
Class Actions, and the Derivative Actions (other than the FLORIDA case pending
in Idaho), the Corporation has accrued an estimated liability of $29,000 at
December 31, 1994. However, there can be no assurance that all the parties to
the preliminary agreements will agree on the terms of the final settlement or
that such final settlement will be approved by the appropriate courts. See the
"Subsequent Events -- Litigation Settlement" Note to Consolidated Financial
Statements in Part II of this Annual Report on Form 10-K.
In addition to the pending lawsuits described above, the Corporation and MK
Rail have been advised that they are the subjects of an "informal investigation"
by the Pacific Regional Office of the Securities and Exchange Commission. The
investigation began October 24, 1994 with a request that certain documents be
produced with respect to MK Rail. On March 7, 1995, the Corporation was advised
that the investigation had been expanded to include the Corporation. The
Corporation has been cooperating with requests for documents from the Staff of
the Commission.
See the disclosure under the caption Item 1. "Business -- Environmental
Matters" for discussion of pending environmental matters.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Corporation did not submit any matters to a vote of security holders
during the fourth quarter of 1994.
I-12
<PAGE>
EXECUTIVE OFFICERS OF THE REGISTRANT
Following is a list of the names and ages of the executive officers and all
positions held by them with the Corporation together with the date of their
election to corporate office as of May 31, 1995.
<TABLE>
<CAPTION>
POSITIONS WITH OFFICER
NAME AGE THE CORPORATION SINCE
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
EXECUTIVE OFFICERS
Robert A. Tinstman 48 President and Chief Executive Officer 1995
(Principal Executive Officer)
Stephen G. Hanks 44 Executive Vice President, 1990
Chief Legal Officer and Secretary
Denis M. Slavich 54 Executive Vice President and 1995
Chief Financial Officer
(Principal Financial Officer)
Thomas F. Kealey 43 Senior Vice President -- Finance 1994
Mark E. Howland 43 Vice President and Controller 1993
(Principal Accounting Officer)
Brent D. Brandon 34 Vice President -- Corporate Communications 1993
Douglas L. Brigham 29 Vice President and Treasurer 1993
</TABLE>
Messrs. Tinstman, Hanks and Brigham have served the Corporation and its
subsidiaries in various executive capacities for the past five years.
PRIOR BUSINESS EXPERIENCE OF EXECUTIVE OFFICERS THAT HAVE NOT BEEN EMPLOYED
BY THE CORPORATION IN AN EXECUTIVE OR MANAGERIAL CAPACITY DURING THE LAST FIVE
YEARS:
Mr. Slavich was previously vice president, marketing of Fluor Daniel, Inc.
Prior to his association with Fluor Daniel, Inc., he served as corporate
director, senior vice president and manager of international power projects and
chief financial officer of Bechtel Group, Inc., where he was employed for 20
years.
Mr. Kealey served the Corporation as senior vice president -- finance since
October 1994 and president of MK Capital Company, a newly formed subsidiary
since his employment with the Corporation in August 1994. Prior to his
employment with the Corporation, Mr. Kealey served as senior vice president --
business development and international of GE Capital Railcar Services, a unit of
General Electric Company in Chicago, Illinois where he was employed for four and
one-half years. Prior to his employment with GE Capital Railcar Services he
served for four years as President of The RoadRailer Company and President of
Transportation Corporation of America, subsidiaries of Duchossois Enterprises,
Elmhurst, Illinois.
Mr. Howland served the Corporation as assistant director and director of
internal audit since his employment with the Corporation in August 1992. Prior
to his employment with the Corporation, Mr. Howland was employed as a Senior
Audit Manager by Price Waterhouse, LLP, San Francisco, California.
Mr. Brandon served the Corporation as executive assistant to the chairman,
and president of Western Aircraft, Inc., a subsidiary of the Corporation, since
his employment with the Corporation in January 1992. Prior to his employment
with the Corporation, Mr. Brandon served in the armed forces of the United
States.
I-13
<PAGE>
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED
STOCKHOLDER MATTERS
MARKET INFORMATION: The Corporation's voting common stock is traded on the
New York and Pacific Stock Exchanges under the Symbol MRN. At the close of
business on May 31, 1995 the Corporation had 33,049,100 shares issued and
outstanding. The New York and Pacific Stock Exchanges have certain listing
criteria applicable to companies listed on such exchanges. Continuing losses
that may be sustained by the Corporation or transactions the Corporation may
pursue in connection with a possible restructuring could adversely impact the
Corporation's continuing eligibility for listing on such exchanges.
HOLDERS: The approximate number of record holders of the Corporation's voting
common stock at May 31, 1995 was approximately 6,000 and does not include
beneficial owners of the Corporation's common stock held in the name of a
broker, dealer, bank, voting trustee or other nominee. The cash dividends
declared and the New York Stock Exchange composite high and low sales prices
of the Corporation's common stock traded on the New York and Pacific Stock
Exchanges for each quarterly period within the two most recent fiscal years
are set forth under the caption "Quarterly Financial Data" on page II-13 of
this Annual Report on Form 10-K.
DIVIDENDS: The Corporation has had a history of paying cash dividends;
however, under the terms of its bank credit agreements, the Corporation is
prohibited from paying cash dividends. See the "Short-Term Debt" and
"Subsequent Events -- New Credit Facility" Notes to Consolidated Financial
Statements.
II-1
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
(THOUSANDS OF DOLLARS EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
OPERATING SUMMARY 1994 1993 1992 1991 1990
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Revenue
Engineering and construction $2,036,527 $2,305,680 $1,985,578 $1,554,628 $1,373,734
MK Rail 368,537 218,160 129,507 201,347 169,828
Transit 132,558 206,859 169,979 268,816 215,196
Eliminations and other (33,323) (8,156) (133) -- --
- -------------------------------------------------------------------------------------------------------------------
Total revenue $2,504,299 $2,722,543 $2,284,931 $2,024,791 $1,758,758
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
Operating income (loss)
Engineering and construction $ (82,164) $55,419 $40,276 $58,956 $89,466
MK Rail (31,104) 10,308 5,464 (519) (2,324)
Transit (224,680) 11,036 5,567 23,477 11,417
Eliminations (16,946) (301) -- -- --
- -------------------------------------------------------------------------------------------------------------------
Total operating income (loss) $(354,894) $76,462 $51,307 $81,914 $98,559
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
Income (loss) before extraordinary charge and
cumulative effect of accounting change $(349,635) $35,767 $13,436 $35,456 $37,623
Extraordinary charge from write-off of
unamortized debt issue cost, net of tax -- -- (3,096) -- --
Cumulative effect of accounting change
for postretirement health care costs, net of tax -- -- (17,403) -- --
- -------------------------------------------------------------------------------------------------------------------
Net income (loss) $(349,635) $35,767 $ (7,063) $35,456 $37,623
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
Earnings (loss) per common and common
equivalent share:
Income (loss) before extraordinary charge and
cumulative effect of accounting change $(10.75) $1.15 $.44 $1.24 $1.43
Extraordinary charge -- -- (.10) -- --
Cumulative effect of accounting change -- -- (.57) -- --
- -------------------------------------------------------------------------------------------------------------------
Net income (loss) $(10.75) $1.15 $(.23) $1.24 $1.43
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
Dividends declared per share $.80 $.80 $.80 $.74 $.74
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
FINANCIAL POSITION SUMMARY
- -------------------------------------------------------------------------------------------------------------------
Current assets $ 865,655 $ 773,318 $681,412 $658,200 $660,114
Current liabilities 1,005,269 686,965 608,730 379,121 410,228
- -------------------------------------------------------------------------------------------------------------------
Working capital (deficit) (139,614) 86,353 72,682 279,079 249,886
Investments and other assets 189,993 231,960 225,005 216,470 147,649
Property and equipment, net 217,261 218,103 194,007 177,107 164,597
Total assets 1,272,909 1,223,381 1,100,424 1,051,777 972,360
Debt due after one year 47,363 9,768 457 195,232 194,952
Other non-current liabilities and minority
interests 162,481 119,681 115,466 81,274 74,933
Stockholders' equity 57,796 406,967 375,771 396,150 292,247
- -------------------------------------------------------------------------------------------------------------------
Book value per share $1.76 $12.87 $12.26 $13.17 $11.15
Shares outstanding at year end 32,864,200 31,618,000 30,640,000 30,086,300 26,199,900
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
II-2
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
DESCRIPTION OF BUSINESS
The Corporation's operations involve three principal businesses:
Engineering and Construction ("E&C"), MK Rail Corporation ("MK Rail") and
Transit.
The E&C segment provides design, engineering, construction, procurement,
project-management and construction-management services in the infrastructure
market, including transportation, water resources, heavy civil and energy
developments, as well as industrial buildings. The segment also provides skills
for the nuclear and fossil-fueled power markets and in cogenera-tion, waste-to-
energy, environmental and hazardous waste, and wastewater treatment fields; and
in addition serves the hydroelectric, oil and gas, and mine engineering markets.
A number of subsidiaries are engaged in long-term contract mining of coal and
lignite at mines in the United States and Germany. Other markets include
operations and maintenance services for military and commercial facilities.
MK Rail completed its initial public offering of 35% of its common stock in
May 1994. MK Rail is the successor to certain operations of the Corporation
relating to (i) the manufacture and remanufacture of freight and passenger
locomotives in Idaho, Pennsylvania and South Australia, (ii) the manufacture and
distribution of component parts for locomotives and (iii) the provision of
locomotive fleet maintenance services.
The Transit segment is engaged principally in building new and rebuilding
used mass transit rail cars in New York, California and Illinois.
The Corporation had an equity interest in MK Gold Company which holds
undivided interests in two gold mining companies in California and provides
contract mining services. In addition, the Corporation has equity interests in
Westmoreland Resources, Inc., a coal mining company in Montana; Strait Crossing
Development, Inc., a company formed to design, build and operate a toll bridge
in Canada; and MIBRAG mbH, a company that operates lignite coal mines, power and
process plants in Germany. On June 6, 1995, the Corporation sold its entire
ownership interest in MK Gold Company. See the "Subsequent Events -- Changes in
Business" Note to Consolidated Financial Statements.
NEW BUSINESS AND BACKLOG
BACKLOG: Backlog of all uncompleted contracts at December 31, 1994, totaled
$3,900.3 million, compared with $4,132.6 million at year-end 1993. The 1994
year-end backlog is composed of 66% fixed priced and 34% fee-type contracts,
compared with 59% and 41% respectively, at December 31, 1993.
NEW BUSINESS: The Corporation booked new business of $2,272.0 million in
1994 compared to $2,204.4 million in 1993. New business in 1994 consisted of
$1,419.4 million for Engineering and Construction, $813.3 million for MK Rail
and $39.3 million for Transit compared with $1,853.7 million, $308.7 million and
$42.0 million in 1993, respectively. New business consists of new contracts and
changes to existing contracts. Backlog consists of uncompleted portions of
engineering and construction contracts, including the proportionate share of
construction joint-venture contracts, uncompleted portions of MK Rail and
transit contracts and the next five-year portion of long-term mining services
contracts. In anticipation of the early termination of a mining services
contract by a customer in mid-1996, backlog at December 31, 1994 includes only
the next 18-month portion of such contract. See the "Subsequent Events --
Navasota Mining Services Contract" Note to Consolidated Financial Statements.
The following table sets forth the revenue backlog at December 31, 1994 and
1993 and the new business booked in each of the two years ended December 31,
1994.
<TABLE>
- -------------------------------------------------------------------------------------------
INDUSTRY SEGMENT NEW BUSINESS AND BACKLOG
(THOUSANDS OF DOLLARS)
- -------------------------------------------------------------------------------------------
<CAPTION>
1994 1993
New Business Backlog New Business Backlog
------------------------- --------------------------
<S> <C> <C> <C> <C>
Engineering and Construction $1,419,400 $2,432,200 $1,853,700 $3,049,300
MK Rail 813,300 595,000 308,700 140,500
Transit 39,300 873,100 42,000 942,800
- -------------------------------------------------------------------------------------------
Totals $2,272,000 $3,900,300 $2,204,400 $4,132,600
- -------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------
</TABLE>
The decline in E&C new business in 1994 compared to 1993 was due to (i) the
Corporation's decision to forego competing on smaller (sub $100 million) civil
projects while focusing on large design-build projects and (ii) the competition
of regional construction companies.
Approximately 53% of the total 1994 year-end backlog (56% of Engineering
and Construction, 18% of MK Rail and 67% of Transit) is expected to be
recognized as revenue in 1995. Although backlog reflects only business which is
considered to be firm and is an indication of expected future revenues, there
can be no assurance that cancelations or scope adjustments will not occur or
when revenue and earnings from such backlog will be realized.
II-3
<PAGE>
RESULTS OF OPERATIONS
1994 COMPARED TO 1993
ENGINEERING AND CONSTRUCTION SEGMENT: E&C's revenue decreased for both the
fourth quarter and the year ended December 1994 compared to the same periods of
1993. This decline was principally due to the execution and completion of
contracts during the previous year, contrasted with decreases in new contract
awards and postponements of the start-up of major new infrastructure projects in
1994.
The E&C segment reported a $97.7 million operating loss in the fourth
quarter of 1994 compared to $10.9 million operating income in the comparable
period of 1993 and a $82.2 million operating loss for the year 1994 compared to
$55.4 million operating income in 1993. The results of operations for both the
quarter and the year ended December 1994 were influenced by the decrease in new
contract awards and postponements of start-up of previously awarded contracts
and adversely affected by the recognition of write-downs of operating assets and
investments as well as provisions for anticipated losses on uncompleted
contracts. The E&C segment recognized $103.3 million of pretax charges to
operating income in the fourth quarter of 1994 consisting of:
$ 12.8 million Write-off of the Corporation's remaining investment in
Vertac stemming from the U.S. Environmental Protection
Agency's (the "EPA") notification in December 1994 to
terminate on-site incineration of hazardous waste at the
Arkansas Superfund site. Prior to this notification the
Corporation had incinerated several types of hazardous
waste under various contracts with the EPA and had
anticipated additional contracts to dispose of the waste
that remains at the site.
17.5 million Contract scope changes initiated by the customer during
the fourth quarter on a number of light rail
transportation projects have subsequently been disputed
by the customers. These disputed change orders have given
rise to claims asserted against the customers for
additional revenue. In accordance with the Corporation's
accounting policy no revenue was recognized for these
items. This caused the estimated contract costs to be in
excess of contract revenue. A provision for anticipated
losses was recorded to reflect these excess costs.
6.3 million Change orders for customer-initiated scope changes on a
power plant project were rejected by the customer. These
change orders were then included in a claim asserted
against the customer. In accordance with the
Corporation's accounting policy no revenue was recognized
for these items. This caused the estimated contract costs
to be in excess of contract revenue. A provision for
anticipated losses was recorded to reflect these excess
costs.
13.0 million Establishment of a reserve for anticipated losses on a
fixed-price contract to construct a toll bridge. The
anticipated losses are based on additional costs expected
to be incurred in the completion of the project based on
actual experience during the 1994 mobilization phase of
the project.
9.1 million Provision for anticipated engineering and labor cost
overruns on a fixed-price petrochemical project and a
fixed-price railroad electrification project.
28.0 million Provision for anticipated losses on the Taipei
fixed-price subway project. The project encountered
subsoil conditions in November 1994 that will adversely
affect the tunnel boring progress. It is anticipated that
these adverse subsoil conditions will extend the time
required to complete the project by more than 12 months.
8.0 million Write-down of the Corporation's investment in the net
assets of the North Pacific construction operations. This
write-down is based on the Corporation's decision in late
1994 to attempt to sell the assets and business.
8.6 million Miscellaneous other write-downs and provisions for
anticipated losses.
- --------------
$103.3 million
- --------------
- --------------
See the "Commitments and Contingencies -- Vertac Site Contractors" and
"--CF Systems" Notes to Consolidated Financial Statements.
In addition, operating income for the first nine months of 1994 was also
adversely impacted by write-downs of assets and provisions for anticipated
losses on uncompleted contracts. The E&C segment recognized $17.6 million of
pretax charges to operating income through September 30, 1994 consisting of (i)
$4.3 million write-down of its surplus tunnel-boring equipment (ii) $5.0 million
write-down of its investment in Vertac and $6.0 million write-down of the
carrying amount of the processing facility of CF Systems -- two remediation and
waste disposal projects -- to their then estimated net recoverable values and
(iii) $2.3 million provision for anticipated losses due to delays on the Taipei
subway project.
Excluding the effects of the aggregate $120.9 million pretax charges for
the year 1994, enumerated above, the operating income of the E&C segment for the
year 1994 was $38.7 million, a decrease of $16.7 million from $55.4 million
operating income in the year 1993.
II-4
<PAGE>
MK RAIL SEGMENT: MK Rail's revenue for the fourth quarter and the year
ended December 1994 was $108.8 million and $368.5 million, respectively, an
increase of $32.5 million and $150.4 million, respectively, compared to the same
periods of 1993. The increases were principally due to (i) the increased
production and delivery of locomotives under a fixed-price contract with
Southern Pacific Railroad (the "SP") to remanufacture 133 locomotives, and the
start-up of fleet maintenance contracts in the U.S. and Mexico (ii) increased
sales of component parts reflecting the inclusion of a full-year's results of
operations of various component part manufacturing businesses acquired in August
and December 1993, and January 1994 and (iii) across-the-board increases in
sales of locomotive component parts due to generally strong economic conditions
in the rail industry.
MK Rail reported a $41.3 million operating loss in the fourth quarter of
1994 compared to $4.2 million operating income in the fourth quarter of 1993
and a $31.1 million operating loss for the year 1994 compared to $10.3
million operating income for the year 1993. MK Rail recognized $24.1 million
of pretax charges to operating income in the fourth quarter of 1994
consisting of (i) $12.4 million for aggregate losses on uncompleted
locomotive remanufacturing contracts including $8.2 million in connection
with the SP contract (completed in February 1995) caused by higher than
expected labor and materials costs and $4.2 million of losses in connection
with a maintenance contract and several other contracts in Australia, (ii)
$3.3 million accrual for estimated legal and professional fees primarily
attributable to stockholders' litigation and (iii) aggregate provisions of
$8.4 million, comprised of $3.7 million provision for non-cancelable purchase
commitments of research and development services under contract with outside
firms, $2.7 million provision for future lease losses on the prospective
lease of new MK5000 locomotives and $2.0 million provision for estimated
manufacturing costs in excess of market value, all of which stem from MK
Rail's decision to curtail its ongoing activities in new locomotive
manufacturing and technology. MK Rail has developed two new locomotives, the
MK5000 and the MK1200, and has performed research and development activities
related to developing a third locomotive utilizing alternating current ("AC")
technology. During the fourth quarter of 1994, MK Rail re-evaluated its focus
and long-range plans. In doing so, MK Rail decided to curtail its ongoing
activities in new locomotive manufacturing and technology.
Excluding the effects of the aggregate $24.1 million pretax charges for the
year 1994, enumerated above, the operating loss of MK Rail for the year 1994 was
$7.0 million, a decrease of $17.3 million from $10.3 million operating income in
the year 1993.
In the third quarter of 1994, the estimated earnings at completion of an MK
Rail fixed-price contract with SP to remanufacture 133 locomotives for delivery
in late 1994 were revised due to lower than expected labor productivity, and
higher than expected material costs. The fixed-price contract was originally
entered into by the Corporation which assigned the contract to MK Rail and
guaranteed the performance of MK Rail's obligations under the contract in
connection with MK Rail's initial public offering ("IPO"). To meet the delivery
dates imposed by the contract, MK Rail entered into an agreement with the
Corporation pursuant to which the Corporation was to remanufacture 42 of the 133
locomotives. On October 20, 1994, the Corporation and MK Rail executed an
agreement whereby the Corporation agreed to indemnify MK Rail for its estimated
loss on the remaining 91 locomotives provided such loss did not exceed $3.8
million. As a result of the foregoing, the Corporation's Transit segment
recognized a $9.2 million pretax charge to operating income in the third quarter
of 1994 for the above and anticipated losses on the uncompleted SP contract to
remanufacture the 42 locomotives. The aggregate estimated pretax loss on the SP
contract recognized by the Corporation's Transit segment and MK Rail in 1994 was
$17.4 million.
TRANSIT SEGMENT: Transit's revenue for the fourth quarter and the year
ended December 1994 was $50.7 million and $132.6 million, respectively, a
decrease of $10.4 million and $74.3 million, respectively, compared to the same
periods of 1993. The decreases were principally due to the higher volume of
deliveries of new transit cars for a midwest transit authority in 1993 as
compared to fewer deliveries of new and remanufactured transit cars under
contracts with Metro North Commuter Railroad ("Metro North") and Illinois Metra
Authority ("METRA") in 1994.
Transit reported a $153.2 million operating loss in the fourth quarter of
1994 compared to $4.2 million operating income in the fourth quarter of 1993 and
$224.7 million operating loss for the year 1994 compared to $11.0 million
operating income for the year 1993. Transit recognized $139.6 million of pretax
charges to operating income in the fourth quarter of 1994 for anticipated cost
overruns on fixed-price new transit car contracts in the early stages of
production which are anticipated to be delivered during 1995 and 1996. As
evident by the following schedule, very few new transit cars have been
manufactured, delivered and accepted at December 31, 1994. Substantially all new
transit cars under contract were in their very early stages of production at
December 31, 1994, while other new transit cars under contract were not yet
fully designed or prototyped at year-end 1994. Only new transit cars of the
Metro North contract were in full production at December 31, 1994.
II-5
<PAGE>
<TABLE>
<CAPTION>
NUMBER OF TRANSIT CARS
----------------------------------------------------
SHIPPED AND REMAINING IN
ACCEPTED AT BACKLOG AT
NEW TRANSIT CAR CUSTOMER UNDER CONTRACT DECEMBER 31, 1994 DECEMBER 31, 1994
<S> <C> <C> <C>
Metro North Commuter Railroad
("Metro North") 48 (12) 36
Illinois Metra Authority ("METRA") 173 (3) 170
National Railroad Passenger Corporation ("Amtrak") 50 (0) 50
Bay Area Rapid Transit District ("BART") 80 (1) 79(a)
California Department of Transportation ("Caltrans") 113 (0) 113(a)
- --------------------------------------------------------------------------------------------------------
TOTAL NEW TRANSIT CARS 464 (16) 448
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
<FN>
(a) The initial two transit cars for Caltrans and six transit cars for BART
shipped in 1994 remained in year-end backlog at December 31, 1994, subject
to acceptance testing by the customers.
</TABLE>
The additional cost overruns have been anticipated as a result of Transit's
actual experience for labor and other direct costs with new transit cars going
into production in late 1994 and early 1995 being much worse than originally
estimated. In addition, these anticipated cost overruns are also associated with
engineering and design changes on the California Department of Transportation
("Caltrans") and National Railroad Passenger Corporation ("Amtrak") contracts,
which caused significant increases in estimated costs for materials and labor
and are expected to cause delays in deliveries which required the recognition of
contingency losses for liquidating damages. In addition, Transit recognized
$14.7 million in the fourth quarter of 1994 to write-off the balance of the
capitalized initial design and engineering costs because the estimated operating
margins on uncompleted and future contracts was not expected to be sufficient to
allow recovery of those costs.
In addition, operating income for the first nine months of 1994 was
adversely impacted when Transit recognized $59.4 million of pretax charges to
operating income for anticipated losses on the Metro North, METRA, Amtrak and
Bay Area Rapid Transit District ("BART") contracts after revision in the second
quarter of 1994, of the estimated costs and earnings (losses) at completion of
the contracts. Contract cost revisions were largely due to (i) delays in testing
and delivery of new transit cars under contract with Metro North resulting in
estimated higher labor and overhead costs and liquidating damages and (ii)
excess start-up costs at two new manufacturing facilities as well as higher
labor and overhead costs attributable to schedule delays.
In addition, Transit recognized a $9.2 million pretax charge to operating
income in the third quarter of 1994 for anticipated losses to remanufacture 42
of the 133 locomotives on the uncompleted SP contract.
GENERAL AND ADMINISTRATIVE EXPENSES: General and administrative expenses for
the fourth quarter and year ended December, 1994 decreased $2.2 million and
$4.3 million, respectively, from the same periods of 1993. The decreases are
due to cost reduction efforts. General and administrative expenses for the
fourth quarter 1994 included estimated non-recurring pretax accruals of $4.9
million for legal and professional fees associated with pending litigation
and employee severance costs.
RESEARCH AND DEVELOPMENT EXPENSES: Research and development ("R&D") costs of
$1.3 million and $5.2 million were recognized by MK Rail and Transit in the
fourth quarter and year ended December 1994, respectively. MK Rail's R&D
costs in both 1994 and 1993 are related to its program to develop two new
high technology locomotive models, the MK1200 and the MK5000. In the fourth
quarter of 1994 MK Rail decided to curtail its ongoing R&D activities in new
locomotive manufacturing and technology. Transit's R&D costs in both 1994 and
1993 are related to improving availability and operations of transit vehicles
and development of a communications-based, train-control system aimed at
improving safety of train operations to comply with federal regulations.
INTEREST EXPENSE: Interest expense for the fourth quarter and year ended
December 31, 1994 increased $3.6 million and $8.4 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 $242.3
million at December 31, 1994, at a weighted average cost of borrowing for the
quarter and year ended December 31, 1994 of 6.91% and 5.72%, respectively.
OTHER INCOME (EXPENSE) NET: As presented in the "Other Income (Expense) Net"
Note to Consolidated Financial Statements, the decline in income and the rise
in expenses for the year 1994 compared to 1993 are due to (i) the absence of
non-operating investment earnings (interest, dividends and gains on sales of
marketable securities) in 1994 and (ii) recognition of net losses on
disposals and write-downs of assets. The rise in expenses in the fourth
quarter of 1994 is principally due to $24.0 million of pretax write-downs of
investments and assets reflecting the Corporation's decision in late 1994 to
accelerate repatriation of certain off-shore investments and receivables, and
reduce the carrying amount of Western Aircraft, Inc., as well as, provide an
allowance for estimated reduction in realizable values of accounts and notes
receivable due to the decision to accelerate collection. See the "Other
Income (Expense) Net" Note to Consolidated Financial Statements.
EQUITY IN NET INCOME (LOSS) OF UNCONSOLIDATED AFFILIATES: The Corporation's
share of unconsolidated affiliates' income increased from $.5 million in the
fourth quarter ended December 31, 1993 to $4.1 million income in the
comparable period of 1994. The
II-6
<PAGE>
increase is primarily due to the recognition by the Corporation of its
$6.4 million equity in the net income of MIBRAG mbH, acquired effective
January 1994. The Corporation's share of investee earnings increased from a
$5.8 million pretax loss in the year ended December 1993 to $11.4 million
pretax income in the year 1994. The increase is principally due to (i)
recognition of $15.5 million equity in the net income of MIBRAG mbH offset by
losses of $4.6 million, principally from its equity investments in a number
of development stage businesses which the Corporation is no longer supporting
and (ii) the Corporation's share of the combined $4.6 million operating
losses for Joy MK Projects Company and McConnell Dowell Corporation, Ltd. in
1993 prior to their consolidation in April and June 1993, respectively. See
the "Investments in and Advances to Unconsolidated Affiliates" Note to
Consolidated Financial Statements.
GAINS ON SUBSIDIARIES SALES OF STOCK: In the fourth quarter of 1993, MK Gold
completed an IPO of 8,000,000 shares of its common stock. The Corporation
recognized a $10.6 million pretax gain because MK Gold's selling 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 pretax gain with respect to such shares, because MK
Gold's public offering price per share exceeded the Corporation's carrying
value per share. In May 1994, MK Rail completed an IPO of 6,000,000 shares of
its common stock. The Corporation recognized a $24.0 million pretax gain with
respect to such shares, because MK Rail's public offering price per share
exceeded the Corporation's carrying value per share. See the "Subsidiaries
Sales of Stock" Note to Consolidated Financial Statements.
DISPOSITION OF INVESTMENTS IN AFFILIATES: The net loss of $17.2 million on
disposition of investments in affiliates for the fourth quarter of 1994
consisted of (i) a pretax charge of $12.4 million by MK Rail in connection
with its decision in November 1994 to dispose of its investments in its
Argentine affiliates, MK Rail Systems of Argentina, S.A. and Metrovias, S.A.
and (ii) a pretax charge of $7.2 million by the Corporation in connection
with the disposition of two development-stage businesses. Also in the fourth
quarter of 1994, the Corporation recovered $1.1 million of its previous
write-off of its investment in Texas TGV and MK Rail sold its ownership
interest in Talleres Sudamericanos, S.A. and recognized a gain of $1.3
million.
In addition, the net loss of $8.9 million on disposition of investments for
the first nine months of 1994 consists of (i) a $13.8 million pretax charge in
the second quarter of 1994 related to the write-off of the Corporation's
investment in Texas TGV, and (ii) a $4.9 million pretax gain in the first
quarter of 1994 on the sale of a portion of its stock holdings in Strait
Crossing Development, Inc. ("SCDI"). SCDI is party to a contract with the
Canadian Government to design, construct and operate for 35 years a toll bridge
in the Atlantic Provinces of Canada. See the "Disposition of Investments in
Affiliates" Note to Consolidated Financial Statements.
PROVISION FOR LITIGATION SETTLEMENT: Preliminary agreements as to the
principal economic terms of settlement of securities class actions and
derivative actions were reached in June 1995, subject to, among other
things, approval by the appropriate courts. The $69.0 million settlement will
include payment of cash and the issuance of stock. The $40.0 million cash
settlement will be paid by the Corporation's and MK Rail's insurers. The
Corporation and MK Rail will issue new common and preferred stock in the
amounts of $25.0 million and $4.0 million, respectively, based on
predetermined stock prices. Effective December 1994, the Corporation
recognized an aggregate pretax charge of $29.0 million for the estimated
costs of the settlement. The estimated liability for the $29.0 million
settlement is included in the balance sheet at December 31, 1994 as a
non-current liability. Assuming court approval and issuance of the stock, the
$29.0 million will be reflected in stockholders' equity. However, there can
be no assurance that all the parties to the preliminary agreements will agree
on the terms of the final settlement or that such final settlement will be
approved by the appropriate courts.This settlement does not include the two
actions brought by the former stockholders of Touchstone and a derivative
action that was filed on June 2, 1995. See Item 3. "Legal Proceedings" in
Part I of this Annual Report on Form 10-K and the "Commitments and
Contingencies -- Legal Proceedings" and "Subsequent Events -- Litigation
Settlement" Notes to Consolidated Financial Statements.
INCOME TAX (EXPENSE) BENEFIT: The Corporation recognized a tax benefit in
1994 of 17.2% of pretax loss whereas in 1993 the Corporation's tax expense
was 42.1% of pretax income. A full tax benefit was not provided on the
Corporation's 1994 loss due to uncertainty of realization causing the
disparity in the rate of tax benefit recognized in 1994 compared to the the
rate of tax expense recognized in 1993. After recognizing a tax benefit for
that portion of the Corporation's loss which is available for carryback to
prior years, the remaining net deferred tax assets, consisting of deductible
temporary differences, were reduced by a valuation allowance which was
established to reduce the carrying value of deferred tax assets to a level
which, more likely than not, will be realized. The net deferred tax assets
reflect management's estimate of the amount which will be realized from
future taxable income which can be predicted with reasonable certainty. See
the "Taxes on Income" Note to Consolidated Financial Statements.
MINORITY INTERESTS IN NET (INCOME) LOSS OF SUBSIDIARIES: The minority
interests share of the consolidated majority-owned subsidiary's 1994 net loss
stems primarily from the net losses of MK Rail and McConnell Dowell.
II-7
<PAGE>
FINANCIAL CONDITION
1994 COMPARED TO 1993
LIQUIDITY AND CAPITAL RESOURCES (THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
1994 1993
<S> <C> <C>
Cash and cash equivalents:
Beginning of period $ 91,879 $134,011
End of period 79,400 91,879
Total debt, December 31, $242,292 $ 47,006
Year Ended
December 31
---------------------
1994 1993
Net cash provided (used) by:
Operating activities $(227,677) $(64,277)
Investing activities 52,497 894
Financing activities $ 161,370 $ 21,276
</TABLE>
Total capitalization at December 31, 1994 was $300.1 million, composed of
$242.3 million debt and $57.8 million stockholders' equity compared to total
capitalization at December 31, 1993 of $454.0 million, composed of $47.0
million debt and $407.0 million stockholders' equity.
Net cash used for operating activities in 1994 of $227.7 million was
primarily due to a $136.0 million increase in inventories ($26.3 million for
MK Rail and $109.7 million for the Transit segment). Net cash used for
operating activities in 1993 of $64.3 million was the result of increases in
trade receivables, unbilled receivables and a significant increase in MK Rail
and Transit segment inventories.
Net cash provided by investing activities in 1994 of $52.5 million included
(i) $88.4 million net proceeds from MK Rail's IPO, (ii) $27.0 million net
proceeds from purchases and sales of securities available for sale,
principally those securities held for sale in connection with the
Corporation's self-insured risk management programs and (iii) $12.4 million
cash proceeds from sales of investments in and collection of receivables from
affiliates less (i) $44.4 million for net acquisitions of property and
equipment, including $15.3 million for MK Rail's additions to its leased
locomotive fleet (ii) $30.9 million for investments in affiliates, including
$11.0 million for MIBRAG mbH, $3.7 million for additional investment in
McConnell Dowell, $3.9 million in connection with Touchstone (a wholly-owned
subsidiary of MK Rail) and $12.3 million for prepaid rent in connection with
MK Rail's formation of a wholly-owned subsidiary in Mexico. Net cash of $.9
million provided by investing activities in 1993 included $47.9 provided by
the proceeds from sale of marketable securities less $46.8 million used for
net acquisitions of fixed assets and other investments.
Net cash provided by financing activities in 1994 of $161.4 million included
$186.5 million net borrowings of short- and long-term debt, reduced by the
payment of $25.6 million cash dividends to stockholders. Financing activities
in 1993 included $44.9 million net borrowings of short- and long-term debt,
and the payment of $24.2 million cash dividends to stockholders. During the
last quarter of 1993 and the year 1994, the Corporation borrowed, net of
repayments, an aggregate of $208.6 million ($22.1 million and $186.5 million,
respectively) to finance working capital requirements, property acquisitions,
and new business investments.
The ratio of debt to total capital (debt plus equity) at December 31, 1994
was 80.7%, compared with 10.4% at the beginning of 1994 and 1.6% at the
beginning of 1993.
LIQUIDITY
As of June 16, 1995, the Corporation had available cash of $33.6 million for
working capital requirements and, based on internal cash flow projections,
the Corporation anticipates that cash generated by operations will meet its
cash needs until approximately mid-July 1995, at which time it currently
expects such needs to begin to exceed its cash resources. At that time, the
Corporation will be required to raise additional equity capital or obtain
additional debt financing. The Corporation is currently in negotiations with its
lenders to extend the terms of the existing loan facilities and has held
discussions with potential equity investors. The Corporation has reached a
preliminary understanding with the Steering Committee of its senior lenders
pursuant to which, among other things, the terms of the Corporation's existing
senior debt would be extended, the Corporation would be provided with
approximately $30 million of new financing and the existing indebtedness of the
Corporation to the lenders would be secured. This understanding is conditioned
upon a number of matters, including the resolution of certain matters relating
to liabilities associated with the Transit segment and approval of the other
participating lenders. While management is encouraged by these developments,
there can be no assurance that the conditions to this understanding will be
satisfied or that this understanding with the Steering Committee will be
implemented.
Unless the Corporation is able to obtain alternative sources of cash, the
Corporation may, among other alternatives, seek protection from its creditors
under the United States Bankruptcy Code. The Corporation believes that, in such
circumstances, the ability, if any, of its stockholders to recover their
investments would be significantly impaired and that any such recovery, if
available, would be substantially delayed.
The Corporation expects significant negative cash flow from operations during
1995, due primarily to the funding of the losses recognized in 1994 for the
Transit segment and interest cost on bank debt. Cash is expected to be
generated from the sales of non-core businesses, including MK Gold
Corporation which was sold in June 1995 for $22.5 million cash and the
Corporation reached an agreement in principle in June 1995 to sell Western
Aircraft, Inc. During the second half of 1995, planned sales of other
non-core business units, including MK Rail Corporation, McConnell Dowell and
North Pacific construction operations and the investment in AmerBank are, if
consummated, expected to generate significant cash which is required to be
used to pay down bank debt. No assurance can be given as to the amount or
timing of the proceeds from such sales.
II-8
<PAGE>
On April 11, 1995, the Corporation and certain current lenders entered into
a New Credit Facility under which the lenders provided secured loans of $110.0
million and waived conditions of default under its unsecured credit agreements
through May 31, 1995. The agreement established $50.0 million of new credit
capacity and the absorption of an existing $60.0 million accounts receivable
facility. On April 25, 1995 the Facility was amended to include an additional
accounts receivable facility of $12.1 million. The $122.1 million outstanding
under the secured loans was due and payable on May 31, 1995. On June 14, 1995, a
second amendment was signed which extended the maturity date and waivers to July
31, 1995. Interest on the outstanding balance under the New Credit Facility
accrues at prime plus three percent, currently 12 percent, and is payable on the
last day of each month. Interest on the unsecured loans, equal to the prime
rate, currently 9%, is generally payable on the last day of each month. The
banks have not agreed to fund any additional operating cash flow requirements.
The New Credit Facility, including amendments, requires bank debt repayments of
$31.2 million by July 31, 1995. The Corporation repaid $23.0 million on June 15,
1995.
MK RAIL LOAN AGREEMENTS
At December 31, 1994, MK Rail had outstanding advances under its
revolving Credit Facility ("Facility") of $38.1 million, of which $19.0
million was used to repay amounts outstanding on a $19.0 million credit
facility from Canadian Imperial Bank of Commerce and $15.0 million was used
to repay additional amounts borrowed. As of December 1, 1994, MK Rail was not
in compliance with certain covenants under the Facility, which noncompliance
was waived by the bank lender in February 1995. Concurrently, MK Rail entered
into an amendment of the Facility that, among other things, modified certain
financial covenants, provided additional collateral to the bank lender and
provided for a higher rate of interest. On March 31, 1995, MK Rail entered
into another amendment of the Facility that, among other things, further
modified certain financial covenants. In addition, as of March 31, 1995, MK
Rail was not in compliance with certain covenants under the Facility, which
non-compliance was waived by the lender bank on June 5, 1995. At December 31,
1994, MK Rail's Touchstone subsidiary was not in compliance with certain
covenants under Touchstone's $2.2 million letter of credit facility with a
bank lender, which noncompliance was waived by the bank in June 1995.
It is important for MK Rail to secure at least $10.0 million of credit
availability during the remainder of 1995, in addition to the $50.0 million
Facility, in order to fund capital needs in its domestic operations. It is
also important for MK Rail to secure up to $10.0 million of additional credit
availability during the remainder of 1995 to finance the overhaul of
locomotives under the Mexican National Railway contract and capital
improvements to its leased facilities in Mexico.
MK Rail has received preliminary non-binding proposals from lending
institutions to extend credit to MK Rail of from $75.0 million to in excess
of $100.0 million. MK Rail intends to use any loan proceeds to refinance the
Facility, to provide additional working capital for domestic operations, and
potentially to provide capital for the contract with Mexican National
Railway. However, none of these lending institutions has made any written
commitment to MK Rail, and no assurance can be given that any such
institution will agree to extend a loan on terms that MK Rail will find
acceptable.
In addition, in June 1995, a Mexican bank authorized a $30.0 million credit
facility for MK Rail's Mexican subsidiary to finance the subsidiary's purchase
of U.S.-manufactured products in connection with the Mexican National Railway
contract. MK Rail also was informed in June 1995 that the Export-Import Bank of
the United States approved a guarantee of the Mexican bank in connection with
the Mexican National Railway contract. However, this financing is subject to
numerous contingencies, including completion of negotiations and execution of
definitive documents (i) by the Mexican bank, MK Rail's Mexican subsidiary and
MK Rail, and (ii) by the Mexican bank and a U.S. bank under which the U.S. bank
is to provide funding to the Mexican bank. Due to various factors, including the
economic and political climate in Mexico, there can be no assurance that these
negotiations will be successfully concluded and a credit facility funded.
MK Rail's management believes that it is more likely than not that it
will obtain the necessary credit facilities. However, no assurance can be
given that additional credit will become available. If this credit is not
made available, or is less than the amount sought, MK Rail intends to take
such actions as it deems necessary to reduce or postpone cash outflows,
including reducing certain of its expenses and limiting its capital
expenditures. In such case, with respect to the Mexican National Railway
contract, MK Rail would seek to defer capital expenditures and utilize
locomotives from its own fleet in lieu of overhauling locomotives in the
Mexican National Railway fleet. No assurance can be given that Mexican
National Railway will accede to these actions.
In January 1995, Morrison Knudsen of Australia Limited ("MKA"), a
wholly-owned subsidiary of MK Rail, entered into a sale/leaseback transaction
with an Australian bank for approximately $15.2 million. In February 1995,
MKA made the initial drawdown of $4.8 million, of which $3.0 million was
held in escrow. In March 1995, the bank declared MKA to be in default under
the agreement, rescinded the transaction and recovered the $3.0 million from
the escrow account. As guarantor of MKA's obligations to this bank, MK Rail
purchased the assets underlying the sale/leaseback agreements which consisted
of 12 locomotive cores, certain of which have been fully or partially
remanufactured (the "MKA Locomotive Assets"). On June 15, 1995, the
Corporation entered into an agreement with MK Rail for the acquisition by the
Corporation of all of MK Rail's Australian operations. Under the terms of
this agreement, MK Rail agreed to (i) transfer the MKA Locomotive Assets to
MKA, (ii) assign all of the common stock of MKA to the Corporation, (iii)
discharge all of MKA's indebtedness to MK Rail, and (iv) grant to MKA an
exclusive three-year distributorship for MK Rail's products in Australia, New
Zealand and Malaysia, subject to satisfaction of certain sales volume
requirements.
II-9
<PAGE>
MK Rail will receive a nominal cash payment and $3.0 million in liquidation
value of MKA's redeemable preferred stock bearing, a 9% cumulative dividend.
This agreement is subject to the approval of the Australian government
authorities.
CURRENCY RISKS
In the normal course of its business, the Corporation evaluates the use
of forward contracts and options to hedge, reduce or eliminate its exposure
to fluctuations in foreign currencies. The Corporation does not currently
have in place any such direct hedging arrangements. MK Rail's fleet
maintenance contract with Mexican National contains an escalation clause that
provides for changes in the billings resulting from fluctuations in currency
rates and inflation. Such adjustments lag any fluctuations for a period of
from one month (in the case of steep inflation) to 12 months (in the case of
gradual inflation). During 1994, MK Rail incurred an exchange loss of $1.2
million due to fluctuations in the value of the Mexican peso. The lag
referred to above may result in future losses, and MK Rail is evaluating
hedging strategies to reduce this exposure.
DIVIDENDS
The Corporation has had a history of paying cash dividends; however,
under the terms of its bank credit agreements, the Corporation is prohibited
from paying cash dividends.
OPERATING RESULTS OUTLOOK
The Corporation's future operating results may be affected by a number of
internal and external factors. The Corporation, as a result of rapidly
expanding its transit business, is presently engaged in several long-term
manufacturing contracts for new transit cars. A high degree of risk and
unpredictability attach to the engineering, design and manufacture of any new
products, especially to those involving technical complexities, complex
fabrication and assembly processes and dependence on outside material
suppliers, some in foreign countries, and, in some instances, a newly-trained
production workforce. The Corporation has incurred significant losses in its
Transit operations. See "Results of Operations -- 1994 Compared to 1993."
These factors have and can result in revisions to contract cost estimates,
especially in the early stages of pre-production (engineering and
prototyping) prior to reaching an economic level of production. When revised
contract cost estimates indicate a loss, provision is made currently for the
estimated total loss anticipated. The Corporation has and may in the future
encounter unusual risks on long-term, fixed-price construction contracts
subject to cost estimate revisions, including unforeseen conditions during
contract performance, and such factors could impact future operating results.
In addition, the Corporation's operations are in part dependent upon
governmental funding of infrastructure and environmental projects.
Significant changes in the level of government funding of these projects
could have a favorable or unfavorable impact on the operating results of the
Corporation. Contract mining services operations may also be adversely
affected by weather conditions, the potential for changes in technology,
demand, product substitution and political factors which effect alternative
fuel decisions. The Corporation's backlog decreased to $3.9 billion at
year-end 1994 from $4.1 billion at year-end 1993 reflecting the delays in
contract awards and start-up postponements of major new infrastructure
projects, and the absence of new work booked during the past year.
The outlook for the Transit segment remains unfavorable as Transit continues
its production of new transit cars and contemplates a decision to idle some
of its manufacturing facilities.
In the fourth quarter of 1994 and through the first six months of 1995, the
Corporation experienced extreme cash liquidity shortfalls from operations.
While there can be no assurance that the Corporation will be successful in
this regard, the Corporation intends to attempt to resolve its liquidity
problem through (i) the sale of certain non-core businesses and investments,
(ii) additional working capital borrowings from certain of its current or
other lenders and (iii) additional financing or financial restructuring. See
Item 1. "Business -- Recent Developments" in Part I of this Annual Report on
Form 10-K.
The Corporation currently does not have blanket authority from its Surety
company for bonding needs. Individual circumstances can be presented to the
Surety for consideration. Bonding capacity has been suspended by the Surety,
except for approved individual circumstances, pending the release of
financial statements and the finalization of banking agreements shown to be
satisfactory to meet the ongoing needs of the Corporation. The Corporation
anticipates that, if it is able to accomplish the foregoing (as to which
there can be no assurance), limited bonding capacity will be reinstated,
subject to normal underwriting criteria of the Surety company. Bonding for
several new contracts in 1995 has been obtained through joint venture
partners.
The 1995 results of operations will be affected by financial factors such as
a substantial increase in interest expense as a result of the Corporation
servicing substantially more debt at effectively higher interest rates. In
addition, the Corporation expects increases for (i) postretirement health
care costs due to significant adverse changes in actuarial assumptions and
plan experience and (ii) professional consulting, legal and other expenses in
connection with the Corporation's restructuring efforts. The Corporation made
decisions in late 1994 and early 1995 to sell certain investments in its
non-core businesses. In this connection, the Corporation has determined for
those businesses for which the sales decision was made in 1994 the fair value
of those investments based on the best information available in the
circumstances and accrued for any expected loss. However, there can be no
assurance that proceeds received from the ultimate sales of these businesses
will not be less than the estimated fair value. The Corporation and MK Rail
are the subject of a number of lawsuits by stockholders. These matters and
other ongoing legal matters which may adversely impact the future operating
results are described in Item 3. "Legal Proceedings" in Part I of this Annual
Report on Form 10-K and the "Commitments and Contingencies -- Legal
Proceedings" Note to the Consolidated Financial Statements.
II-10
<PAGE>
RESULTS OF OPERATIONS
1993 COMPARED TO 1992
ENGINEERING AND CONSTRUCTION SEGMENT: Operating income of the E&C
segment in the fourth quarter of 1993 was $10.9 million compared to $14.1
million for the comparable 1992 quarter. The 1993 fourth quarter's results
were adversely affected by (i) the sluggishness of the private sector market
for E&C services and (ii) an increase in operating loss provisions of $1.2
million. In addition, the 1992 fourth quarter was favorably effected by the
recognition of additional claim revenue of $1.5 million. Operating income of
the Engineering and Construction segment increased in 1993 to $55.4 million
from $40.3 million in 1992 due primarily to an improvement in operating
results from heavy civil construction, which sustained significant losses on
a number of contracts in 1992, but which returned to profitability in 1993.
MK RAIL SEGMENT: MK Rail's operating income in the fourth quarter of 1993 was
$4.2 million compared to $3.6 million for the comparable 1992 quarter. This
increase resulted from higher levels of sales primarily due to the segment's
Australian remanufacturing operations and an increase in shipments of
component parts and products. Operating income of MK Rail increased $4.8
million to $10.3 million for the year compared to $5.5 million for 1992,
principally due to a substantially higher level of revenue in 1993 and
increased operating income from the Australian operations.
TRANSIT SEGMENT: Transit's operating income in the fourth quarter of 1993 was
$4.2 million compared to $5.4 million for the comparable 1992 quarter. This
decrease resulted primarily from a decrease in the number of transit cars
shipped compared to the fourth quarter of 1992. Operating income of Transit
increased $5.5 million to $11.0 million for the year 1993 compared to the
year 1992, primarily the result of the increased volume of new transit cars
shipped to a midwest transit authority begun in the last quarter of 1992 and
continuing through 1993.
GENERAL AND ADMINISTRATIVE EXPENSES: General and administrative expenses
decreased $.8 million from $38.2 million in 1992 to $37.4 million in 1993 due
in part to reclassifications to cost of revenue of certain period costs
deemed to indirectly relate to segment operations.
RESEARCH AND DEVELOPMENT EXPENSES: Research and development expenditures of
$3.7 million by MK Rail, relating to the design of new locomotives intended
for sale or lease, were charged to operations in 1993. MK Rail did not incur
significant research and development expenses in 1992.
GAINS ON SUBSIDIARIES SALES OF STOCK: In December 1993 MK Gold Company,
previously a wholly-owned subsidiary of the Corporation, completed an initial
public offering of eight million unissued shares of its common stock at an
offering price of six dollars a share. The Corporation recognized a $10.6
million pretax gain because the selling price per share exceeded the
Corporation's carrying cost per share. Concurrent with the initial public
offering, the Corporation sold one million shares of MK Gold's common stock
to the public and recognized a $2.1 million pretax gain.
INTEREST EXPENSE: Interest expense in 1993 increased to $3.3 million compared
to $1.7 million of interest expense in 1992 (excluding $10.6 million of
original issue discount recognized in 1992 prior to the redemption for cash
of the outstanding LYONs in 1992). The increase reflects the rise in the
average short-term borrowings outstanding from $1.4 million in 1992 to $41.1
million in 1993, partially offset by a decline in the weighted average
interest rate in 1993 compared to 1992.
EQUITY IN NET INCOME (LOSS) OF UNCONSOLIDATED AFFILIATES: The increase in the
Corporation's share of investee net losses from $.1 million in 1992 to $5.8
million in 1993 reflect increases in the Corporation's share of losses
including (i) $.7 million from Texas TGV Corporation, (ii) $2.9 million from
a new venture investment, (iii) $1.2 million from McConnell Dowell
Corporation Limited ("MDC") (for the period prior to consolidation in July
1993), and a reduction in interest income from MDC in 1993.
OTHER INCOME (EXPENSE), NET: Other income, net increased from $23.7 million
in 1992 to $25.8 million in 1993. See the "Other Income (Expense) Net" Note
to Consolidated Financial Statements.
INCOME TAX (EXPENSE) BENEFIT: The effective tax rates for the past two years
have been 44.3% in 1992 and 42.1% in 1993. These rates are higher than the
U.S. statutory rates of 34% in 1992 and 35% in 1993, because they include
both foreign income, which generally continues to be taxed at rates higher
than the U.S. statutory rate, and state income taxes. The Corporation changed
its method of accounting for income taxes effective January 1, 1993. The
impact of this change was not significant.
II-11
<PAGE>
FINANCIAL CONDITION
1993 COMPARED TO 1992
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
LIQUIDITY AND CAPITAL RESOURCES
(THOUSANDS OF DOLLARS)
- --------------------------------------------------------------------------------
1993 1992
- --------------------------------------------------------------------------------
<S> <C> <C>
Cash, cash equivalents, and short-term investments $ 91,879 $ 177,692
Net cash provided (used) by:
Operating activities (64,277) 173,905
Investing activities 894 35,762
Financing activities 21,276 (214,602)
- --------------------------------------------------------------------------------
</TABLE>
Total capitalization at December 31, 1993 was $454.0 million composed of
$47.0 million debt and $407.0 million equity.
The Corporation's primary sources of short-term financing during the past few
years were customer advances, particularly for the Transit segment, sale of
short-term investments and operations. However, in 1993, net cash generated
by operations decreased compared to the previous year, primarily as a
result of increased accounts receivable and inventory levels and a decrease
in customer advances, particularly for the Transit segment. The increase in
accounts receivable, including customer's retentions, which increased $17.9
million at December 31, 1993 compared with December 31, 1992 was due
principally to increased revenues. The increased inventory levels at year-end
1993 primarily reflected higher inventory levels necessary to support the
Transit segment's expanding role as a fully-integrated manufacturer of
transit cars and MK Rail's growth as a vertically integrated locomotive
manufacturer and supplier of after market railway products. The decreases in
customer advances in 1993 of $75.7 million were used primarily to fund
Transit's inventories.
Excluding $47.9 million of cash provided from the sale of short-term
investments, net cash used for investments declined in 1993. In 1993 net cash
used for investing activities included $52.2 million that was invested in
property, plant and equipment, primarily for Transit's leasehold
improvements, manufacturing machinery, and equipment. Aside from certain
owned facilities, the Corporation leases the majority of its facilities and
certain construction equipment under noncancelable operating leases. In 1993,
rent expense under all operating leases was $38.8 million. The Corporation's
future lease commitments are discussed in the "Commitments and
Contingencies" Note to Consolidated Financial Statements.
Net cash provided by financing activities increased in 1993 compared to 1992.
In 1992, the Corporation redeemed the LYONs for cash and paid down loan
balances assumed in business combinations. In 1993, the Corporation borrowed
short-term to finance working capital needs. The Corporation expects that it
will continue to incur short-term borrowings from time to time to finance
Transit and Engineering and Construction working capital needs.
The Corporation had available from banks $135.0 million under committed
revolving credit agreements. The Corporation subsequently negotiated with
banks to replace its two unsecured revolving credit agreements with a $150.0
million revolving credit facility by March 31, 1994.
II-12
<PAGE>
QUARTERLY FINANCIAL DATA
(Thousands of dollars except share data)
Selected quarterly financial data for each of the two years in the period
ended December 31, 1994, is presented below. Computations of earnings (loss)
per common share for each quarter and the annual period are independent.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
1994 Quarter 1st 2nd 3rd 4th
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenue $541,301 $591,444 $735,482 $636,072
Operating income (loss) 14,172 (64,829) 1,507 (305,744)
Net income (loss) 9,652 (40,466) (3,201) (315,620)
Earnings (loss) per common share .30 (1.24) (.10) (9.64)
- --------------------------------------------------------------------------------
Dividends declared $.20 $.20 $.20 $.20
Market price
High $29.12 $29.87 $21.50 $17.87
Low 24.37 20.12 15.12 12.25
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1993 Quarter 1st 2nd 3rd 4th
- --------------------------------------------------------------------------------
Revenue $560,195 $655,392 $733,840 $773,116
Operating income 17,876 17,843 21,496 19,247
Net income 7,883 8,207 9,250 10,427
Earnings per common share .26 .27 .30 .33
- --------------------------------------------------------------------------------
Dividends declared $.20 $.20 $.20 $.20
Market price
High $22.25 $25.62 $27.12 $26.50
Low 19.37 19.75 23.75 21.75
- --------------------------------------------------------------------------------
</TABLE>
II-13
<PAGE>
ITEM 8: FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEX TO FINANCIAL STATEMENTS
MORRISON KNUDSEN CORPORATION AND SUBSIDIARIES
Consolidated Financial Statements as of December 31, 1994 and 1993, and for
each of the three years in the period ended December 31, 1994
PAGE(S)
Independent Auditors' Report II-15
Consolidated Statements of Operations II-16
Consolidated Statements of Cash Flow II-17
Consolidated Balance Sheets II-18, II-19
Consolidated Statements of Stockholders' Equity II-20
Notes to Consolidated Financial Statements II-21 -- II-39
II-14
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Stockholders and Board of Directors
Morrison Knudsen Corporation
We have audited the accompanying consolidated balance sheets of Morrison Knudsen
Corporation and subsidiaries as of December 31, 1994 and 1993, and the related
consolidated statements of operations, stockholders' equity, and cash flows for
each of the three years in the period ended December 31, 1994. Our audits also
included the financial statement schedule listed in the Table of Contents at
Item 14. These financial statements and the financial statement schedule are the
responsibility of the Corporation's management. Our responsibility is to express
an opinion on the financial statements and financial statement schedule based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of Morrison Knudsen Corporation and
subsidiaries at December 31, 1994 and 1993, and the results of their operations
and their cash flows for each of the three years in the period ended December
31, 1994 in conformity with generally accepted accounting principles. Also, in
our opinion, such financial statement schedule, when considered in relation to
the basic consolidated financial statements taken as a whole, presents fairly,
in all material respects, the information set forth therein.
As discussed in "Notes to Consolidated Financial Statements -- Commitments and
Contingencies" the Corporation is a defendant in litigation filed by its
stockholders and the stockholders of one of its subsidiaries. Although the
Corporation has recorded its estimate of the minimum liability, the ultimate
outcome of the litigation cannot presently be determined. Accordingly, no
provision for additional loss that may result upon resolution of this matter has
been made in the accompanying consolidated financial statements.
The accompanying consolidated financial statements have been prepared assuming
the Corporation will continue as a going concern. As discussed in "Notes to
Consolidated Financial Statements -- Basis of Presentation and Management's
Plans", the Corporation: had substantial losses and negative cash flow from
operations in 1994, which significantly reduced stockholders' equity and
resulted in a substantial retained deficit and a working capital deficit at
December 31, 1994; was not in compliance with certain financial covenants of
certain of its credit agreements at December 31, 1994 and subsequently failed to
meet scheduled repayment terms; and will require additional funding to cover
substantial expected negative cash flows in 1995. In addition, substantially all
of the Corporation's short term debt agreements expire on July 31, 1995. If the
Corporation is unable to obtain adequate financing it may be required to seek
protection under the United States Bankruptcy Code in order to continue
operating. These conditions raise substantial doubt about the Corporation's
ability to continue as a going concern. Management's plans in regard to these
matters are also described in "Notes to Consolidated Financial Statements --
Basis of Presentation and Management's Plans." The consolidated financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.
As emphasized in "Notes to Consolidated Financial Statements -- Estimated Losses
on Uncompleted Contracts", the Corporation recorded significant provisions for
losses during 1994 related to revised estimates of costs to be incurred to
complete certain transit car contracts. These management estimates are based on
numerous assumptions which, if not ultimately achieved, could result in
additional revisions of the estimates of costs to complete the transit car
contracts and such revisions could be material.
As discussed in "Notes to Consolidated Financial Statements -- Benefit Plans,"
the Corporation changed its method of accounting for postretirement health care
costs in 1992 to conform with Statement of Financial Accounting Standards No.
106.
/s/ Deloitte & Touche, LLP
DELOITTE & TOUCHE, LLP
Boise, Idaho
June 26, 1995
II-15
<PAGE>
CONSOLIDATED STATEMENTS OF OPERATIONS
(THOUSANDS OF DOLLARS EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, 1994 1993 1992
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Revenue $ 2,504,299 $ 2,722,543 $ 2,284,931
Cost of revenue (2,859,193) (2,646,081) (2,233,624)
- ----------------------------------------------------------------------------------------------------------------------------------
Operating income (loss) (354,894) 76,462 51,307
General and administrative expenses (33,087) (37,358) (38,160)
Research and development expenses (5,168) (3,701) --
Interest expense (11,658) (3,277) (12,307)
Other income (expense), net (18,890) 25,827 23,676
Equity in net income (loss) of unconsolidated affiliates 11,390 (5,757) (133)
Gains on subsidiaries sales of stock 25,284 10,602 --
Gain (loss) on disposition of investments in affiliates, net (26,123) -- --
Provision for litigation settlement (29,000) -- --
- ----------------------------------------------------------------------------------------------------------------------------------
Income (loss) before income taxes, minority interests, extraordinary charge,
and cumulative effect of accounting change (442,146) 62,798 24,383
Income tax (expense) benefit 76,259 (26,459) (10,813)
Minority interests in net (income) loss of subsidiaries 16,252 (572) (134)
- ----------------------------------------------------------------------------------------------------------------------------------
Income (loss) before extraordinary charge and cumulative effect of
accounting change (349,635) 35,767 13,436
Extraordinary charge from write-off of unamortized debt issue cost, net of tax -- -- (3,096)
Cumulative effect of accounting change for postretirement health care costs,
net of tax -- -- (17,403)
- ----------------------------------------------------------------------------------------------------------------------------------
Net income (loss) $(349,635) $(35,767 $0(7,063)
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
Earnings (loss) per common share
Income (loss) before extraordinary charge and cumulative effect of
accounting change $(10.75) $1.15 $(.44
Extraordinary charge -- -- (.10)
Cumulative effect of accounting change -- -- (.57)
- ----------------------------------------------------------------------------------------------------------------------------------
Net income (loss) $(10.75) $1.15 $(.23)
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
Common shares used to compute earnings (loss) per share 32,528,000 30,991,200 30,410,600
- ----------------------------------------------------------------------------------------------------------------------------------
Dividends per share $.80 $.80 $.80
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
II-16
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
(THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, 1994 1993 (A) 1992 (A)
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Operating activities
Net income (loss) $(349,635) $ 35,767 $ 7,063)
Reconciliation of net income (loss) to net cash provided (used) by operating activities:
Cumulative effect of accounting change and extraordinary charge -- -- 32,029
Depreciation and amortization 50,479 39,114 31,338
Equity in net (income) loss of investees less dividends received (10,490) 5,973 1,250
Provisions for (reversals of) estimated losses on uncompleted contracts 154,769 (6,161) 6,080
Provision for (benefit from) deferred income taxes (59,445) 4,156 (11,087)
Provisions for non-current liabilities 32,855 6,895 6,015
Provision for litigation settlement 29,000 -- --
Amortization of original issue discount less payment of $32,285 -- -- (21,679)
Gains on subsidiaries sales of stock (25,284) (10,602) --
Loss on disposition of investments in affiliates, net 26,123 -- --
(Gain) loss on dispositions of property 7,033 (14,677) (15,915)
Write-downs of investments and non-current assets 43,806 -- --
Minority interests in net income, (loss) of subsidiaries (16,252) 572 134
Cash paid to prefund workers' compensation liability (44,100) -- --
Other items, net (4,186) 6,803 7,425
Change in current assets and liabilities, net of effects of purchases of businesses:
Accounts receivable and unbilled receivables (14,338) (72,670) 4,766
Inventories (136,047) (38,306) (19,939)
Investments in and advances to construction joint ventures 67,693 (286) (9,550)
Other current assets 11,870 (15,395) (1,967)
Accounts payable, accrued compensation and other liabilities (13,160) 19,246 41,635
Income taxes payable (refundable) (90) (1,423) (19,887)
Billings in excess of costs and earnings on uncompleted contracts 11,622 52,430 20,317
Customer advances, net 10,100 (75,713) 130,003
- ----------------------------------------------------------------------------------------------------------------------------------
Net cash provided (used) by operating activities (227,677) (64,277) 173,905
- ----------------------------------------------------------------------------------------------------------------------------------
Investing activities
Short-term investments, net -- 47,859 90,488
Property and equipment acquisitions (74,078) (52,187) (35,668)
Property and equipment disposals 29,690 5,341 7,399
Purchase of securities available for sale (24,786) -- --
Proceeds from sales of securities available for sale 51,821 -- --
Proceeds from subsidiaries sales of stock 88,365 -- --
Investments in and receivables from unconsolidated affiliates (10,992) (9,605) (12,450)
Proceeds from sales of investments in unconsolidated affiliates 6,943 -- --
Collection of affiliate receivables 5,413 4,013 25,302
Other investing activities, net (15,979) 1,104 (8,961)
Purchases of businesses, net of cash acquired (3,900) 4,369 (30,348)
- ----------------------------------------------------------------------------------------------------------------------------------
Net cash provided (used) by investing activities 52,497 894 35,762
- ----------------------------------------------------------------------------------------------------------------------------------
Financing activities
Net borrowings (repayments) under credit agreements and short-term debt, net 151,191 43,810 (22,134)
Borrowings of long-term debt 48,027 1,526 --
Payments of long-term debt (12,744) (399) (171,813)
Proceeds from stock issued and other equity transactions 509 503 1,875
Dividends paid (25,613) (24,164) (22,530)
- ----------------------------------------------------------------------------------------------------------------------------------
Net cash provided (used) by financing activities 161,370 21,276 (214,602)
- ----------------------------------------------------------------------------------------------------------------------------------
Effect of exchange rate changes on cash 1,331 (25) --
- ----------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in cash and cash equivalents (12,479) (42,132) (4,935)
Cash and cash equivalents at beginning of period 91,879 134,011 138,946
- ----------------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of period $79,400 $91,879 $134,011
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Interest paid $10,786 $7,076 $36,616
Income taxes paid (refunded), net (17,832) 25,034 30,257
Acquisitions of assets and businesses for stock:
Property, plant and equipment and other assets 12,619 10,700 --
Goodwill and other intangibles 19,840 7,248 --
Long-term debt (4,675) -- --
Other liabilities assumed (5,277) (2,535) --
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
<FN>
(a) Certain amounts reclassified to conform to 1994 financial statement
presentation.
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
II-17
<PAGE>
CONSOLIDATED BALANCE SHEETS
(THOUSANDS OF DOLLARS EXCEPT SHARE DATA)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DECEMBER 31, 1994 1993 (A)
- --------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
- --------------------------------------------------------------------------------
Current assets
Cash and cash equivalents $ 79,400 $ 91,879
Accounts receivable including retentions of $45,396
and $62,800 244,239 231,021
Unbilled receivables 136,128 145,292
Refundable income taxes, net 20,002 21,096
Inventories, net of advances of $293,696 and $231,495 268,580 133,350
Investments in and advances to construction joint
ventures 12,854 80,547
Deferred income taxes 72,301 25,019
Other 32,151 45,114
- --------------------------------------------------------------------------------
Total current assets 865,655 773,318
- --------------------------------------------------------------------------------
Investments and other assets
Securities available for sale, at fair value 25,101 51,143
Investments in and advances to unconsolidated
affiliates 71,382 62,649
Goodwill and other intangibles, net 45,556 36,284
Other investments and assets 47,954 81,884
- --------------------------------------------------------------------------------
Total investments and other assets 189,993 231,960
- --------------------------------------------------------------------------------
Property and equipment, at cost
Land and mineral rights 20,313 21,131
Buildings and improvements 170,606 158,719
Machinery and equipment 80,594 67,187
Construction equipment 194,186 226,221
Leased locomotives 15,333 --
- --------------------------------------------------------------------------------
Total property and equipment 481,032 473,258
Less accumulated depreciation (263,771) (255,155)
- --------------------------------------------------------------------------------
Property and equipment, net 217,261 218,103
- --------------------------------------------------------------------------------
Total assets $1,272,909 $1,223,381
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<FN>
(a) Certain amounts reclassified to conform to 1994 financial statement
presentation.
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
II-18
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
DECEMBER 31, 1994 1993 (a)
- --------------------------------------------------------------------------------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Short-term and current portion of long-term debt $ 194,929 $ 37,238
Accounts payable including retentions of $30,475 and
$45,951 266,225 293,746
Accrued salaries, wages and benefits 53,188 46,507
Accruals for estimated losses on uncompleted contracts 155,699 930
Other accrued liabilities 63,955 59,026
Billings in excess of costs and earnings on
uncompleted contracts 106,535 95,307
Advances from customers 157,888 147,788
Dividends payable 6,850 6,423
- --------------------------------------------------------------------------------
Total current liabilities 1,005,269 686,965
- --------------------------------------------------------------------------------
Non-current liabilities
Deferred income taxes 11,896 24,189
Deferred compensation 18,001 13,524
Deferred income 12,764 147
Accrued workers' compensation insurance and other
non-current liabilities 17,571 46,597
Accrued postretirement benefit obligation 27,934 26,506
Debt due after one year 47,363 9,768
Accrued litigation settlement 29,000 --
- --------------------------------------------------------------------------------
Total non-current liabilities 164,529 120,731
- --------------------------------------------------------------------------------
Commitments and contingencies
- --------------------------------------------------------------------------------
Minority interests in subsidiaries 45,315 8,718
- --------------------------------------------------------------------------------
Stockholders' equity
Preferred stock, par value $.10, authorized
10,000,000 shares, none issued
Common stock, par value $1.67, authorized
100,000,000 shares, issued 33,490,664 and
32,698,179 shares 55,818 54,494
Capital in excess of par value 272,594 252,250
Retained earnings (deficit) (248,209) 127,466
Treasury stock, 626,434 and 1,080,184 shares, at cost (11,116) (19,435)
Unearned compensation -- restricted stock (2,473) (5,837)
Cumulative translation adjustments (8,239) (1,971)
Net unrealized holding loss on securities available
for sale (579) --
- --------------------------------------------------------------------------------
Total stockholders' equity 57,796 406,967
- --------------------------------------------------------------------------------
Total liabilities and stockholders' equity $1,272,909 $1,223,381
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
II-19
<PAGE>
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(THOUSANDS OF DOLLARS EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
SHARES OF
COMMON STOCK (A)
CAPITAL IN RETAINED
COMMON EXCESS OF EARNINGS TREASURY
ISSUED TREASURY STOCK PAR VALUE (DEFICIT) STOCK OTHER
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
December 31, 1991 31,887,650 (1,801,384) $53,145 $230,304 $ 146,693 $(32,761) $ (1,231)
Net loss (7,063)
Dividends declared (23,200)
Stock option and award plans 184,703 375,546 308 4,993 7,073 (3,456)
Treasury stock acquired (6,540) (271)
Compensation amortization 443
Foreign currency
translation adjustments (146)
Transactions of
pooled companies 1,040 (100)
- ----------------------------------------------------------------------------------------------------------------------------------
December 31, 1992 32,072,353 (1,432,378) 53,453 236,337 116,330 (25,959) (4,390)
Net income 35,767
Dividends declared (24,631)
Stock issued in
business combinations 471,996 787 11,653
Stock option and award plans 153,830 365,567 254 4,260 6,847 (3,087)
Treasury stock acquired (13,373) (323)
Compensation amortization 910
Foreign currency
translation adjustments (1,241)
- ----------------------------------------------------------------------------------------------------------------------------------
December 31, 1993 32,698,179 (1,080,184) 54,494 252,250 127,466 (19,435) (7,808)
Net loss (349,635)
Dividends declared (26,040)
Stock issued in business
combinations 770,000 1,283 19,012
Stock option and award plans 109,473 380,852 186 2,646 7,161
Reclassifications (86,988) 86,988 (145) (1,314) 1,459
Treasury stock acquired (14,090) (301)
Compensation amortization 3,364
Foreign currency
translation adjustments (6,268)
Unrealized holding gain (loss), net (579)
- ----------------------------------------------------------------------------------------------------------------------------------
December 31, 1994 33,490,664 (626,434)(a) $55,818 $272,594 $(248,209) $(11,116) $(11,291)
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
<FN>
(a) Treasury stock at December 31, 1994 includes 198,593 shares of unallocated
stock held by the Employee Stock Ownership Plan Trust and 427,841 shares
held in trust for distribution under variable-price stock options.
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
II-20
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(THOUSANDS OF DOLLARS EXCEPT SHARE DATA)
The term "Corporation" as used in this Annual Report includes Morrison Knudsen
Corporation and its consolidated subsidiaries unless otherwise indicated.
SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION: The consolidated financial statements include the
accounts of the Corporation and all of its majority-owned subsidiaries except
for the accounts of MK Rail Corporation's ("MK Rail") majority-owned Argentine
subsidiary, MK Rail Systems of Argentina, S.A. See the "Disposition of
Investments in Affiliates" Note to Consolidated Financial Statements.
Investments in 20 percent to 50 percent owned companies and joint ventures are
accounted for by the equity method. The Corporation's proportionate share of
joint venture revenue, cost of revenue and operating income (loss) is included
in the consolidated statements of operations. Intercompany accounts and
transactions have been eliminated.
USE OF ESTIMATES: The preparation of the Corporation's consolidated financial
statements in conformity with generally accepted accounting principles
necessarily requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the balance sheet dates and the reported amounts of
revenue and expenses during the reporting periods for long-term contracts.
The E&C segment has a substantial history of making reasonably dependable
estimates of the extent of progress towards completion, contract revenues, and
contract costs on its long-term construction contracts. However, due to
uncertainties inherent in the estimation process, it is at least reasonably
possible that completion costs will be further revised in the near-term for
certain major construction projects in the early stages of progress.
The Transit segment makes significant assumptions concerning cost estimates
for labor productivity rates and material price and usage as well as production
schedules for new transit car contracts in the early stages of production. Due
to the uncertainties inherent in the estimation process, and the magnitude of
the new transit car contracts in the early stages of production at December 31,
1994, it is at least reasonably possible that completion costs for some
uncompleted new transit car contracts will be further revised in the near-term
and such revisions could be material.
MK Rail makes significant assumptions concerning cost estimates for
material price and usage and labor productivity for remanufactured locomotives
under long-term contracts and locomotive fleet maintenance contracts. Due to
uncertainties inherent in the estimation process, it is reasonably possible that
the costs for uncompleted long-term contracts at December 31, 1994 will be
further revised in the near-term.
RECOGNITION OF REVENUE: The Corporation recognizes revenue on construction
contracts, including substantially all of its construction joint-venture
contracts, on the percentage-of-completion method, based on the proportion of
costs incurred on the contract to total estimated contract costs. Construction-
management and engineering contract revenue is recognized on the accrual method.
Revenue is recognized on long-term MK Rail and Transit contracts when products
are shipped and, under certain contracts -- upon acceptance by the customer.
Costs of revenue for MK Rail's remanufactured locomotives and Transit's new
and remanufactured transit cars are determined on the basis of the estimated
average cost of all units to be produced under uncompleted long-term contracts.
MK Rail recognizes revenue on long-term maintenance contracts based upon a
percentage of the expected gross margin. Under the terms of the maintenance
contracts, significant costs are incurred in the early years (locomotive
overhauls and fleet normalization), while payments from the customers remain
relatively constant throughout the life of the contract. By using a percentage
of the expected gross margin to recognize revenue under the maintenance
contracts, appropriate consideration is given to the risks associated with the
nature of the contracts.
Revisions in uncompleted contract revenue and cost estimates are reflected
in the accounting period when known. Any anticipated losses on uncompleted
contracts are charged to operations as soon as they are determinable. Claims for
additional contract revenue in excess of original contract price are recognized
when an offer to settle has been received from the customer.
UNBILLED RECEIVABLES: Unbilled receivables arise when revenues have been
recorded but amounts cannot be billed under the terms of the contracts but are
recoverable from customers upon various measures of performance such as
quantities excavated or delivered, costs incurred, time schedules or completion
of the contracts. Amounts of unbilled receivables in the balance sheets at
December 31, 1994 and 1993 represent (i) unbilled amounts arising from the use
of the percentage-of-completion method of accounting, (ii) incurred costs to be
billed under cost-reimbursement-type contracts, or (iii) amounts arising from
routine lags in billing (for example, for work completed in one month but not
billed until the next month pursuant to contract terms). Substantially all the
unbilled receivables at December 31,
II-21
<PAGE>
1994, net of progress payments, if any, are expected to be collected during
1995.
CLASSIFICATION OF CURRENT ASSETS AND LIABILITIES: The Corporation includes in
current assets and liabilities amounts realizable and payable under Engineering
and Construction, MK Rail and Transit segment contracts that extend beyond one
year. Accounts receivable at December 31, 1994 include $19,051 of retentions,
generally payable by customers on final acceptance, which are expected to be
collected after 1995.
Advances received from customers as payments on account of work in progress
are regarded as partial payment and reflected as deductions from the related
asset. Advances by customers to provide a revolving fund from which to pay
contract-related costs are reflected as liabilities until the contract is
substantially or fully completed. The Corporation does not pay interest on
customer advances.
CASH EQUIVALENTS: Cash equivalents consist of investments in highly liquid
securities purchased with an original maturity of three months or less.
INVENTORIES: MK Rail and Transit segment inventories are stated at the lower of
cost or market. New transit car and locomotive inventories under long-term
contracts consist of actual direct material, labor and manufacturing overhead
which are allocated to individual units based on the estimated average
production costs of units to be produced under a contract. MK Rail's component
part inventories are valued at purchase cost using the last-in first-out (LIFO)
method or average production cost.
TRANSIT CAR DESIGN COSTS: Certain initial design and engineering costs on new
transit car models are capitalized and amortized over their estimated economic
useful lives of five years. The unamortized balance of transit car design and
engineering costs at December 31, 1994 and 1993 was nil and $15,519,
respectively. Such capitalized costs were included in the balance sheet at
December 31, 1993 under the caption "Other investments and assets". The
Corporation, in addition to normal periodic amortization, wrote-off $14,725 of
capitalized costs in the fourth quarter of 1994 because estimated margins on
uncompleted and future contracts was not expected to be sufficient to allow
recovery of such costs.
CREDIT RISKS: Financial instruments which potentially subject the Corporation to
concentrations of credit risks consist of cash equivalents, securities available
for sale and accounts receivable and unbilled receivables.
The Corporation by policy, limits the amount of credit exposure to any one
financial institution and places the investments with financial institutions
evaluated as highly creditworthy. Concentrations of credit with respect to
accounts receivable and unbilled receivables are limited due to the
Corporation's credit evaluation process. Historically, the Corporation has not
incurred any significant credit-related losses.
DEPRECIATION AND AMORTIZATION: The cost of buildings and office furniture and
equipment is depreciated on the straight-line method over periods from three to
30 years. The cost of construction equipment (less salvage values of 10 to 20%)
is depreciated on the straight-line method over periods from five to 10 years.
Certain specialty equipment is depreciated using the units-of-production method
and may have salvage values which exceed 20% of original cost. The cost of
leased locomotives is depreciated on the straight-line method over periods from
five to 15 years. The cost and accumulated depreciation of property and
equipment disposals are removed from the accounts, and gains or losses are
reflected in the results of operations of the period.
GOODWILL AND OTHER INTANGIBLES: Goodwill, cost in excess of the net assets of
businesses acquired, is amortized on the straight-line method over periods
ranging from five to 30 years. Cost of noncompete agreements is amortized on the
straight-line method over their contract periods of three and 10 years. Cost of
patents is amortized on the straight-line method over periods not exceeding
seven years. In periods subsequent to purchase acquisitions giving rise to
goodwill or other intangible assets, the Corporation periodically evaluates the
existence or extent of an impairment of the unamortized amounts. Accumulated
amortization at December 31, 1994 and 1993, was $11,519 and $2,741,
respectively.
PROJECT DEVELOPMENT COSTS: The Corporation defers certain costs related to the
design, engineering and construction of certain major projects. Such costs
include licenses, fees, permits, outside professional consulting costs and
engineering and technical labor costs which are expected to benefit future
operations. Such costs are capitalized as part of the project when the project
becomes operational. When the commercial success of a particular project becomes
doubtful, deferred development costs are written off immediately. Project
development costs of $6,406 and $5,922 were deferred at December 31, 1994 and
1993, respectively, and are included in the balance sheets under the caption
"Other investments and assets".
FOREIGN CURRENCY TRANSLATION: The functional currency for the majority of the
Corporation's foreign operations is the applicable local currency. Translation
from the applicable foreign currencies to U.S. dollars is performed for asset
and liability accounts using current exchange rates in effect at the balance
sheet date and for revenue and expense accounts using a weighted average
exchange rate during the period. Gains or losses, net of applicable deferred
income taxes, resulting from such translation are deferred as a separate
component of stockholders' equity until disposition or substantial disposition
of the investment. Gains or losses resulting from
II-22
<PAGE>
foreign currency transactions are included in the results of operations of the
period in which the transaction is completed.
INCOME TAXES: Effective January 1, 1993, the Corporation adopted the provisions
of Statement of Financial Accounting Standards No. 109 ACCOUNTING FOR INCOME
TAXES. The Statement requires an asset and liability approach for financial
accounting and reporting for income taxes. Deferred income tax assets and
liabilities are recognized for the effects of temporary differences between the
financial statement carrying amounts and the income tax basis of assets and
liabilities using enacted tax rates in effect in the years in which the
differences are expected to reverse. In addition, future tax benefits, such as
net operating loss carryforwards are recognized currently to the extent such
benefits are more likely than not to be realized as an economic benefit in the
form of a reduction of income taxes in future years. Adoption of this statement
did not have a material effect on the financial statements of the Corporation.
RESEARCH AND DEVELOPMENT: Corporation-sponsored research and development
expenditures related to MK Rail and Transit products are expensed as incurred.
INVESTMENTS IN DEBT AND EQUITY SECURITIES: The Corporation classifies
investments in equity securities that have readily determinable fair values and
all investments in debt securities into three categories at the time of purchase
and re-evaluates such designation as of each balance sheet date. The Corporation
adopted, effective January 1, 1994, Statement of Financial Accounting Standard
No. 115 ACCOUNTING FOR CERTAIN INVESTMENTS IN DEBT AND EQUITY SECURITIES. This
statement addresses the accounting and reporting for investments in equity
securities that have readily determinable fair values and for all investments
in debt securities. Investments not classified as trading securities nor as
held-to-maturity securities are classified as available-for-sale securities in
the balance sheet. Unrealized holding gains and losses are reflected as a
separate component of stockholders' equity.
DERIVATIVES: Effective January 1, 1994, the Corporation adopted Statement of
Financial Accounting Standard No. 119 DISCLOSURE ABOUT DERIVATIVE FINANCIAL
INSTRUMENTS AND FAIR VALUE OF FINANCIAL INSTRUMENTS. The Statement requires
certain disclosures about derivative financial instruments, such as, futures and
forward contracts, and other financial instruments with similar characteristics.
Gains and losses on hedges of existing assets or liabilities are included
in the carrying amounts of those assets or liabilities and are ultimately
recognized in the results of operations as part of those carrying amounts. Gains
and losses related to qualifying hedges of firm commitments or anticipated
transactions also are deferred and recognized in the results of operations or as
adjustments of carrying amounts when the hedged transaction occurs.
VALUATION OF CARRYING AMOUNTS OF INVESTMENTS: When the Corporation decides to
sell its investment in a consolidated subsidiary or an unconsolidated affiliate,
and the carrying value of the investment exceeds its fair value, the Corporation
accrues an expected loss on disposition. The Corporation determines fair value
based on the best information available in the circumstances.
EARNINGS (LOSS) PER SHARE: Earnings (loss) per share are computed based on the
weighted average number of shares outstanding plus the dilutive effect of shares
issuable upon assumed exercise of stock options, reduced by the shares which
could be purchased with the assumed proceeds from such shares, if dilutive.
BASIS OF PRESENTATION AND MANAGEMENT'S PLANS
The Corporation's consolidated financial statements have been prepared on the
basis that it will continue as a going concern, which contemplates the
realization of asset values and the satisfaction of liabilities in the normal
course of business. There are certain conditions that raise substantial doubt
about the Corporation's ability to continue as a going concern:
- - The Corporation reported a net loss of $349,635 for the year ended December
31, 1994, including a $224,680 pretax operating loss from the Transit
segment.
- - Net cash used by the Corporation's operating activities was $227,677 for
the year ended December 31, 1994.
- - At December 31, 1994 stockholders' equity was $57,796 and included a
retained deficit of $248,209.
- - At December 31, 1994 there was a working capital deficit of $139,614.
- - At December 31, 1994 the Corporation was not in compliance with certain
financial covenants under its unsecured credit agreements and subsequently
failed to meet scheduled repayment terms.
- - The Corporation expects significant negative cash flow from operations in
1995 and will require additional funding to cover expected negative cash
flows.
- - Although the Corporation has received bank waivers on covenant defaults
under its unsecured credit agreements, additional funding of $50,000 from
its banks (of which $23,000 has been repaid at June 15, 1995) and received
extensions of all the bank credit agreements through July 31, 1995, there
is no assurance that the banks will extend the agreements beyond July 31,
1995 or provide any additional funding.
- - If the Corporation is unable to obtain adequate financing it may be
required to seek protection under the United States Bankruptcy Code in
order to continue operating.
The Corporation's ability to continue as a going concern is dependent upon
renewing or replacing the bank
II-23
<PAGE>
debt when it matures on July 31, 1995, obtaining additional debt or equity
capital to fund negative operating cash flows and returning the Corporation to
profitable operations. In this connection, the Corporation has adopted the
following operating and management plans to:
- - Minimize the unfavorable effect of the Transit segment by selling or
separately financing that operation and pursue contract negotiations or
other remedies to minimize or defer the losses associated with several of
the new transit car contracts.
- - Sell non-core businesses and use the cash proceeds to substantially reduce
the debt burden.
- - Successfully resolve the stockholders' litigation. See the "Commitments and
Contingencies -- Legal Proceedings" Note to Consolidated Financial
Statements.
- - Continue negotiations with the banks to obtain any short-term funding that
may be required and to obtain additional extensions of the waivers of non-
compliance with the financial covenants under existing credit agreements.
- - Continue to obtain new, profitable contracts and to generate positive cash
flow from operations in 1996 and beyond.
Although the results of these actions cannot be predicted with certainty,
management believes that if the Corporation can continue to receive the
cooperation of its banks, and can obtain additional debt or equity financing to
fund the negative cash flow from operations in 1995, that the Corporation has
the ability ultimately to return to profitability and pay off or refinance the
existing bank debt.
RESTRICTED CASH
The Corporation is restricted in accessing the cash flows of certain non-wholly
owned, publicly traded domestic and foreign subsidiaries, because of certain
restrictive debt covenants and technical and legal requirements. Of the $79,400
in cash and cash equivalents at December 31, 1994, $12,459 is restricted or
otherwise committed.
SECURITIES AVAILABLE FOR SALE
The Corporation has a portfolio of securities consisting primarily of foreign
government bonds, maintained in support of the Corporation's self-insurance
programs. Maturities of debt securities in the portfolio available for sale at
December 31, 1994 follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
DECEMBER 31, 1994
- --------------------------------------------------------------------------------
Fair
Due in Value Cost
- --------------------------------------------------------------------------------
<S> <C> <C>
1995 $ 7,636 $ 7,636
1996 -- 1999 9,742 10,118
2000 -- 2004 7,063 7,255
2005 and after 660 671
- --------------------------------------------------------------------------------
Totals $25,101 $25,680
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
Gross unrealized holding gains and losses at December 31, 1994, were $7 and
$586, respectively. The change in net unrealized holding gain from January 1,
1994 to December 31, 1994 was a $2,616 net unrealized holding loss. The proceeds
from sales of securities available for sale in 1994 amounted to $51,821 which
resulted in $2,638 of realized gains and $1,066 of realized losses based upon
specific identification of the securities sold.
SUBSIDIARIES SALES OF STOCK
MK GOLD COMPANY: On December 21, 1993, MK Gold Company, ("MK Gold") then a
wholly-owned subsidiary of the Corporation, completed an initial public offering
("IPO") of 8,000,000 shares of its common stock at an offering price of $6.00 a
share. The Corporation recorded a $10,602 pretax gain on the IPO because MK
Gold's offering price per share exceeded the Corporation's carrying value per
share. Concurrent with MK Gold's IPO, the Corporation sold 1,000,000 shares of
MK Gold's common stock to the public, at a price of six dollars a share. These
sales reduced the Corporation's investment to 50%. In January 1994, MK Gold sold
additional common stock to the public which reduced the Corporation's investment
to 46.4%. The Corporation recognized a pretax gain of $1,255 in 1994 with
respect to such shares, because MK Gold's public offering price per share
exceeded the Corporation's carrying value per share. Beginning December 1993 the
Corporation has accounted for its investment in MK Gold by the equity method.
See the "Subsequent Events -- Changes in Business" Note to Consolidated
Financial Statements.
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 per share which decreased the
Corporation's investment to 65%. The net proceeds to MK Rail from the IPO, after
deducting underwriters' discounts, commissions and estimated issuance costs,
were $88,365, of which $74,839 was paid to the Corporation, consisting of a
$35,600 special dividend and $39,239 to retire outstanding intercompany
indebtedness. The Corporation recognized a $24,029 pretax gain with respect to
such shares, because MK Rail's public offering price per share exceeded the
Corporation's carrying value per share. See the "Subsequent Events -- Changes in
Business" Note to Consolidated Financial Statements.
II-24
<PAGE>
DISPOSITION OF INVESTMENTS IN AFFILIATES
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. Because Texas TGV failed to provide equity
financing by December 31, 1993 as required under the franchise agreement and
since its efforts to extend the deadline or to negotiate amendments to the
franchise agreement with the Texas High Speed Rail Authority in early 1994 were
unsuccessful, the Corporation abandoned the project and wrote-off its $13,828
investment in Texas TGV in June 1994. In December 1994, the Corporation
recognized a pretax gain of $1,125 from the sale of substantially all of its
ownership interest in Texas TGV.
SALE OF INTEREST IN STRAIT CROSSING DEVELOPMENT, INC.: In October 1993, Strait
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
Atlantic 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, 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 ownership interest in SCDI from 45% to 36%. The Corporation
recorded a pretax gain of $4,877 on the change of interest.
SALE OF INVESTMENTS IN TALLERES SUDAMERICANOS S.A. ("TALLERES"), MK RAIL SYSTEMS
OF ARGENTINA, S.A. ("MKRSA") AND METROVIAS, S.A. ("METROVIAS"): In November
1994, MK Rail decided to dispose of its operations in Argentina, which consisted
of a 24% ownership interest in Talleres, a 16.7% ownership interest in Metrovias
and a 51% ownership interest in MKRSA.
On December 15, 1994, MK Rail completed the sale of its 24% ownership
interest in Talleres for $4,300 cash. MK Rail recognized a pretax gain of $1,300
on the sale.
In May 1995, MK Rail sold its 16.7% ownership interest in Metrovias for
$3,500, consisting of $500 in cash and $3,000 in notes receivable, secured by
letters of credit. In addition, the purchaser agreed to pay $921 previously owed
to MK Rail, comprised of a note receivable secured by letters of credit. MK Rail
intends to sell the secured letters of credit related to the combined $3,921
notes receivable. Accordingly, the discounted value of the notes receivable of
$3,300 is included in other current assets on the balance sheet at December 31,
1994. In addition to the proceeds discussed above, MK Rail received $1,500 of
unsecured notes but did not record this amount as an asset at December 31, 1994,
because the recoverability of $1,500 could not be determined.
Also in May 1995, MK Rail sold a 32% ownership interest in MKRSA for $1,300
in notes receivable. In addition, the purchaser, further agreed to (i) pay
$5,200 previously owed to MK Rail and (ii) contribute $1,000 to a new venture on
behalf of MK Rail, which contribution will reduce the amounts owed MK Rail. MK
Rail is unable to determine if future cash flows from MKRSA's or the new
venture's operations will be sufficient to pay the balances owed to MK Rail.
Accordingly, all amounts owed to MK Rail by the purchaser, as well as MK Rail's
remaining 19% ownership interest in MKRSA, were fully reserved at December 31,
1994. The MKRSA agreement (i) provides MK Rail an option to put its remaining
19% interest in MKRSA and its future investment in the new venture back to the
purchaser for $1,200 and $1,000, respectively, and (ii) provides the purchaser a
call option with terms consistent with the put option. MK Rail expects the
exercise of either option no later than the third quarter of 1996. MK Rail
recognized a pretax loss of $12,360 in 1994 in connection with the disposition
of its ownership interests in Metrovias and MKRSA.
SALE OF INVESTMENTS IN DEVELOPMENT STAGE COMPANIES: In December 1994, the
Corporation recognized a $7,237 pretax charge to operations representing its
$1,600 investment in and $5,637 of expected losses for loan guarantees for two
development-stage, non-core businesses. The Corporation decided to discontinue
its financial support for Beacon Light, a manufacturer of light enhancement
products, and dataCACHE, a computer software company.
In February 1995, dataCACHE was sold and the Corporation received $500 cash
for its ownership interest and the rights to receive future product royalties,
if any, up to $12,000. The $500 cash proceeds were applied towards the
outstanding balance of the guaranteed loan.
On June 2, 1995, the Corporation sold its ownership interest in Beacon
Light for $1,000 cash and applied the $1,000 proceeds to pay down the
outstanding balance of the guaranteed loan. In addition, $1,639 of the guarantee
was converted to a note payable maturing in October 1995. The note payable bears
a variable rate of interest which was 12% at June 2, 1995.
WORKERS' COMPENSATION LIABILITY AND SECURITIES AVAILABLE FOR SALE
In March 1994 the Corporation and an insurance company entered into an agreement
under which the Corporation novated its reinsurance agreements and prefunded its
estimated $53,829 self-insurance liability for workers' compensation claims
incurred through March 31, 1994 with cash of $44,100. The Corporation recorded a
deferred gain of $9,729 on the transaction. The Corporation recognizes the
deferred gain over the period of the outstanding liability beginning January
1994, based on the proportion of cumulative claims paid, to the total estimated
liability for claims. After March
II-25
<PAGE>
1994, the Corporation continued to self-insure for additional workers'
compensation losses through its captive insurance subsidiary and reinsurance
agreements with outside insurers. The unamortized deferred gain of $7,274 is
included in the accompanying balance sheet at December 31, 1994 under the
caption "Deferred income".
The securities available for sale at December 31, 1994 consisted primarily
of foreign government bonds held for unspecified periods of time and sold to
meet liquidity needs as part of the Corporation's self-insured risk management
programs, principally workers' compensation liabilities. See the "Securities
Available for Sale" Note to Consolidated Financial Statements.
ACQUISITIONS
TOUCHSTONE, INC.: On January 31, 1994, the Corporation acquired all of the
voting stock of Touchstone, Inc. ("Touchstone") for $22,665 which consisted of
720,000 shares of the Corporation's common stock and $3,900 cash. Touchstone is
a supplier of new and remanufactured locomotive cooling systems. The acquisition
has been accounted for by the purchase method of accounting and the excess of
the purchase price over the estimated fair values of the net assets acquired of
$18,027 has been recorded as goodwill, and is being amortized on a straight line
basis over 15 years. In connection with the MK Rail IPO, the Corporation
transferred its investment in Touchstone to MK Rail in March 1994.
MIBRAG MBH: Effective January 1, 1994, the Corporation and two nonaffiliated
investors acquired majority ownership of Mitteldeutsche Braunkohlengesellschaft
mbH ("MIBRAG mbH") from the German government. MIBRAG mbH was 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 mbH was a portion of a larger state-owned enterprise. MIBRAG
mbH's operations, employee base, production techniques and net asset valuation
prior to acquisition were not generally the same and therefore comparability of
financial information for periods prior to January 1, 1994 would not be
meaningful. The acquisition has been accounted for by the purchase method of
accounting. The Corporation's 33% interest in MIBRAG mbH acquired for $13,940
is accounted for by the equity method. The excess of the estimated fair value of
the underlying net assets over the purchase price of MIBRAG mbH is being ratably
amortized to income over less than 30 years -- the average remaining useful
lives of fixed assets.
In addition, the Corporation, through its German subsidiary, has an
agreement to provide mine planning, engineering and related services to MIBRAG
mbH during the remaining 40 year life of the mine. The Corporation is currently
precluded from realizing the full amount of its mining services fees because of
restrictions imposed as a consequence of German government loan guarantees of
MIBRAG mbH's current and future indebtedness. However, MIBRAG mbH has made a
capital contribution of certain productive power plant assets to a limited
partnership ("partnership"). A number of outside investors will contribute cash
in exchange for 99% interest in the partnership and rights to receive certain
tax depreciation benefits accruing to MIBRAG mbH. The addition of cash by the
outside investors will effectively reduce MIBRAG mbH's future funding
requirements and should allow MIBRAG mbH to release the German government from a
substantial portion of its initial loan guarantees. The German government, in
consideration for a reduction in its loan guarantees, has, among other things,
agreed to lift the restrictions on payment of certain service fees by MIBRAG mbH
to the Corporation's German subsidiary.
MCCONNELL DOWELL: In August and November 1994, the Corporation acquired
additional voting stock of McConnell Dowell Corporation Limited ("MDC") for
$7,430 consisting of cash and settlement of an account receivable, representing
10.8% of the total issued and outstanding voting stock bringing the total of its
ownership interest to 62.8%. MDC is a mechanical and commercial construction
company operating in Australia, New Zealand, South East Asia and the Middle
East. MDC relies on the credit support of the Corporation. Under contractual
agreements which expire on March 1, 1996, MDC's bank debt is guaranteed by the
Corporation and the Corporation provides performance and financial guarantees
for certain large off-shore projects.
ACCOUNTS RECEIVABLE
The Corporation had a six month accounts receivable purchase agreement with
banks (expiring in June 1995) to sell, with limited recourse, up to $60,000 of
undivided interests in a designated pool of accounts receivable. As collections
reduce previously sold undivided interests, new receivables could be sold up to
the $60,000 level. In addition, $16,967 of accounts receivable at December 31,
1994 were sold to a bank under an agreement which required collection by January
31, 1995. Accounts receivable totaling $704,957 and $713,804 have been sold
under the agreements in 1994 and 1993, respectively. At December 31, 1994 and
1993, accounts receivable in the balance sheets are net of receivables sold
under the agreements of $76,959 and $75,937, respectively. The $60,000 accounts
receivable agreement was canceled and paid off on April 11, 1995.
II-26
<PAGE>
INVENTORIES
MK Rail and Transit segments inventories are summarized as follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
DECEMBER 31, 1994 1993
- --------------------------------------------------------------------------------
<S> <C> <C>
Finished goods $ 12,377 $ 4,267
Work in progress 337,707 240,097
Raw materials 212,192 120,481
- --------------------------------------------------------------------------------
Total inventories 562,276 364,845
Payments on account of work in progress (293,696) (231,495)
- --------------------------------------------------------------------------------
Net inventories $268,580 $ 133,350
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
Approximately $33,200 and $34,540 of total inventories at December 31, 1994
and 1993, respectively, were valued on the LIFO cost method, and the excess
current replacement cost of these inventories over the stated LIFO value was
$3,400 and $2,924, respectively.
CONSTRUCTION JOINT VENTURES
The Corporation has from time to time entered into a number of partnership
arrangements with other contractors commonly referred to as "joint ventures".
Construction joint ventures frequently have a short life span, since they are
designed and created for the sole purpose of bidding on, negotiating for, and
completing one specific project and are liquidated when the project is
completed. 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 summary financial information between periods may not be meaningful.
The following table presents summarized financial information of the
construction joint ventures on a combined 100 percent basis.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
FINANCIAL POSITION
DECEMBER 31, 1994 1993
- --------------------------------------------------------------------------------
<S> <C> <C>
Cash and cash equivalents $ 124,627 $ 161,084
Other current assets 143,521 197,448
Non-current assets 19,365 5,989
Property and equipment, net 32,299 37,776
Advances from customers (88,214) (87,777)
Other current liabilities (213,295) (208,100)
- --------------------------------------------------------------------------------
Net assets $ 18,303 $ 106,420
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Corporation's investment in and advances
to construction joint ventures $12,854 $ 80,547
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<CAPTION>
- --------------------------------------------------------------------------------
RESULTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1994 1993 1992
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Combined joint ventures, net
Revenue $ 1,026,702 $1,025,376 $ 750,676
Cost of revenue (1,057,888) (985,314) (716,939)
- --------------------------------------------------------------------------------
Operating income (loss) $ (31,186) $ 40,062 $ 33,737
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Corporation's share, net
Revenue $ 331,866 $ 485,393 $ 379,261
Cost of revenue (359,420) (465,301) (364,450)
- --------------------------------------------------------------------------------
Operating income (loss) $ (27,554) $ 20,092 $ 14,811
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
Under an agreement with the project owner and the Corporation's joint-
venture partners on a major construction project, the Corporation acted as
investment manager of a securities portfolio of preferred stocks acquired with
project-owner advances. Under the agreement, the Corporation bore the risks and
rewards of managing the portfolio, after guaranteeing a fixed return to the
project owner and its joint venture partners. In this connection, the
Corporation recognized a $5,323 pretax charge to operations in 1994 for
unrealized holding losses on securities in the portfolio. Subsequent to December
31, 1994, the responsibility to manage the securities portfolio was transferred
to an independent party and the Corporation no longer guarantees a fixed return
to its joint venture partners.
INVESTMENTS IN AND ADVANCES TO UNCONSOLIDATED AFFILIATES
The following table presents summarized financial information of the
unconsolidated affiliated companies accounted for by the equity method on a
combined 100 percent basis. Amounts presented include the accounts of the
following individually significant investees (the Corporation's ownership
interests therein are shown parenthetically): MK Gold (46.4% at December 31,
1994 and 50% at December 31, 1993); Strait Crossing Development, Inc. ("SCDI")
(36% at December 31, 1994 and 45% at December 31, 1993); AmerBank (29.5% at
December 31, 1994 and 31.1% at December 31, 1993); Westmoreland Resources, Inc.
(24%); and MIBRAG mbH (33%). The summary financial position presented at
December 31, 1994 and 1993, and the summary results of operations for each of
the three years in the period ended December 31, 1994 include the accounts of
Texas TGV until the write-off of the ownership interest therein in June 1994.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
FINANCIAL POSITION
DECEMBER 31, 1994(1) 1993
- --------------------------------------------------------------------------------
<S> <C> <C>
Current assets $ 446,260 $ 91,775
Non-current assets 494,560 125,762
Current liabilities (241,174) (68,569)
Long-term debt (75,455) (2,401)
Other non-current liabilities (440,987) (14,657)
- --------------------------------------------------------------------------------
Net assets $ 183,204 $131,910
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Corporation's investment in and advances
to unconsolidated affiliates $71,382 $62,649
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<CAPTION>
- --------------------------------------------------------------------------------
RESULTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1994(1) 1993 1992
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Revenue $614,131 $199,110 $286,811
Operating income 77,769 4,046 10,055
Net income (loss) 79,259 (2,734) (3,794)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Corporation's equity in net
income (loss) of
unconsolidated affiliates (1) $11,390 $(5,757) $(133)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
(1) The increase in the assets, liabilities, revenues and the Corporation's
equity in the net earnings of affiliates in 1994 compared to prior years, stems
from its investment in MIBRAG mbH, acquired in January 1994.
The Corporation recognized a net loss from its investee's operations in
1993 primarily because of $4,600 combined net losses of Joy MK Projects Company,
then a
II-27
<PAGE>
50% owned unconsolidated affiliate, and McConnell Dowell, then a 48.9% owned
unconsolidated affiliate. Joy MK Projects Company became a wholly-owned
subsidiary in April 1993 and McConnell Dowell became a majority-owned
consolidated subsidiary in June 1993.
The Corporation's investment in MK Gold and AmerBank at December 31, 1994
was $31,828 and $5,188, respectively. The aggregate market value of 9,000,000
shares of common stock of MK Gold and 796,535 shares of common stock of AmerBank
held by the Corporation was $37,125 and $6,571, respectively, based on published
market prices at December 31, 1994. See the "Subsequent Events -- Changes in
Business" Note to Consolidated Financial Statements.
The Corporation received dividends from unconsolidated affiliates of $900,
$216 and $1,380 in 1994, 1993 and 1992, respectively.
The Corporation's consolidated retained deficit at December 31, 1994
includes $17,348 of accumulated undistributed earnings of the unconsolidated
affiliates accounted for by the equity method.
ESTIMATED LOSSES ON UNCOMPLETED CONTRACTS
During the year ended December 31, 1994 the Corporation recognized significant
losses on several uncompleted long-term contracts. At December 31, 1994,
$155,699 of such losses on uncompleted contracts remained to be realized in
future years.
The most significant of these losses resulted from new transit car fixed-
price contracts for which $199,000 of anticipated cost overruns were recognized
in 1994. Of this amount, $108,684 remained as accrued losses on uncompleted
contracts at December 31, 1994 and are expected to be realized principally
during 1995 and 1996. The anticipated cost overruns were due to costs associated
with engineering and design changes, increases in estimated costs for materials
and labor, liquidated damages due to delays in production schedules, and
excessive start-up costs at the Transit segment's two new manufacturing
facilities. Substantially all new transit cars under contract were in their very
early stages of production at December 31, 1994, while other new transit cars
under contract were not yet fully designed or prototyped at year-end 1994.
In order to develop cost estimates, management must make numerous
assumptions concerning labor productivity, material price and usage, overhead
costs and production schedules. Due to inherent uncertainties involved with the
achievement of these assumptions and the early stages of production, it is
reasonably possible that these cost estimates will be further revised in the
near-term, and such revisions could be material.
The remaining $47,015 of accrued losses on uncompleted contracts at
December 31, 1994 related principally to the Taiwan subway project and several
contracts of MK Rail.
SHORT-TERM DEBT
Short-term debt at December 31, 1994 and 1993 consisted of the following:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
DECEMBER 31, 1994 1993
- --------------------------------------------------------------------------------
<S> <C> <C>
Unsecured revolving credit borrowings $139,000 $15,900
Commercial paper, interest rate of 6% 19,765 --
Secured loan 12,100 --
Other unsecured borrowings, principally
of foreign subsidiaries, interest rates
of 6.4% to 10.5% in 1994, 3.9% to 15.6%
in 1993 21,381 21,020
Current portion of long-term debt 2,683 318
- --------------------------------------------------------------------------------
Total short-term debt $194,929 $37,238
- --------------------------------------------------------------------------------
</TABLE>
At December 31, 1994 the Corporation had an unsecured committed revolving
credit agreement ("Credit Agreement") with U.S. and foreign banks under which it
may borrow, at varying interest rates up to $150,000 through March 31, 1997. The
Corporation pays a facility fee of .20 of 1% per year. A balance of $139,000 was
outstanding under the Credit Agreement at December 31, 1994.
In addition, the Corporation's short-term obligations at December 31, 1994
consisted of (i) commercial paper borrowings of $19,765, (ii) a $12,100 loan
secured by unbilled receivables, which on April 25, 1995 was refinanced under
the Corporation's New Credit Facility and (iii) $21,381 of unsecured borrowings
principally with foreign banks, and includes $5,637 of loans with development-
stage affiliates which the Corporation assumed pursuant to its guarantees.
The weighted average interest rates on short-term borrowings outstanding of
$192,246 at December 31, 1994 and $36,920 at December 31, 1993 were 6.6% and
5.9%, respectively.
The Corporation failed to meet certain financial covenants under its Credit
Agreement at December 31, 1994, including the required minimum level of tangible
net worth, interest coverage, and required financial ratios.
On April 11, 1995, the Corporation and its current lender banks entered
into a New Credit Facility under which certain of the lender banks provided
secured loans of $110,000. The Facility included establishment of $50,000 in new
borrowing capacity and absorption of existing $60,000 accounts receivable
purchase agreements. The New Credit Facility also waived until May 31, 1995,
non-compliance with various financial covenants under the unsecured credit
agreements under which $214,394 has been borrowed as of the date of this Annual
Report on Form 10-K. Interest on the outstanding unsecured loans, equal to the
prime rate (9% at May 31, 1995), is generally payable on the last day of each
month. On April 25, 1995 the New Credit Facility was amended to include an
additional accounts receivable facility of $12,100. The $122,100 outstanding
under
II-28
<PAGE>
the New Credit Facility was due and payable on May 31, 1995. Effective June 1,
1995, the New Credit Facility was amended to (i) extend the loan termination
date and the waivers from May 31, 1995 to July 31, 1995 and (ii) require the
Corporation to repay $31,200 of the secured loans by July 31, 1995. The
Corporation repaid $23,000 on June 15, 1995. Interest on the outstanding
$122,100 secured loans, equal to the prime rate plus three percent per annum
(12% at May 31, 1995), is payable on the last day of each month and on July 31,
1995. The New Credit Facility specifies certain events of default. These events
of default arise upon the occurrence of, among other things, (i) the
Corporation's failure to pay amounts owing under the secured loans (ii) breaches
of covenants, representations and warranties and (iii) other events that
customarily constitute events of default under loan agreements similar to the
secured loans.
The Corporation, as of the date of this Annual Report on Form 10-K, has
made all periodic interest payments required on the $214,394 unsecured loans and
the $122,100 secured loans. The Corporation has not made periodic interest
payments on an unsecured loan in connection with commercial real estate
operations discontinued in 1987. See the "Commitments and Contingencies --
Discontinued Operations" Note to Consolidated Financial Statements.
LONG-TERM DEBT
Long-term debt at December 31, 1994 and 1993 consisted of the following:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
DECEMBER 31, 1994 1993
- --------------------------------------------------------------------------------
<S> <C> <C>
Unsecured term bank loan, due 1998
interest rate of 8.5% $38,068 $ --
Mortgaged real estate and
other debt, interest rates of
8.75% in 1994, 4.8% in 1993,
due 1996 9,273 7,421
Other long-term debt of businesses
acquired at varying interest rates from,
4.5% to 12.65% in 1994, 7.5% to
12.5% in 1993 2,705 2,665
- --------------------------------------------------------------------------------
Total 50,046 10,086
Less current portion (2,683) (318)
- --------------------------------------------------------------------------------
Long-term portion $47,363 $ 9,768
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
Aggregate maturities of long-term debt for the next five years are as
follows: 1995 -- $2,683; 1996 -- $9,295; 1997 -- nil; 1998 -- $38,068 and
1999 -- nil.
On September 30, 1994, MK Rail entered into a $50,000 Revolving Credit and
Letter of Credit Facility with a domestic bank ("Facility"). The Facility was
amended on March 31, 1995. The Facility has an original expiration date of
September 30, 1998, with extensions available in one year increments.
Outstanding borrowings are subject to interest at the prime rate (8.5% at
December 31, 1994, prime rate plus 150 basis points from March 31, 1995). In
addition, MK Rail pays a quarterly commitment fee of .25%, .50% starting January
1, 1995, per annum on the unused portion of the Facility. The balance
outstanding at December 31, 1994 was $38,068.
Available advances under the Facility are based upon the amount of eligible
accounts receivable and inventories. The Facility, as amended, provides for a
maximum of $10,000 of letters of credit, of which approximately $712 were
outstanding at December 31, 1994. Borrowings under the Facility are secured by
certain inventory, accounts receivable, equipment and capital stock of MK Rail's
subsidiaries.
The Facility provides for certain restrictive covenants; including
maintaining a minimum consolidated tangible net worth, fixed charge coverage and
other financial covenants. The Facility also restricts MK Rail's ability to
advance funds to foreign subsidiaries and make principal and interest payments
on its indebtedness to the Corporation. In the event of a default, if no waivers
are obtained, MK Rail is restricted from paying dividends. At December 31, 1994,
MK Rail was not in compliance with certain financial covenants and ratios. Such
instances of noncompliance were waived by MK Rail's bank on February 7, 1995,
prior to MK Rail obtaining an amended agreement on March 31, 1995. The amendment
reset the financial ratios subsequent to December 31, 1994.
At December 31, 1994, MK Rail's Touchstone subsidiary has obligations in
the amount of $2,193 consisting primarily of Industrial Revenue Bonds ("IRB")
for the construction of manufacturing buildings and acquisition of equipment
bearing interest at rates ranging from 4.5% to 10%. MK Rail was not in
compliance with certain financial and non-financial covenants with respect to
Touchstone's IRBs at December 31, 1994. In June 1995, MK Rail obtained a waiver
of such non-compliance, which requires Touchstone to replace its current letter
of credit bank in July 1995. Accordingly, $2,193 is included in the current
portion of long-term debt at December 31, 1994.
TAXES ON INCOME
The components of the U.S. federal, state and foreign income tax expense
(benefit) reflected in the statements of operations for the three years in the
period ended December 31, 1994 are shown below:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, 1994 1993 1992
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Currently payable
U.S. federal $(24,147) $14,258 $ 10,142
State and foreign 7,333 7,681 228
- --------------------------------------------------------------------------------
(16,814) 21,939 10,370
- --------------------------------------------------------------------------------
Deferred
U.S. federal (47,261) 880 (11,877)
State and foreign (12,184) 3,640 790
- --------------------------------------------------------------------------------
(59,445) 4,520 (11,087)
- --------------------------------------------------------------------------------
Total expense (benefit) $(76,259) $26,459 $ (717)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
II-29
<PAGE>
The income tax expense (benefit) applicable to continuing operations,
extraordinary charge and cumulative effect of accounting change are as follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, 1994 1993 1992
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Continuing operations:
Current $(16,814) $21,939 $ 12,111
Deferred (59,445) 4,520 (1,298)
- --------------------------------------------------------------------------------
(76,259) 26,459 10,813
Extraordinary charge:
Current -- -- (1,741)
Cumulative effect of
accounting change:
Deferred -- -- (9,789)
- --------------------------------------------------------------------------------
Total expense (benefit) $(76,259) $26,459 $ (717)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
Deferred income taxes arise from temporary differences in the recognition
of certain items of revenue and expense for income tax and consolidated
financial statement purposes. The source of each difference and the related tax
effect are as follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, 1994 1993 1992
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Employee benefit plans $ (7,446) $(6,511) $(10,415)
Provision for estimated losses (74,951) 8,723 (972)
Revenue recognition (47,077) 8,509 (361)
Alternative minimum tax (11,401) 1,286 (2,574)
Joint ventures (2,615) (1,600) 3,979
Depreciation (10,837) 331 2,619
Basis difference in affiliates 10,969 (1,349) 68
Self insurance liability 5,481 -- --
Net operating loss (19,356) -- --
Valuation allowance 134,846 -- --
Other, net (37,058) (4,869) (3,431)
- --------------------------------------------------------------------------------
Deferred income taxes $(59,445) $ 4,520 $(11,087)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
The Corporation may be entitled to recovery of certain foreign tax credits
not taken or recorded in prior years. The amount of such credits is subject to
challenge by the Internal Revenue Service.
Deferred tax assets and liabilities as of December 31, 1994 and 1993
consist of the following:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
ASSETS LIABILITIES TOTAL
- --------------------------------------------------------------------------------
DECEMBER 31, 1994
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Employee benefit plans $18,954 $ -- $ 18,954
Provision for estimated losses 92,610 -- 92,610
Revenue recognition 37,705 -- 37,705
Alternative minimum tax 12,689 -- 12,689
Joint ventures 1,244 -- 1,244
Depreciation -- (12,286) (12,286)
Basis difference in affiliates -- (12,176) (12,176)
Self insurance liability 26,435 -- 26,435
Net operating loss 19,356 -- 19,356
Valuation allowance -- (134,846) (134,846)
Other, net 10,720 -- 10,720
- --------------------------------------------------------------------------------
Deferred tax assets (liabilities)
Continuing operations 219,713 (159,308) 60,405
Discontinued operations -- (98) (98)
- --------------------------------------------------------------------------------
Total $219,713 $(159,406) $ 60,307
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<CAPTION>
- --------------------------------------------------------------------------------
DECEMBER 31, 1993 ASSETS LIABILITIES TOTAL
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Employee benefit plans $11,508 $ -- $ 11,508
Provision for estimated losses 17,659 -- 17,659
Revenue recognition -- (9,372) (9,372)
Alternative minimum tax 1,288 -- 1,288
Joint ventures -- (1,371) (1,371)
Depreciation -- (23,123) (23,123)
Basis difference in affiliates -- (1,207) (1,207)
Self insurance liability 31,916 -- 31,916
Other, net -- (26,468) (26,468)
- --------------------------------------------------------------------------------
Deferred tax assets (liabilities)
Continuing operations 62,371 (61,541) 830
Discontinued operations 313 -- 313
- --------------------------------------------------------------------------------
Total $62,684 $(61,541) $ 1,143
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
A valuation allowance is provided to reduce the deferred tax assets to a
level which, more likely than not, will be realized. The net deferred assets
reflect management's estimate of the amount which will be realized from future
taxable income which can be predicted with reasonable certainty.
At December 31, 1994, the Corporation has alternative minimum tax and
general business credit carryforwards which may be utilized to offset future tax
liabilities to the extent that the Corporation's regular tax liability exceeds
the alternative minimum tax liability. Alternative minimum tax credit
carryforwards of $12,689 are available to reduce future federal income taxes
over an indefinite period. General business credit carryforwards of $1,528 begin
to expire in 2003.
Income tax expense (benefit) on continuing operations differed from income
taxes at the U.S. federal statutory tax rate of 35% for 1994 and 1993 and 34%
for 1992 for the following reasons:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, 1994 1993 1992
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Tax at federal statutory rate $(154,751) $21,779 $ 8,290
Expense (benefit) for:
State taxes (22,612) 3,550 3,667
Foreign taxes 5,115 3,808 1,297
Change in valuation allowance 134,846 -- --
Nondeductible expenses
(nontaxable income), net 5,193 (2,350) (1,803)
Adjustment of prior years'
accruals (46,504) -- --
Other 2,454 (328) (638)
- --------------------------------------------------------------------------------
Income tax expense (benefit) $ (76,259) $26,459 $10,813
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
The domestic and foreign components of income (loss) before income taxes
are as follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, 1994 1993 1992
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
United States $(430,581) $40,265 $12,496
Foreign (11,565) 22,533 11,887
- --------------------------------------------------------------------------------
Income (loss) before
income taxes $(442,146) $62,798 $24,383
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
II-30
<PAGE>
OTHER INCOME (EXPENSE) NET
Other income (expense) items are as follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, 1994 1993 1992
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Interest $ 2,912 $ 10,694 $ 6,222
Dividends 31 2,733 10,860
Net gains on sales of marketable
securities 1,037 22,402 22,648
Net loss on disposals and
write-downs of assets, net (20,494) (4,578) (8,208)
Foreign currency losses (1,272) -- (1,651)
Underwriting income (expense)
of insurance subsidiary, net 4,117 (1,480) (2,807)
Miscellaneous income
(expense), net (5,221) (3,944) (3,388)
- --------------------------------------------------------------------------------
Other income (expense), net $(18,890) $ 25,827 $ 23,676
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
COMMITMENTS AND CONTINGENCIES
The Corporation has commitments and performance guarantees arising from
engineering and construction, MK Rail and transit contracts including those of
its construction joint ventures. The Corporation is self insured for workers'
compensation, automobile, general liability and third party errors and
omissions. The Corporation has insurance agreements with insurers for losses in
excess of self insurance limits.
LONG-TERM LEASES: Total rentals charged to operations in 1994, 1993 and 1992
were $36,900, $38,800 and $39,800, respectively. Future minimum rental payments
under operating leases with remaining noncancelable terms in excess of one year
at December 31, 1994 are as follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
YEAR REAL ESTATE EQUIPMENT TOTAL
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
1995 $ 17,120 $ 5,477 $ 22,597
1996 15,493 8,002 23,495
1997 13,973 6,463 20,436
1998 12,288 4,997 17,285
1999 7,269 1,436 8,705
2000 and after 124,980 41,971 166,951
- --------------------------------------------------------------------------------
</TABLE>
MK Rail has financed its locomotive lease fleet with operating leases
arising from sale and leaseback transactions. MK Rail has sold new and
remanufactured locomotives to various financial institutions and leased them
back under operating leases with terms from five to 20 years. The locomotives
are subleased to customers under both short-term and long-term leases. Total
rental payments under long-term locomotive lease obligations for 1994, 1993 and
1992 were $4,919, $1,821 and $1,879, respectively. Total rental income under
short-term and long-term locomotive subleases for 1994, 1993 and 1992 were
$5,730, $3,015 and $1,605, respectively. The future minimum rental payments
shown in the table above reflect the total rental payments under the long-term
locomotive lease obligations for all periods presented, but does not reflect any
anticipated sublease rental income.
In addition, the Corporation, through its wholly-owned subsidiary Navasota
Mining Company, Inc., has leased mining equipment under operating leases through
2012 with a basic annual rent of $6,686, which is reimbursable and funded under
the mining services contract with the mine owner. The mining services contract
can be terminated for convenience by the mine owner at any time and by the
Corporation at the end of any successive five-year period commencing on January
1, 1989. Should the contract be terminated, the mine owner would be required to
assume obligations under the lease agreements. See the "Subsequent Events --
Navasota Mining Services Contract" Note to Consolidated Financial Statements.
VERTAC SITE CONTRACTORS, ("VERTAC") A JOINT VENTURE: The Corporation acquired a
50% participating interest in Vertac in 1988. Under contract to the State of
Arkansas and subsequently with URS Consultants, Inc. ("URS"), a prime contractor
for the U.S. Environmental Protection Agency ("EPA"), Vertac agreed to
incinerate dioxin waste using a facility constructed by Vertac at a Superfund
Site in Arkansas. The joint venture also planned to incinerate additional dioxin
waste located at the site. Based on information then available, the Corporation
recognized a $5,000 pretax charge to operations in the second quarter of 1994 in
connection with the write-down of its investment in Vertac to its estimated net
recoverable value. In December 1994, the EPA advised Vertac that (i) the
remaining waste would be sent to another facility off-site and (ii) on-site-
incineration of hazardous waste was suspended and upon completion of certain
cleanup activities the work under the subcontract was complete.
On January 30, 1995, URS, at the direction of the EPA, formally notified
Vertac of contract completion and directed Vertac to vacate the site as soon as
practically possible. In the absence of any additional waste to process, the
facility was of no further economic value. Accordingly, the Corporation
recognized a pretax charge to operations of $12,800, representing the balance of
its unrecovered investment in Vertac. The disposition of the facility is still
undetermined. On March 13, 1995, the Corporation submitted a proposal for
effecting settlement of the terminated subcontract which includes a claim for
recovery of significant costs. In accordance with the Corporation's accounting
policy, no revenue has been recognized for this claim.
CF SYSTEMS: In 1990, the Corporation acquired CF Systems, which had developed a
solvent-extraction technology and constructed a processing facility. The
Corporation subsequently deferred additional design and engineering costs in
modifying the processing facility for commercial application. The Corporation
recognized a $6,000 pretax charge to operations 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. In March 1995, the Corporation was awarded
a $26,700 fixed-price contract by the Texas Natural Resource Conservation
Commission ("TNRCC") for remediation of contaminated soil at a Superfund Site in
Texas. Among other provisions, the contract will require CF Systems to (i)
front-end (design, procure, fabricate, assemble and start-up) an on-site
solvent-extraction facility and (ii) provide a guarantee
II-31
<PAGE>
in the form of a letter of credit for the estimated front-end costs of $13,600.
TNRCC will make periodic payments to CF Systems for the front-end costs, until
completion of the start-up phase in August 1996, up to a maximum of $13,600. If
the completed facility is successful in meeting certain specified performance
criteria at the end of the start-up phase, CF Systems will proceed to the
operations phase and complete the contract. If CF Systems does not meet the
performance criteria, such failure will be grounds for termination for default
and TNRCC will recover the front-end costs through draw-down of the letter of
credit. The Corporation's investment in CF Systems, reduced by amortization of
intangibles of $3,987 in 1994, was $4,400 at December 31, 1994 and $13,896 at
December 31, 1993.
DISCONTINUED OPERATIONS: In April 1989, the Corporation sold its ownership
interest in National Steel and Shipbuilding Company ("NASSCO") and in June 1994,
the 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 three 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
December 31, 1994, NASSCO had no balance outstanding under the Corporation's
credit facility.
At December 31, 1994 the Corporation was 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 December 31, 1994 was
$17,000. The Corporation's credit facility is reduced by the amount of funds
borrowed under NASSCO's bank credit facility. The Corporation has also
guaranteed $21,000 of NASSCO's port facility bonds until not later than December
1, 2002, and guaranteed $1,879 of NASSCO's federal workers' compensation bonds.
NASSCO's floating dry dock is pledged as collateral for the $21,000 port
facility bonds.
At December 31, 1994, the Corporation was contingently liable for $31,078
of bank loans in connection with commercial real estate operations discontinued
in 1987. Net assets of the real estate operations are included in the balance
sheets at December 31, 1994 and 1993 under the caption "Other investments and
assets" and consist of:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
DECEMBER 31, 1994 1993
- --------------------------------------------------------------------------------
<S> <C> <C>
Notes and interest receivable $25,504 $27,222
Properties held for sale 5,920 8,470
Other assets, net 2,853 3,027
Unsecured term bank loans, 6.4% and
6.9% at December 31, 1994, 3.7% and
3.9% at December 31, 1993 (31,078) (33,500)
- --------------------------------------------------------------------------------
Net assets $ 3,199 $ 5,219
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
The notes receivable are due at various dates from 1995 through 1999 at
interest rates ranging from 6.4% to 6.9%. Most of the notes are collateralized
by deeds of trust.
On March 31, 1995, Emkay Development Company, Inc. ("Emkay"), a subsidiary
of the Corporation, failed to make a scheduled $5,000 payment under one of two
unsecured loan agreements with banks. In addition, Emkay has not made interest
payments since March 31, 1995. The Corporation and the banks have reached a
preliminary agreement in principle, which is intended to result in a Forbearance
Agreement (the "Agreement"). The Agreement will, among other things, provide for
the waiving of existing defaults resulting from the nonpayment of the $5,000
owed under the loan agreement and the granting to the banks of security
interests and mortgages in all of Emkay's real estate and other assets, and the
repayment of the outstanding $31,078 loan balance by June 30, 1996. Interest on
the outstanding $31,078 secured loan, equal to the prime rate (9% at May 31,
1995), is payable on the last day of each month. The Agreement contemplates
delinquent interest to be paid at the date of execution. The Agreement is
subject to approval by the senior lenders of the Corporation's senior credit
facilities.
LETTERS OF CREDIT: At December 31, 1994 the Corporation was contingently liable,
in the normal course of business, for $419,037 in standby letters of credit not
reflected in the balance sheet at December 31, 1994. Of this aggregate amount,
$401,492 were for contract performance guarantees on a number of construction
and transit contracts.
In addition, the Corporation provides a guarantee for $8,602 in letters of
credit issued by third parties to meet the reinsurance requirements of the
Corporation's captive insurance subsidiary. The credit risk is mitigated by the
insurance subsidiary's portfolio of high quality investments ($25,101 market
value at December 31, 1994) used to collateralize the letters of credit.
LEGAL PROCEEDINGS: The Corporation and several of its current and former
officers and the Corporation's auditors were named as defendants in lawsuits
asserted by certain stockholders who claim to represent a class of stockholders
that purchased shares of the Corporation's common stock between October 15, 1993
and March 20, 1995 (the "MK Securities Class Actions"). These class action
complaints, which were first filed on July 28, 1994, purport to present claims
under federal and state securities and other laws and seek equitable relief and
unspecified damages for losses resulting from alleged improper disclosures
during the class periods. The Corporation, MK Rail, several of MK Rail's
officers and directors, and the managing underwriters of MK Rail's initial
public offering were named as defendants in lawsuits asserted by stockholders
who claim to represent a class of stockholders that purchased shares of MK
Rail's common stock between April 26, 1994 and September 29, 1994 (the "MK Rail
Securities Class Actions"). The com-
II-32
<PAGE>
plaints, which were first filed on October 20, 1994,purport to present claims
under the federal securities laws and seek equitable relief and unspecified
damages for losses resulting from, among other things, alleged improper
disclosures during the class period. Certain of the Corporation's current and
former directors and officers have been named as defendants in thirteen
derivative actions which have been filed in state courts in Idaho and Delaware
between February 13 and June 2, 1995. The Corporation is a nominal defendant in
each of these actions. Plaintiffs assert that the defendants authorized or
acquiesced in wrongful conduct on the part of the Corporation's former chairman
and failed to properly supervise his activities, and also allege waste of
corporate assets through payment of excessive compensation.
Settlement discussions have resulted in preliminary agreements as to the
principal economic terms to settle the foregoing litigation as to all defendants
other than the Corporation's auditors. The preliminary agreements will be
followed by formal settlement documentation, and the settlement will be
submitted for approval by the appropriate courts. Effective December 1994, the
Corporation recognized an aggregate pretax charge of $29,000 for the estimated
costs of the settlement. However, there can be no assurance that all the parties
to the preliminary agreements will agree on the terms of the final settlement or
that such final settlement will be approved by the appropriate courts. Although
the Corporation has recorded its estimate of the minimum liability, the ultimate
outcome of the litigation cannot presently be determined. Accordingly, no
provision for additional loss that may result upon resolution of this matter has
been made in the consolidated financial statements. See the "Subsequent
Events -- Litigation Settlement" Note to Consolidated Financial Statements.
On February 7, 1995 the Corporation was named a defendant in lawsuits by
former stockholders of Touchstone. The plaintiffs allege that certain financial
statements of the Corporation, upon which they based their decision to exchange
their shares for shares of common stock of the Corporation, were misleading. The
plaintiffs purport to state claims for violation of federal and state securities
laws and also assert certain common law and contractual claims. The Touchstone
actions are at a preliminary state of proceedings and accordingly, the outcome
cannot be predicted with any certainty. As a result, the Corporation cannot make
a determination if the affects of the Touchstone actions will have a material
adverse affect on the Corporation's financial position.
The Corporation is a defendant in a number of other legal actions of the
type normally associated with the Corporation's business and involving claims
for damages. The Corporation is of the opinion that such actions will not result
in any material adverse effect on the Corporation's financial position.
GOVERNMENT AUDITS: The Corporation has a number of cost reimbursable contracts
with the U.S. Government, the allowable costs of which are subject to
adjustments upon audit by various agencies of the U.S. Government. Audits
currently in progress are in varying stages of completion and relate to years
ended 1987 through 1994. The Corporation must complete cost analysis for the
years under audit before it can determine the merit of the issues raised and
quantify the amount of any potential disallowance. The Corporation expects that
the resolution of these matters will not materially effect the Corporation's
financial position.
ENVIRONMENTAL: The Corporation's subsidiary MK Rail is subject to a Post Closure
Permit ("Permit") issued by the U.S. Environmental Protection Agency and the
Idaho Department of Health and Welfare, Division of Environmental Quality
relating to the monitoring and treatment of hazardous waste on, and adjacent to,
MK Rail's Boise Locomotive Plant. In compliance with the Permit, MK Rail has
drilled wells to retrieve and treat contaminated groundwater and to monitor the
amount of hazardous waste. MK Rail has estimated expected aggregate undiscounted
costs to be incurred over the next 20 years, adjusted for inflation at 3.5% per
annum, to be $4,890, based on the Permit's corrective action plan. The
discounted liability at December 31, 1994, using a discount rate of 6.0%, was
$2,652 and is reflected in the balance sheet as an other non-current liability.
EMPLOYMENT AGREEMENTS: The Corporation has employment agreements with several of
its key employees which generally provide for salary continuation for a number
of years plus continuation of certain benefits in the event of termination of
employment without cause (as defined), including a change of control in the
Corporation (as defined). If all of the key employees under contract at December
31, 1994 were to be terminated without cause or following a change of control,
the Corporation's liability would be approximately $11,000.
RELATED PARTY TRANSACTION
On October 20, 1994, the Corporation and MK Rail executed an agreement
whereby the Corporation agreed to indemnify MK Rail for its estimated loss on 91
locomotives remanufactured for Southern Pacific Railroad provided such loss did
not exceed $3,800. The effect of the Corporation's indemnification of MK Rail's
$3,800 loss was to increase the Corporation's consolidated net loss for the year
ended December 31, 1994 by approximately $800, representing the net aftertax
amount of MK Rail's 35% minority interest share of the $3,800 loss.
II-33
<PAGE>
INDUSTRY SEGMENT AND GEOGRAPHIC INFORMATION
The Corporation's operations involve three principal businesses: Engineering and
Construction, MK Rail and Transit.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
INDUSTRY SEGMENT DATA
YEAR ENDED DECEMBER 31, 1994 1993 1992
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Revenue
Engineering and
Construction $2,036,527 $2,305,680 $1,985,578
MK Rail 368,537 218,160 129,507
Transit 132,558 206,859 169,979
Eliminations and other (33,323) (8,156) (133)
- --------------------------------------------------------------------------------
Total revenue $2,504,299 $2,722,543 $2,284,931
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Operating income (loss)
Engineering and
Construction $0(82,164) $55,419 $40,276
MK Rail (31,104) 10,308 5,464
Transit (224,680) 11,036 5,567
Eliminations (16,946) (301) --
- --------------------------------------------------------------------------------
Total operating
income (loss) $(354,894) $76,462 $51,307
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Operating assets
Engineering and
Construction $,0640,893 $0(717,202 $633,064
MK Rail 311,297 193,132 138,263
Transit 222,671 130,276 48,652
Corporate assets 98,048 182,771 280,445
- --------------------------------------------------------------------------------
Total assets $1,272,909 $1,223,381 $1,100,424
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Property and equipment
acquisitions
Engineering and
Construction $30,088 $18,123 $20,725
MK Rail 36,374 13,944 4,492
Transit 6,499 17,378 5,416
Corporate 1,117 2,742 5,035
- --------------------------------------------------------------------------------
$74,078 $52,187 $35,668
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Depreciation and
amortization expense
Engineering and
Construction $31,513 $29,467 $22,069
MK Rail 11,632 5,153 4,355
Transit 4,559 2,577 1,731
Corporate 2,775 1,917 3,183
- --------------------------------------------------------------------------------
$50,479 $39,114 $31,338
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
A summary of the Corporation's operations by geographic area is presented
below:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
GEOGRAPHIC DATA
YEAR ENDED DECEMBER 31, 1994 1993 1992
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Revenue
United States $1,806,279 $2,121,668 $2,089,635
Asia/Pacific 447,107 342,433 50,240
Other international 250,913 258,442 145,056
- --------------------------------------------------------------------------------
Total revenue $2,504,299 $2,722,543 $2,284,931
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Operating income (loss)
United States $(338,789) $48,308 $35,151
Asia/Pacific (15,005) 13,896 3,556
Other international (1,100) 14,258 12,600
- --------------------------------------------------------------------------------
Total operating income (loss) $(354,894) $76,462 $51,307
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Operating assets
United States $0,814,434 $0,739,788 $0,695,711
Asia/Pacific 220,863 179,710 65,624
Other international 139,564 121,112 58,644
Corporate assets 98,048 182,771 280,445
- --------------------------------------------------------------------------------
Total assets $1,272,909 $1,223,381 $1,100,424
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
Ten percent or more of the Corporation's revenue was derived from contracts
with U.S. Government agencies of $544,400 in 1994, $603,900 in 1993 and $535,100
in 1992.
STOCK PLANS
STOCK OPTION AND RESTRICTED STOCK AWARDS: The Corporation has two stock award
plans (i) the amended 1991 Stock Incentive Plan (the "1991 Plan") and (ii) the
1994 Stock Compensation Plan (the "1994 Plan") adopted with stockholder approval
in 1994. The 1991 and 1994 Plans permit the issuance of stock options, stock
appreciation rights (SAR's), limited SAR's, and restricted stock to selected
employees of the Corporation. The amended 1991 Plan reserved 1,367,324 shares
for options, SAR's, limited SAR's or restricted stock and the 1994 Plan reserved
1,275,000 shares for options, SAR's or limited SAR's and 225,000 shares for
restricted stock.
Under the terms of the 1991 and 1994 Plans, options may be either
nonqualified or incentive stock options and the exercise price may not be less
than the fair market value of a share on the date of grant. However, under the
terms of the 1991 Plan, variable-price nonqualified stock options may be
exercised at (i) the fair market value on the date of exercise if less than the
grant price or (ii) the grant price less any market appreciation from date of
grant to date of exercise, but not less than par value of $1.67 per share.
SAR's and limited SAR's granted in tandem with an option shall be
exercisable only to the extent the underlying option is exercisable and the
grant price shall be equal to the exercise price of the underlying option.
During 1994, stock options, SAR's and limited SAR's were granted for 263,500
shares.
Restricted stock awards may be granted to employees at no cost. Other than
the restrictions which limit the sale and transfer of restricted stock,
participants are entitled to all the rights of a stockholder.
Options granted under the 1991 and 1994 Plans become exercisable
cumulatively over periods of three to six years from the date of grant. At
December 31, 1994, options were exercisable to purchase 688,584 shares.
Unexercised options expire 10 years after the date of grant. At December 31,
1994, there were 132,584 restricted shares outstanding under the plan, with
restriction periods ranging from one to four years.
At December 31, 1994, 427,841 shares of treasury stock were held in trust
for distribution under variable-price options.
II-34
<PAGE>
The following table summarizes the changes in shares under option under the
1991 and 1994 Plans:
<TABLE>
<CAPTION>
PRICE RANGE
SHARES PER SHARE
- ------------------------------------------------------------------------------
<S> <C> <C>
Shares under option December 31, 1991 681,504 $3.50-24.81
Options granted 399,400 $20.44-27.84
Options exercised (55,748) $5.50-25.03
Options canceled/expired (33,452)
Shares under option December 31, 1992 991,704 $11.06-27.84
Options granted 448,000 $21.19-26.44
Options exercised (51,250) $3.87-24.88
Options canceled/expired (85,186)
Shares under option December 31, 1993 1,303,268 $14.03-27.84
Options granted 263,500 $16.06-25.31
Options exercised (23,408) $14.03-27.84
Options canceled/expired (189,817)
- ------------------------------------------------------------------------------
Shares under option December 31, 1994 1,353,543 $16.06-27.84
==============================================================================
</TABLE>
The number of shares of common stock reserved for granting future options
and restricted stock awards under the 1991 and 1994 Plans were 1,700,674,
405,874, and 883,924, at December 31, 1994, 1993, and 1992, respectively.
DIRECTORS STOCK OPTION PLAN: The Corporation has a directors stock option
plan, adopted in 1990, under which 192,000 shares of common stock have been
reserved for issuance to non-employee directors and 156,000 shares have been
granted as of December 31, 1994. The plan entitles the non-employee directors
to purchase shares of common stock at a 50 percent discount from market value
at the date of grant. The options granted become exercisable in one-third
increments over a three-year period beginning one year after the date of
grant. Options for 87,000 shares were exercisable at December 31, 1994.
In addition, the Corporation has issued 240,117 shares of restricted stock,
with restriction periods of three, five and ten years, to former stockholders
of acquired businesses as consideration for noncompete agreements and in
return for an agreement to provide services to the Corporation during
specific future periods. During 1994, the recipients acquired full rights to
22,753 shares. At December 31, 1994, 198,952 shares remained outstanding with
restriction periods ranging from three to ten years.
Compensation expense for the employee and non-employee restricted stock
award plans and the non-employee directors stock option plan was $1,361 in
1994, $852 in 1993 and $804 in 1992.
SAVINGS PLANS: The Corporation has a voluntary 401(k) savings plan ("401(k)
plan") and an Employee Stock Ownership Plan ("ESOP") covering eligible
salaried employees. Through March 31, 1995, the Corporation matched
participant's salary deferrals to the 401(k) plan up to 5% of participant's
eligible compensation. The match consisted of an allocation of shares in the
ESOP Trust not to exceed 3% of participant's eligible compensation and cash
paid into the 401(k) plan, not to exceed 2% of eligible compensation.
Beginning April, 1995, the Corporation began matching participant's salary
deferrals entirely to the 401(k) plan with cash, not to exceed 5% of
participant's eligible compensation. The unallocated ESOP shares remaining
from the original 2,441,932 prefunded shares, were allocated to participants
in May 1995. On May 10, 1995, the ESOP was terminated and allocated common
stock was made available for distribution to participants. Compensation
expense charged to operations for (i) cash contributions to the 401(k) plan
and (ii) the fair market value of the allocated shares in the ESOP Trust and
the redistribution of Corporation dividends on unallocated shares paid in
cash to plan participants in 1994, 1993 and 1992 was $12,818, $13,761 and
$12,285, respectively.
BENEFIT PLANS
PENSION PLANS: The Corporation sponsors a defined benefit pension plan which
was curtailed so that employees do not earn additional defined benefits for
future services. The plan remains in existence and continues to pay benefits,
to invest assets and to receive contributions, if necessary.
Pension cost (income) included the following components:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------
PENSION COST (INCOME)
YEAR ENDED DECEMBER 31, 1994 1993 1992
- ------------------------------------------------------------------------
<S> <C> <C> <C>
Interest cost on accumulated
benefit obligation $ 3,055 $ 2,869 $ 2,545
Actual return on plan assets (3,690) (4,240) (2,168)
Net amortization and deferral 890 1,602 (1,155)
- -------------------------------------------------------------------------
Pension cost (income) $ 255 $ 231 $ (778)
=========================================================================
</TABLE>
The funded status of the plan at December 31, 1994 and 1993 follows:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------
PREPAID PENSION COST
DECEMBER 31, 1994 1993
- ------------------------------------------------------------------------
<S> <C> <C>
Accumulated benefit obligation,
including vested benefits
of $35,393 and $39,286 $(37,444) $(43,116)
Plan assets at fair value 42,542 44,332
- ------------------------------------------------------------------------
Plan assets in excess of accumulated
benefit obligation 5,098 1,216
Unrecognized net loss 6,425 10,562
- ------------------------------------------------------------------------
Prepaid pension cost $ 11,523 $ 11,778
========================================================================
</TABLE>
The prepaid pension cost is included in the balance sheets at December 31,
1994 and 1993 under the caption "Other investments and assets".
At December 31, 1994, approximately 37% of plan assets of $42,542 were
invested in common stocks, 13% in corporate bonds, 26% in U.S. government
securities and 24% in cash equivalents.
The discount rates used in determining the actuarial present value of the
accumulated benefit obligation were 8.5% for 1994 and 7% for 1993. The
expected long-term rate of return on plan assets was 8% for 1994 and 8.5% for
1993.
II-35
<PAGE>
The Corporation sponsors several defined contribution pension plans for
certain hourly contract mining services and construction services employees.
Pension cost charged to operations, based on hours worked, amounted to $2,102
in 1994, $2,320 in 1993 and $1,596 in 1992.
The Corporation participates in and makes contributions to numerous
construction-industry multiemployer pension plans. Generally, the plans
provide defined benefits to substantially all direct-hire craft employees
covered by collective bargaining agreements. The Corporation charged to
operations pension cost under the plans amounting to $7,814 in 1994, $10,302
in 1993 and $12,693 in 1992. Under ERISA, as amended by the Multiemployer
Pension Plan Amendment Act of 1980, a contributor to a multiemployer plan is
liable upon termination of the plan or its withdrawal from the plan, for its
share of the multiemployer plan's unfunded vested liabilities.
The Corporation has long maintained policies and procedures to attempt to
preclude it from being subject to withdrawal liability for any portion of an
unfunded vested liability under a construction industry multiemployer pension
plan. Based on information provided by the multiemployer plan administrators
to the U.S. Department of Labor, the Corporation's share of such plans'
unfunded vested liabilities as of the most recent disclosures available was
approximately $6,830.
INCENTIVE PLANS: The Corporation has a chief executive officer incentive
plan, an executive incentive plan and two long-term incentive and benefit
plans for officers and key employees. The cost of incentive plans were nil in
1994, $5,536 in 1993 and $3,528 in 1992.
SUPPLEMENTAL RETIREMENT INCOME ARRANGEMENTS: The Corporation has unfunded
supplemental retirement income arrangements for officers and key employees
and an unfunded defined benefit pension plan for non-employee directors.
Periodic cost of the plans included the following components:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------
PERIODIC COST
YEAR ENDED DECEMBER 31, 1994 1993 1992
- -----------------------------------------------------------------------
<S> <C> <C> <C>
Service cost-benefits earned
during year $1,464 $ 336 $ 303
Interest cost on accumulated
benefit obligation 837 693 667
Net amortization and deferral 1,805 350 327
- -----------------------------------------------------------------------
Periodic cost $4,106 $1,379 $1,297
=======================================================================
</TABLE>
The unfunded status of the plans at December 31, 1994 and 1993 follows:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------
ACCRUED BENEFIT OBLIGATION
DECEMBER 31, 1994 1993
- ------------------------------------------------------------------------
<S> <C> <C>
Accumulated benefit obligation,
including vested benefits
of $10,698 and $10,906 $(11,005) $(11,080)
========================================================================
Accumulated benefit obligation $(11,202) $(12,300)
Prior service cost not yet recognized 519 571
Unrecognized net (gain) loss (1,089) 3,263
Minimum liability adjustment (452) --
- ------------------------------------------------------------------------
Accrued benefit obligation $(12,224) $ (8,466)
========================================================================
</TABLE>
The accrued benefit obligation is included in the balance sheets at
December 31, 1994 and 1993 under the caption "Deferred compensation".
The discount rate used in determining the actuarial present value of the
accumulated benefit obligation was 8.5% and 7%, respectively, for 1994 and
1993.
The Corporation had a deferred compensation plan for officers and key
employees. The accrued liability of $4,386 and $1,890 is included in the
balance sheets at December 31, 1994 and 1993, respectively, under the caption
"Deferred compensation." On April 20, 1995 the deferred compensation plan was
cancelled and substantially all of the accrued liability at December 31, 1994
was paid to participants
POSTRETIREMENT HEALTH CARE PLAN: In addition to providing pension and other
supplemental retirement income arrangements, certain health care benefits are
provided for retired employees, their surviving spouses and dependent
children. Benefit design changes in 1992 limited postretirement health care
benefits to employees who retired by July 1, 1993. Employees who retire
thereafter are not eligible for postretirement health care benefits. Retirees
who retired before July 1, 1990 pay no contributions for coverage while those
who retired after July 1, 1990 and before July 1, 1993 pay periodic
contributions. In the past the Corporation has made changes to the plan that
have reduced benefits and increased participant's contributions. The
Corporation reserves the right to amend or terminate the benefits of retirees
who retired after July 1, 1990 and before July 1, 1993, at any time.
Effective January 1, 1992, the Corporation changed its accounting for
postretirement health care costs to the accrual method. In prior years, cost
was recognized when retirees' claims were paid. The unfunded present value of
the accumulated postretirement benefit obligation ("APBO") for retirees was
recognized as a cumulative effect of an accounting change as of the beginning
of 1992.
Postretirement health care costs for 1994, 1993 and 1992 were $2,970,
$2,494 and $2,470, respectively, consisting of interest cost of $2,443,
$2,494 and $2,311 respectively, on the unfunded APBO.
II-36
<PAGE>
The following table sets forth the plan's activity and unfunded balances at
December 31, 1994 and 1993.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------
ACCRUED POSTRETIREMENT BENEFIT OBLIGATION
DECEMBER 31, 1994 1993
- ------------------------------------------------------------------------------
<S> <C> <C>
Accumulated postretirement
benefit obligation (1) $(55,667) $(36,475)
Unrecognized net loss from changes
in assumptions and experience 27,733 9,969
- ------------------------------------------------------------------------------
Accrued postretirement benefit obligation $(27,934) $(26,506)
==============================================================================
(1) The net increase in the APBO from December 31, 1993 to December 31, 1994
was $19,192 or 53%. The reasons for the net increase stem from updating the
actuarial assumptions used in the computation of the APBO to reflect current
experience. The individual effects of these changes in actuarial assumptions
are (i) $16,665 from higher than expected health care costs and updating the
health care cost trend to reflect current experience (ii) $8,799 from
updating the mortality table to reflect mortality improvements experienced as
well as demographic experience different than expected, offset by (iii) $6,272
of actuarial gains, principally from increasing the discount rate from 7.0%
to 8.5%.
</TABLE>
Gains and losses that occur because of changes in assumptions and because
actual experience differs from that assumed are amortized over 13 years --
the average future expected lifetime of retirees and surviving spouses --
and recognized as a component of postretirement health care cost in subsequent
years. The increase in the unfunded APBO is expected to have a material
effect on the periodic postretirement health care cost in subsequent years.
The postretirement health care cost for 1995 is estimated to be $6,300
compared to $2,970 in 1994.
The APBO was determined using the projected unit credit method and an
assumed discount rate of 8.5% for 1994 and 7% for 1993. In addition, an
annual rate increase of 9.4% and 11.6% in the per capita cost of health care
benefits was assumed for 1994 and 1993, respectively, gradually declining to
3.5% in the year 2008 and thereafter over the projected payout period of the
benefits. The health care cost trend rate assumption has a significant effect
on the amounts reported. For example, a 1% increase in the health care cost
trend rate would increase the APBO at December 31, 1994 by $5,183 and the
1994 cost by $218.
FINANCIAL INSTRUMENTS
The estimated fair values of financial instruments at December 31, 1994 and
1993 have been determined by the Corporation, using available market
information and appropriate valuation methodologies. However, considerable
judgment is necessary in interpreting market data to develop the estimates of
fair value. Accordingly, the estimates presented herein are not necessarily
indicative of the amounts that the Corporation could realize in a current
market exchange. The use of different market assumptions and/or estimation
methodologies may have a material effect on the estimated fair value amounts.
The contract or notional amounts reflect the extent of involvement the
Corporation has in particular classes of financial instruments.
The carrying amounts and estimated fair values of financial instruments at
December 31, 1994 and 1993 are as follows:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------
CONTRACT OR
CARRYING FAIR NOTIONAL
AMOUNT VALUE AMOUNT
- -----------------------------------------------------------------------------------------
DECEMBER 31, 1994
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C>
FINANCIAL ASSETS
Customer retentions $ 45,396 $ 43,906
Other investments and assets:
Discontinued operations
Notes and interest receivable 25,504 25,066
Notes payable 31,078 31,078
Other financial assets 7,116 6,726
FINANCIAL LIABILITIES
Retentions 30,475 29,475
Customers advances (gross) 157,888 152,777
OFF-BALANCE SHEET FINANCIAL INSTRUMENTS
Committed revolving credit
agreements 601 $224,952
Standby letters of credit 3,089 419,037
Financial guarantees -- 59,964
- -----------------------------------------------------------------------------------------
DECEMBER 31, 1993
- -----------------------------------------------------------------------------------------
FINANCIAL ASSETS
Customer retentions $ 62,800 $ 60,267
Marketable securities 51,143 53,180
Other investments and assets:
Discontinued operations
Notes and interest receivable 27,222 26,080
Notes payable 33,500 33,500
Other financial assets 17,587 17,378
FINANCIAL LIABILITIES
Retentions 45,951 44,097
Customers advances (gross) 147,788 139,527
OFF-BALANCE SHEET FINANCIAL INSTRUMENTS
Committed revolving credit
agreements 338 $135,000
Standby letters of credit 1,905 414,203
Financial guarantees 986 73,436
- -----------------------------------------------------------------------------------------
</TABLE>
CASH AND CASH EQUIVALENTS, ACCOUNTS RECEIVABLE (LESS RETENTIONS), UNBILLED
RECEIVABLES, SECURITIES AVAILABLE FOR SALE, ACCOUNTS PAYABLE, BILLINGS IN
EXCESS, SHORT-TERM AND LONG-TERM DEBT: The carrying amounts of these items
approximate their fair values.
CUSTOMER RETENTIONS: Rates currently available to the Corporation for the
sale of trade receivables at a discount are used to estimate fair value.
DISCONTINUED OPERATIONS: Fair value of notes and interest receivable are
determined by discounting the projected cash flows using rates which would be
made to borrowers with similar credit ratings for the same maturities. Notes
payable are valued at rates currently available to the Corporation for debt
with similar terms.
OTHER FINANCIAL ASSETS: The projected cash flows of notes receivable are
discounted at current market rates to estimate fair value. The fair values of
investments at
II-37
<PAGE>
cost in small untraded companies are estimated using conservative potential
earnings ratios or at the Corporation's proportionate share of the market
value of the investee's underlying net assets.
ADVANCES: Net present value of future expected cash flows discounted at rates
currently available for short-term debt are used to estimate fair value.
OFF-BALANCE SHEET FINANCIAL INSTRUMENTS: The fair value of committed
revolving credit agreements, standby letters of credit, and lending
commitments are estimated using fees currently charged to the Corporation
taking into account remaining terms and the creditworthiness of the
counterparty.
FINANCIAL GUARANTEES: The estimated fair value of financial guarantees is
based upon rates charged for similar agreements or estimated cost to
terminate them determined from the amount of exposure under the guarantee and
the likelihood of performance being required.
DERIVATIVE FINANCIAL INSTRUMENTS: Forward exchange contracts and hedges are
valued based on quoted prices for financial instruments with identical or
similar terms. The Corporation operates internationally, giving rise to
occasional exposure to market risks from changes in foreign exchange rates.
Derivative financial instruments are utilized by the Corporation to reduce
those risks. The Corporation has only limited involvement with derivative
financial instruments and does not hold or issue financial instruments for
trading purposes. At December 31, 1994 the Corporation was not party to any
derivative financial instruments.
SUBSEQUENT EVENTS
NEW CREDIT FACILITY: On April 11, 1995, the Corporation and its lender banks
entered into a New Credit Facility under which certain of the lenders
provided secured loans of $110,000. The Facility included the establishment
of $50,000 in new borrowing capacity and the absorption of existing $60,000
accounts receivable purchase agreements in the New Credit Facility. The New
Credit Facility also waived until May 31, 1995, non-compliance with various
financial covenants under the unsecured credit agreements under which
$214,394 has been borrowed as of the date of this Annual Report on Form 10-K.
On April 25, 1995 the New Credit Facility was amended to include an
additional accounts receivable facility of $12,100. The $122,100 outstanding
under the New Credit Facility was due and payable on May 31, 1995. Effective
June 1, 1995, the New Credit Facility was amended to (i) extend the loan
termination date and waivers from May 31, 1995 to July 31, 1995 and (ii)
require the Corporation to repay $31,200 of the secured loans by July 31,
1995. The Corporation repaid $23,000 on June 15, 1995. Interest on the
outstanding $122,100 secured loans, equal to the prime rate plus three
percent per annum (12% at May 31, 1995), is payable on the last day of each
month and on July 31, 1995. The New Credit Facility specifies certain events
of default. These events of default arise upon the occurrence of, among other
things, (i) the Corporation's failure to pay amounts owing under the secured
loans (ii) breaches of covenants, representations and warranties and (iii)
other events that customarily constitute events of default under loan
agreements similar to the secured loans. See the "Short-Term Debt" Note to
Consolidated Financial Statements.
Prior to July 31, 1995, the Corporation plans to negotiate a long-term
financial restructuring with the lenders to allow for the planned disposition
of non-core businesses, including MK Rail Corporation, McConnell Dowell
Corporation, Ltd., MK Investments, Inc., Western Aircraft, Inc. and its
investment in Amerbank, and the completion of its existing contracts.
LITIGATION SETTLEMENT: .Preliminary agreements as to the principal economic
terms of a settlement of securities class actions and derivative actions were
reached in June 1995, subject, among other things, to approval by the
appropriate courts. The $69,000 settlement will include payment of cash and
the issuance of stock. The $40,000 cash settlement will be paid by the
Corporation's and MK Rail's insurers. The Corporation and MK Rail will issue
new common and preferred stock in the amounts of $25,000 and $4,000,
respectively, based on predetermined stock prices. Effective December 1994,
the Corporation recognized an aggregate pretax charge of $29,000 for the
estimated costs of the settlement. The estimated liability for the $29,000
settlement is included in the balance sheet at December 31, 1994 as a
non-current liability. Assuming court approval and issuance of the stock, the
$29,000 will be reflected in stockholders' equity. However, there can be no
assurance that all the parties to the preliminary agreements will agree on
the terms of the final settlement or that such final settlement will be
approved by the appropriate courts. Although the Corporation has recorded its
estimate of the minimum liability, the ultimate outcome of the litigation
cannot presently be determined. Accordingly, no provision for additional loss
that may result upon resolution of this matter has been made in the
consolidated financial statements. This settlement does not include the two
actions brought by the former stockholders of Touchstone and a derivative
action that was filed on June 2, 1995. See the "Commitments and Contingencies
- -- Legal Proceedings" Note to Consolidated Financial Statements.
CHANGES IN BUSINESS: The Corporation decided in the fourth quarter of 1994
and the first quarter of 1995 to pursue the sale of certain of the
Corporation's consolidated subsidiaries -- MK Rail Corporation, McConnell
Dowell Corporation, Ltd., MK Investments, Inc. (North Pacific construction
operations), Western Aircraft, Inc. and the Corporation's unconsolidated
affiliates -- MK Gold
II-38
<PAGE>
Company and Amerbank. Also, the Corporation subsequently decided that its
Transit segment would also be considered for sale. In this connection the
Corporation has contracted the services of investment banking firms to
actively pursue a program of controlled disposition. The plans for disposal
are in their preliminary stages and the amounts the Corporation will
ultimately realize could differ materially in the near-term from the carrying
amounts of the investments at December 31, 1994.
On June 6, 1995 the Corporation sold its 46.4% ownership interest in MK
Gold Company to Leucadia National Corporation ("Leucadia") for $22,500 cash.
As a condition to the purchase of the shares, Leucadia acquired MK Gold's
$20,000 bank credit facility and released the Corporation from its guarantee
obligations under the facility. The Corporation expects to recognize a pretax
loss of approximately $10,000 in 1995.
In June 1995, the Corporation entered into an agreement to sell its
wholly-owned subsidiary Western Aircraft, Inc., subject to due diligence and
certain other contingencies.
On June 15, 1995, the Corporation entered into a settlement agreement with
MK Rail (subject to the approval of the Corporation's lender banks) regarding
the amount of intercompany indebtedness owed by MK Rail to the Corporation
and certain other matters. The settlement will result in the Corporation
reducing the intercompany receivable from MK Rail through a capital
contribution of $29,500 to be recorded in 1995. The remaining balance of the
intercompany receivable will be converted into a note, with interest at the
prime rate, due in 2000 with earlier repayments under certain conditions.
NAVASOTA MINING SERVICES CONTRACT: The Corporation, through its wholly-owned
subsidiary Navasota Mining Company, Inc. ("Navasota") has a mining services
contract ("Contract") with Texas Municipal Power Agency ("TMPA") to operate a
lignite mine in Texas. TMPA is a separate municipal corporation. In early
1995, TMPA announced that a TMPA-commissioned engineering study concluded it
would be "advantageous" for TMPA to switch from lignite mined by Navasota to
Wyoming steam coal.
The Contract can be terminated by TMPA at any time. However, termination of
Navasota's mining services will not likely occur within the next 12 months
because of necessary TMPA power plant modifications and transportation
improvements at the Wyoming mine site. Other than the loss of future revenue
and earnings, the Corporation expects that the impact of TMPA terminating
Navasota's mining services contract in 1996, on its results of operations and
financial position will not be material.
MORRISON KNUDSEN OF AUSTRALIA: On June 15, 1995, the Corporation reached an
agreement with MK Rail subject to the approval of the Australian governmental
authorities to acquire MK Rail's ownership interest in MKA. The Corporation
will acquire 100% of MK Rail's investment in exchange for $3,000 in preferred
stock of MKA.
II-39
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
Not Applicable.
II-40
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
(a)
NOMINEES FOR TERMS OF OFFICE TO CONTINUE UNTIL 1998
LINDSAY E. FOX, AGE 58
Chairman, Linfox Group (Trucking and Warehousing), Melbourne, Australia. Mr.
Fox also serves as a director for Coles Myer Limited and Premier Investments
Limited. Mr.Fox has served as a director since 1992.
Member: Executive Compensation and Nominating Committee.
IRENE C. PEDEN, AGE 69
Retired. Formerly, Professor of Electrical Engineering at the University of
Washington, Seattle, Washington. Formerly, Director of Electrical and
Communications Systems, the National Science Foundation, Washington, D.C.
Dr. Peden has served as a director since 1990.
Member: Audit Committee.
JOHN W. ROGERS, JR., AGE 37
Founder and President, Ariel Capital Management, Inc. (Institutional Money
Management and Investment Advisor Firm), Chicago, Illinois. Mr. Rogers also
serves as a director for Aon Corporation and the National Association of
Securities Dealers. Mr. Rogers has served as a director since 1993.
Member: Audit Committee.
DIRECTORS WHOSE TERMS OF OFFICE CONTINUE UNTIL 1997
PETER S. LYNCH, AGE 51
Trustee, the Fidelity Group of Funds and Vice Chairman, Fidelity Management &
Research Company (Mutual Fund and Pension Management Firm), Boston,
Massachusetts. Formerly, Portfolio Manager, Fidelity Magellan Fund, Boston,
Massachusetts. Mr. Lynch also serves as a director for W.R. Grace & Co. Mr.
Lynch has served as a director since 1988.
Member: Audit Committee, Chairman.
GERARD R. ROCHE, AGE 63
Chairman of the Board, Heidrick & Struggles, Inc. (International Executive
Search Firm), New York, New York. Mr. Roche is Chairman of the Board for
Heidrick & Struggles, Inc., a company which performs general executive search
services for the Company. Mr. Roche has served as a director since 1990.
Member: Audit Committee.
ROBERT A. TINSTMAN, AGE 48
President and Chief Executive Officer of the Company. Formerly, President of
the Company's Mining Group. Mr. Tinstman has served as a director since March 8,
1995.
DIRECTORS WHOSE TERMS OF OFFICE CONTINUE UNTIL 1996
JOHN ARRILLAGA, AGE 58
Partner, Peery-Arrillaga (Commercial Real Estate Development), Santa Clara,
California. Mr. Arrillaga has served as a director since 1990.
Member: Executive Compensation and Nominating Committee.
III-1
<PAGE>
CHRISTOPHER B. HEMMETER, AGE 55
Partner, Hemmeter Partners and Chairman, Hemmeter Enterprises, Inc. (Real
Estate Development), Denver, Colorado. Mr. Hemmeter has served as a director
since 1988.
Member: Executive Compensation and Nominating Committee.
ROBERT A. MCCABE, AGE 60
President, Pilot Capital Corporation (Private Equity Financing), New York,
New York. Mr. McCabe also serves as a director for Church & Dwight Co., Inc.,
Thermo Electron Corporation, Thermo Instruments Systems, Inc. and Borg-Warner
Security Corporation. Mr. McCabe has served as a director since 1972.
Member: Executive Compensation and Nominating Committees. On February 9,
1995, Mr. McCabe was appointed Chairman of the Executive Compensation and
Nominating Committee.
ROBERT S. MILLER, JR., AGE 53
Chairman of the Board of the Company. Formerly, Vice Chairman of Chrysler
Corporation. Mr. Miller also serves as a director for Coleman Company, Federal-
Mogul Corp., Fluke Corp., Pope & Talbot, Inc. and Symantec Corp. Mr. Miller has
served as a director since 1995.
EXECUTIVE COMPENSATION AND NOMINATING COMMITTEE. The Executive Compensation and
Nominating Committee ("Compensation Committee") reviews and adjusts the salaries
of the principal officers and key executives of the Company and recommends
nominees for membership to the Board of Directors. The Compensation Committee
also administers the Company's executive compensation and benefit plans. The
Compensation Committee meets at such times as may be deemed necessary by the
Board of Directors or the Compensation Committee.
The Compensation Committee will consider nominees for the Board of Directors
recommended by stockholders for the 1996 Annual Meeting if the following
information concerning each nominee is disclosed in writing: name, age, business
address, residence address, principal occupation or employment, class and number
of shares of common stock of the Company which are beneficially owned by each
nominee and other information relating to the nominee that is required to be
disclosed in solicitations for proxies for election of directors pursuant to
Regulation 14A under the Securities Act of 1934, as amended. The stockholder
making the nomination must also disclose his or her name, address and the number
of shares beneficially owned. All such recommendations must be submitted in a
letter to the Secretary of the Company not less than 50 days nor more than 75
days prior to the 1996 Annual Meeting; provided, however, that in the event that
less than 65 days notice is given to stockholders, such recommendation by the
stockholder must be received not later than 15 days following the day on which
the notice of the 1996 Annual Meeting is mailed.
AUDIT COMMITTEE. The primary function of the Audit Committee is to facilitate
communications among outside auditors, internal auditors and the Board of
Directors. The Audit Committee also reviews financial statements, internal
controls and procedures and the scope and results of audits. The Audit Committee
meets at such times as may be deemed necessary by the Board of Directors or the
Audit Committee.
(b) For information with respect to the executive officers of the Corporation,
see the unnumbered caption "Executive Officers of the Registrant" at the end
of Part I after Item 4 of this Annual Report on Form 10-K.
(c) The information called for with respect to the identification of certain
significant employees is not applicable to the registrant.
(d) There are no family relationships between the directors and executive
officers listed above. There are no arrangements nor understandings between
any named officer and any other person pursuant to which such person was
selected as an officer.
(e) Each of the executive officers named in Part I was elected to serve in the
office indicated for one year terms and until his successor is elected and
qualified.
(f) Legal proceedings involving directors and executive officers are included in
Part I, Item 3 of this Annual Report on Form 10-K.
III-2
<PAGE>
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Section 16(a) of the Securities Act of 1934 and the rules thereunder require the
Company's officers and directors and persons who own more than 10% of the
Company's common stock to file reports of ownership and changes in ownership
with, among others, the Securities and Exchange Commission and to furnish the
Company with copies.
Based on its review of the copies of such forms received by it, or written
representatives from certain reporting persons, the Company believes that,
during the last fiscal year all filing requirements applicable to its officers,
directors and greater than 10% beneficial owners were complied with, except John
W. Rogers, Jr. who failed to timely file Form 4, Statement of Changes of
Beneficial Ownership of Securities, to report the purchases on May 20, 1993 of
1,000 shares and on April 13, 1994 of 500 shares of the Company's common stock.
ITEM 11. EXECUTIVE COMPENSATION
DIRECTOR COMPENSATION. Non-employee directors receive a retainer fee of $5,000
per quarter, plus $1,000 for each day of attendance at a Board of Directors
meeting and $500 for each standing or special committee meeting attended.
Committee chairmen receive an additional $3,000 per year. During 1994 the
following amounts were received by members of the Board of Directors: Mrs. Peden
$29,500 and Messrs. Arrillaga $29,500, Brzezinski $24,500, Clark $16,500, Fox
$29,500, Hemmeter $30,500, Lynch $31,500, McCabe $29,500, Roche $29,500, Rogers
$29,500 and Ueberroth $34,000. A non-employee director may defer all or a
portion of his or her retainer and meeting fees pursuant to the Non-Employee
Directors Deferred Compensation Plan, as described herein under the section
titled "Non-Employee Directors Deferred Compensation Plan." Directors who are
employees of the Company receive no additional compensation for serving as
directors.
Non-employee directors may also participate in the Company's group health and
dental plan, group life insurance plan and group travel accident insurance plan.
The Company pays all costs associated with the non-employee directors'
participation in the group plans, although such costs are imputed as taxable
income to the directors. During 1994, Mrs. Peden, Messrs. Brzezinski, Clark,
McCabe, Roche, Rogers and Ueberroth participated in some or all of the group
plans.
STOCK OPTION PLAN FOR NON-EMPLOYEE DIRECTORS. The Company's Stock Option Plan
for Non-Employee Directors was approved by stockholders of the Company on April
30, 1990. The purpose of the plan is to encourage the highest level of
performance from members of the Board of Directors who are not employees of the
Company by providing non-employee directors with a proprietary interest in the
financial success of the Company. Under the plan, non-employee directors are
granted discounted options to purchase the Company's common stock. Each current
non-employee director has been granted an option to purchase 12,000 shares of
common stock. The purchase price per share for shares covered by the option
award is equal to 50% of the fair market value of common stock on the date of
grant. Options granted under the plan are non-transferable and non-assignable by
the participant other than by will or by the laws of descent and distribution.
The options granted under the plan vest over a three-year period in annual
increments of one-third on each anniversary of the date of grant for
participants who continue to serve on the Board of Directors. If a participant
ceases to be a non-employee director for any reason except termination for
cause, all vested options then held are exercisable for a period of three years
and all unvested options terminate 30 days after the participant ceases to be a
non-employee director. If a participant is terminated for cause, all vested
options are exercisable for a period of 30 days and all unvested options
automatically terminate.
RETIREMENT PLAN FOR NON-EMPLOYEE DIRECTORS. In order to attract and retain
qualified outside directors, the Company maintains the Retirement Plan for Non-
Employee Directors. The plan provides that non-employee directors are eligible
for a retirement benefit if they retire from the Board (i) at age 55 or above
with at least five years of service, (ii) at any age with at least 15 years of
service or (iii) after becoming disabled while serving. An eligible non-employee
director who becomes disabled or who retires from the Board is entitled to
receive an annual benefit over a period of time equal to the number of months
such eligible non-employee director served on the Board (not to exceed 180
months). The amount of such annual benefit is equal to 100% of the director's
total compensation for the final 12 months immediately preceding retirement from
the Board. This benefit is referred to as the "standard benefit."
In lieu of the standard benefit, non-employee directors who were first
elected to the Board prior to November 20, 1992 have the following retirement
options: (i) for retirement after reaching mandatory retirement age (currently
age 70
III-3
<PAGE>
unless waived by the Board of Directors) or after having served at least 15
years, such director may elect to receive an annual benefit for life equal to
50% of the director's total compensation for the final 12 months immediately
preceding retirement from the Board, (ii) for disability or retirement prior to
mandatory retirement age or 15 years of service, such director may elect to
receive for a period of time equal to the number of months he or she served on
the Company's Board an annual benefit equal to 50% of the director's total
compensation for the final 12 months immediately preceding retirement from the
Board. Payments under the plan are made quarterly in equal amounts.
NON-EMPLOYEE DIRECTORS DEFERRED COMPENSATION PLAN. The Company's Non-Employee
Directors Deferred Compensation Plan provides non-employee directors with the
option of electing to defer compensation (which is defined as retainer and
meeting attendance fees). The plan provides for compensation to be deferred
until a time following the participant's termination as a director. Such
compensation may be deferred to a cash account which accrues interest at prime
rate (established by Citibank, N.A.) or into stock units, upon which dividends
are credited in the form of additional stock units. Stock units are distributed
in the form of actual shares of the Company's common stock in a single sum or in
annual installments over a period of between five and 20 years, at the
participant's election. Cash accounts may be distributed over the same periods.
During 1994 four of the non-employee directors, Messrs. Arrillaga, Hemmeter,
Rogers and Ueberroth, participated in the plan and were credited with 1,797,
1,961, 806 and 2,008 stock units, respectively. Mrs. Peden, who participated in
the plan for two years and currently has 1,253 stock units credited to her
account, discontinued participation in the plan at year-end 1992. In 1994, she
accrued dividends on her account balance and such dividends amounted to 54 stock
units. Mr. McCabe, who participated in the plan for ten years and currently has
19,880 stock units credited to his account, discontinued participation in the
plan at year-end 1990. In 1994, he accrued dividends on his account balance and
such dividends amounted to 854 stock units.
EXECUTIVE COMPENSATION. The following table summarizes all plan and non-plan
compensation awarded or paid to, or earned by, each of the Named Executives (the
chief executive officer and the other four most highly-compensated executive
officers of the Company and its subsidiaries) during the fiscal years indicated:
III-4
<PAGE>
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
FOR FISCAL YEARS ENDED 1992, 1993 AND 1994
Long-Term Compensation
-----------------------------------------------
Annual Compensation Awards Payouts
----------------------------------------
Securities
Other Restricted Underlying All
Annual Stock Options/ LTIP Other
Name and Principal Salary Bonus Compensation Award(s) SARs Payouts Comp.
Position Year ($) ($) ($) ($)(14) (#) ($)(15) ($)
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
William J. Agee
Chairman, President and
Chief Executive Officer 1994 750,000 0 198,508(1) 0 0 0 70,040(16)
1993 750,000 950,000 169,761(2) 0 0 395,415 164,919
1992 750,000 500,000 153,703(3) 0 80,000 202,500 130,862
Stephen G. Hanks
Executive Vice President -
Finance and
Administration and
General Counsel 1994 358,173 0 16,548(4)) $1,010,000 50,000 0 31,216(17)
1993 250,000 150,000 13,311(5) 0 0 102,515 35,320
1992 201,158 100,000 11,205(6) 0 35,000 52,500 33,235
Stephen R. Grant
Senior Vice President 1994 325,000 0 33,969(7) 0 0 0 33,072(18)
1993 325,000 140,000 30,622(8) 0 0 133,270 42,857
1992 325,000 110,000 28,069(9) 0 20,000 68,250 55,657
Robert A. Tinstman
President -
Mining Group 1994 284,615 0 23,988(10) 0 0 0 28,851(19)
1993 250,000 140,000 23,430(11) 0 0 102,515 37,379
1992 250,000 130,000 20,623(12) 0 20,000 52,500 45,700
Thomas H. Zarges
President - Engineering,
Construction and
Environmental Group 1994 243,700 0 6,322(13) 108,125 0 0 23,844(20)
1993 206,768 10,000 0 123,125 7,000 0 16,235
1992 200,000 105,000 0 0 10,000 0 9,028
<FN>
(1) Imputed income of $46,075 for use of Company facilities and $48,898 tax
gross-up thereon, gross-up of $90,621 on prior years' salary adjustment for use
of Company facilities, disability insurance premium of $4,533 and tax gross-up
of $8,381 on the foregoing disability insurance premium and the value of the
term life insurance premium reported under footnote 16 to this table.
(2) Imputed income of $40,403 for use of Company facilities and $37,713 tax
gross-up thereon, $81,212 tax gross-up on prior years' salary adjustments for
use of Company facilities, disability insurance premium of $4,423 and tax gross-
up of $6,010 on the foregoing disability insurance premium and the value of the
term life insurance premium included for such year in the last column to this
table.
(3) Imputed income of $98,850 for use of Company facilities and $45,437 tax
gross-up thereon, disability insurance premium of $4,312 and tax gross-up of
$5,104 on the foregoing disability insurance premium and the value of the term
life insurance premium included for such year in the last column to this table.
(4) Disability insurance premium of $8,243 and tax gross-up of $8,305 on the
foregoing disability insurance premium and the value of the term life insurance
premium reported under footnote 17 to this table.
(5) Disability insurance premium of $6,783 and tax gross-up of $6,528 on the
foregoing disability insurance premium and the value of the term life insurance
premium included for such year in the last column to this table.
(6) Disability insurance premium of $6,478 and tax gross-up of $4,727 on the
foregoing disability insurance premium and the value of the term life insurance
premium included for such year in the last column to this table.
(7) Disability insurance premium of $16,347 and tax gross-up of $17,622 on the
foregoing disability insurance premium and the value of the term life insurance
premium reported under footnote 18 to this table.
(8) Disability insurance premium of $16,262 and tax gross-up of $14,360 on the
foregoing disability insurance premium and the value of the term life insurance
premium included for such year in the last column to this table.
(9) Disability insurance premium of $16,182 and tax gross-up of $11,887 on the
foregoing disability insurance premium and the value of the term life insurance
premium included for such year in the last column to this table.
(10) Disability insurance premium of $12,089 and tax gross-up of $11,899 on the
foregoing disability insurance premium and the value of the term life insurance
premium reported under footnote 19 to this table.
III-5
<PAGE>
(11) Disability insurance premium of $12,020 and tax gross-up of $11,410 on the
foregoing disability insurance premium and the value of the term life insurance
premium included for such year in the last column to this table.
(12) Disability insurance premium of $11,955 and tax gross-up of $8,668 on the
foregoing disability insurance premium and the value of the term life insurance
premium included for such year in the last column to this table.
(13) Disability insurance premium of $2,957 and tax gross-up of $3,365 on the
foregoing disability insurance premium and the value of the term life insurance
premium reported under footnote 20 to this table.
(14) As of December 31, 1994, the number and value of shares of restricted stock
held by Messrs. Agee, Hanks, Grant, Tinstman, and Zarges were, respectively: 0
shares; 32,000 shares valued at $400,000; 0 shares; 0 shares; and 8,750 shares
valued at $109,375. Dividends are payable on all shares of restricted stock to
the extent the Company declares a dividend. On February 7, 1994, Mr. Hanks was
granted an award of 40,000 shares of restricted stock, which vested immediately
with respect to 20% of the shares, with the remainder vesting in four equal
increments over the following four years. On August 6, 1993, Mr. Zarges was
granted an award of 5,000 shares of restricted stock, which vests in four equal
increments on each of the first, second, third, and fourth anniversaries of the
date of grant. On May 13, 1994, Mr. Zarges was granted an award of 5,000 shares
of restricted stock, which vests in four equal increments on each of the first,
second, third, and fourth anniversaries of the date of grant.
(15) This column discloses amounts paid under the Company's 3-Year Plan. For a
description of such plan, see the section herein titled "Long-Term Incentive
Plans. A. 3-Year Plan."
(16) Amount is comprised of $7,500 matching contributions to employee's ESOP and
401(k) accounts, $30,000 matching contribution to employee's Supplemental
Savings Plan account and $32,540 attributable to a life insurance policy on Mr.
Agee's life under the Key Executive Life Insurance Plan, of which $3,375
represents the dollar value of the term life insurance premium and $29,165
represents Mr. Agee's interest in the policy's cash surrender value as projected
on an actuarial basis attributable to the 1994 premium.
(17) Amount is comprised of $7,500 matching contributions to employee's ESOP and
401(k) accounts, $10,607 matching contribution to employee's Supplemental
Savings Plan account, $3,969 for service recognition and $9,140 attributable to
a life insurance policy on Mr. Hanks' life under the Key Executive Life
Insurance Plan, of which $523 represents the dollar value of the term life
insurance premium and $8,617 represents Mr. Hanks' interest in the policy's cash
surrender value as projected on an actuarial basis attributable to the 1994
premium.
(18) Amount is comprised of $7,500 matching contributions to employee's ESOP and
401(k) accounts, $8,750 matching contributions to employee's Supplemental
Savings Plan and Deferred Compensation Plan accounts and $16,822 attributable to
a life insurance policy on Mr. Grant's life under the Key Executive Life
Insurance Plan, of which $960 represents the dollar value of the term life
insurance premium and $15,862 represents Mr. Grant's interest in the policy's
cash surrender value as projected on an actuarial basis attributable to the 1994
premium.
(19) Amount is comprised of $7,115 matching contributions to employee's ESOP and
401(k) accounts, $7,115 matching contributions to employee's Deferred
Compensation Plan account, $2,090 attributable to a rebate paid to Mr. Tinstman
by the Company as a result of savings realized by booking air travel at an
economy class and $12,531 attributable to a life insurance policy on Mr.
Tinstman's life under the Key Executive Life Insurance Plan, of which $470
represents the dollar value of the term life insurance premium and $12,061
represents Mr. Tinstman's interest in the policy's cash surrender value as
projected on an actuarial basis attributable to the 1994 premium.
(20) Amount is comprised of $7,500 matching contributions to employee's ESOP and
401(k) accounts, $4,685 matching contributions to employee's Supplemental
Savings Plan and Deferred Compensation Plan accounts and $11,659 attributable to
a life insurance policy on Mr. Zarges' life under the Key Executive Life
Insurance Plan, of which $415 represents the dollar value of the term life
insurance premium and $11,244 represents Mr. Zarges' interest in the policy's
cash surrender value as projected on an actuarial basis attributable to the 1994
premium.
</TABLE>
<PAGE>
OPTION GRANTS. The following table summarizes pertinent information
concerning individual grants of stock options, including a theoretical grant
date present value for each such grant:
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
--------------------------
NUMBER OF
SECURITIES
UNDERLYING % OF TOTAL
OPTIONS/ OPTIONS/SARS EXERCISE
SARS GRANTED TO OR BASE
GRANTED EMPLOYEES PRICE EXPIRATION GRANT DATE
NAME (#) IN FISCAL YEAR(1) ($/SH) DATE PRESENT VALUE ($)
- ---- ---------- ----------------- --------- ---------- -----------------
<S> <C> <C> <C> <C> <C>
William J. Agee 300,000(2) 11.4 16.0000 04/26/04 2,779,000(3)
Stephen G. Hanks 50,000(4) 1.9 25.3125(5) 02/07/04 742,000(6)
50,000(7) 1.9 16.0000 04/26/04 463,000(8)
Stephen R. Grant 0 0 0
Robert A. Tinstman 15,000(9) 0.6 5.4375 07/14/04 61,980(10)
Thomas H. Zarges 0 0 0
<FN>
(1) The percentages set forth in this column are calculated based upon the
aggregate number of stock options granted during the year to employees of the
Company and its subsidiaries, MK Rail Corporation and MK Gold Company. The
total number of options granted to employees of such companies were as
follows: Company, 263,500; MK Rail Corporation, 1,501,000; and MK Gold
Company, 876,800. Thus, options granted in the aggregate during 1994 were
2,641,300.
(2) These options were granted to Mr. Agee by MK Rail Corporation, a
majority-owned, publicly traded subsidiary of the Company. The stock options
were granted on April 26, 1994, the effective date of an initial public
offering of common stock of MK Rail Corporation, at the initial public
offering price of $16.00 per share. Twenty-five percent of the options vested
on July 20, 1994; the remainder were scheduled to vest in three equal
installments on the anniversaries of the first vesting date. However, Mr.
Agee's employment with the Company ceased on February 9, 1995. The MK Rail
Corporation Stock Incentive Plan provides that upon termination of
employment, an optionee is entitled to exercise all options then vested for a
period of one year provided such termination was due to death, disability or
retirement. In the case of termination for cause, the options immediately
terminate and are no longer exercisable. In the case of termination for any
other reason not previously described, the optionee is entitled to exercise
all options then vested for a period of three months. A determination as to
the appropriate course of action with respect to Mr. Agee's options is
pending.
Limited Stock Appreciation Rights ("LSARs") in a like number were granted
to the optionee in conjunction with the grant of stock options. An LSAR
provides the optionee with the right, under certain circumstances, to receive
cash in an amount equal to the difference between the exercise price of the
option and its fair market value on the date of exercise. Subject to the
conditions below, LSARs are exercisable only to the extent the underlying
options are exercisable. When an LSAR is exercised, the underlying option is
canceled, and vice versa. LSARs may not be exercised within six months of the
date of grant and may be exercised only during the 60-day period following a
"trigger event," as defined in the plan pursuant to which the LSARs were
granted. Such trigger events generally involve circumstances constituting a
change in control of the company granting the stock option.
(3) This dollar amount is the result of calculations using the Black-Scholes
based option valuation model. In calculating the grant date present value set
forth in the table, a factor of 56.9% has been assigned to the volatility of
the common stock and the annualized dividend yield has been set at 1.58%,
both based on 52 weeks of historical data. The risk-free rate of return has
been fixed at 7.3%, the rate for a 10-year zero-coupon U.S. Treasury security
in April 1994, the month of grant. The actual option term of ten years has
been used and the grant date present value has been discounted by 3% per year
for risk of forfeiture due to vesting restrictions. The grant date present
value set forth in the table is a theoretical value and may not accurately
determine present value. The actual value, if any, the optionee will realize
will depend on the excess of the fair market value of the common stock over
the exercise price on the date the option is exercised.
(4) The stock options were granted by the Company on February 7, 1994. The
options become exercisable in four equal installments beginning on the first
anniversary of the date of grant. Limited Stock Appreciation Rights ("LSARs") in
a like number were granted to the optionee in conjunction with the grant of the
stock options. For a description of the LSARs, see footnote 2 to this table.
(5) The options were granted at the fair market value of the Company's common
stock on the date of grant. However, over the 10-year term of the option, the
exercise price of the option varies inversely with the market value of the
stock. Specifically, the exercise price of the option and LSAR will be
determined at the date of exercise of the option and LSAR as follows:
(i) if the fair market value per share at the date of grant is
greater than or equal to the fair market value per share at the date of
exercise, the exercise price will be equal to the fair market value per
share at the date of exercise; or
(ii) if the fair market value per share at the date of exercise is
greater Than the fair market value per share at the date of grant, the
exercise price will be equal to the fair market value per share at the
date of grant reduced (but not below zero) by the difference between the
fair market value at the date of exercise and the fair market value at the
date of grant.
Notwithstanding the foregoing, in no event shall the exercise price per
share be less than the par value per share.
(6) This dollar is the result of calculations using the Black-Scholes based
option valuation model. In calculating the grant date present value set forth
in the table, a factor of 30.74% has been assigned to the volatility of the
common stock and the annualized dividend yield has been set at 3.74%, both
based on 36 months of historical data. The risk-free rate of return.
The Board of Directors of the Company is divided into three classes, as
nearly equal in number as possible. Each class serves three years, with terms
of office of the respective classes expiring in successive years. The terms
of office of three directors will expire at the 1995 Annual Meeting. The
proxies solicited hereby cannot be voted to elect more than three directors
at the Annual Meeting.
It is the intention of the proxy holders named in the enclosed proxy to
vote such proxies for the three nominees first named below, all of whom
currently are directors, to hold office until the 1998 Annual Meeting and
until their successors are elected and qualified.
If it is determined prior to the meeting that any nominee will be unable
to serve as a director, the proxy holders reserve the right to substitute a
nominee and vote for another person of their choice in the place and stead of
any nominee unable so to serve, unless the Board of Directors reduces the
size of the membership of the Board of Directors prior to the meeting to
eliminate the position of any such nominee.
III-7
<PAGE>
There were seven Board of Directors meetings held during the last fiscal
year. All directors and nominees attended at least 75% of the aggregate of
the 1994 meetings of the Board of Directors and all committees on which such
persons served. Certain information with respect to the nominees and
continuing directors given below has been furnished by the respective
nominees and continuing directors. has been fixed at 6.5%, the rate for a
10-year zero-coupon U.S. Treasury security in February 1994, the month of
grant. The actual option term of ten years has been used and the grant date
present value has been discounted by 3% per year for risk of forfeiture due
to vesting restrictions. The grant date present value has been multiplied by
a factor of 2.0 to reflect the variable exercise price which effectively
doubles the potential stock option gain which may be achieved by the option
grant. The grant date present value set forth in the table is a theoretical
value and may not accurately determine present value. The actual value, if
any, the optionee will realize will depend on the excess of the market value
of the common stock over the exercise price on the date the option is
exercised.
(7) These options were granted to Mr. Hanks by MK Rail Corporation, a
majority-owned, publicly traded subsidiary of the Company. The stock options
were granted on April 26, 1994, the effective date of an initial public
offering of common stock of MK Rail Corporation, at the initial public
offering price of $16.00 per share. Twenty-five percent of the options vested
on July 20, 1994; the remainder will vest in three equal installments on the
anniversaries of the first vesting date. Limited Stock Appreciation Rights
("LSARs") in a like number were granted to the optionee in conjunction with
the grant of the stock options. For a description of the LSARs, see footnote
2 to this table.
(8) This dollar amount was calculated in a manner identical to that described
for Mr. Agee's grant of MK Rail Corporation stock options. See footnote 3 to
this table.
(9) These options were granted to Mr. Tinstman on July 14, 1994 by MK Gold
Company, a minority-owned, publicly traded subsidiary of the Company. One
third of the options vests on each of the anniversary dates of the original
date of grant. Limited Stock Appreciation Rights ("LSARs") in a like number
were granted to the optionee in conjunction with the grant of the stock
options. For a description of the LSARs, see footnote 2 to this table.
(10) This dollar amount is the result of calculations using the
Black-Scholes based option valuation model. In calculating the grant date
present value set forth in the table, a factor of 69.78% has been assigned to
the volatility of the common stock and the annualized dividend yield has been
set at 0%, both based on 52 weeks of historical data. The risk-free rate of
return has been fixed at 7.3%, the rate for a 10-year zero-coupon U.S.
Treasury security in July 1994, the month of grant. The actual option term of
ten years has been used and the grant date present value has been discounted
by 3% per year for risk of forfeiture due to vesting restrictions. The grant
date present value set forth in this table is a theoretical value and may not
accurately determine present value. The actual value, if any, the optionee
will realize, will depend on the excess of the fair market value of the
common stock over the exercise price on the date the option is exercised.
</TABLE>
AGGREGATE OPTION EXERCISES AND FISCAL YEAR-END OPTION VALUES. The
following table summarizes pertinent information concerning the exercise of
stock options during fiscal year 1994 by each of the Named Executives and the
fiscal year-end value of unexercised options:
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
VALUE OF
NUMBER OF UNEXERCISED,
SECURITIES UNDERLYING IN-THE-MONEY
UNEXERCISED OPTIONS/SARS AT
OPTIONS/SARS FISCAL YEAR END ($)
AT FISCAL YEAR END (#)
SHARES ACQUIRED VALUE EXERCISABLE/ EXERCISABLE/
NAME ON EXERCISE (#) REALIZED ($) UNEXERCISABLE UNEXERCISABLE
- ---- ---------------- -------------- ---------------------- ---------------------
<S> <C> <C> <C> <C>
William J. Agee 0 0 315,000/ 0/
265,000 0
Stephen G. Hanks 0 0 46,202/ 0/
107,500 0
Stephen R. Grant 0 0 50,000/ 0/
10,000 0
Robert A. Tinstman 0 0 41,602/ 0/
30,000 0
Thomas H. Zarges 0 0 12,750/ 0/
12,250 0
</TABLE>
LONG-TERM INCENTIVE PLANS.
A. 3-YEAR PLAN. On October 31, 1991 the Company established the
3-Year Plan. Participation in the 3-Year Plan is limited to those individuals
who are able to influence significantly the Company's long-term performance
and who are selected to participate by the Compensation Committee.
The 3-Year Plan is designed to compare Total Shareholder Return for the
Company at the end of the initial three-year period (January 1, 1989 to
December 31, 1991) and each rolling three-year period thereafter, against
Total Shareholder Return for the same period for each of 12 other companies
("Competitors") which operate primarily in the same markets in which the
Company operates. Total Shareholder Return for each three-year performance
period is defined as the percentage obtained for a company by dividing (a) by
(b) where (a) equals (the 30-day average for the Company's closing stock
price for the last month of the performance period less the 30-day average of
the Company's closing stock price for the month immediately preceding the
first month of the performance period) plus dividends
III-8
<PAGE>
declared to be paid to stockholders on those record dates falling within the
performance period (b) equals the 30-day average of the Company's closing
stock price for the month immediately preceding the first month of the
performance period. The competitors are Guy F. Atkinson Company of
California; Blount, Inc.; CBI Industries, Inc.; CRSS Inc.; Ensearch
Corporation; Fluor Corporation; Foster Wheeler Corporation; Jacobs
Engineering Group, Inc.; McDermott International, Inc.; Perini Corporation;
Stone & Webster Incorporated and The Turner Corporation.
At the end of each three-year performance period, each Competitor and
the Company are ranked based upon their Total Shareholder Return. The 3-Year
Plan provides that targeted bonuses, if any, are paid at the end of each
performance period according to the following table:
<TABLE>
<CAPTION>
COMPANY'S PERCENTILE RANKING PERCENT OF TARGET BONUS EARNED
WITHIN COMPETITOR GROUP BY PARTICIPANTS
---------------------------- ------------------------------
<S> <C>
0 to 35th 0%
47.5th 50%
60th 100%
72.5th 150%
85 to 100th 200%
</TABLE>
The Compensation Committee, in conjunction with recommendations previously
made by compensation experts, has set each participant's target bonus which
is a percentage of his base salary. Target bonus percentages for Messrs.
Agee, Grant, Hanks and Tinstman for the three-year period ending on December
31, 1994 were 45%, 35%, 35% and 35% of base compensation, respectively.
A percentile ranking falling between numbers is interpolated.
In the event of a change in control, as defined in the 3-Year Plan,
bonuses become immediately payable. Such bonuses would be based upon Total
Shareholder Return calculated as of the last day of the month immediately
preceding the month in which the change in control occurred and would be
prorated based upon the number of full calendar months of service rendered by
the participant during the performance period and prior to the change in
control.
On February 7, 1994, the Named Executives were designated as
participants in the 3-Year Plan for the 1994-1996 performance period.
Accordingly, the following table summarizes estimated payment information
under the 3-Year Plan for the performance period January 1, 1994 through
December 31, 1996:
III-9
<PAGE>
LONG-TERM INCENTIVE PLAN -- ESTIMATED PAYOUTS UNDER 3-YEAR PLAN
<TABLE>
<CAPTION>
ESTIMATED FUTURE PAYOUTS
----------------------------------------
PERFORMANCE
PERIOD UNTIL THRESHOLD(1) TARGET(2) MAXIMUM(3)
NAME PAYOUT ($) ($) ($)
- ---- -------------------- --------------- ---------- -----------
<S> <C> <C> <C> <C>
William J. Agee(4) January 1, 1994-
December 31, 1996 0 0 0
Stephen G. Hanks January 1, 1994-
December 31, 1996 2,982 105,000 210,000
Stephen R. Grant January 1, 1994-
December 31, 1996 1,392 49,000 98,000
Robert A. Tinstman January 1, 1994-
December 31, 1996 2,982 105,000 210,000
Thomas H. Zarges January 1, 1994-
December 31, 1996 2,485 87,500 175,000
<FN>
(1) Assumes that the Company's Total Shareholder Return falls on the 35.71st
percentile when ranked with the Competitors.
(2) Assumes that the Company's Total Shareholder Return falls on the 60th
percentile when ranked with the Competitors.
(3) Assumes that the Company's Total Shareholder Return falls above the 85th
percentile when ranked with the Competitors.
(4) In order for a participant to be entitled to an award under the 3-Year
Plan, such individual generally must be rendering services to the Company on the
last day of the performance period. Mr. Agee ceased rendering services to the
Company on February 9, 1995. The performance period will end on December 31,
1996. Accordingly, Mr. Agee is not entitled to any benefit thereunder. Mr.
Agee's employment agreement, described under the section herein titled
"Employment Contracts and Change In Control Arrangements," may override the
above provisions of the 3-Year Plan under certain circumstances and require the
immediate vesting and payout of any awards accrued under the 3-Year Plan. No
amounts have been accrued under the 3-Year Plan for the January 1, 1994 through
December 31, 1996 performance period cycle. Thus, even if the overriding
provisions of Mr. Agee's employment contract were to become applicable, he would
not be entitled to receive any award under the 3-Year Plan for such cycle.
</TABLE>
B. INDIVIDUAL 5-YEAR PLANS. During 1993, Messrs. Hanks and Tinstman
were awarded participation in long-term incentive plans that were tailored to
each of their positions (the "Individual 5-Year Plans"). Such plans provide
the participants with an opportunity for a cash award at the end of a
five-year performance period. No shares of Company common stock, performance
units or other stock rights are involved.
Mr. Hanks' Individual 5-Year Plan measures annually (over the five-year
period January 1, 1993 to December 31, 1997) the Company's after-tax net
income as a percentage of its average total capital. In the case of Mr.
Tinstman, who was the President of the Mining Group, the performance formula
is modified to measure over the same period the contribution to net income at
the Mining Group level over such group's average annual capital employed
("ROTC").
A positive award pool is created each year during the performance period
in an amount equal to the Company's net income (in the case of Mr. Hanks) or
contribution to net income by each group (in the case of Mr. Tinstman) in
excess of the predetermined ROTC goal set by the Compensation Committee. The
award pool is not capped at any maximum amount. If net income or contribution
to net income falls below the ROTC goal in any given year, the amounts by
which the Company or Mining Group failed to meet its goal becomes a negative
award pool for such individual. The negative award pool is not capped at any
maximum amount.
Each participant shares in the annual award pool (which may be positive or
negative based upon Company or group performance) applicable to his position in
accordance with a sharing percentage established by the Compensation Committee.
The participant's share of the award pool, which may be positive or negative, is
not paid to the executive. Rather, such amounts are tracked throughout the five-
year performance period by the Company and "netted" at the end thereof. Assuming
that the "cumulative" five-year award is positive, it can be adjusted upward if
the compound annual growth rate in the Company's stock price exceeds targets
established by the Compensation Committee. This latter adjustment is applicable
only to Mr. Hanks and not to Mr. Tinstman. Payments to participants under the
Individual 5-Year Plans, if any, are reduced by payments received by
participants during the same period under the Company's 3-Year Plan and for
awards of restricted stock granted as incentive compensation during such period.
III-10
<PAGE>
Except in the case of death, disability or termination without cause, any
payments due to participants under the Individual 5-Year Plans will be made
within 120 days following December 31, 1997. In the event of a change in
control, as defined in the Individual 5-Year Plans, the participants' accrued
awards are immediately vested and payable.
It is impossible for the Company to estimate with reasonable accuracy
the many variables affecting potential payments under the Individual 5-Year
Plans. Thus, it is impossible to determine whether participation in the
Individual 5-Year Plans by Messrs. Hanks and Tinstman will result in cash
bonuses to them at the end of the performance period and, if so, in what
amounts. However, if one assumed that such plans were terminated as of
December 31, 1994, Messrs. Hanks and Tinstman would be entitled to receive
the following unaudited amounts: $0 and $1,260,260, respectively.
Although Mr. Zarges was awarded participation in an Individual 5-Year
Plan during 1994 applicable to his position as President of the Engineering,
Construction and Environmental Group, no such plan was drafted. If such plan
is ultimately drafted for Mr. Zarges, it will function in all material
respects as the plan described for Mr. Tinstman.
C. CEO 5-YEAR PLAN. In February 1991, the Compensation Committee
approved the Key Executive Long-Term Incentive Plan ("CEO 5-Year Plan") upon the
advice of independent compensation experts. The plan measures annually return on
total capital ("ROTC") over the five-year period January 1, 1991 to December 31,
1995. An award pool is created each year in the amount by which net income
exceeds the ROTC goal set by the Compensation Committee at the beginning of the
five-year performance period. If net income for a given year meets but does not
exceed the ROTC goal established by the Compensation Committee, the award pool
for such year is $0. Finally, the award pool is negative in the amount by which
net income falls below the ROTC goal for a given year.
Mr. Agee, who was the only Named Executive to participate in the CEO
5-Year Plan, is credited with a percentage of the annual pool (whether the
pool is positive or negative) based on a table of percentages established by
the Compensation Committee at the beginning of the five-year performance
period. Annual awards are not paid but are "tracked" over the performance
period. At the end of the performance period, the annual awards (whether
positive or negative) are "netted" against one another for a cumulative
award. If the cumulative award is negative, no award is paid to Mr. Agee. If
the cumulative five-year award is positive, it may be adjusted upward if the
compound annual growth rate in the Company's stock price over the performance
period exceeds targets established by the Compensation Committee. Any
payments to be awarded to Mr. Agee under the 5-Year Plan are to be offset by
payments received by him during the same period under the Company's 3-Year
Plan.
On February 9, 1995, Mr. Agee terminated employment with the Company. Mr.
Agee's net accrual for years 1991 through 1994 was negative. Thus, under no
circumstances would Mr. Agee be entitled to receive an award from the CEO 5-Year
Plan.
PENSION. Company retirement or actuarial benefits to the Named
Executives are derived principally from three sources: (i) an annuity issued
by United Pacific Life Insurance Company arising out of the termination of
the Morrison Knudsen Corporation Retirement Plan established January 1, 1970
and terminated December 12, 1987 ("UPL Annuity"); (ii) a retirement benefit
from the Morrison Knudsen Corporation Retirement Plan established January 1,
1988 and frozen December 31, 1991 ("Frozen MKRP Benefit"); and (iii) a
retirement benefit from supplemental retirement benefit agreements ("SRBA
Benefit"). The details as to the source and amount of each Named Executive's
retirement benefits are provided below.
III-11
<PAGE>
The following table summarizes the estimated annual benefits payable in
the form of a straight-life annuity upon normal retirement to each of the
Named Executives:
PENSION TABLE
<TABLE>
<CAPTION>
TOTAL ANNUAL
FROZEN MKRP SRBA BENEFIT(3) BENEFIT AT
UPL ANNUITY(1) BENEFIT(2) AT AGE 65($) AT AGE 65
NAME ($) ($) ($) ($)
- ---- -------------- ------------- ----------------- --------------
<S> <C> <C> <C> <C>
William J. Agee 0 9,052 335,397(4) 344,449
Stephen G. Hanks 7,284 13,755 0 21,039
Stephen R. Grant 0 9,082 254,680(5) 263,762
Robert A. Tinstman 9,385 17,860 10,568 37,813
Thomas H. Zarges 0 0 0 0
<FN>
(1) The amounts shown in this column are fixed amounts based upon the formula
contained in the Morrison Knudsen Corporation Retirement Plan established
January 1, 1970 and terminated December 12, 1987. Such amounts will not increase
due to compensation paid or services rendered by the Named Executive after
December 12, 1987.
(2) The amounts shown in this column are fixed amounts based upon the formula
contained in the Morrison Knudsen Corporation Retirement Plan established
January 1, 1988 and frozen December 31, 1991. Such amounts will not increase due
to compensation paid or services rendered by the Named Executive after December
31, 1991.
(3) The Company has entered into various nonqualified and unfunded SRBAs or
other agreements to provide retirement income to Messrs. Agee, Grant and
Tinstman. Generally, the SRBAs provide each Named Executive, except Messrs.
Hanks and Zarges, with a retirement benefit equal to the difference between (a)
the retirement benefit that would be payable to such participant under the
Morrison Knudsen Corporation Retirement Plan established January 1, 1988 and
frozen December 31, 1991, if it were not for certain limits imposed on the Named
Executive under the Internal Revenue Code of 1986, as amended; and (b) the Named
Executive's Frozen MKRP Benefit. This difference is referred to hereafter as the
"Standard SRBA Benefit." In the case of Mr. Tinstman, the Standard SRBA Benefit
will not increase, absent any future amendments to his SRBA, due to compensation
paid or services rendered after December 31, 1991. Mr. Agee's SRBA, which is
part of his employment agreement, also provides that under certain circumstances
he is entitled to receive a retirement benefit which, inclusive of the Frozen
MKRP Benefit and the Standard SRBA Benefit, will equal 45% of his final average
compensation at normal retirement. "Final average compensation" is the average
compensation earned by Mr. Agee during the five sequential calendar years of
service out of the last ten completed calendar years of service in which his
compensation was the highest. If Mr. Agee's employment is terminated for cause,
as defined in his employment agreement, the SRBA provides that he is not
entitled to receive any retirement benefit thereunder. Mr. Grant's agreement
provides him with additional retirement income equal to the greater of (a) the
Standard SRBA Benefit paid in monthly installments; or (b) a monthly benefit at
age 65 which, inclusive of the Frozen MKRP Benefit, equals 50% of his highest
monthly compensation during the five consecutive years out of the last ten years
of service with the Company immediately preceding retirement, less 50% of his
unreduced primary social security benefit.
(4) For purposes of this calculation, it was assumed that Mr. Agee was
entitled to the SRBA benefit. His final average compensation was calculated as
$1,534,977, and was based upon actual compensation received by Mr. Agee during
his tenure with the Company. Such benefit was calculated using seven years of
credited service with the Company, which was the amount of service Mr. Agee had
accrued as of the date of his termination of employment. If one assumed that Mr.
Agee's employment with the Company was terminated for cause, as defined in his
employment agreement, his SRBA benefit would be $0. Litigation currently brought
by shareholders of the Company, if successful, would preclude the payment of any
benefits to Mr. Agee under the terms of his employment agreement, regardless of
the reason for his termination of employment from the Company. A determination
by the Company's Board of Directors as to the appropriate course of action with
respect to Mr. Agee's SRBA benefit is pending.
(5) Mr. Grant's final average compensation is calculated as $503,900 and is
based upon actual compensation received by Mr. Grant through December 31, 1994.
Such benefit is to accrue over 16 years of service with the Company. Mr. Grant
currently has six years of credited service with the Company.
</TABLE>
EMPLOYMENT CONTRACTS AND CHANGE IN CONTROL ARRANGEMENTS. The Company has
entered into the following employment agreements with the Named Executives:
A. MR. AGEE. On April 2, 1991, the Company entered into a five-year
employment agreement (April 2, 1991 through December 31, 1995) with Mr. Agee.
Pursuant to the terms of the employment agreement, Mr. Agee was entitled to
receive a minimum annual base salary of $750,000 and was to be considered for
an annual bonus of at least 50% of his base salary with the actual bonus
determined by the Compensation Committee after an assessment of the Company's
financial performance and Mr. Agee's strategic accomplishments. He was also
entitled to participate in (i) the CEO 5-Year Plan, (ii) the Key Executive
Life Insurance Plan (which provides pre-retirement life insurance of three
times base salary, inclusive of the Company's group plan and which provides
post-retirement life insurance of one times base salary), (iii) the Key
Executive Disability Insurance Plan (which provides a disability benefit of
60% of base salary and annual bonus, inclusive of all Company and government
programs) and (iv) all other health and welfare benefits generally available
to executive officers of the Company. Upon retirement at age 65, he was to be
entitled to receive a retirement benefit of 45% of his final average
compensation, less any benefits provided under the Company's frozen MKRP
Benefit and the Standard SRBA Benefit. Lesser benefits were payable if he
retired before age 65.
Under the employment agreement, Mr. Agee was also entitled to receive a
severance benefit equal to twice his base compensation (which includes such
items as base salary, bonuses and participation in health and retirement
programs) if his employment was terminated for a reason other than death,
disability, cause (as defined in such agree-
III-12
<PAGE>
ment), voluntary resignation under circumstances not constituting
constructive termination or the expiration of the employment agreement. Under
such circumstances, the Company was to fully vest all unvested stock options
and restricted stock awards previously granted and fully vest and immediately
pay any accrued awards and bonuses. Finally, if any payments due under the
employment agreement were to result in liability to Mr. Agee for an excise
tax imposed by Section 4999 of the Internal Revenue Code of 1986, as amended,
the Company has agreed to pay him an amount which (after deducting any
Federal, state and local income taxes payable with respect to such amount)
would be sufficient to fully satisfy such tax. If Mr. Agee's employment is
terminated for death, disability, cause, as defined in the employment
agreement, voluntary resignation not constituting constructive termination,
or upon expiration of the agreement, Mr. Agee would not be entitled to any of
the benefits described above. A determination by the Company's Board of
Directors as to the appropriate course of action with respect to Mr. Agee's
employment agreement is pending.
Litigation currently brought by shareholders of the Company, if
successful, would preclude the payment of any benefits to Mr. Agee under the
terms of his employment agreement, regardless of the reason for his
termination of employment from the Company.
B. MR. GRANT. Effective January 1, 1989 the Company entered into
an employment agreement with Mr. Grant. The agreement does not set forth a
minimum term of employment with the Company. However, while employed Mr.
Grant is entitled to receive a minimum annual base salary of $310,000 and is
to be considered for an annual bonus (with no amount specified).
Additionally, he is entitled to participate in the health and welfare benefit
plans generally available to all other employees of the Company. Pursuant to
the terms of the employment agreement, Mr. Grant received 15,000 options to
purchase shares of the Company's common stock and 15,000 shares of restricted
Company common stock.
Under the terms of the employment agreement, Mr. Grant is entitled to
receive a severance benefit equal to twice his annual base salary on the date
of termination if he terminates his employment for "good reason" as defined
in the agreement after the occurrence of a change in control. Additionally,
all outstanding options become immediately exercisable and all restrictions
on restricted stock awards immediately lapse upon a change in control. In Mr.
Grant's case, the options and restricted stock granted in 1989 are now fully
vested and unrestricted. Finally, under the January 1, 1989 employment
agreement the Company has agreed to pay Mr. Grant an amount which (after
deducting any Federal, state and local income taxes payable with respect to
such amount) is equal to the tax, if any, imposed by Section 4999 of the
Internal Revenue Code of 1986, as amended.
On October 24, 1994, the Company entered into an additional agreement
pursuant to which Mr. Grant's annual base salary will be reduced to $140,000
for the first 500 hours of service during 1995 and 1996, respectively. For
services in excess of 500 hours each year, Mr. Grant will be compensated at a
rate of $185 per hour. The agreement will expire on December 31, 1996.
However, if prior to such expiration Mr. Grant is terminated by the Company
without cause, he is entitled to receive the remainder of his salary through
December 31, 1996 and certain early retirement benefits pursuant to an agreed
upon schedule.
C. MESSRS. HANKS, TINSTMAN AND ZARGES. Effective January 1, 1993,
the Company entered into five-year employment agreements (January 1, 1993
through December 31, 1997) with Messrs. Hanks and Tinstman. Effective January
1, 1994, the Company entered into a similar five-year employment agreement
with Mr. Zarges (January 1, 1994 through December 31, 1998). Pursuant to the
terms of the employment agreements, Messrs. Hanks, Tinstman and Zarges are
entitled to receive a minimum annual base salary of $250,000, $250,000 and
$250,000, respectively, and to participate in the Company's annual bonus plan
applicable to their corporate position or operating group position. They are
also entitled to participate in (i) an Individual 5-Year Plan tailored to
their corporate position or operating group position (for a description of
such plans, see the section herein titled "Long-Term Incentive Plans. B.
Individual 5-Year Plans"), (ii) the Key Executive Life Insurance Plan (which
provides pre-retirement life insurance of three times base salary, inclusive
of the Company's group plan and which provides post-retirement life insurance
of one times base salary), (iii) the Key Executive Disability Insurance Plan
(which provides a disability benefit of 60% of base salary and annual bonus,
inclusive of all Company and government programs) and (iv) all other health
and welfare benefits generally available to executive officers of the
Company.
Under the employment agreements, Messrs. Hanks, Tinstman and Zarges are
also entitled to receive a severance benefit equal to twice their base
compensation (which includes such items as base salary in effect immediately
preceding the termination of employment, bonuses and participation in health
and retirement programs) if their employment is terminated for a reason other
than death, disability, cause, voluntary resignation under circumstances
III-13
<PAGE>
not constituting constructive termination or the expiration of their
employment agreements. Under such circumstances, the Company will fully vest
all unvested stock options and restricted stock awards previously granted,
and fully vest and immediately pay any accrued awards and bonuses. If any
payments due under the employment agreements will result in liability to
Messrs. Hanks, Tinstman and Zarges for an excise tax imposed by Section 4999
of the Internal Revenue Code of 1986, as amended, the Company has agreed to
pay to them an amount which (after deducting any Federal, state and local
income taxes payable with respect to such amount) is sufficient to fully
satisfy such tax.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF. The following table
shows the persons (as the term is used in Section 13(d)(3) of the Securities
Exchange Act of 1934) known to the Company to beneficially own more than 5%
of the Company's common stock. It also shows the same information for all
directors of the Company, the Named Executives, and the directors and other
executive officers of the Company as a group:
<TABLE>
<CAPTION>
(1) (2) (3) (4)
Number of Shares and
Nature of Beneficial
Ownership as of
May 31, 19951 Right to Acquire
Name and Address Unless Otherwise Noted Within 60 Days of Percent of
of Beneficial Owner (Including Shares in Column (3)) May 31, 1995 Class(2)
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Mellon Bank Corporation 2,111,368(3) 0 6.12%
Mellon Bank Center
Pittsburgh, PA 15258
Systematic Financial Management, Inc. 1,717,129(4) 0 5.00%
Two Executive Drive
Fort Lee, NJ 07024
DIRECTORS:
John Arrillaga 14,000 8,000 *
Lindsay E. Fox 12,000 12,000 *
Christopher B. Hemmeter 14,000 12,000 *
Peter S. Lynch 19,000 12,000 *
Robert A. McCabe 12,806 12,000 *
Robert S. Miller, Jr. 20,000 0 *
Irene C. Peden 12,200 7,000 *
Gerard R. Roche 12,000 8,000 *
John W. Rogers, Jr. 10,500 8,000 *
Robert A. Tinstman 81,679 49,602 *
NAMED EXECUTIVES:
William J. Agee 156,090(5) 0 *
Stephen R. Grant 57,977 55,000 *
Stephen G. Hanks 98,977(6) 57,452 *
Thomas H. Zarges 26,295(7) 15,250 *
All Directors and Executive 436,071(8) 299,554 1.3%
Officers as a Group (16)
<FN>
*Indicates that the percentage of shares beneficially owned does not exceed
1% of the class.
III-14
<PAGE>
(1) For purposes of this table, shares are considered to be "beneficially"
owned if the person directly or indirectly has the sole or shared power to
vote or direct the voting of the securities or the sole or shared power to
dispose of or direct the disposition of the securities; and a person is
considered to be the beneficial owner of shares if that person has the right
to acquire the beneficial ownership of the shares within 60 days of May 31,
1995, unless otherwise noted. The numbers shown in this column include shares
allocated to an employee's account under the Company's Employee Stock
Ownership Plan and include shares purchased under the Company's 401(k)
Savings Plan by an employee who has shared voting power and sole dispositive
power over such shares, except in cases where dispositions are required by
law.
(2) The percentages shown are calculated based upon the shares indicated in
column (2).
(3) Mellon Bank Corporation ("Mellon") filed an Amendment No. 5 to Schedule
13G dated January 25, 1995 with the Securities and Exchange Commission
pursuant to the Securities Exchange Act of 1934. The Amendment No. 5 to
Schedule 13G states that as of January 25, 1995 Mellon and certain of its
subsidiary corporations are the beneficial owners of 2,111,368 shares of the
Company's common stock of which Mellon has sole voting power as to 186,000
shares, shared voting power as to 1,924,368 shares, sole dispositive power as
to 185,000 shares and shared dispositive power as to 4,000 shares. Mellon
Bank, N.A., a subsidiary of Mellon, has acted as trustee of the Company's
Employee Stock Ownership Plan which was terminated effective May 10, 1995.
Amendment No. 5 to Schedule 13G states that on January 25, 1995 Mellon Bank,
N.A. held 1,922,368 shares, which shares are included in the total above.
Upon termination of the Plan, participants were given the immediate right to
receive their account balances under the ESOP or to have them transferred to
the Company's 401(k) Savings Plan or any other plan or IRA that can receive
an eligible rollover distribution.
(4) Systematic Financial Management, Inc. ("SFMI") filed a Schedule 13G dated
February 13, 1995 with the Securities and Exchange Commission pursuant to the
Securities Exchange Act of 1934. The Schedule 13G states that as of December
31, 1994 SFMI and certain of its subsidiary corporations are the beneficial
owners of 1,717,129 shares of the Company's common stock of which SFMI has
sole voting power as to 0 shares, shares voting power as to 125,045 shares,
sole dispositive power as to 1,717,129 shares and shared dispositive power as
to 0 shares.
(5) Based on best records available to the Company.
(6) Of such shares, Mr. Hanks has sole power to vote and no power to dispose
of 24,000 shares.
(7) Of such shares, Mr. Zarges has sole power to vote and no power to dispose
of 7,500 shares.
(8) Of such shares, certain executive officers have sole power to vote and no
power to dispose of 33,750 shares beneficially owned by them.
</TABLE>
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
INDEBTEDNESS INFORMATION. There are no officers or directors who have
had, at any time since January 1, 1994, more than $60,000 of debt to the
Company.
RELATED TRANSACTIONS. On May 18, 1994, Mr. and Mrs. Agee sold their
residence located in Boise, Idaho, to PHH Homequity Corporation (the
Company's agent for its relocation program) for an amount equal to $650,000.
The purchase price for the home, which was held by the Agee's for more than
two years, was derived by an average of two real estate appraisals.
The appraisals were obtained by the Company from Sullivan Real Estate
Appraisal and Appraisals of Value, both headquartered in Boise, Idaho. The
purchase of the home for $650,000 by the Company's agent was authorized by
the Executive Compensation and Nominating Committee of the Board of
Directors. The residence was sold on July 8, 1994 for $628,000 to an
independent third party. The Company incurred a loss of ($75,490) in
commissions and carrying costs, which included the difference between the
purchase price and the sales price, in connection with the purchase and sale
of the home.
III-15
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
FORM 8-K.
<TABLE>
<CAPTION>
PAGE(S)
<S> <C>
(a) DOCUMENTS FILED AS A PART OF THIS ANNUAL REPORT ON FORM 10-K.
1. The Consolidated Financial Statements, together with the report
thereon of Deloitte & Touche, LLP dated June 26, 1995, are included
in Part II, Item 8 of this Annual Report on Form 10-K
Independent Auditors' Report II-15
Consolidated Statements of Operations for years ended December 31,
1994, 1993, and 1992 II-16
Consolidated Statements of Cash Flows for years ended December 31,
1994, 1993 and 1992 II-17
Consolidated Balance Sheets at December 31, 1994 and 1993 II-18, II-19
Consolidated Statements of Stockholders' Equity for years ended
December 31, 1994, 1993 and 1992 II-20
Notes to Consolidated Financial Statements II-21-II-39
2. Financial Statement Schedule as of December 31, 1994 and 1993
included in Part IV of this Annual Report on Form 10-K
Valuation and Qualifying Accounts IV-3
Financial statement schedules not listed above are omitted
because they are not required or are not applicable, or the
required information is given in the financial statements
including the notes thereto. Captions and column headings have
been omitted where not applicable.
3. Exhibits
The exhibits to this Annual Report on Form 10-K are listed in the
Exhibit Index contained elsewhere in this Annual Report.
(B) REPORTS ON FORM 8-K.
No reports on Form 8-K were filed during the fourth quarter of 1994.
</TABLE>
IV-1
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Corporation has duly caused this Annual Report on
Form 10-K to be signed on its behalf by the undersigned, thereunto duly
authorized on June 26, 1995.
Morrison Knudsen Corporation
By /s/ R.A. Tinstman
----------------------------------------------------
R.A. Tinstman, President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Annual Report has been signed below on June 26, 1995 by the following persons
on behalf of the Corporation in the capacities indicated.
<TABLE>
<C> <S>
President and Chief Executive Officer and Director
/s/ R.A. Tinstman (Principal Executive Officer)
- ----------------------------------
R.A. Tinstman
Executive Vice President and Chief Financial Officer
/s/ D.M. Slavich (Principal Financial Officer)
- ----------------------------------
D.M. Slavich
Vice President and Controller
/s/ M.E. Howland (Principal Accounting Officer)
- ----------------------------------
M.E. Howland
/s/ J. Arrillaga* Director
- ----------------------------------
J. Arrillaga
/s/ L.E. Fox* Director
- ----------------------------------
L.E. Fox
/s/ C.B. Hemmeter* Director
- ----------------------------------
C.B. Hemmeter
/s/ P.S. Lynch* Director
- ----------------------------------
P.S. Lynch
/s/ R.A. McCabe* Director
- ----------------------------------
R.A. McCabe
/s/ R.S. Miller, Jr. Director
- ----------------------------------
R.S. Miller, Jr.
/s/ I.C. Peden* Director
- ----------------------------------
I.C. Peden
/s/ J.W. Rogers, Jr.* Director
- ----------------------------------
J.W. Rogers, Jr.
/s/ G.R. Roche* Director
- ----------------------------------
G.R. Roche
* Stephen G. Hanks, by signing his name hereto, does hereby sign this Annual
Report on Form 10-K on behalf of each of the above-named officers and
directors of Morrison Knudsen Corporation, pursuant to powers of attorney
executed on behalf of each such officer and director.
*By /s/ S.G. Hanks
----------------------------------------------------
S.G. Hanks, Attorney-in-fact
</TABLE>
IV-2
<PAGE>
MORRISON KNUDSEN CORPORATION
SCHEDULE II. VALUATION AND QUALIFYING AND RESERVE ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 1994 AND 1993
(THOUSANDS OF DOLLARS)
ALLOWANCE FOR DOUBTFUL NOTES AND ACCOUNTS RECEIVABLES
<TABLE>
Balance at Provisions Balance at
Beginning Charged to End of
Year Ended of Year Operations Deductions Period
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
December 31, 1994 $(1,277) $(16,600) $1,516 $(16,361)
December 31, 1993 (1,237) (792) 752 (1,277)
December 31, 1992 (367) (870) -- (1,237)
</TABLE>
DEFERRED INCOME TAX ASSET VALUATION ALLOWANCE
<TABLE>
Balance at Provisions Balance at
Beginning Charged to End of
Year Ended of Year Operations Deductions Period
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
December 31, 1994 $ -- $(134,846) $ -- $(134,846)
</TABLE>
ACCRUALS FOR ESTIMATED LOSSES ON UNCOMPLETED CONTRACTS
<TABLE>
Balance at Provisions Balance at
Beginning Charged to End of
Year Ended of Year Operations Deductions Period
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
December 31, 1994 $ (930) $(156,989) $ 2,220 $(155,699)
December 31, 1993 (7,091) (1,869) 8,030 (930)
December 31, 1992 (1,011) (28,993) 22,913 (7,091)
</TABLE>
ACCRUALS FOR ESTIMATED LOSSES ON UNCOMPLETED CONTRACTS DEDUCTED
FROM INVESTMENTS IN CONSTRUCTION JOINT VENTURES
<TABLE>
Balance at Provisions Balance at
Beginning Charged to End of
Year Ended of Year Operations Deductions Period
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
December 31, 1994 $(2,569) $(29,292) $ -- $(31,861)
December 31, 1993 (216) (2,569) 216 (2,569)
December 31, 1992 (427) (2,232) 2,443 (216)
</TABLE>
WARRANTY AND MAINTENANCE LIABILITIES
<TABLE>
Balance at Provisions Balance at
Beginning Charged to End of
Year Ended of Year Operations Deductions Period
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
December 31, 1994 $(6,176) $(6,058) $6,082 $(6,152)
December 31, 1993 (4,833) (5,855) 4,512 (6,176)
December 31, 1992 (7,035) (2,993) 5,195 (4,833)
</TABLE>
IV-3
<PAGE>
MORRISON KNUDSEN CORPORATION
EXHIBIT INDEX
COPIES OF EXHIBITS WILL BE SUPPLIED UPON REQUEST. THERE IS NO CHARGE FOR
EXHIBIT 13 - MORRISON KNUDSEN CORPORATION'S ANNUAL REPORT TO STOCKHOLDERS.
OTHER EXHIBITS WILL BE PROVIDED AT A FEE OF $.25 PER PAGE REQUESTED.
EXHIBITS MARKED WITH AN ASTERISK ARE FILED HEREWITH, THE REMAINDER OF
THE EXHIBITS HAVE HERETOFORE BEEN FILED WITH THE COMMISSION AND ARE
INCORPORATED BY REFERENCE.
EXHIBIT
NUMBER EXHIBITS
- ------ --------
3.1 The registrant's Restated Certificate of Incorporation, including
all amendments thereto (filed as Exhibit 4.1 to Form S-3
Registration Statement No. 33-55402 filed on December 4, 1992 and
incorporated herein by reference.)
3.2 * The registrant's Restated By-Laws, including all amendments thereto.
4.1 The registrant's Rights Agreement dated as of June 12, 1986 (the
"Rights Agreement") with Bank of America National Trust and Savings
Association, as Rights Agent (filed as Exhibit 2.1 to Registration
Statement on Form 8-A filed on June 25, 1986 and incorporated herein
by reference).
Amendment to the registrant's Rights Agreement dated as of July 7,
1988 with Bank of America National Trust and Savings Association
(filed as Exhibit 28 to Form 8-K Current Report dated July 7, 1988
and incorporated herein by reference.)
* Second Amendment to the registrant's Rights Agreement dated as of
December 23, 1994 with Norwest Bank Minnesota, N.A., as Successor
Rights Agent.
4.2 The registrant's amended credit agreement dated as of March 31, 1994
with Morgan Guaranty Trust Company of New York, Bank of America
National Trust and Savings Association, Continental Bank N.A.,
Deutsche Bank AG, Society National Bank and National Westminster
Bank PLC with combined commitments of the banks in the aggregate
amount of $150 million (filed as Exhibit 4.2 to Form 10-K/A Annual
Report for year ended December 31, 1993 filed on April 13, 1995 and
incorporated herein by reference.)
4.3 The registrant's amended standby letter of credit and reimbursement
agreement dated as of August 4, 1992 with Bank of America National
Trust and Savings Association, as Agent, and other financial
institutions with combined commitments of the banks in the aggregate
amount of $190 million (filed as Exhibit 4.4 to Form 10-K/A Annual
Report for year ended December 31, 1993 filed on April 13, 1995 and
incorporated herein by reference.)
4.4 * The registrant's Credit Agreement dated as of April 11, 1995 with
Mellon Bank, N.A., as Administrative Agent and Co-Agent, and Bank of
America National Trust and Savings Association, as Co-Agent, and
other financial institutions with combined commitments of the banks
in the aggregate of $110 million; as amended by the First Amendment
to Credit Agreement dated as of April 25, 1995 increasing the
aggregate to $122,100,000; and, as amended by the Second Amendment
to Credit Agreement dated as of May 31, 1995.
4.5 The registrant agrees to provide the Securities and Exchange
Commission, upon request, with copies of instruments defining the
rights of holders of other long-term debt of the registrant.
<PAGE>
10.1 Agreement to Vary Shareholders Agreement and Plan of Restructuring
and for the Sale and Purchase of Shares in McConnell Dowell
Investments, Inc. among the registrant, McConnell Dowell Holdings
Pty Limited and McConnell Dowell Corporation Limited dated April 29,
1992 (filed as Exhibit 10.4 to Form 10-K Annual Report for year
ended December 31, 1992 and incorporated herein by reference.)
10.2 Form of Guaranty by the registrant, as Guarantor, in favor of Morgan
Guaranty Trust Company of New York, as Trustee (filed as Exhibit 4.2
to Amendment No. 1 to Form S-3 Registration Statement No. 33-50046
filed on October 30, 1992 and incorporated herein by reference.)
10.3 Form of Indenture of Trust between the City of San Diego and Morgan
Guaranty Trust Company of New York, as Trustee (filed as Exhibit 4.3
to Amendment No. 1 to Form S-3 Registration Statement No. 33-50046
filed on October 30, 1992 and incorporated herein by reference.)
10.4 Form of Loan Agreement between the City of San Diego and National
Steel and Shipbuilding Company (filed as Exhibit 4.4 to Amendment
No. 1 to Form S-3 Registration Statement No. 33-50046 filed on
October 30, 1992 and incorporated herein by reference.)
10.5 Transfer Agreement between the registrant and MK Rail Corporation
(filed as Exhibit 10.4 to Form 10-Q Quarterly Report for quarter
ended June 30, 1994 and incorporated herein by reference.)
10.6 Environmental Liability Transfer Agreement between the registrant
and MK Rail Corporation (filed as Exhibit 10.5 to Form 10-Q
Quarterly Report for quarter ended June 30, 1994 and incorporated
herein by reference.)
10.7 Tax Matters Agreement between the registrant and MK Rail Corporation
(filed as Exhibit 10.6 to Form 10-Q Quarterly Report for quarter
ended June 30, 1994 and incorporated herein by reference.)
10.8 Employee Transfer and Benefits Agreement between the registrant and
MK Rail Corporation (filed as Exhibit 10.7 to Form 10-Q Quarterly
Report for quarter ended June 30, 1994 and incorporated herein by
reference.)
10.9 Indemnification Agreement dated October 20, 1994 between Morrison
Knudsen Corporation, an Ohio corporation, and MK Rail Corporation
(filed as Exhibit 10.1 to Form 10-Q Quarterly Report for quarter
ended September 30, 1994 and incorporated herein by reference.)
10.10 * The registrant's Global Settlement Agreement dated as of June 15,
1995 with MK Rail Corporation.
10.11 * Form of Note Agreement between the registrant and MK Rail
Corporation.
10.12 * Form of Mutual Release between the registrant and MK Rail
Corporation.
10.13 * Form of Indemnification Agreement between the registrant and MK Rail
Corporation.
10.14 * The registrant's Share Purchase Agreement dated as of June 15, 1995
with MK Rail Corporation.
2
<PAGE>
10.15 Shareholders Agreement dated December 18, 1993 among Morrison
Knudsen BV, a wholly owned subsidiary of the registrant, Lambique
Beheer BV and Ergon Overseas Holdings Limited. [To be filed by
amendment; subject to Freedom of Information Act request for
confidential treatment.]
10.16 * The registrant's Agreement of Indemnity dated July 1, 1992 with
Fidelity and Deposit Company of Maryland and Amendment thereto dated
March 3, 1995.
10.17 * Agreement of Indemnity dated February 1, 1995 between MK Rail
Corporation and Fidelity and Deposit Company of Maryland.
10.18 * Stock Purchase Agreement dated as of May 12, 1995 between the
registrant and Leucadia National Corporation, as amended by
Amendment No. 1 to Stock Purchase Agreement dated as of May 17,
1995, Amendment No. 2 to Stock Purchase Agreement dated as of May
22, 1995, and Amendment No. 3 to Stock Purchase Agreement dated as
of May 24, 1995.
10.19 * Stock Purchase Agreement dated as of June 2, 1995 between the
registrant and Western Acquisition Corp.
MANAGEMENT CONTRACT OR COMPENSATORY PLAN OR ARRANGEMENT WHICH IS
SEPARATELY IDENTIFIED IN ACCORDANCE WITH ITEM 14(A) (3) OF FORM 10-K.
10.20 The registrant's Executive Incentive Plans for the
years 1972 through 1981, inclusive (filed as Exhibit
10.2 to Form 10-K Annual Report for year ended
December 31, 1990 and incorporated herein by
reference.)
10.21 The registrant's 1982 Executive Incentive Plan, as
amended (filed as Exhibit 10.7 to Form 10-K Annual
Report for year ended December 31, 1993 and
incorporated herein by reference.)
10.22 A description of the registrant's Key Executive
Disability Insurance Plan (filed as Exhibit 10.12 to
Form 10-K Annual Report for year ended December 31,
1992 and incorporated herein by reference.)
10.23 The registrant's Key Executive Life Insurance Plan
(filed as Exhibit 10.13 to Form 10-K Annual Report
for year ended December 31, 1992 and incorporated
herein by reference.)
10.24 The registrant's Key Executive Long-Term Incentive
Plan (filed as Exhibit 10.2 to Form 10-Q Quarterly
Report for quarter ended March 31, 1991 and
incorporated herein by reference.)
10.25 The registrant's Long-Term Performance Compensation
Benefit Plan (filed as Exhibit 10.8 to Form 10-K
Annual Report for year ended December 31, 1991 and
incorporated herein by reference.)
10.26 The registrant's Long-Term Incentive Plan for
Corporate Executives (filed as Exhibit 10.3 to Form
10-Q Quarterly Report for quarter ended March 31,
1994 and incorporated herein by reference.)
10.27 The registrant's Long-Term Incentive Plan for the
Engineering and Construction Group (filed as Exhibit
10.4 to Form 10-Q Quarterly Report for quarter ended
March 31, 1994 and incorporated herein by
reference.)
3
<PAGE>
10.28 The registrant's Stock Incentive Plan, as amended
(filed as Exhibit 10.16 to Form 10-K Annual Report
for year ended December 31, 1992 and incorporated
herein by reference.)
10.29 The registrant's Chief Executive Officer Incentive
Plan (filed as Appendix I to Proxy Statement dated
April 4, 1994 and incorporated herein by reference.)
10.30 The registrant's Stock Compensation Plan (filed as
Appendix II to Proxy Statement dated April 4, 1994
and incorporated herein by reference.)
10.31 * The registrant's Non-Employee Directors' Deferred
Compensation Plan, as amended.
10.32 The registrant's Retirement Plan for Non-Employee
Directors, as amended (filed as Exhibit 10.22 to
Form 10-K Annual Report for year ended December 31,
1992 and incorporated herein by reference.)
10.33 The registrant's Stock Option Plan for Non-Employee
Directors, as amended (filed as Exhibit 10.23 to
Form 10-K Annual Report for year ended December 31,
1992 and incorporated herein by reference.)
10.34 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.
10.35 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.
10.36 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.
10.37 The registrant's employment agreement with William
J. Agee dated April 2, 1991 (filed as Exhibit 10.1
to Form 10-Q Quarterly Report for quarter ended
March 31, 1991 and incorporated herein by
reference.)
10.38 The registrant's Key Executive Long-Term Incentive
Plan Participation Agreement with William J. Agee
dated November 1, 1991, amending the registrant's
employment agreement with William J. Agee dated
April 2, 1991 (filed as Exhibit 10.16 to Form 10-K
Annual Report for year ended December 31, 1991 and
incorporated herein by reference.)
10.39 The registrant's Supplemental Retirement Benefit
Agreement with William J. Agee dated April 2, 1991
(filed as Exhibit 10.26 to Form 10-K Annual Report
for year ended December 31, 1992 and incorporated
herein by reference.).
4
<PAGE>
10.40 The registrant's Deferred Compensation Agreement
with Stephen R. Grant dated January 1, 1989 (filed
as Exhibit 10.27 to Form 10-K Annual Report for year
ended December 31, 1992 and incorporated herein by
reference.)
10.41 The registrant's Amendment to Deferred Compensation
Agreement with Stephen R. Grant dated July 15, 1993
(filed as Exhibit 10.3 to Form 10-Q Quarterly Report
for quarter ended June 30, 1993 and incorporated
herein by reference.)
10.42 * The registrant's employment agreement with Stephen
R. Grant dated as of October 24, 1994.
10.43 * The registrant's employment agreement with Robert S.
Miller, Jr. dated as of April 1, 1995.
10.44 * The registrant's employment agreement with Denis M.
Slavich dated as of March 9, 1995.
10.45 The registrant's employment agreement with Gunnar E.
Sarsten dated as of March 1, 1994 (filed as Exhibit
10.26 to Form 10-K Annual Report for year ended
December 31, 1993 and incorporated herein by
reference.)
13. The registrant's Annual Report to Stockholders for the year ended
December 31, 1994, furnished for the information of the SEC and not
deemed to be "filed" as part of the Form 10-K filing.
21. * Subsidiaries of the registrant.
23. * Consent of Deloitte & Touche, independent auditors.
24. * Powers of Attorney.
27. * Financial Data Schedule.
5
<PAGE>
EXHIBIT 3.2
RESTATED BY-LAWS
OF
MORRISON KNUDSEN CORPORATION
(Restated as of April 1, 1995)
OFFICES.
1. The registered office shall be in the City of Wilmington, County
of New Castle, State of Delaware, and the name of the resident agent in charge
thereof is The Corporation Trust Company.
The corporation may also have an office in the City of Boise, Ada
County, State of Idaho, and offices at such other places as the Board of
Directors may from time to time appoint or the business of the corporation may
require.
SEAL.
2. The corporate seal shall have inscribed thereon the name of the
corporation, the year of its organization, and the words "Corporate Seal,
Delaware". Said seal may be used by causing it or a facsimile thereof to be
impressed or affixed or reproduced or otherwise.
STOCKHOLDERS' MEETINGS.
3. All meetings of the stockholders shall be held at the office of
the corporation in the City of Wilmington, State of Delaware, or in the City of
Boise, State of Idaho, or at such other places as the Board of Directors may
from time to time appoint.
4. An annual meeting of stockholders shall be held the first Friday
in May, the exact date, time and place to be fixed by resolution of the Board of
Directors, when they shall elect by a plurality vote, by ballot, the members of
that class of the Board of Directors whose terms expire coincident with such
annual meeting as provided in Article SIXTH of the Certificate of Incorporation,
and transact such other business as may properly be brought before the meeting.
To be properly brought before an annual meeting, business must be specified in
the notice of meeting (or any supplement thereto) given by or at the direction
of the Board of Directors, otherwise properly brought before the meeting by or
at the direction of the Board of Directors, or otherwise properly brought before
the meeting by a stockholder. In addition to any other applicable requirements,
for business to be properly brought before an annual meeting by a stockholder,
the stockholder must have given timely
<PAGE>
notice thereof in writing to the Secretary. To be timely, a shareholder's
notice must be delivered to or mailed and received at the principal executive
office of the corporation, not less than 50 days nor more than 75 days prior to
the meeting; PROVIDED, HOWEVER, that in the event that less than 65 days notice
or prior public disclosure of the date of the meeting is given or made to
stockholders, notice by the stockholder to be timely must be so received not
later than the close of business on the 15th day following the day on which such
notice of the date of the annual meeting was mailed or such public disclosure
was made. For purposes of this Section 4 and Section 12(b) of these By-laws,
public notice or disclosure shall be deemed to first be given when disclosure of
such date of the meeting of stockholders is first made in a press release
reported by the Dow Jones News Services, Associated Press or comparable national
news service, or in a document publicly filed by the Corporation with the
Securities and Exchange Commission pursuant to Sections 13, 14 or 15(d) of the
Securities Exchange Act of 1934, as amended. A stockholder's notice to the
Secretary shall set forth as to each matter the stockholder proposes to bring
before the annual meeting (i) a brief description of the business desired to be
brought before the annual meeting and the reasons for conducting such business
at the annual meeting, (ii) the name and record address of the stockholder
proposing such business, (iii) the class and number of shares of the corporation
which are beneficially owned by the stockholder, and (iv) any material interest
of the stockholder in such business. Notwithstanding anything in these By-Laws
to the contrary, no business shall be conducted at the annual meeting except in
accordance with the procedures set forth in this Section 4; PROVIDED, HOWEVER,
that nothing in this Section 4 shall be deemed to preclude discussion by any
stockholder of any business properly brought before the annual meeting in
accordance with said procedure. The Chairman of an annual meeting shall, if the
facts warrant, determine and declare to the meeting that business was not
properly brought before the meeting in accordance with the provisions of these
By-Laws, and if he should so determine and declare, any such business not
properly brought before the meeting shall not be transacted.
5. The holders of a majority of the stock issued and outstanding,
and entitled to vote thereat, present in person, or represented by proxy, shall
be requisite and shall constitute a quorum at all meetings of the stockholders
for the transaction of business, except as otherwise provided by law, by the
Certificate of Incorporation or these By-Laws. If, however, such majority shall
not be present or represented at any meeting, including an adjourned meeting, of
the stockholders, the stockholders entitled to vote thereat, and present in
person or by proxy, shall have the power to adjourn the meeting. When a meeting
is adjourned to another date or place, notice need not be given of the adjourned
meeting if the time and place thereof are announced at the meeting at which the
adjournment is taken. At the adjourned meeting, any business may be transacted
which might have been transacted at the original meeting. If the adjournment is
for more than thirty days, or if, after the adjournment, a new record date is
fixed for the adjourned meeting, a notice of the adjourned meeting shall be
given to each stockholder of record entitled to vote at the meeting.
6. At each meeting of the stockholders every stockholder having the
right to vote shall be entitled to vote in person, or by proxy appointed by an
instrument authorized by such stockholder and bearing a date not more than three
years prior to said
BY-LAWS - Page 2
<PAGE>
meeting, unless said instrument provides for a longer period. The vote for
directors, and upon the demand of any stockholder, the vote upon any questions
before the meeting, shall be by ballot. All proxies, ballots and voting
tabulations that identify shareholders shall be kept confidential, except when
disclosure is mandated by the laws of the State of Delaware or is expressly
requested by a shareholder, or during any contested election or vote of
stockholders.
7. Written notice of the annual meeting shall be mailed to each
stockholder entitled to vote thereat at such address as appears on the stock
ledger of the corporation at least ten days prior to the meeting.
8. At least ten days before every meeting of stockholders, a
complete list of the stockholders entitled to vote at the meeting, arranged in
alphabetical order, and showing the address of each stockholder and the number
of shares registered in the name of each stockholder shall be prepared by an
independent inspector of election and not an employee of the Corporation. Such
list shall be open to the examination of any stockholder, for any purpose
germane to the meeting, during ordinary business hours, for a period of at least
ten days prior to the meeting, either at a place within the city where the
meeting is to be held, which place shall be specified in the notice of the
meeting, or if not so specified, at the place where the meeting is to be held.
The list shall also be produced and kept at the time and place of the meeting
during the whole time thereof and may be inspected by any stockholder who is
present.
9. Special meetings of the stockholders, for any purpose, or
purposes, unless otherwise prescribed by statute, may be called by the chairman
of the board, and shall be called by the chairman of the board or secretary at
the request in writing of a majority of the Board of Directors, which request
shall state the purpose or purposes of the proposed meeting.
10. Business transacted at all special meetings shall be confined to
the objects stated in the call.
11. Written notice of a special meeting of stockholders, stating the
time and place and object thereof shall be mailed, postage prepaid, not less
than ten nor more than sixty days before such meeting, to each stockholder
entitled to vote thereat at such address as appears on the books of the
corporation.
DIRECTORS.
12. (a) The number of directors which shall constitute the whole
Board of Directors shall be fixed from time to time by a resolution of a
majority of the Board of Directors, subject to the provisions of Article SIXTH
of the Certificate of Incorporation. The directors, other than those who may be
elected by a class or series of preferred stock, shall be divided into three
classes, as nearly equal in number as possible, as provided in Article SIXTH, in
the manner determined by a resolution of a majority of the Board of Directors.
The initial Board of Directors shall consist of ten directors and shall be
divided into three classes, the first class to consist of four directors to hold
office initially for a term
BY-LAWS - Page 3
<PAGE>
expiring at the annual meeting of stockholders to be held in 1985, the second
class to consist of three directors to hold office initially for a term expiring
at the annual meeting of stockholders to be held in 1986, and the third class to
consist of three directors to hold office initially for a term expiring at the
annual meeting of stockholders to be held in 1987. Any director other than
those directors who may be elected by any class or series of preferred stock may
be removed for cause, but only for cause, at any time, by the affirmative vote
of at least a majority of the stock represented and entitled to vote at any
regular or special meeting of stockholders provided that written notice of the
proposed removal is contained in the notice of such meeting, and the vacancy in
the Board of Directors caused by any such removal may be filled by the
stockholders at such meeting, or if the stockholders fail to fill such vacancy,
by the Board of Directors.
(b) Only persons who are nominated in accordance with the
following procedures shall be eligible for election as directors. Nominations
of persons for election to the Board of the Directors may be made at a meeting
of stockholders by or at the direction of the Board of Directors by any
nominating committee or person appointed by the Board of Directors or by a
stockholder of the corporation entitled to vote for the election of Directors at
the meeting who complies with the notice procedures set forth in these By-Laws.
Such nominations, other than those made by or at the direction of the Board of
Directors, shall be made pursuant to timely notice in writing to the Secretary.
To be timely, a stockholder's notice shall be delivered to or mailed and
received at the principal executive offices of the corporation not less than 50
days nor more than 75 days prior to the meeting; PROVIDED, HOWEVER, that in the
event that less than 65 days notice or prior public disclosure of the date of
the meeting is given or made to stockholders, notice by the stockholder to be
timely must be so received not later than the close of business on the 15th day
following the day on which such notice of the date of the meeting was mailed or
such public disclosure was made. Such stockholder's notice to the Secretary
shall set forth (i) as to each person whom the stockholder proposes to nominate
for election or reelection as a director (A) the name, age, business address and
residence address of the person, (B) the principal occupation or employment of
the person, (C) the class and number of shares of capital stock of the
corporation which are beneficially owned by the person and (D) any other
information relating to the person that is required to be disclosed in
solicitations for proxies for election of Directors pursuant to Rule 14A under
the Securities Exchange Act of 1934, as amended; and (ii) as to the stockholder
giving the notice (A) the name and record address of the stockholder and (B) the
class and number of shares of capital stock of the corporation which are
beneficially owned by the stockholder. The corporation may require any proposed
nominee to furnish such other information as may reasonably be required by the
corporation to determine the eligibility of such proposed nominee to serve as a
director of the corporation. No person shall be eligible for election as a
director of the corporation unless nominated in accordance with the procedures
set forth herein. The Chairman of the meeting shall, if the facts warrant,
determine and declare to the meeting that a nomination was not made in
accordance with the foregoing procedure, and if he should so determine and
declare, the defective nomination shall be disregarded.
13. The directors may hold their meetings at the City of Boise, Ada
County, State of Idaho, and at such other places within or without the states of
Idaho or Delaware as the Board of Directors may determine, and may have one or
more offices and keep the
BY-LAWS - Page 4
<PAGE>
books of the corporation outside of Delaware, at the office of the corporation
in the City of Boise, State of Idaho or at such other places as they may from
time to time determine.
14. In addition to the powers and authorities by these By-Laws
expressly conferred upon them, the Board may exercise all such powers of the
corporation and do all such lawful acts and things as are not by statute or by
the Certificate of Incorporation or by these By-Laws directed or required to be
exercised or done by the stockholders.
COMMITTEES.
15. The Board of Directors may, by resolution or resolutions, passed
by a majority of the whole Board, designate one or more committees, each
committee to consist of two or more of the directors of the corporation, which,
to the extent provided in said resolution or resolutions or in these By-Laws,
shall have and may exercise to the fullest extent permitted by law the powers of
the Board of Directors in the management of the business and affairs of the
corporation and may have power to authorize the seal of the corporation to be
affixed to all papers which may require it. Such committee or committees shall
have such name or names as may be stated in these By-Laws or as may be
determined from time to time by resolution adopted by the Board of Directors.
16. The committees shall keep regular minutes of their proceedings
and report the same to the Board when required.
COMPENSATION OF DIRECTORS.
17. Compensation for directors, if any, and policy for reimbursement
of expenses for directors shall be fixed by resolution of the Board. Directors
shall not be precluded from serving the Corporation in any other capacity and
receiving compensation therefor.
18. Members of special or standing committees may be allowed like
compensation for attending committee meetings.
MEETINGS OF THE BOARD.
19. Immediately following each annual meeting of stockholders, the
Board of Directors shall hold a regular meeting for the purpose of organization
and the transaction of other business. Notice of each such meeting is hereby
considered to have been given.
20. Regular meetings, other than the aforesaid organizational
meeting, shall be held without call at such times as shall from time to time be
determined by the Board of Directors. Notice of each and all such regular
meetings is considered to have been given.
21. (a) Special meetings of the Board of Directors for any purpose
or purposes may be called at any time by the chairman of the board or if he is
absent or unable to, or refuses to act, by the president, any vice president or
by any two directors.
BY-LAWS - Page 5
<PAGE>
(b) Written notice of the time and place of special meetings
shall be delivered personally to the directors or sent to each director by mail
or by telegram at least three days prior to the holding of the meeting.
22. At all meetings of the Board, no less than one-third of the total
number of directors shall be necessary and sufficient to constitute a quorum for
the transaction of business and the act of a majority of the directors present
at any meeting at which there is a quorum, shall be the act of the Board of
Directors, except as may be otherwise specifically provided by statute or by the
Certificate of Incorporation or by these By-Laws; provided, however, that in the
absence of a quorum a majority of the directors present at any meeting, either
regular or special, may adjourn from time to time until the time fixed for the
next regular meeting of the Board of Directors. The transactions of any meeting
of the Board of Directors, whether or not called or noticed or wherever held,
shall be as valid as though taken at a meeting duly held after regular call and
notice, if a quorum be present and if, either before or after the time stated
therein, each director not present signs a written waiver of notice. All such
waivers shall be filed with the corporate records or made a part of the minutes
of the meeting to which they respectively relate.
23. Any meeting, regular or special, of the Board of Directors (or
any meeting of any committee of the Board of Directors designated pursuant to
the provisions of these By-Laws) may be participated in by any director or
directors by means of conference telephone or similar communications equipment
by means of which all persons participating in the meeting can hear each other,
and participation in a meeting pursuant to this By-Law shall constitute presence
in person at such meeting.
OFFICERS.
24. The principal officers of the corporation shall be a president,
one or more vice presidents, a secretary, a treasurer and a controller. The
Board may at its discretion elect one or more assistant secretaries, assistant
treasurers, and assistant controllers, and such other subordinate officers as it
may deem appropriate; and the chairman of the board or the chief executive
officer may appoint additional subordinate officeholders, who shall not be
corporate officers, to such positions, with such limited authority and such
titles, as the chairman of the board or the chief executive officer may
determine. Any person may hold two or more offices except the offices of
president and secretary.
25. The principal officers shall be chosen annually by the Board of
Directors at the first meeting of the Board following the stockholders' annual
meeting, or as soon thereafter as is conveniently possible, and vacancies
occurring shall be filled from time to time by the Board of Directors.
Subordinate officers appointed by the Board may be chosen from time to time and
shall hold office for such period, have such authority and perform such duties
as may be provided in these By-Laws or as the Board may from time to time
determine. Subordinate officeholders may be appointed from time to time by the
chairman of the board or president in accordance with Section 24 of these By-
Laws and shall hold office for such period, and have such authority and title,
and perform such duties as may be designated by the chairman of the board or
president; provided that such
BY-LAWS - Page 6
<PAGE>
subordinate officeholders shall not have or perform authorities or duties co-
extensive with the authorities or duties of principal or subordinate officers
chosen by the Board of Directors.
26. The salaries of all principal officers shall be fixed by the
Board of Directors. The salaries of all subordinate officers and subordinate
officeholders shall be fixed by the chairman of the board.
27. The officers of the corporation shall hold office until their
successors are chosen and qualify in their stead. Any officer elected or
appointed by the Board of Directors may be removed at any time by the
affirmative vote of a majority of the whole Board of Directors. If the office
of any officer or officers becomes vacant for any reason, the vacancy shall be
filled by the affirmative vote of a majority of the whole Board of Directors.
CHAIRMAN OF THE BOARD.
28. The chairman of the board shall preside at all meetings of the
Board of Directors and the stockholders and shall see that all orders and
resolutions of the Board of Directors and its committees are carried into
effect. The position of the chairman of the board shall be distinct from the
that of the president of the corporation and no one individual shall hold both
positions at the same time. Except as limited by resolution of the Board of
Directors, the chairman of the board shall have authority to execute all
contracts, bonds, mortgages and other instruments of the corporation and, where
such instruments require a seal, shall execute under the seal of the
corporation.
PRESIDENT.
29. Subject to the control and direction of the Board of Directors,
the president shall be the chief executive officer of the corporation and shall
have general supervision of the business, property, operations, policies and
affairs of the corporation and authority over all of its other officers and
employees. The position of the president shall be distinct from that of the
chairman of the board of the corporation and no one individual shall hold both
positions at the same time. Except as may be limited by resolution of the Board
of Directors, the president shall have authority to execute all contracts,
bonds, mortgages and other instruments of the corporation and, where such
instruments require a seal, shall execute under the seal of the corporation.
SECRETARY AND ASSISTANT SECRETARIES.
30. (a) The secretary shall attend all sessions of the Board and all
meetings of the stockholders and record all votes and the minutes of all
proceedings in a book to be kept for that purpose; and shall perform like duties
for the standing committees when required. He shall give, or cause to be given,
notice of all meetings of the stockholders and of the Board of Directors, and
shall perform such other duties as may be prescribed by the Board of Directors
or the chairman of the board. He shall keep in safe custody the seal of the
corporation, and when authorized by the Board, affix the same to any
BY-LAWS - Page 7
<PAGE>
instrument requiring it, and when so affixed, it shall be attested by his
signature or by the signature of the treasurer.
(b) The assistant secretaries shall, in the absence or
disability of the secretary, perform the duties and exercise the powers of the
secretary, and shall perform such other duties as the Board of Directors shall
prescribe.
TREASURER AND ASSISTANT TREASURERS.
31. (a) The treasurer shall have the custody of the corporate funds
and securities and shall keep full and accurate accounts of receipts and
disbursements in books belonging to the corporation and shall deposit all moneys
and other valuable effects in the name and to the credit of the corporation, in
such depositories as may be designated by the Board of Directors.
(b) He shall disburse the funds of the corporation as may be
ordered by the Board, taking proper vouchers for such disbursements, and shall
render to the chairman of the board and directors, at the regular meetings of
the Board, or whenever they may require it, an account of all his transactions
as treasurer and of the financial condition of the corporation.
(c) He shall give the corporation a bond if required by the
Board of Directors in a sum, and with one or more sureties satisfactory to the
Board, for the faithful performance of the duties of his office, and for the
restoration to the corporation, in case of his death, resignation, retirement or
removal from office, of all books, papers, vouchers, money, and other property
of whatever kind in his possession or under his control belonging to the
corporation.
(d) The assistant treasurers in the order of their seniority
shall, in the absence or disability of the treasurer, perform the duties and
exercise the powers of the treasurer, and shall perform such other duties as the
Board of Directors shall prescribe.
CONTROLLER AND ASSISTANT CONTROLLERS.
32. (a) The controller shall be the chief accounting officer of the
corporation. He shall keep or cause to be kept all books of accounts and
accounting records of the corporation and shall keep and maintain, or cause to
be kept and maintained, adequate and correct accounts of the properties and
business transactions of the corporation, including accounts of its assets,
liabilities, receipts, disbursements, gains, losses, capital, surplus and
shares. Any surplus, including earned surplus, paid-in surplus and surplus
arising from a reduction of stated capital, shall be classified according to
source and shown in a separate account. The books of account shall at all times
be open to inspection by any director. He shall prepare or cause to be prepared
appropriate financial statements for the corporation and shall have such other
powers and perform such other duties as may be prescribed by the Board of
Directors, the chairman of the board or the By-Laws.
BY-LAWS - Page 8
<PAGE>
(b) The assistant controllers in the order of their seniority
shall, in the absence or disability of the controller, perform the duties and
exercise the powers of the controller, and shall perform such other duties as
the Board of Directors shall prescribe.
VACANCIES.
33. If the office of any director becomes vacant by reason of his
death, resignation, retirement, disqualification, removal from office or
otherwise, the remaining directors, though less than a quorum, shall choose a
successor who shall hold office for the remainder of the term of the director to
whose office he succeeds and until a successor shall have been duly elected or
the Board of Directors may reduce the number of members who make up the whole
Board.
DUTIES OF OFFICERS MAY BE DELEGATED.
34. In case of the absence of any officer of the corporation, or for
any other reason that the Board may deem sufficient, the Board may delegate, for
the time being, the powers or duties, or any of them of such officer to any
other officer, or to any director, provided, a majority of the entire Board
concurs therein.
CERTIFICATES OF STOCK.
35. The certificates of stock of the corporation shall be numbered
and shall be entered in the books of the corporation as they are issued. They
shall exhibit the holder's name and number of shares. The designations,
preferences, and relative, participating, optional, or other special rights of
the various classes of stock or series thereof and the qualifications,
limitations, or restrictions on such preferences or rights shall be set forth in
full or summarized on the face or back of the certificates which the corporation
shall issue to represent such stock; provided that in lieu of the foregoing
requirements, there may be set forth on the face or back of the certificate a
statement that the corporation will furnish without charge to each stockholder
who so requests the designations, preferences and relative, participating,
optional or other special rights of each class of stock or series thereof and
the qualifications, limitations or restrictions on such preferences or rights.
TRANSFERS OF STOCK.
36. Transfers of stock shall be made on the books of the corporation
only upon due authorization of the person named in the certificate or by
attorney, lawfully constituted in writing, and upon surrender of the certificate
therefor.
RECORD DATE.
37. In order that the corporation may determine the stockholders
entitled to notice of or to vote at any meeting of stockholders or any
adjournment thereof, or entitled to receive payment of any dividend or other
distribution or allotment of any rights, or entitled to exercise any rights in
respect of any change, conversion or exchange of stock or for the purpose of any
other lawful action, the Board of Directors may fix, in advance,
BY-LAWS - Page 9
<PAGE>
a record date, which shall not be more than sixty nor less than ten days before
the date of such meeting.
REGISTERED STOCKHOLDERS.
38. The corporation shall be entitled to treat the holder of record
of any share or shares of stock as the holder in fact thereof and accordingly
shall not be bound to recognize any equitable or other claim to or interest in
such share on the part of any other person, whether or not it shall have express
or other notice thereof save as expressly provided by the laws of Delaware.
LOST CERTIFICATE.
39. Any person claiming a certificate of stock to be lost or
destroyed, shall make an affidavit or affirmation of that fact and advertise the
same in such manner as the Board of Directors may require, and the Board of
Directors may, in their discretion, require the owner of the lost or destroyed
certificate, or his legal representative, to give the corporation a bond, in
such sum as they may direct, not exceeding double the value of the stock, to
indemnify the corporation against any claim that may be made against it on
account of the alleged loss of any such certificate; a new certificate of the
same class and number of shares as the one alleged to be lost or destroyed may
be issued without requiring any bond when, in the judgment of the directors, it
is proper to do so.
INSPECTION OF BOOKS.
40. Subject to the provisions of Delaware law, the directors shall
determine from time to time whether and, if allowed, when and under what
conditions and regulations the accounts and books of the corporation (except
such as may by statute be specifically open to inspection) or any of them shall
be open to the inspection of the stockholders, and the stockholders' rights in
this respect are and shall be restricted and limited accordingly.
CHECKS.
41. All checks or demands for money and notes of the corporation
shall be signed by such officer or officers as the Board of Directors may from
time to time designate, or by such employees of the corporation as the chairman
of the board shall designate with the approval of the Board.
FISCAL YEAR.
42. The fiscal year shall begin the first day of January and shall
end the last day of December of each year.
DIVIDENDS.
43. (a) Dividends upon the capital stock of the corporation, subject
to the provisions of the Certificate of Incorporation, if any, may be declared
by the Board of
BY-LAWS - Page 10
<PAGE>
Directors at any regular or special meeting, pursuant to law. Dividends may be
paid in cash, in property, or in shares of the capital stock.
(b) Before payment of any dividend, there may be set aside out
of any funds of the corporation available for dividends such sum or sums as the
directors from time to time, in their absolute discretion, think proper as a
reserve fund to meet contingencies, or for equalizing dividends, or for
repairing or maintaining any property of the corporation, or for such other
purpose as the directors shall think conducive to the interest of the
corporation.
NOTICES.
44. (a) Whenever under the provisions of these By-Laws, notice is
required to be given to any director, officer, or stockholder, it shall not be
construed to mean personal notice, but such notice may be given in writing, by
mail, by depositing the same in the post office or letter box, in a postpaid,
sealed wrapper, addressed to such stockholder, officer, or director at such
address as appears on the books of the corporation, or in default of other
address, to such director, officer, or stockholder at the General Post Office in
the City of Wilmington, Delaware, and such notice shall be deemed to be given at
the time when the same shall be thus mailed.
(b) Any stockholder, director, or officer may waive any notice
required to be given under these By-Laws.
INDEMNIFICATION OF OFFICERS, DIRECTORS AND EMPLOYEES.
45. The corporation shall indemnify to the full extent authorized by
law any person made or threatened to be made a party to an action or proceeding,
whether criminal, civil, administrative or investigative, by reason of the fact
that he, his testator or intestate is or was a director, officer or employee of
the corporation or any predecessor of the corporation or serves or served any
other enterprise as a director, officer or employee at the request of the
corporation or any predecessor of the corporation.
AMENDMENTS.
46. These By-Laws may be changed, altered, amended or repealed, in
whole or in part, by the affirmative vote of at least two-thirds of the stock
issued and outstanding and entitled to vote thereat, at any regular or special
meeting of the stockholders, provided that written notice of the proposed
change, alteration, amendment or repeal is contained in the notice of the
meeting, or by the affirmative vote of at least two-thirds of the total
membership of the Board of Directors at any regular or special meeting of the
Board of Directors.
BY-LAWS - Page 11
<PAGE>
EXHIBIT 4.1
SECOND AMENDMENT TO RIGHTS AGREEMENT
SECOND AMENDMENT, dated as of December 23, 1994, to the Rights Agreement
dated as of June 12, 1986, as amended by that certain Amendment to Rights
Agreement dated as July 7, 1988 (the "Rights Agreement"), between Morrison
Knudsen Corporation, a Delaware corporation (the "Company") and Bank of America
National Trust and Savings Association, a national banking association, as
Rights Agent (the "Rights Agent").
WHEREAS, the Company has appointed Norwest Bank Minnesota, N.A. as
Successor Rights Agent ("Successor Rights Agent"), effective as of December 23,
1994, in accordance with Section 20 of the Rights Agreement;
WHEREAS, the Company and the Successor Rights Agent desire to amend the
Rights Agreement in accordance with Section 25 to the Rights Agreement.
NOW, THEREFORE, in consideration of the premises and mutual agreements set
forth in the Rights Agreement and this Second Amendment to Rights Agreement, the
parties hereby agree a follows:
1. The fifth sentence of Section 20 of the Rights Agreement shall be
amended in its entirety, to read as follows:
"Any successor Rights Agent, whether appointed by the Company or by
such a court, shall be a corporation organized and doing business under the
laws of the United States or of the States of Idaho, New York or Minnesota
(or of any other state of the United States so long as such corporation is
authorized to do business as a banking institution in the States of Idaho,
New York or Minnesota), in good standing, having a principal office in the
States of Idaho, New York or Minnesota, which is authorized under such laws
to exercise corporate trust powers and is subject to supervision or
examination by federal or state authority and which has at the time of its
appointment as Rights Agent a combined capital or surplus of at least $50
million and maintains such offices as may be required to comply with any
applicable law or with any rule or regulation made pursuant thereto or with
any rule or regulation of any stock exchange, or relating to any
transaction reporting system, on which the Common Shares or the Rights may
from time to time be listed or quoted."
2. The term "Agreement" as used in the Rights Agreement shall be deemed
to refer to the Rights Agreement as amended hereby.
<PAGE>
3. The foregoing amendment shall be effective as of the date hereof an,
except as set forth herein, the Rights Agreement shall remain in full force and
effect and shall be otherwise unaffected hereby.
4. This amendment 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.
IN WITNESS WHEREOF, the parties have caused this Second Amendment to Rights
Agreement to be duly executed and their corporate seals to be affixed, all as of
the day and year first above written.
THE "COMPANY"
MORRISON KNUDSEN CORPORATION
By /s/ Stephen G. Hanks
-------------------------------------
Stephen G. Hanks
Executive Vice President -
Finance and Administration
and Secretary
"SUCCESSOR RIGHTS AGENT"
NORWEST BANK MINNESOTA, N.A.
By /s/ Suzanne M. Swits
-------------------------------------
Assistant Secretary and Trust Officer
<PAGE>
EXHIBIT 4.4
$110,000,000
CREDIT AGREEMENT
DATED AS OF
APRIL 11, 1995
AMONG
MORRISON KNUDSEN CORPORATION,
A DELAWARE CORPORATION,
AND
MORRISON KNUDSEN CORPORATION,
AN OHIO CORPORATION,
AS BORROWERS
THE BANKS AND OTHER FINANCIAL INSTITUTIONS LISTED HEREIN
AS LENDERS
MELLON BANK, N.A.,
AS ADMINISTRATIVE AGENT
AND
MELLON BANK, N.A. AND
BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION,
AS CO-AGENTS
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . 2
1.1. Definitions. . . . . . . . . . . . . . . . . . . . . . . . 2
1.2. Accounting Terms and Determinations. . . . . . . . . . . . 17
1.3. General Construction . . . . . . . . . . . . . . . . . . . 17
ARTICLE II AMOUNT AND TERMS OF THE LOANS. . . . . . . . . . . . . . . 17
2.1. The Loans. . . . . . . . . . . . . . . . . . . . . . . . . 17
2.2. Notice of Borrowing. . . . . . . . . . . . . . . . . . . . 17
2.3. Notice to Lenders; Funding of Loans. . . . . . . . . . . . 18
2.4. Notes. . . . . . . . . . . . . . . . . . . . . . . . . . . 19
2.5. Maturity of Loans. . . . . . . . . . . . . . . . . . . . . 19
2.6. Interest Rates . . . . . . . . . . . . . . . . . . . . . . 19
2.7. Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
(a) Closing Fee . . . . . . . . . . . . . . . . . . . . 20
(b) Administrative Agent's Fee. . . . . . . . . . . . . 20
(c) Bank of America's Fee . . . . . . . . . . . . . . . 20
(d) Collateral Agent's Fee. . . . . . . . . . . . . . . 20
(e) Fees Cumulative . . . . . . . . . . . . . . . . . . 21
2.8. Optional Prepayments . . . . . . . . . . . . . . . . . . . 21
2.9. Mandatory Prepayment . . . . . . . . . . . . . . . . . . . 21
2.10. Application of Payments. . . . . . . . . . . . . . . . . . 23
2.11. General Provisions as to Payments. . . . . . . . . . . . . 23
2.12. Computation of Interest and Fees . . . . . . . . . . . . . 24
2.13. Cash Management System . . . . . . . . . . . . . . . . . . 24
ARTICLE III CHANGE IN CIRCUMSTANCES. . . . . . . . . . . . . . . . . . 24
3.1. Increased Cost . . . . . . . . . . . . . . . . . . . . . . 24
3.2. Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . 25
ARTICLE IV SECURITY . . . . . . . . . . . . . . . . . . . . . . . . . 26
4.1. The Borrowers' Obligations . . . . . . . . . . . . . . . . 26
4.2. Further Assurances . . . . . . . . . . . . . . . . . . . . 26
ARTICLE V CONDITIONS PRECEDENT . . . . . . . . . . . . . . . . . . . 27
5.1. Conditions Precedent to Initial Loans. . . . . . . . . . . 27
(a) Restructuring Documents . . . . . . . . . . . . . . 27
(b) The Notes . . . . . . . . . . . . . . . . . . . . . 27
(c) Legal Opinion of the Borrowers' Counsel . . . . . . 27
(d) Insurance . . . . . . . . . . . . . . . . . . . . . 27
(e) Perfection and Priority of Personal Property
Security Interests. . . . . . . . . . . . . . . . . 27
(f) Descriptions with Respect to Real Property
Collateral. . . . . . . . . . . . . . . . . . . . . 28
(g) Mortgages; Landlord Waivers . . . . . . . . . . . . 28
(h) Title Policies. . . . . . . . . . . . . . . . . . . 28
(i) Environmental Inspection. . . . . . . . . . . . . . 29
(j) Evidence of Indebtedness. . . . . . . . . . . . . . 29
(k) Consents. . . . . . . . . . . . . . . . . . . . . . 29
(l) Disbursement Authorization. . . . . . . . . . . . . 29
(m) Payment of Fees and Expenses. . . . . . . . . . . . 29
(n) Solvency Certificate. . . . . . . . . . . . . . . . 30
i
<PAGE>
(o) Pending and Threatened Litigation . . . . . . . . . 30
(p) Asset Disposition Program . . . . . . . . . . . . . 30
(q) The MK Rail Restructuring.. . . . . . . . . . . . . 30
(r) Other Matters . . . . . . . . . . . . . . . . . . . 30
5.2. Conditions Precedent to All Loans. . . . . . . . . . . . . 30
(a) Borrowings. . . . . . . . . . . . . . . . . . . . . 30
(b) Representations and Warranties. . . . . . . . . . . 30
(c) No Default or Event of Default. . . . . . . . . . . 31
(d) No Violations . . . . . . . . . . . . . . . . . . . 31
(e) Certificate of Chief Financial Officer Regarding
the Budget. . . . . . . . . . . . . . . . . . . . . 31
(f) Officer's Certificate . . . . . . . . . . . . . . . 31
ARTICLE VI REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . 31
6.1. Organization and Qualification . . . . . . . . . . . . . . 32
6.2. Corporate Power and Authorization; Binding Effect. . . . . 32
6.3. No Conflict. . . . . . . . . . . . . . . . . . . . . . . . 32
6.4. No Consents. . . . . . . . . . . . . . . . . . . . . . . . 32
6.5. Absence of Litigation. . . . . . . . . . . . . . . . . . . 33
6.6. No Default under the Restructuring Documents . . . . . . . 33
6.7. Indebtedness . . . . . . . . . . . . . . . . . . . . . . . 33
6.8. Material Contracts . . . . . . . . . . . . . . . . . . . . 33
6.9. Correctness of Collateral Schedules. . . . . . . . . . . . 34
6.10. Correctness of Financial Information . . . . . . . . . . . 34
6.11. Security Documents . . . . . . . . . . . . . . . . . . . . 34
6.12. Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . 34
6.13. No Burdensome Restrictions . . . . . . . . . . . . . . . . 35
6.14. Judgments. . . . . . . . . . . . . . . . . . . . . . . . . 35
6.15. Compliance with Laws . . . . . . . . . . . . . . . . . . . 35
6.16. Compliance with ERISA. . . . . . . . . . . . . . . . . . . 35
6.17. Governmental Authorizations; Permits, Licenses and
Accreditations; Other Rights . . . . . . . . . . . . . . . 36
6.18. Environmental Matters. . . . . . . . . . . . . . . . . . . 36
6.19. No Material Adverse Effect . . . . . . . . . . . . . . . . 37
6.20. Solvency . . . . . . . . . . . . . . . . . . . . . . . . . 37
6.21. Consolidated Subsidiaries; Subsidiaries. . . . . . . . . . 37
6.22. Margin Securities. . . . . . . . . . . . . . . . . . . . . 37
6.23. Investment Company Act . . . . . . . . . . . . . . . . . . 38
6.24. Business Locations and Trade Names . . . . . . . . . . . . 38
6.25. Title to Real Property and Other Assets. . . . . . . . . . 38
6.26. Labor Matters. . . . . . . . . . . . . . . . . . . . . . . 38
6.27. Employment and Investment Agreements . . . . . . . . . . . 38
6.28. No Misstatements . . . . . . . . . . . . . . . . . . . . . 39
6.29. MK Rail Restructuring. . . . . . . . . . . . . . . . . . . 39
ARTICLE VII AFFIRMATIVE COVENANTS. . . . . . . . . . . . . . . . . . . 39
7.1. Financial Statements; Additional Reporting Requirements. . 39
7.2. Provision of Notices . . . . . . . . . . . . . . . . . . . 41
(a) Default . . . . . . . . . . . . . . . . . . . . . . 41
(b) Other Default or Litigation . . . . . . . . . . . . 41
(c) Reportable Events . . . . . . . . . . . . . . . . . 42
ii
<PAGE>
(d) Environmental Matters . . . . . . . . . . . . . . . 42
(e) Material Contracts; Material Obligations. . . . . . 42
(f) Casualty Losses . . . . . . . . . . . . . . . . . . 42
(g) Notices re: Bonding Issues. . . . . . . . . . . . . 42
(h) Notices of Violation. . . . . . . . . . . . . . . . 43
(i) Changes to Schedules. . . . . . . . . . . . . . . . 43
7.3. Filing of Returns; Payment of Taxes. . . . . . . . . . . . 43
7.4. Maintenance of Existence . . . . . . . . . . . . . . . . . 43
7.5. Compliance with Laws . . . . . . . . . . . . . . . . . . . 43
7.6. Maintenance of Properties. . . . . . . . . . . . . . . . . 43
7.7. Insurance. . . . . . . . . . . . . . . . . . . . . . . . . 43
7.8. Books and Records. . . . . . . . . . . . . . . . . . . . . 44
7.9. Compliance With Terms of All Real Property Related
Agreements . . . . . . . . . . . . . . . . . . . . . . . . 44
7.10. Hazardous Materials. . . . . . . . . . . . . . . . . . . . 44
7.11. Intellectual Property Assignments. . . . . . . . . . . . . 45
7.12. Further Assurances . . . . . . . . . . . . . . . . . . . . 45
7.13. Inspection of Property, Books and Records. . . . . . . . . 45
7.14. Use of Proceeds. . . . . . . . . . . . . . . . . . . . . . 46
7.15. Compliance with Asset Disposition Program. . . . . . . . . 46
ARTICLE VIII NEGATIVE COVENANTS . . . . . . . . . . . . . . . . . . . . 46
8.1. Indebtedness . . . . . . . . . . . . . . . . . . . . . . . 46
8.2. Negative Pledge. . . . . . . . . . . . . . . . . . . . . . 47
8.3. Prohibition of Fundamental Changes . . . . . . . . . . . . 48
8.4. Prohibition on Sale of Assets. . . . . . . . . . . . . . . 48
8.5. Investments. . . . . . . . . . . . . . . . . . . . . . . . 49
8.6. Compliance with ERISA. . . . . . . . . . . . . . . . . . . 49
8.7. Restricted Payments. . . . . . . . . . . . . . . . . . . . 49
8.8. Transactions With Affiliates . . . . . . . . . . . . . . . 50
8.9. Sale/Lease-Backs . . . . . . . . . . . . . . . . . . . . . 50
8.10. Operating Leases . . . . . . . . . . . . . . . . . . . . . 50
8.11. Capital Expenditures . . . . . . . . . . . . . . . . . . . 50
8.12. Amendment of Charter or Bylaws . . . . . . . . . . . . . . 50
8.13. No Consent to Subordination. . . . . . . . . . . . . . . . 50
ARTICLE IX DEFAULTS . . . . . . . . . . . . . . . . . . . . . . . . . 51
9.1. Events of Default. . . . . . . . . . . . . . . . . . . . . 51
9.2. The Lenders' Remedies. . . . . . . . . . . . . . . . . . . 54
9.3. Other Remedies . . . . . . . . . . . . . . . . . . . . . . 54
9.4. Waivers by Borrowers . . . . . . . . . . . . . . . . . . . 55
ARTICLE X THE ADMINISTRATIVE AGENT AND CO-AGENTS . . . . . . . . . . 55
10.1. Appointment. . . . . . . . . . . . . . . . . . . . . . . . 55
10.2. Administrative Agent, Co-Agents and Affiliates . . . . . . 56
10.3. Retention of Documents and Information to the
Lenders. . . . . . . . . . . . . . . . . . . . . . . . . . 56
10.4. Delegation of Duties . . . . . . . . . . . . . . . . . . . 56
10.5. Limitation of Liability. . . . . . . . . . . . . . . . . . 56
10.6. Reliance by the Administrative Agent and Co-Agents . . . . 57
10.7. Notice of Default. . . . . . . . . . . . . . . . . . . . . 58
iii
<PAGE>
10.8. Non-Reliance on the Administrative Agent, Co-Agents and
the Other Lenders. . . . . . . . . . . . . . . . . . . . . 58
10.9. Collateral . . . . . . . . . . . . . . . . . . . . . . . . 59
10.10. Indemnification. . . . . . . . . . . . . . . . . . . . . . 59
10.11. Each Agent in its Individual Capacity. . . . . . . . . . . 59
10.12. Successor Administrative Agent and Co-Agent. . . . . . . . 60
10.13. Applicability of Section to The Borrowers. . . . . . . . . 60
ARTICLE XI JOINT AND SEVERAL LIABILITY. . . . . . . . . . . . . . . . 61
11.1. Joint and Several Liability. . . . . . . . . . . . . . . . 61
11.2. The Guarantees . . . . . . . . . . . . . . . . . . . . . . 61
11.3. Guarantees Unconditional . . . . . . . . . . . . . . . . . 61
11.4. Discharge Only Upon Payment In Full; Reinstatement In
Certain Circumstances. . . . . . . . . . . . . . . . . . . 62
11.5. Waivers by The Borrowers . . . . . . . . . . . . . . . . . 62
11.6. Subrogation. . . . . . . . . . . . . . . . . . . . . . . . 64
11.7. Stay of Acceleration . . . . . . . . . . . . . . . . . . . 64
ARTICLE XII TREATMENT OF LENDER'S APPLICABLE PRO RATA SHARES . . . . . 65
12.1. Funding of Loans . . . . . . . . . . . . . . . . . . . . . 65
12.2. Prepayments and Repayments of Loans. . . . . . . . . . . . 65
12.3. Treatment of Loans for Voting Purposes . . . . . . . . . . 65
ARTICLE XIII MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . 66
13.1. Notices. . . . . . . . . . . . . . . . . . . . . . . . . . 66
13.2. Entire Agreement . . . . . . . . . . . . . . . . . . . . . 66
13.3. No Waivers . . . . . . . . . . . . . . . . . . . . . . . . 66
13.4. Expenses; Indemnification. . . . . . . . . . . . . . . . . 67
13.5. Set-Off; Sharing of Set-Offs . . . . . . . . . . . . . . . 68
13.6. Amendments and Waivers . . . . . . . . . . . . . . . . . . 69
13.7. Effect of Waivers; Modification of Documents . . . . . . . 69
13.8. Successors and Assigns . . . . . . . . . . . . . . . . . . 70
13.9. Headings and Captions. . . . . . . . . . . . . . . . . . . 71
13.10. Interpretation . . . . . . . . . . . . . . . . . . . . . . 71
13.11. Inconsistencies With Other Documents . . . . . . . . . . . 71
13.12. Severability . . . . . . . . . . . . . . . . . . . . . . . 71
13.13. Governing Law. . . . . . . . . . . . . . . . . . . . . . . 72
13.14. Consent to Jurisdiction. . . . . . . . . . . . . . . . . . 72
13.15. Waiver of Jury Trial . . . . . . . . . . . . . . . . . . . 72
13.16. Cumulative Remedies. . . . . . . . . . . . . . . . . . . . 72
13.17. Survival of Representations and Warranties . . . . . . . . 72
13.18. Relationship of the Parties. . . . . . . . . . . . . . . . 73
13.19. Counterparts . . . . . . . . . . . . . . . . . . . . . . . 73
iv
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EXHIBITS
- --------
EXHIBIT A FORM OF PROMISSORY NOTE
EXHIBIT B FORM OF NOTICE OF BORROWING
EXHIBIT C BORROWER SOLVENCY CERTIFICATE
EXHIBIT D BUDGET
EXHIBIT E FORM OF STANDSTILL AGREEMENT
EXHIBIT F FORM OF WAIVER AGREEMENT
SCHEDULES
- ---------
SCHEDULE A SCHEDULE OF LENDERS
SCHEDULE B PART 1 SCHEDULE OF THE EXISTING LENDERS
SCHEDULE B PART 2 EXISTING AGREEMENTS
SCHEDULE C SCHEDULE OF DOCUMENTS
SCHEDULE D SCHEDULE FOR NOTICES
SCHEDULE E SCHEDULE OF GUARANTORS
SCHEDULE F CASH MANAGEMENT SYSTEM
SCHEDULE G SCHEDULE OF REAL PROPERTY COLLATERAL
SCHEDULE 5.1(h) SCHEDULE OF TITLE POLICIES
SCHEDULE 5.1(j) SCHEDULE OF FUNDED DEBT DEFAULTS
SCHEDULE 5.1(o) SCHEDULE OF PENDING AND THREATENED LITIGATION
SCHEDULE 5.2(e) BACKLOG CERTIFICATE
SCHEDULE 6.7A SCHEDULE OF INDEBTEDNESS
SCHEDULE 6.7B SCHEDULE OF CONTINGENT OBLIGATIONS
SCHEDULE 6.8 SCHEDULE OF MATERIAL CONTRACTS
SCHEDULE 6.8A MATERIAL DEFAULTS
SCHEDULE 6.14 SCHEDULE OF JUDGMENTS
SCHEDULE 6.16 SCHEDULE OF MULTIEMPLOYER PLAN WITHDRAWAL LIABILITY
SCHEDULE 6.19 SCHEDULE OF MATERIAL ADVERSE EFFECTS
SCHEDULE 6.21 SCHEDULE OF SUBSIDIARIES
SCHEDULE 6.24A SCHEDULE OF BUSINESS LOCATIONS
SCHEDULE 6.24B SCHEDULE OF TRADE NAMES
SCHEDULE 6.25 SCHEDULE OF CONTRACTS OR OPTIONS FOR SALE OR LEASE OF REAL
PROPERTY COLLATERAL
SCHEDULE 6.27 SCHEDULE OF EMPLOYMENT AND INVESTMENT AGREEMENTS
SCHEDULE 7.2(c)(A) SCHEDULE OF REPORTABLE EVENTS
SCHEDULE 7.2(c)(B) SCHEDULE OF PLAN TERMINATIONS
SCHEDULE 8.1 SCHEDULE OF EXISTING INDEBTEDNESS
SCHEDULE 8.2 SCHEDULE OF PERMITTED LIENS
SCHEDULE 8.5 SCHEDULE OF PERMITTED INVESTMENTS
SCHEDULE 8.10 SCHEDULE OF OPERATING LEASES
SCHEDULE 13.4 SCHEDULE OF STEERING COMMITTEE LENDERS
v
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CREDIT AGREEMENT
THIS CREDIT AGREEMENT (this "Agreement"), dated as of April 11, 1995,
is entered into among MORRISON KNUDSEN CORPORATION ("MKD"), a Delaware
corporation, and MORRISON KNUDSEN CORPORATION ("MKO"), an Ohio corporation (each
a "Borrower," and collectively, the "Borrowers"), the banks and other financial
institutions named on SCHEDULE A hereto (the "Schedule of Lenders") and whose
signatures appear on the signature pages hereto (each a "Lender," and
collectively, the "Lenders"), Mellon Bank, N.A., as administrative agent for the
Lenders (in such capacity, the "Administrative Agent"), and Mellon Bank, N.A.
and Bank of America National Trust and Savings Association as co-agents for the
Lenders (in such capacity, the "Co-Agents").
The parties hereto agree as follows:
RECITALS
A. MKO and MKD have obligations (funded, contingent or otherwise) in
excess of $800,000,000 (the "Existing Loans") to certain lenders or their
predecessors in interest (the "Existing Lenders") pursuant to the terms of the
respective loan agreements and other financing arrangements set forth on the
Schedule of the Existing Lenders attached hereto as SCHEDULE B (the "Existing
Agreements").
B. The Borrowers are in default under various provisions of the Existing
Agreements.
C. The Borrowers have requested (i) the Lenders to provide secured loans
of up to approximately $110,000,000 to be used for working capital purposes and
to pay amounts due under the Bank of America Illinois Receivables Purchase
Agreement (as hereinafter defined); and (ii) the Existing Lenders to make
certain agreements concerning the respective rights and remedies of the Existing
Lenders, among other things, under the Existing Agreements arising from the
defaults thereunder, pursuant to the Waiver Agreement (as hereinafter defined).
D. The Lenders are willing to agree to the above requests on the terms
and conditions set forth herein and in the documents executed in connection
herewith, including the condition that the Borrowers secure their obligations
under this Agreement with substantially all of their assets.
In consideration of the foregoing, MKD, MKO, the Administrative Agent, the
Co-Agents and each of the Lenders hereby agree as follows:
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ARTICLE I
DEFINITIONS
1.1. DEFINITIONS. The following terms, as used herein, have the
following meanings:
"Additional Capital Expenditure Indebtedness" has the meaning
assigned to it in SECTION 8.1(e).
"Administrative Agent" means Mellon Bank, N.A., in its capacity as
administrative agent for the Lenders hereunder, and its successors in such
capacity.
"Administrative Agent's Fee" has the meaning assigned to it in
SECTION 2.7(b).
"Affiliate" means, as to any Person, any other Person that,
directly or indirectly, controls, is controlled by or is under common control
with such Person. As used herein, the term "control" means possession, directly
or indirectly, or the power to direct or cause the direction of the management
or policies of a Person, whether through the ownership of voting securities, by
contract or otherwise.
"Agents" means, collectively, the Administrative Agent, the Co-
Agents and the Collateral Agent.
"All Lenders" means one hundred percent (100%) of the Lenders
listed on SCHEDULE A without regard to their Applicable Pro Rata Share.
"Alpha Loan" means any Loan which, when made, does not cause the
aggregate unpaid balance of the Loans to exceed $60,000,000.
"Alpha Pro Rata Share" for each Lender means that percentage set
forth opposite such Lender's name as its Alpha Pro Rata Share on the Schedule of
Lenders.
"Applicable Pro Rata Share" means, with respect to each Lender,
such Lender's Alpha Pro Rata Share, Beta Pro Rata Share, or Final Pro Rata
Share, as the case may be, determined in accordance with ARTICLE XII and as set
forth on the Schedule of Lenders.
"Asset Disposition Program" means a program designed by the
Borrowers setting forth a detailed list of actions to be taken by specified
dates with respect to the proposed disposition of assets, including dates when
materials are to be prepared and when solicitations are to be commenced relating
to the Borrowers or the following Subsidiaries: MK Gold Company; MK Rail
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Corporation; Western Aircraft, Inc.; McConnell Dowell Corporation Limited;
AmeriBank; Morrison & Knudsen Investments, Inc.; MK Pacific, Inc.; G.W. Murphy
Construction Company, Inc.; E.E. Black Limited; Black Construction Corporation;
Black Micro Corporation; and P.T.E.E. Black Indonesia.
"Assignee" has the meaning assigned to it in SECTION 13.8(C).
"Bank of America Illinois Receivables Purchase Agreement" means the
Receivables Purchase Agreement, as amended, dated as of December 31, 1991 among
the Borrowers, the Participants named therein and Bank of America Illinois
(formerly, Continental Bank N.A.) as agent.
"Bank of America Fee" has the meaning assigned to it in
SECTION 2.7(c).
"Benefit Arrangement" means at any time an employee benefit plan
within the meaning of Section 3(3) of ERISA which is not a Plan or a Multi-
employer Plan and which is maintained or otherwise contributed to by any member
of the ERISA Group.
"Beta Loan" means any Loan made during a period in which, prior to
such Loan, the aggregate unpaid balance of the Loans exceeds $60,000,000.
"Beta Pro Rata Share" for each Lender means that percentage set
forth opposite such Lender's name as its Beta Pro Rata Share on the Schedule of
Lenders.
"Bonding Company" means Colonial American Casualty and Surety
Company or any such other Person that provides the Borrowers or their
Subsidiaries with payment or performance bonds.
"Borrower" means MKD or MKO and the "Borrowers" means both of the
foregoing.
"Borrowing" means a borrowing consisting of Loans made on the same
day.
"Borrowing Period" has the meaning assigned to it in SECTION 2.1.
"Budget" means the projections of the Borrowers for the period from
the Closing Date through the Termination Date attached hereto as EXHIBIT D.
"Business Day" means any day except a Saturday, Sunday or other day
on which commercial banks in New York City,
3
<PAGE>
New York, Los Angeles, California or Pittsburgh, Pennsylvania are authorized by
law to close.
"Capital Expenditures" means, as to any Person, any expenditures
for the acquisition or construction of fixed assets which would be capitalized
on a balance sheet of such Person prepared in accordance with Generally Accepted
Accounting Principles.
"Capital Lease" means, as to any Person, any lease of property by
such Person as lessee which would be capitalized on a balance sheet of such
Person prepared in accordance with Generally Accepted Accounting Principles.
"Capital Lease Obligation" means, as to any Person, collectively,
the capitalized amount of the obligations of such Person and its Subsidiaries
under all Capital Leases.
"Cash" means money, currency or a credit balance in a Deposit
Account.
"Cash Equivalent" means, at any time, (a) United States of America
government securities having a maturity not exceeding one year from the date
acquired, (b) commercial paper rated at least A-l+ by Standard & Poor's
Corporation or P-1 by Moody's Investors Service, Inc., having a maturity not
exceeding one year from the date acquired, (c) certificate of deposits or time
deposits of commercial banks with capital and undivided surplus of at least
$300,000,000 issuing commercial paper rated as described in the preceding clause
(b) and organized and existing under the laws of the United States or any State
thereof or the District of Columbia, having a maturity not exceeding one year
from the date acquired, and (d) time deposits (of one year or less) and demand
deposits with any FDIC insured bank, not exceeding the maximum amount insured
thereby.
"Cash Management System" means the Cash Management System set forth
on SCHEDULE F.
"Citicorp" means Citicorp North America, Inc. and/or Citibank, N.A.
"Citicorp Receivables Purchase Agreement" means the Amended and
Restated Receivables Purchase and Sale Agreement dated as of February 22, 1995,
as amended to date and as it may be further amended, assigned, supplemented,
restated or otherwise modified from time to time hereafter, among MKO, Export
Receivables Corporation and Citicorp, individually and as Agent.
"Closing Date" means April 11, 1995, or such other later date on
which the Administrative Agent shall have
4
<PAGE>
determined that all conditions precedent set forth in ARTICLE V have been
satisfied in full or waived.
"Closing Fee" has the meaning assigned to it in SECTION 2.7(a).
"Co-Agents" means Mellon Bank, N.A. and Bank of America National
Trust and Savings Association as co-agents for the Lenders hereunder, and their
successors in such capacity.
"Collateral" means, collectively, all real and personal property,
fixtures and interests in such property and proceeds thereof, presently owned or
hereafter acquired or presently existing or hereafter created by the Borrowers,
including the Real Property Collateral, and proceeds thereof presently owned or
hereafter acquired or presently existing or hereafter created by the Borrowers
or any Guarantor, in which a security interest, mortgage, or ship mortgage is
granted in favor of the Collateral Agent for the benefit of the Lenders to
secure the Obligations.
"Collateral Account" shall have the meaning assigned to it in
SCHEDULE F.
"Collateral Agent" means the entity or person serving as the
"Collateral Agent and Mortgage Trustee" under and as defined in the Collateral
Agent Agreement, in its capacity as agent or trustee for the Lenders, or any
successor agent or trustee pursuant to the terms thereof.
"Collateral Agent Agreement" means the Collateral Agent Agreement
and Mortgage Trust dated as of April 11, 1995 among the Borrowers, the Lenders,
the Co-Agents, the Administrative Agent and the Collateral Agent.
"Commitment" means, with respect to each Lender for any given
Borrowing Period, the amount set forth opposite the name of such Lender on the
Schedule of Lenders as such Lender's commitment for such Borrowing Period.
"Commonly Controlled Entity" means a Person, which is under common
control with a Borrower within the meaning of Section 414(b) or Section 414(c)
of the Internal Revenue Code.
"Consolidated," when used with respect to any of the terms defined
herein, refers to such terms as reflected in a consolidation of the accounts or
other items of the Borrowers and of the accounts or other items of the
Borrowers' Subsidiaries, if any, in conformity with Generally Accepted
Accounting Principles.
"Consolidated Subsidiary" means at any date any Subsidiary or other
entity the accounts of which would be
5
<PAGE>
Consolidated in accordance with Generally Accepted Accounting Principles with
those of the Borrowers in their Consolidated financial statements if such
statements were prepared as of such date; PROVIDED, that any Consolidated
Subsidiary which ceases to be a Consolidated Subsidiary solely because it is
classified as a discontinued operation shall be deemed to be a Consolidated
Subsidiary so long as it remains a Subsidiary.
"Contingent Obligations" means, as to any Person, collectively, all
Indebtedness, obligations or other liabilities of such Person guarantying or in
effect guarantying the payment or performance of any Indebtedness, obligation or
other liability, whether or not contingent (collectively, the "primary
obligations"), of any other Person (the "primary obligor") in any manner,
whether directly or indirectly, including any Indebtedness, obligation or other
liability of such Person (a) to purchase any such primary obligation or any
property constituting direct or indirect security therefor, (b) to advance or
supply funds (i) for the purchase or payment of any such primary obligation or
(ii) to maintain working capital or equity capital of the primary obligor or
otherwise to maintain the net worth or solvency of the primary obligor, (c) to
purchase property, securities or services primarily for the purpose of assuring
the owner of any such primary obligation of the ability of the primary obligor
to make payment of such primary obligation, or (d) otherwise to assure or hold
harmless the owner of such primary obligation against loss with respect thereto.
"Contractual Obligations" means, as to any Person, collectively,
any Indebtedness, obligation or other liability of such Person (whether for the
payment of money or otherwise), now existing or hereafter arising, whether due
or not due, absolute or contingent, liquidated or unliquidated, direct or
indirect, express or implied, individually or jointly with others, pursuant to
the provisions of any security issued by such Person or any document, instrument
or agreement to which such Person is a party or by which such Person or any of
its property is or may be bound or affected.
"Default" means any condition or event which constitutes an Event
of Default or which with the giving of notice or lapse of time or both would,
unless cured or waived, become an Event of Default.
"Default Rate" means a rate of interest equal to the Prime Rate
plus five percent (5%) per annum, PROVIDED, that to the extent the Default Rate
exceeds the Maximum Lawful Rate, the Default Rate shall be a rate equal to the
Maximum Lawful Rate.
"Deposit Account" means a demand, time, savings, passbook or like
account with a bank, savings and loan
6
<PAGE>
association, credit union or like organization, other than an account evidenced
by a negotiable certificate of deposit.
"Environmental Laws" means all Federal, state and local laws,
statutes, ordinances and regulations, now or hereafter in effect, and in each
case as amended or supplemented from time to time, and any applicable judicial
or administrative interpretation thereof relating to the disposal of waste and
the regulation and protection of human health, safety, the environment and
natural resources (including ambient air, surface water, groundwater, wetlands,
land surface or subsurface strata, wildlife, aquatic species and vegetation).
Environmental Laws include the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, as amended (42 U.S.C. Sections 9601 ET
SEQ.) ("CERCLA"); the Hazardous Material Transportation Act, as amended
(49 U.S.C. Sections 1801 ET SEQ.); the Federal Insecticide, Fungicide, and
Rodenticide Act, as amended (7 U.S.C. Sections 136 ET SEQ.); the Resource
Conservation and Recovery Act, as amended (42 U.S.C. Sections 6901 ET SEQ.)
("RCRA"); the Toxic Substance Control Act, as amended (15 U.S.C. Sections 2601
ET SEQ.); the Clean Air Act, as amended (42 U.S.C. Sections 7400 ET SEQ.); the
Federal Water Pollution Control Act, as amended (33 U.S.C. Sections 1251 ET
SEQ.); the Occupational Safety and Health Act, as amended (29 U.S.C. Sections
651 ET SEQ.) ("OSHA"); and the Safe Drinking Water Act, as amended (42 U.S.C.
Sections 300(f) ET SEQ.); and any and all regulations promulgated thereunder,
and all analogous state and local counterparts or equivalents and any transfer
of ownership notification or approval statutes.
"ERISA" means the Employee Retirement Income Security Act of 1974,
as amended, or any successor statute.
"ERISA Group" means the Borrowers and their Subsidiaries and all
members of a controlled group of corporations and all trades or businesses
(whether or not incorporated) under common control which, together with the
Borrowers or any of their Subsidiaries, are treated as a single employer under
Section 414 of the Internal Revenue Code.
"Event of Default" has the meaning set forth in SECTION 9.1.
"Existing Agreements" has the meaning set forth in Recital A.
"Existing Lenders" has the meaning set forth in Recital A.
"Existing Loans" has the meaning set forth in Recital A.
7
<PAGE>
"Federal Funds Rate" means, for any day, the rate per annum
(rounded upward, if necessary, to the nearest 1/100th of 1%) equal to the
weighted average of the rates on overnight Federal funds transactions with
members of the Federal Reserve System arranged by Federal funds brokers on such
day, as published by the Federal Reserve Bank of New York on the Business Day
next succeeding such day, PROVIDED, that (i) if such day is not a Business Day,
the Federal Funds Rate for such day shall be such rate on such transactions on
the next preceding Business Day as so published on the next succeeding Business
Day, and (ii) if no such rate is so published on such next succeeding Business
Day, the Federal Funds Rate for such day shall be the average rate quoted to
Mellon Bank, N.A. on such day on such transactions as determined by the
Administrative Agent.
"Final Pro Rata Share" for each Lender shall be a percentage
derived in the manner described for determination of the Final Pro Rata Share on
the Schedule of Lenders.
"Financing Shortfall" means the amounts set forth on the Budget as
"Financing Shortfall."
"Financing Statements" means any Uniform Commercial Code financing
statement on form UCC-1 or a comparable form executed pursuant to the provisions
of this Agreement or any of the other Loan Documents or any such similar
statement to be filed in Canada.
"Form 10-K" means the annual report on Form 10-K as filed with the
Securities and Exchange Commission pursuant to the Securities Exchange Act of
1934.
"Form 10-Q means the report on Form 10-Q as filed with the
Securities and Exchange Commission pursuant to the Securities Exchange Act of
1934.
"Generally Accepted Accounting Principles" means accounting
principles that are generally accepted and consistently applied and maintained
throughout the period indicated and that are consistent with the prior financial
practices of the Borrowers, except for changes mandated by the Financial
Accounting Standards Board or any similar accounting authority of comparable
standing.
"Governmental Authority" means any nation, province, state or other
political subdivision thereof, any government or any natural person or entity
exercising executive, legislative, regulatory or administrative functions of or
pertaining to government.
8
<PAGE>
"Guarantor" means each of the indirectly or directly wholly-owned
Subsidiaries of each Borrower listed on SCHEDULE E and "Guarantors" means all of
the foregoing.
"Guaranty" means a Guaranty Agreement dated as of April 11, 1995
made by a Guarantor in favor of the Administrative Agent for the benefit of the
Lenders guarantying the Obligations.
"Guaranty Security Agreement" means a Security and Pledge Agreement
(Guaranty) dated as of April 11, 1995 among a Guarantor and the Collateral Agent
securing the Obligations under such Guarantor's Guaranty.
"Hazardous Materials" means (i) any substance, material or waste,
which is either (a) defined as, (b) included in the definition, listing or
identification of, or (c) otherwise regulated as, a "solid waste," "hazardous
waste," "hazardous material," "hazardous substance," "extremely hazardous waste"
or "restricted hazardous waste" or other similar term or phrase under any
Environmental Laws, or (ii) petroleum or any fraction or by-product thereof,
asbestos, polychlorinated biphenyls, or radioactive substances.
"Indebtedness" of any Person means without duplication, any
obligation of such Person for borrowed money, including (a) any obligation of
such Person evidenced by bonds, debentures, notes or other similar debt
instruments, (b) any obligation of such Person for the deferred purchase price
of any property or services, except trade accounts payable of such Person with a
maturity of not greater than 90 days incurred in the ordinary course of such
Person's business, (c) any obligation of such Person as lessee under a Capital
Lease, (d) Contingent Obligations, (e) any reimbursement obligation in respect
of any letter of credit or any other financing accommodations, and (f) any
obligation for borrowed money which is non-recourse to such Person but which is
secured by a Lien on any asset of such Person.
"Internal Revenue Code" means the Internal Revenue Code of 1986, as
amended, or any successor statute.
"Investment" has the meaning assigned to it in SECTION 8.5.
"Lender" and "Lenders" have the meanings assigned to them in the
preamble hereto, and shall include the Administrative Agent and the Co-Agents,
in their individual capacity.
"Lien" means, as to any asset, (a) any lien, charge, claim,
mortgage, security interest, pledge or other encumbrance of any kind with
respect to such asset, (b) any interest of a vendor or lessor under any
conditional sale agreement, Capital
9
<PAGE>
Lease or other title retention agreement relating to such asset, (c) any
reservation, exception, encroachment, easement, right-of-way, covenant,
condition, restriction, lease or other title exception affecting such asset, or
(d) any preference, priority or other security agreement or preferential
arrangement of any kind or nature whatsoever (including any conditional sale or
other title retention agreement, any financing lease having substantially the
same economic effect as any of the foregoing, and the filing of any financing
statement under the Uniform Commercial Code or comparable law of any
jurisdiction other than a precautionary financing statement with respect to a
lease that is not in the nature of a security interest).
"Loans" has the meaning assigned to it in SECTION 2.1.
"Loan Documents" means this Agreement, the Notes, the Security
Documents, any Guaranty, the Collateral Agent Agreement, and any other of those
documents listed on the Schedule of Documents and therein specified to be
executed and delivered, or caused to be executed and delivered, by the Borrowers
to the Agent, the Lenders or the Collateral Agent; PROVIDED, that the Waiver
Agreement and the Standstill Agreement shall not be included in the definition
of Loan Documents.
"Majority Lenders" means the Lenders holding at least sixty-six and
two thirds percent (66 2/3%) of the Applicable Pro Rata Shares.
"Material Adverse Effect" means a material adverse effect on (a)
the business, assets, operations, prospects or financial or other condition of
any Borrower, Guarantor or any of their Consolidated Subsidiaries; (b) the
ability of any Borrower, Guarantor or their Consolidated Subsidiaries to pay or
perform the Obligations under the Loan Documents in accordance with the terms
thereof; (c) the Collateral or the Collateral Agent's Liens on the Collateral or
the priority of any such Lien; or (d) the Lenders' rights and remedies under any
Loan Documents or the other Restructuring Documents.
"Material Contract" means, as to the Borrowers or their
Consolidated Subsidiaries, a Contractual Obligation (a) the cancellation, non-
performance or non-renewal of which by any party thereto could have or result in
a Material Adverse Effect on the Borrowers or the Borrowers and their
Consolidated Subsidiaries taken as a whole or (b) which involves amounts,
payments or Indebtedness in excess of $10,000,000.
"Maximum Commitment" means, with respect to each Lender, the
Commitment of such Lender listed on the Schedule of Lenders for the Borrowing
Period of May 1, 1995 to May 31, 1995.
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"Maximum Lawful Rate" means the highest rate of interest
permissible under any law which a court of competent jurisdiction shall, in a
final determination, deem applicable under this Agreement.
"MKD" means Morrison Knudsen Corporation, a Delaware corporation,
and its successors.
"MKD Security Agreement" means the Pledge and Security Agreement
dated as of April 11, 1995, executed by MKD in favor of the Collateral Agent,
for the benefit of the Administrative Agent, the Co-Agents and the Lenders,
granting a security interest in the personal property Collateral described
therein.
"MKO" means Morrison Knudsen Corporation, an Ohio corporation, and
its successors.
"MKO Security Agreement" means the Pledge and Security Agreement
dated as of April 11, 1995, executed by MKO in favor of the Collateral Agent,
for the benefit of the Administrative Agent, the Co-Agents and the Lenders,
granting a security interest in the personal property Collateral described
therein.
"MK Rail Credit Agreement" means that certain Amended and Restated
Revolving Credit and Letter of Credit Issuance Agreement dated as of March 31,
1995, between MK Rail Corporation, certain other borrowers, the financial
institution's party thereto, PNC Bank, N.A., as Agent and PNC Bank, N.A. as
Letter of Credit Issuer.
"MK Rail Receivable" has the meaning assigned to it in SECTION
2.9(B).
"MK Rail Restructuring" means a restructuring of the Indebtedness
owed by MK Rail Corporation to PNC Bank, N.A. in accordance with the MK Rail
Credit Agreement.
"Mortgages" means, collectively, the fee and leasehold deeds of
trust and mortgages and any modification thereto, executed by any Borrower in
favor of the Collateral Agent for the benefit of the Lenders, granting a lien on
and security interest in the Real Property Collateral.
"Multi-employer Plan" means at any time an employee pension benefit
plan within the meaning of Section 4001(a)(3) of ERISA to which any member of
the ERISA Group is then making or accruing an obligation to make contributions
or has within the preceding five plan years made contributions, including for
these purposes any Person which ceased to be a member of the ERISA Group during
such five year period.
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"Net Cash Proceeds" means, with respect to either the sale or
refinancing of any asset of any Borrower or any Consolidated Subsidiary or any
other transaction identified in SECTION 2.9, all amounts payable to such
Borrower or such Consolidated Subsidiary as a result of such transaction after
payment of (i) all reasonable and customary closing costs, including, brokerage
commissions, appraisal fees, recording fees, attorneys' fees, title insurance
premiums, inspection report charges, prepayment penalties payable to senior
lienholders, escrow credits in favor of the purchaser or financier, customary
prorations, transfer and other taxes, escrow fees, points and other loan fees,
and (ii) Indebtedness secured by Senior Permitted Liens on such asset.
"Net Cash Proceeds Retainage Amount" has the meaning assigned to it
in SECTION 2.9(A).
"Notes" means promissory notes of a Borrower, substantially in the
form of EXHIBIT A hereto, evidencing the obligation of such Borrower to repay
the Loans, and "Note" means any one of such promissory notes issued hereunder.
"Notice of Acceleration" means a written notice sent to the
Borrowers pursuant to SECTION 9.2, accelerating the Obligations.
"Notice of Borrowing" has the meaning assigned to it in SECTION
2.2.
"Notice of Default" means a written notice sent to the Borrowers
notifying the Borrowers that an Event of Default has occurred.
"Obligations" means, as to any Borrower or Guarantor, collectively,
all liabilities of such Borrower or Guarantor, arising in connection with or
pursuant to the provisions of this Agreement, the Notes, or the other Loan
Documents, owing to the Administrative Agent, the Co-Agents or the Lenders of
any kind and description, now existing or hereafter arising, whether due or not
due, absolute or contingent, liquidated or unliquidated, direct or indirect,
express or implied, individually or jointly with others, howsoever evidenced or
acquired, including the payment and performance of all Indebtedness, obligations
and other liabilities of such Borrower or Guarantor and overdraft coverage and
account funding obligations in connection with the Cash Management System,
arising in connection with or pursuant to the provisions of this Agreement, the
Notes or the other Loan Documents; PROVIDED, HOWEVER, the Obligations shall not
include any Indebtedness, obligations or other liabilities arising under the
Existing Agreements.
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"Operating Lease" means, as to any Person, any lease of property
(whether real, personal or mixed) by such Person as lessee which is not a
Capital Lease.
"Other Taxes" means any present or future stamp or documentary
taxes and any other excise or property taxes, or similar charges or levies,
which arise from any payment made pursuant to this Agreement or under any Note
or from the execution or delivery of, or otherwise with respect to, this
Agreement or any Note.
"Parent" means, with respect to any Lender, any Person controlling
such Lender directly or indirectly.
"Participant" has the meaning set forth in SECTION 13.8(B).
"PBGC" means the Pension Benefit Guaranty Corporation or any entity
succeeding to any or all of its functions under ERISA.
"Permitted Liens" means, collectively, those certain Liens, in
existence on the date hereof, described in SCHEDULE 8.2 and as permitted under
SECTION 8.2.
"Person" means an individual, corporation, partnership, trust,
business trust, association, joint stock company, joint venture, pool,
syndicate, sole proprietorship, unincorporated organization, Governmental
Authority or any other form of entity not specifically listed herein.
"Plan" means at any time an employee pension benefit plan (other
than a Multi-employer Plan) which is covered by Title IV of ERISA or subject to
the minimum funding standards under Section 412 of the Internal Revenue Code and
either (i) is maintained, or contributed to, by any member of the ERISA Group
for employees of any member of the ERISA Group or (ii) has at any time within
the preceding five years been maintained, or contributed to, by any Person which
was at such time a member of the ERISA Group for employees of any Person which
was at such time a member of the ERISA Group.
"Prime Rate" means the rate of interest publicly announced by
Mellon Bank, N.A. from time to time as its Prime Rate.
"Professionals" means, collectively, all attorneys, accountants,
paraprofessionals, appraisers, auditors, inspectors, engineers, title insurance
companies, and environmental experts employed, retained, or internally used by
each of the Steering Committee Lenders or Agents in performing any of the
Obligations
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or in asserting any of the Agents' and Lenders' rights or remedies under this
Agreement.
"Real Property" means all of the right, title and interest of any
Borrower in and to land, improvements and fixtures (to the extent interests
therein arise under the real property law of the jurisdiction where located).
"Real Property Collateral" means, collectively, all of the
Borrowers' right, title and interest in and to the real property more
specifically described on SCHEDULE G attached hereto, including their fee and
leasehold interests in such real property, pledged by certain of the Borrowers,
in favor of the Collateral Agent for the benefit of the Lenders, pursuant to the
Mortgages.
"Real Property Lien" has the meaning assigned to it in SECTION
11.5(B)(II).
"Recalculation Date" means the first to occur of (a) May 31, 1995,
(b) the first day, if any, upon which the aggregate outstanding balance of the
Loans equals $110,000,000, and (c) the occurrence of an Event of Default
described in clauses (F) or (G) of SECTION 9.1.
"Regulation U" means Regulation U of the Board of Governors of the
Federal Reserve System, as in effect from time to time.
"Reportable Event" means any of the events set forth under Section
4043(b) of ERISA or the PBGC regulations thereunder for which notice to the PBGC
has not been waived by applicable law or administrative guidance.
"Requirement of Law" means, as to any Person, collectively, (a) the
partnership agreement, certificate of incorporation, bylaws or other
organizational or governing documents of such Person; (b) any Federal, state or
local law, treaty, ordinance, rule or regulation; and (c) any order, decree or
determination of a court, arbitrator or other Governmental Authority, in each
case applicable to or binding upon such Person or any of its property or to
which such Person or any of its property is subject.
"Restructuring Documents" means this Agreement, the Notes, the
Security Documents, any Guaranty, the Collateral Agent Agreement, the Waiver
Agreement, the Standstill Agreement, and any other of those documents listed on
the Schedule of Documents and therein specified to be executed and delivered, or
caused to be executed and delivered, by the Borrowers to the Administrative
Agent, the Co-Agents, the Lenders or the Collateral Agent;
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PROVIDED, HOWEVER, that the Restructuring Documents shall not include any of the
Existing Agreements.
"Schedule of Documents" means the schedule annexed as SCHEDULE C
hereto, listing those documents to be delivered in connection with the closing
of the transactions contemplated by this Agreement and the other Restructuring
Documents.
"Schedule of Lenders" means the schedule annexed as SCHEDULE A
hereto, listing the name of each Lender, such Lender's Commitment, such Lender's
Applicable Pro Rata Share and such Lender's Existing Agreements.
"Schedule for Notices" means the schedule annexed as SCHEDULE D
hereto, listing the name, address and wiring instructions for each Lender.
"Security Agreements" means the MKD Security Agreement and the MKO
Security Agreement.
"Security Documents" means the Mortgages, the Security Agreements,
the Guaranty Security Agreements, the Financing Statements, the Ship Mortgage
and all documents, instruments and agreements now or hereafter executed or
delivered pursuant thereto or in connection therewith.
"Senior Permitted Liens" means any Permitted Lien that is senior to
the Lien of the Collateral Agent on any Collateral.
"Ship Mortgage" means the First Preferred Mortgage dated as of
April 11, 1995, executed by MKO in favor of Mellon Bank, N.A. as "Mortgage
Trustee" under and as defined in the Collateral Agent Agreement, with respect to
the vessel "Betty L."
"Single Employer Plan" means any Plan which is not a Multi-employer
Plan.
"Standstill Agreement" means that certain agreement between the
Borrowers and the Bonding Company in substantially the form of EXHIBIT E.
"Steering Committee Lenders" means that certain group of Lenders
acting as the Steering Committee, as such group is constituted on the Closing
Date and may be reconstituted from time to time.
"Subsidiary" means, as to any Person, any corporation or other
entity of which securities or other ownership interests having ordinary voting
power to elect a majority of the board of directors or other persons performing
similar functions are at the time directly or indirectly owned by such Person;
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unless otherwise specified, "Subsidiary" means any Subsidiary of MKD or MKO.
"Taxes" means any and all present or future taxes, duties, levies,
imposts, deductions, charges or withholdings with respect to any payment by
either Borrower pursuant to this Agreement or under any Note, and all
liabilities with respect thereto, EXCLUDING (i) in the case of each Lender and
the Agents, taxes imposed on its income, and franchise or similar taxes imposed
on it, by a jurisdiction under the laws of which such Lender or the Agents (as
the case may be) is organized or in which its principal executive office is
located and (ii) in the case of each Lender, any United States withholding tax
imposed on such payments but only to the extent that such Lender is subject to
United States withholding tax at the time such Lender first becomes a party to
this Agreement.
"Termination Date" means May 31, 1995, or such earlier date as the
Commitments are terminated or the Loans are accelerated pursuant to SECTION 9.2.
"Unfunded Liabilities" means, with respect to any Plan at any time,
the amount (if any) by which (i) the value of all benefit liabilities under such
Plan, determined on a plan termination basis using the assumptions prescribed by
the PBGC for purposes of Section 4044 of ERISA, exceeds (ii) the fair market
value of all Plan assets allocable to such liabilities under Title IV of ERISA
(excluding any accrued but unpaid contributions), all determined as of the then
most recent valuation date for such Plan, but only to the extent that such
excess represents a potential liability of a member of the ERISA Group to the
PBGC or any other Person under Title IV of ERISA.
"Uniform Commercial Code" means the Uniform Commercial Code as the
same may, from to time, be in effect in the Commonwealth of Pennsylvania;
PROVIDED, that in the event that, by reason of mandatory provisions of law, any
or all of the attachment perfection or priority of, or remedies with respect to,
Lenders' security interest in any Collateral is governed by the Uniform
Commercial Code as in effect in a jurisdiction other than the Commonwealth of
Pennsylvania, the term "Uniform Commercial Code" shall mean the Uniform
Commercial Code as in effect in such other jurisdiction for purposes of the
provisions of the Loan Document relating to such attachment, perfection,
priority or remedies and for purposes of definitions related to such provisions.
"United States" means the United States of America, including the
States and the District of Columbia, but excluding its territories and
possessions.
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"Waiver Agreement" means an agreement or agreements between the
Borrowers and the Existing Lenders in substantially the form of EXHIBIT F.
1.2. ACCOUNTING TERMS AND DETERMINATIONS. Unless otherwise specified
herein, all accounting terms used herein shall be interpreted, all accounting
determinations hereunder shall be made, and all financial statements required to
be delivered hereunder shall be prepared in accordance with Generally Accepted
Accounting Principles.
1.3. GENERAL CONSTRUCTION. As used in this Agreement, the masculine,
feminine and neuter genders, and the plural and singular numbers shall be deemed
to include the others in all cases where they would so apply. "Includes" and
"including" are not limiting, and "or" is not exclusive.
ARTICLE II
AMOUNT AND TERMS OF THE LOANS
2.1. THE LOANS.
Each Lender severally agrees, on the terms and conditions set forth
in this Agreement, to make a loan (each a "Loan", and collectively, the
"Loans"), to the Borrowers during the periods listed below (each such period
being a "Borrowing Period") in a maximum amount equal to its Applicable Pro Rata
Share of the aggregate amount of the Loans set forth below opposite the
Borrowing Period for such Loan:
BORROWING PERIOD AGGREGATE AMOUNT OF LOANS
---------------- -------------------------
Closing Date - April 16, 1995 $ 90,000,000
April 17, 1995 - April 23, 1995 $100,000,000
April 24, 1995 - April 30, 1995 $105,000,000
May 1, 1995 - May 31, 1995 $110,000,000
PROVIDED, that the aggregate principal amount of the Loans by such Lender
outstanding at any time during a Borrowing Period to the Borrowers shall not
exceed the amount of its Commitment as such Commitment may be reduced pursuant
to SECTION 2.9. Each Borrowing under this SECTION 2.1 shall be in an aggregate
amount of $5,000,000 or multiples thereof. Subject to SECTION 2.9, amounts
borrowed hereunder and repaid or prepaid may be reborrowed.
2.2. NOTICE OF BORROWING. The Borrowers shall give notice to the
Administrative Agent by telephone, at the telephone
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number listed in the Schedule of Notices, to Administrative Agent's account
executive responsible for Borrowers' account, confirmed immediately in writing,
or in writing (by facsimile at the address listed in the Schedule of Notices),
substantially in the form of EXHIBIT B, or to such other telephone or facsimile
number as Administrative Agent may designate, (a "Notice of Borrowing") no later
than 12:00 Noon (Pittsburgh, Pennsylvania time) on the Business Day immediately
preceding a Borrowing Period, specifying:
(a) The date of such Borrowing;
(b) The aggregate amount of such Borrowing; and
(c) That such aggregate amount does not exceed the aggregate
amount of available Loans set forth in SECTION 2.1 opposite the Borrowing Period
during which the date of such Borrowing occurs.
2.3. NOTICE TO LENDERS; FUNDING OF LOANS.
(a) Subject to the provisions of SECTION 12.1, upon receipt of a
Notice of Borrowing, the Administrative Agent shall promptly notify each Lender
of the contents thereof and of such Lender's Applicable Pro Rata Share (if any)
of such Borrowing, and such Notice of Borrowing shall not thereafter be
revocable by the Borrowers.
(b) Subject to the provisions of SECTION 12.1, not later than 1:00
p.m. (Pittsburgh time) on the date of each Borrowing, each Lender shall make
available its Applicable Pro Rata Share of such Borrowing, in Federal or other
funds immediately available in Pittsburgh, Pennsylvania, to the Administrative
Agent at its address referred to in the Schedule of Notices. Unless the
Administrative Agent determines that any applicable condition specified in
ARTICLE V has not been satisfied, the Administrative Agent will make the funds
so received from the Lenders available to the Borrowers at 3:00 p.m. Pittsburgh
time at the Administrative Agent's aforesaid address.
(c) Unless the Administrative Agent shall have received notice
from a Lender prior to the date of any Borrowing that such Lender will not make
available to the Administrative Agent such Lender's Applicable Pro Rata Share,
if any, of such Borrowing, the Administrative Agent may assume that such Lender
has made such Applicable Pro Rata Share available to the Administrative Agent on
the date of such Borrowing in accordance with subsection (b) of this SECTION 2.3
and the Administrative Agent may, in reliance upon such assumption, make
available to the Borrowers on such date a corresponding amount. If and to the
extent that such Lender shall not have so made such Applicable Pro Rata Share
available to the Administrative Agent, such Lender
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and the Borrowers severally agree to repay to the Administrative Agent forthwith
on demand such corresponding amount together with interest thereon, for each day
from the date such amount is made available to the Borrowers until the date such
amount is repaid to the Administrative Agent, at (i) in the case of the
Borrowers, a rate per annum equal to the Prime Rate plus three percent (3%), and
(ii) in the case of such Lender, the Federal Funds Rate. If such Lender shall
repay to the Administrative Agent such corresponding amount, such amount so
repaid shall constitute such Lender's Loan included in such Borrowing for
purposes of this Agreement.
2.4. NOTES.
(a) The Loans of each Lender to the Borrowers shall be evidenced
by a single Note of the Borrowers payable to the order of such Lender in an
original principal amount equal to such Lender's Maximum Commitment.
(b) Upon receipt of each Lender's Note pursuant to SECTION 5.1(B),
the Administrative Agent shall forward such Note to such Lender. Each Lender
shall record the date, amount and maturity of each Loan made by it to the
Borrowers and the date and amount of each payment of principal made by the
Borrowers with respect thereto, and may, if such Lender so elects in connection
with any transfer or enforcement of its Note, endorse on the schedule forming a
part thereof appropriate notations to evidence the foregoing information with
respect to each such Loan then outstanding; PROVIDED, that the failure of any
Lender to make any such recordation or endorsement shall not affect the
obligations of either Borrower hereunder or under the Notes absent manifest
error. Each Lender is hereby irrevocably authorized by each Borrower so to
endorse its Note and to attach to and make a part of any Note a continuation of
any such schedule as and when required.
2.5. MATURITY OF LOANS. Each Loan included in any Borrowing shall
mature, and the principal amount thereof shall be due and payable, on the
Termination Date.
2.6. INTEREST RATES.
(a) Each Loan shall bear interest on the outstanding principal
amount thereof, for each day from the date such Loan is made until it becomes
due, at a rate per annum equal to the Prime Rate for such day plus three
percent (3%). Interest shall be payable each calendar month on the last day of
such month and on the Termination Date.
(b) Any overdue principal of or interest on any Loan shall bear
interest, payable on demand, for each day until paid at a rate per annum equal
to the Default Rate. In addition,
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with respect to all Defaults from and after the occurrence of any Event of
Default (including any Event of Default resulting from the filing of a
bankruptcy case) and continuing until such Event of Default is cured or has been
waived in writing by the Administrative Agent in accordance with the terms of
this Agreement, interest shall accrue on the Obligations at the Default Rate.
Any interest, reasonable professional fees and expenses of the Administrative
Agent, the Co-Agents and the Collateral Agent, or other reasonable professional
fees, expenses and charges of the Steering Committee Lenders due under SECTION
13.4, which are not paid as and when due, shall bear interest at the Default
Rate. The interest rate increase shall take effect immediately upon the
occurrence of an Event of Default, without prior notice to Borrowers.
2.7. FEES.
(a) CLOSING FEE. The Borrowers shall pay to the Administrative
Agent for the benefit of the Lenders, on the Closing Date, a closing fee of
$500,000 (the "Closing Fee") to be distributed by the Administrative Agent to
each Lender in an amount equal to such Lender's Beta Pro Rata Share.
(b) ADMINISTRATIVE AGENT'S FEE. The Borrowers shall pay to the
Administrative Agent on the Closing Date and monthly thereafter on the first day
of each month in advance, a non-refundable fee in an amount equal to $30,000 per
month (the "Administrative Agent's Fee"). The Administrative Agent's Fee is
payable from the Closing Date until such time as the Borrowers and the
Administrative Agent have no Obligations under this Agreement and the other
Restructuring Documents and the obligation to pay the Administrative Agent's Fee
shall survive the payment in full of the Obligations under this Agreement.
(c) BANK OF AMERICA'S FEE. The Borrowers shall pay to Bank of
America National Trust and Savings Association, as Co-Agent, on the Closing Date
and monthly thereafter on the first day of each month in advance, a non-
refundable fee in an amount equal to $30,000 per month (the "Bank of America
Fee"). The Bank of America Fee is payable from the Closing Date until such time
as the Borrowers and the Co-Agents have no Obligations under this Agreement and
the other Restructuring Documents and the obligation to pay the Bank of America
Fee shall survive the payment in full of the Obligations under this Agreement.
(d) COLLATERAL AGENT'S FEE. The Borrowers shall pay to the
Collateral Agent on the Closing Date and monthly thereafter on the first day of
each month in advance, a non-refundable fee in an amount equal to $30,000 per
month (the "Collateral Agent's Fee"). The Collateral Agent's Fee is payable
from the Closing Date until such time as the Borrowers and the Collateral Agent
have no Obligations under this Agreement and the
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other Restructuring Documents and the obligation to pay the Collateral Agent's
Fee shall survive the payment in full of the Obligations under this Agreement.
(e) FEES CUMULATIVE. All fees payable under this Agreement shall
be cumulative, and fully earned on the date of payment.
2.8. OPTIONAL PREPAYMENTS.
(a) The Borrowers may, upon at least one Business Day's notice to
the Administrative Agent, prepay any Borrowing, in each case in whole at any
time, or from time to time in part in amounts aggregating $1,000,000 or any
larger multiple of $1,000,000, by paying the principal amount to be prepaid
together with accrued interest thereon to the date of prepayment. Each such
optional prepayment shall be applied to prepay each Lender's Loans in an amount
equal to such Lender's Applicable Pro Rata Share of such prepayment.
(b) Upon receipt of a notice of prepayment pursuant to this
Section, the Administrative Agent shall promptly notify each Lender of the
contents thereof and of such Lender's Applicable Pro Rata Share (if any) of such
prepayment and such notice shall not thereafter be revocable by the Borrowers.
2.9. MANDATORY PREPAYMENT.
(a) Immediately upon receipt by any Borrower or the Administrative
Agent of Net Cash Proceeds of (i) any sale of assets (other than sales in the
ordinary course of business, sales of equipment which is promptly replaced or
sales under SECTION 8.4(a)(ii)), (ii) issuance of capital stock by the Borrowers
or (iii) insurance, the Borrowers shall pay or cause to be paid such Net Cash
Proceeds to the Administrative Agent on account of the Obligations for the
benefit of Lenders; PROVIDED, HOWEVER, that (x) the Borrowers may retain up to
an aggregate amount of $1,000,000 of insurance proceeds to rebuild or replace
insured property destroyed or damaged, if such property is capable of being
rebuilt or replaced within a reasonable period of time, and no Event of Default
exists and is continuing at the time such insurance proceeds are received,
unless otherwise set forth in the Security Documents, (y) the Borrowers may
retain up to the first $36,000,000 of the Net Cash Proceeds from the sale of the
capital stock of MK Gold Company and fifty percent (50%) of any Net Cash
Proceeds from the sale of the capital stock of MK Gold Company in excess of
$36,000,000, and (z) so long as, and to the extent that, any "Outstanding
Balance" remains on any "Purchased Receivables" under the Citicorp Receivables
Purchase Agreement, the Borrowers may retain up to an amount equal to 9.91%
[12.1 divided by 122.1] of the amount of such Net Cash Proceeds remaining after
the Borrower's retention of the amounts described
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in clauses (x) and (y) above (the "Net Cash Proceeds Retainage Amount").
Amounts prepaid under this SECTION 2.9(a) may not be reborrowed and each
Lender's Commitment shall be reduced in the amount of such Lender's Applicable
Pro Rata Share in such mandatory prepayment.
(b) Immediately upon receipt by the Borrowers of any repayment of
the Indebtedness of MK Rail Corporation to the Borrowers with respect to the
Borrowers' intercompany receivable from MK Rail Corporation (the "MK Rail
Receivable"), the Borrowers shall pay the Net Cash Proceeds received in
connection with the MK Rail Receivable to the Administrative Agent on account of
the Obligations for the benefit of the Lenders in connection with the
Obligations; PROVIDED, HOWEVER, that so long as, and to the extent that, any
"Outstanding Balance" remains on any "Purchased Receivables" under the Citicorp
Receivables Purchase Agreement, the Borrowers may retain up to the related Net
Cash Proceeds Retainage Amount. Amounts prepaid under this SECTION 2.9(b) may
not be reborrowed and each Lender's Commitment shall be reduced in the amount of
such Lender's Applicable Pro Rata Share in such mandatory prepayment.
(c) In the event that the Borrowers repay or prepay any payment of
principal on any Indebtedness in connection with the Existing Agreements, the
Borrowers shall prepay the Obligations in full. Amounts prepaid under this
SECTION 2.9(c) may not be reborrowed and each Lender's Commitment shall be
reduced in the amount of such Lender's Applicable Pro Rata Share in such
mandatory prepayment.
(d) To the extent funds are on deposit in the Collateral Account,
at the close of business on the last Business Day of each week, the Borrowers
shall pay to the Administrative Agent, for the benefit of the Lenders in respect
of the Obligations, such funds pursuant to the terms of the Cash Management
System or otherwise. Amounts prepaid under this SECTION 2.9(d) may be
reborrowed.
(e) Immediately upon receipt by the Borrowers of any tax refund,
the Borrowers shall pay or cause to be paid the Net Cash Proceeds of such tax
refunds to the Administrative Agent on account of the Obligations for the
benefit of the Lenders; PROVIDED, HOWEVER, that so long as, and to the extent
that, any "Outstanding Balance" remains on any "Purchased Receivables" under the
Citicorp Receivables Purchase Agreement, the Borrowers may retain up to the
related Net Cash Proceeds Retainage Amount. Amounts prepaid under this SECTION
2.9(e) may not be reborrowed and each Lender's Commitment shall be reduced in
the amount of such Lender's Applicable Pro Rata Share in such mandatory
prepayment.
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(f) Upon receipt by Administrative Agent or Collateral Agent of
written instructions from Borrowers to pay any of Borrowers' Net Cash Proceeds
Retainage Amount received by Administrative Agent or Collateral Agent,
Administrative Agent or Collateral Agent, as the case may be, shall,
notwithstanding any contrary provision of this Agreement or any other Loan
Document, and notwithstanding the occurrence of a Default or Event of Default,
pay such Net Cash Proceeds Retainage Amount in accordance with such
instructions; PROVIDED, HOWEVER, that Administrative Agent and Collateral Agent
shall have no such obligation to pay Borrowers' Net Cash Proceeds Retainage
Amount as so instructed to the extent such payment would conflict with any order
of any court, or would, in the reasonable judgment of Administrative Agent or
Collateral Agent, violate any applicable law.
2.10. APPLICATION OF PAYMENTS. All payments (including prepayments),
other than regularly scheduled interest payments, on the Loans or on any of the
other Obligations (other than Obligations under the Cash Management System)
shall be made to the Lenders or the Administrative Agent, as the case may be,
for application against the Borrowers' Obligations as follows (regardless of how
each Lender may treat such payments for purposes of its own accounting): FIRST
to then due and outstanding fees, expenses or other charges of the
Administrative Agent, the Co-Agents, the Steering Committee Lenders or the
Collateral Agent under this Agreement or any of the other Restructuring
Documents to the extent payable by the Borrowers; SECOND to then due interest on
the Loans accrued and unpaid prior to the date such funds are received by the
Lenders; and THIRD to the principal balance of the Loans (as provided in SECTION
12.2).
2.11. GENERAL PROVISIONS AS TO PAYMENTS. The Borrowers shall make each
payment of principal of, and interest on, the Loans and of fees and of all other
Obligations (other than Obligations payable under the Cash Management System)
hereunder, not later than 12:00 Noon (Pittsburgh, Pennsylvania time) on the date
when due, in Federal or other funds immediately available in Pittsburgh,
Pennsylvania, to the Administrative Agent at its address referred to in the
Schedule for Notices. Subject to the provisions of SECTION 2.10, the
Administrative Agent will promptly distribute to each Lender its Applicable Pro
Rata Share (if any) of each such payment received by the Administrative Agent
for the account of the Lenders. The Borrowers agree to pay to the
Administrative Agent, upon demand, the amount of any payment received by the
Administrative Agent pursuant to the terms of the Cash Management System that is
subsequently returned to the bank at which the Collateral Account is maintained
or any bank that has transferred funds to the Collateral Account in accordance
with the Cash Management System, because such bank transferred funds in advance
of final collection and such funds are not finally collected. If such payment
has already been
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applied in accordance with SECTION 2.10 and is not paid by the Borrowers within
one (1) Business Day after the Administrative Agent's demand therefor, then each
Lender shall pay to the Administrative Agent its Applicable Pro Rata Share of
such returned payment. Whenever any payment of principal of, or interest on, the
Loans or of fees with respect to the Loans or of any other Obligations shall be
due on a day which is not a Business Day, the date for payment thereof shall be
extended to the next succeeding Business Day. If the date for any payment of
principal is extended by operation of law or otherwise, interest thereon shall
be payable for such extended time.
2.12. COMPUTATION OF INTEREST AND FEES. Interest and fees shall be
computed on the basis of a year of 360 days and paid for the actual number of
days elapsed (including the first day but excluding the last day).
2.13. CASH MANAGEMENT SYSTEM. Each Borrower will establish, on or prior
to the Closing Date, and each Borrower will maintain until the Obligations have
been paid in full and all Commitments have been terminated, the Cash Management
System described in SCHEDULE F.
ARTICLE III
CHANGE IN CIRCUMSTANCES
3.1. INCREASED COST.
(a) If any Lender shall have determined that, after the date
hereof, the adoption of any applicable law, rule or regulation regarding capital
adequacy, or any change in any such law, rule or regulation, or any change in
the interpretation or administration thereof by any Governmental Authority,
central bank or comparable agency charged with the interpretation or
administration thereof, or any request or directive regarding capital adequacy
(whether or not having the force of law) of any such authority, central bank or
comparable agency, has or would have the effect of reducing the rate of return
on capital of such Lender (or its Parent) as a consequence of such Lender's
obligations hereunder to a level below that which such Lender (or its Parent)
could have achieved but for such adoption, change, request or directive (taking
into consideration its policies with respect to capital adequacy) by an amount
deemed by such Lender to be material, then from time to time, within 15 days
after demand by such Lender (with a copy to the Administrative Agent), the
Borrowers shall pay to such Lender such additional amount or amounts as will
compensate such Lender (or its Parent) for such reduction.
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(b) Each Lender will promptly notify the Borrowers and the
Administrative Agent of any event of which it has knowledge, occurring after the
date hereof, which will entitle such Lender to compensation pursuant to this
SECTION 3.1. A certificate of any Lender claiming compensation under this
SECTION 3.1 and setting forth the additional amount or amounts to be paid to it
hereunder shall be conclusive in the absence of manifest error. In determining
such amount, such Lender may use any reasonable averaging and attribution
methods.
3.2. TAXES.
(a) Any and all payments by either Borrower to or for the account
of any Lender or the Agents hereunder or under any Note or any other Loan
Document shall be made without deduction for any Taxes or Other Taxes; PROVIDED,
that if either Borrower shall be required by law to deduct any Taxes or Other
Taxes from any such payments, (i) the sum payable shall be increased as
necessary so that after making all required deductions (including deductions
applicable to additional sums payable under this SECTION 3.2) such Lender or the
Agents (as the case may be) receives an amount equal to the sum it would have
received had no such deductions been made, (ii) such Borrower shall make such
deductions, (iii) such Borrower shall pay the full amount deducted to the
relevant taxation authority or other authority in accordance with applicable law
and (iv) such Borrower shall furnish to the Administrative Agent, at its address
referred to in the Schedule for Notices, the original or a certified copy of a
receipt evidencing payment thereof.
(b) The Borrowers agree to indemnify each Lender and each Agent
for the full amount of Taxes or Other Taxes (including any Taxes or Other Taxes
imposed or asserted by any jurisdiction on amounts payable under this SECTION
3.2) paid by such Lender or the Agents (as the case may be) and any liability
(including penalties, interest and expenses) arising therefrom or with respect
thereto. This indemnification shall be paid within 15 days after such Lender or
the Agents (as the case may be) makes demand therefor.
(c) Each Lender organized under the laws of a jurisdiction outside
the United States, on or prior to the date of its execution and delivery of this
Agreement in the case of each Lender listed on the signature pages hereof and on
or prior to the date on which it becomes a Lender in the case of each other
Lender, and from time to time thereafter if requested in writing by the
Borrowers (but only so long as such Lender remains lawfully able to do so),
shall provide the Borrowers with Internal Revenue Service form 1001 or 4224, as
appropriate, or any successor form prescribed by the Internal Revenue Service,
certifying that such Lender is entitled to benefits under an income tax treaty
to which the United States is a party which
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exempts the Lender from United States withholding tax or reduces the rate of
withholding tax on payments of interest for the account of such Lender or
certifying that the income receivable pursuant to this Agreement is effectively
connected with the conduct of a trade or business in the United States.
(d) For any period with respect to which a Lender has failed to
provide the Borrowers with the appropriate form pursuant to SECTION 3.2(c)
(unless such failure is due to a change in treaty, law or regulation occurring
subsequent to the date on which such form originally was required to be
provided), such Lender shall not be entitled to indemnification under SECTION
3.2(b) or (c) with respect to Taxes imposed by the United States on payments by
such Borrower; PROVIDED, that if a Lender, which is otherwise exempt from or
subject to a reduced rate of withholding tax, becomes subject to Taxes because
of its failure to deliver a form required hereunder, such Borrower shall take
such steps as such Lender shall reasonably request to assist such Lender to
recover such Taxes.
(e) If either Borrower is required to pay additional amounts to or
for the account of any Lender pursuant to this SECTION 3.2, then such Lender
will change the jurisdiction of its lending office to an office it maintains if,
in the judgment of such Lender, such change (i) will eliminate or reduce any
such additional payment which may thereafter accrue and (ii) is not otherwise
disadvantageous to such Lender.
ARTICLE IV
SECURITY
4.1. THE BORROWERS' OBLIGATIONS. The Obligations of the Borrowers to
pay all sums due to the Agents and the Lenders and to perform all other
covenants and agreements under this Agreement, the Notes and the other Loan
Documents to which the Borrowers are a party, shall be secured to the extent
provided in the Security Documents. It is agreed and understood that the
Indebtedness, liabilities and other obligations under the Existing Agreements
shall not be secured by the Collateral.
4.2. FURTHER ASSURANCES. The Borrowers shall, at their sole cost and
expense, execute and deliver to the Administrative Agent or the Collateral Agent
for the benefit of the Lenders all such further documents, instruments and
agreements and agree to perform all such other acts which may be required in the
opinion of the Administrative Agent to enable the Collateral Agent, the Agents
and the Lenders to exercise and enforce their respective rights as the secured
parties or beneficiaries under the Security Documents. To the extent permitted
by applicable law, the Borrowers hereby authorize the Collateral Agent or the
Administrative Agent on behalf of the Lenders to file Financing
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Statements and continuation statements with respect to the security interests
granted under the Security Documents in favor of the Collateral Agent for the
benefit of the Agents and the Lenders and to execute such Financing Statements
and continuation statements on behalf of the Borrowers.
ARTICLE V
CONDITIONS PRECEDENT
5.1. CONDITIONS PRECEDENT TO INITIAL LOANS. The making of initial Loans
hereunder shall be subject to the satisfaction by the Borrowers of the following
conditions precedent, unless each Lender shall otherwise agree:
(a) RESTRUCTURING DOCUMENTS. The Administrative Agent shall have
received counterpart originals of this Agreement, the other Restructuring
Documents and all the other certificates, schedules, and other items as
specified in the Schedule of Documents attached hereto as SCHEDULE C, each duly
and validly executed and acknowledged, where appropriate, by or on behalf of all
the parties hereto or thereto (as the case may be).
(b) THE NOTES. The Administrative Agent shall have received, for
the benefit of each Lender, a Note conforming to the requirements of SECTION 2.4
duly and validly executed on behalf of the Borrowers.
(c) LEGAL OPINION OF THE BORROWERS' COUNSEL. The Administrative
Agent shall have received, with an executed counterpart for each Lender, the
legal opinion of Jones, Day, Reavis & Pogue and of Hawley Troxell Ennis &
Hawley, counsel to the Borrowers and Guarantors, and such other counsel approved
by the Administrative Agent, dated the Closing Date, and addressed to the
Administrative Agent and the Co-Agents for the benefit of the Lenders, in form
and substance satisfactory to the Administrative Agent, and the Co-Agents.
(d) INSURANCE. The Administrative Agent shall have received a
certificate of the issuance of the insurance policies required by SECTION 7.7
and the Security Documents and the naming of the Administrative Agent, for the
benefit of the Lenders, as lender loss payee and/or additional insured (as
specified by the Administrative Agent) thereon under Form 438 BFU together with
certified copies of all existing insurance policies, where available.
(e) PERFECTION AND PRIORITY OF PERSONAL PROPERTY SECURITY
INTERESTS. The Administrative Agent shall have received evidence that the
Financing Statements have been filed as of the Closing Date with the corporate
filing officers in the
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appropriate locations and that the security interests capable of being perfected
by the filing of a Financing Statement on all of the personal property
Collateral are duly perfected and subject to no prior Liens other than Permitted
Liens. The Administrative Agent shall have received evidence of Lien searches,
through a date satisfactory to the Administrative Agent, showing no Liens
affecting the property covered by the Security Documents other than those
granted in favor of the Agents for the benefit of the Lenders in connection
herewith or Permitted Liens. The Administrative Agent shall have received all
certificates of stock to be delivered pursuant to the Security Agreements.
(f) DESCRIPTIONS WITH RESPECT TO REAL PROPERTY COLLATERAL. The
Administrative Agent shall have received complete and correct legal descriptions
with respect to all Real Property Collateral.
(g) MORTGAGES; LANDLORD WAIVERS. The Mortgages, or modifications
thereof, each duly and validly executed and acknowledged, where appropriate, by
or on behalf of all the appropriate parties thereto, shall have been duly
recorded in the official real property records of the appropriate offices of the
respective counties (or parishes) in which the Real Property Collateral relating
thereto is located. The Administrative Agent shall have received all landlord
waivers, estoppel certificates and consents with respect to any leasehold
estates required by the Administrative Agent, in form and substance satisfactory
to the Administrative Agent.
(h) TITLE POLICIES. The Administrative Agent shall have received
with respect to each of the Mortgages, or modifications thereof, title policies
or title endorsements, as the case may be, from title companies acceptable to
the Administrative Agent dated as of the Closing Date. Each title policy shall
(a) be in an amount not less than the amount set forth on Schedule 5.1(h), (b)
be issued at ordinary premium rates, (c) insure that the Mortgage insured
thereby creates a valid, first priority Lien on the Real Property Collateral
covered by the Mortgage, free and clear of all defects and encumbrances except
such standard printed exceptions contained in the policy form referred to below
as the Administrative Agent may, in its sole discretion, permit and the
Permitted Liens, (d) be in the form of ALTA Extended Coverage Lenders'
Policy -- 1970, (e) contain such endorsements and affirmative coverages as the
Administrative Agent may request, including endorsements for future advances
under this Agreement and for mechanic's liens and (f) where the Administrative
Agent requests, be accompanied by a Uniform Commercial Code search. The
Administrative Agent shall have received evidence satisfactory to it that all
premiums with respect to such policies have been paid by or on behalf of the
Borrowers.
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(i) ENVIRONMENTAL INSPECTION. The Administrative Agent shall have
received a copy of the environmental inspection reports regarding all real
property currently leased or owned by the Borrowers, which reports (a) shall be
in form and substance satisfactory to the Administrative Agent and (b) shall
reveal no material violations of any Environmental Material Laws and no other
conditions which are unacceptable to the Administrative Agent in its sole
discretion.
(j) EVIDENCE OF INDEBTEDNESS. The Administrative Agent shall have
received (a) a copy of each indenture, loan agreement, guarantee, promissory
note and other evidence of Indebtedness (together with all modifications,
amendments, restatements or supplements thereto) to which the Borrowers or any
Guarantors are a party constituting a liability (contingent or otherwise) equal
to or in excess of $2,000,000, the terms and conditions of which shall be
satisfactory to the Administrative Agent, and (b) a SCHEDULE 5.1(j) certified by
the chief executive officer and chief financial officer of each Borrower
describing any default or failure of performance or any event which with the
giving of notice of, or lapse of time, or both, would become a default by such
Borrower under any of such documents, instruments or agreements.
CONSENTS. The Administrative Agent shall have received
evidence reasonably satisfactory to it in its sole discretion that the Borrowers
and any Guarantors have obtained all requisite consents and approvals required
to be obtained from any Governmental Authority, Person or entity whatsoever, to
permit the transactions contemplated by the Restructuring Documents to be
consummated in accordance with their respective terms and conditions.
(l) DISBURSEMENT AUTHORIZATION. The Administrative Agent shall
have received a Notice of Borrowing regarding the disbursement of the proceeds
of the Loans to be made on the Closing Date.
(m) PAYMENT OF FEES AND EXPENSES. The Borrowers shall have paid
all fees set forth in SECTION 2.7 that are payable on the Closing Date and such
other fees and expenses of the Steering Committee Lenders and their
Professionals set forth in that certain side letter dated April 11, 1995.
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(n) SOLVENCY CERTIFICATE. The Administrative Agent shall have
received a solvency certificate of the chief executive officer and the chief
financial officer of MKD, in substantially the form of EXHIBIT C.
(o) PENDING AND THREATENED LITIGATION. The Administrative Agent
shall have received SCHEDULE 5.1(o) and shall have reviewed all such pending or
threatened litigation against the Borrowers and their Subsidiaries, and such
disclosures shall reveal no conditions unacceptable to the Administrative Agent
in its sole discretion.
(p) ASSET DISPOSITION PROGRAM. The Administrative Agent shall
have received the Asset Disposition Program.
THE MK RAIL RESTRUCTURING. The MK Rail Restructuring shall
have been consummated with all conditions to the effectiveness having been
satisfied, subject only to the execution of this Agreement and the other Loan
Documents.
(r) OTHER MATTERS. The Administrative Agent shall have received
all other documents, instruments, agreements, opinions, certificates, insurance
policies, consents and evidences of other legal matters, in form and substance
satisfactory to the Administrative Agent and its counsel, as the Administrative
Agent reasonably may request.
5.2. CONDITIONS PRECEDENT TO ALL LOANS. The obligation of each of the
Lenders to make any Loans on any date is subject to the satisfaction by the
Borrowers, or the waiver by the Administrative Agent and the Majority Lenders,
of the conditions set forth below. Each Borrowing by the Borrowers shall
constitute a representation and warranty by the Borrowers to the Administrative
Agent and each such Lender, as of each such borrowing, that the conditions in
this SECTION 5.2 have been satisfied.
(a) BORROWINGS. Receipt by the Administrative Agent of a Notice
of Borrowing as required by SECTION 2.2. Immediately after such Borrowing, the
aggregate outstanding principal amount of the Loans will not exceed the
aggregate amount of the Commitments.
(b) REPRESENTATIONS AND WARRANTIES. The representations and
warranties of the Borrowers and each of them set forth in this Agreement, the
Notes or the other Restructuring Documents or, in any certificate or opinion by
or on behalf of the Borrowers in connection herewith, shall be correct on and as
of the date of any requested Loan as if made on and as of such date.
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(c) NO DEFAULT OR EVENT OF DEFAULT. No Default or Event of
Default shall have occurred and be continuing on the date of such requested Loan
or after giving effect to the Loans to be made on such date.
(d) NO VIOLATIONS. No Requirement of Law shall prohibit, and no
order, judgment or decree of any Governmental Authority shall, and no litigation
shall be pending which would enjoin, prohibit or restrain any Lender from making
a requested Loan.
(e) CERTIFICATE OF CHIEF FINANCIAL OFFICER REGARDING THE BUDGET.
Receipt by the Administrative Agent of a certificate of the chief financial
officer of each of the Borrowers (i) certifying the Borrowers' compliance with
the Budget for the period prior to the Borrowing and (ii) setting forth
projected uses for requested Loans.
(f) OFFICER'S CERTIFICATE. The Administrative Agent shall have
received a certificate of the chief executive officer and the chief financial
officer of each Borrower dated the date of such requested Loan, that to the best
of each officers' knowledge (i) each of the representations and warranties
contained in ARTICLE VI and in any other Loan Document is true and correct on
and as of the date of such requested Loans, with the same force and effect as if
made on and as of such date; (ii) all obligations, covenants, agreements and
conditions contained in this Agreement and the Restructuring Documents to be
performed or satisfied by each Borrower on or prior to the date of such
requested Loan have been performed or satisfied in all respects or duly waived
by the Majority Lenders or All Lenders as the case may be; (iii) as of the date
of such requested Loan and since March 23, 1995, no Material Adverse Effect has
occurred (except as disclosed on SCHEDULE 6.19 hereto); (iv) no Default or Event
of Default has occurred, or would result from the making of such requested
Loans; (v) each Borrower and each Guarantor has delivered to the Administrative
Agent true and correct copies of all documents required to be delivered to the
Administrative Agent pursuant to the Schedule of Documents, and all such
documents are complete and correct on and as of the date of such requested Loan;
and (vi) no Liens have arisen or been granted with respect to the Collateral
other than Permitted Liens.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES
In order to induce the Agents and the Lenders to enter into this
Agreement, and to make the Loans and other financial accommodations provided for
herein, the Borrowers
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hereby make the following representations and warranties to the Agents and to
each Lender:
6.1. ORGANIZATION AND QUALIFICATION. Each of the Borrowers and
Guarantors is a corporation duly organized, validly existing and in good
standing under the laws of its incorporation and is duly qualified and in good
standing in each jurisdiction wherein the conduct of its business or the
ownership of its properties requires such qualification, except for those
jurisdictions in which the failure to be qualified and in good standing would
not have or result in a Material Adverse Effect or would not materially
adversely affect the ability of the Collateral Agent to collect any material
account receivable.
6.2. CORPORATE POWER AND AUTHORIZATION; BINDING EFFECT. Each of the
Borrowers and Guarantors has the corporate power and has taken all corporate
action necessary to authorize it to execute, deliver, and perform this Agreement
and each of the other Restructuring Documents executed by it and to grant the
security interests and liens granted or created thereunder. This Agreement
constitutes, and when executed the other Restructuring Documents will
constitute, legal and valid obligations of each Borrower binding upon it and
enforceable in accordance with their respective terms, except as the
enforceability of each such Restructuring Document may be subject to or limited
by bankruptcy, insolvency, reorganization, arrangement, moratorium or other
similar laws relating to or affecting the rights of creditors and except as the
availability of equitable remedies are subject to the application of equitable
principles.
6.3. NO CONFLICT. The execution, delivery and performance of this
Agreement, the Notes, the other Restructuring Documents and the secured
financing transactions contemplated hereby, the use of proceeds thereof, and the
performance by the Borrowers and the Guarantors (a) do not conflict with or
violate any provision of the Articles of Incorporation or Certificate of
Incorporation, as the case may be, or By-Laws of any Borrower or any Guarantor,
any material Requirement of Law or any Contractual Obligation of any Borrower or
any Guarantor, (b) do not conflict with, constitute a default or require any
consent under any Contractual Obligation of any Borrower or any Guarantor, and
(c) do not result in the creation of any Lien other than a Permitted Lien upon
any property or assets of any Borrower or any Guarantor.
6.4. NO CONSENTS. All necessary consents, approvals and authorizations
of, filings with, and acts by or with respect to all Governmental Authorities
and other Persons (except possession of certain collateral or filings with the
appropriate Governmental Authorities necessary to perfect the security interests
under the Security Documents) required to be obtained, made or taken by the
Borrowers or the Guarantors in connection
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with the secured financing transactions contemplated hereby or with the
execution, delivery, performance, validity or enforceability of this Agreement
or the other Restructuring Documents, have been obtained, made or taken, and
remain in effect. All applicable waiting periods have expired without any
Governmental Authority or other Person taking any action which restricts,
prevents or imposes materially adverse conditions upon the consummation of the
secured financing transactions contemplated hereby.
6.5. ABSENCE OF LITIGATION. Except as otherwise set forth in
SCHEDULE 5.1(O), there are no actions, suits, proceedings or other litigation
(including proceedings by or before any arbitrator or Governmental Authority)
pending, or, to the Borrowers' knowledge, threatened, against or affecting the
Borrowers or the Guarantors or any of their Consolidated Subsidiaries or, to the
knowledge of the Borrowers, any basis therefor, (a) which challenge the validity
or propriety of the secured financing transactions contemplated hereby, (b)
which could reasonably be expected to have or result in, individually or in the
aggregate, a Material Adverse Effect, or (c) which could materially affect the
ability of the Borrowers to perform their obligations under this Agreement or
the other Restructuring Documents.
6.6. NO DEFAULT UNDER THE RESTRUCTURING DOCUMENTS. No Default or Event
of Default has occurred and is continuing.
6.7. INDEBTEDNESS. Set forth on SCHEDULE 6.7A hereto is a complete and
correct list of all Indebtedness of the Borrowers and the Guarantors in excess
of $2,000,000, other than Contingent Obligations, and the approximate aggregate
principal amount thereof outstanding. Set forth on SCHEDULE 6.7B is a complete
and correct list of all Contingent Obligations for which the principal amount
outstanding or the amount for which the Borrowers or the Guarantors are liable
exceeds $1,000,000, and the approximate aggregate amount of such principal or of
such liability outstanding.
6.8. MATERIAL CONTRACTS. Set forth on SCHEDULE 6.8 hereto is a complete
and accurate list of (a) each Material Contract, and (b) each Capital Lease
Obligation of the Borrowers and the Guarantors existing on the Closing Date
which exceeds $10,000,000 annually; other than as set forth in SCHEDULE 6.8 or
otherwise disclosed in writing to the Administrative Agent, each such Material
Contract or Capital Lease is, and after giving effect to the consummation of the
transactions contemplated by the Restructuring Documents will be, in full force
and effect in accordance with the terms thereof. Except as previously disclosed
to the Administrative Agent and the Lenders or as listed in SCHEDULE 6.8A
hereto, there are no defaults by the Borrowers or the Guarantors or, to the best
of their knowledge,
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by any other party under any such Material Contract which could reasonably be
expected to have or result in a Material Adverse Effect, or could reasonably be
expected to affect the Borrowers' or the Guarantors' ability to perform their
Obligations under this Agreement, the Notes and the other Restructuring
Documents. Neither the Borrowers nor the Guarantors are in default (nor has any
event occurred which, with notice or lapse of time or both would constitute a
default) under any of the Existing Agreements. The Borrowers and the Guarantors
have delivered to the Administrative Agent a true and complete copy of each
Material Contract required to be listed on SCHEDULE 6.8.
6.9. CORRECTNESS OF COLLATERAL SCHEDULES. The Schedules listed as Item
No. 3.00 of the Schedule of Documents and delivered to the Administrative Agent
in connection herewith are complete and correct in all material respects.
6.10. CORRECTNESS OF FINANCIAL INFORMATION. The financial statements
described in Item No. 1.00 of the Schedule of Documents and delivered to the
Administrative Agent in connection herewith are true and correct and (a) present
fairly, in all material respects, the Consolidated financial condition of the
Borrowers, the Guarantors and their Consolidated Subsidiaries as of the date
thereof, (b) disclose all material liabilities of the Borrowers, the Guarantors
and their Consolidated Subsidiaries, whether liquidated or unliquidated, fixed
or contingent, that are required to be disclosed under Generally Accepted
Accounting Principles as of the date thereof, and (c) have been prepared in
accordance with Generally Accepted Accounting Principles, consistently applied.
Each of the Budget and the projections described in ITEM 1.00 of the Schedule of
Documents and delivered to Administrative Agent in connection herewith are based
upon reasonable estimates and assumptions, and reflect the reasonable estimates
of the Borrowers and their Consolidated Subsidiaries of the results of
operations and other information projected therein.
6.11. SECURITY DOCUMENTS. The Security Documents to which the Borrowers
and the Guarantors are a party create in favor of the Collateral Agent for the
benefit of the Lenders to secure the Obligations valid, and, upon the proper
filing by the Collateral Agent of Financing Statements at appropriate offices, a
first priority, perfected security interests in the property and assets
described in the Security Documents capable of being perfected by the filing of
a Financing Statement, subject only to Permitted Liens.
6.12. TAXES. The Borrowers and the Guarantors have filed all tax returns
which were required to be filed in any jurisdiction, and paid all taxes shown
thereon to be due or otherwise due upon the Borrowers and the Guarantors or any
of their properties, income or franchises, including interest,
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assessments, fees and penalties (other than any immaterial amounts, which the
Borrowers or the Guarantors shall pay or make provision to pay), or have
provided adequate reserves for the payment thereof. To the best knowledge of
the Borrowers, no claims are threatened, pending or being asserted with respect
to, or in connection with any return referred to in this SECTION 6.12, which
could reasonably be expected to have or result in a Material Adverse Effect, or
could reasonably be expected to affect the Borrowers' ability to perform their
Obligations under this Agreement and the other Restructuring Documents.
6.13. NO BURDENSOME RESTRICTIONS. No Material Contract and no material
Requirement of Law relating to or otherwise affecting the Borrowers or the
Guarantors will result in a Material Adverse Effect.
6.14. JUDGMENTS. There are no outstanding or unpaid judgments against
the Borrowers or the Guarantors in excess of (a) $100,000 individually, or
(b) $2,000,000 in the aggregate, except as expressly set forth in SCHEDULE 6.14.
6.15. COMPLIANCE WITH LAWS. The Borrowers and the Guarantors are not and
will not be in violation of, or not in compliance with, any Requirement of Law
binding upon the Borrowers and the Guarantors or their properties and assets,
including any building, zoning, occupational safety and health ordinances or
regulations relating to their structure or equipment, or the operation thereof
or of its respective business, or any applicable fair employment, equal
opportunity or similar law, ordinance or regulation, the noncompliance with
which could reasonably be expected to have or result in a Material Adverse
Effect, and (b) are not a party to any agreement or instrument, or subject to
any judgment, order, writ, rule, regulation, code or ordinance which could
reasonably be expected to have or result in a Material Adverse Effect.
6.16. COMPLIANCE WITH ERISA. Each member of the ERISA Group has
fulfilled its obligations under the minimum funding standards of ERISA and the
Internal Revenue Code with respect to each Plan and is in compliance in all
material respects with the presently applicable provisions of ERISA and the
Internal Revenue Code with respect to each Plan. No member of the ERISA Group
has (i) sought a waiver of the minimum funding standard under Section 412 of the
Internal Revenue Code in respect of any Plan, (ii) failed to make any
contribution or payment to any Plan or Multi-employer Plan or in respect of any
Benefit Arrangement, or made any amendment to any Plan or Benefit Arrangement,
which has resulted or could reasonably result in the imposition of a Lien or the
posting of a bond or other security under ERISA or the Internal Revenue Code or
(iii) except as set forth on SCHEDULE 6.16, incurred any liability under Title
IV of ERISA
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other than a liability to the PBGC for premiums under Section 4007 of ERISA.
6.17. GOVERNMENTAL AUTHORIZATIONS; PERMITS, LICENSES AND ACCREDITATIONS;
OTHER RIGHTS. The Borrowers and the Guarantors have all licenses, permits,
approvals, qualifications, consents, certificates of needs and accreditations
(where such are required) and other authorizations necessary for the lawful
conduct of their respective businesses or operations wherever now conducted and
as planned to be conducted, pursuant to all applicable statutes, laws,
ordinances, rules and regulations of all Governmental Authorities having,
asserting or claiming jurisdiction over the Borrowers or the Guarantors, except
where such failure could not have or result in a Material Adverse Effect.
Copies of all such licenses, permits, approvals, qualifications, consents and
other authorizations shall be provided to the Administrative Agent upon request.
Neither the Borrowers nor the Guarantors are in default under any of such
licenses, permits, approvals, consents, qualifications or authorizations and no
event has occurred, and no condition exists, which, with the giving of notice,
the passage of time, or both, would constitute a default thereunder or would
result in the suspension, revocation, impairment, forfeiture or non-renewal of
any such permit, license, authorization or accreditation, except where such
failure could not have or result in a Material Adverse Effect. The
continuation, validity and effectiveness of all material licenses, permits,
approvals, consents, qualifications and authorizations will not be adversely
affected by the transactions contemplated by this Agreement. The Borrowers know
of no reason why they or the Guarantors will not be able to maintain all
licenses, permits, approvals, consents, qualifications, accreditations and other
authorizations necessary or appropriate to own and operate their respective
current businesses and to obtain such licenses, permits, approvals, consents,
qualifications and other authorizations necessary to own and operate their
respective current businesses, and otherwise conduct the business of the
Borrowers, the Guarantors and their Consolidated Subsidiaries as now conducted
and presently proposed to be conducted.
6.18. ENVIRONMENTAL MATTERS. In the ordinary course of their business,
the Borrowers conduct an ongoing review of the effect of Environmental Laws on
the business, operations and properties of the Borrowers, the Guarantors and
their Consolidated Subsidiaries, in the course of which they identify and
evaluate associated liabilities and costs (including any capital or operating
expenditures required for clean-up or closure of properties presently or
previously owned, any capital or operating expenditures required to achieve or
maintain compliance with environmental protection standards imposed by law or as
a condition of any license, permit or contract, any related constraints on
operating activities, including any periodic or
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permanent shutdown of any facility or reduction in the level of or change in the
nature of operations conducted thereat, any costs or liabilities in connection
with off-site disposal of wastes or Hazardous Materials, and any actual or
potential liabilities to third parties, including employees, and any related
costs and expenses). On the basis of this review, the Borrowers have reasonably
concluded that such associated liabilities and costs, including the costs of
compliance with Environmental Laws, are unlikely to have or result in a Material
Adverse Effect.
6.19. NO MATERIAL ADVERSE EFFECT. Since March 23, 1995, there has been
no Material Adverse Effect, other than as disclosed in SCHEDULE 6.19.
6.20. SOLVENCY. On the Closing Date, after giving effect to the initial
Borrowings under this Agreement to be made on the Closing Date and the
consummation of the transactions contemplated thereby, the amount of the assets
of MKD on a consolidated basis will exceed the amount of the liabilities of MKD
on a consolidated basis as determined in accordance with Generally Accepted
Accounting Principles.
6.21. CONSOLIDATED SUBSIDIARIES; SUBSIDIARIES. Each of the Borrowers'
and the Guarantors' Consolidated Subsidiaries is a corporation or other entity
duly organized, validly existing and in good standing under the laws of its
jurisdiction of organization, and has all legal powers and all material
governmental licenses, authorizations, consents and approvals required to carry
on its business as now conducted. Set forth on SCHEDULE 6.21 is a complete and
correct list of each of the Borrower's Subsidiaries. Set forth on SCHEDULE E is
a complete and correct list of each of the Borrower's wholly-owned Subsidiaries
other than foreign wholly-owned subsidiaries, Emkay Development Company, Inc.
and Emkay Capital Investments, Inc.
6.22. MARGIN SECURITIES. Neither Borrower nor any Guarantor is engaged
principally in, nor has as one of its most important activities, the business of
extending credit for the purpose of purchasing or carrying "margin stock" as
that term is defined in Regulation U promulgated by the Board of Governors of
the Federal Reserve System, as now in effect. No part of the Indebtedness
evidenced by the Notes, or otherwise created in connection with this Agreement
or the other Restructuring Documents, shall be used, directly or indirectly, for
the purpose of purchasing any such margin stock. If requested by the
Administrative Agent, the Borrowers shall furnish or cause to be furnished to
the Administrative Agent a statement, in conformity with the requirements of
Federal Reserve Form U-1 referred to in Regulation U, to the foregoing effect.
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6.23. INVESTMENT COMPANY ACT. Neither of the Borrowers nor any Guarantor
is an "investment company" nor a company "controlled" by an investment company
within the meaning of the Investment Company Act of 1940, as now in effect.
6.24. BUSINESS LOCATIONS AND TRADE NAMES. Set forth on SCHEDULE 6.24A is
a complete and correct list of each location where each of the Borrowers and the
Guarantors maintains its chief executive office, its principal place of
business, an office, a place of business or any material financial records. Set
forth on SCHEDULE 6.24B is a complete and correct list of each name under or by
which each Borrower and Guarantor conducts its business, or by which each
Borrower and Guarantor (or its predecessors in interest) has conducted its
business during the past five years.
6.25. TITLE TO REAL PROPERTY AND OTHER ASSETS. The Borrowers and the
Guarantors have good and marketable title (or good and marketable leasehold
interests with respect to leased property) to all their Real Property and all
personal property assets and fixtures subject to no Liens other than Permitted
Liens. The Borrowers and the Guarantors hold directly the fee and leasehold
interest in all facilities constituting the Real Property Collateral. As of the
Closing Date, there are no contracts or options by either Borrower, any
Guarantor or any of their Subsidiaries for the sale or lease of any of the Real
Property Collateral, except as set forth on SCHEDULE 6.25. All easements,
servitudes and rights of way necessary to the operations presently conducted or
proposed to be conducted at the facilities constituting the Real Property
Collateral have been obtained.
6.26. LABOR MATTERS. There are no controversies pending between the
Borrowers, the Guarantors or their Subsidiaries and their employees which may
constitute or result in a Material Adverse Effect.
6.27. EMPLOYMENT AND INVESTMENT AGREEMENTS. Set forth in SCHEDULE 6.27
is a complete and accurate list of (i) all employment agreements and executive
compensation arrangements to which any Borrower, any Guarantor or any Subsidiary
of a Borrower or a Guarantor is a party which provides for aggregate
compensation to any Person (assuming compliance with or satisfaction of all
contingencies or conditions) of more than $150,000 per year, and (ii) all
agreements relating to the voting or disposition of any outstanding shares of
capital stock of each Borrower, Guarantor or any of their Subsidiaries. The
Borrowers and the Guarantors have delivered to the Administrative Agent a true
and complete copy of each of the agreements required to be listed in
SCHEDULE 6.27.
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6.28. NO MISSTATEMENTS. Neither this Agreement, the Notes, the other
Restructuring Documents, nor any document, instrument and other agreement,
certificate, statement or other information referred to herein or expressly
furnished to the Administrative Agent or to any of the Lenders pursuant hereto
or thereto, contains any misstatement of a material fact or omits to state any
material fact or any fact necessary to make the statements contained herein or
therein not misleading on the date furnished or on the Closing Date, except as
otherwise subsequently disclosed to the Administrative Agent and all Lenders in
writing on or prior to the Closing Date.
6.29. MK RAIL RESTRUCTURING. The MK Rail Restructuring has occurred.
ARTICLE VII
AFFIRMATIVE COVENANTS
So long as any Loans or other amounts due hereunder are unpaid or
outstanding, any Obligations are unperformed or any of the Commitments are in
effect, the Borrowers, and, without duplication, each of them, shall, unless the
Majority Lenders shall otherwise agree:
7.1. FINANCIAL STATEMENTS; ADDITIONAL REPORTING REQUIREMENTS. Furnish
to the Administrative Agent:
(a) Not later than three Business Days after each calendar week,
an unaudited consolidating cash flow statement in the form of the Budget for
such week setting forth a comparison to the Budget for such calendar week,
certified by the chief financial officer as complete and correct to the best of
his knowledge;
(b) Not later than the twenty-fifth (25th) day after each calendar
month, an unaudited consolidating income statement, balance sheet and cash flow
statement (including MK Rail Corporation on an equity basis using the most
current monthly information available), in each case for such month, and setting
forth a comparison to the projections for such calendar month and the actual
results for such calendar month in the previous fiscal year, certified by the
chief financial officer as complete and correct, subject to normal accounting
adjustments and without footnotes;
(c) Not later than two (2) Business Days after the Borrowers
receive all necessary financial information regarding MK Rail Corporation, the
financial statements referred to in (b) above but including MK Rail Corporation,
certified by the chief financial officer as complete and correct, subject to
normal accounting adjustments and without footnotes;
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(d) As soon as available and in any event within 45 days after the
end of each of the first three quarters of each fiscal year of MKD, a
Consolidated balance sheet of MKD and its Consolidated Subsidiaries as of the
end of such quarter and the related Consolidated statements of income and cash
flows for such quarter and for the portion of MKD's fiscal year ended at the end
of such quarter, setting forth in the case of such income and cash flows in
comparative form the figures for the corresponding quarter and the corresponding
portion of MKD's previous fiscal year, all certified (subject to normal year-end
adjustments) as to fairness of presentation, Generally Accepted Accounting
Principles and consistency by the chief financial officer, controller or
treasurer of MKD;
(e) As soon as available and in any event by April 30, 1995, a
Consolidated balance sheet of MKD and its Consolidated Subsidiaries as of the
end of such fiscal year and the related Consolidated statements of income,
retained earnings and cash flows for such fiscal year, setting forth in each
case in comparative form the figures for the previous fiscal year, all reported
on in a manner acceptable to the Securities and Exchange Commission by Deloitte
& Touche or other independent public accountants of nationally recognized
standing, together with an unaudited annual report prepared on a consolidating
basis in conformity with Generally Accepted Accounting Principles;
(f) Promptly upon the mailing thereof to the shareholders of MKD
generally, copies of all financial statements, reports and proxy statements so
mailed;
(g) Promptly upon the filing thereof, copies of all reports on
Forms 10-K, 10-Q and 8-K (or their equivalents) which MKD shall have filed with
the Securities and Exchange Commission;
(h) Promptly after the furnishing thereof, copies of any
statement or report furnished to any other holder of the securities or any
Indebtedness of the Borrowers pursuant to the terms of any indenture, loan or
credit or similar agreement and not otherwise required to be furnished to the
Administrative Agent pursuant to any other clause of this SECTION 7.1;
(i) On a monthly basis a statement listing the outstanding
receivable and payable accounts between the Borrowers, and Affiliates of the
Borrowers; PROVIDED, HOWEVER, that any transfers or group of related transfers
of cash or other assets in excess of $1,000,000 between the Borrowers, and
Affiliates of the Borrowers, shall be reported on a weekly basis;
(j) On a monthly basis, within twenty five (25) days of the close
of the prior calendar month, a report outlining work status for jobs involving
either Borrower or any Consolidated Subsidiary valued by any Borrower or
Consolidated
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Subsidiary in excess of $10,000,000 certified by the chief financial officer as
complete and correct;
(k) On a weekly basis reports outlining new work awards and
bonding requirements for jobs involving either Borrower or any Consolidated
Subsidiary, certified by the chief financial officer as complete and correct;
(l) On a monthly basis, within twenty five (25) days of the close
of the prior calendar month, a report outlining the status of each of the
Borrowers' backlog, certified by the chief financial officer as complete and
correct;
(m) On a weekly basis a report prepared by each of the Borrowers'
financial advisors regarding the status of asset sales by either Borrower or any
Consolidated Subsidiary (excluding the asset sales involving AmerBank and
Western Aircraft, Inc.), certified by the chief financial officer as complete
and correct;
(n) As required under the Standstill Agreement, reports required
to be delivered to the Bonding Company under the Standstill Agreement;
(o) On a daily basis, each Borrower's daily cash balances,
certified by the chief financial officer as complete and correct;
(p) On a weekly basis, a report of any reductions of letter of
credit obligations under the Existing Agreements;
(q) On a weekly basis, the management operation reports prepared
for each of the Borrowers' divisions; and
(r) From time to time such additional information regarding the
financial position, business, properties or operations of MKD, MKO and any of
their Consolidated Subsidiaries as the Administrative Agent, at the request of
any Lender, may reasonably request.
7.2. PROVISION OF NOTICES. Give notice to the Administrative Agent of
the occurrence of any of the following events not later than twenty-four (24)
hours after the Borrowers know of such event:
(a) DEFAULT. Any Default or Event of Default.
(b) OTHER DEFAULT OR LITIGATION. (i) Any default or event of
default under any Contractual Obligation of any Borrower or Guarantor of greater
than $1,000,000 or which could otherwise have or result in a Material Adverse
Effect; (ii) any litigation, investigation or proceeding which may exist at any
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time between the Borrowers and any Governmental Authority; or (iii) any other
litigation, which, as relates to (i) or (ii) above, if adversely determined,
could (y) if the remedies prayed for do not include damages, have or result in a
Material Adverse Effect, and (z) if the remedies prayed for include damages,
would result in a liability equal to or in excess of $5,000,000 if the claim is
covered by insurance, and in excess of $1,000,000 if the claim is not covered by
insurance.
(c) REPORTABLE EVENTS. Except as provided on Schedule 7.2(c)A,
any Reportable Event with respect to any Single Employer Plan maintained by the
Borrowers or (b) the institution of proceedings or except as provided on
Schedule 7.2(c)B the taking or expected taking of any other action by the PBGC,
any Borrower or any Commonly Controlled Entity to terminate, withdraw or
partially withdraw from any Single Employer Plan maintained by any Borrower and
with respect to a Multi-employer Plan, the reorganizational insolvency of the
Plan. In addition to such notice, the Borrowers shall as soon as practicable
deliver to the Administrative Agent and each Lender whichever of the following
may be applicable: (i) a certificate of the chief executive officer and the
chief financial officer of each Borrower setting forth details as to such
Reportable Event and the action, if any, that it or the Commonly Controlled
Entity proposes to take with respect thereto, together with the copy of any
notice of such Reportable Event that is required to be filed with PBGC, or (ii)
any notice delivered by PBGC evidencing its intent to institute such proceedings
or any notice to PBGC that such Plan is to be terminated, as the case may be.
(d) ENVIRONMENTAL MATTERS. (i) Any event which makes any of the
representations set forth in SECTION 6.18 inaccurate in any respect or (ii) the
receipt by any Borrower of any notice, order, directive or other written
communication from a Governmental Authority alleging violations of or
noncompliance with any Environmental Laws.
(e) MATERIAL CONTRACTS; MATERIAL OBLIGATIONS. (i) Any proposed
material amendment, change or modification to, or waiver of any material
provision of, or any termination of, any Material Contract, other than
amendments, changes, modifications, waivers or terminations in the ordinary
course of business as presently conducted, and (ii) any new Material Contract
which has not been previously disclosed to the Lender in financial reports or
otherwise in writing.
(f) CASUALTY LOSSES. Any casualty loss or losses, not covered by
insurance, in excess of $1,000,000.
(g) NOTICES RE: BONDING ISSUES. The receipt by any of the
Borrowers of any notice or other communication from the Bonding Company
regarding material changes in the Bonding
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Company's issuance of payment or performance bonds in connection with the
projects to be performed by the Borrowers or their Consolidated Subsidiaries.
(h) NOTICES OF VIOLATION. The receipt by any Borrower of any
notice, order, directive or other written communication from a Governmental
Authority commencing an investigation or inquiry by any Governmental Authority
or alleging violations of or noncompliance with any Requirement of Law which
could reasonably be expected to have or result in a Material Adverse Effect.
(i) CHANGES TO SCHEDULES. Any changes to the information on
SCHEDULES 6.24A and 6.24B.
7.3. FILING OF RETURNS; PAYMENT OF TAXES. File all tax returns when due
and pay or cause to be paid before the same shall become delinquent and before
penalties have accrued thereon, all taxes, assessments and governmental charges
or levies imposed on the income, profits, franchises, property or business of
the Borrowers except to the extent and so long as (a) the same are being
contested in good faith by appropriate proceedings, and (b) as to which adequate
reserves in conformity with Generally Accepted Accounting Principles with
respect thereto have been provided on the books of the Borrowers.
7.4. MAINTENANCE OF EXISTENCE. Maintain and preserve, and, will cause
each Consolidated Subsidiary to maintain and preserve, its respective existence
as a corporation or other form of business organization, as the case may be, and
all rights, privileges, licenses, patents, patent rights, copyrights,
trademarks, trade names, franchises and other authority to the extent material
and necessary for the conduct of its respective business in the ordinary course
as conducted from time to time.
7.5. COMPLIANCE WITH LAWS. Comply, and cause each Consolidated
Subsidiary to comply, with all Requirements of Law in all material respects
except where the necessity of compliance therewith is contested in good faith by
appropriate proceedings.
7.6. MAINTENANCE OF PROPERTIES. Maintain, preserve and keep all of its
buildings, tangible properties, equipment and other property and assets, whether
owned or leased, used and necessary in its business, in good repair, working
order and condition, and from time to time to make all necessary and proper
repairs and replacements so that at all times the utility, efficiency or value
thereof shall not be impaired in any material respect.
7.7. INSURANCE. Maintain (a) insurance (in addition to any insurance
required under the Security Documents) on all insurable property and assets
owned or leased by the Borrowers or
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the Guarantors in the manner, to the extent and against at least such risks (in
any event, including liability and casualty, including hazard, fire and business
interruption coverage) usually done by owners of similar businesses and
properties in similar geographic areas, and adequate workers' compensation
insurance and (b) appropriate self-insurance reserve funds covering those risks
for which the Borrowers or the Guarantors presently self-insure, which self-
insurance reserves shall be funded to the extent from time to time required by
the insurer for the Borrowers and the Guarantors (which insurer shall be
acceptable to the Administrative Agent) or another excess insurance carrier for
the Borrowers or the Guarantors acceptable to the Administrative Agent. All
such insurance shall be in such amounts and form and with such insurance
companies as are reasonably satisfactory to the Administrative Agent and shall
name the Collateral Agent, for the benefit of the Lenders, as an additional
insured. The Borrowers or the Guarantors shall furnish the following to the
Administrative Agent: (x) annually or at any time upon written request, full
information as to such insurance carried, including the amounts of all self-
insurance reserve funds; (y) lender loss payable endorsements (Form 438 BFU) in
favor of the Collateral Agent (for the benefit of the Lenders), in form and
substance satisfactory to the Administrative Agent; and (z) at least annually
and on such other times as reasonably requested by the Administrative Agent,
certificates of insurance from such insurance companies and certified copies of
such insurance policies. All policies of insurance shall provide for not less
than 30 days prior written cancellation notice to the Administrative Agent.
7.8. BOOKS AND RECORDS. Keep and maintain full and accurate books of
record and accounts of its operations, dealings and transactions in relation to
its business and activities, in conformity with Generally Accepted Accounting
Principles and all Requirements of Law.
7.9. COMPLIANCE WITH TERMS OF ALL REAL PROPERTY RELATED AGREEMENTS.
Make all payments and otherwise perform all of its obligations in respect of all
Real Property Collateral with respect to which the failure to so perform could
have a material adverse effect on the security afforded thereby, and use its
best efforts to keep, and take all action to keep, the leases on all leaseholds
in full force and effect, and not allow such leases to lapse or be terminated or
any rights to renew such leases to be forfeited or canceled, and notify the
Administrative Agent of any defaults of the Borrowers or any default of any
other party with respect to such leases and cooperate in all respects with all
actions of the Administrative Agent to cure such defaults.
7.10. HAZARDOUS MATERIALS. Except in compliance with all applicable
Environmental Laws, the Borrowers shall not and shall use its reasonable best
efforts not to cause or permit any other
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person or entity to, cause or permit the presence, use, generation, manufacture,
installation, release, discharge, storage or disposal of any Hazardous Materials
on, under, in or about any real property owned by the Borrowers or any
Subsidiary or any real property leased, subleased, occupied or used by the
Borrowers or any Subsidiary, or the transportation of any Hazardous Materials to
or from any such real property unless such use or transportation is on a
temporary basis incidental to the conduct of its business in the ordinary course
and is performed in a manner that does not cause a material violation of any
applicable Environmental Law. In the event of any breach or violation of the
foregoing, or in the event of any other release or threatened release of
Hazardous Materials on, under, in or about any real property owned by the
Borrowers or any real property leased, subleased, occupied or used by the
Borrowers, the Borrowers shall promptly commence and diligently complete a
clean-up or other remediation of any such environmental contamination to the
extent required by applicable Environmental Law using a duly qualified, licensed
and insured contractor. In the event of any release or threatened release of
Hazardous Material on, under, in or about any real property owned by any
Subsidiary or any real property leased, subleased, occupied or used by any
Subsidiary, the Borrowers shall cause such Subsidiary to promptly commence and
diligently complete a clean-up or other remediation of any such environmental
contamination to the extent required by applicable Environmental Law using a
duly qualified, licensed and insured contractor.
7.11. INTELLECTUAL PROPERTY ASSIGNMENTS. Execute intellectual property
assignments in form and substance satisfactory to the Administrative Agent, upon
the Borrowers' applications with any state or federal agency for or registration
of any patents, trademarks or other intellectual property or licenses thereof,
and cooperate with the Administrative Agent to have such assignments or other
documents filed with the appropriate state or federal agency.
7.12. FURTHER ASSURANCES. Perform, make, execute and deliver all such
additional and further acts, things, deeds, occurrences and instruments as the
Administrative Agent or the Majority Lenders may reasonably require to document
and consummate the transactions contemplated hereby and to vest completely in
and ensure the Administrative Agent, the Co-Agents and the Lenders their
respective rights under this Agreement, the Notes and the other Restructuring
Documents.
7.13. INSPECTION OF PROPERTY, BOOKS AND RECORDS. Keep, and will cause
each Consolidated Subsidiary to keep, proper books of record and account in
which full, true and correct entries in conformity with Generally Accepted
Accounting Principles shall be made of all dealings and transactions in relation
to its business and activities; and will permit, and will cause each
Consolidated
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Subsidiary to permit, representatives and Professionals of the Administrative
Agent or any Steering Committee Lender, including Ernst & Young (at the
Borrowers' expense), to enter upon the Real Property Collateral, to take and
remove soil and groundwater samples from the Real Property Collateral, to
conduct tests on any part of the Real Property Collateral, to visit, inspect,
and appraise any of the Collateral, to examine and make abstracts from any of
their respective books and records and to discuss their respective affairs,
finances and accounts with their respective officers, employees and independent
public accountants, all at such times and as often as may be desired.
7.14. USE OF PROCEEDS. The proceeds of the Loans made under this
Agreement will be used by the Borrowers to pay all obligations under the Bank of
America Illinois Receivables Purchase Agreement, and for working capital
purposes in accordance with the Budget, and for no other purpose. None of such
proceeds will be used, directly or indirectly, for the purpose, whether
immediate, incidental or ultimate, of buying or carrying any "margin stock"
within the meaning of Regulation U.
7.15. COMPLIANCE WITH ASSET DISPOSITION PROGRAM.
(a) Timely comply with the terms of their Asset Disposition
Program, subject to the restrictions of SECTIONS 8.3 AND 8.4.
(b) Provide a brief description of any bona fide offer in excess of
$3,500,000 for any proposed disposition of assets.
ARTICLE VIII
NEGATIVE COVENANTS
So long as any Loans or other amounts due hereunder are unpaid or
outstanding, any Obligations are unperformed or any of the Commitments are in
effect, the Borrowers shall not, unless the Majority Lenders shall otherwise
agree (except as otherwise provided in SECTION 13.6):
8.1. INDEBTEDNESS. Create, incur, assume or suffer to exist, or permit
any Consolidated Subsidiary to create, incur, assume or suffer to exist, any
Indebtedness, EXCEPT:
(a) Indebtedness of the Borrowers in connection with this
Agreement;
(b) Indebtedness existing, or relating to commitments existing, on
the Closing Date, all as set forth on SCHEDULE 8.1 and any extensions,
refundings or renewals thereof on terms satisfactory to the Majority Lenders;
PROVIDED, HOWEVER,
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that the principal amount thereof or the interest rate thereon shall not be
increased, nor shall the amortization schedule thereof be shortened;
(c) Indebtedness with respect to financed insurance premiums which
is not past due;
(d) Indebtedness for performance or payment bonds incurred in the
ordinary course of the Borrowers' or any Consolidated Subsidiary's business; or
(e) Purchase money Indebtedness with respect to Capital
Expenditures obtained from financing sources other than the Lenders ("Additional
Capital Expenditure Indebtedness"); PROVIDED, that (i) no Default or Event of
Default has occurred and is continuing at the time the Additional Capital
Expenditure Indebtedness is to be incurred, (ii) the amount of such Additional
Capital Expenditure Indebtedness outstanding at any time shall in no event
exceed $1,000,000, and (iii) each of the Borrowers shall have delivered notice
to the Administrative Agent of its intention to incur any Additional Capital
Expenditure Indebtedness.
(f) Indebtedness in connection with a refinancing of the MK Rail
Credit Agreement; PROVIDED, that any cash received by MK Rail in excess of the
amount of Indebtedness outstanding under the MK Rail Credit Agreement as of the
Closing Date is paid to Borrowers and then paid pursuant to Section 2.9(b).
(g) Indebtedness of McConnell Dowell Corporation Limited that is
not guaranteed by the Borrowers.
8.2. NEGATIVE PLEDGE. Create, assume or suffer to exist, or permit any
Consolidated Subsidiary to create, assume or suffer to exist, any Lien on any
asset now owned or hereafter acquired by them, except:
(a) Liens of the Security Documents;
(b) Liens existing on the date of this Agreement securing
Indebtedness outstanding on the date of this Agreement which are listed on
SCHEDULE 8.2 hereto;
(c) Any Lien on any asset securing Indebtedness incurred or
assumed for the purpose of financing all or any part of the cost of acquiring
such asset; PROVIDED, that such Lien attaches to such asset concurrently with or
within 90 days after the acquisition thereof;
(d) Any Lien arising out of the refinancing, extension, renewal or
refunding of any Indebtedness secured by any Lien permitted by any of the
foregoing clauses of this
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Section; PROVIDED, that such Indebtedness other than as permitted in SECTION
8.1(f) is not increased and is not secured by any additional assets;
(e) Liens for taxes either not yet due or being contested in good
faith by appropriate proceedings so long as such proceedings do not involve any
material danger of the sale, forfeiture or loss of any material asset and the
Borrowers shall maintain in accordance with Generally Accepted Accounting
Principles appropriate reserves therefor;
(f) Materialmen's, mechanic's, workmen's repairmen's or other like
Liens arising in the ordinary course of business (including those arising under
maintenance agreements entered into in the ordinary course of business) securing
obligations that are not overdue or are being contested in good faith by
appropriate proceedings so long as such proceedings do not involve any material
danger of the sale, forfeiture or loss of any material asset;
(g) Liens which are bonded in a manner reasonably satisfactory to
the Majority Lenders; and
(h) Liens permitted by the Ship Mortgage on the vessel thereby
encumbered.
8.3. PROHIBITION OF FUNDAMENTAL CHANGES. Directly or indirectly,
(whether in one transaction or a series of transactions), (a) enter into any
transaction of merger, consolidation or amalgamation; (b) liquidate, wind up or
dissolve itself (or suffer any liquidation or dissolution); (c) convey, sell,
lease, transfer or otherwise dispose of all or a substantial part of its
respective business or assets; (d) acquire by purchase or otherwise all or
substantially all the business or assets, or stock or other evidence of
beneficial ownership, of any Person; (e) make any material change, which could
have an adverse effect on the Borrowers' ability to perform their Obligations
hereunder, in their present method of conducting business; (f) enter into any
agreement or transaction where they are bound to do or permit any of the
foregoing; or (g) permit any Consolidated Subsidiary to do any of the foregoing.
8.4. PROHIBITION ON SALE OF ASSETS.
(a) Sell, transfer, convey, lease or otherwise dispose of, or
permit any Consolidated Subsidiary to sell, transfer, convey, lease, or
otherwise dispose of, all or any of the assets of the Borrowers and their
Consolidated Subsidiaries except (i) sales of inventory in the ordinary course
of business and (ii) sales of equipment not exceeding $200,000 for any
individual item or $1,500,000 in the aggregate; PROVIDED, that if
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the sales price of any item is greater than $50,000 but less than $200,000, then
such sale shall require the consent of the Administrative Agent.
(b) Sell or assign, with or without recourse, any accounts
receivable or chattel paper, other than accounts receivable having aggregate
face amount of all accounts receivable or chattel paper sold and outstanding at
any one time not to exceed $12,200,000 pursuant to the Citicorp Receivables
Purchase Agreement.
8.5. INVESTMENTS. Make or commit to make any loan, extension of credit
or capital contribution to, or purchase of any stock, bonds, notes, debentures
or other securities of, or make any other investment in any Person (all such
transactions being called "Investments"), except:
(a) Investments in Cash Equivalents;
(b) Investments existing on the Closing Date and set forth in
SCHEDULE 8.5 hereto and consented to by the Majority Lenders; and
(c) Investments made in any Person in accordance with the Budget.
8.6. COMPLIANCE WITH ERISA.
(a) Terminate any Single Employer Plan maintained by any Borrower
or a Commonly Controlled Entity so as to result in any material liability to
PBGC.
(b) Engage in any "prohibited transaction" (as defined in Section
4975 of the Code) involving any Single Employer Plan maintained by any Borrower
or a Commonly Controlled Entity which would result in a material liability for
an excise tax or civil penalty in connection therewith.
(c) Incur or suffer to exist any material "accumulated funding
deficiency" (as defined in Section 302 of ERISA), whether not waived, involving
any Single Employer Plan maintained by any Borrower or a Commonly Controlled
Entity.
(d) Allow or suffer to exist any event or condition, which
presents a material risk of incurring a material liability to PBGC by reason of
the termination of any Plan.
8.7. RESTRICTED PAYMENTS. (a) Declare, pay or make (i) any dividends or
other distributions with respect to their capital stock or any payment on
account of such capital stock, or (ii) any prepayment of principal or prepayment
of interest on account of any of their Indebtedness, (b) set apart assets for a
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sinking or any analogous fund for the purchase, redemption, or retirement or
other acquisition of, any shares of their capital stock or any of their
Indebtedness, or (c) purchase, defease, acquire or redeem any of their
Indebtedness; PROVIDED, that the Borrowers may make payments or prepayments on
the Loans required or permitted by this Agreement.
8.8. TRANSACTIONS WITH AFFILIATES. Enter into any transaction,
including any purchase, sale, lease or exchange of property or the rendering of
any service, with any Affiliate or employee; except transactions which are
contemplated by this Agreement or are in the ordinary course of the Borrowers'
businesses and are made in accordance with the Budget.
8.9. SALE/LEASE-BACKS. Enter into any arrangements, directly or
indirectly, with any Persons whereby a Borrower shall sell or transfer any
property, whether now owned or hereafter acquired in connection with the rent or
lease of (i) such property or (ii) other property which such Borrower intends to
use for substantially the same purpose or purposes as the property so sold or
transferred.
8.10. OPERATING LEASES. Incur at any time any additional annual lease
payments as lessee under Operating Leases, excluding (i) scheduled increases in
lease payments in connection with leases existing on the Closing Date and as set
forth in SCHEDULE 8.10 or replacements of such leases upon expiration thereof
and (ii) conversions of existing Capital Leases to Operating Leases, so long as
such conversion does not have the effect of increasing total annual lease
payments to the lessor.
8.11. CAPITAL EXPENDITURES. Make any Capital Expenditures other than (a)
items included in the Budget for Mining, Transit, Infrastructure, and EC&E or
(b) other Capital Expenditures aggregating not more than $1,000,000.
8.12. AMENDMENT OF CHARTER OR BYLAWS. Amend their articles of
incorporation to revise, in any material respect, the Borrowers' capital
structure, or to change the names of the Borrowers, or make any other material
amendments thereto or to their bylaws without promptly providing a copy thereof
to the Administrative Agent.
8.13. NO CONSENT TO SUBORDINATION. Give their consent, nor will they
permit any Consolidated Subsidiary to give its consent, to the subordination of
any of their rights or claims (including any subordination in the form of an
agreement to defer remedies or extend maturities) to any right or claim of any
other Person.
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ARTICLE IX
DEFAULTS
9.1. EVENTS OF DEFAULT. Any one or more of the following described
events shall constitute an Event of Default hereunder, whether such occurrence
shall be voluntary or involuntary, or occur or be effected by operation of law
or otherwise:
(a) Any Borrower shall fail to pay when due any principal,
interest, fees, expenses, or any other amount owing in respect of any of the
Loans or any of the other Obligations when due and payable pursuant to the terms
thereof or hereof;
(b) Any Borrower shall fail to observe or perform any covenant
contained in ARTICLE VIII;
(c) Any Borrower or any Guarantor shall fail to observe or perform
any covenant or agreement contained in this Agreement or the other Restructuring
Documents (other than those covered by clause (a) or (b) above) for 10 days
after written notice thereof has been given to any Borrower by the
Administrative Agent;
(d) Any representation or warranty of any Borrower or any
Guarantor set forth in this Agreement, the Notes or the other Restructuring
Documents or in any other certificate, opinion or other statement at any time
provided by or on behalf of any Borrower pursuant hereto shall prove to be in
any material respect false or misleading at the time given or deemed given;
(e) Any event or condition shall occur which results in the
acceleration of the maturity of any Indebtedness or set-off of such Indebtedness
of any Borrower, Guarantor or any Consolidated Subsidiary or enables (or, with
the giving of notice or lapse of time or both, would enable) the holder of such
Indebtedness or any Person acting on such holder's behalf to accelerate the
maturity thereof;
(f) Any Borrower, any Guarantor or any Consolidated Subsidiary
shall commence a voluntary case or other proceeding seeking liquidation,
reorganization or other relief with respect to itself or its Indebtedness under
any bankruptcy, insolvency or other similar law now or hereafter in effect or
seeking the appointment of a trustee, receiver, liquidator, custodian or other
similar official of it or any substantial part of its property, or shall consent
to any such relief or to the appointment of or taking possession by any such
official in an involuntary case or other proceeding commenced against it, or
shall make a general assignment for the benefit of creditors, or shall fail
generally to pay its Indebtedness as it becomes due,
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or shall take any corporate action to authorize any of the foregoing;
(g) An involuntary case or other proceeding shall be commenced
against any Borrower, any Guarantor or any Consolidated Subsidiary seeking
liquidation, reorganization or other relief with respect to it or its
Indebtedness under any bankruptcy, insolvency or other similar law now or
hereafter in effect or seeking the appointment of a trustee, receiver,
liquidator, custodian or other similar official of it or any substantial part of
its property, and such involuntary case or other proceeding shall remain
undismissed and unstayed for a period of 20 days; or an order for relief shall
be entered against any Borrower or any Consolidated Subsidiary under the federal
bankruptcy laws as now or hereafter in effect;
(h) Any writ of execution, attachment or garnishment or any lien,
any judgment or any other legal process to be issued against any Borrower or any
Guarantor or any of the property of any Borrower, any Guarantor or their
Subsidiaries (including the Collateral) which by itself or together with all
other such legal processes is for an amount in excess of $1,000,000 which shall
remain unvacated, unbonded or unstayed;
(i) The occurrence of any of the events specified in subsections
(a) through (g) of Section 6.1 of the Standstill Agreement or the project owner
makes any demand under any indemnity agreement between the Bonding Company and
any Borrower;
(j) Actual disbursements of any type shall exceed the total
projected disbursements as set forth in the Budget by $10,000,000 in any one
week or $20,000,000 in the aggregate;
(k) Actual Financing Shortfall shall exceed the projected amount
as set forth in the Budget by $10,000,000 in any one week or $20,000,000 in the
aggregate;
(l) All or substantially all of the property of any Borrower,
Guarantor or any Consolidated Subsidiary shall be condemned, seized or otherwise
appropriated;
(m) Any Borrower, any Guarantor or any Consolidated Subsidiary
shall voluntarily suspend the transaction of substantially all of its business
for more than three consecutive Business Days;
(n) Any Borrower or any Commonly Controlled Entity shall engage in
(a) any "prohibited transaction" (as defined in ERISA or Section 4975 of the
Code) involving any Single Employer Plan maintained by any Borrower or a
Commonly Controlled Entity, (b) any "accumulated funding deficiency" (as defined
in ERISA), whether or not waived, shall exist with respect to any Single
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Employer Plan maintained by any Borrower or a Commonly Controlled Entity, (c) a
Reportable Event shall occur with respect to, or proceedings shall commence to
have a trustee appointed, or a trustee shall be appointed, to administer or to
terminate, any Single Employer Plan, which Reportable Event or institution of
proceedings presents a material risk of termination of such Plan for purposes of
Title IV of ERISA, and, in the case of a Reportable Event, the continuance of
such Reportable Event unremedied for ten days after notice of such Reportable
Event pursuant to Section 4043(a), (c) or (d) of ERISA is given or the
continuance of such proceedings for ten days after commencement thereof, as the
case may be, (d) any Single Employer Plan shall terminate for purposes of Title
IV of ERISA, (e) the withdrawal or partial withdrawal from any Multi-employer
Plan, or (f) the reorganization or insolvency of a Single Employer Plan
maintained by any Borrower or a Commonly Controlled Entity and in each case in
clauses (a) through (f) above, such event or condition together with all other
such events or conditions, if any, would subject any Borrower to any tax,
penalty or other liabilities in excess of $1,000,000 or would otherwise have a
materially adverse effect on the business, operations, property, financial or
other condition of any Borrower and any of its Subsidiaries;
(o) Any person or group of persons (within the meaning of Section
13 or 14 of the Securities Exchange Act of 1934, as amended) shall acquire
beneficial ownership (within the meaning of Rule 13d-3 promulgated by the
Securities and Exchange Commission under said Act) of 35% or more of the
outstanding shares of common stock of MKD; or, during any period of 12
consecutive calendar months commencing on the Closing Date, individuals who were
directors of MKD on the first day of such period shall cease to constitute a
majority of the board of directors of the MKD;
(p) Any of the Restructuring Documents or provision thereof, for
any reason whatsoever, cease to be valid and binding on any Borrower or any
Guarantor, or any Borrower or any Guarantor shall so assert, or the Liens
granted pursuant to any of the Security Documents shall not constitute valid,
perfected, first-priority Liens on the properties and assets described therein,
subject only to the Permitted Liens, or any Borrower or any Guarantor shall be
in default under the Security Documents, subject to any cure periods contained
therein;
(q) Any other event or condition occurs or exists which could have
or result in a Material Adverse Effect;
(r) The Borrowers shall fail to maintain a level of outstanding
accounts receivables sold to Citibank, N.A. pursuant to the Citicorp Receivables
Purchase Agreement of not less than $12,100,000, minus any Net Cash Proceeds
Retainage Amount
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retained by the Borrowers pursuant to SECTION 2.9, and such failure shall
continue for three (3) Business Days; or
(s) The occurrence of any breach or default under the Standstill
Agreement.
9.2. THE LENDERS' REMEDIES. Upon the occurrence of an Event of Default
or at any time thereafter, after notice and the lapse of any cure period, where
applicable, and in each and every case, until such Event of Default shall have
been remedied or waived in writing in accordance with SECTION 13.6, either one
or both of the following actions may be taken (a) upon the request of the
Majority Lenders, the Administrative Agent shall, by notice in writing to the
Borrowers, terminate any or all of the Commitments, whereupon such Commitments
of the Lenders thereunder immediately shall terminate; and (b) upon the request
of the Majority Lenders, the Administrative Agent shall, by notice in writing to
the Borrowers (a "Notice of Acceleration") declare all the Obligations due
hereunder and thereunder to be immediately due and payable, without presentment,
demand, protest or notice of any kind (other than notices provided herein), all
of which are hereby expressly waived to the extent permitted by applicable law;
PROVIDED, HOWEVER, that upon the occurrence of any event specified in either
SECTION 9.1(f) or SECTION 9.1(g) (and, in the case of SECTION 9.1(g), after the
lapse of the 20 day period referred to therein) the Commitments shall
automatically terminate, and all amounts owing under this Agreement, the Notes
and the other Restructuring Documents immediately shall automatically be due and
payable in full without declaration or other notice (other than notices provided
herein) to the Borrowers. The Administrative Agent immediately, and without
expiration of any period of grace (other than that specifically provided
herein), may enforce payment of all Obligations of any Borrower to the
Administrative Agent and the Lenders and the Administrative Agent shall be
entitled to all remedies available hereunder and thereunder.
9.3. OTHER REMEDIES. Upon the occurrence of an Event of Default or at
any time thereafter, after notice and the lapse of any cure period, where
applicable, and in each and every case, until such Event of Default shall have
been remedied or waived in writing in accordance with SECTION 13.6, in addition
to the remedies listed in SECTION 9.2 upon the earlier of a Notice of
Acceleration or acceleration of the Obligations, the Lenders acting by and
through the Administrative Agent and the Collateral Agent shall have all rights,
powers and remedies available under each of the Restructuring Documents and
applicable law, including (i) commencing judicial or nonjudicial foreclosure
proceedings against the Real Property Collateral, (ii) enforcing the Collateral
Agent's security interest in the Collateral by means of one or more public or
private sales thereof, (iii) taking possession of all or any portion of the
Collateral, in person or
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by means of a court appointed receiver (who shall be appointed without regard to
the value of Collateral Agent's security), and (iv) exercising any or all of the
rights of a beneficiary or secured party pursuant to applicable law. All
rights, powers and remedies of the Agents or the Lenders in connection with each
of the Restructuring Documents may be exercised at any time or from time to
time, are cumulative and not exclusive, and shall be in addition to any other
rights, powers or remedies provided by law or equity. Upon the request of the
Majority Lenders after the occurrence of an Event of Default, the Administrative
Agent shall instruct the Collateral Agent to exercise any remedies under the
Restructuring Documents, including collection of funds in deposit accounts,
foreclosure on Real Property Collateral, seeking a receiver to take possession
of any Collateral and/or the Real Property Collateral, and commencement of or
actions in court proceedings.
9.4. WAIVERS BY BORROWERS. Except as otherwise provided for in this
Agreement and applicable law, the Borrowers waive (i) presentment, demand and
protest and notice of presentment, dishonor, notice of intent to accelerate,
notice of acceleration, protest, default, nonpayment, maturity, release,
compromise, settlement, extension or renewal of any or all commercial paper,
accounts, contract rights, documents, instruments, chattel paper and guaranties
at any time held by the Administrative Agent, the Co-Agents, the Collateral
Agent or the Lenders on which the Borrowers may in any way be liable and hereby
ratify and confirm whatever the Administrative Agent, the Co-Agents, the
Collateral Agent or the Lenders may do in this regard, (ii) all rights to notice
and a hearing prior to the Collateral Agent's taking possession or control of,
or replevy, attachment or levy upon, the Collateral, or any bond or security
which might be required by any court prior to allowing the Administrative Agent
or the Collateral Agent to exercise any of its remedies, and (iii) the benefit
of all valuation, appraisal and exemption laws. Each Borrower acknowledges that
it has been advised by counsel of its choice with respect to the effect of the
foregoing waivers and this Agreement, the other Restructuring Documents and the
transactions evidenced by this Agreement and the other Restructuring Documents,
generally.
ARTICLE X
THE ADMINISTRATIVE AGENT AND CO-AGENTS
10.1APPOINTMENT. Each Lender hereby (a) irrevocably appoints Mellon
Bank, N.A. as the Administrative Agent and Mellon Bank, N.A. and Bank of America
National Trust and Savings Association as the Co-Agents of such Lender under
this Agreement and the other Loan Documents, and (b) irrevocably authorizes the
Administrative Agent and Co-Agents to take such action on its behalf under the
provisions of this Agreement and the other Loan
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Documents and to exercise such powers and perform such duties as are expressly
delegated to the Administrative Agent and Co-Agents by the terms of this
Agreement and the other Loan Documents, together with such other powers as are
reasonably incidental thereto. Notwithstanding anything to the contrary herein,
the Administrative Agent and Co-Agents shall have no duties, except those
expressly set forth in this Agreement and the other Restructuring Documents, and
no implied covenants, responsibilities, duties, obligations or liabilities shall
be read into this Agreement and the other Restructuring Documents or otherwise
exist against the Administrative Agent and Co-Agents.
10.2. ADMINISTRATIVE AGENT, CO-AGENTS AND AFFILIATES. The Administrative
Agent and Co-Agents shall have the same rights and powers under this Agreement
as any other Lender and may exercise or refrain from exercising the same as
though it were not the Administrative Agent or Co-Agent, and the Administrative
Agent, Co-Agents and their Affiliates may accept deposits from, lend money to,
and generally engage in any kind of business with either Borrower or any
Subsidiary or Affiliate of either Borrower as if it were not the Administrative
Agent and Co-Agent hereunder.
10.3. RETENTION OF DOCUMENTS AND INFORMATION TO THE LENDERS.
Administrative Agent shall deliver to each Lender any material documents and
written information required under this Agreement to be delivered by the
Borrowers to Administrative Agent within a reasonable period after the
Administrative Agent's receipt of such documents or information.
10.4. DELEGATION OF DUTIES. The Administrative Agent and each Co-Agent
may exercise any of its powers or execute any of its duties under this Agreement
and the other Restructuring Documents by or through one or more agents or
attorneys-in-fact and shall be entitled to take, and to rely on, advice of
counsel concerning all matters pertaining to such rights and duties. The
Administrative Agent and each and Co-Agent may utilize the services of such
agents and attorneys-in-fact as the Administrative Agent and each Co-Agent in
its sole discretion reasonably determines, and all fees and expenses of such
agents and attorneys-in-fact shall be paid by the Borrowers on demand. The
Administrative Agent and Co-Agents shall not be responsible for the negligence
or misconduct of any agents or attorneys-in-fact selected by the Administrative
Agent or Co-Agents with reasonable care.
10.5. LIMITATION OF LIABILITY. Neither the Administrative Agent, the Co-
Agents nor their officers, directors, employees, agents, attorneys-in-fact or
affiliates shall be (a) liable for any waiver, consent or approval given or any
action taken or omitted to be given or taken by them or by such Person under or
in connection with this Agreement or the other the Loan Documents
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or (b) responsible for the consequences of any oversight or error in judgment by
them or such Person whatsoever, except for their or such Person's own gross
negligence or willful misconduct. The Administrative Agent and Co-Agents shall
not be responsible for (v) the execution, validity, enforceability,
effectiveness or genuineness of this Agreement or the other Loan Documents, (w)
the collectability of any amounts owing under this Agreement or the other Loan
Documents, (x) the value, sufficiency, enforceability or collectability of any
Collateral security therefor, (y) the failure by any Borrower to perform its
Obligations hereunder or (z) the truth, accuracy and completeness of the
recitals, statements, representations or warranties made by any Borrower or any
officer or agent thereof contained in this Agreement, the other Loan Documents
or in any certificate, report, statement or other document referred to or
provided for in, or received by the Administrative Agent or Co-Agents in
connection with, this Agreement or the other Loan Documents.
10.6. RELIANCE BY THE ADMINISTRATIVE AGENT AND CO-AGENTS. The
Administrative Agent and Co-Agents shall not have any obligation (a) to
ascertain or to inquire as to the observance or performance of any of the
conditions, covenants or agreements in this Agreement or the other Loan
Documents or in any document, instrument or agreement at any time constituting,
or intended to constitute, collateral security therefor, (b) to ascertain or
inquire as to whether any notice, consent, waiver or request delivered to them
shall have been duly authorized or is genuine, accurate and complete, or (c) to
inspect the properties, books or records of the Borrowers. The Administrative
Agent and each Co-Agent shall be entitled to rely, and shall be fully protected
in relying, (x) upon any writing, resolution, notice, consent, certificate,
affidavit, letter, cablegram, telegram, telecopy, telex or teletype message,
statement, order or other document, instrument or conversation believed by it to
be genuine and correct and to have been signed, sent or made by the proper
Person or Persons, or (y) upon advice and statements of legal counsel,
independent accountants and other experts selected by the Administrative Agent
and each Co-Agent. The Administrative Agent and each Co-Agent may deem and
treat each Lender party hereto or any Assignee as a Lender for all purposes
unless a written notice of the assignment, negotiation or transfer thereof, in
accordance with the provisions of this Agreement shall have been delivered to
the Administrative Agent or Co-Agents identifying the name of any successor or
Assignee. The Administrative Agent and each Co-Agent shall be entitled to fail
or refuse, and shall be fully protected in failing or refusing, to take any
action under this Agreement or the other Loan Documents unless (a) it first
shall receive such advice or concurrence of the Majority Lenders as it deems
appropriate, or (b) it first shall be indemnified to its satisfaction by the
Lenders against any and all liability and expense which may be incurred by it by
reason of taking or continuing to take any such
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action. In all cases the Administrative Agent and each Co-Agent shall be fully
protected in acting, or in refraining from acting, under this Agreement or the
Loan Documents in accordance with a request of the Majority Lenders, and such
request and any action taken or failure to act pursuant thereto shall be binding
upon all the Lenders and all future holders of the Notes.
10.7. NOTICE OF DEFAULT. The Administrative Agent and Co-Agents shall
not be deemed to have knowledge or notice of the occurrence of any Event of
Default unless the Administrative Agent and each Co-Agent has received notice
from a Lender or the Borrowers referring to this Agreement, describing such
Event of Default and stating that such notice is a "notice of default." If the
Administrative Agent or Co-Agents receives such a notice or has actual knowledge
of the occurrence of an Event of Default, the Administrative Agent or Co-Agents
promptly shall give notice thereof to the Lenders. The Administrative Agent and
Co-Agents shall take such action with respect to such Event of Default as shall
be directed by the Majority Lenders; PROVIDED, HOWEVER, that unless and until
the Administrative Agent and each Co-Agent shall have received such directions,
the Administrative Agent and each Co-Agent may (but shall not be obligated to)
take such action, or refrain from taking such action, with respect to such Event
of Default as it deems advisable in the best interests of the Lenders.
10.8. NON-RELIANCE ON THE ADMINISTRATIVE AGENT, CO-AGENTS AND THE OTHER
LENDERS. Each Lender expressly acknowledges that neither the Administrative
Agent, Co-Agents nor any of their officers, directors, employees, agents,
attorneys-in-fact or affiliates has made any representations or warranties to
it. The Administrative Agent and each Co-Agent shall have no obligation or
liability to any of the Lenders regarding the creditworthiness or financial
condition of any Borrower. No act by the Administrative Agent or Co-Agents
hereinafter taken, including any review of the Borrowers, shall be deemed to
constitute any representation or warranty by the Administrative Agent or
Co-Agents to any Lender. Each Lender represents to the Administrative Agent and
each Co-Agent that, independently and without reliance upon the Administrative
Agent or Co-Agents or any other Lender and based on such documents and
information as it has deemed appropriate, it has made its own appraisal of and
investigation into the business, operations, property, financial and other
condition and creditworthiness of the Borrowers and has made its own decision to
make its Loans hereunder and to enter into this Agreement. Each Lender also
represents that, independently and without reliance upon the Administrative
Agent or Co-Agents or any other Lender, and based on such documents and
information as it deems appropriate at the time, it shall continue to make its
own credit analysis, appraisals and decisions in taking or not taking action
under this Agreement and the other Loan Documents and to make such investigation
as it
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deems necessary to inform itself as to the business, operations, property,
financial and other condition and creditworthiness of the Borrowers. Except for
notices, reports and other documents expressly required to be furnished to the
Lenders by the Administrative Agent or Co-Agents hereunder, the Administrative
Agent and Co-Agents shall have no obligation or liability to provide any Lender
with any credit or other information concerning the business, operations,
property, financial and other condition or creditworthiness of the Borrowers
which may come into the possession of either of the Administrative Agent, the
Co-Agents or any of their officers, directors, employees, agents, attorneys-in-
fact or affiliates.
10.9. COLLATERAL. Each of the Lenders represents to the Administrative
Agent, each Co-Agent and each of the other Lenders that it in good faith is not
relying upon any "margin stock" (as defined in Regulation U) as collateral in
the extension or maintenance of the credit provided for in this Agreement.
10.10. INDEMNIFICATION. Each of the Lenders shall indemnify, defend and
hold harmless the Administrative Agent and each Co-Agent in its capacity as such
(to the extent not reimbursed by the Borrowers and without limiting the
obligation of the Borrowers to do so), ratably according to their Applicable Pro
Rata Share from and against any and all claims, demands, lawsuits, costs,
expenses, fees, liabilities, obligations, losses, damages, actions, recoveries,
judgments, suits, costs, expenses or disbursements of any kind whatsoever,
including interest, penalties and attorneys' fees and costs, whether direct,
indirect, consequential or incidental, which at any time (including at any time
following the payment of all amounts payable under the Existing Agreements and
the Restructuring Documents) may be imposed on, incurred by or asserted against
the Administrative Agent or any Co-Agent in any way relating to, resulting from
or arising out of this Agreement, or the Restructuring Documents, the
transactions contemplated hereby or any action taken or omitted by the
Administrative Agent or any Co-Agent under or in connection with any of the
foregoing; PROVIDED, HOWEVER, that no Lender shall be liable for the payment of
any portion of such claims, demands, lawsuits, costs, expenses, fees,
liabilities, obligations, losses, damages, actions, remedies, judgments, suits,
costs, expenses or disbursements to the extent such result from the
Administrative Agent's or any Co-Agent's gross negligence or willful misconduct.
The agreements in this SECTION 10.10 shall survive the payment of all amounts
payable under Restructuring Documents and shall be in addition to and not in
lieu of any other indemnification agreements set forth in the Restructuring
Documents.
10.11. EACH AGENT IN ITS INDIVIDUAL CAPACITY. Each of the Agents in its
individual capacity, and its Affiliates, may make loans and other financial
accommodations to, accept deposits from
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and generally engage in any kind of business with the Borrowers and their
Subsidiaries as though such Agent was not an Agent hereunder. With respect to
its Existing Loans and any other Loans made or renewed by it, such Agent in its
individual capacity shall have the same benefits, rights, powers and privileges
under this Agreement, and the Loan Documents as any Lender and may exercise the
same as though it were not an Agent, and the terms "Lender" and "Lenders" shall
include such Agent in its individual capacity.
10.12. SUCCESSOR ADMINISTRATIVE AGENT AND CO-AGENT. The Administrative
Agent and each Co-Agent may resign as such upon ten days' prior written notice
to the Lenders. The Administrative Agent and each Co-Agent shall concurrently
provide the Borrowers with a copy of such notice. If the Administrative Agent
or either Co-Agent shall resign as such under this Agreement, then the Majority
Lenders shall appoint from among the Lenders a successor agent for the Lenders.
Upon acceptance of its appointment as successor agent, (a) such successor agent
shall succeed to the rights, powers, privileges and duties of the Administrative
Agent or Co-Agent, as the case may be, (b) the retiring Administrative Agent or
Co-Agent shall be discharged of all its obligations and liabilities in such
capacity under this Agreement, and the Restructuring Documents, (c) the term
"Administrative Agent" and "Co-Agents" shall mean such successor agent effective
upon its appointment, and (d) the retiring Administrative Agent's or Co-Agent's
rights, powers and duties as the Administrative Agent or Co-Agent as the case
may be shall be terminated, without any other or further act or deed on the part
of such former Administrative Agent or Co-Agent or any of the parties to this
Agreement or their successors and assigns. With respect to any actions taken or
omitted to be taken by the retiring Administrative Agent or Co-Agent while it
was the Administrative Agent or Co-Agent (for which retiring Administrative
Agent or Co-Agent may still have liability), the retiring Administrative Agent
or Co-Agent shall continue to receive the benefits of this ARTICLE X, including
SECTION 10.8.
10.13. APPLICABILITY OF SECTION TO THE BORROWERS. Notwithstanding any
other provision contained in this ARTICLE X, the rights and obligations of the
Borrowers under this Agreement shall not be affected by any provision otherwise
included in this ARTICLE X. The Borrowers shall be permitted to rely on
communications from the Administrative Agent which it reasonably believes are
made on behalf of the Administrative Agent and, if specified therein, the
Lenders, and except as otherwise set forth specifically herein, all notices and
payments to be made by the Borrowers hereunder shall be made to the
Administrative Agent. Further, if any Lender shall be in default hereunder,
such default shall not affect the right and obligations of the Borrowers
hereunder. The Administrative Agent shall provide the Borrowers with prompt
notice of any default by any Lender.
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ARTICLE XI
JOINT AND SEVERAL LIABILITY
11.1. JOINT AND SEVERAL LIABILITY. Each Borrower agrees that such
Borrower is jointly and severally liable for the Obligations hereunder and that
all Obligations of each Borrower now or hereafter existing under this Agreement,
whether for principal, interest, fees, indemnification, expenses or other wise,
will be paid strictly in accordance with the terms of this Agreement and the
other Restructuring Documents regardless of any law, regulation or order now or
hereafter in effect in any jurisdiction affecting any of such terms or the
rights of the Administrative Agent or the Lenders with respect thereto. So long
as the Obligations have not been paid in full, the liability of each Borrower
hereunder shall be absolute and unconditional irrespective of:
(a) any taking, exchange, release, or nonperfection of any
Collateral or any release or amendment or waiver of or consent to departure from
any guaranty, for all or any of the Obligations; or
(b) any other circumstance which might otherwise constitute a
defense available to, or a discharge of, any Borrower.
11.2. THE GUARANTEES. If and to the extent any Obligation of any
Borrower to the Administrative Agent or any Lender shall be considered an
obligation of guaranty or suretyship, each Borrower hereby unconditionally
guarantees the full and punctual payment (whether at stated maturity, upon
acceleration or otherwise) of the Obligations. Upon failure by either Borrower
to pay punctually any such amount, the other Borrower shall forthwith on demand
pay the amount not so paid at the place and in the manner specified in this
Agreement.
11.3. GUARANTEES UNCONDITIONAL. The Obligations of each Borrower
hereunder shall be unconditional and absolute and, without limiting the
generality of the foregoing, shall not be released, discharged or otherwise
affected by:
(a) Any extension, renewal, settlement, compromise, waiver or
release in respect of any Obligation of the other Borrower under this Agreement,
any Note, the other Restructuring Documents or by operation of law or otherwise;
(b) Any modification or amendment of or supplement to this
Agreement, any Note or the other Restructuring Documents;
(c) Any release, impairment, non-perfection or invalidity of any
direct or indirect security for any Obligation
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of the other Borrower under this Agreement, any Note or the other Restructuring
Documents;
(d) Any change in the corporate existence, structure or ownership
of the other Borrower, or any insolvency, bankruptcy, reorganization or other
similar proceeding affecting the other Borrower or its assets or any resulting
release or discharge of any Obligation of the other Borrower contained in this
Agreement, any Note or the other Restructuring Documents;
(e) The existence of any claim, set-off or other rights which a
Borrower may have at any time against the other Borrower, the Administrative
Agent, any Lender or any other Person, whether in connection herewith or any
unrelated transactions; PROVIDED, that nothing herein shall prevent the
assertion of any such claim by separate suit or compulsory counterclaim;
(f) Any invalidity or unenforceability relating to or against the
other Borrower for any reason of this Agreement, any Note or the other
Restructuring Documents, or any provision of applicable law or regulation
purporting to prohibit the payment by the other Borrower of the principal of or
interest on any Note or any other amount payable by it under this Agreement or
the other Restructuring Documents; or
(g) Any other act or omission to act or delay of any kind by the
other Borrower, the Administrative Agent, any Lender or any other Person or any
other circumstance whatsoever which might, but for the provisions of this
paragraph, constitute a legal or equitable discharge of its Obligations under
this Agreement, any Note or the other Restructuring Documents.
11.4. DISCHARGE ONLY UPON PAYMENT IN FULL; REINSTATEMENT IN CERTAIN
CIRCUMSTANCES. The Borrowers' Obligations hereunder shall remain in full force
and effect until the Commitments shall have terminated and the principal of and
interest on the Notes and all other amounts payable by the Borrowers under this
Agreement shall have been paid in full. If at any time any payment of the
principal of or interest on any Note or any other amount payable by a Borrower
under this Agreement is rescinded or must be otherwise restored or returned upon
the insolvency, bankruptcy or reorganization of a Borrower or otherwise, the
other Borrower's Obligations hereunder with respect to such payment shall be
reinstated at such time as though such payment had been due but not made at such
time.
11.5. WAIVERS BY THE BORROWERS. The following waivers shall apply to the
guarantees under this ARTICLE XI:
(a) EACH BORROWER EXPRESSLY WAIVES THE RIGHT TO REQUIRE THE
ADMINISTRATIVE AGENT, THE CO-AGENTS, THE COLLATERAL
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AGENT OR ANY LENDER FIRST TO PURSUE THE OTHER BORROWER OR ANY OTHER PERSON, THE
COLLATERAL, OR ANY OTHER SECURITY OR GUARANTY THAT MAY BE HELD FOR THE
OBLIGATIONS, OR TO APPLY ANY SUCH SECURITY OR GUARANTY TO THE OBLIGATIONS BEFORE
SEEKING FROM SUCH BORROWER PAYMENT IN FULL OF ITS OBLIGATIONS TO THE
ADMINISTRATIVE AGENT AND THE LENDERS OR PROCEEDING AGAINST SUCH BORROWER FOR
SAME;
(b) EACH BORROWER ACKNOWLEDGES THAT:
(i) IF A DEFAULT OR EVENT OF DEFAULT OCCURS AND SUCH BORROWER
PAYS TO THE ADMINISTRATIVE AGENT AND THE LENDERS ALL OR PART OF THE OBLIGATIONS,
SUCH BORROWER WOULD HAVE A RIGHT TO PROCEED AGAINST THE OTHER BORROWER TO THE
EXTENT OF THE OBLIGATIONS SO PAID BY SUCH BORROWER AND TO HAVE THE BENEFIT OF
ANY SECURITY HELD BY THE ADMINISTRATIVE AGENT OR COLLATERAL AGENT FOR THE
OBLIGATIONS TO THE EXTENT OF THE OBLIGATIONS SO PAID BY THE BORROWER. SUCH
RIGHT IS COMMONLY KNOWN AS THE "RIGHT OF SUBROGATION."
(ii) IF AN EVENT OF DEFAULT OCCURS, THE ADMINISTRATIVE AGENT,
AMONG OTHER THINGS, MAY ENFORCE ANY LIEN UPON ANY INTEREST IN REAL PROPERTY
("REAL PROPERTY LIEN") BY MEANS OF JUDICIAL ACTION OR BY NON-JUDICIAL ACTION
COMMONLY KNOWN AS A "NON-JUDICIAL FORECLOSURE," "TRUSTEE'S SALE" OR "POWER OF
SALE FORECLOSURE."
(iii) IF AN EVENT OF DEFAULT OCCURS, AND THE ADMINISTRATIVE
AGENT ENFORCES ANY REAL PROPERTY LIEN BY MEANS OF A NON-JUDICIAL FORECLOSURE,
TRUSTEE'S SALE OR POWER OF SALE FORECLOSURE, SUCH BORROWER'S RIGHT OF
SUBROGATION TO PROCEED AGAINST THE OTHER BORROWER WOULD BE EXTINGUISHED BY THE
OPERATION OF CALIFORNIA CODE OF CIVIL PROCEDURE ("CCP") SECTION 580 OR SIMILAR
LAWS, AND, IN SUCH CASE, SUCH BORROWER MIGHT HAVE A DEFENSE AGAINST PAYMENT.
(iv) IF AN EVENT OF DEFAULT OCCURS, AND THE ADMINISTRATIVE
AGENT ENFORCES ANY REAL PROPERTY LIEN BY MEANS OF JUDICIAL ACTION, SUCH
BORROWER'S RIGHT TO PROCEED AGAINST THE OTHER BORROWER MIGHT BE LIMITED BY THE
OPERATION OF CCP SECTION 580 OR SIMILAR LAWS, IN WHICH CASE SUCH BORROWER MIGHT
HAVE A COMPLETE OR PARTIAL DEFENSE AGAINST PAYMENT.
NEVERTHELESS, SUCH BORROWER EXPRESSLY, KNOWINGLY AND
INTENTIONALLY WAIVES AND RELINQUISHES ANY AND ALL RIGHTS, DEFENSES OR BENEFITS
THE BORROWER MIGHT HAVE UNDER CCP SECTIONS 580(b) OR 580(d) OR SIMILAR LAWS.
(v) IN ADDITION, THE BORROWER WAIVES ALL RIGHTS AND DEFENSES
ARISING OUT OF AN ELECTION OF REMEDIES BY THE LENDERS, EVEN THOUGH THAT ELECTION
OF REMEDIES, SUCH AS A NONJUDICIAL FORECLOSURE WITH RESPECT TO SECURITY FOR A
GUARANTEED
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OBLIGATION, HAS DESTROYED THE GUARANTOR'S RIGHTS OF SUBROGATION AND
REIMBURSEMENT AGAINST THE PRINCIPAL BY THE OPERATION OF CCP SECTION 580, OR
SIMILAR LAWS OR OTHERWISE.
(vi) SUCH BORROWER ALSO AGREES THAT THIS AGREEMENT WILL REMAIN
FULLY EFFECTIVE, AND SUCH BORROWER WILL BE LIABLE TO THE ADMINISTRATIVE AGENT
AND THE LENDERS FOR ANY OBLIGATIONS EVEN IF THE ADMINISTRATIVE AGENT SELLS AN
INTEREST IN REAL PROPERTY BY JUDICIAL FORECLOSURE ACTION AND SUCH BORROWER'S
RIGHTS AGAINST THE BORROWERS ARE LIMITED BY THE OPERATION OF CCP SECTIONS 580b
OR 580d OR SIMILAR LAWS; AND
(c) SUCH BORROWER AGREES THAT THE ADMINISTRATIVE AGENT AND THE
LENDERS SHALL BE UNDER NO OBLIGATION TO: MARSHAL ANY ASSETS IN FAVOR OF SUCH
PERSON, TO PROCEED FIRST AGAINST ANY OTHER PERSON OR ANY PROPERTY OF ANY OTHER
PERSON OR AGAINST ANY COLLATERAL, ENFORCE FIRST ANY OTHER GUARANTY OBLIGATIONS
WITH RESPECT TO, OR SECURITY FOR, THE OBLIGATIONS, PURSUE ANY OTHER REMEDY IN
THE ADMINISTRATIVE AGENT'S OR ANY LENDER'S POWER THAT SUCH BORROWER MAY NOT BE
ABLE TO PURSUE ITSELF AND THAT MAY LIGHTEN SUCH BORROWER'S BURDEN, ANY RIGHT TO
WHICH SUCH BORROWER HEREBY EXPRESSLY WAIVES.
EACH BORROWER ACKNOWLEDGES THAT THE FOREGOING WAIVERS ARE A
MATERIAL INDUCEMENT TO THE ADMINISTRATIVE AGENT'S, THE CO-AGENTS' AND EACH
LENDER'S ENTERING INTO THIS AGREEMENT AND THAT THE ADMINISTRATIVE AGENT, THE CO-
AGENTS AND EACH LENDER ARE RELYING UPON THE FOREGOING WAIVERS IN THEIR FUTURE
DEALINGS WITH SUCH BORROWER. EACH BORROWER WARRANTS AND REPRESENTS THAT IT HAS
REVIEWED THE FOREGOING WAIVERS WITH ITS LEGAL COUNSEL.
11.6. SUBROGATION. Each Borrower agrees that it shall have no right of
subrogation, contribution or reimbursement against the other Borrower until the
Obligations are paid in full. Each Borrower agrees upon making any payment
hereunder to be subrogated to the rights of the payee against the other Borrower
with respect to such payment or against any direct or indirect security
therefor, or otherwise to be reimbursed, indemnified or exonerated by or for the
account of the other Borrower in respect thereof.
11.7. STAY OF ACCELERATION. In the event that acceleration of the time
for payment of any amount payable by either Borrower under this Agreement or its
Notes is stayed upon insolvency, bankruptcy or reorganization of such Borrower,
all such amounts otherwise subject to acceleration under the terms of this
Agreement shall nonetheless be payable by the other Borrower hereunder forthwith
on demand by the Administrative Agent made at the request of the Majority
Lenders.
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ARTICLE XII
TREATMENT OF LENDER'S APPLICABLE PRO RATA SHARES
12.1. FUNDING OF LOANS.
(a) Prior to the Recalculation Date, each Lender's Applicable Pro
Rata Share of each Alpha Loan shall be such Lender's Alpha Pro Rata Share and
such Lender's Applicable Pro Rata Share of each Beta Loan shall be such Lender's
Beta Pro Rata Share. Each Lender acknowledges and agrees that any Borrowing
which would cause the aggregate amount of all Loans to increase from an amount
below $60,000,000 to an amount in excess of $60,000,000 will consist of Alpha
Loans to the extent of the portion of such Borrowing which would cause the
aggregate amount of all Loans to be $60,000,000 and Beta Loans for the
remainder.
(b) After the Recalculation Date, each Lender's Applicable Pro
Rata Share of the Loans shall be such Lender's Final Pro Rata Share.
12.2. PREPAYMENTS AND REPAYMENTS OF LOANS.
Prepayments and repayments to be applied to the principal balance
of the Loans shall be distributed by the Administrative Agent pursuant to the
requirements of SECTION 2.10 AND SECTION 2.11 to the Lenders as follows:
(a) Until the Recalculation Date: (i) to the Lenders, each in
accordance with its Beta Pro Rata Share, to the extent that after such
prepayment or repayment, the aggregate amount of all Loans would equal or exceed
$60,000,000; (ii) to the Lenders, each in accordance with its Alpha Pro Rata
Share, to the extent that, after such prepayment or repayment, the aggregate
amount of all Loans would not exceed $60,000,000. Each Lender acknowledges and
agrees that any prepayment or repayment which causes the Loans to be reduced
from a sum in excess of $60,000,000 to a sum below $60,000,000, will be
allocated in accordance with the Beta Pro Rata Share of each Lender for that
portion in excess of $60,000,000, and in accordance with the Alpha Pro Rata
Share for that portion below $60,000,000; and
(b) On or after the Recalculation Date, to each Lender in
accordance with its Final Pro Rata Share.
12.3. TREATMENT OF LOANS FOR VOTING PURPOSES.
Any vote, consent or other action to be taken by the Lenders under
the Loan Documents shall be calculated as follows:
(a) Until the Recalculation Date, (i) any vote, consent or other
action to be taken by the Majority Lenders shall
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be calculated based on each Lender's Beta Pro Rata Share and (ii) any vote,
consent or other action to be taken by All Lenders shall require the vote,
consent or other action of each of the Lenders.
(b) On or after the Recalculation Date, any action to be taken by
the Lenders shall be based, for each Lender, on such Lenders' Final Pro Rata
Share.
ARTICLE XIII
MISCELLANEOUS
13.1. NOTICES. All notices, requests and other communications to any
party hereunder shall be in writing (including bank wire, facsimile transmission
or similar writing) and shall be given to such party at its address or facsimile
number set forth on the Schedule for Notices attached hereto or such other
address or facsimile number as such party may hereafter specify for the purpose
by notice to the Administrative Agent and the Borrowers. Each such notice,
request or other communication shall be effective, (i) if given by facsimile
transmission, when transmitted to the facsimile number specified in this Section
and confirmation of receipt is received, (ii) if given by mail, seventy-two (72)
hours after such communication is deposited in the mails with first class
postage prepaid, addressed as aforesaid or (iii) if given by any other means,
when delivered at the address specified in this Section; PROVIDED, that notices
to the Administrative Agent under ARTICLE II or ARTICLE III shall not be
effective until received.
13.2. ENTIRE AGREEMENT. The execution and delivery of this Agreement,
the Notes and the other Loan Documents supersede all the negotiations or
stipulations concerning matters thereof which preceded or accompanied the
execution and delivery hereof and thereof. This Agreement, the Notes and the
other Loan Documents are intended, by the parties hereto and thereto, to be a
complete and exclusive statement of the terms and conditions hereof and thereof.
13.3. NO WAIVERS. No failure or delay by the Administrative Agent or any
Lender in exercising any right, power or privilege hereunder or under any Note
or the other Restructuring Documents shall operate as a waiver thereof nor shall
any single or partial exercise thereof preclude any other or further exercise
thereof or the exercise of any other right, power or privilege. The rights and
remedies herein provided shall be cumulative and not exclusive of any rights or
remedies provided by law.
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13.4. EXPENSES; INDEMNIFICATION.
(a) The Borrowers shall pay (i) all reasonable out-of-pocket
expenses of the Administrative Agent, the Co-Agents and the Steering Committee
Lenders as a group, including reasonable fees and disbursements of the
Professionals retained by the Steering Committee Lenders as a whole, in
connection with the preparation and administration of this Agreement, any waiver
or consent hereunder or any amendment hereof or any Default or alleged Default
hereunder and (ii) if an Event of Default occurs, all reasonable out-of-pocket
expenses incurred by the Administrative Agent, the Co-Agents and each Steering
Committee Lender, or their Professionals, including the reasonable fees and
disbursements of counsel (including allocated costs of internal counsel), in
connection with such Event of Default and collection, bankruptcy, insolvency and
other enforcement proceedings resulting therefrom.
(b) The Borrowers agree to indemnify the Administrative Agent, the
Co-Agents and each Lender, their respective Affiliates and the respective
directors, officers, agents and employees of the foregoing (each an
"Indemnitee") and hold each Indemnitee harmless from and against any and all
liabilities, losses, damages, costs and expenses of any kind, including the
reasonable fees and disbursements of counsel (including allocated costs of
internal counsel), which may be incurred by such Indemnitee in connection with
any investigative, administrative or judicial proceeding (whether or not such
Indemnitee shall be designated a party thereto) brought or threatened
(i) relating to or arising out of this Agreement or any actual or proposed use
of proceeds of Loans hereunder or (ii) directly or indirectly results from,
arises out of, or is based upon (x) the presence, use, generation, manufacture,
installation, release, discharge, storage or disposal, at any time, of any
Hazardous Materials on, under, in or about, or the transportation of any such
materials to or from, any Real Property or real property owned, leased or
operated by Borrower or any Affiliate of Borrower (collectively, the "Subject
Property") or (y) the violation or alleged violation by Borrower or any
Affiliate of Borrower of any law, statute, ordinance, order, rule, regulation,
permit, judgment or license relating to the use, generation, manufacture,
installation, release, discharge, storage or disposal of Hazardous Materials to
or from the Subject Property; PROVIDED, that no Indemnitee shall have the right
to be indemnified hereunder (A) for such Indemnitee's own gross negligence or
willful misconduct or (B) in the case of any Lender, for its failure to perform
the duties expressly required to be performed by it by the terms of this
Agreement, in each case as determined by a court of competent jurisdiction.
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13.5. SET-OFF; SHARING OF SET-OFFS.
(a) In addition to any rights and remedies of the Lenders provided
by law, the Lenders each shall have a security interest in any and all deposits
of the Borrowers (general or special, time or demand, provisional or final) at
any time held by such Lender which security interest shall secure the
Obligations. Upon the occurrence and during the continuance of an Event of
Default, provided that it has first received the written consent of the
Administrative Agent, without prior notice to the Borrowers (any such notice
being specifically waived by the Borrowers to the fullest extent permitted by
applicable law) each Lender may set off and apply against any Obligations,
whether matured or unmatured, of the Borrowers to the Lenders, any amount owing
from the Lenders to the Borrowers. No Lender shall exercise any right of set-
off it may have against any Borrower or Guarantor in connection with the
Obligations without the prior written consent of the Administrative Agent. Each
Lender promptly shall notify the Borrowers and the Administrative Agent after
any such setoff and application made by any such Lender; PROVIDED, HOWEVER, that
failure to give such notice shall not affect the validity of such setoff and
application. Provided that an Event of Default described in either
SECTION 9.1(F) or SECTION 9.1(G) has not occurred, Bank of America National
Trust and Savings Association expressly agrees that it will not exercise set-off
rights with respect to cash in the Cash Management System for application
against any Indebtedness, liabilities or other obligations of any of the
Borrowers, Guarantors or any Consolidated Subsidiaries under any agreements
other than the Loan Documents, including the Existing Agreements.
(b) Each Lender agrees that if it shall, by exercising any right
of set-off or counterclaim or otherwise, receive payment of a proportion of the
aggregate amount of principal and interest due to it which is greater than the
proportion received by any other Lender in respect of the aggregate amount of
principal and interest due to such other Lender, the Lender receiving such
proportionately greater payment shall purchase such participations in the Loans
held by the other Lenders, and such other adjustments shall be made, as may be
required so that all such payments of principal and interest with respect to the
Loans held by the Lenders shall be shared by the Lenders pro rata; PROVIDED,
that nothing in this Section shall impair the right of any Lender to exercise
any right of set-off or counterclaim it may have and to apply the amount subject
to such exercise to the payment of Indebtedness of a Borrower other than its
Indebtedness hereunder. Each Borrower agrees, to the fullest extent it may
effectively do so under applicable law, that any holder of a participation in a
Loan, whether or not acquired pursuant to the foregoing arrangements, may
exercise rights of set-off or counterclaim and other rights with respect to such
participation as fully as if such holder of a
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participation were a direct creditor of such Borrower in the amount of such
participation.
13.6. AMENDMENTS AND WAIVERS. Any provision of this Agreement or the
Notes may be amended or waived if, but only if, such amendment or waiver is in
writing and is signed by the Borrowers, the Administrative Agent, the Co-Agents
and the Majority Lenders; PROVIDED, that (i) the consent of All Lenders shall be
required to amend, modify or waive any provision relating to (a) a change in the
amount or the time of payment of any amount owing on any of the Loans, other
than the timing of any payment required under SECTION 2.9(A) or 2.9(B), (b) a
change in the rate of interest or fees to be paid by the Borrowers with respect
to any of the Loans, (c) a change in the definitions of "Majority Lenders",
"Applicable Pro Rata Share" or "the Recalculation Date" (d) any increase in the
total amounts of the Commitments or in any Lender's Commitment or any change
that subjects any Lender to any additional obligation, (e) this SECTION 13.6 or
ARTICLE XII, (f) release of any Collateral that is not identified in the Asset
Disposition Program (for which the consent of Majority Lenders shall be
required) or otherwise permitted to be released in connection with the Loan
Documents, and (g) the release of any Guarantor; (ii) any change in the duties
of or indemnities in favor of any Lender or in a Lender's Applicable Pro Rata
Share shall require the consent of such Lender; and (iii) any change in the
duties of or indemnities in favor of the Agents shall require the consent of the
Administrative Agent. Notwithstanding anything to the contrary herein, the
Administrative Agent, the Co-Agents and the Majority Lenders may modify, amend,
restate, supplement or waive any provision of ARTICLE X, other than
SECTION 10.13 and ARTICLE XII, without the consent of the Borrowers.
13.7. EFFECT OF WAIVERS; MODIFICATION OF DOCUMENTS. The Administrative
Agent's, the Co-Agents', the Collateral Agent's or the Lenders' failure, at any
time or times, to require strict performance by the Borrowers or any other
Person of any provision of this Agreement or any of the other Loan Documents
shall not waive, affect or diminish any right of the Administrative Agent, the
Co-Agents, the Collateral Agent or the Lenders thereafter to demand strict
compliance and performance therewith. Any suspension or waiver by the
Administrative Agent, the Co-Agents, the Collateral Agent or the Lenders of a
Default or Event of Default under this Agreement or any of the other Loan
Documents, shall not suspend, waive or affect any other Default or Event of
Default under this Agreement or any of the other Loan Documents, whether the
same is prior or subsequent thereto and whether of the same or of a different
type. No waiver of any provision of this Agreement or any other Loan Documents,
nor consent to any departure by the Borrowers, or any other person or entity
therefrom, shall in any event be effective unless the same shall be in writing
and signed by the Administrative Agent or the
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Majority Lenders or All Lenders, as the case may be, necessary to effectuate
such waiver or consent and then such waiver or consent shall be effective only
in the specific instance and for the specific purpose for which given.
13.8. SUCCESSORS AND ASSIGNS.
(a) The provisions of this Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
assigns, except that neither Borrower may assign or otherwise transfer any of
its rights under this Agreement without the prior written consent of All
Lenders.
(b) Any Lender may at any time grant to one or more of the
Existing Lenders (each a "Participant") participating interests in its
Commitment or any or all of its Loans. In the event of any such grant by a
Lender of a participating interest to a Participant, whether or not upon notice
to the Borrowers and the Administrative Agent, such Lender shall remain
responsible for the performance of its obligations hereunder, and the Borrowers
and the Administrative Agent shall continue to deal solely and directly with
such Lender in connection with such Lender's rights and obligations under this
Agreement. Any agreement pursuant to which any Lender may grant such a
participating interest shall provide that such Lender shall retain the sole
right and responsibility to enforce the Obligations of the Borrowers hereunder,
including the right to approve any amendment, modification or waiver of any
provision of this Agreement. The Borrowers agree that each Participant shall,
to the extent provided in its participation agreement, be entitled to the
benefits of ARTICLE III with respect to its participating interest. An
assignment or other transfer which is not permitted by subsection (c) below
shall be given effect for purposes of this Agreement only to the extent of a
participating interest granted in accordance with this subsection (b).
(c) Lenders may at any time assign to one or more of the Existing
Lenders (each an "Assignee") all of its rights and obligations under this
Agreement and the Notes or any part of, and such Assignee shall assume such
rights and obligations, pursuant to an assignment and assumption agreement in
form and substance satisfactory to the Co-Agents executed by such Assignee and
such transferor Lender, with (and subject to) the subscribed consent of the
Borrowers and the Agent; PROVIDED, that if an Assignee is an Affiliate of such
transferor Lender or was a Lender immediately prior to such assignment, no such
consent shall be required. Upon execution and delivery of such instrument and
payment by such Assignee to such transferor Lender of an amount equal to the
purchase price agreed to between such transferor Lender and such Assignee, such
Assignee shall be deemed to be a Lender under this Agreement and shall have all
of the rights and obligations of a Lender with a Maximum Commitment
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as set forth in such instrument of assumption, and the transferor Lender shall
be released from its obligations hereunder to a corresponding extent, and no
further consent or action by any party shall be required. Upon the consummation
of any assignment pursuant to this subsection (c), the transferor Lender, the
Agent and the Borrowers shall make appropriate arrangements so that new Notes
are issued to the Assignee and an updated Schedule of Lenders is annexed to the
Credit Agreement. If the Assignee is not incorporated under the laws of the
United States or a state thereof, then it shall deliver to the Borrowers and the
Agent certification as to its exemption from deduction or withholding of any
United States federal income taxes in accordance with SECTION 3.2.
13.9. HEADINGS AND CAPTIONS. The headings and captions used in this
Agreement, the Notes and the other Restructuring Documents are solely for the
purpose of reference and are not to be considered as construing or interpreting
the provisions hereof or thereof.
13.10. INTERPRETATION. Neither this Agreement, the Notes or the other
Restructuring Documents, nor any uncertainty or ambiguity herein or therein
shall be construed or resolved against the Administrative Agent, the Co-Agents,
the Lenders or the Borrowers, whether under any rule of construction or
otherwise. This Agreement, the Notes and the other Restructuring Documents have
been reviewed by all the parties hereto and thereto and shall be construed and
interpreted according to the ordinary meaning of the words used as to fairly
accomplish the purposes and intentions of all such parties.
13.11. INCONSISTENCIES WITH OTHER DOCUMENTS. In the event there is a
conflict or inconsistency between this Agreement, the Notes or the other Loan
Documents, the terms of this Agreement shall control; PROVIDED, HOWEVER, that
any provision of the Security Documents which imposes additional burdens on the
Borrowers or further restricts the rights of the Borrowers or gives the Lenders
additional rights shall not be deemed to be in conflict or inconsistent with
this Agreement and shall be given full force and effect.
13.12. SEVERABILITY. If any portion of this Agreement, the Notes and the
other Loan Documents shall be judged by a court of competent jurisdiction to be
unenforceable, the remaining portions shall be valid and enforceable to the
extent that the remaining terms thereof provide for the consummation of the
issuance of the Notes, the grant of collateral security therefor, and the
payment of principal and interest on the Loans substantially on the same terms
and subject to the same conditions as set forth herein and therein.
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13.13. GOVERNING LAW. THIS AGREEMENT, THE NOTES AND THE OTHER
RESTRUCTURING DOCUMENTS, UNLESS OTHERWISE EXPRESSLY SET FORTH THEREIN, SHALL BE
GOVERNED BY, CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE
COMMONWEALTH OF PENNSYLVANIA, WITHOUT REFERENCE TO THE CONFLICTS OR CHOICE OF
LAW PRINCIPLES THEREOF.
13.14. CONSENT TO JURISDICTION. THE BORROWERS HEREBY IRREVOCABLY CONSENT
TO THE PERSONAL JURISDICTION OF THE STATE AND FEDERAL COURTS LOCATED IN
PITTSBURGH, PENNSYLVANIA IN ANY ACTION, CLAIM OR OTHER PROCEEDING ARISING OUT OF
ANY DISPUTE IN CONNECTION WITH THIS AGREEMENT, THE NOTES AND THE OTHER
RESTRUCTURING DOCUMENTS, ANY RIGHTS OR OBLIGATIONS HEREUNDER OR THEREUNDER, OR
THE PERFORMANCE OF SUCH RIGHTS AND OBLIGATIONS. THE BORROWERS HEREBY
IRREVOCABLY CONSENT TO THE SERVICE OF A SUMMONS AND COMPLAINT AND OTHER PROCESS
IN ANY ACTION, CLAIM OR PROCEEDING BROUGHT BY THE ADMINISTRATIVE AGENT, THE CO-
AGENTS OR ANY LENDER IN CONNECTION WITH THIS AGREEMENT, THE NOTES OR THE OTHER
RESTRUCTURING DOCUMENTS, ANY RIGHTS OR OBLIGATIONS HEREUNDER OR THEREUNDER, OR
THE PERFORMANCE OF SUCH RIGHTS AND OBLIGATIONS, ON BEHALF OF THEMSELVES AND
THEIR PROPERTY, IN THE MANNER SPECIFIED IN SECTION 13.1 (PROVIDED TELECOPY
NOTICES MAY NOT BE USED FOR THIS PURPOSE). NOTHING IN THIS SECTION 13.14 SHALL
AFFECT THE RIGHT OF THE ADMINISTRATIVE AGENT, THE CO-AGENTS OR ANY LENDER TO
SERVE LEGAL PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR AFFECT THE RIGHT OF
THE ADMINISTRATIVE AGENT, THE CO-AGENTS OR ANY LENDER TO BRING ANY ACTION OR
PROCEEDING AGAINST THE BORROWERS OR THEIR PROPERTIES IN THE COURTS OF ANY OTHER
JURISDICTIONS.
13.15. WAIVER OF JURY TRIAL. THE ADMINISTRATIVE AGENT, THE CO-AGENTS,
EACH LENDER AND THE BORROWERS EACH HEREBY IRREVOCABLY WAIVES ITS RIGHT TO A JURY
TRIAL WITH RESPECT TO ANY ACTION, CLAIM OR OTHER PROCEEDING ARISING OUT OF ANY
DISPUTE IN CONNECTION WITH THIS AGREEMENT, THE NOTES OR THE OTHER RESTRUCTURING
DOCUMENTS, ANY RIGHTS OR OBLIGATIONS HEREUNDER OR THEREUNDER, OR THE PERFORMANCE
OF SUCH RIGHTS AND OBLIGATIONS.
13.16. CUMULATIVE REMEDIES. All rights and remedies provided in and
contemplated by this Agreement, the Notes and the other Restructuring Documents
are cumulative and not exclusive of any right or remedy otherwise provided
herein, therein, at law or in equity.
13.17. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations
and warranties of the Borrowers set forth in this Agreement, the Notes and the
other Restructuring Documents and in any other certificate, opinion or other
statement provided at any time by or on behalf of the Borrowers in connection
herewith shall survive the execution of the delivery of this Agreement, the
Notes and the other Restructuring Documents and the payment of all Loans and
other amounts due hereunder.
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13.18. RELATIONSHIP OF THE PARTIES. Neither the Administrative Agent, the
Co-Agents nor the Lenders shall be deemed partners or joint venturers with the
Borrowers or any Affiliate thereof in making this Agreement or by any action
taken hereunder.
13.19. COUNTERPARTS. This Agreement may be executed in one or more
counterparts each of which shall be deemed an original, but all of which
together shall constitute one and the same document.
73
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be duly executed by their respective authorized officers as of the day and
year first above written.
BORROWERS: MORRISON KNUDSEN CORPORATION
(a Delaware corporation)
/s/ Douglas L. Brigham
By __________________________________
Name: Douglas L. Brigham
Title: V.P. and Treasurer
MORRISON KNUDSEN CORPORATION
(an Ohio corporation)
/s/ Douglas L. Brigham
By __________________________________
Name: Douglas L. Brigham
Title: V.P. and Treasurer
AGENTS AND LENDERS:
MELLON BANK, N.A., as Administrative
Agent, a Co-Agent and a Lender
/s/ Christopher Shannon
By __________________________________
Name: Christopher Shannon
Title: First Vice President
BANK OF AMERICA NATIONAL TRUST AND SAVINGS
ASSOCIATION, as a Co-Agent and a Lender
/s/ Henry Y. Yu
By __________________________________
Name: Henry Y. Yu
Title: Senior Vice President
[ADDITIONAL SIGNATURES FOR LENDERS CONTINUED ON NEXT PAGE]
<PAGE>
[ADDITIONAL SIGNATURES OF LENDERS TO $110,000,000 CREDIT AGREEMENT
AMONG MORRISON KNUDSEN CORPORATION, A DELAWARE CORPORATION, AND
MORRISON KNUDSEN CORPORATION, AN OHIO CORPORATION, AS BORROWERS, THE
LENDERS LISTED HEREIN, AND MELLON BANK, N.A. AS ADMINISTRATIVE AGENT
AND MELLON BANK, N.A. AND BANK OF AMERICA NATIONAL TRUST AND SAVINGS
ASSOCIATION AS CO-AGENTS.]
BANK OF AMERICA ILLINOIS,
as a Lender
/s/Henry Y. Yu
By __________________________________
Name: Henry Y. Yu
Title: Attorney In Fact
<PAGE>
[ADDITIONAL SIGNATURES OF LENDERS TO $110,000,000 CREDIT AGREEMENT
AMONG MORRISON KNUDSEN CORPORATION, A DELAWARE CORPORATION, AND
MORRISON KNUDSEN CORPORATION, AN OHIO CORPORATION, AS BORROWERS, THE
LENDERS LISTED HEREIN, AND MELLON BANK, N.A. AS ADMINISTRATIVE AGENT
AND MELLON BANK, N.A. AND BANK OF AMERICA NATIONAL TRUST AND SAVINGS
ASSOCIATION AS CO-AGENTS.]
Bank of Montreal,
as a Lender (type in Lender's name)
/s/James R. Easter
By __________________________________
Name: James R. Easter
Title: Account Manager
<PAGE>
[ADDITIONAL SIGNATURES OF LENDERS TO $110,000,000 CREDIT AGREEMENT
AMONG MORRISON KNUDSEN CORPORATION, A DELAWARE CORPORATION, AND
MORRISON KNUDSEN CORPORATION, AN OHIO CORPORATION, AS BORROWERS, THE
LENDERS LISTED HEREIN, AND MELLON BANK, N.A. AS ADMINISTRATIVE AGENT
AND MELLON BANK, N.A. AND BANK OF AMERICA NATIONAL TRUST AND SAVINGS
ASSOCIATION AS CO-AGENTS.]
The Bank of Nova Scotia,
as a Lender (type in Lender's name)
/s/ D. N. Gillespie
By __________________________________
Name: D. N. Gillespie
Title: Assistant General Manager
<PAGE>
[ADDITIONAL SIGNATURES OF LENDERS TO $110,000,000 CREDIT AGREEMENT
AMONG MORRISON KNUDSEN CORPORATION, A DELAWARE CORPORATION, AND
MORRISON KNUDSEN CORPORATION, AN OHIO CORPORATION, AS BORROWERS, THE
LENDERS LISTED HEREIN, AND MELLON BANK, N.A. AS ADMINISTRATIVE AGENT
AND MELLON BANK, N.A. AND BANK OF AMERICA NATIONAL TRUST AND SAVINGS
ASSOCIATION AS CO-AGENTS.]
THE BANK OF TOKYO, LTD., SEATTLE BRANCH,
as a Lender (type in Lender's name)
/S/ M. Tomi
By __________________________________
Name: M. Tomi
Title: General Manager
<PAGE>
[ADDITIONAL SIGNATURES OF LENDERS TO $110,000,000 CREDIT AGREEMENT
AMONG MORRISON KNUDSEN CORPORATION, A DELAWARE CORPORATION, AND
MORRISON KNUDSEN CORPORATION, AN OHIO CORPORATION, AS BORROWERS, THE
LENDERS LISTED HEREIN, AND MELLON BANK, N.A. AS ADMINISTRATIVE AGENT
AND MELLON BANK, N.A. AND BANK OF AMERICA NATIONAL TRUST AND SAVINGS
ASSOCIATION AS CO-AGENTS.]
Banque Nationale de Paris,
as a Lender (type in Lender's name)
/s/Judith A. Dowling /s/Katherine Wolfe
By _______________________________________
Name: Judith A. Dowling Katherine Wolfe
Title: Vice President Vice President
<PAGE>
[ADDITIONAL SIGNATURES OF LENDERS TO $110,000,000 CREDIT AGREEMENT
AMONG MORRISON KNUDSEN CORPORATION, A DELAWARE CORPORATION, AND
MORRISON KNUDSEN CORPORATION, AN OHIO CORPORATION, AS BORROWERS, THE
LENDERS LISTED HEREIN, AND MELLON BANK, N.A. AS ADMINISTRATIVE AGENT
AND MELLON BANK, N.A. AND BANK OF AMERICA NATIONAL TRUST AND SAVINGS
ASSOCIATION AS CO-AGENTS.]
BANQUE PARIBAS,
as a Lender (type in Lender's name)
/s/ John N. Cate/Alan E. McLintock
By __________________________________
Name: John N. Cate/Alan E. McLintock
Title: Group V.P./Regional Gen'l Manager
<PAGE>
[ADDITIONAL SIGNATURES OF LENDERS TO $110,000,000 CREDIT AGREEMENT
AMONG MORRISON KNUDSEN CORPORATION, A DELAWARE CORPORATION, AND
MORRISON KNUDSEN CORPORATION, AN OHIO CORPORATION, AS BORROWERS, THE
LENDERS LISTED HEREIN, AND MELLON BANK, N.A. AS ADMINISTRATIVE AGENT
AND MELLON BANK, N.A. AND BANK OF AMERICA NATIONAL TRUST AND SAVINGS
ASSOCIATION AS CO-AGENTS.]
CIBC INC.,
as a Lender (type in Lender's name)
/s/ David C. Quon
By __________________________________
Name: David C. Quon
Title: Vice President, Corporate Finance
<PAGE>
[ADDITIONAL SIGNATURES OF LENDERS TO $110,000,000 CREDIT AGREEMENT
AMONG MORRISON KNUDSEN CORPORATION, A DELAWARE CORPORATION, AND
MORRISON KNUDSEN CORPORATION, AN OHIO CORPORATION, AS BORROWERS, THE
LENDERS LISTED HEREIN, AND MELLON BANK, N.A. AS ADMINISTRATIVE AGENT
AND MELLON BANK, N.A. AND BANK OF AMERICA NATIONAL TRUST AND SAVINGS
ASSOCIATION AS CO-AGENTS.]
Citibank, N.A.,
as a Lender (type in Lender's name)
/s/ Bradley Dietz
By __________________________________
Name: Bradley Dietz
Title: Vice President
JENA/IRM Dept.
599 Lex/21st Fl/Zone 10
212-559-2864
<PAGE>
[ADDITIONAL SIGNATURES OF LENDERS TO $110,000,000 CREDIT AGREEMENT
AMONG MORRISON KNUDSEN CORPORATION, A DELAWARE CORPORATION, AND
MORRISON KNUDSEN CORPORATION, AN OHIO CORPORATION, AS BORROWERS, THE
LENDERS LISTED HEREIN, AND MELLON BANK, N.A. AS ADMINISTRATIVE AGENT
AND MELLON BANK, N.A. AND BANK OF AMERICA NATIONAL TRUST AND SAVINGS
ASSOCIATION AS CO-AGENTS.]
Credit Lyonnais New York Branch,
as a Lender (type in Lender's name)
/s/ Alan Sidrane
By __________________________________
Name: Alan Sidrane
Title: Vice President
<PAGE>
[ADDITIONAL SIGNATURES OF LENDERS TO $110,000,000 CREDIT AGREEMENT
AMONG MORRISON KNUDSEN CORPORATION, A DELAWARE CORPORATION, AND
MORRISON KNUDSEN CORPORATION, AN OHIO CORPORATION, AS BORROWERS, THE
LENDERS LISTED HEREIN, AND MELLON BANK, N.A. AS ADMINISTRATIVE AGENT
AND MELLON BANK, N.A. AND BANK OF AMERICA NATIONAL TRUST AND SAVINGS
ASSOCIATION AS CO-AGENTS.]
KEY BANK OF IDAHO,
as a Lender (type in Lender's name)
/s/ Terry L. Pitkin
By _____________________________________
Name: Terry L. Pitkin
Title: V.P. & Manager - Credit Admin.
<PAGE>
[ADDITIONAL SIGNATURES OF LENDERS TO $110,000,000 CREDIT AGREEMENT
AMONG MORRISON KNUDSEN CORPORATION, A DELAWARE CORPORATION, AND
MORRISON KNUDSEN CORPORATION, AN OHIO CORPORATION, AS BORROWERS, THE
LENDERS LISTED HEREIN, AND MELLON BANK, N.A. AS ADMINISTRATIVE AGENT
AND MELLON BANK, N.A. AND BANK OF AMERICA NATIONAL TRUST AND SAVINGS
ASSOCIATION AS CO-AGENTS.]
NATIONAL WESTMINSTER BANK PLC,
as a Lender (type in Lender's name)
/s/ Theodore P. Nikolis
By __________________________________
Name: THEODORE P. NIKOLIS
Title: VICE PRESIDENT
<PAGE>
[ADDITIONAL SIGNATURES OF LENDERS TO $110,000,000 CREDIT AGREEMENT
AMONG MORRISON KNUDSEN CORPORATION, A DELAWARE CORPORATION, AND
MORRISON KNUDSEN CORPORATION, AN OHIO CORPORATION, AS BORROWERS, THE
LENDERS LISTED HEREIN, AND MELLON BANK, N.A. AS ADMINISTRATIVE AGENT
AND MELLON BANK, N.A. AND BANK OF AMERICA NATIONAL TRUST AND SAVINGS
ASSOCIATION AS CO-AGENTS.]
PNC BANK, N.A.,
as a Lender (type in Lender's name)
/s/ Thomas J. McCool
By __________________________________
Name: Thomas J. McCool
Title: Senior Vice President
<PAGE>
[ADDITIONAL SIGNATURES OF LENDERS TO $110,000,000 CREDIT AGREEMENT
AMONG MORRISON KNUDSEN CORPORATION, A DELAWARE CORPORATION, AND
MORRISON KNUDSEN CORPORATION, AN OHIO CORPORATION, AS BORROWERS, THE
LENDERS LISTED HEREIN, AND MELLON BANK, N.A. AS ADMINISTRATIVE AGENT
AND MELLON BANK, N.A. AND BANK OF AMERICA NATIONAL TRUST AND SAVINGS
ASSOCIATION AS CO-AGENTS.]
ROYAL BANK OF CANADA,
as a Lender (type in Lender's name)
/s/ Brian Dixon
By __________________________________
Name: BRIAN DIXON
Title: SENIOR MANAGER
<PAGE>
[ADDITIONAL SIGNATURES OF LENDERS TO $110,000,000 CREDIT AGREEMENT
AMONG MORRISON KNUDSEN CORPORATION, A DELAWARE CORPORATION, AND
MORRISON KNUDSEN CORPORATION, AN OHIO CORPORATION, AS BORROWERS, THE
LENDERS LISTED HEREIN, AND MELLON BANK, N.A. AS ADMINISTRATIVE AGENT
AND MELLON BANK, N.A. AND BANK OF AMERICA NATIONAL TRUST AND SAVINGS
ASSOCIATION AS CO-AGENTS.]
Society National Bank,
as a Lender (type in Lender's name)
/s/ Nancy Terrill
By __________________________________
Name: Nancy Terrill
Title: Vice President
<PAGE>
[ADDITIONAL SIGNATURES OF LENDERS TO $110,000,000 CREDIT AGREEMENT
AMONG MORRISON KNUDSEN CORPORATION, A DELAWARE CORPORATION, AND
MORRISON KNUDSEN CORPORATION, AN OHIO CORPORATION, AS BORROWERS, THE
LENDERS LISTED HEREIN, AND MELLON BANK, N.A. AS ADMINISTRATIVE AGENT
AND MELLON BANK, N.A. AND BANK OF AMERICA NATIONAL TRUST AND SAVINGS
ASSOCIATION AS CO-AGENTS.]
Westdeutsche Landesbank,
as a Lender (type in Lender's name)
/s/Salvatore Battinelli /s/James Malley
By ________________________________________
Name: Salvatore Battinelli James Malley
Title: V.P. V.P.
<PAGE>
EXHIBITS AND SCHEDULES
[The registrant agrees to provide the Securities and Exchange
Commission, upon request, with copies of the Exhibits and Schedules
hereto.]
<PAGE>
FIRST AMENDMENT TO CREDIT AGREEMENT
THIS FIRST AMENDMENT TO CREDIT AGREEMENT ("Amendment") dated as of
April 25, 1995 is entered into among MORRISON KNUDSEN CORPORATION ("MKD"), a
Delaware corporation, and MORRISON KNUDSEN CORPORATION ("MKO"), an Ohio
corporation (each a "Borrower," and collectively, the "Borrowers"), the banks
and other financial institutions named on SCHEDULE A to the Credit Agreement (as
defined below) and whose signatures appear on the signature pages thereto and
hereto (each a "Lender," and collectively, the "Lenders"), Mellon Bank, N.A., as
Administrative Agent (as defined in the Credit Agreement), and Mellon Bank, N.A.
and Bank of America National Trust and Savings Association as Co-Agents (as
defined in the Credit Agreement) with reference to the following facts:
RECITALS
A. Pursuant to the Credit Agreement dated as of April 11, 1995 by and
among the Borrowers, the Lenders, the Administrative Agent and the Co-Agents
(the "Credit Agreement"), the Lenders agreed to make certain financial
accommodations to or for the benefit of the Borrowers upon the terms and
conditions contained therein. Unless otherwise defined in this Amendment,
(i) capitalized terms used herein shall have the meanings attributed to them in
the Credit Agreement, and (ii) references to sections and subsections shall
refer to sections or subsections of the Credit Agreement.
B. The Borrowers have requested that certain provisions of the Credit
Agreement be amended, among other things, to increase the maximum amount
available to be borrowed under the Credit Agreement from $110,000,000 to
$122,100,000 in order to permit the Borrowers to repurchase the receivables sold
by MKO to Citicorp under the Citicorp Receivables Purchase Agreement.
C. The Lenders are willing to provide the requested financial
accommodations to the Borrowers under the terms and conditions set forth in this
Amendment and to enter into this Amendment, but only upon the condition, among
others, that the Borrowers, the Administrative Agent, the Co-Agents and the
Lenders shall have executed and delivered this Amendment to the Administrative
Agent.
NOW, THEREFORE, in consideration of the continued performance by the
Borrowers of their promises and obligations under the Credit Agreement and the
other Loan Documents, and for other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the parties hereby agree as
follows:
<PAGE>
A G R E E M E N T
1. AMENDMENT TO CREDIT AGREEMENT.
1.1 Section 1.1 of the Credit Agreement is hereby amended as follows:
(a) The definition of "Alpha Loan" is hereby deleted in its
entirety and the following is substituted therefor:
"'Alpha Loan' means (i) prior to the effectiveness of the First
Amendment, any Loan to the extent that, after giving effect to such
Loan, the aggregate unpaid balance of the Loans does not exceed
$60,000,000, and (ii) on and after the effectiveness of the First
Amendment, (a) the Receivables Repurchase Loan, (b) any Loan which was
an Alpha Loan prior to the effectiveness of the First Amendment, and
(c) any other Loan made after the effectiveness of the First Amendment
to the extent that, after giving effect to such Loan, the aggregate
unpaid balance of the Loans does not exceed $72,100,000."
(b) The definition of "Beta Loan" is hereby deleted in its
entirety and the following is substituted therefor:
"'Beta Loan' means (i) prior to the effectiveness of the First
Amendment, any Loan to the extent that, after giving effect to such
Loan, the aggregate unpaid balance of the Loans exceeds $60,000,000,
and (ii) on and after the effectiveness of the First Amendment,
(a) any Loan which was a Beta Loan prior to the effectiveness of the
First Amendment, and (b) any other Loan (other than the Receivables
Repurchase Loan) made after the effectiveness of the First Amendment
to the extent that, after giving effect to such Loan, the aggregate
unpaid balance of the Loans exceeds $72,100,000."
(c) A new definition of "First Amendment" is hereby added in
appropriate alphabetical order to read as follows:
"'First Amendment' means the First Amendment to Credit Agreement
dated as of April 25, 1995 among MKD, MKO, the Administrative Agent,
the Co-Agents and the Lenders."
(d) The definition of "Net Cash Proceeds Retainage Amount" is
deleted in its entirety.
2
<PAGE>
(e) The definition of "Recalculation Date" is amended by
deleting the amount "$110,000,000" and substituting the amount "$122,100,000"
therefor.
(f) A new definition of "Receivables Repurchase Loan" is hereby
added to read as follows:
"'Receivables Repurchase Loan' means the Loan, in the original
principal amount of $12,100,000, deemed made hereby by Citibank, N.A.
to the Borrowers pursuant to Section 12.1(c)."
1.2 Section 2.1 of the Credit Agreement is hereby deleted in its
entirety and the following is substituted therefor:
"2.1 THE LOANS.
Each Lender severally agrees, on the terms and conditions
set forth in this Agreement, to make a loan (each, including the
Receivables Repurchase Loan, a "Loan", and collectively, the "Loans"),
to the Borrowers during the periods listed below (each such period
being a "Borrowing Period") in a maximum amount equal to its
Applicable Pro Rata Share of the aggregate amount of the Loans set
forth below opposite the Borrowing Period for such Loan:
<TABLE>
<CAPTION>
Borrowing Period Aggregate Amount of Loans
---------------- -------------------------
<S> <C>
Closing Date - April 16, 1995 $ 90,000,000
April 17, 1995 - April 23, 1995 $112,100,000
April 24, 1995 - April 30, 1995 $117,100,000
May 1, 1995 - May 31, 1995 $122,100,000
</TABLE>
PROVIDED, that the aggregate principal amount of the Loans by such
Lender outstanding at any time during a Borrowing Period to the
Borrowers shall not exceed the amount of its Commitment as such
Commitment may be reduced pursuant to SECTION 2.9. Each Borrowing
under this SECTION 2.1 shall be in an aggregate amount of $5,000,000
or multiples thereof; PROVIDED, that during the last three Borrowing
Periods set forth above, a Borrowing shall not be required to be in a
multiple of $5,000,000 to the extent the aggregate amount of the Loans
listed above are not divisible by $5,000,000. Subject to SECTION 2.9,
amounts borrowed hereunder and repaid or prepaid may be reborrowed."
3
<PAGE>
1.3 Section 2.9 of the Credit Agreement is hereby amended as follows:
(a) The following phrase in Section 2.9(a) is hereby deleted:
", and (z) so long as, and to the extent that, any "Outstanding
Balance" remains on any "Purchased Receivables" under the Citicorp
Receivables Purchase Agreement, the Borrowers may retain up to an
amount equal to 9.91% [12.1 DIVIDED BY 122.1] of the amount of such
Net Cash Proceeds remaining after the Borrower's retention of the
amounts described in clauses (x) and (y) above (the "Net Cash Proceeds
Retainage Amount")".
(b) The following phrase in Section 2.9(b) is hereby deleted:
"; PROVIDED, HOWEVER, that so long as, and to the extent that, any
"Outstanding Balance" remains on any "Purchased Receivables" under the
Citicorp Receivables Purchase Agreement, the Borrowers may retain up
to the related Net Cash Proceeds Retainage Amount".
(c) The following phrase in Section 2.9(e) is hereby deleted:
"; PROVIDED, HOWEVER, that so long as, and to the extent that, any
"Outstanding Balance" remains on any "Purchased Receivables" under the
Citicorp Receivables Purchase Agreement, the Borrowers may retain up
to the related Net Cash Proceeds Retainage Amount".
(d) Section 2.9(f) is hereby deleted in its entirety.
1.4 Section 8.4(b) is hereby deleted in its entirety.
1.5 Section 8.10 is hereby amended by adding the following language
after the word "lessor":
"; and (iii) lease payments in connection with new Operating Leases,
PROVIDED that the aggregate annual lease payments for such Operating
Leases shall not exceed $1,000,000"
1.6 Section 9.1(r) is hereby deleted in its entirety.
4
<PAGE>
1.7 Section 12.1 is hereby amended as follows:
(a) Section 12.1(a) is amended by deleting the amount
"$60,000,000" each place it appears and substituting the amount "$72,100,000"
therefor.
(b) A new Section 12.1(c) is added to read as follows:
"(c) Notwithstanding anything in this Agreement or any other
Loan Document to the contrary, upon the effectiveness of the First
Amendment, an Alpha Loan in the original principal amount of $12,100,000
shall be deemed to have been made hereunder by Citibank, N.A. to the
Borrowers and such Loan shall be repaid in accordance with the terms, and
entitled to all benefits, of this Agreement and the other Loan Documents.
Each Borrower, the Administrative Agent, each Co-Agent and each Lender
acknowledges and agrees that the Loan deemed made by Citibank, N.A.
pursuant to this Section 12.1(c) will not be funded to either Borrower or
any other Person but is being deemed made in connection with the repurchase
by the Borrowers from Citicorp of certain Purchased Receivables (as defined
in the Citicorp Receivables Purchase Agreement)."
1.8 Section 12.2(a) is hereby amended by deleting the amount
"$60,000,000" each place it appears and substituting the amount "$72,100,000"
therefor.
1.9 Schedule A -- Schedule of Lenders is hereby deleted in its
entirety and the Schedule of Lenders attached hereto as Schedule A is
substituted therefor.
1.10 Schedule C -- Schedule of Documents is hereby amended by deleting
Appendix H thereto and the Appendix H to the Schedule of Documents attached
hereto as Appendix H is substituted therefor.
1.11 Schedule 6.7A -- Schedule of Indebtedness is hereby deleted in
its entirety and the Schedule of Indebtedness attached hereto as Schedule 6.7A
is substituted therefor.
1.12 Schedule 8.2 -- Schedule of Permitted Liens is hereby deleted in
its entirety and the Schedule of Permitted Liens attached hereto as Schedule 8.2
is substituted therefor.
2. CONDITIONS OF EFFECTIVENESS. This Amendment shall become effective
only upon satisfaction of each of the following conditions:
(a) The Administrative Agent shall have received copies of this
Amendment that, when taken together, bear the
5
<PAGE>
signatures of the Borrowers, the Administrative Agent, the Co-Agents and each of
the Lenders.
(b) The Administrative Agent shall have received a copy of the
accompanying Guarantor Consents executed by each of the Guarantors.
(c) The Administrative Agent shall have received a copy of the
Assignment of Purchased Receivables executed by Citicorp and the Borrowers in
substantially the form of EXHIBIT A attached hereto.
(d) The Borrowers shall have delivered to the Administrative
Agent for the benefit of Citibank, N.A. a secured promissory note payable to the
order of Citibank, N.A. in the amount of $12,700,000 in substantially the form
of EXHIBIT B attached hereto.
(e) Citibank, N.A. shall have delivered to the Administrative
Agent for cancellation and delivery to the Borrowers, that certain Secured
Promissory Note payable to the order of Citibank, N.A. dated April 11, 1995 in
the amount of $600,000.
(f) Citicorp shall have delivered to the Collateral Agent, for
the benefit of the Lenders, a Uniform Commercial Code Financing Statement(s)
executed by Citicorp assigning all of Citicorp's rights to the collateral set
forth on any Uniform Commercial Code Financing Statement(s) filed by Citicorp in
connection with the Citicorp Receivables Purchase Agreement.
(g) The Administrative Agent shall have received copies of an
amendment to the Collateral Agent Agreement in form and substance satisfactory
to the Administrative Agent executed by each of the parties thereto.
(h) The Administrative Agent shall have received agreements from
the Existing Lenders consenting to the increase in the maximum amount of the
Loans available under the Credit Agreement and waiving any applicable
prohibitions to such increase under their respective Existing Agreements.
(i) The Collateral Agent shall have received, in form and
substance satisfactory to the Administrative Agent, a first modification to that
certain (i) Open-End Mortgage, Assignment of Rents, Security Agreement and
Fixture Filing from MKO as Mortgagor to Collateral Agent as Mortgagee dated as
of April 11, 1995; (ii) Deed of Trust, Assignment of Rents, Security Agreement
and Fixture Filing from MKO as Trustor to David S. Jensen as Trustee for the
benefit of the Collateral Agent as Beneficiary dated as of April 11, 1995 (805
Park Boulevard
6
<PAGE>
property, Boise Idaho); (iii) Deed of Trust, Assignment of Rents, Security
Agreement and Fixture Filing from MKO as Trustor to David S. Jensen as Trustee
for the benefit of the Collateral Agent as Beneficiary dated as of April 11,
1995 (1701 Eastover Drive property, Boise Idaho); and (iv) Leasehold Deed of
Trust, Assignment of Rents, Security Agreement and Fixture Filing from MKO as
Trustor to P. Michael Pleska and Deborah A. Sink as Trustee for the benefit of
the Collateral Agent as Beneficiary, in each case executed by the parties
thereto and notarized in recordable form.
(j) The Collateral Agent shall have received, in form and
substance satisfactory to the Administrative Agent, a Second Supplement and
Amendment to First Preferred Mortgage executed by the parties thereto and
notarized in recordable form.
(k) The Administrative Agent shall have received the legal
opinion of Hawley Troxell Ennis & Hawley addressed to the Administrative Agent
and the Co-Agents for the benefit of the Lenders, in form and substance
satisfactory to the Agents.
3. REFERENCE TO AND EFFECT ON CREDIT AGREEMENT AND RELATED DOCUMENTS.
(a) Upon the effectiveness of this Amendment, on and after the
date hereof each reference in the Credit Agreement to "this Agreement",
"hereunder", "hereof", "herein" or words of like import shall mean and be a
reference to the Credit Agreement as amended hereby and each reference in the
Loan Documents to the Credit Agreement shall also mean and be a reference to the
Credit Agreement as amended hereby.
(b) Except as expressly modified under Section 1 of this
Amendment, all of the terms and conditions set forth in the Credit Agreement and
the other Loan Documents are incorporated herein by this reference, and the
Obligations of the Borrowers under the Credit Agreement and the other Loan
Documents are hereby acknowledged, confirmed and ratified by the Borrowers.
(c) The execution, delivery and effectiveness of this Amendment
shall not, except as expressly provided herein, operate as a waiver of any
right, power or remedy of the Administrative Agent, the Co-Agents or the Lenders
under the Credit Agreement or any of the Loan Documents, nor constitute a waiver
of any provision of the Credit Agreement or any of the Loan Documents.
4. ENTIRE AGREEMENT. This Amendment, together with the Credit Agreement
and the other Loan Documents, is the entire agreement between the parties hereto
with respect to the subject matter hereof. This Amendment supersedes all prior
and contemporaneous oral and written agreements and discussions with
7
<PAGE>
respect to the subject matter hereof. Except as otherwise expressly modified
herein, the Loan Documents shall remain in full force and effect.
5. REPRESENTATIONS AND WARRANTIES. Each Borrower hereby represents and
warrants that the representations and warranties contained in the Credit
Agreement were true and correct in all material respects when made and, except
to the extent (a) that a particular representation or warranty by its terms
expressly applies only to an earlier date, or (b) such Borrower has previously
advised the Administrative Agent in writing as contemplated under the Credit
Agreement, are true and correct in all material respects as of the date hereof.
The recitals set forth at the beginning of this Amendment are true and correct,
and such recitals are incorporated into and are a part of this Amendment.
6. MISCELLANEOUS.
6.1 COUNTERPARTS. This Amendment may be executed in identical
counterpart copies, each of which shall be an original, but all of which shall
constitute one and the same agreement. Delivery of an executed counterpart of a
signature page to this Amendment by facsimile transmission shall be effective as
delivery of a manually executed counterpart of this Amendment. Any Lender
delivering this Amendment by facsimile shall send the original manually executed
counterpart of this Amendment to the Administrative Agent promptly after such
facsimile transmission.
6.2 AUTHORITY. Each Person executing this Amendment represents and
warrants that he or she is lawfully authorized and empowered to execute this
Amendment on behalf of the entity on whose behalf such Person is signing, and
that upon execution, this Amendment will be binding upon such entity, without
any further approval, ratification, or other action.
6.3 HEADINGS. Section headings used herein are for convenience of
reference only, are not part of this Amendment, and are not to be taken into
consideration in interpreting this Amendment.
6.4 GOVERNING LAW. This Amendment shall be governed by, and
construed and enforced in accordance with, the laws of the Commonwealth of
Pennsylvania applicable to contracts made and performed in such state, without
regard to the principles thereof regarding conflict of laws.
6.5 CONFLICT OF TERMS. In the event of any inconsistency between the
provisions of this Amendment and any provision of the Credit Agreement, the
terms and provisions of this Amendment shall govern and control.
8
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be duly executed by their respective authorized officers as of the day and year
first above written.
BORROWERS: MORRISON KNUDSEN CORPORATION
(a Delaware corporation)
By /s/ Douglas L. Brigham
----------------------------------
Name: Douglas L. Brigham
--------------------------------
Title: Vice President & Treasurer
-------------------------------
MORRISON KNUDSEN CORPORATION
(an Ohio corporation)
By /s/ Douglas L. Brigham
--------------------------------
Name: Douglas L. Brigham
--------------------------------
Title: Vice Presidenty & Treasurer
-------------------------------
AGENTS AND LENDERS:
MELLON BANK, N.A., as Administrative Agent, a Co-Agent
and a Lender
By /s/ Alan J. Kopolow
----------------------------------
Name: Alan J. Kopolow
--------------------------------
Title: Vice President
-------------------------------
BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION,
as a Co-Agent and a Lender
By /s/ Henry Y. Yu
----------------------------------
Name: Henry Y. Yu
--------------------------------
Title: Senior Vice President
-------------------------------
[ADDITIONAL SIGNATURES FOR LENDERS CONTINUED ON NEXT PAGE]
9
<PAGE>
LENDERS:
BANK OF AMERICA ILLINOIS
By /s/ Henry Y. Yu
------------------------------
Name: Henry Y. Yu
---------------------------
Title: Attorney In Fact
---------------------------
BANK OF MONTREAL
By /s/ James R. Easter
------------------------------
Name: James R. Easter
---------------------------
Title: Account Manager
--------------------------
THE BANK OF NOVA SCOTIA
By /s/ D. N. Gillespie
------------------------------
Name: D. N. Gillespie
---------------------------
Title: Assistant General Manager
--------------------------
THE BANK OF TOKYO, LTD.,
SEATTLE BRANCH
By /s/ Stanley A. Lance
-----------------------------
Name: Stanley A. Lance
---------------------------
Title: Vice President
--------------------------
BANQUE NATIONALE DE PARIS
By /s/ Katherine Wolfe
------------------------------
Name: Katherine Wolfe
---------------------------
Title: Vice President
--------------------------
By /s/ Judith A. Dowling
-----------------------------
Name: Judith A. Dowling
---------------------------
Title: Vice President
--------------------------
[ADDITIONAL SIGNATURES FOR LENDERS CONTINUED ON NEXT PAGE]
10
<PAGE>
BANQUE PARIBAS
By /s/ John Cate
------------------------------
Name: John Cate
--------------------------
Title: Group Vice President
--------------------------
By /s/ Alan E. McLintock
-----------------------------
Name: Alan E. McLintock
---------------------------
Title: Regional General Manager
---------------------------
CIBC INC.
By /s/ David C. Quon
-----------------------------
Name: David C. Quon
---------------------------
Title: Vice President
--------------------------
CITIBANK, N.A.
By /s/ Bradley I. Dietz
-----------------------------
Name: Bradley I. Dietz
--------------------------
Title: Vice President
--------------------------
CREDIT LYONNAIS, NEW YORK BRANCH
By /s/ Alan Sidrane
-----------------------------
Name: Alan Sidrane
---------------------------
Title: Vice President
---------------------------
KEY BANK OF IDAHO
By /s/ Terry L. Pitkin
-----------------------------
Name: Terry L. Pitkin
---------------------------
Title: Vice President & Manager
--------------------------
[ADDITIONAL SIGNATURES FOR LENDERS CONTINUED ON NEXT PAGE]
11
<PAGE>
NATIONAL WESTMINSTER BANK PLC
By /s/ Theodore P. Nikolis
------------------------------
Name: Theodore P. Nikolis
----------------------------
Title: Vice President
---------------------------
By
------------------------------
Name:
----------------------------
Title:
---------------------------
PNC BANK, N.A.
By /s/ Thomas J. McCaal
------------------------------
Name:
----------------------------
Title:
---------------------------
ROYAL BANK OF CANADA
By /s/ Brian W. Dixon
------------------------------
Name: Brian W. Dixon
----------------------------
Title: Senior Manager
---------------------------
SOCIETY NATIONAL BANK
By /s/ Amy J. Piesen
------------------------------
Name: Amy J. Piesen
----------------------------
Title: Assistant Vice President
---------------------------
WESTDEUTSCHE LANDESBANK
GIROZENTRALE, NEW YORK AND CAYMAN
ISLANDS BRANCHES
By /s/ Catherine Ruhland
------------------------------
Name: Catherine Ruhland
----------------------------
Title: Associate
---------------------------
By /s/ S. Battinelli
------------------------------
Name: S. Battinelli
----------------------------
Title: Vice President
---------------------------
[GUARANTOR CONSENTS FOLLOW ON NEXT PAGE]
12
<PAGE>
GUARANTOR CONSENTS
Each of the undersigned, a Guarantor under a Guaranty, hereby (i)
ratifies and reaffirms, as of the date hereof, all of the provisions of its
Guaranty and its Guaranty Security Agreement, (ii) acknowledges receipt of a
copy of the First Amendment to Credit Agreement dated as of April 25, 1995 (the
"Amendment"), and (iii) consents to all of the provisions of the Amendment.
National Projects, Inc.
By: /s/ Douglas L. Brigham
------------------------------
Name: Douglas L. Brigham
----------------------------
Title: Treasurer
---------------------------
Morrison-Knudsen Financial Company, Inc.
By: /s/ Douglas L. Brigham
------------------------------
Name: Douglas L. Brigham
----------------------------
Title: Treasurer
---------------------------
Morrison-Knudsen Services, Inc.
By: /s/ Douglas L. Brigham
------------------------------
Name: Douglas L. Brigham
----------------------------
Title: Treasurer
---------------------------
Atascosa Mining Co.
By: /s/ Douglas L. Brigham
------------------------------
Name: Douglas L. Brigham
----------------------------
Title: Treasurer
---------------------------
Centennial Engineering, Inc.
By: /s/ Douglas L. Brigham
------------------------------
Name: Douglas L. Brigham
----------------------------
Title: Assistant Treasurer
---------------------------
[GUARANTOR CONSENTS CONTINUED ON NEXT PAGE]
13
<PAGE>
CF Systems Corporation
By: /s/ Douglas L. Brigham
------------------------------
Name: Douglas L. Brigham
----------------------------
Title: Treasurer
---------------------------
Chemical Demilitarization of Anniston Company
By: /s/ Douglas L. Brigham
------------------------------
Name: Douglas L. Brigham
----------------------------
Title: Vice President & Treasurer
---------------------------
Joy MK Projects Company
By: /s/ Douglas L. Brigham
------------------------------
Name: Douglas L. Brigham
----------------------------
Title:Vice President & Assistant Treasurer
---------------------------
MK Capital Company
By: /s/ Douglas L. Brigham
------------------------------
Name: Douglas L. Brigham
----------------------------
Title: Treasurer
---------------------------
MK-Ferguson Engineering Company
By: /s/ S. G. Hanks
------------------------------
Name: S. G. Hanks
----------------------------
Title: Assistant Secretary
---------------------------
MK-Ferguson of Idaho Company
By: /s/ Douglas L. Brigham
------------------------------
Name: Douglas L. Brigham
----------------------------
Title: Treasurer
---------------------------
[GUARANTOR CONSENTS CONTINUED ON NEXT PAGE]
14
<PAGE>
MK-Ferguson of Oak Ridge Company
By: /s/ Douglas L. Brigham
------------------------------
Name: Douglas L. Brigham
----------------------------
Title: Treasurer
---------------------------
MK Infrastructure Corporation
By: /s/ Douglas L. Brigham
------------------------------
Name: Douglas L. Brigham
----------------------------
Title: Assistant Treasurer
---------------------------
MK Train Control, Inc.
By: /s/ Douglas L. Brigham
------------------------------
Name: Douglas L. Brigham
----------------------------
Title:Vice President & Treasurer
---------------------------
Morrison Knudsen Investments, Inc.
By: /s/ Douglas L. Brigham
------------------------------
Name: Douglas L. Brigham
----------------------------
Title: Treasurer
---------------------------
MK Pacific, Inc.
By: /s/ Douglas L. Brigham
------------------------------
Name: Douglas L. Brigham
----------------------------
Title: Treasurer
---------------------------
G.W. Murphy Construction Company, Inc.
By: /s/ Douglas L. Brigham
------------------------------
Name: Douglas L. Brigham
----------------------------
Title: Treasurer
---------------------------
[GUARANTOR CONSENTS CONTINUED ON NEXT PAGE]
15
<PAGE>
Navasota Mining Company, Inc.
By: /s/ Douglas L. Brigham
------------------------------
Name: Douglas L. Brigham
----------------------------
Title: Treasurer
---------------------------
Western Aircraft, Inc.
By: /s/ Douglas L. Brigham
------------------------------
Name: Douglas L. Brigham
----------------------------
Title: Treasurer
---------------------------
Yampa Mining Co.
By: /s/ Douglas L. Brigham
------------------------------
Name: Douglas L. Brigham
----------------------------
Title: Treasurer
---------------------------
Morrison-Knudsen Company, Inc.
By: /s/ Douglas L. Brigham
------------------------------
Name: Douglas L. Brigham
----------------------------
Title:Vice President & Treasurer
---------------------------
Morrison-Knudsen Engineers, Inc.
By: /s/ Douglas L. Brigham
------------------------------
Name: Douglas L. Brigham
----------------------------
Title:Vice President & Treasurer
---------------------------
Morrison-Knudsen International Company, Inc.
By: /s/ Douglas L. Brigham
------------------------------
Name: Douglas L. Brigham
----------------------------
Title:Vice President & Treasurer
---------------------------
[GUARANTOR CONSENTS CONTINUED ON NEXT PAGE]
16
<PAGE>
E.E. Black, Limited
By: /s/ Douglas L. Brigham
------------------------------
Name: Douglas L. Brigham
----------------------------
Title: Treasurer
---------------------------
Black Construction Corporation
By: /s/ Douglas L. Brigham
------------------------------
Name: Douglas L. Brigham
----------------------------
Title: Treasurer
---------------------------
Black Micro Corporation
By: /s/ Douglas L. Brigham
------------------------------
Name: Douglas L. Brigham
----------------------------
Title: Treasurer
---------------------------
17
<PAGE>
EXHIBITS
[The registrant agrees to provide the Securities and Exchange Commission, upon
request, with copies of Exhibits and Schedules hereto.]
<PAGE>
SECOND AMENDMENT TO CREDIT AGREEMENT
THIS SECOND AMENDMENT TO CREDIT AGREEMENT ("Amendment") dated as of
June 1, 1995 is entered into among MORRISON KNUDSEN CORPORATION ("MKD"), a
Delaware corporation, and MORRISON KNUDSEN CORPORATION ("MKO"), an Ohio
corporation (each a "Borrower," and collectively, the "Borrowers"), the banks
and other financial institutions named on SCHEDULE A to the Credit Agreement (as
defined below) and whose signatures appear on the signature pages thereto and
hereto (each a "Lender," and collectively, the "Lenders"), Mellon Bank, N.A., as
Administrative Agent (as defined in the Credit Agreement), and Mellon Bank, N.A.
and Bank of America National Trust and Savings Association as Co-Agents (as
defined in the Credit Agreement), with reference to the following facts:
RECITALS
A. Pursuant to the Credit Agreement dated as of April 11, 1995 by and
among the Borrowers, the Lenders, the Administrative Agent and the Co-Agents, as
amended by the First Amendment (the "Credit Agreement"), the Lenders agreed to
make certain financial accommodations to or for the benefit of the Borrowers
upon the terms and conditions contained therein. Unless otherwise defined in
this Amendment, (i) capitalized terms used herein shall have the meanings
attributed to them in the Credit Agreement, and (ii) references to sections and
subsections shall refer to sections or subsections of the Credit Agreement.
B. The Borrowers have requested that certain provisions of the Credit
Agreement be amended, among other things, to extend the Termination Date.
C. The Lenders are willing to provide the requested accommodations to the
Borrowers under the terms and conditions set forth in this Amendment and to
enter into this Amendment, but only upon the condition, among others, that the
Borrowers, the Administrative Agent, the Co-Agents and the Lenders shall have
executed and delivered this Amendment to the Administrative Agent.
NOW, THEREFORE, in consideration of the continued performance by the
Borrowers of their promises and obligations under the Credit Agreement and the
other Loan Documents, and for other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the parties hereby agree as
follows:
<PAGE>
A G R E E M E N T
1. AMENDMENT TO CREDIT AGREEMENT.
1.1 Section 1.1 of the Credit Agreement is hereby amended as follows:
(a) The definition of Collateral is deleted in its entirety and
the following is substituted therefor:
"'Collateral' means collectively, all real and personal property,
fixtures and interests in such property and proceeds thereof presently
owned or hereafter created or acquired by the Borrowers or the Guarantors,
including the Real Property Collateral, in which a security interest,
Mortgage or ship mortgage is granted in favor of the Collateral Agent for
the benefit of the Lenders to secure the Obligations."
(b) A new definition of "Concentration Account" is hereby added
in appropriate alphabetical order to read as follows:
"'Concentration Account' has the meaning assigned to it in
Schedule F."
(c) A new definition of "Deposit Bank" is hereby added in
appropriate alphabetical order to read as follows:
"'Deposit Bank' has the meaning assigned to it in Schedule F."
(d) The definition of "Guaranty" is amended by deleting the word
"Administrative Agent" and substituting the word "Co-Agents" therefor.
(e) The definition of "Maximum Commitment" is amended by
deleting the date "May 31, 1995" and substituting the date "June 14, 1995"
therefor.
(f) A new definition of "Second Amendment" is hereby added in
appropriate alphabetical order to read as follows:
"'Second Amendment' means the Second Amendment to Credit Agreement
dated as of June 1, 1995 among MKD, MKO, the Administrative Agent, the Co-
Agents and the Lenders."
(g) The definition of "Termination Date" is amended by deleting
the date "May 31, 1995" and substituting the date "July 31, 1995" therefor.
2
<PAGE>
1.2 Section 2.1 of the Credit Agreement is hereby deleted in its
entirety and the following is substituted therefor:
"2.1 THE LOANS.
From time to time until the Business Day preceding the
Termination Date, each Lender severally agrees, on the terms and conditions
set forth in this Agreement, to make a loan (each, including the
Receivables Repurchase Loan, a "Loan", and collectively, the "Loans"), to
the Borrowers during the periods listed below (each such period being a
"Borrowing Period") in a maximum amount equal to its Applicable Pro Rata
Share of the aggregate amount of the Loans set forth below opposite the
Borrowing Period for such Loan:
BORROWING PERIOD AGGREGATE AMOUNT OF LOANS
---------------- -------------------------
Closing Date - April 16, 1995 $ 90,000,000
April 17, 1995 - April 23, 1995 $112,100,000
April 24, 1995 - April 30, 1995 $117,100,000
May 1, 1995 - June 14, 1995 $122,100,000
June 15, 1995 - June 30, 1995 $ 99,100,000
July 1, 1995 - July 31, 1995 $ 90,900,000
PROVIDED, that the aggregate principal amount of the Loans by such Lender
outstanding at any time during a Borrowing Period to the Borrowers shall
not exceed the amount of its Commitment as such Commitment may be reduced
pursuant to this SECTION 2.1 or SECTION 2.9. Each Borrowing under this
SECTION 2.1 shall be in an aggregate amount of $5,000,000 or multiple
thereof; PROVIDED, that during the last Borrowing Period set forth above,
the amount of any Borrowing which would cause the aggregate Loans to equal
the maximum aggregate amount of Loans permitted during such Borrowing
Period need not equal an integral multiple of $5,000,000. Subject to
SECTION 2.9, amounts borrowed hereunder and repaid or prepaid may be
reborrowed."
1.3 Section 2.9 of the Credit Agreement is hereby amended as follows:
(a) Section 2.9(a) is hereby deleted and the following is
substituted therefor:
"(a) Immediately upon receipt by any Borrower or the
Administrative Agent of Net Cash Proceeds of (i) any sale of assets (other
than sales in the ordinary course of business, sales of equipment which is
promptly replaced or sales under SECTION 8.4(a)(ii)), (ii) issuance of
capital
3
<PAGE>
stock by the Borrowers or (iii) insurance proceeds, the Borrowers shall pay or
cause to be paid such Net Cash Proceeds to the Administrative Agent on account
of the Obligations for the benefit of Lenders; PROVIDED, HOWEVER, that (x) the
Borrowers may retain up to an aggregate amount of $1,000,000 of insurance
proceeds to rebuild or replace insured property destroyed or damaged, if such
property is capable of being rebuilt or replaced within a reasonable period of
time, and no Event of Default exists and is continuing at the time such
insurance proceeds are received, unless otherwise set forth in the Security
Documents and (y) the Borrowers may retain the Net Cash Proceeds from the sale
of the capital stock of MK Gold Company currently held in escrow by the
Collateral Agent, and the Collateral Agent shall immediately release such Net
Cash Proceeds to the Borrowers upon the effective date of the Second Amendment.
Amounts prepaid under this SECTION 2.9(a) may not be reborrowed and each
Lender's Commitment shall be reduced in the amount of such Lender's Applicable
Pro Rata Share in such mandatory prepayment; PROVIDED, HOWEVER, that to the
extent any such prepayments relating to Net Cash Proceeds from the sale of the
capital stock or assets of Western Aircraft, Inc. are received, each such
Lender's Commitment shall not be reduced and such amounts prepaid may be
reborrowed."
(b) A new Section 2.9(f) is added to read as follows:
"(f) If at any time the aggregate principal amount of the
Loans of any Lender outstanding at any time exceeds the amount
of such Lender's Commitment as such Lender's Commitment may be
reduced pursuant to SECTION 2.1 or this SECTION 2.9, the
Borrowers shall immediately pay to the Administrative Agent for
the benefit of such Lender, the amount necessary to reduce the
aggregate principal amount of such Loans to the amount of such
Lender's Commitment."
4
<PAGE>
1.4 Section 2.11 of the Credit Agreement is hereby deleted in its
entirety and the following is substituted therefor:
"2.11 GENERAL PROVISIONS AS TO PAYMENTS. The Borrowers shall make
each payment of principal of, and interest on, the Loans and of fees and of
all other Obligations (other than Obligations payable under the Cash
Management System) hereunder, not later than 12:00 Noon (Pittsburgh,
Pennsylvania time) on the date when due, in Federal or other funds
immediately available in Pittsburgh, Pennsylvania, to the Administrative
Agent at its address referred to in the Schedule for Notices. Subject to
the provisions of SECTION 2.10, the Administrative Agent will promptly
distribute to each Lender its Applicable Pro Rata Share (if any) of each
such payment received by the Administrative Agent for the account of the
Lenders. The Borrowers agree to pay to the Administrative Agent, upon
demand, the amount of any payment received by the Administrative Agent
pursuant to the terms of the Cash Management System that is subsequently
returned to any bank that has transferred funds to the Concentration
Account in accordance with the Cash Management System, because such bank
transferred funds in advance of final collection and such funds are not
finally collected. If such payment has already been applied in accordance
with SECTION 2.10 and is not paid by the Borrowers within one (1) Business
Day after the Administrative Agent's demand therefor, then each Lender
shall pay to the Administrative Agent its Applicable Pro Rata Share of such
returned payment. Upon receipt by Administrative Agent of any such payment
from the Borrowers, or from the Lenders in the event the Borrowers fail to
make such payment after Administrative Agent's demand, Administrative Agent
shall pay such funds to Bank of America Illinois, Bank of America N.T. &
S.A. or Key Bank of Idaho, as appropriate, in such bank's capacity as a
Deposit Bank in order to pay the bank that transferred funds that were not
finally collected and the Loans shall be reinstated to the extent the
Administrative Agent makes such payment. Whenever any payment of principal
of, or interest on, the Loans or of fees with respect to the Loans or of
any other Obligations shall be due on a day which is not a Business Day,
the date for payment thereof shall be extended to the next succeeding
Business Day. If the date for any payment of principal is extended by
operation of law or otherwise, interest thereon shall be payable for such
extended time."
1.5 Section 5.2(f) of the Credit Agreement is hereby amended by
deleting clause (v) in its entirety and substituting the following therefor:
5
<PAGE>
"(v) the documents delivered to the Administrative Agent by each
Borrower and each of the Guarantors are true and correct as of the date of
such requested Loan;"
1.6 A new Section 6.30 is added to read as follows:
"6.30 MK RAIL LOCK BOX. Lock Box number 98485 maintained at Bank
of America Illinois is used solely for collections related to MK Rail
and not collections related to any Borrower or any Guarantor. No
Borrower or Guarantor has instructed any account debtor or other
Person owing any monies to such Borrower or such Guarantor to make
any payments to Lock Box number 98485."
1.7 A new Section 7.1(s) is added to read as follows:
"(s) No later than July 15, 1995, a three-year operating plan
detailing projected operations for each of the Borrowers' operating
divisions in a form acceptable to the Majority Lenders. Without limiting
the generality of the foregoing, such projections shall provide a
description of the Borrowers' intentions regarding the Borrowers' Transit
Division and the economic and other consequences of those intentions in
such detail as the Co-Agents may request."
1.8 A new Section 7.1(t) is added to read as follows:
"(t) No later than July 15, 1995, the certificate required in Section
12(a) of the Cash Management System executed by the chief financial officer
of the Borrower."
1.9 A new Section 7.1(u) is added to read as follows:
"(u) No later than July 31, 1995, the certificate required in Section
12(b) of the Cash Management System executed by the chief financial officer
of the Borrower."
1.10 A new Section 8.14 is added to read as follows:
"8.14 INTERCOMPANY OBLIGATIONS. Adjust, settle or compromise, any
amounts receivable from any Subsidiary or Affiliate including, but not
limited to, accounts receivable, notes receivable, or any other
intercompany account reflected on the books of the Borrowers; PROVIDED,
that the Borrowers may adjust, settle or compromise any amounts
receivable from any Subsidiary or Affiliate if the aggregate amount of
such adjustments, settlements, or compromises does not exceed $500,000."
1.11 A new Section 8.15 is added to read as follows:
"8.15 MK RAIL LOCK BOX. Instruct any account debtor or other Person
owing monies to any Borrower, and shall cause each Guarantor not to
instruct any account debtor or other Person owing monies to such
Guarantor, to make any payments owed to Borrowers or any Guarantor to
Lock Box number 98485 at Bank of America Illinois."
1.12 A new Section 9.1(t) is added to read as follows:
"(t) Negative cash flow relating to the Borrowers' Transit Division
exceeds the negative cash flow set forth in the Budget by $3,000,000 on
a cumulative weekly basis, which negative cash flow shall first be
measured on June 16, 1995 for the period commencing on June 2, 1995."
6
<PAGE>
1.13 Exhibit D -- Budget is hereby amended in its entirety and the
Budget attached hereto as Exhibit D is substituted therefor.
1.14 Schedule A -- Schedule of Lenders is hereby amended in its
entirety and the Schedule of Lenders attached hereto as Schedule A is
substituted therefor.
1.15 Schedule F -- Cash Management System is hereby amended in its
entirety and the Cash Management System attached hereto as Schedule F is
substituted therefor.
1.16 Schedule 6.7B -- Contingent Obligations is hereby deleted in its
entirety and the Schedule of Contingent Obligations attached hereto as Schedule
6.7B is substituted therefor.
2. CONDITIONS OF EFFECTIVENESS. This Amendment shall become effective
only upon satisfaction of each of the following conditions:
(a) SECOND AMENDMENT. The Administrative Agent shall have
received copies of this Amendment that, when taken together, bear the signatures
of the Borrowers, the Administrative Agent, the Co-Agents and each of the
Lenders.
(b) GUARANTOR CONSENTS. The Administrative Agent shall have
received a copy of the accompanying Guarantor Consents executed by each of the
Guarantors.
(c) PREFERRED SHIP MORTGAGE. The Collateral Agent shall have
received, in form and substance satisfactory to the Administrative Agent, a
Third Supplement and Amendment to First Preferred Mortgage executed by the
parties thereto and notarized in recordable form.
(d) STANDSTILL AGREEMENT. The Administrative Agent shall have
received copies of the Third Amendment to the Standstill Agreement in
substantially the form attached hereto as Exhibit A.
(e) WAIVER AGREEMENTS. The Administrative Agent shall have
received waiver agreements executed by the Existing Lenders and the Borrowers in
substantially the form attached hereto as Exhibit B.
7
<PAGE>
(f) FINANCING STATEMENT AMENDMENTS. The Collateral Agent shall
have received UCC financing statement amendments in form and substance
satisfactory to the Administrative Agent for those jurisdictions listed in
Appendix D to the Schedule of Documents.
(g) EXPENSES. The Borrowers shall have paid all the fees and
expenses of the Steering Committee Lenders and their Professionals set forth in
that certain side letter to be dated June 8, 1995.
(h) EXTENSION FEE. The Borrowers shall have paid the
Administrative Agent, for the benefit of the Lenders in accordance with their
respective Applicable Pro Rata Shares, an extension fee of $250,000.
(i) LANDLORD WAIVERS AND CONSENTS. Administrative Agent shall
have received an original, executed and notarized Landlord Waiver and Consent
for each of the properties listed on Schedule 1 hereto, in form and substance
satisfactory to the Agents.
(j) MEMORANDA OF LEASE. Administrative Agent shall have
received an original, executed and notarized Memorandum of Lease for each of the
properties listed on Schedule 2 hereto.
(k) LEASEHOLD MORTGAGES/DEEDS OF TRUST. Administrative Agent
shall have received an original, executed and notarized Leasehold Deed of Trust
or Leasehold Mortgage for each of the properties listed on Schedule 3 hereto.
(l) CERTIFICATES OF TITLE. Administrative Agent shall have
received all original certificates of title of the certificated vehicles listed
on Schedule 3.23 to the Schedule of Documents.
(m) PHASE I SITE ASSESSMENTS. Administrative Agent shall have
received Phase I Site Assessments for each of the following properties:
(i) 4925 State Road, Cleveland Ohio; and
(ii) The Harmon Facilities located in the municipality of
Dededo, Guam.
(n) MAI APPRAISALS. Administrative Agent shall have received
MAI appraisals for the each of the following properties:
(i) 4925 State Road, Cleveland Ohio;
(ii) 1701 Eastover Drive, Boise, Idaho; and
8
<PAGE>
(iii) The Harmon Facilities located in the municipality of
Dededo, Guam.
(o) TAX STATUS CERTIFICATES. Administrative Agent shall have
received tax status certificates, as of a recent date, showing (i) MKO to be in
good standing with the respective tax authorities listed in Schedule 4 hereto,
and (ii) the respective Guarantors listed in Schedule 5 hereto to be in good
standing with the respective tax authorities that are referenced alongside each
Guarantor's name.
(p) FOREIGN COUNSEL LEGAL OPINIONS. Administrative Agent shall
have received a legal opinion from Borrowers' (i) German counsel stating that
the Collateral Agent has a valid perfected lien in MKO's interest in Morrison
Knudsen Deutschland GmbH, a German corporation, (ii) Dutch counsel that
Collateral Agent has a valid perfected lien in MKO's interest in MK-River
Constructie Maatschappij, B.V., a Dutch corporation, and Morrison Knudsen B.V.,
a Dutch corporation, or that either of such corporations have been liquidated,
and (iii) Poland counsel stating that Collateral Agent has a valid perfected
security interest in MKO's interest in American Bank in Poland.
(q) SHIP MORTGAGE INSURANCE. Administrative Agent shall have
received a written opinion from the insurance broker that issued the Ship
Mortgage insurance policy or policies that the policy or policies meet the
insurance requirements set forth in the Ship Mortgage.
(r) LEGAL OPINION. The Administrative Agent shall have received
the legal opinion of Hawley Troxell Ennis & Hawley addressed to the Agents for
the benefit of the Lenders, in form and substance satisfactory to the Agents.
(s) EXTENSION OF METRA LETTER OF CREDIT. The Borrowers shall
have requested the banks under that certain Standby Letter of Credit and
Reimbursement Agreement dated as of August 4, 1992 among MKO and Bank of America
N.T. & S.A. as agent and the other banks parties thereto to have extended the
expiry date of the letter of credit issued in connection therewith.
(t) TAX REFUND. The Borrowers shall have paid the $23,000,000
federal net operating loss carryback tax refund to the Administrative Agent.
3. REFERENCE TO AND EFFECT ON CREDIT AGREEMENT AND RELATED
DOCUMENTS.
----------------------------------------------------------------------
(a) Upon the effectiveness of this Amendment, on and after the
date hereof each reference in the Credit Agreement to "this Agreement",
"hereunder", "hereof", "herein" or words of like import shall mean and be a
reference to the Credit Agreement as amended hereby and each reference in the
Loan Documents to the Credit Agreement shall also mean and be a reference to the
Credit Agreement as amended hereby.
9
<PAGE>
(b) Except as expressly modified under Section 1 of this
Amendment, all of the terms and conditions set forth in the Credit Agreement and
the other Loan Documents are incorporated herein by this reference, and the
Obligations of the Borrowers under the Credit Agreement and the other Loan
Documents are hereby acknowledged, confirmed and ratified by the Borrowers.
(c) The execution, delivery and effectiveness of this Amendment
shall not, except as expressly provided herein, operate as a waiver of any
right, power or remedy of the Administrative Agent, the Co-Agents or the Lenders
under the Credit Agreement or any of the Loan Documents, nor constitute a waiver
of any provision of the Credit Agreement or any of the Loan Documents.
4. ENTIRE AGREEMENT. This Amendment, together with the Credit Agreement
and the other Loan Documents, is the entire agreement between the parties hereto
with respect to the subject matter hereof. This Amendment supersedes all prior
and contemporaneous oral and written agreements and discussions with respect to
the subject matter hereof. Except as otherwise expressly modified herein, the
Loan Documents shall remain in full force and effect.
5. REPRESENTATIONS AND WARRANTIES. Each Borrower hereby represents and
warrants that the representations and warranties contained in the Credit
Agreement were true and correct in all material respects when made and, except
to the extent (a) that a particular representation or warranty by its terms
expressly applies only to an earlier date, or (b) such Borrower has previously
advised the Administrative Agent in writing as contemplated under the Credit
Agreement, are true and correct in all material respects as of the date hereof.
The recitals set forth at the beginning of this Amendment are true and correct,
and such recitals are incorporated into and are a part of this Amendment.
6. MISCELLANEOUS.
6.1 COUNTERPARTS. This Amendment may be executed in identical
counterpart copies, each of which shall be an original, but all of which shall
constitute one and the same agreement. Delivery of an executed counterpart of a
signature page to this Amendment by facsimile transmission shall be effective as
delivery of a manually executed counterpart of this Amendment. Any Lender
delivering this Amendment by facsimile shall send the original manually executed
counterpart of this Amendment to the Administrative Agent promptly after such
facsimile transmission.
6.2 AUTHORITY. Each Person executing this Amendment represents and
warrants that he or she is lawfully authorized and empowered to execute this
Amendment on behalf of the entity on whose behalf such Person is signing, and
that upon execution,
10
<PAGE>
this Amendment will be binding upon such entity, without any further approval,
ratification or other action.
6.3 HEADINGS. Section headings used herein are for convenience of
reference only, are not part of this Amendment, and are not to be taken into
consideration in interpreting this Amendment.
6.4 GOVERNING LAW. This Amendment shall be governed by, and
construed and enforced in accordance with, the laws of the Commonwealth of
Pennsylvania applicable to contracts made and performed in such state, without
regard to the principles thereof regarding conflict of laws.
6.5 CONFLICT OF TERMS. In the event of any inconsistency between the
provisions of this Amendment and any
11
<PAGE>
provision of the Credit Agreement, the terms and provisions of this Amendment
shall govern and control.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be duly executed by their respective authorized officers as of the day and year
first above written.
BORROWERS: MORRISON KNUDSEN CORPORATION
(a Delaware corporation)
By /s/ Douglas L. Brigham
----------------------------------
Name: Douglas L. Brigham
--------------------------------
Title: Vice President and Treasurer
-------------------------------
MORRISON KNUDSEN CORPORATION
(an Ohio corporation)
By /s/ Douglas L. Brigham
----------------------------------
Name: Douglas L. Brigham
--------------------------------
Title: Vice President and Treasurer
-------------------------------
AGENTS AND LENDERS:
MELLON BANK, N.A., as Administrative Agent,
a Co-Agent and a Lender
By /s/ Alan J. Kopolow
----------------------------------
Name: Alan J. Kopolow
--------------------------------
Title: Vice President
-------------------------------
BANK OF AMERICA NATIONAL TRUST AND SAVINGS
ASSOCIATION, as a Co-Agent and a Lender
By /s/ Henry Y. Yu
----------------------------------
Name: Henry Y. Yu
--------------------------------
Title: Senior Vice President
-------------------------------
[ADDITIONAL SIGNATURES FOR LENDERS CONTINUED ON NEXT PAGE]
12
<PAGE>
LENDERS:
Bank of America Illinois CIBC Inc.
By:/s/ Henry Y. Yu By: /s/ Robert N. Greer
------------------------- -------------------------
Name: Henry Y. Yu Name: Robert N. Greer
----------------------- -----------------------
Title: Attorney In Fact Title: Vice President
---------------------- ----------------------
Bank of Montreal Citibank, N.A.
By: /s/ James R. Easter By: /s/ Bradley I. Dietz
------------------------- -------------------------
Name: James R. Easter Name: Bradley I. Dietz
----------------------- -----------------------
Title: Title:
---------------------- ----------------------
The Bank of Nova Scotia Credit Lyonnais, New York Branch
By: /s/ D.N. Gillespie By: /s/ Alan Sidrane
------------------------- -------------------------
Name: D.N. Gillespie Name: Alan Sidrane
----------------------- -----------------------
Title: Assistant General Manager Title: Vice President
---------------------- ----------------------
The Bank of Tokyo, Ltd., Key Bank of Idaho
Seattle Branch
By: /s/ Stanley A. Lanee By: /s/ Terry L. Pitkin
------------------------- -------------------------
Name: Stanley A. Lanee Name: Terry L. Pitkin
----------------------- -----------------------
Title: Vice President Title: Vice President
---------------------- ----------------------
Banque Nationale de Paris National Westminster Bank PLC
By: /s/ Katherine Wolfe By: /s/ Theodore P. Nikolis
------------------------- -------------------------
Name: Katherine Wolfe Name: Theodore P. Nikolis
----------------------- -----------------------
Title: Vice President Title: Vice President & Counsel
---------------------- ----------------------
By /s/ William J. LaHerran PNC Bank, N.A.
--------------------------
Name: William J. LaHerran By: /s/ Thomas J. McCool
----------------------- -------------------------
Title: Assistant Vice President Name Thomas J. McCool
---------------------- ------------------------
Title: Senior Vice President
Banque Paribas ----------------------
By:/s/ Steve Y. Li Royal Bank of Canada
--------------------------
Name: Steve Y. Li
------------------------ By: /s/ Brian W. Dixon
Title: Assistant Vice President ------------------------
----------------------- Name: Brian W. Dixon
----------------------
By: /s/ J. Cate Title: Senior Manager
------------------------- ----------------------
Name: J. Cate
-----------------------
Title: General Vice President
----------------------
[ADDITIONAL SIGNATURES FOR LENDERS CONTINUED ON NEXT PAGE]
13
<PAGE>
Society National Bank
By: /s/ Nancy Terrill
-------------------------
Name: Nancy Terrill
-----------------------
Title: Vice President
----------------------
Westdeutsche Landesbank
Girozentrale, New York and Cayman
Islands Branches
By: /s/ S. Battinelli
-------------------------
Name: S. Battinelli
-----------------------
Title: Vice President
----------------------
By: /s/ C. Ruhland
-------------------------
Name: C. Ruhland
-----------------------
Title: Associate
----------------------
[GUARANTOR CONSENTS FOLLOW ON NEXT PAGE]
<PAGE>
GUARANTOR CONSENTS
Each of the undersigned, a Guarantor under a Guaranty, hereby (i)
ratifies and reaffirms, as of the date hereof, all of the provisions of its
Guaranty and its Guaranty Security Agreement, (ii) acknowledges receipt of a
copy of the Second Amendment to Credit Agreement dated as of June 1, 1995 (the
"Amendment"), and (iii) consents to all of the provisions of the Amendment.
National Projects, Inc. Chemical Demilitarization of
Anniston Company
By: /s/ Douglas L. Brigham By: /s/ Douglas L. Brigham
------------------------- --------------------------
Name: Douglas L. Brigham Name: Douglas L. Brigham
----------------------- -----------------------
Title: Treasurer Title: Vice President & Treasurer
---------------------- ----------------------
Morrison-Knudsen Services, Inc. Joy MK Projects Company
By: /s/ Douglas L. Brigham By: /s/ Douglas L. Brigham
------------------------- --------------------------
Name: Douglas L. Brigham Name: Douglas L. Brigham
----------------------- -----------------------
Title: Treasurer Title: V P & Assistant Treasurer
---------------------- ----------------------
Morrison-Knudsen Financial MK Capital Company
Company, Inc.
By: /s/ Douglas L. Brigham By: /s/ Douglas L. Brigham
------------------------- --------------------------
Name: Douglas L. Brigham Name: Douglas L. Brigham
----------------------- -----------------------
Title: Treasurer Title: Treasurer
---------------------- ----------------------
Atascosa Mining Co. MK-Ferguson Engineering Company
By: /s/ Douglas L. Brigham By: /s/ Douglas L. Brigham
------------------------- --------------------------
Name: Douglas L. Brigham Name: Douglas L. Brigham
----------------------- -----------------------
Title: Treasurer Title: Assistant Treasurer
---------------------- ----------------------
Centennial Engineering, Inc. MK-Ferguson of Idaho Company
By: /s/ Douglas L. Brigham By: /s/ Douglas L. Brigham
------------------------- --------------------------
Name: Douglas L. Brigham Name: Douglas L. Brigham
----------------------- -----------------------
Title: Treasurer Title: Treasurer
---------------------- ----------------------
CF Systems Corporation MK-Ferguson of Oak Ridge Company
By: /s/ Douglas L. Brigham By: /s/ Douglas L. Brigham
------------------------- --------------------------
Name: Douglas L. Brigham Name: Douglas L. Brigham
----------------------- -----------------------
Title: Treasurer Title: Treasurer
---------------------- ----------------------
[GUARANTOR CONTENTS CONTINUED ON NEXT PAGE]
<PAGE>
MK Infrastructure Corporation Black Micro Corporation
By: /s/ Douglas L. Brigham By: /s/ Douglas L. Brigham
------------------------- --------------------------
Name: Douglas L. Brigham Name: Douglas L. Brigham
----------------------- -----------------------
Title: Assistant Treasurer Title: Treasurer
---------------------- ----------------------
MK Train Control, Inc. Navasota Mining Company, Inc.
By: /s/ Douglas L. Brigham By: /s/ Douglas L. Brigham
------------------------- --------------------------
Name: Douglas L. Brigham Name: Douglas L. Brigham
----------------------- -----------------------
Title: Vice President & Treasurer Title: Treasurer
---------------------- ----------------------
Morrison Knudsen Investments, Inc. Western Aircraft, Inc.
By: /s/ Douglas L. Brigham By: /s/ Douglas L. Brigham
------------------------- --------------------------
Name: Douglas L. Brigham Name: Douglas L. Brigham
----------------------- -----------------------
Title: Treasurer Title: Treasurer
---------------------- ----------------------
MK Pacific, Inc. Yampa Mining Co.
By: /s/ Douglas L. Brigham By: /s/ Douglas L. Brigham
------------------------- --------------------------
Name: Douglas L. Brigham Name: Douglas L. Brigham
----------------------- -----------------------
Title: Treasurer Title: Treasurer
---------------------- ----------------------
G.W. Murphy Construction Company, Inc. Morrison-Knudsen Company, Inc.
By: /s/ Douglas L. Brigham By: /s/ Douglas L. Brigham
------------------------- --------------------------
Name: Douglas L. Brigham Name: Douglas L. Brigham
----------------------- -----------------------
Title: Treasurer Title: Vice President & Treasurer
---------------------- ----------------------
E.E. Black, Limited Morrison-Knudsen Engineers, Inc.
By: /s/ Douglas L. Brigham By: /s/ Douglas L. Brigham
------------------------- --------------------------
Name: Douglas L. Brigham Name: Douglas L. Brigham
----------------------- -----------------------
Title: Treasurer Title: Vice President & Treasurer
---------------------- ----------------------
Black Construction Corporation Morrison-Knudsen International
Company, Inc.
By: /s/ Douglas L. Brigham By: /s/ Douglas L. Brigham
------------------------- --------------------------
Name: Douglas L. Brigham Name: Douglas L. Brigham
----------------------- -----------------------
Title: Treasurer Title: Vice President & Treasurer
---------------------- ----------------------
<PAGE>
EXHIBITS
[The registrant agrees to provide the Securities and Exchange Commission, upon
request, with copies of Exhibits and Schedules hereto.]
<PAGE>
Exhibit 10.10
EXECUTION VERSION
GLOBAL SETTLEMENT AGREEMENT
THIS GLOBAL SETTLEMENT AGREEMENT, dated as of June 15, 1995 (this
"AGREEMENT"), is by and among Morrison Knudsen Corporation, an Ohio
corporation ("MKO"), MK Rail Corporation, a Delaware corporation ("MK RAIL")
and Morrison Knudsen Corporation, a Delaware corporation ("MKC").
W I T N E S S E T H:
WHEREAS, MKO owns 65% of the issued and outstanding shares of common
stock of MK Rail (the "MKO RAIL COMMON STOCK");
WHEREAS, there currently exists intercompany debt between MK Rail
and MKO;
WHEREAS, MK Rail alleges that it has certain claims against MKO, MKC
and the MK Released Persons (as hereinafter defined);
WHEREAS, MKO and MKC allege that they have certain claims against MK
Rail and the MK Rail Released Persons (as hereinafter defined);
WHEREAS, MKO, MKC and MK Rail have a good faith dispute as to such
intercompany debt and such claims;
WHEREAS, as more fully set forth herein, MK Rail, MKO and MKC desire
to settle, compromise and equitably adjust certain claims, counterclaims,
setoffs and causes of action that MK Rail and all of its subsidiaries, on one
hand, and MKO, MKC and all of their respective wholly-owned domestic
subsidiaries on the other hand, may have against each other; and
WHEREAS, MK Rail, MKO and MKC desire to enter into an agreement
setting forth the terms and conditions governing such a settlement;
NOW, THEREFORE, in consideration of the premises and the mutual
agreements contained herein, and for other good and valuable consideration, the
receipt and sufficiency of which hereby are acknowledged, the parties hereto
agree as follows:
1. DEFINITIONS.
When used herein, the following terms have the following meanings:
<PAGE>
"CLAIMS" means, collectively, actions, causes of action, setoffs,
claims, crossclaims, counterclaims, cross-actions, third-party actions,
suits, debts, dues, sums of money, accounts, reckonings, bonds, bills,
specialties, covenants, contracts, controversies, agreements, promises,
variances, trespasses, damages, losses, demands, costs, expenses,
liabilities, obligations, accounts, defenses, claims for relief or
judgments, of whatever kind or character, including, but not limited to,
all matters arising out of federal or state securities laws or
regulations, statute, common law, contract, tort, regulation, violation of
law or otherwise, whether known or unknown, suspected or unsuspected,
fixed or unfixed, direct or indirect, contingent or otherwise, at law or
in equity, for or because of any matter or thing done, omitted, admitted
or suffered to be done now or hereafter, relating to events prior hereto.
"CLOSING DATE" has the meaning assigned such term in SECTION 7
hereof.
"EXISTING INTERCOMPANY AGREEMENTS" means the Environmental
Liability Transfer Agreement dated as of February 25, 1994 between MKO and
MK Rail; the Employee Transfer Benefits Agreement dated as of April 20,
1994 between MKO and MK Rail; the Service Mark and Trademark License
Agreement dated as of February 14, 1994 among MKC, MKO and MK Rail; the
Indemnification Agreement among MKC, MKO and MK Rail dated as of April 19,
1994 (the "MK RAIL INDEMNIFICATION AGREEMENT"); the Registration Rights
Agreement dated as of February 25, 1994 among MKC, MKO and MK Rail; and
the Tax Matters Agreement dated as of February 22, 1994.
"GOVERNMENTAL AUTHORITY" means any nation or government, any
federal, state, local or other political subdivision thereof and any
entity exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to government.
"MK AUSTRALIA" means Morrison Knudsen Corporation of Australia
Limited, Morrison Knudsen Australia Leasing Limited and their
subsidiaries.
"MK RAIL RELEASED CLAIMS" means any and all Claims MK Rail or any
of its subsidiaries (excluding MK Australia) ever had, now have, hereafter
can, shall or may have against any of the MK Released Persons (excluding
the MK Rail Retained Claims), including, but not limited to, any and all
Claims relating to (i) the Transfer Agreement dated as of February 25,
1994, (ii) the prior transfer of any businesses, portions of businesses or
assets by MKO or MKC to MK Rail or any of its subsidiaries, (iii) the
assumption of liabilities by MK Rail or any of its subsidiaries in
<PAGE>
connection with any prior transfer of any business, portions of businesses
or assets by MKO or MKC to MK Rail or any of its subsidiaries, (iv) the
initial public offering of common stock of MK Rail and the underwriting
contract with respect thereto, (v) Claims that have been made or could
have been made in any securities, shareholder and derivative actions,
including those pending against MK Rail, MKO, MKC and others, (vi) the
Corporate Support and Professional Services Agreement dated as of February
25, 1994 and (vii) the Agreement dated as of October 20, 1994 between MKO
and MK Rail relating to Southern Pacific Transportation Company.
"MK RAIL RELEASED PERSONS" means MK Rail and its respective
successors, predecessors, assigns, assignees, subsidiaries, stockholders,
affiliates, present and former directors, trustees, officers, employees,
attorneys and agents, and in the case of individuals, their respective
heirs, receivers, conservators, beneficiaries, executors and
administrators, and, in any case, any other person who, within the meaning
of Rule 12b-2 of the Securities Exchange Act of 1934, as amended,
"controls," is "controlled by" or is under "common control" with, any such
persons past or present, excluding in each case William J. Agee and Ted
Nelson.
"MK RAIL RETAINED CLAIMS" means any and all Claims of MK Rail
against the MK Released Persons relating to (i) breach by MKO or MKC of
the terms of this Agreement, the Mutual Release (as defined herein), the
Corporate Services Agreement (as defined herein), the Note Agreement (as
defined herein) or the Indemnity Agreement (as defined herein), (ii)
breach by MKO or MKC after the date hereof of any of the Existing
Intercompany Agreements and (iii) MK Australia.
"MK RELEASED CLAIMS" means any and all Claims MKO, MKC or any of
their wholly-owned domestic subsidiaries ever had, now have, hereafter
can, shall or may have against any of the MK Rail Released Persons
(excluding the MK Retained Claims), including, but not limited to, any and
all Claims relating to (i) the Transfer Agreement dated as of February 25,
1994 (excluding all indemnification obligations of MK Rail thereunder);
(ii) the prior transfer of any businesses, portions of businesses or
assets by MKO or MKC to MK Rail or any of its subsidiaries; (iii) the
assumption of liabilities by MK Rail or any of its subsidiaries in
connection with any prior transfer of any business, portions of businesses
or assets by MKO or MKC to MK Rail or any of its subsidiaries, (iv) the
initial public offering of common stock of MK Rail and the underwriting
contract with respect thereto, (v) Claims that have been made or could
have been made in any securities, shareholder and derivative actions,
including those pending against MK Rail, MKO, MKC and
<PAGE>
others, (vi) the Corporate Support and Professional Services Agreement
dated as of February 25, 1994 and (vii) the setoff claim asserted by the
Transit Division of MKO in the amount of approximately $1,700,000 against
MK Rail with respect to invoices for locomotive parts.
"MK RELEASED PERSONS" means MKO and MKC and their respective
successors, predecessors, assigns, assignees, subsidiaries, stockholders,
affiliates, present and former directors, trustees, officers, employees,
attorneys and agents, and in the case of individuals, their respective
heirs, receivers, conservators, beneficiaries, executors and
administrators, and, in any case, any other person who, within the meaning
of Rule 12b-2 of the Securities Exchange Act of 1934, as amended,
"controls," is "controlled by" or is under "common control" with, any such
persons past or present.
"MK RETAINED CLAIMS" means any and all Claims of MKO or MKC
against the MK Rail Released Persons relating to (i) breach by MK Rail or
any of its subsidiaries of the terms of this Agreement, the Mutual Release
(as defined herein) or the Corporate Services Agreement (as defined
herein), (ii) MK Australia, (iii) any of the Existing Intercompany
Agreements; (iv) the Intercompany Debt, the Note or the Note Agreement
(all as defined herein); and (v) any and all existing or future
indemnification obligations of MK Rail and/or its subsidiaries to MKO, MKC
or their respective subsidiaries under the Transfer Agreement, the MK Rail
Indemnification Agreement or otherwise.
"MOU" means that certain Memorandum of Understanding among the
parties specified therein establishing the economic terms for a settlement
of the class actions pending in the United States District Court for the
District of Idaho entitled NEWMAN, ET AL. V. MK RAIL CORPORATION, ET
AL., Case No. 94-489 and SUSSER, ET AL. V. MK RAIL CORPORATION, ET AL.,
Case No. 94-477 attached hereto as EXHIBIT E.
"MUTUAL RELEASE" means the Mutual Release substantially in the
form of EXHIBIT C hereof to be entered into among MK Rail and all of its
subsidiaries, MKO, MKC and all of their wholly-owned domestic subsidiaries
on the Closing Date.
2. CREATION OF INTERCOMPANY DEBT.
On the Closing Date, MK Rail, as payor, shall deliver to MKO, as
payee, a promissory note substantially in the form of EXHIBIT A hereof (the
"NOTE") in the amount of $52,200,000 (the "INTERCOMPANY DEBT"). The terms
for the repayment of the
<PAGE>
Intercompany Debt shall be governed by the Note and a Note Agreement
substantially in the form of EXHIBIT B hereof (the "NOTE AGREEMENT") to be
entered into between MK Rail, as borrower, and MKO, as lender, on the Closing
Date.
3. MUTUAL RELEASES.
3.1 RELEASES BY MK RAIL. On the Closing Date, MK Rail and all
of its subsidiaries (other than MK Australia) shall release the MK Released
Persons from the MK Rail Released Claims, which shall not include the MK Rail
Retained Claims, by executing the Mutual Release.
3.2 RELEASES BY MKO AND MKC. On the Closing Date, MKC, MKO and
all of their respective wholly-owned domestic subsidiaries shall release the MK
Rail Released Persons from the MK Released Claims, which shall not include the
MK Retained Claims, by executing the Mutual Release. The parties expressly
agree that the foregoing releases by MKO or MKC shall not affect in any way
MKO's rights incident to ownership of the MKO Rail Common Stock.
4. REPRESENTATIONS AND WARRANTIES.
4.1 REPRESENTATIONS AND WARRANTIES OF MK RAIL. To induce MKO
and MKC to enter into this Agreement, MK Rail represents and warrants that as of
the date of the execution of this Agreement:
(a) CORPORATE EXISTENCE. MK Rail and its subsidiaries are
corporations duly organized, validly existing and in good standing under
the laws of their respective jurisdictions of incorporation and are duly
qualified as foreign corporations and are in good standing in all
jurisdictions where the nature and extent of the business transacted by
them or the ownership of their respective assets makes such qualification
necessary.
(b) CORPORATE AUTHORITY. The execution and delivery by MK Rail
and its subsidiaries (but only as to those agreements to which they are
signatories) of this Agreement, the Mutual Release and the performance of
MK Rail's obligations hereunder and thereunder: (i) are within their
respective corporate powers; (ii) are duly authorized by their respective
board of directors and, if necessary, their respective stockholders; (iii)
are not in contravention of the terms of their respective certificates of
incorporation, or by-laws, or of any indenture, agreement or undertaking
to which they are a party or by which they or any of their respective
property is bound; (iv) does not, as of the execution hereof, require any
consent, registration or approval of any Governmental Authority; and (v)
does not
<PAGE>
contravene any contractual or governmental restriction binding upon them.
(c) BINDING EFFECT. This Agreement and the Mutual Release are
the legal, valid and binding obligation of MK Rail and are enforceable
against MK Rail in accordance with their terms. The Mutual Release is the
legal, valid and binding obligation of the subsidiaries of MK Rail and is
enforceable against them in accordance with its terms.
(d) NO PRIOR ASSIGNMENT. Neither MK Rail nor any of its
subsidiaries have sold, assigned, granted, conveyed or transferred to any
other person, firm, corporation or other entity any of the MK Rail
Released Claims or any of the MK Rail Retained Claims.
4.2 REPRESENTATIONS AND WARRANTIES OF MKO. To induce MK Rail to
enter into this Agreement, MKO and MKC each represents and warrants that as of
the date of the execution of this Agreement:
(a) CORPORATE EXISTENCE. MKO, MKC and each of their
wholly-owned domestic subsidiaries are corporations duly organized,
validly existing and in good standing under the laws of their respective
jurisdictions of incorporation and are duly qualified as foreign
corporations and are in good standing in all states where the nature and
extent of the business transacted by them or the ownership of their
respective assets makes such qualification necessary.
(b) CORPORATE AUTHORITY. The execution and delivery by MKO, MKC
and their wholly-owned domestic subsidiaries (but only as to those
agreements as to which they are signatories) of this Agreement, the Mutual
Release and the Indemnity Agreement and the performance of their
obligations hereunder: (i) are within their respective corporate powers;
(ii) are duly authorized by their respective boards of directors and, if
necessary, their respective stockholders; (iii) are not in contravention
of the terms of their respective certificates of incorporation, or
by-laws, or of any indenture, agreement or undertaking to which they are a
party or by which they or any of their respective property is bound; (iv)
does not, as of the execution hereof, require any consent, registration or
approval of any Governmental Authority; and (v) does not contravene any
contractual or governmental restriction binding upon MKO, MKC or their
wholly-owned domestic subsidiaries.
(c) BINDING EFFECT. This Agreement is the legal, valid and
binding obligation of MKO and MKC and is enforceable against MKO and MKC
in accordance with its terms. The Mutual Release is the legal, valid and
binding obligation of MKO, MKC and their wholly-owned domestic
subsidiaries and is enforceable against them in accordance
<PAGE>
with its terms. The Indemnity Agreement is the legal, valid and binding
obligation of MKC and is enforceable against MKC in accordance with its
terms.
(d) NO PRIOR ASSIGNMENT. None of MKO, MKC or any of their
respective wholly-owned domestic subsidiaries has sold, assigned, granted,
conveyed or transferred to any person, firm, corporation or other entity
any of the MK Released Claims or any of the MK Retained Claims.
5. COVENANTS.
Each party hereto covenants and agrees that:
5.1 MK BOARD REPRESENTATION. So long as MKO owns a majority of
the common stock of MK Rail, MKO shall be entitled to fill the Vice Chairman
seat on the MK Rail Board of Directors and the Vice Chairman shall have all the
rights of the Chairman of the MK Rail Board of Directors. MKO may, at its
option, in connection with a proposed sale by MKO of all of its interest in MK
Rail to an unaffiliated third party (a "PROPOSED PURCHASER"), give MK Rail a
written notice of its intention to sell its interest to a prospective
unaffiliated third party and requesting that the Board of Directors of MK Rail
take such actions as are necessary so that nominees of the Proposed Purchaser to
the Board of Directors of MK Rail ("PROPOSED NOMINEES") will, simultaneous
with the closing of the Proposed Purchaser's acquisition of said interest in MK
Rail, hold a percentage of the positions on the Board of Directors of MK Rail
equal to the percentage of MKO's said interest in the issued and outstanding
common stock of MK Rail. MKO shall include in or with said notice the name or
names of the Proposed Purchaser and of the Proposed Nominees and such other
information as MKO deems reasonably necessary in order for the Board of
Directors of MK Rail to determine whether the Proposed Nominees are acceptable
to the Board. MKO shall also, after giving said notice, provide to the Board of
Directors of MK Rail such additional information as is reasonably requested by
the Board regarding the Proposed Nominees and the Proposed Purchaser as is in
MKO's control or reasonably available to it. If the Board of Directors of MK
Rail has no reasonable basis in fact to object to the Proposed Nominees based
upon each such individual nominee's employment, affiliations and service
history, business reputation and other factors related to such nominee's
qualification to serve as a director of MK Rail, the Board and/or some or all of
its individual members shall take such actions as are necessary so that,
effective as soon as practicable after the submission of the written notice by
MKO (but in no event prior to the consummation of the acquisition by the
Proposed Purchaser), the Proposed Nominees will be appointed to the Board of
Directors of MK Rail. If objection to any Proposed Nominee is raised, the Board
of Directors of MK Rail will so advise MKO in writing, including a detailed
statement of the basis for the objection, and the Proposed Nominee and/or the
<PAGE>
Proposed Purchaser will be given a prompt opportunity to be heard and to resolve
any objection by the Board of Directors of MK Rail. If the attempt to resolve
the objection and/or opportunity to be heard does not result in the approval of
such Proposed Nominee (based on the standard set forth above), MKO and the
Proposed Purchaser may submit the names of additional Proposed Nominees until
objection (based on the standards set forth above) is not raised. Each of MKO
and MK Rail hereby agree to act in a prompt manner and so as not to cause undue
delay of a possible transaction involving a proposed sale by MKO of its interest
in MK Rail. It is acknowledged and agreed that the Board of Directors of MK
Rail will in no event be required to take any action to eliminate the
classification of the Board of Directors of MK Rail and that in the event that
the Proposed Nominees are appointed to the Board of Directors of MK Rail, they
shall be appointed proportionately among the classes of the Board. Nothing in
this Section, and no action taken by the Board of Directors of MK Rail in
accordance with this Section, shall be deemed (a) to constitute an approval or
an agreement by MK Rail to approve, or to require the Board of Directors of MK
Rail to approve, for purposes of Section 203 of the Delaware General Corporation
Law (the "DGCL"), (i) any transaction or transactions that result in a
Proposed Purchaser or any other party acquiring MKO's interest in MK Rail or
(ii) any business combination (as defined in Section 203 of the DGCL) with any
such party or (b) to otherwise in any way waive the provisions of or
restrictions on business combinations contained in Section 203 of the DGCL. Any
such approval or action under Section 203 of the DGCL shall be effected only by
a resolution or resolutions that specifically state that the Board is giving
such approval or taking such actions under Section 203 of the DGCL.
5.2 [Intentionally omitted.]
5.3 ADJUSTMENT OF INTERCOMPANY DEBT. In the event that the
settlement contemplated by the MOU is not consummated, then the amount of the
Intercompany Debt shall be increased by $4,500,000 pursuant to the provisions of
the Note Agreement. The amount of the Intercompany Debt shall thereafter be
decreased pursuant to the provisions of the Note Agreement by (a) in the event
that the Litigation (as defined in the MOU) is settled but on terms other than
as set forth in the MOU, unless otherwise consented by MKC in writing, which
consent shall not be unreasonably withheld, the lesser of (i) $4,500,000 and
(ii) the sum of (x) any cash contributed by MK Rail to such settlement plus (y)
the dollar value placed in such settlement on any securities of MK Rail
contributed by MK Rail to such settlement plus (z) MK Rail's reasonable
attorneys' fees and expenses with respect to the Litigation or (b) in the event
that the Litigation (as defined in the MOU) is not settled, the amount of any
cash payment by MK Rail made pursuant to a final nonappealable judgment of a
court of competent jurisdiction with respect to the Litigation (as defined in
the MOU) after subtracting therefrom the amount of any crossclaim, counterclaim
or third-party action
<PAGE>
of MKO or MKC against any MK Rail Released Person (other than Stephen Hanks or
William J. Agee) pursuant to a nonappealable judgment of a court of competent
jurisdiction with respect to the Litigation (as defined in the MOU). Any and
all Claims of MK Rail or any of its subsidiaries relating to any Claims that
have been made or could have been made in any shareholder or derivative actions
pending against MK Rail, MKO, MKC and others shall be addressed solely as set
forth in this SECTION 5.3, and MK Rail and any of its subsidiaries expressly
waive any rights of contribution against any MK Released Person with respect
thereto and shall not assert such Claims against, or seek satisfaction thereof,
from the MK Released Persons other than as set forth in this SECTION 5.3.
6. CONDITIONS PRECEDENT TO CLOSING.
As conditions precedent to the obligations of the parties under this
Agreement:
(a) the boards of directors of MKO, MKC and MK Rail shall have
approved the transactions contemplated by this Agreement;
(b) MKO and MKC shall have received the written consent of the
Majority Lenders under the Credit Agreement dated as of April 11, 1995, as
amended, to the transactions contemplated by this Agreement;
(c) MK Rail shall have received the written consent of PNC Bank,
National Association to the transactions contemplated by this Agreement;
(d) MK Rail shall have duly executed and delivered to MKO a
promissory note substantially the form of EXHIBIT A hereof in the
amount of $52,200,000 for the Intercompany Debt;
(e) MKO and MK Rail shall have duly executed the Note Agreement
substantially in the form of EXHIBIT B hereof;
(f) MK Rail shall have delivered to MKO and MKC an opinion of its
legal counsel as to the agreements having been duly authorized, executed
and delivered and such agreements being the valid, binding and enforceable
obligations of MK Rail and its domestic subsidiaries;
(g) MKO and MKC shall have delivered to MK Rail an opinion of its
legal counsel as to the agreements having been duly authorized, executed
and delivered and such agreement being the valid, binding and enforceable
obligations of MKO, MKC and their wholly-owned domestic subsidiaries;
<PAGE>
(h) MK Rail and all of its subsidiaries, MKO and MKC and their
wholly-owned domestic subsidiaries shall have duly executed and delivered
the Mutual Release;
(i) MKO shall have agreed to indemnify MK Rail and its officers
and directors from any liability arising from shareholder litigation
resulting from the sale by MKO after the date hereof of the MKO Rail
Common Stock, such agreement of indemnity to be in substantially the form
of EXHIBIT D hereof (the "INDEMNITY AGREEMENT");
(j) no judgment, order or decree shall have been rendered by a
court of competent jurisdiction, government agency or other tribunal that
has the effect of enjoining the consummation of the transactions
contemplated hereby and no request for such a judgment, order or decree
shall be pending before such a court, government agency or other tribunal;
(k) the required officers and directors of MK Rail shall have
executed the final Form 10-K for 1994 and Form 10-Q for the first quarter
of 1995 of MK Rail to be filed with the SEC, and such forms shall have
been delivered to MKC; and
(l) MK Rail, MKC and MKO shall have entered into a Corporate
Support and Professional Services Agreement (the "CORPORATE SERVICES
AGREEMENT") in form and substance satisfactory to MK Rail and MKO and
shall have terminated the Corporate Support and Professional Services
Agreement dated as of February 25, 1994.
7. CLOSING.
The closing of the transactions contemplated by this Agreement shall
take place the later of (i) the date on which all the conditions precedent set
forth in SECTION 6 hereof have been met (or waived in writing by the
respective parties) or (ii) June 19, 1995 (the "CLOSING DATE"). The Closing
shall take place at the Chicago office of Jones, Day, Reavis & Pogue.
8. MISCELLANEOUS.
8.1 CAPTIONS AND REFERENCES. The recitals to this Agreement
(except for definitions) and the section captions used in this Agreement are for
convenience only, and shall not affect the construction of this Agreement.
8.2 COUNTERPARTS. This Agreement may be executed in any number
of counterparts and by the different parties on separate counterparts and each
such counterpart shall be deemed
<PAGE>
to be an original, but all such counterparts shall together constitute but one
and the same Agreement.
8.3 NOTICES. Any notice, request or other communication to
either party by the other as provided herein will be given in writing and will
be deemed received upon the earlier of receipt or (i) 3 days after mailing if
mailed postage prepaid by US mail; (ii) when sent after receipt of confirmation
if sent by telecopy or other similar facsimile transmission; (iii) 1 business
day after deposit with a reputable overnight courier with all charges prepaid or
(iv) when delivered, if hand delivered by messenger, all of which shall be
properly addressed to the address for such party as set forth on the signature
pages hereto, or at such other address as either party may notify the other of
hereunder.
8.4 ENTIRE AGREEMENT; AMENDMENT; WAIVER. This Agreement, the
Mutual Release, the Note, the Note Agreement and the Indemnity Agreement
constitute the entire agreement between MK Rail, MKO and MKC regarding the
subject matter hereof. It is acknowledged and agreed that said documents
evidence and effect one and the same integrated transaction and that the
consideration for any and all agreements, releases, promises, or obligations of
one party to the other under said documents consists of all of the agreements,
releases, covenants, promises and obligations of the other party contained in
all of said documents. This Agreement may not be amended or altered in any
manner unless such amendment or alteration is in writing and signed by each of
MK Rail, MKO and MKC. No covenant or condition or any other part of this
Agreement may be waived except by written instrument signed and made a part
hereof by MK Rail, MKO and MKC. The failure of any party hereto to enforce any
of the provisions of this Agreement or the waiver thereof in any instance will
not be construed as a general waiver or relinquishment on its part of any such
provisions, but the same will be and remain in full force and effect.
8.5 SUCCESSORS AND ASSIGNS. This Agreement shall be binding
upon MK Rail, MKO and MKC and their respective successors and assigns, and shall
inure to the benefit of MK Rail, MKO, MKC, the MK Rail Released Persons and the
MK Released Persons and their respective successors and assigns. No party
hereto shall have any right to assign its rights or delegate its duties under
this Agreement.
8.6 FULL AND FINAL RESOLUTION. MKO, MKC and MK Rail acknowledge
that the transactions contemplated by this Agreement involve a global resolution
of all disputes between (a) MK Rail and the MK Rail Released Persons on one hand
and (b) MKO, MKC and the MK Released Persons on the other hand, except with
respect to the MK Rail Retained Claims and the MK Retained Claims. Except as
contemplated by SECTION 5.3 hereof and the Note Agreement, the amount of the
Intercompany Debt contemplated by this Agreement shall not be decreased or
increased by any further event,
<PAGE>
including, but not limited, to the sale by MKO of the MK Rail Common Stock. MK
Rail and its subsidiaries shall not assert any of the MK Rail Released Claims
against any MK Released Person to lower any sale price of the MKO Rail Common
Stock. All transaction costs of MK Rail relating to the sale of all of the
common stock of MK Rail, including, but not limited to, fees and expenses for
investment bankers, attorneys and other advisors, shall be borne by MK Rail.
All transaction costs of MKC or MKO relating to the sale solely of MKO's shares
of MK Rail common stock shall be borne by MKC and MKO, and MK Rail shall be
indemnified for such costs. To the extent that MK Rail's reasonable attorneys'
fees and expenses with respect to the litigation being settled by the MOU are
less than $500,000, MK Rail shall pay such difference to MKO on the day
immediately following the closing date of the settlement contemplated by the
MOU.
8.7 GOVERNING LAW; SEVERABILITY. THIS AGREEMENT SHALL BE A
CONTRACT MADE UNDER AND GOVERNED BY THE INTERNAL LAWS OF THE STATE OF DELAWARE
WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES. WHEREVER POSSIBLE, EACH
PROVISION OF THIS AGREEMENT SHALL BE INTERPRETED IN SUCH MANNER AS TO BE
EFFECTIVE AND VALID UNDER APPLICABLE LAW, BUT, IF ANY PROVISION OF THIS
AGREEMENT SHALL BE PROHIBITED BY OR INVALID UNDER SUCH LAW, SUCH PROVISION SHALL
BE INEFFECTIVE ONLY TO THE EXTENT OF SUCH PROHIBITION OR INVALIDITY, WITHOUT
INVALIDATING THE REMAINDER OF SUCH PROVISION OR THE REMAINING PROVISIONS OF THIS
AGREEMENT.
* * *
<PAGE>
IN WITNESS WHEREOF, this Agreement has been duly executed as of the
day and year first above written.
MK RAIL CORPORATION,
a Delaware corporation
By: s/s James F. Cleary, Jr.
------------------------------------
Name: James F. Cleary, Jr.
Title: Executive Vice President
Address: MK Rail Corporation
1200 Reedsdale Street
Pittsburgh, PA 51233
MORRISON KNUDSEN CORPORATION,
an Ohio corporation
By: /s/ Thomas F. Kealey
------------------------------------
Name: Thomas F. Kealey
Title: Senior Vice President - Finance
Address: Morrison Knudsen Corporation
720 Park Boulevard
Boise, ID 83712
MORRISON KNUDSON CORPORATION,
a Delaware corporation
By: /s/ Thomas F. Kealey
------------------------------------
Name: Thomas F. Kealey
Title: Senior Vice President - Finance
Address: Morrison Knudson Corporation
720 Park Boulevard
Boise, Idaho 83712
<PAGE>
EXHIBITS
THE REGISTRANT AGREES TO PROVIDE THE SECURITIES AND EXCHANGE COMMISSION, UPON
REQUEST, WITH COPIES OF EXHIBITS HERETO.
<PAGE>
Exhibit 10.11
NOTE AGREEMENT
THIS NOTE AGREEMENT, dated as of June __, 1995 (this "AGREEMENT"), is
by and between Morrison Knudsen Corporation, an Ohio corporation (the "LENDER")
and MK Rail Corporation, a Delaware corporation (the "BORROWER").
W I T N E S S E T H:
WHEREAS, there currently exists intercompany debt between Borrower and
Lender;
WHEREAS, the Borrower, on the one hand, and the Lender and Morrison
Knudsen Corporation, a Delaware corporation ("MKC") on the other hand have
asserted various claims, counterclaims, setoffs and causes of action against
each other (collectively, the "CLAIMS");
WHEREAS, to settle, compromise and equitably adjust the Claims, the
Borrower, the Lender and MKC are consummating the transactions contemplated by
the Global Settlement Agreement dated as of June 15, 1995 (the "GLOBAL
SETTLEMENT AGREEMENT");
WHEREAS, in accordance with Section 2 of the Global Settlement
Agreement, the Borrower and the Lender desire to enter into this Agreement to
provide for the terms and conditions of the repayment of the Intercompany Debt
(as defined herein);
NOW, THEREFORE, in consideration of the premises and the mutual
agreements contained herein, and for other good and valuable consideration, the
receipt and sufficiency of which hereby are acknowledged, the parties hereto
agree as follows:
1. DEFINITIONS.
When used herein, the following terms have the following meanings:
"CLOSING DATE" means the date of this Agreement.
"EVENT OF DEFAULT" has the meaning set forth in SECTION 4 hereof.
"FINANCING AGREEMENTS" means all agreements, instruments and
documents, including, without limitation, this Agreement and the Note,
whether now, or hereafter executed by or on behalf of the Borrower and
delivered to the Lender in connection with the Intercompany Debt.
<PAGE>
"GOVERNMENTAL AUTHORITY" means any nation or government, any federal,
state, local or other political subdivision thereof and any entity
exercising executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government.
"INDEBTEDNESS" means as to any person at any time, any and all
indebtedness, obligations or liabilities (whether indirect, absolute or
contingent, or joint or several) of such person for or in respect of:
(i) borrowed money, (ii) amounts raised under or liabilities in respect of
any note purchase or acceptance credit facility, (iii) reimbursement
obligations under any letter of credit, currency swap agreement, interest
rate swap, cap, collar or floor agreement or other interest rate management
device, (iv) the Intercompany Debt, (v) any other transaction (including
without limitation forward sale or purchase agreements, capitalized leases
and conditional sales agreements) having the commercial effect of a
borrowing of money entered into by such person to finance its operations or
capital requirements (but not including trade payables and accrued expenses
incurred in the ordinary course of business which are not represented by a
promissory note other evidence of indebtedness and which are not more than
30 days past due), or (iv) any guaranty of any of the foregoing.
"INTERCOMPANY DEBT" has the meaning set forth in SECTION 2.1 hereof.
"LOAN PARTY" and "LOAN PARTIES" means, collectively, the Borrower,
Touchstone, Inc., MK Engine Systems Company, Inc., Motor Coils
Manufacturing Co., Power Parts Company, Power Parts Sign Co., Alert Mfg. &
Supply Co. and Clark Industries, Inc.
"MATURITY DATE" means May 31, 2000.
"MK RAIL PNC CREDIT AGREEMENT" means the Amended and Restated
Revolving Credit and Letter of Credit Issuance Agreement dated as of March
31, 1995 by and among the Loan Parties, the financial institutions listed
on Schedule 1.01(a) thereto and PNC Bank, National Association, as the
issuer of letters of credit and as agent as now in effect.
"NOTE" has the meaning set forth in SECTION 2.1 hereof.
"PERSON" means any individual, corporation, partnership, association,
joint-stock company, trust, unincorporated organization, joint venture,
government or political subdivision of agency thereof, or any other entity.
<PAGE>
"PRIME RATE" means for any day, a fluctuating interest rate per annum
equal to the rate of interest which PNC Bank, National Association
announces from time to time as its prime lending rate, which rate may not
be the lowest rate then being charged by PNC Bank, National Association to
commercial borrowers.
"REPLACEMENT FINANCING" means Indebtedness in any amount that is
senior debt incurred to refinance, extend or add to the Indebtedness of the
Borrower to PNC Bank, National Association under the PNC MK Rail Credit
Agreement including without limitation additional, new or replacement
Indebtedness from PNC Bank, National Association and/or other institutional
lenders.
"REPLACEMENT FINANCING CREDIT AGREEMENTS" means the credit agreements,
security agreements, notes and other financing agreements governing the
terms of any Replacement Financing.
2. CREDIT.
2.1 INTERCOMPANY DEBT. The Borrower and the Lender agree that the
Borrower is indebted to the Lender under the terms of the Global Settlement
Agreement on the Closing Date in the original principal amount of $52,200,000
(the "INTERCOMPANY DEBT"). The Intercompany Debt shall be evidenced by a
promissory note (the "NOTE") of even date herewith in the form attached hereto
as EXHIBIT A. Amounts repaid on the Intercompany Debt may not be reborrowed.
2.2 INTEREST. The Borrower shall pay to the Lender interest on the
outstanding principal balance of the Intercompany Debt at the Prime Rate.
Interest shall be computed on the basis of a 360-day year for the actual number
of days elapsed. Following the occurrence and during the continuance of an
Event of Default, the Borrower shall pay to the Lender interest on the
Intercompany Debt from the date of an Event of Default until such Event of
Default has been cured or waived at the per annum rate of two percent in excess
of the Prime Rate.
2.3 AMORTIZATION. The Intercompany Debt and interest thereon shall
be payable in annual installments of principal and interest due on the last
business day of March in an amount equal to the lesser of (a) $10,440,000 or
(b) such amount as the Borrower is permitted to pay with respect to the
Intercompany Debt under the MK Rail PNC Credit Agreement or any Replacement
Financing Credit Agreement, as the case may be. Any payment of principal or
interest that becomes due and owing but cannot be paid because of the
restrictions of the MK Rail PNC Credit Agreement or any Replacement Financing
Credit Agreement, as the case may be, shall be paid by the Borrower to the
Lender on the
<PAGE>
first date thereafter upon which such payment is permitted to be paid
thereunder.
2.4 MANDATORY PREPAYMENT; MATURITY. All outstanding principal on the
Intercompany Debt accrued thereon from the Closing Date shall be due and payable
in full on the earlier of (i) the acquisition of all of the common stock or
substantially all of the assets of the Borrower by a person other than the
Lender or MKC; (ii) the Maturity Date; or (iii) acceleration after an Event of
Default.
2.5 REPLACEMENT FINANCING. It is understood and agreed that MK Rail
is currently attempting to obtain Replacement Financing with respect to its
Indebtedness to PNC Bank, National Association under the MK Rail PNC Credit
Agreement and to obtain additional credit to finance its working capital needs.
The Lender agrees to execute such intercreditor agreements and/or subordination
agreements with respect to the Intercompany Debt as are reasonably required in
connection with such Replacement Financing and additional credit as well in
connection with any subsequent extension of credit to the Borrower.
2.6 ADJUSTMENT OF INTERCOMPANY DEBT. In the event that the
settlement contemplated by the MOU (as defined in the Global Settlement
Agreement) is not consummated, then the principal amount of the Intercompany
Debt shall be increased by $4,500,000. The principal amount of the Intercompany
Debt shall thereafter be decreased by (a) in the event that the Litigation (as
defined in the MOU) is settled but on terms other than as set forth in the MOU,
unless otherwise consented by MKC in writing, which consent shall not be
unreasonably withheld, the lesser of (i) $4,500,000 and (ii) the sum of (x) any
cash contributed by MK Rail to such settlement plus (y) the dollar value placed
in such settlement on any securities of MK Rail contributed by MK Rail to such
settlement plus (z) MK Rail's reasonable attorneys' fees and expenses with
respect to the Litigation or (b) in the event that the Litigation (as defined in
the MOU) is not settled, the amount of any cash payment by MK Rail made pursuant
to a final nonappealable judgment of a court of competent jurisdiction with
respect to the Litigation (as defined in the MOU) after subtracting therefrom
any crossclaim, counterclaim or third-party action of MKO or MKC against any
MK Rail Released Person (other than Stephen Hanks or William J. Agee) pursuant
to a non-appealable judgment of a court of competent jurisdiction with respect
to the Litigation (as defined in the MOU). In connection with such adjustments,
the Borrower shall duly execute and deliver to the Lender a new promissory note
in form and substance satisfactory to the Lender to replace the Note, which new
promissory note shall be in an amount equal to the outstanding principal amount
of the Intercompany Debt on the day thereof after taking into account such
reductions. The Lender shall deliver the existing Note to the Borrower in
exchange for such new note. In addition, Section 2.3 of this Agreement shall be
amended to adjust the amount of the annual
<PAGE>
installment ratably in accordance with the foregoing adjustments of the
Intercompany Debt.
3. REPRESENTATIONS AND WARRANTIES.
The Borrower represents and warrants that as of the date of the
execution of this Agreement, and continuing so long as the Intercompany Debt or
accrued interest thereon remain outstanding:
3.1 CORPORATE EXISTENCE. The Borrower is a corporation duly
organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation and is duly qualified as a foreign corporation and
is in good standing in all states where the nature and extent of the business
transacted by it or the ownership of its assets makes such qualification
necessary.
3.2 CORPORATE AUTHORITY. The execution and delivery by the Borrower
of this Agreement and of all the other Financing Agreements and the performance
of the Borrower's obligations hereunder and thereunder: (i) are within the
Borrower's corporate powers; (ii) are duly authorized by the Borrower's board of
directors and, if necessary, the Borrower's stockholders; (iii) are not in
contravention of the terms of the Borrower's certificate of incorporation, or
by-laws, or of any indenture, agreement or undertaking to which the Borrower is
a party or by which the Borrower or any of its property is bound; (iv) does not,
as of the execution hereof, require any consent, registration or approval of any
Governmental Authority; and (v) does not contravene any contractual or
governmental restriction binding upon the Borrower.
3.3 BINDING EFFECT. This Agreement, the Note and all of the
Financing Agreements are the legal, valid and binding obligations of the
Borrower and are enforceable against the Borrower in accordance with their
respective terms.
3.4 SURVIVAL OF WARRANTIES. All representations and warranties
contained in this Agreement, the Note and any of the Financing Agreements shall
survive the execution and delivery of this Agreement.
4. EVENTS OF DEFAULT.
The occurrence of any one or more of the following events ("EVENTS OF
DEFAULT") will constitute a default under this Agreement:
(a) failure to make any installment of principal or interest when due
and payable and not restricted by the
<PAGE>
MK Rail PNC Credit Agreement or any Replacement Financing Credit
Agreements, as the case may be;
(b) a proceeding shall have been instituted in a court having
jurisdiction in the premises seeking a decree or order for relief in
respect of any Loan Party, in an involuntary case under any applicable
bankruptcy, insolvency, reorganization or other similar law now or
hereafter in effect, or a receiver, liquidator, assignee, custodian,
trustee, sequestrator, conservator (or similar official) of a Loan Party,
for any substantial part of such Person's property, or for the winding-up
or liquidation of such Person's affairs, and such proceeding shall remain
undismissed or unstayed and in effect for a period of 120 consecutive days
or such court shall enter a decree or order granting any of the relief
sought in such proceeding;
(c) a Loan Party shall commence a voluntary case under any applicable
bankruptcy, insolvency, reorganization or other similar law now or
hereafter in effect, shall consent to the entry of an order for relief in
an involuntary case under any such law, or shall consent to the appointment
or taking possession by a receiver, liquidator, assignee, custodian,
trustee, sequestrator, conservator (or other similar official) of itself or
for any substantial part of property or shall make a general assignment for
the benefit of creditors, or shall fail generally to pay debts as they
become due, or shall take any action in furtherance of any of the
foregoing;
(d) an Event of Default shall have occurred under the MK Rail PNC
Credit Agreement or any Replacement Financing Credit Agreement, as the case
may be, and shall have resulted in an acceleration of such Indebtedness or
the filing of any action to enforce or collect such Indebtedness; or
(e) failure of the Borrower to deliver within 15 days of a written
request therefor a new promissory note to the Lender in accordance with
SECTION 2.6 hereof.
5. REMEDIES.
In the event of the occurrence and continuation of an Event of Default
the Lender may, upon notice to the Borrower, declare any or all of the
Intercompany Debt to be immediately due and payable, whereupon all of the
Intercompany debt shall become immediately due and payable, except that if an
Event of Default described in SECTIONS 4(b) AND 4(c) above shall exist or occur,
all of the Intercompany Debt, without notice of any kind, shall be immediately
due and payable. All of the Lender's rights and remedies under this Agreement,
the Note and the Financing
<PAGE>
Agreements or otherwise shall be cumulative, and none exclusive, to the extent
permitted by applicable law.
6. MISCELLANEOUS.
6.1 CAPTIONS AND REFERENCES. The recitals to this Agreement (except
for definitions) and the section captions used in this Agreement are for
convenience only, and shall not affect the construction of this Agreement.
6.2 COUNTERPARTS. This Agreement may be executed in any number of
counterparts and by the different parties on separate counterparts and each such
counterpart shall be deemed to be an original, but all such counterparts shall
together constitute but one and the same Agreement.
6.3 NOTICES. Any notice, request or other communication to either
party by the other as provided herein will be given in writing and will be
deemed received upon the earlier of receipt or (i) 3 days after mailing if
mailed postage prepaid by US mail; (ii) when sent after receipt of confirmation
if sent by telecopy or other similar facsimile transmission; (iii) 1 business
day after deposit with a reputable overnight courier with all charges prepaid or
(iv) when delivered, if hand delivered by messenger, all of which shall be
properly addressed to the address for such party as set forth on the signature
pages hereto, or at such other address as either party may notify the other of
hereunder.
6.4 ENTIRE AGREEMENT; AMENDMENT; WAIVER. This Agreement, the Global
Settlement Agreement, and all other documents executed under or referenced in
the Global Settlement Agreement constitute the entire agreement between the
Borrower and the Lender relating to the subject matter hereof, it being
acknowledged and agreed that such documents represent one and the same
integrated transaction and that a part of the consideration hereof and of the
execution and delivery of the Note is the execution and delivery by the Lender
and certain of its affiliates of the Global Settlement Agreement and of the
Mutual Releases provided for in the Global Settlement Agreement and the
agreements, releases, covenants, premises and obligations of the Lender
contained therein or given in accordance therewith. This Agreement may not be
amended or altered in any manner unless such amendment or alteration is in
writing and signed by both the Borrower and the Lender. No covenant or
condition or any other part of this Agreement may be waived except by written
instrument signed and made a part hereof by the Lender. The failure of the
Lender to enforce any of the provisions of this Agreement or the waiver thereof
in any instance will not be construed as a general waiver or relinquishment on
its part of any such provisions, but the same will be and remain in full force
and effect.
<PAGE>
6.5 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon the
Borrower, the Lender and their respective successors and assigns, and shall
inure to the benefit of the Borrower, the Lender and their respective successors
and assigns. The Borrower shall not have any right to assign its rights or
delegate its duties under this Agreement.
6.6 APPLICATION OF PAYMENTS. Notwithstanding any contrary provision
contained in this Agreement, the Note or in any of the Financing Agreements, the
Borrower does irrevocably waive the right to direct the application of any and
all payments at any time or times hereafter received by the Lender from the
Borrower with respect to the Intercompany Debt, or any and all recoveries
received by the Lender from the Borrower pursuant to a judgment rendered by a
court of competent jurisdiction with respect to the Intercompany Debt, and the
Borrower does hereby irrevocably agree that such payments and recoveries may be
applied by the Lender, in its sole discretion, to payment of the Intercompany
Debt in the following order or in any other order chosen by the Lender, unless a
court of competent jurisdiction shall otherwise direct:
(a) FIRST, to payment of all costs and expenses of the Lender
incurred in connection with the collection and enforcement of the
Intercompany Debt;
(b) SECOND, to payment of that portion of the Intercompany Debt
constituting accrued and unpaid interest owing to the Lender;
(c) THIRD, to payment of the principal of the Intercompany Debt owing
to the Lender; and
(d) FOURTH, the balance, if any, after the Intercompany Debt has been
satisfied, shall be returned to the Borrower.
6.7 GOVERNING LAW; SEVERABILITY. THIS AGREEMENT SHALL BE A CONTRACT
MADE UNDER AND GOVERNED BY THE INTERNAL LAWS OF THE STATE OF DELAWARE. WHEREVER
POSSIBLE, EACH PROVISION OF THIS AGREEMENT SHALL BE INTERPRETED IN SUCH MANNER
AS TO BE EFFECTIVE AND VALID UNDER APPLICABLE LAW, BUT IF ANY PROVISION OF THIS
AGREEMENT SHALL BE PROHIBITED BY OR INVALID UNDER SUCH LAW, SUCH PROVISION SHALL
BE INEFFECTIVE ONLY TO THE EXTENT OF SUCH PROHIBITION OR INVALIDITY, WITHOUT
INVALIDATING THE REMAINDER OF SUCH PROVISION OR THE REMAINING PROVISIONS OF THIS
AGREEMENT.
6.8 WAIVER OF JURY TRIAL. THE BORROWER AND THE LENDER WAIVE ANY
RIGHT TO HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE, WHETHER SOUNDING IN
CONTRACT, TORT, OR OTHERWISE, BETWEEN THE LENDER AND THE BORROWER ARISING OUT
OF, CONNECTED WITH, RELATED TO OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED
BETWEEN THEM IN CONNECTION WITH THIS AGREEMENT, THE PROMISSORY NOTE OR ANY
FINANCING AGREEMENT OR ANY OTHER INSTRUMENT, DOCUMENT
<PAGE>
OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH OR THE TRANSACTIONS
RELATED HERETO. THE BORROWER AND THE LENDER HEREBY AGREE AND CONSENT THAT ANY
SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL
WITHOUT A JURY AND THAT EITHER MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF
THIS AGREEMENT WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE PARTIES
HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.
[The Balance of This Page Intentionally Left Blank]
<PAGE>
IN WITNESS WHEREOF, this Agreement has been duly executed as of the
day and year first above written.
MK RAIL CORPORATION,
a Delaware corporation
By:___________________________
Name:
Title:
Address:
MORRISON KNUDSEN CORPORATION,
an Ohio corporation
By:____________________________
Name:
Title:
Address:
<PAGE>
EXHIBIT A
FORM OF PROMISSORY NOTE
[Attached]
<PAGE>
NOTE
$52,200,000 June __, 1995
FOR VALUE RECEIVED, the undersigned, MK Rail Corporation, a Delaware
corporation ("BORROWER"), hereby promises to pay to the order of Morrison
Knudsen Corporation, an Ohio corporation ("LENDER"), at Lender's office at 720
Park Boulevard, Boise Idaho, or at such other place as the holder of this note
("NOTE") may from time to time designate in writing, in lawful money of the
United States of America and in immediately available funds, the principal sum
of FIFTY-TWO MILLION TWO HUNDRED THOUSAND AND NO/100 DOLLARS ($52,200,000).
This Note is referred to in and was executed and delivered pursuant to that
certain Global Settlement Agreement and Note Agreement of even date herewith
between Borrower and Lender (as from time to time amended, modified, restated or
supplemented, the "NOTE AGREEMENT") to which reference is hereby made for a more
complete statement of the terms and conditions under which the debt evidenced
hereby is to be repaid. All terms which are capitalized and used herein (which
are not otherwise specifically defined herein) and which are defined in the Note
Agreement shall be used in this Note as defined in the Note Agreement.
Unless otherwise paid sooner pursuant to the provisions of
SUBSECTION 2.4 of the Note Agreement, any and all outstanding principal shall be
due and payable on May 31, 2000.
Borrower further promises to pay interest on the outstanding principal
amount hereof from the date hereof until payment in full hereof on the terms set
forth in the Note Agreement and at the applicable rates set forth in
SUBSECTION 2.2 of the Note Agreement. Except as otherwise provided in the Note
Agreement interest shall be computed on the basis of a 360-day year for the
actual number of days elapsed.
If payment hereunder becomes due and payable on a Saturday, Sunday, or
legal holiday under the laws of the State of Delaware, the due date thereof
shall be extended to the next succeeding Business Day, and interest be payable
thereon during such extension at the rate specified in the Note Agreement. In
no contingency or event whatsoever shall interest charged hereunder, however
such interest may be characterized or computed , exceed the highest rate
permissible under any law which a court of competent jurisdiction shall, in a
final determination, deem applicable hereto. In the event that such a court
determines that Lender has received interest hereunder in excess of the highest
rate applicable hereto, any such excess interest collected by Lender shall be
deemed to have been a repayment of principal and shall be so applied.
Except as otherwise agreed in the Note Agreement, payments received by
Lender from Borrower on this note shall be applied first to the payment of
interest which is due and payable and only thereafter to the outstanding
principal balance thereof.
<PAGE>
This Note is subject to prepayment at the option of Borrower as provided
in the Note Agreement and mandatory prepayment as provided in the Note
Agreement. Any such prepayments shall be applied in the manner set forth in the
Note Agreement.
DEMAND, PRESENTMENT, PROTEST AND NOTICE OF NONPAYMENT AND PROTEST ARE
HEREBY WAIVED BY BORROWER.
This Note shall be interpreted and the rights and liabilities of the
parties hereto determined in accordance with the internal laws (as opposed to
conflicts of law provisions) and decisions of the State of Delaware. Whenever
possible each provision of this Note shall be interpreted in such a manner as to
be effective and valid under applicable law, but if any provision of this Note
shall be prohibited by or invalid under applicable law, such provision shall be
ineffective to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of this
Note. Whenever in this Note reference is made to Lender or Borrower, such
reference shall be deemed to include, as applicable, a reference to their
respective successors and assigns. The provisions of this Note shall be binding
upon and shall inure to the benefit of said successors and assigns. Borrower's
successors and assigns shall include, without limitation, a receiver, trustee or
debtor-in-possession of or for Borrower.
MK RAIL CORPORATION
By:________________________________
Name:___________________________
Title:__________________________
<PAGE>
Exhibit 10.12
MUTUAL RELEASE
This MUTUAL RELEASE (this "AGREEMENT") dated as of June __, 1995, is made
by and among (a) MK Rail Corporation, a Delaware corporation ("MK RAIL") and all
of its subsidiaries and (b) Morrison Knudsen Corporation, an Ohio corporation
("MKO"), Morrison Knudsen Corporation, a Delaware corporation ("MKC") (MKO and
MKC shall be referred to herein collectively as "MK") and their wholly-owned
domestic subsidiaries.
W I T N E S E T H:
WHEREAS, MK Rail and MK have executed and entered into that certain Global
Settlement Agreement dated as of June 15, 1995 (the "GLOBAL SETTLEMENT
AGREEMENT"); and
WHEREAS, pursuant to Section 3.1 of the Global Settlement Agreement,
MK Rail has agreed to release certain claims that it and its subsidiaries may
have against MK and the MK Released Persons (as defined herein) and to execute a
mutual release to evidence such releases;
WHEREAS, pursuant to Section 3.2 of the Global Settlement Agreement, MK has
agreed to release certain claims that it and its wholly-owned domestic
subsidiaries may have against MK Rail and the MK Rail Released Persons (as
defined herein) and to execute a mutual release to evidence such releases;
WHEREAS, simultaneously with the execution of this Agreement, the "CLOSING
DATE" under the Global Settlement Agreement has occurred; and
WHEREAS, MK Rail and MK desire to enter into this Agreement to satisfy the
requirements of Section 6(h) of the Global Settlement Agreement;
NOW, THEREFORE, in consideration of the terms and conditions contained
herein, the consideration received by the parties pursuant to the Global
Settlement Agreement, and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
1. MK RAIL RELEASE. MK Rail and all of its subsidiaries (excluding
MK Australia) hereby fully, absolutely, unconditionally and completely release
and discharge MKO and MKC and their respective successors, predecessors,
assigns, assignees, subsidiaries, stockholders, affiliates, present and former
directors, trustees, officers, employees, attorneys and agents, and in the case
of individuals, their respective heirs, receivers, conservators, beneficiaries,
executors and administrators, and, in any case, any other person who, within the
meaning of Rule 12b-2 of the Securities Exchange Act of 1934, as amended,
"CONTROLS," is "CONTROLLED BY" or is under "COMMON CONTROL" with, any such
persons past or present (collectively, the "MK RELEASED PERSONS") from any and
all actions, causes of action, setoffs,
<PAGE>
claims, crossclaims, counterclaims, cross-actions, third-party actions, suits,
debts, dues, sums of money, accounts, reckonings, bonds, bills, specialties,
covenants, contracts, controversies, agreements, promises, variances,
trespasses, damages, losses, demands, costs, expenses, liabilities, obligations,
accounts, defenses, claims for relief or judgments, of whatever kind or
character, including, but not limited to, all matters arising out of federal or
state securities laws or regulations, statute, common law, contract, tort,
regulation, violation of law or otherwise, whether known or unknown, suspected
or unsuspected, fixed or unfixed, direct or indirect, contingent or otherwise,
at law or in equity, for or because of any matter or thing done, omitted,
admitted or suffered to be done now or hereafter, relating to events prior
hereto (collectively, "CLAIMS") MK Rail or any of its subsidiaries (excluding
MK Australia) ever had, now have, hereafter can, shall or may have against any
of the MK Released Persons (excluding the "MK Rail Retained Claims"), including,
but not limited to, any and all Claims relating to (i) the Transfer Agreement
dated as of February 25, 1994 (the "TRANSFER AGREEMENT"); (ii) the prior
transfer of any businesses, portions of businesses or assets by MKO or MKC to
MK Rail or any of its subsidiaries; (iii) the assumption of liabilities by
MK Rail or any of its subsidiaries in connection with any prior transfer of any
business, portions of businesses or assets by MKO or MKC to MK Rail or any of
its subsidiaries, (iv) the initial public offering of common stock of MK Rail
and the underwriting contract with respect thereto, (v) Claims that have been
made or could have been made in any securities, shareholder and derivative
actions, including those pending against MK Rail, MKO, MKC and others and
(vi) the Corporate Support and Professional Services Agreement dated as of
February 25, 1994 and (vii) the Agreement dated as of October 20, 1994 between
MKO and MK Rail relating to Southern Pacific Transportation Company
(collectively, the "MK RAIL RELEASED CLAIMS"). The "MK Rail Retained Claims"
shall mean any and all Claims of MK Rail against the MK Released Persons
relating to (i) breach by MKO or MKC of the terms of the Global Settlement
Agreement, this Agreement, the Note Agreement or the Indemnity Agreement (as
defined in the Global Settlement Agreement), (ii) breach by MKO or MKC after the
date hereof of any of the Existing Intercompany Agreements (as defined in the
Global Settlement Agreement) and (iii) MK Australia.
2. MK RELEASE. MKO and MKC and all of their wholly-owned domestic
subsidiaries hereby fully, absolutely, unconditionally and completely release
and discharge MK Rail and its successors, predecessors, assigns, assignees,
subsidiaries, stockholders, affiliates, present and former directors, trustees,
officers, employees, attorneys and agents, and in the case of individuals, their
respective heirs, receivers, conservators, beneficiaries, executors and
administrators, and, in any case, any other person who, within the meaning of
Rule 12b-2 of the Securities Exchange Act of 1934, as amended, "CONTROLS," is
"CONTROLLED BY" or is under "COMMON CONTROL" with, any such persons past or
present, excluding in each case William J. Agee and Ted Nelson (collectively,
the "MK RAIL RELEASED PERSONS") from any and all Claims MKO, MKC or any of their
wholly-owned domestic subsidiaries ever had, now have, hereafter can, shall or
may have against any of the MK Rail Released Persons (excluding the "MK RETAINED
CLAIMS"), including, but not limited to, any and all Claims relating to (i) the
Transfer Agreement (excluding all indemnification obligations of MK Rail
thereunder); (ii) the prior transfer of any businesses, portions of businesses
or assets by MKO or MKC to MK Rail or any of its subsidiaries; (iii) the
assumption of liabilities by MK Rail or any of its subsidiaries in connection
with any prior transfer of any business,
-2-
<PAGE>
portions of businesses or assets by MKO or MKC to MK Rail or any of its
subsidiaries, (iv) the initial public offering of common stock of MK Rail and
the underwriting contract with respect thereto, (v) Claims that have been made
or could have been made in any securities, shareholder and derivative actions,
including those pending against MK Rail, MKO, MKC and others, (vi) the Corporate
Support and Professional Services Agreement dated as of February 25, 1994 and
(vii) the setoff claim asserted by the Transit Division of MKO in the amount of
approximately $1,700,000 against MK Rail with respect to invoices for locomotive
parts (collectively, the "MK RELEASED CLAIMS"). The "MK RETAINED CLAIMS" shall
mean any and all Claims of MKO or MKC against the MK Rail Released Persons
relating to (i) breach by MK Rail or any of its subsidiaries of the terms of the
Global Settlement Agreement, this Agreement or the Corporate Services Agreement
(as defined in the Global Settlement Agreement), (ii) MK Australia, (iii) any of
the Existing Intercompany Agreements (as defined in the Global Settlement
Agreement; (iv) the Intercompany Debt, the Note or the Note Agreement; and
(v) any and all existing or future indemnification obligations of MK Rail and/or
its subsidiaries to MKO, MKC or their respective subsidiaries under the Transfer
Agreement, the MK Rail Indemnification Agreement or otherwise. The parties
expressly agree that the foregoing releases by MKO or MKC shall not affect in
any way MKO's rights incident to ownership of the MKO Rail Common Stock (as
defined in the Global Settlement Agreement).
3. MK RAIL COVENANT NOT TO SUE. MK Rail and all of its subsidiaries
hereby covenant and agree not to sue or maintain, or assign or otherwise
transfer the right to sue or maintain, any action or proceeding for any claim,
cause of action, demand, cross-action, crossclaim, counterclaim, third-party
action or other form of pleading, in law or in equity, against the MK Released
Persons or any of them, individually, jointly and severally, with respect to any
and all claims, demands, actions, or causes of action (including without
limitation any claims or causes of action based upon indemnity, contribution, or
subrogation), suits, costs, damages, expenses, compensation, penalties,
liabilities and obligations of any kind or nature, whether in law or in equity,
whatsoever, known or unknown, direct or consequential, foreseen or unforeseen,
matured or unmatured, developed or undeveloped, anticipated or unanticipated,
fixed or contingent, incurred or arising at any time prior to the date hereof,
or at any time in the future, from or in connection with or in any way related
to the MK Rail Released Claims, regardless of whether it was beyond human wisdom
to have discovered or foreseen the circumstances giving rise to the cause of
action or claims. Any and all Claims of MK Rail or any of its subsidiaries
relating to any Claims that have been made or could have been made in any
securities, shareholder or derivative actions pending against MK Rail, MKO, MKC
and others shall be addressed solely as set forth in Section 5.3 of the Global
Settlement Agreement and MK Rail and any of its subsidiaries expressly waive any
rights of contribution against any MK Released Person with respect thereto and
shall not assert such Claims against, or seek satisfaction thereof, from the
MK Released Persons other than as set forth in Section 5.3 of the Global
Settlement Agreement.
4. MK COVENANT NOT TO SUE. MKO, MKC and all of their wholly-owned
domestic subsidiaries hereby covenant and agree not to sue or maintain, or
assign or otherwise transfer the right to sue or maintain, any action or
proceeding for any claim, cause
-3-
<PAGE>
of action, demand, cross-action, crossclaim, counterclaim, third-party action or
other form of pleading, in law or in equity, against the MK Rail Released
Persons or any of them, individually, jointly and severally, with respect to any
and all claims, demands, actions, or causes of action (including without
limitation any claims or causes of action based upon indemnity, contribution, or
subrogation), suits, costs, damages, expenses, compensation, penalties,
liabilities and obligations of any kind or nature, whether in law or in equity,
whatsoever, known or unknown, direct or consequential, foreseen or unforeseen,
matured or unmatured, developed or undeveloped, anticipated or unanticipated,
fixed or contingent, incurred or arising at any time prior to the date hereof,
or at any time in the future, from or in connection with or in any way related
to the MK Released Claims, regardless of whether it was beyond human wisdom to
have discovered or foreseen the circumstances giving rise to the cause of action
or claims.
5. REPRESENTATION BY COUNSEL. The parties hereto hereby acknowledge that
they are, and have been, represented by counsel in connection with the
negotiation and preparation of this Agreement, that the provisions of this
Agreement and the legal effect thereof have been fully explained to them, and
that they have entered into this Agreement freely and voluntarily and without
coercion or undue influence.
6. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and the MK Released Persons and the
MK Rail Released Persons and their heirs, executors, representatives, successors
and assigns as such may now or hereafter be a part.
7. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the internal laws of the State of Delaware without regard to
conflicts of law principles.
8. SURVIVAL. The covenants and agreements contained in this Agreement
shall survive the execution hereof.
9. HEADINGS. The headings in this Agreement are solely for convenience
of reference and shall not be given any effect in the construction or
interpretation of this Agreement.
10. ADOPTION OF REPRESENTATIONS AND WARRANTIES. By executing this
Agreement, the subsidiaries of MK Rail and the wholly-owned domestic
subsidiaries of MKO and MKC confirm that (a) the representations and warranties
set forth in the Global Settlement Agreement as to such subsidiaries are true
and correct as of the date hereof and (b) they have received an executed copy of
the Global Settlement Agreement.
11. DEFINED TERMS. Any capitalized term used in this Agreement not
otherwise defined herein shall have the meaning given to such term in the Global
Settlement Agreement.
-4-
<PAGE>
12. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall for all purposes be deemed an original, and
all of such counterparts shall together constitute one and the same agreement.
* * *
-5-
<PAGE>
IN WITNESS WHEREOF, the undersigned have caused this Agreement to be duly
executed by them on the date first above written.
MK RAIL CORPORATION
By:_______________________________________________
Name:_________________________________________
Title:________________________________________
[SIGNATURE LINES FOR ALL SUBSIDIARIES OF
MK RAIL CORPORATION]
By:_______________________________________________
Name:_________________________________________
Title:________________________________________
MORRISON KNUDSEN CORPORATION,
an Ohio corporation
By:_______________________________________________
Name:_________________________________________
Title:________________________________________
MORRISON KNUDSEN CORPORATION,
a Delaware corporation
By:_______________________________________________
Name:_________________________________________
Title:________________________________________
[SIGNATURE LINES FOR ALL WHOLLY-OWNED
DOMESTIC SUBSIDIARIES OF MKO AND MKC]
By:_______________________________________________
Name:_________________________________________
Title:________________________________________
-6-
<PAGE>
Exhibit 10.13
INDEMNIFICATION AGREEMENT
THIS INDEMNIFICATION AGREEMENT, dated as of June __, 1995 (this
"AGREEMENT"), is made by and between Morrison Knudsen Corporation, an Ohio
corporation ("MKO") and MK Rail Corporation, a Delaware corporation ("MK
RAIL").
W I T N E S E T H:
WHEREAS, MKO owns 65% of the issued and outstanding shares of common
stock of MK RAIL (the "MKO RAIL COMMON STOCK");
WHEREAS, MK Rail, Morrison Knudsen Corporation, a Delaware
corporation ("MKC"), and MKO have executed and entered into that certain
Global Settlement Agreement dated as of June 15, 1995 (the "GLOBAL SETTLEMENT
AGREEMENT");
WHEREAS, pursuant to Section 6(i) of the Global Settlement
Agreement, MKO has agreed to indemnify MK Rail and its officers and directors
from any liability arising from shareholder litigation resulting from the sale
by MKO of the MKO Rail Common Stock;
WHEREAS, simultaneously with the execution of this Agreement, the
"Closing Date" under the Global Settlement Agreement has occurred; and
WHEREAS, MKO and MK Rail desire to enter into this Agreement to
satisfy the requirements of Section 6(i) of the Global Settlement Agreement;
NOW THEREFORE, in consideration of the terms and conditions
contained herein, the consideration received by the parties pursuant to the
Global Settlement Agreement, and other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the parties hereto
agree as follows:
1. DEFINITIONS.
When used herein, the following terms have the following meanings:
"ACTION" any action or suit brought by a shareholder of MK Rail
prior to the expiration of any applicable statute of limitations with
respect thereto against an Indemnified Party arising out of, or resulting
from, the sale by MKO of the MKO Rail Common Stock, including, without
limitation, any derivative action.
<PAGE>
"INDEMNIFIABLE LOSS" means any Loss for which MKO is required
under this Agreement to indemnify an Indemnified Party.
"INDEMNIFIED PARTY" means MK Rail and its present officers and
directors.
"INDEMNITY PAYMENT" means any amount required to be paid by MKO to
any Indemnified Party pursuant to SECTION 3.1 hereof.
"LOSS" means any actually incurred loss, claim, damage,
obligation, payment, cost or expense arising out of any Action (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).
"THIRD PARTY CLAIM" means any Action brought by any shareholder of
MK Rail with respect to which MKO is or may be obligated to indemnify any
Indemnified Party under this Agreement.
2. SURVIVAL OF AGREEMENTS.
The obligations of the parties under this Agreement shall survive
any sale by MKO of the MKO Rail Common Stock for a period of ten years.
3. INDEMNIFICATION.
3.1 INDEMNIFICATION. MKO agrees to indemnify, defend and hold
harmless the Indemnified Parties from and against any and all Losses relating
to, arising out of or resulting from the sale by MKO of the MKO Rail Common
Stock.
3.2 REDUCTION OF INDEMNITY PAYMENTS. The amount of any
Indemnity Payment shall be reduced (including, without limitation,
retroactively) by any insurance proceeds or other amounts actually recovered by
any Indemnified Party in reduction of the related Indemnifiable Loss. If any
Indemnified Party 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 Indemnified Party
shall pay to MKC a sum equal to the lesser of the amount of such insurance
proceeds or other amounts actually received and retained or the net amount of
the Indemnity Payments actually received previously. MKO shall be subrogated to
the rights of each Indemnified Party under any insurance policy.
<PAGE>
4. PROCEDURE FOR INDEMNIFICATION.
(a) If MK Rail receives notice of a Third Party Claim, MK Rail
shall give MKO 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 MK Rail to give notice as provided in this
SECTION 4(a) shall not relieve MKO of its indemnification obligations
hereunder, except to the extent that MKO is actually prejudiced by such
failure to give notice.
(b) In addition to the notification requirements of SECTION 4(a)
hereof, MK Rail shall notify MKO, in the manner specified in such SECTION
4(a), of 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 MKO could be adversely affected in any material respect or
the ability of MKO to conduct its business could be impaired in any
material respect as a result of any injunctive relief sought.
(c) MKO may elect to compromise or defend, at its own expense and
by its own counsel, any Third Party Claim. If MKO elects to compromise or
defend such Third Party Claim, it shall within 30 days of receipt of
notice advise MK Rail of its intent to do so, and MK Rail shall cooperate,
at the expense of MKO, in the compromise of, or defense against, such
Third Party Claim. If MKO elects not to compromise or defend the Third
Party Claim, fails to notify MK Rail of its election as herein provided or
contests its obligation to indemnify MK Rail under this Agreement, MK Rail
may pay, compromise of defend such Third Party Claim; PROVIDED,
HOWEVER, MK Rail may not settle or compromise any Third Party Claim over
the objection of MKO. In any event, MK Rail and MKO may participate, at
their own expense, in the defense of such Third Party Claim.
(d) Notwithstanding anything to the contrary in SECTION 4(c)
hereof, unless MK Rail and MKO otherwise agree in writing, MKO shall have
the exclusive right at its option to defend any Third Party Claim
described in SECTION 4(b) hereof. 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, the
other party shall make available all employees, books, records,
communications, documents, items or matters within its knowledge,
possession or control that are necessary or appropriate or reasonably
deemed relevant with
<PAGE>
respect to such defense; PROVIDED, HOWEVER, that nothing in this
SECTION 4(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.
5. NO BENEFICIARIES.
Except to the extent expressly provided otherwise in this Agreement
with respect to present officers and directors of MK Rail, the indemnification
provided for by this Agreement shall not inure to the benefit of any third party
or parties and shall not relieve any insurer who would otherwise be 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.
6. MISCELLANEOUS.
6.1 CAPTIONS AND REFERENCES. The recitals to this Agreement
(except for definitions) and the section captions used in this Agreement are for
convenience only, and shall not affect the construction of this Agreement.
6.2 COUNTERPARTS. This Agreement may be executed in any number
of counterparts and by the different parties on separate counterparts and each
such counterpart shall be deemed to be an original, but all such counterparts
shall together constitute but one and the same Agreement.
6.3 NOTICES. Any notice, request or other communication to
either party by the other as provided herein shall be given in the manner
provided for by the Global Settlement Agreement.
6.4 GOVERNING LAW; SEVERABILITY. THIS AGREEMENT SHALL BE A
CONTRACT MADE UNDER AND GOVERNED BY THE INTERNAL LAWS OF THE STATE OF DELAWARE.
WHEREVER POSSIBLE, EACH PROVISION OF THIS AGREEMENT SHALL BE INTERPRETED IN SUCH
MANNER AS TO BE EFFECTIVE AND VALID UNDER APPLICABLE LAW, BUT IF ANY PROVISION
OF THIS AGREEMENT SHALL BE PROHIBITED BY OR INVALID UNDER SUCH LAW, SUCH
PROVISION SHALL BE INEFFECTIVE ONLY TO THE EXTENT OF SUCH PROHIBITION OR
INVALIDITY, WITHOUT INVALIDATING THE REMAINDER OF SUCH PROVISION OR THE
REMAINING PROVISIONS OF THIS AGREEMENT.
<PAGE>
IN WITNESS WHEREOF, this Agreement has been duly executed as of the
day and year first above written.
MK RAIL CORPORATION,
a Delaware corporation
By:
----------------------------------
Name:
Title:
MORRISON KNUDSEN CORPORATION,
an Ohio corporation
By:
----------------------------------
Name:
Title:
<PAGE>
Exhibit 10.14
SHARE PURCHASE AGREEMENT
MK RAIL CORPORATION
("Vendor")
and
MORRISON KNUDSEN CORPORATION
("Purchaser")
Mallesons Stephen Jaques
Solicitors
Governor Phillip Tower
1 Farrer Place
Sydney NSW 2000
Telephone (02) 250 3000
Fax (02) 250 3133
DX 113 Sydney
Ref SLM:IRJ
<PAGE>
SHARE PURCHASE AGREEMENT
This Agreement is made as of 15 June 1995 between:
MK RAIL CORPORATION a corporation duly constituted under the laws of
Delaware, USA, with its office at 1200 Reedsdale Street, Pittsburgh,
Pennsylvania 15293, USA ("Vendor" or "MKR")
And:
MORRISON KNUDSEN CORPORATION a corporation duly constituted under
the laws of Ohio, USA, with its office at Morrison Knudsen Plaza,
Boise, Idaho, 83729, USA ("Purchaser")
RECITALS:
A. On or about 18 October 1991 the Purchaser commenced carrying on
business in Australia.
B. On 10 August 1992, the Company was incorporated as a wholly-owned
subsidiary of the Purchaser and assumed the business activities of
the Purchaser in Australia.
C. On 25 April 1994, the Purchaser and its nominees transferred to the
Vendor and its nominees the Sale Shares.
D. The Vendor has agreed to sell and the Purchaser has agreed to
purchase the Sale Shares on the terms of this agreement.
OPERATIVE PROVISIONS:
1 INTERPRETATION
1.1 In this agreement unless the contrary intention appears:
CBA means Commonwealth Bank of Australia.
Company or MKA means Morrison Knudsen Corporation of Australia
Limited (ACN 056 629 988) having its registered office at
Level 12, 4 O'Connell Street, Sydney, New South Wales,
Australia.
Completion means settlement of the sale and purchase of the
Sale Shares in accordance with clause 4.
Completion Date means the later of (a) July 1, 1995 or (b) the
date the condition precedent set forth in clause 5(a) is
satisfied, or any other date agreed by the Vendor and the
Purchaser.
<PAGE>
MK-ALL means Morrison Knudsen Australia Leasing Limited, a
wholly-owned subsidiary of the Company.
Nominee Shareholders means Power Parts Company, Motor Coils
Manufacturing Company, MK Engine Systems Company, Inc. and
Touchstone, Inc.
Nominee Shares means the 4 fully paid ordinary shares in the
capital of the Company represented by share certificate
numbers 1 to 4.
Reports means the reports on the financial condition of the
Company prepared by Hall Chadwick dated 5 May 1994 and 13 May
1995, copies of which have been provided to the Purchaser.
Sale Shares means the entire ordinary share capital of the
Company agreed to be sold under this agreement.
Subscription Agreement means the document so described dated
the same as this agreement and made between the Company (as
issuer) and MKR (as subscriber).
Transfer Agreement means the Transfer Agreement between
Purchaser and Vendor of 25 February 1994.
1.2 In this agreement unless the contrary intention appears, a reference
to this agreement or another instrument includes any variation or
replacement of either of them.
1.3 Headings are inserted for convenience and do not affect the
interpretation of this agreement.
2 SALE AND PURCHASE OF SHARES
2.1 The Vendor agrees to sell and transfer the Sale Shares to the
Purchaser and the Purchaser agrees to purchase the Sale Shares from
the Vendor on the terms and conditions of this agreement.
2.2 The Sale Shares must be transferred free from any mortgage, charge,
lien, pledge or other encumbrance created by the Vendor and with all
rights attached to or accruing to them on and from the date of this
agreement.
2.3 The Vendor represents and warrants to the Purchaser that:
(a) it is the beneficial owner of the Sale Shares and has such
title to them as it received from the Purchaser under the
Transfer Agreement;
<PAGE>
(b) the Sale Shares are free from any mortgage, charge, lien,
pledge or other encumbrance created by it;
(c) it has due authority to sell the Sale Shares to the Purchaser
under this agreement; and
(d) the sale of the Sale Shares under this agreement will not
violate its constituent documents or any agreement to which it
is a party.
3 PURCHASE PRICE
The consideration payable by the Purchaser to the Vendor for the
Sale Shares is A$100.
4 COMPLETION
4.1 Completion of the sale and purchase of the Sale Shares will occur
9:00 am Sydney, Australia time on the Completion Date.
4.2 The Vendor agrees to do the following on Completion:
(a) deliver to the Purchaser or its solicitor an executed transfer
in favor of the Purchaser of all of the Sale Shares in the
form set out in the schedule to this agreement, together with
the share certificates for the Sale Shares;
(b) procure that the Nominee Shareholders deliver to the Purchaser
or its solicitors an executed transfer in favor of the
Purchaser of all the Nominee Shares in the form set out in
schedule A to this agreement;
(c) provide, in a form satisfactory to the Purchaser, a form of
appointment of corporate representative in favor of a nominee
of the Purchaser to enable that nominee to attend and vote at
a general meeting of the Company in respect of the Sale
Shares; and
(d) provide, in a form satisfactory to the Purchaser, signed and
dated letters of resignation from those directors of the
Company and its subsidiaries who are MKR employees.
4.3 The Purchaser agrees to pay to the Vendor on Completion the sum of
A$100 in full and final payment of the Purchase Price.
4.4 The parties agree to use their best efforts to cause the conditions
precedent in clause 5 to be satisfied at or prior to Completion.
<PAGE>
5 CONDITIONS PRECEDENT
Completion is conditional on:
(a) the Treasurer of the Commonwealth of Australia consenting,
under the Foreign Acquisitions and Takeovers Act 1975, to the
proposed acquisition by the Purchaser of the Sale Shares and
the Treasurer is to be deemed to have so consented:
(i) if the Purchaser receives written advice from the
Treasurer or on his behalf to the effect that the
acquisition of the Sale Shares is not objected to under
the Foreign Acquisitions and Takeovers Act 1975; or
(ii) if ten (10) days have elapsed from the day the Treasurer
ceased to be empowered to make any order under Part II
of the Foreign Acquisitions and Takeovers Act in
relation to the proposed acquisition because of lapse of
time, notice of the proposed acquisition of the Sale
Shares having been given to the Treasurer under the
Foreign Acquisitions and Takeovers Act 1975;
(b) receipt of the following by the Company or the Purchaser:
(i) a Deed of Release executed by the Vendor substantially
in the form attached as annexure 1;
(ii) the transfer to the Company the 4 narrow gauge
locomotives and 8 standard gauge locomotives and
component parts and materials pursuant to acceptance of
an offer substantially in the form attached as annexure
2;
(iii) an Exclusive Distribution Agreement and Technical
Services Agreement between the Company and the Vendor
substantially in the forms attached as annexure 3 and
annexure 4; and
(iv) evidence executed by CBA that as of the date thereof all
monetary obligations of MKA under its lease facilities
with CBA have been paid in full subject to recapture and
CBA has been paid in full for the locomotives and assets
referred to in clause (ii) above.
(v) the written consent of the majority lenders of Purchaser
under the Credit Agreement dated as of April 11, 1995,
as amended, to the transactions contemplated by this
Agreement.
<PAGE>
(c) receipt by the Vendor of a Deed of Release executed by the
Company and its subsidiaries substantially in the form
attached as annexure 1.
(d) the issue to the Vendor, pursuant to an Application
substantially in the form attached as annexure 5, of the
Australian dollar equivalent of US$3,000,000 of redeemable
preference shares bearing a 9% per annum cumulative preferred
dividend having the terms attached as schedule 2.
(e) Vendor shall have received the written consent of PNC Bank,
National Association to the transactions contemplated by this
Agreement.
(f) the Purchaser and Vendor shall have entered a Mutual Release
substantially in the form of annexure 6.
(g) the Purchaser shall have given the Vendor a letter reasonably
satisfactory to Vendor setting forth its plans for MKA that
outline the manner in which MKA will be operated for the
reasonably foreseeable future after the Completion Date. In
no event shall Purchaser be liable to Vendor for any failure
to achieve said plans in whole or in part.
6 NOTICE TO COMPLETE
- --------------------------------------------------------------------------------
6.1 Notice by the Purchaser
If the Vendor fails to satisfy its obligations under clause 4 on or
before the Completion Date, the Purchaser may give the Vendor a
notice requiring it to satisfy those obligations within a period of
5 days from the date of receipt of the notice, and declaring time to
be of the essence in all respects. If the Vendor fails to satisfy
those obligations on the date specified in the Purchaser's notice,
the Purchaser may, without affecting or limiting any other rights it
might have, terminate this Agreement.
6.2 Notice by the Vendor
If the Purchaser fails to satisfy its obligations under clause 4 on
or before the Completion Date, the Vendor may give the Purchaser a
notice requiring it to satisfy those obligations within a period of
5 days from the date of receipt of the notice, and declaring time to
be of the essence in all respects. If the Purchaser fails to
satisfy those obligations on the date specified in the Vendor's
notice, the Vendor may, without affecting or limiting any other
rights it might have, terminate this Agreement.
<PAGE>
7 RIGHTS TO TERMINATE
- --------------------------------------------------------------------------------
Either party may terminate this Agreement by giving notice to the other if
Completion has not occurred by 16 July 1995.
8 NO RELIANCE
- --------------------------------------------------------------------------------
The Purchaser acknowledges that:
(a) in entering into this agreement, it has not relied on any
statement, representation, warranty, condition or conduct by
the Vendor or its officers, agents and advisors, except as
provided in clause 2.3;
(b) it has been afforded a full opportunity to make inquiries with
respect to the Company, its subsidiaries and the Sale Shares;
(c) it has, independently and without reliance on the Vendor or
its officers, agents and advisers, made its own analysis of
the business, financial status and affairs of the Company and
its subsidiaries and has reached its own decision to enter
into this agreement; and
(d) it has, independently and without reliance on the Vendor or
its officers, agents and advisers, made its own analysis of
the content and conclusions of the Reports and has not relied
upon the Reports.
9 COSTS AND STAMP DUTY
- --------------------------------------------------------------------------------
The Purchaser agrees to bear all stamp duty payable or assessed in
connection with this agreement and the transfer of the Sale Shares to the
Purchaser.
10 FURTHER ASSURANCE BY VENDOR
- --------------------------------------------------------------------------------
The Vendor agrees that it will on request by the Purchaser execute, sign
and deliver all documents and do all things reasonably necessary for
transferring to and vesting in the Purchaser the Sale Shares or otherwise
for giving effect to the terms of this agreement.
11 GOVERNING LAW
- --------------------------------------------------------------------------------
This agreement and the transactions contemplated by this agreement are
governed by the law in force in New South Wales.
<PAGE>
EXECUTED as an agreement.
MK RAIL CORPORATION
By: /S/ JAMES F. CLEARY, JR.
--------------------------------------------------
Title: EXECUTIVE VICE PRESIDENT
-----------------------------------------------
MORRISON KNUDSEN CORPORATION
By: /S/ THOMAS F. KEALEY
-----------------------------------------------
Title: SENIOR VICE PRESIDENT - FINANCE
--------------------------------------------
<PAGE>
EXHIBITS/ANNEXURE
[The registrant agrees to provide the Securities and Exchange Commission,
upon request, with copies of exhibits hereto.]
<PAGE>
Exhibit 10.16
AGREEMENT OF INDEMNITY
THIS AGREEMENT of Indemnity, made and entered into this 1st day of
--------
July , 1992, by Morrison Knudsen Corporation, a Delaware Corporation
- ------------ -- -----------------------------------------------------
(Insert full name and address of Contractor)
or any of the companies listed in paragraph Twenty-Third (hereinafter called
- ---------------------------------------------------------
the Contractor) and Morrison Knudsen Corporation, a Delaware Corporation and
---------------------------------------------------------
(Insert full names and addresses of Indemnitors, if any)
the companies listed in paragraph Twenty-Third
- -----------------------------------------------------------------------------
- ------------(hereinafter called the Indemnitors, if any) and FIDELITY AND
DEPOSIT COMPANY OF MARYLAND, COLONIAL AMERICAN CASUALTY AND SURETY COMPANY,
singly or in combination, their address being Fidelity Building, Charles and
Lexington Streets, P. O. Box 1227, Baltimore, Md. 21203, their successors and
assigns (hereinafter called Surety),
WITNESSETH:
WHEREAS, the Contractor, in the performance of contracts and the
fulfillment of obligations generally, whether in its own name solely or as
co-adventurer with others, may desire or be required to give or procure
certain surety bonds, undertakings or instruments of guarantee, and to renew,
or continue or substitute from time to time the same or new bonds,
undertakings or instruments of guarantee with the same or different
penalties, and/or conditions, any one or more of which are hereinafter
called Bonds; or the Contractor or Indemnitors may request the Surety to
refrain from cancelling said Bonds; and
WHEREAS, at the request of the Contractor and the Indemnitors and upon
the express understanding that this Agreement of Indemnity be given, the
Surety has executed or procured to be executed, and may from time to time
hereafter execute or procure to be executed, said Bonds on behalf of the
Contractor; and
WHEREAS, the Indemnitors have a substantial, material and beneficial
interest in the obtaining of the Bonds or in the Surety's refraining from
cancelling said Bonds.
NOW, THEREFORE, in consideration of the premises the Contractor and
Indemnitors for themselves, their heirs, executors, administrators,
successors and assigns, jointly and severally, hereby covenant and agree with
the Surety, as follows:
PREMIUMS
FIRST: The Contractor and Indemnitors will pay to the Surety in such
manner as may be agreed upon all premiums and charges of the Surety for the
Bonds in accordance with its rate filings, its manual of rates, or as otherwise
agreed upon, until the Contractor or Indemnitors shall serve evidence
satisfactory to the Surety of its discharge or release from the Bonds and all
liability by reason thereof.
INDEMNITY
SECOND: The Contractor and Indemnitors shall exonerate, indemnify, and
keep indemnified the Surety from and against any and all liability for losses
and/or expenses of whatsoever kind or nature (including, but not limited to,
interest, court costs and counsel fees) and from and against any and all such
losses and/or expenses which the Surety may sustain and incur: (1) By reason
of having executed or procured the execution of the Bonds, (2) By reason of
the failure of the Contractor or Indemnitors to perform or comply with the
covenants and conditions of this Agreement or (3) In enforcing any of the
covenants and conditions of this Agreement. Payment by reason of the
aforesaid causes shall be made to the Surety by the Contractor and
Indemnitors as soon as liability exists or is asserted against the Surety,
whether or not the Surety shall have made any payment therefor. Such payment
shall be equal to the amount of the reserve set by the Surety. In the event
of any payment by the Surety the Contractor and Indemnitors further agree
that in any accounting between the Surety and the Contractor, or between the
Surety and the Indemnitors, or either or both of them, the Surety shall be
entitled to charge for any and all disbursements made by it in good faith in
and about the matters herein contemplated by this Agreement under the belief
that it is or was liable for the sums and amounts so disbursed, or that it
was necessary or expedient to make such disbursements, whether or not such
liability, necessity or expediency existed; and that the vouchers or other
evidence of any such payments made by the Surety shall be PRIMA FACIE
evidence of the fact and amount of the liability to the Surety.
ASSIGNMENT
THIRD: The Contractor, the Indemnitors hereby consenting, will assign,
transfer and set over, and does hereby assign, transfer and set over to the
Surety, as collateral, to secure the obligations in any and all of the
paragraphs of this Agreement and any other indebtedness and liabilities of
the Contractor to the Surety, whether heretofore or hereafter incurred, the
assignment in the case of each contract to become effective as of the date of
the bond covering such contract, but only in the event of (1) any
abandonment, forfeiture or breach of any contracts referred to in the Bonds or
of any breach of any said Bonds; or (2) of any breach of the provisions of
any of the paragraphs of this Agreement; or (3) of a default in discharging
such other indebtedness or liabilities when due; or (4) of any assignment
by the Contractor for the benefit of creditors, or of the appointment, or of
any application for the appointment, of a receiver or trustee for the
Contractor whether insolvent or not; or (5) of any proceeding which deprives
the Contractor of the use of any of the machinery, equipment, plant, tools or
material referred to in section (b) of this paragraph; or (6) of the
Contractor's dying, absconding, disappearing, incompetency, being convicted
of a felony, or imprisoned if the Contractor be an individual: (a) All the
rights of the Contractor in, and growing in any manner out of, all contracts
referred to in the Bonds, or in, or growing in any manner out of the Bonds;
(b) All the rights, title and interest of the Contractor in and to all
machinery, equipment, plant, tools and materials which are now, or may
hereafter be, about or upon the site or sites of any and all of the
contractual work referred to in the Bonds or elsewhere, including materials
purchased for or chargeable to any and all contracts referred to in the
bonds, materials which may be in process of construction, in storage
elsewhere, or in transportation to any and all of said sites; (c) All the
rights, title and interest of the Contractor in and to all subcontracts let or
to be let in connection with any and all contracts referred to in the Bonds,
and in and to all surety bonds supporting such subcontracts; (d) All actions,
causes of actions, claims and demands whatsoever which the Contractor may have
or acquire against any subcontractor, laborer or materialman, or any person
furnishing or agreeing to furnish or supply labor, material, supplies,
machinery, tools or other equipment in connection with or on account of any
and all contracts referred to in the Bonds; and against any surety or
sureties of any subcontractor, laborer, or materialman; (e) Any and all
percentages retained and any and all sums that may be due or hereafter become
due on account of any and all contracts referred to in the Bonds and all
other contracts whether bonded or not in which the Contractor has an interest.
TRUST FUND
FOURTH: If any of the Bonds are executed in connection with a contract
which by its terms or by law prohibits the assignment of the contract price,
or any part thereof, the Contractor and Indemnitors covenant and agree that
all payments received for or on account of said contract shall be held as a
trust fund in which the Surety has an interest, for the payment of
obligations incurred in the performance of the contract and for labor,
materials,
<PAGE>
and services furnished in the prosecution of the work provided in said
contract or any authorized extension or modification thereof; and, further,
it is expressly understood and declared that all monies due and to become due
under any contract or contracts covered by the Bonds are trust funds, whether
in the possession of the Contractor or Indemnitors or otherwise, for the
benefit of and for payment of all such obligations in connection with any
such contract or contracts for which the Surety would be liable under any of
said Bonds, which said trust also inures to the benefit of the Surety for any
liability or loss it may have or sustain under any said Bonds, and this
Agreement and declaration shall also constitute notice of such trust.
UNIFORM COMMERCIAL CODE
FIFTH: That this Agreement shall constitute a Security Agreement to the
Surety and also a Financing Statement, both in accordance with the provisions
of the Uniform Commercial Code of every jurisdiction wherein such Code is in
effect and may be so used by the Surety without in any way abrogating,
restricting or limiting the rights of the Surety under this Agreement or under
law, or in equity.
TAKEOVER
SIXTH: In the event of any breach or default asserted by the obligee in
any said Bonds, or the Contractor has abandoned the work on or forfeited any
contract or contracts covered by any said Bonds, or has failed to pay
obligations incurred in connection therewith, or in the event of the death,
disappearance, Contractor's conviction for a felony, imprisonment,
incompetency, insolvency, or bankruptcy of the Contractor, or the appointment
of a receiver or trustee for the Contractor, or the property of the
Contractor, or in the event of an assignment for the benefit of creditors of
the Contractor, or if any action is taken by or against the Contractor under
or by virtue of the National Bankruptcy Act, or should reorganization or
arrangement proceedings be filed by or against the Contractor under said Act,
or if any action is taken by or against the Contractor under the insolvency
laws of any state, possession, or territory of the United States the Surety
shall have the right, at its option and in its sole discretion and is hereby
authorized, with or without exercising any other right or option conferred
upon it by law or in the terms of this Agreement, to take possession of any
part or all of the work under any contract or contracts covered by any said
Bonds, and at the expense of the Contractor and Indemnitors to complete or
arrange for the completion of the same, and the Contractor and Indemnitors
shall promptly upon demand pay to the Surety all losses, and expenses so
incurred.
CHANGES
SEVENTH: The Surety is authorized and empowered, without notice to or
knowledge of the Indemnitors to assent to any change whatsoever in the Bonds,
and/or any contracts referred to in the Bonds, and/or in the general
conditions, plans and/or specifications accompanying said contracts,
including, but not limited to, any change in the time for the completion of
said contracts and to payments or advances thereunder before the same may be
due, and to assent to or take any assignment or assignments, to execute or
consent to the execution of any continuations, extensions or renewals of the
Bonds and to execute any substitute or substitutes therefor, with the same or
different conditions, provisions and obligees and with the same or larger or
smaller penalties, it being expressly understood and agreed that the
Indemnitors shall remain bound under the terms of this Agreement even though
any such assent by the Surety does or might substantially increase the
liability of said Indemnitors.
ADVANCES
EIGHTH: The Surety is authorized and empowered to guarantee loans, to
advance or lend to the Contractor any money, which the Surety may see fit, for
the purpose of any contracts referred to in, or guaranteed by the Bonds; and
all money expended in the completion of any such contracts by the Surety, or
lent or advanced from time to time to the Contractor, or guaranteed by the
Surety for the purposes of any such contracts, and all costs, and expenses
incurred by the Surety in relation thereto, unless repaid with legal interest
by the Contractor to the Surety when due, shall be presumed to be a loss by
the Surety for which the Contractor and the Indemnitors shall be responsible,
notwithstanding that said money or any part thereof should not be used by the
Contractor.
BOOKS AND RECORDS
NINTH: At any time, and until such time as the liability of the Surety
under any and all said Bonds is terminated, the Surety shall have the right
to reasonable access to the books, records, and accounts of the Contractor,
and Indemnitors; and any bank depository, materialman, supply house, or other
person, firm, or corporation when requested by the Surety is hereby
authorized to furnish the Surety any information requested including, but not
limited to, the status of the work under contracts being performed by the
Contractor, the condition of the performance of such contracts and payments
of accounts.
DECLINE EXECUTION
TENTH: Unless otherwise specifically agreed in writing, the Surety may
decline to execute any Bond and the Contractor and Indemnitors agree to make
no claim to the contrary in consideration of the Surety's receiving this
Agreement; and if the Surety shall execute a Bid or Proposal Bond, it shall
have the right to decline to execute any and all of the bonds that may be
required in connection with any award that may be made under the proposal for
which the Bid or Proposal Bond is given and such declination shall not
diminish or alter the liability that may arise by reason of having executed
the Bid or Proposal Bond.
NOTICE OF EXECUTION
ELEVENTH: The Indemnitors hereby waive notice of the execution of said
Bonds and of the acceptance of this Agreement, and the Contractor and the
Indemnitors hereby waive all notice of any default, or any other act or acts
giving rise to any claim under said Bonds, as well as notice of any and all
liability of the Surety under said Bonds, and any and all liability on their
part hereunder, to the end and effect that, the Contractor and the
Indemnitors shall be and continue liable hereunder, notwithstanding any
notice of any kind to which they might have been or be entitled, and
notwithstanding any defenses they might have been entitled to make.
HOMESTEAD
TWELFTH: The Contractor and the Indemnitors hereby waive, so far as
their respective obligations under this Agreement are concerned, all rights
to claim any of their property, including their respective homesteads, as
exempt from levy, execution, sale or other legal process under the laws of any
State, Territory, or Possession.
SETTLEMENTS
THIRTEENTH: The Surety shall have the right to adjust, settle or
compromise any claim, demand, suit or judgment upon the Bonds, unless the
Contractor and the Indemnitors shall request the Surety to litigate such
claim or demand, or to defend such suit, or to appeal from such judgment, and
shall deposit with the Surety, at the time of such request, cash or
collateral satisfactory to the Surety in kind and amount, to be used in
paying any judgment or judgments rendered or that may be rendered, with
interest, costs, expenses and attorneys' fees, including those of the Surety.
SURETIES
FOURTEENTH: In the event the Surety procures the execution of the Bonds
by other sureties, or executes the
<PAGE>
Bonds with co-sureties, or reinsures any portion of said Bonds with
reinsuring sureties, then all the terms and conditions of this Agreement
shall inure to the benefit of such other sureties, co-sureties and reinsuring
sureties, as their interests may appear.
SUITS
FIFTEENTH: Separate suits may be brought hereunder as causes of action
accrue, and the bringing of suit or the recovery of judgment upon any cause
of action shall not prejudice or bar the bringing of other suits, upon other
causes of action, whether theretofore or thereafter arising.
OTHER INDEMNITY
SIXTEENTH: That the Contractor and the Indemnitors shall continue to
remain bound under the terms of this Agreement even though the Surety may
have from time to time heretofore or hereafter, with or without notice to or
knowledge of the Contractor and the Indemnitors, accepted or released other
agreements of indemnity or collateral in connection with the execution or
procurement of said Bonds, from the Contractor or Indemnitors or others, it
being expressly understood and agreed by the Contractor and the Indemnitors
that any and all other rights which the Surety may have or acquire against
the Contractor and the Indemnitors and/or others under any such other or
additional agreements of indemnity or collateral shall be in addition to, and
not in lieu of, the rights afforded the Surety under this Agreement.
INVALIDITY
SEVENTEENTH: In case any of the parties mentioned in this Agreement fail
to execute the same, or in case the execution hereof by any of the parties be
defective or invalid for any reason, such failure, defect or invalidity shall
not in any manner affect the validity of this Agreement or the liability
hereunder of any of the parties executing the same, but each and every party
so executing shall be and remain fully bound and liable hereunder to the same
extent as if such failure, defect or invalidity had not existed. It is
understood and agreed by the Contractor and Indemnitors that the rights,
powers, and remedies given the Surety under this Agreement shall be and are
in addition to, and not in lieu of, any and all other rights, powers, and
remedies which the Surety may have or acquire against the Contractor and
Indemnitors or others whether by the terms of any other agreement or by
operation of law or otherwise.
ATTORNEY IN FACT
EIGHTEENTH: The Contractor and Indemnitors hereby irrevocably nominate,
constitute, appoint and designate the Surety as their attorney-in-fact with
the right, but not the obligation, to exercise all of the rights of the
Contractor and Indemnitors assigned, transferred and set over to the Surety
in this Agreement, and in the name of the Contractor and Indemnitors to make,
execute, and deliver any and all additional or other assignments, documents
or papers deemed necessary and proper by the Surety in order to give full
effect not only to the intent and meaning of the within assignments, but also
to the full protection intended to be herein given to the Surety under all
other provisions of this Agreement. The Contractor and Indemnitors hereby
ratify and confirm all acts and actions taken and done by the Surety as such
attorney-in-fact.
TERMINATION
NINETEENTH: This Agreement may be terminated by the Contractor or
Indemnitors upon twenty days' written notice sent by registered mail to the
Surety at its home office at Fidelity Building, Charles and Lexington Streets,
Baltimore, Maryland 21203, but any such notice of termination shall not
operate to modify, bar, or discharge the Contractor or the Indemnitors as to
the Bonds that may have been theretofore executed.
TWENTIETH: This Agreement may not be changed or modified orally. No
change or modification shall be effective unless made by written endorsement
executed to form a part hereof.
TWENTY-FIRST: Paragraphs Twenty-Second, Twenty-Third, Twenty-Fourth and
-----------------------------------------------------------
Twenty-Fifth hereof are set forth on the signature pages attached hereto,
- -----------------------------------------------------------------------------
which, together with the acknowledgement pages, constitute a part of this
- -----------------------------------------------------------------------------
Agreement.
- -----------------------------------------------------------------------------
IN WITNESS WHEREOF, we have signed and sealed the day and year first
above written.
Morrison Knudsen Corporation,
ATTEST OR WITNESS: a Delaware Corporation
---------------------------------------
(Full Name and Address of Contractor)
Morrison Knudsen Plaza, Boise, ID 83707
---------------------------------------
/s/ David A. Channer By: /s/ Stephen M. Hanks
- ------------------------------------ ----------------------------------(SEAL)
David A. Channer,
Assistant Secretary INDEMNITORS:
- ------------------------------------ ----------------------------------------
(Full Name and Address of Indemnitor)
----------------------------------------
- ------------------------------------ ----------------------------------------
(Full Name and Address of Indemnitor)
----------------------------------------
- ------------------------------------ ----------------------------------------
(Full Name and Address of Indemnitor)
----------------------------------------
- ------------------------------------ ----------------------------------------
FIDELITY AND DEPOSIT COMPANY OF MARYLAND
By (SEAL)
- ------------------------------------ ---------------------------------
ASSISTANT SECRETARY VICE-PRESIDENT
COLONIAL AMERICAN CASUALTY AND SURETY COMPANY
By (SEAL)
- ------------------------------------- ---------------------------------
ASSISTANT SECRETARY VICE-PRESIDENT
<PAGE>
FOR ACKNOWLEDGMENT OF CONTRACTOR'S SIGNATURE
INDIVIDUAL ACKNOWLEDGMENT
STATE OF )
-----------------------------)
)SS:
COUNTY OF )
----------------------------)
On this day of , 19 , before me, the
--------------- --------------- --
subscriber, personally appeared
------------------------------------------------
to me personally known, and known by me to be the person described in, and
----
who executed, the foregoing instrument and acknowledged same to be
-------------
act and deed.
My Commission Expires
------------------ -------------------------------------
(Notary Public)
PARTNERSHIP ACKNOWLEDGMENT
STATE OF )
-----------------------------)
)SS:
COUNTY OF )
----------------------------)
On this day of , 19 , before me,
--------------- --------------- --
personally appeared
---------------------------------------------------------
a member of the co-partnership of
--------------------------------------------,
to me known and known to me to be the person who is described in and who
executed the foregoing instrument, and acknowledged to me that he executed
the same as and for the act and deed of the said co-partnership.
My Commission Expires
------------------ -------------------------------------
(Notary Public)
CORPORATE ACKNOWLEDGMENT
STATE OF Idaho )
-----------------------------)
)SS:
COUNTY OF Ada )
----------------------------)
On this 1st day of April , 1993, before me, the
--------------- --------------- --
subscriber, personally appeared Stephen G. Hanks
---------------------------------------------
(Insert here name of officer who signs for the corporation)
to me personally known, who, being duly sworn, did depose and say that he
resided in the city of Boise, Idaho that he is the
-------------------,
General Counsel, Secretary & Senior Vice
- ------------------------------------------ President of
----------------------
the corporation described in, and which executed, the within instrument; that
he knows the seal of said corporation; that the seal affixed to said
instrument is such corporate seal; that it was so affixed by order
of the Board of Directors of said corporation, and that he signed his
name thereto by like order; and the deponent further said that he
is acquainted with David A. Channer
--------------------------------------------------------,
(Insert here name of officer who attests for corporation)
and knows that he is the Assistant Secretary of said corporation and
-----------------
that he subscribed his name to the within instrument by a like order of the
said Board of Directors.
My Commission Expires November 13, 1997 /s/ Tawny Aldrich
------------------ -------------------------------------
(Notary Public)
FOR ACKNOWLEDGMENT OF INDEMNITOR'S SIGNATURES
INDIVIDUAL ACKNOWLEDGMENT
STATE OF )
-----------------------------)
)SS:
COUNTY OF )
----------------------------)
On this day of , 19 , before me, the
--------------- --------------- --
subscriber, personally appeared
------------------------------------------------
to me personally known, and known by me to be the person described in, and
----
who executed, the foregoing instrument and acknowledged same to be
-------------
act and deed.
My Commission Expires
------------------ -------------------------------------
(Notary Public)
INDIVIDUAL ACKNOWLEDGMENT
STATE OF )
-----------------------------)
)SS:
COUNTY OF )
----------------------------)
On this day of , 19 , before me, the
--------------- --------------- --
subscriber, personally appeared
------------------------------------------------
to me personally known, and known by me to be the person described in, and
----
who executed, the foregoing instrument and acknowledged same to be
-------------
act and deed.
My Commission Expires
------------------ -------------------------------------
(Notary Public)
PARTNERSHIP ACKNOWLEDGMENT
STATE OF )
-----------------------------)
)SS:
COUNTY OF )
----------------------------)
On this day of , 19 , before me,
--------------- --------------- --
personally appeared
---------------------------------------------------------
a member of the co-partnership of
--------------------------------------------,
to me known and known to me to be the person who is described in and who
executed the foregoing instrument, and acknowledged to me that he executed
the same as and for the act and deed of the said co-partnership.
My Commission Expires
------------------ -------------------------------------
(Notary Public)
CORPORATE ACKNOWLEDGMENT
STATE OF )
-----------------------------)
)SS:
COUNTY OF )
----------------------------)
On this day of , 19 , before me, the
--------------- --------------- --
subscriber, personally appeared
---------------------------------------------
(Insert here name of officer who signs for the corporation)
to me personally known, who, being duly sworn, did depose and say that he
resides in the city of that he is the
-------------------,
- ------------------------------------------ President of
---------------------
the corporation described in, and which executed, the within instrument; that
he knows the seal of said corporation; that the seal affixed to said
instrument is such corporate seal; that it was so affixed by order
of the Board of Directors of said corporation, and that he signed his
name thereto by like order; and the deponent further said that he
is acquainted with
--------------------------------------------------------,
(Insert here name of officer who attests for corporation)
and knows that he is the Secretary of said corporation and
-----------------
that he subscribed his name to the within instrument by a like order of the
said Board of Directors.
My Commission Expires
------------------ -------------------------------------
(Notary Public)
<PAGE>
SIGNATURE PAGE NO. 1
Attached to and made a part of the Agreement of Indemnity consisting of
three pages and dated the 1st day of July, 1992 made and entered into between
Morrison Knudsen Corporation, a Delaware Corporation, and the companies
listed in paragraph Twenty-Third as Contractors and Indemnitors, and Fidelity
and Deposit Company of Maryland, Colonial American Casualty and Surety
Company, singly or in combination, as Surety.
TWENTY-SECOND: Whereas, Surety in reliance on Agreement of Indemnity dated
the 26th day of October 1981 and various other agreements have heretofore
executed or procured Bonds at the request of and on behalf of Morrison
Knudsen Company, Inc. and/or various subsidiaries, each acting in its own
name solely or as co-adventures composed of combinations of any or all of
them, as well as co-adventures with others. Whereas, Morrison Knudsen
Company, Inc. and subsidiaries subsequently became direct or indirect
subsidiaries of Morrison Knudsen Corporation, a Delaware Corporation. Now,
therefore in consideration of Surety's agreement to consider executing
additional Bonds for the companies listed in paragraph Twenty-Third (subject
to paragraph Tenth of this Agreement) this indemnity shall also apply to any
Bond or Bonds previously executed or procured on behalf of Morrison Knudsen
Company, Inc. and/or its subsidiaries.
TWENTY-THIRD: The terms "Contractors" and "Indemnitors" as used in said
agreement shall include the following parties:
Atascosa Mining Co.
E.E. Black, Ltd.
Black Construction Corporation
Black Micro Corporation
Centennial Engineering, Inc.
CF Systems Corporation
CF Systems Remediation
MK Gold Company
Morrison Knudsen Corporation, a Delaware Corporation
Morrison Knudsen Corporation, an Ohio Corporation
G.W. Murphy Construction Co., Inc.
National Projects, Inc.
Navasota Mining Company, Inc.
Northern Construction Company, Ltd.
Western Aircraft, Inc.
Yampa Mining Co.
The term "Contractor" shall also include any company in which any of the
above named parties owns a controlling interest, directly or indirectly,
whether in existence now or hereafter acquired each acting in its own name
solely or operating under a trade name, or as co-adventures composed of
combinations of any or all of them, as well as co-adventures with others.
TWENTY-FOURTH: With respect to any Bonds executed or procured for
Contractor(s) as co-adventures with others, if Surety requests Contractor(s)
to execute and Contractor(s) do execute an Application for Performance and
Payment Bonds and Indemnity Agreement (Form 1, 2, or 3) the obligations of
the undersigned Indemnitors with respect to any Bonds issued in connection
with such Application shall be limited to the amount of the obligations
assumed by the Contractor(s) in said Application for Performance and Payment
Bonds and Indemnity Agreement (Form 1, 2, or 3), otherwise the duties and
obligations of the Contractors and Indemnitors will, without limitation, be
governed by the provisions of this agreement.
TWENTY-FIFTH: Wherever Colonial American Casualty and Surety Company is
mentioned in this Agreement of Indemnity, it is construed to also mean
Fidelity and Deposit Company. Effective January 1, 1992 Fidelity and
Deposit Company changed its name to Colonial American Casualty and Surety
Company.
IN WITNESS THEREOF, we have signed and sealed the day and year first written
above.
Attest: Atascosa Mining Co.
/s/ S. G. Hanks By: /s/ Robert A. Tinstman
- ------------------------------------- ----------------------------------
S. G. Hanks, Secretary Robert A. Tinstman, President
<PAGE>
SIGNATURE PAGE NO. 2
Attest: E.E. Black, Ltd.
/s/ J. S. Voorhees By: /s/ E. R. Ferguson
- ------------------------------------- ----------------------------------
J. S. Voorhees, Vice President and E. R. Ferguson, President
Assistant Secretary
Attest: Black Construction Corporation
/s/ J. S. Voorhees By: /s/ E. R. Ferguson
- ------------------------------------- ----------------------------------
J. S. Voorhees, Vice President and E. R. Ferguson, President
Assistant Secretary
Attest: Black Micro Corporation
/s/ J. S. Voorhees By: /s/ E. R. Ferguson
- ------------------------------------- ----------------------------------
J. S. Voorhees, Vice President and E. R. Ferguson, President
Assistant Secretary
Attest: Centennial Engineering, Inc.
/s/ T. D. Gray By: /s/ Larry R. Thomas
- ------------------------------------- ----------------------------------
T. D. Gray, Senior Vice President, Larry R. Thomas, President
Secretary and Treasurer
Attest: CF Systems Corporation
/s/ S. G. Hanks By: /s/ S. W. Box
- ------------------------------------- ----------------------------------
S. G. Hanks, Secretary S. W. Box, President
Attest: CF Systems Remediation
/s/ S. G. Hanks By: /s/ S. W. Box
- ------------------------------------- ----------------------------------
S. G. Hanks, Secretary S. W. Box, President
Attest: MK Gold Company
/s/ S. G. Hanks By: /s/ Robert A. Tinstman
- ------------------------------------- ----------------------------------
S. G. Hanks, Secretary Robert A. Tinstman, President
Attest: Morrison Knudsen Corporation,
a Delaware Corporation
/s/ David A. Channer By: /s/ Stephen G. Hanks
- ------------------------------------- ----------------------------------
David A. Channer, Assistant Secretary Stephen G. Hanks, Senior Vice
President, Secretary and General
Counsel
Attest: Morrison Knudsen Corporation,
an Ohio Corporation
/s/ David A. Channer By: /s/ Stephen G. Hanks
- ------------------------------------- ----------------------------------
David A. Channer, Assistant Secretary Stephen G. Hanks, Senior Vice
President, Secretary and General
Counsel
Attest: G. W. Murphy Construction Co., Inc.
/s/ J. S. Voorhees By: /s/ E. R. Ferguson
- ------------------------------------- ----------------------------------
J. S. Voorhees, Vice President and E. R. Ferguson, Managing Director
Assistant Secretary
Attest: National Projects, Inc.
/s/ S. G. Hanks By: /s/ Jack C. Granger
- ------------------------------------- ----------------------------------
S. G. Hanks, Senior Vice President, Jack C. Granger, President
Secretary & General Counsel
Attest: Navasota Mining Company, Inc.
/s/ S. G. Hanks By: /s/ Robert A. Tinstman
- ------------------------------------- ----------------------------------
S. G. Hanks, Secretary Robert A. Tinstman, President
<PAGE>
SIGNATURE PAGE NO. 3
Attest: Northern Construction Company, Ltd.
/s/ S. G. Hanks By: /s/ Jack C. Granger
- ------------------------------------- ----------------------------------
S. G. Hanks, Secretary Jack C. Granger, President
Attest: Western Aircraft, Inc.
/s/ S. G. Hanks By: /s/ Brent D. Brandon
- ------------------------------------- ----------------------------------
S. G. Hanks, Secretary Brent D. Brandon, President
Attest: Yampa Mining Co.
/s/ S. G. Hanks By: /s/ Robert A. Tinstman
- ------------------------------------- ----------------------------------
S. G. Hanks, Secretary Robert A. Tinstman, President
<PAGE>
CORPORATE ACKNOWLEDGMENT
STATE OF Idaho )
-----------------------------)
)SS:
COUNTY OF Ada )
----------------------------)
On this 1st day of April , 1993, before me, the
--------------- --------------- --
subscriber, personally appeared Robert A. Tinstman
---------------------------------------------
(Insert here name of officer who signs for the corporation)
to me personally known, who, being duly sworn, did depose and say that he
resided in the city of Boise, Idaho , that he is the
-------------------
President of
- ---------------------------------------------------
Atascosa Mining Co. the corporation described in, and which
- -----------------------------------
executed, the within instrument; that he knows the seal of said corporation;
that the seal affixed to said instrument is such corporate seal; that
it was so affixed by order of the Board of Directors of said corporation,
and that he signed his name thereto by like order; and the deponent
further said that he is acquainted with
S. G. Hanks and knows that
- ----------------------------------------------------------,
(Insert here name of officer who attests for corporation)
he is the Secretary of said corporation and that he
-------------------------
subscribed his name to the within instrument by a like order of the said
Board of Directors.
My Commission Expires November 13, 1997 /s/ Tawny Aldrich
------------------ -------------------------------------
(Notary Public)
CORPORATE ACKNOWLEDGMENT
STATE OF Hawaii )
-----------------------------)
)SS:
COUNTY OF Honolulu )
----------------------------)
On this 1st day of April , 1993, before me, the
--------------- --------------- --
subscriber, personally appeared E. R. Ferguson
---------------------------------------------
(Insert here name of officer who signs for the corporation)
to me personally known, who, being duly sworn, did depose and say that he
resides in the city of Honolulu, Hawaii , that he is the
------------------------
President of
- ---------------------------------------------------
E. E. Black, Limited the corporation described in, and which
- -----------------------------------
executed, the within instrument; that he knows the seal of said corporation;
that the seal affixed to said instrument is such corporate seal; that
it was so affixed by order of the Board of Directors of said corporation,
and that he signed his name thereto by like order; and the deponent
further said that he is acquainted with
J. S. Voorhees , and knows that
- ----------------------------------------------------------
(Insert here name of officer who attests for corporation)
he is the Assistant Secretary of said corporation and that he
-------------------------
subscribed his name to the within instrument by a like order of the said
Board of Directors.
My Commission Expires March 4, 1997 /s/ Betsy A. MacMackin
------------------ -------------------------------------
(Notary Public)
CORPORATE ACKNOWLEDGMENT
STATE OF Hawaii )
-----------------------------)
)SS:
COUNTY OF Honolulu )
----------------------------)
On this 1st day of April , 1993, before me, the
--------------- --------------- --
subscriber, personally appeared E. R. Ferguson
---------------------------------------------
(Insert here name of officer who signs for the corporation)
to me personally known, who, being duly sworn, did depose and say that he
resided in the city of Honolulu, Hawaii , that he is the
------------------------
President of
- ---------------------------------------------------
Black Construction Corporation the corporation described in, and which
- -----------------------------------
executed, the within instrument; that he knows the seal of said corporation;
that the seal affixed to said instrument is such corporate seal; that
it was so affixed by order of the Board of Directors of said corporation,
and that he signed his name thereto by like order; and the deponent
further said that he is acquainted with
J. S. Voorhees , and knows that
- ----------------------------------------------------------
(Insert here name of officer who attests for corporation)
he is the Assistant Secretary of said corporation and that he
-------------------------
subscribed his name to the within instrument by a like order of the said
Board of Directors.
My Commission Expires March 4, 1997 /s/ Betsy A. MacMackin
------------------ -------------------------------------
(Notary Public)
CORPORATE ACKNOWLEDGMENT
STATE OF Hawaii )
-----------------------------)
)SS:
COUNTY OF Honolulu )
----------------------------)
On this 1st day of April , 1993, before me, the
--------------- --------------- --
subscriber, personally appeared E. R. Ferguson
---------------------------------------------
(Insert here name of officer who signs for the corporation)
to me personally known, who, being duly sworn, did depose and say that he
resides in the city of Honolulu, Hawaii , that he is the
------------------------
President of
- ---------------------------------------------------
Black Micro Corporation the corporation described in, and which
- -----------------------------------
executed, the within instrument; that he knows the seal of said corporation;
that the seal affixed to said instrument is such corporate seal; that
it was so affixed by order of the Board of Directors of said corporation,
and that he signed his name thereto by like order; and the deponent
further said that he is acquainted with
J. S. Voorhees , and knows that
- ----------------------------------------------------------
(Insert here name of officer who attests for corporation)
he is the Assistant Secretary of said corporation and that he
-------------------------
subscribed his name to the within instrument by a like order of the said
Board of Directors.
My Commission Expires March 4, 1997 /s/ Betsy A. MacMackin
------------------ -------------------------------------
(Notary Public)
<PAGE>
CORPORATE ACKNOWLEDGMENT
STATE OF )
-----------------------------)
)SS:
COUNTY OF )
----------------------------)
On this 1st day of April , 1993, before me, the
--------------- --------------- --
subscriber, personally appeared Larry R. Thomas
---------------------------------------------
(Insert here name of officer who signs for the corporation)
to me personally known, who, being duly sworn, did depose and say that he
resided in the city of , that he is the
-----------------------
President of
- ---------------------------------------------------
Centennial Engineering, Inc. the corporation described in, and which
- -----------------------------------
executed, the within instrument; that he knows the seal of said corporation;
that the seal affixed to said instrument is such corporate seal; that
it was so affixed by order of the Board of Directors of said corporation,
and that he signed his name thereto by like order; and the deponent
further said that he is acquainted with
T. D. Gray , and knows that
- ----------------------------------------------------------
(Insert here name of officer who attests for corporation)
he is the Secretary of said corporation and that he
-------------------------
subscribed his name to the within instrument by a like order of the said
Board of Directors.
My Commission Expires August 8, 1995 /s/ Michele Gunderson
------------------ -------------------------------------
(Notary Public)
CORPORATE ACKNOWLEDGMENT
STATE OF Idaho )
-----------------------------)
)SS:
COUNTY OF Ada )
----------------------------)
On this 1st day of April , 1993, before me, the
--------------- --------------- --
subscriber, personally appeared S. W. Box
---------------------------------------------
(Insert here name of officer who signs for the corporation)
to me personally known, who, being duly sworn, did depose and say that he
resides in the city of Boise, Idaho , that he is the
------------------------
President of
- ---------------------------------------------------
CF Systems Corporation the corporation described in, and which
- -----------------------------------
executed, the within instrument; that he knows the seal of said corporation;
that the seal affixed to said instrument is such corporate seal; that
it was so affixed by order of the Board of Directors of said corporation,
and that he signed his name thereto by like order; and the deponent
further said that he is acquainted with
S. G. Hanks , and knows that
- ----------------------------------------------------------
(Insert here name of officer who attests for corporation)
he is the Secretary of said corporation and that he
-------------------------
subscribed his name to the within instrument by a like order of the said
Board of Directors.
My Commission Expires November 13, 1997 /s/ Tawny Aldrich
------------------ -------------------------------------
(Notary Public)
CORPORATE ACKNOWLEDGMENT
STATE OF Idaho )
-----------------------------)
)SS:
COUNTY OF Ada )
----------------------------)
On this 1st day of April , 1993, before me, the
--------------- --------------- --
subscriber, personally appeared S. W. Box
---------------------------------------------
(Insert here name of officer who signs for the corporation)
to me personally known, who, being duly sworn, did depose and say that he
resided in the city of Boise, Idaho , that he is the
------------------------
President of
- ---------------------------------------------------
CF Systems Remediation the corporation described in, and which
- -----------------------------------
executed, the within instrument; that he knows the seal of said corporation;
that the seal affixed to said instrument is such corporate seal; that
it was so affixed by order of the Board of Directors of said corporation,
and that he signed his name thereto by like order; and the deponent
further said that he is acquainted with
S. G. Hanks , and knows that
- ----------------------------------------------------------
(Insert here name of officer who attests for corporation)
he is the Secretary of said corporation and that he
-------------------------
subscribed his name to the within instrument by a like order of the said
Board of Directors.
My Commission Expires November 13, 1997 /s/ Tawny Aldrich
------------------ -------------------------------------
(Notary Public)
CORPORATE ACKNOWLEDGMENT
STATE OF Idaho )
-----------------------------)
)SS:
COUNTY OF Ada )
----------------------------)
On this 1st day of April , 1993, before me, the
--------------- --------------- --
subscriber, personally appeared Robert A. Tinstman
---------------------------------------------
(Insert here name of officer who signs for the corporation)
to me personally known, who, being duly sworn, did depose and say that he
resides in the city of Boise, Idaho , that he is the
------------------------
President of
- ---------------------------------------------------
MK Gold Company the corporation described in, and which
- -----------------------------------
executed, the within instrument; that he knows the seal of said corporation;
that the seal affixed to said instrument is such corporate seal; that
it was so affixed by order of the Board of Directors of said corporation,
and that he signed his name thereto by like order; and the deponent
further said that he is acquainted with
S. G. Hanks , and knows that
- ----------------------------------------------------------
(Insert here name of officer who attests for corporation)
he is the Secretary of said corporation and that he
-------------------------
subscribed his name to the within instrument by a like order of the said
Board of Directors.
My Commission Expires November 13, 1997 /s/ Tawny Aldrich
------------------ -------------------------------------
(Notary Public)
<PAGE>
CORPORATE ACKNOWLEDGMENT
STATE OF Idaho )
-----------------------------)
)SS:
COUNTY OF Ada )
----------------------------)
On this 1st day of April , 1993, before me, the
--------------- --------------- --
subscriber, personally appeared Stephen G. Hanks
---------------------------------------------
(Insert here name of officer who signs for the corporation)
to me personally known, who, being duly sworn, did depose and say that he
resided in the city of Boise, Idaho , that he is the
-----------------------
General Counsel, Secretary & Senior Vice President of
- ---------------------------------------------------
Morrison Knudsen Corporation the corporation described in, and which
- -----------------------------------
executed, the within instrument; that he knows the seal of said corporation;
that the seal affixed to said instrument is such corporate seal; that
it was so affixed by order of the Board of Directors of said corporation,
and that he signed his name thereto by like order; and the deponent
further said that he is acquainted with
David A. Channer , and knows that
- ----------------------------------------------------------
(Insert here name of officer who attests for corporation)
he is the Assistant Secretary of said corporation and that he
-------------------------
subscribed his name to the within instrument by a like order of the said
Board of Directors.
My Commission Expires November 13, 1997 /s/ Tawny Aldrich
------------------ -------------------------------------
(Notary Public)
CORPORATE ACKNOWLEDGMENT
STATE OF Idaho )
-----------------------------)
)SS:
COUNTY OF Ada )
----------------------------)
On this 1st day of April , 1993, before me, the
--------------- --------------- --
subscriber, personally appeared Stephen G. Hanks
---------------------------------------------
(Insert here name of officer who signs for the corporation)
to me personally known, who, being duly sworn, did depose and say that he
resides in the city of Boise, Idaho , that he is the
------------------------
General Counsel, Secretary & Senior Vice President of
- ---------------------------------------------------
Morrison Knudsen Corporation the corporation described in, and which
- -----------------------------------
executed, the within instrument; that he knows the seal of said corporation;
that the seal affixed to said instrument is such corporate seal; that
it was so affixed by order of the Board of Directors of said corporation,
and that he signed his name thereto by like order; and the deponent
further said that he is acquainted with
David A. Channer , and knows that
- ----------------------------------------------------------
(Insert here name of officer who attests for corporation)
he is the Assistant Secretary of said corporation and that he
-------------------------
subscribed his name to the within instrument by a like order of the said
Board of Directors.
My Commission Expires November 13, 1997 /s/ Tawny Aldrich
------------------ -------------------------------------
(Notary Public)
CORPORATE ACKNOWLEDGMENT
STATE OF Hawaii )
-----------------------------)
)SS:
COUNTY OF Honolulu )
----------------------------)
On this 1st day of April , 1993, before me, the
--------------- --------------- --
subscriber, personally appeared E. R. Ferguson
---------------------------------------------
(Insert here name of officer who signs for the corporation)
to me personally known, who, being duly sworn, did depose and say that he
resided in the city of Honolulu, Hawaii that he is the
------------------------,
Managing Director President of
- ---------------------------------------------------
G. W. Murphy Construction Co., Inc. the corporation described in, and which
- -----------------------------------
executed, the within instrument; that he knows the seal of said corporation;
that the seal affixed to said instrument is such corporate seal; that
it was so affixed by order of the Board of Directors of said corporation,
and that he signed his name thereto by like order; and the deponent
further said that he is acquainted with
J. S. Voorhees and knows that
- ----------------------------------------------------------,
(Insert here name of officer who attests for corporation)
he is the Assistant Secretary of said corporation and that he
-------------------------
subscribed his name to the within instrument by a like order of the said
Board of Directors.
My Commission Expires March 4, 1997 /s/ Betsy A. MacMackin
------------------ -------------------------------------
(Notary Public)
CORPORATE ACKNOWLEDGMENT
STATE OF Idaho )
-----------------------------)
)SS:
COUNTY OF Ada )
----------------------------)
On this 1st day of April , 1993, before me, the
--------------- --------------- --
subscriber, personally appeared Jack C. Granger
---------------------------------------------
(Insert here name of officer who signs for the corporation)
to me personally known, who, being duly sworn, did depose and say that he
resides in the city of Boise, Idaho , that he is the
------------------------
President of
- ---------------------------------------------------
National Projects, Inc. the corporation described in, and which
- -----------------------------------
executed, the within instrument; that he knows the seal of said corporation;
that the seal affixed to said instrument is such corporate seal; that
it was so affixed by order of the Board of Directors of said corporation,
and that he signed his name thereto by like order; and the deponent
further said that he is acquainted with
S. G. Hanks and knows that
- ----------------------------------------------------------,
(Insert here name of officer who attests for corporation)
he is the Secretary of said corporation and that he
-------------------------
subscribed his name to the within instrument by a like order of the said
Board of Directors.
My Commission Expires November 13, 1997 /s/ Tawny Aldrich
------------------ -------------------------------------
(Notary Public)
<PAGE>
CORPORATE ACKNOWLEDGMENT
STATE OF Idaho )
-----------------------------)
)SS:
COUNTY OF Ada )
----------------------------)
On this 1st day of April , 1993, before me, the
--------------- --------------- --
subscriber, personally appeared Robert A. Tinstman
---------------------------------------------
(Insert here name of officer who signs for the corporation)
to me personally known, who, being duly sworn, did depose and say that he
resided in the city of Boise, Idaho , that he is the
------------------------
President of
- ---------------------------------------------------
Navasota Mining Company the corporation described in, and which
- -----------------------------------
executed, the within instrument; that he knows the seal of said corporation;
that the seal of said corporation; that the seal affixed to said instrument is
such corporate seal; that it was so affixed by order of the Board of Directors
of said corporation, and that he signed his name thereto by like order; and
the deponent further said that he is acquainted with
S. G. Hanks , and knows that
- ----------------------------------------------------------
(Insert here name of officer who attests for corporation)
he is the Secretary of said corporation and that he
-------------------------
subscribed his name to the within instrument by a like order of the said
Board of Directors.
My Commission Expires November 13, 1997 /s/ Tawny Aldrich
------------------ -------------------------------------
(Notary Public)
CORPORATE ACKNOWLEDGMENT
STATE OF Idaho )
-----------------------------)
)SS:
COUNTY OF Ada )
----------------------------)
On this 1st day of April , 1993, before me, the
--------------- --------------- --
subscriber, personally appeared Jack C. Granger
---------------------------------------------
(Insert here name of officer who signs for the corporation)
to me personally known, who, being duly sworn, did depose and say that he
resided in the city of Boise, Idaho , that he is the
------------------------
President of
- ---------------------------------------------------
Northern Construction Company, Ltd. the corporation described in, and which
- -----------------------------------
executed, the within instrument; that he knows the seal of said corporation;
that the seal affixed to said instrument is such corporate seal; that
it was so affixed by order of the Board of Directors of said corporation,
and that he signed his name thereto by like order; and the deponent
further said that he is acquainted with
S. G. Hanks , and knows that
- ----------------------------------------------------------
(Insert here name of officer who attests for corporation)
he is the Secretary of said corporation and that he
-------------------------
subscribed his name to the within instrument by a like order of the said
Board of Directors.
My Commission Expires November 13, 1997 /s/ Tawny Aldrich
------------------ -------------------------------------
(Notary Public)
CORPORATE ACKNOWLEDGMENT
STATE OF Idaho )
-----------------------------)
)SS:
COUNTY OF Ada )
----------------------------)
On this 1st day of April , 1993, before me, the
--------------- --------------- --
subscriber, personally appeared Brent D. Brandon
---------------------------------------------
(Insert here name of officer who signs for the corporation)
to me personally known, who, being duly sworn, did depose and say that he
resided in the city of Boise, Idaho , that he is the
------------------------
President of
- ---------------------------------------------------
Western Aircraft, Inc. the corporation described in, and which
- -----------------------------------
executed, the within instrument; that he knows the seal of said corporation;
that the seal affixed to said instrument is such corporate seal; that
it was so affixed by order of the Board of Directors of said corporation,
and that he signed his name thereto by like order; and the deponent
further said that he is acquainted with
S. G. Hanks , and knows that
- ---------------------------------------------------------
(Insert here name of officer who attests for corporation)
he is the Secretary of said corporation and that he
-------------------------
subscribed his name to the within instrument by a like order of the said
Board of Directors.
My Commission Expires November 13, 1997 /s/ Tawny Aldrich
------------------ -------------------------------------
(Notary Public)
CORPORATE ACKNOWLEDGMENT
STATE OF Idaho )
-----------------------------)
)SS:
COUNTY OF Ada )
----------------------------)
On this 1st day of April , 1993, before me, the
--------------- --------------- --
subscriber, personally appeared Robert A. Tinstman
---------------------------------------------
(Insert here name of officer who signs for the corporation)
to me personally known, who, being duly sworn, did depose and say that he
resides in the city of Boise, Idaho , that he is the
------------------------
President of
- ---------------------------------------------------
Yampa Mining Co. the corporation described in, and which
- -----------------------------------
executed, the within instrument; that he knows the seal of said corporation;
that the seal affixed to said instrument is such corporate seal; that
it was so affixed by order of the Board of Directors of said corporation,
and that he signed his name thereto by like order; and the deponent
further said that he is acquainted with
S. G. Hanks , and knows that
- ----------------------------------------------------------
(Insert here name of officer who attests for corporation)
he is the Secretary of said corporation and that he
-------------------------
subscribed his name to the within instrument by a like order of the said
Board of Directors.
My Commission Expires November 13, 1997 /s/ Tawny Aldrich
------------------ -------------------------------------
(Notary Public)
<PAGE>
[F & D Companies Letterhead]
AMENDMENT TO AGREEMENT OF INDEMNITY
THIS DOCUMENT TO BE KNOWN AS THE RELEASE
It is hereby mutually agreed that for good and valuable consideration,
receipt of which is hereby acknowledged, the Agreement of Indemnity dated the
1st day of July 1992 (hereinafter called the Agreement) and executed by
Morrison Knudsen Corporation, a Delaware Corporation, and all of the
companies listed in paragraph Twenty-Third of said Agreement, their
successors and assigns, (all of whom are hereinafter called Indemnitors) and
executed by said Indemnitors to provide indemnity to Fidelity and Deposit
Company of Maryland and Colonial American Casualty and Surety Company (both
of whom are hereinafter called Surety) in accordance with the terms of said
Agreement is amended as follows:
FIRST Surety and all other Indemnitors hereby release Indemnitor MK Gold
Company, its successors and assigns, from all obligations of
indemnity to Surety or to each other which obligations may have been
incurred by MK Gold Company because of any and all bonds which may
have been issued by Surety on behalf of any of the other Indemnitors
whether as a joint venturer or otherwise. This release does not
apply to any obligation of indemnity which may have been incurred
in the past or which may be incurred in the future because of any
bond issued by Surety in which MK Gold Company is named as bond
principal either alone or as a joint venturer.
SECOND MK Gold, for itself, its successors and its assigns, hereby
releases all other Indemnitors from all obligations of indemnity
whether incurred under the obligations of the Agreement, incurred
under common law, or arising from any other source because of any
surety bond naming MK Gold Company as principal which may be issued
by Surety or others subsequent to the date of this Release.
THIRD Except as amended by the terms of this Release, all terms and
conditions of the Agreement remain unchanged.
Dated this 3rd day of March, 1995.
ATTEST: FIDELITY AND DEPOSIT COMPANY OF MARYLAND
By: /s/ James I. Keenan, Jr. By: /s/ Richard F. Yeazel
----------------------------- ----------------------------------------
James I. Keenan, Jr., Secretary Richard F. Yeazel, Senior Vice President
Page 1 of 3
<PAGE>
ATTEST: COLONIAL AMERICAN CASUALTY AND SURETY COMPANY
By: /s/ James I. Keenan, Jr. By: /s/ Richard F. Yeazel
-------------------------- ------------------------------------------
James I. Keenan, Jr., Secretary Richard F. Yeazel, Senior Vice President
ATTEST: MORRISON KNUDSEN CORPORATION (DELAWARE)
By: /s/ By: /s/ S. G. Hanks
----------------------------- ------------------------------------------
(Title) Assistant Secretary (Title) S. G. Hanks, Executive Vice President
ATTEST: MORRISON KNUDSEN CORPORATION (OHIO)
By: /s/ By: /s/ S. G. Hanks
----------------------------- ------------------------------------------
(Title) Assistant Secretary (Title) S. G. Hanks, Executive Vice President
ATTEST: M. K. GOLD COMPANY
By: /s/ By: /s/ D. J. Kunz
----------------------------- ------------------------------------------
(Title) Vice President, (Title) D. J. Kunz, President and CEO
Secretary and General Counsel
ATTEST: ATASCOSA MINING CO.
By: /s/ By: /s/ R. A. Tinstman
----------------------------- ------------------------------------------
(Title) Assistant Secretary (Title) R. A. Tinstman, President
ATTEST: E.E. BLACK, LTD.
By: /s/ By: /s/ E. R. Ferguson
----------------------------- ------------------------------------------
(Title) Assistant Secretary (Title) E. R. Ferguson, President
ATTEST: BLACK CONSTRUCTION CORPORATION
By: /s/ By: /s/ E. R. Ferguson
----------------------------- ------------------------------------------
(Title) Assistant Secretary (Title) E. R. Ferguson, President
Page 2 of 3
<PAGE>
ATTEST: BLACK MICRO CORPORATION
By: /s/ By: /s/ E. R. Ferguson
----------------------------- ------------------------------------------
(Title) Assistant Secretary (Title) E. R. Ferguson, President
ATTEST: CENTENNIAL ENGINEERING, INC.
By: /s/ By: /s/ L. R. Thomas
----------------------------- ------------------------------------------
(Title) Assistant Secretary (Title) L. R. Thomas, President
ATTEST: CF SYSTEMS CORPORATION
By: /s/ By: /s/ C. S. Allred
----------------------------- ------------------------------------------
(Title) Assistant Secretary (Title) C. S. Allred, President
ATTEST: G. W. MURPHY CONSTRUCTION CO., INC.
By: /s/ By: /s/ E. R. Ferguson
----------------------------- ------------------------------------------
(Title) Assistant Secretary (Title) E. R. Ferguson, Managing Director
ATTEST: NATIONAL PROJECTS, INC.
By: /s/ By: /s/ J. C. Granger
----------------------------- ------------------------------------------
(Title) Assistant Secretary (Title) J. C. Granger, President
ATTEST: NAVASOTA MINING COMPANY, INC.
By: /s/ By:
--------------------------- ----------------------------------------
(Title) Assistant Secretary (Title) R. A. Tinstman, President
Page 3 of 3
<PAGE>
Exhibit 10.17
AGREEMENT OF INDEMNITY
THIS AGREEMENT of Indemnity, made and entered into this 1st day of
-----------
February , 1995, by the parties listed in Paragraph
- ----------------- -- ------------------------------------------------
(Insert full name and address of Contractor)
Twenty-Second hereof
- -----------------------------------------(hereinafter called the Contractor) and
the parties listed in Paragraph Twenty-Third hereof
- -------------------------------------------------------------------------------
(Insert full names and addresses of Indemnitors, if any)
- -------------------------------------------------------------------------------
(hereinafter called the Indemnitors, if any) and
- --------------------------------
FIDELITY AND DEPOSIT COMPANY OF MARYLAND, 300 Saint Paul Place, P.O. Box 1227,
Baltimore, Maryland 21203, its successors and assigns (hereinafter called
Surety),
WITNESSETH:
WHEREAS, the Contractor, in the performance of contracts and the
fulfillment of obligations generally, whether in its own name solely or as
co-adventurer with others, may desire or be required to give or procure
certain surety bonds, undertakings or instruments of guarantee, and to renew,
or continue or substitute from time to time the same or new bonds,
undertakings or instruments of guarantee with the same or different
penalties, and/or conditions, any one or more of which are hereinafter called
Bonds; or the Contractor or Indemnitors may request the Surety to refrain
from cancelling said Bonds: and
WHEREAS, at the request of the Contractor and the Indemnitors and upon the
express understanding that this Agreement of Indemnity be given, the Surety
has executed or procured to be executed, and may from time to time hereafter
execute or procure to be executed, said Bonds on behalf of the Contractor; and
WHEREAS, the Indemnitors have a substantial, material and beneficial
interest in the obtaining of the Bonds or in the Surety's refraining from
cancelling said Bonds.
NOW, THEREFORE, in consideration of the premises the Contractor and
Indemnitors for themselves, their heirs, executors, administrators,
successors and assigns, jointly and severally, hereby covenant and agree with
the Surety, as follows:
PREMIUMS
FIRST: The Contractor and Indemnitors will pay to the Surety in such
manner as may be agreed upon all premiums and charges of the Surety for the
Bonds in accordance with its rate filings, its manual of rates, or as
otherwise agreed upon, until the Contractor or Indemnitors shall serve
evidence satisfactory to the Surety of its discharge or release from the
Bonds and all liability by reason thereof.
INDEMNITY
SECOND: The Contractor and Indemnitors shall exonerate, indemnify, and
keep indemnified the Surety from and against any and all liability for losses
and/or expenses of whatsoever kind or nature (including, but not limited to,
interests, court costs and counsel fees) and from and against any and all
such losses and/or expenses which the Surety may sustain and incur: (1) By
reason of having executed or procured the execution of the Bonds, (2) By
reason of the failure of the Contractor of Indemnitors to perform or comply
with the covenants and conditions of this Agreement or (3) In enforcing any
of the covenants and conditions of this Agreement. Payment by reason of the
aforesaid cuses shall be made to the Surety by the Contractor and Indemnitors
as soon as liability exists or is asserted against the Surety, whether or not
the Surety shall have made any payment therefor. Such payment shall be equal
to the amount of the reserve set by the Surety. In the event of any payment
by the Surety the Contractor and Indemnitors further agree that in any
accounting between the Surety and Contractor, or between the Surety and the
Indemnitors, or either or both of them, the Surety shall be entitled to
charge for any and all disbursements made by it in good faith in and about
the matters herein contemplated by this Agreement under the belief that it is
or was liable for the sums and amounts so disbursed, or that it was
necessary or expedient to make such disbursements, whether or not such
liability, necessity or expediency existed; and that the vouchers or other
evidence of any such payments made by the Surety shall be PRIMA FACIE evident
of the fact and amount of the liability to the Surety.
ASSIGNMENT
THIRD: The Contractor, the Indemnitors hereby consenting, will assign,
transfer and set over, and does hereby assign, transfer and set over to the
Surety, as collateral, to secure the obligations in any and all of the
paragraphs of this Agreement and any other indebtedness and liabilities of
the Contractor to the Surety, whether heretofore or hereafter, incurred, the
assignment in the case of each contract to become effective as of the date of
the bond covering such contract, but only in the event of (1) any
abandonment, forfeiture or breach of any contracts referred to in the Bonds
or of any breach of any said Bonds; or (2) of any breach of the provisions of
any of the paragraphs of this Agreement; or (3) of a default in discharging
such other indebtedness or liabilities when due; or (4) of any assignment by
the Contractor for the benefit of creditors, or of the appointment, or of any
application for the appointment, of a receiver or trustee for the Contractor
whether insolvent or not; or (5) of any proceeding which deprives the
Contractor of the use of any of the machinery, equipment, plant, tools or
material referred to in section (b) of this paragraph; or (6) of the
Contractor's dying, absconding, disappearing, incompetency, being convicted
of a felony, or imprisoned if the Contractor be an individual: (a) All the
rights of the Contractor in, and growing in any manner out of, all contracts
referred to in the Bonds, or in, or growing in any manner out of the Bonds;
(b) All the rights, title and interest of the Contractor in and to all
machinery, equipment, plant, tools and materials which are now, or may
hereafter be, about or upon the site or sites of any and all of the
contractual work referred to in the Bonds or elsewhere, including materials
purchased for or chargeable to any and all contracts referred to in the
bonds, materials which may be in process of construction, in storage
elsewhere, or in transportation to any and all of said sites; (c) All the
rights, title and interest of the Contractor in and to all subcontracts let
or to be let in connection with any and all contracts referred to in the
Bonds, and in and to all surety bonds supporting such subcontracts; (d) All
actions, causes of actions, claims and demands whatsoever which the
Contractor may have or acquire against any subcontractor, laborer or
materialman, or any person furnishing or agreeing to furnish or supply labor,
material, supplies, machinery, tools or other equipment in connection with or
on account of any and all contracts referred to in the Bonds; and against any
surety or sureties of any subcontractor, laborer, or materialman; (e) Any and
all percentages retained and any and all sums that may be due or hereafter
become due on account of any and all contracts referred to in the Bonds and
all other contracts whether bonded or not in which the Contractor has an
interest.
<PAGE>
TRUST FUND
FOURTH: If any of the Bonds are executed in connection with a contract
which by its terms or by law prohibits the assignment of the contract price,
or any part thereof, the Contractor and Indemnitors covenant and agree that
all payments received for or on account of said contract shall be held as a
trust fund in which the Surety has an interest, for the payment of
obligations incurred in the performance of the contract and for labor,
materials, and services furnished in the prosecution of the work provided in
said contract or any authorized extension or modification thereof; and,
further, it is expressly understood and declared that all monies due and to
become due under any contract or contracts covered by the Bonds are trust
funds, whether in the possession of the Contractor or Indemnitors or
otherwise, for the benefit of and for payment of all such obligations in
connection with any such contract or contracts for which the Surety would be
liable under any of said Bonds, which said trust also inures to the benefit
of the Surety for any liability or loss it may have or sustain under any said
Bonds, and this Agreement and declaration shall also constitute notice of
such trust.
UNIFORM COMMERCIAL CODE
FIFTH: That this Agreement shall constitute a Security Agreement to the
Surety and also a Financing Statement, both in accordance with the provisions
of the Uniform Commercial Code of every jurisdiction wherein such Code is in
effect and may be so used by the Surety without in any way abrogating,
restricting or limiting the rights of the Surety under this Agreement or
under law, or in equity.
TAKEOVER
SIXTH: In the event of any breach or default asserted by the obligee in
any said Bonds, or the Contractor has abandoned the work on or forfeited any
contract or contracts covered by any said Bonds, or has failed to pay
obligations incurred in connection therewith, or in the event of the death,
disappearance, Contractor's conviction for a felony, imprisonment,
incompetency, insolvency, or bankruptcy of the Contractor, or the appointment
of a receiver or trustee for the Contractor, or the property of the
Contractor, or in the event of an assignment for the benefit of creditors of
the Contractor, or if any action is taken by or against the Contractor under
or by virtue of the National Bankruptcy Act, or should reorganization or
arrangement proceedings be filed by or against the Contractor under said Act,
or if any action is taken by or against the Contractor under the insolvency
laws of any state, possession, or territory of the United States the Surety
shall have the right, at its option and in its sole discretion and is hereby
authorized, with or without exercising any other right or option conferred
upon it by law or in the terms of this Agreement, to take possession of any
part or all of the work under any contract or contracts covered by any said
Bonds, and at the expense of the Contractor and Indemnitors to complete or
arrange for the completion of the same, and the Contractor and Indemnitors
shall promptly upon demand pay to the Surety all losses, and expenses so
incurred.
CHANGES
SEVENTH: The Surety is authorized and empowered, without notice to or
knowledge of the Indemnitors to assent to any change whatsoever in the Bonds,
and/or any contracts referred to in the Bonds, and/or in the general
conditions, plans and/or specifications accompanying said contracts,
including, but not limited to, any change in the time for the completion of
said contracts and to payments or advances thereunder before the same may be
due, and to assent to or take any assignment or assignments, to execute or
consent to the execution of any continuations, extensions or renewals of the
Bonds and to execute any substitute or substitutes therefor, with the same or
different conditions, provisions and obligees and with the same or larger or
smaller penalties, it being expressly understood and agreed that the
Indemnitors shall remain bound under the terms of this Agreement even though
any such assent by the Surety does or might substantially increase the
liability of said Indemnitors.
ADVANCES
EIGHTH: The Surety is authorized and empowered to guarantee loans, to
advance or lend to the Contractor any money, which the Surety may see fit,
for the purpose of any contracts referred to in, or guaranteed by the Bonds;
and all money expended in the completion of any such contracts by the Surety,
or lent or advanced from time to time to the Contractor, or guaranteed by the
Surety for the purposes of any such contracts, and all costs, and expenses
incurred by the Surety in relation thereto, unless repaid with legal interest
by the Contractor to the Surety when due, shall be presumed to be a loss by
the Surety for which the Contractor and the Indemnitors shall be responsible,
notwithstanding that said money or any part thereof should not be used by the
Contractor.
BOOKS AND RECORDS
NINTH: At any time, and until such time as the liability of the Surety
under any and all said Bonds is terminated, the Surety shall have the right
to reasonable access to the books, records, and accounts of the Contractor,
and Indemnitors; and any bank depository, materialman, supply house, or other
person, firm, or corporation when requested by the Surety is hereby
authorized to furnish the Surety any information requested including, but not
limited to, the status of the work under contracts being performed by the
Contractor, the condition of the performance of such contracts and payments
of accounts.
DECLINE EXECUTION
TENTH: Unless otherwise specifically agreed in writing, the Surety may
decline to execute any Bond and the Contractor and Indemnitors agree to make
no claim to the contrary in consideration of the Surety's receiving this
Agreement; and if the Surety shall execute a Bid or Proposal Bond, it shall
have the right to decline to execute any and all of the bonds that may be
required in connection with any award that may be made under the proposal for
which the Bid or Proposal Bond is given and such declination shall not
diminish or alter the liability that may arise by reason of having executed
the Bid or Proposal Bond.
NOTICE OF EXECUTION
ELEVENTH: The Indemnitors hereby waive notice of the execution of said
Bonds and of the acceptance of this Agreement, and the Contractor and the
Indemnitors hereby waive all notice of any default, or any other act or acts
giving rise to any claim under said Bonds, as well as notice of any and all
liability of the Surety under said Bonds, and any and all liability on their
part hereunder, to the end and effect that, the Contractor and the
Indemnitors shall be and continue liable hereunder, notwithstanding any
notice of any kind to which they might have been or be entitled, and
notwithstanding any defenses they might have been entitled to make.
HOMESTEAD
TWELFTH: The Contractor and the Indemnitors hereby waive, so far as their
respective obligations under this Agreement are concerned, all rights to
claim any of their property, including their respective homesteads, as
exempt from levy, execution, sale or other legal process under the laws of
any State, Territory, or Possession.
SETTLEMENTS
THIRTEENTH: The Surety shall have the right to adjust, settle or
compromise any claim, demand, suit or judgment upon the Bonds, unless the
Contractor and the Indemnitors shall request the Surety to litigate such
claim or demand, or to defend such suit, or to appeal from such judgment, and
shall deposit with the Surety, at the time of such request, cash or
collateral satisfactory to the Surety in kind and amount, to be used in
paying any judgment or judgments rendered or that may be rendered, with
interest, costs, expenses and attorneys' fees, including those of the Surety.
<PAGE>
SURETIES
FOURTEENTH: In the event the Surety procures the execution of the Bonds by
other sureties, or executes the Bonds with co-sureties, or reinsures any
portion of said Bonds with reinsuring sureties, then all the terms and
conditions of this Agreement shall inure to the benefit of such other
sureties, co-sureties and reinsuring sureties, as their interests may appear.
SUITS
FIFTEENTH: Separate suits may be brought hereunder as causes of action
accrue, and the bringing of suit or the recovery of judgment upon any cause
of action shall not prejudice or bar the bringing of other suits, upon other
causes of action, whether theretofore or thereafter arising.
OTHER INDEMNITY
SIXTEENTH: That the Contractor and the Indemnitors shall continue to
remain bound under the terms of this Agreement even though the Surety may
have from time to time heretofore or hereafter, with or without notice to or
knowledge of the Contractor and the Indemnitors, accepted or released other
agreements of indemnity or collateral in connection with the execution or
procurement of said Bonds, from the Contractor or Indemnitors or others, it
being expressly understood and agreed by the Contractor and the Indemnitors
that any and all other rights which the Surety may have or acquire against
the Contractor and the Indemnitors and/or others under any such other or
additional agreements of indemnity or collateraL shall be in addition to, and
not in lieu of, the rights afforded the Surety under this Agreement.
INVALIDITY
SEVENTEENTH: In case any of the parties mentioned in this Agreement fail
to execute the same, or in case the execution hereof by any of the parties be
defective or invalid for any reason, such failure, defect or invalidity shall
not in any manner affect the validity of this Agreement or the liability
hereunder of any of the parties executing the same, but each and every party
so executing shall be and remain fully bound and liable hereunder to the same
extent as if such failure, defect or invalidity had not existed. It is
understood and agreed by the Contractor and Indemnitors that the rights,
powers, and remedies given the Surety under this Agreement shall be and are
in addition to, and not in lieu of, any and all other rights, powers, and
remedies which the Surety may have or acquire against the Contractor and
Indemnitors or others whether by the terms of any other agreement or by
operation of law of otherwise.
ATTORNEY IN FACT
EIGHTEENTH: The Contractor and Indemnitors hereby irrevocably nominate,
constitute, appoint and designate the Surety as their attorney-in-fact
with the right, but not the obligation, to exercise all of the rights of the
Contractor and Indemnitors assigned, transferred and set over to the Surety
in this Agreement, and in the name of the Contractor and Indemnitors to make,
execute, and deliver any and all additional or other assignments, documents
or papers deemed necessary and proper by the Surety in order to give full
effect not only to the intent and meaning of the within assignments, but also
to the full protection intended to be herein given to the Surety under all
other provisions of this Agreement. The Contractor and Indemnitors hereby
ratify and confirm all acts and actions taken and done by the Surety as such
attorney-in-fact.
TERMINATION
NINETEENTH: This Agreement may be terminated by the Contractor or
Indemnitors upon twenty days' written notice sent by registered mail to the
Surety at its home office at 300 Saint Paul Place, Baltimore, Maryland 21202,
Attention: Vice President, Surety Department, but any such notice of
termination shall not operate to modify, bar, or discharge the Contractor or
the Indemnitors as to the Bonds that may have been theretofore executed.
TWENTIETH: This Agreement may not be changed or modified orally. No change
or modification shall be effective unless made by written endorsement
executed to form a part hereof.
TWENTY-FIRST: Paragraphs Twenty=Second, Twenty-Third and Twenty-Fourth
-------------------------------------------------------------
hereof are set forth on the signature page attached hereto, which, together
- ------------------------------------------------------------------------------
with the acknowledgement pages, constitutes a part of this agreement. This
- ------------------------------------------------------------------------------
agreement is taken in addition to and not in lieu of prior agreements of
- ------------------------------------------------------------------------------
indemnity.
IN WITNESS WHEREOF, we have signed and sealed the day and year first above
written.
ATTEST OR WITNESS: See attached signature page.
---------------------------------------
(Full Name and Address of Contractor)
---------------------------------------
- ------------------------------------- ----------------------------------(SEAL)
INDEMNITORS:
See attached signature page.
- ------------------------------------- ----------------------------------(SEAL)
(Full Name and Address of Indemnitor
---------------------------------------
- ------------------------------------- ----------------------------------(SEAL)
(Full Name and Address of Indemnitor)
----------------------------------------
- ------------------------------------- ----------------------------------(SEAL)
(Full Name and Address of Indemnitor)
----------------------------------------
- ------------------------------------- ----------------------------------(SEAL)
(Full Name and Address of Indemnitor)
FIDELITY AND DEPOSIT COMPANY OF MARYLAND
- ------------------------------------- By ------------------------------(SEAL)
ASSISTANT SECRETARY VICE-PRESIDENT
<PAGE>
Page 1 of 1
SIGNATURE PAGE
Attached to and made a part of the Agreement of Indemnity dated February 1,
1995, made and entered into between the parties listed in Paragraph
Twenty-Second as Contractors and the parties listed in Paragraph Twenty-Third
as Indemnitors, and FIDELITY AND DEPOSIT COMPANY OF MARYLAND, as Surety.
TWENTY-SECOND: Anything to the contrary in the said Agreement of Indemnity
notwithstanding the term "Contractor" referred to herein is defined to
include without limitations the parties listed herein acting separately or as
co-adventurers or any relationships whatsoever with others:
MK Rail Corporation
M.K. GAIN, S.A. DE C.V.
The Term "Contractor" shall also include any company in which MK Rail
Corporation or M.K. GAIN, S.A. DE C.V. owns a controlling interest, directly
or indirectly, whether in existence now or hereafter acquired, each acting in
its own name solely or as co-adventurers composed of combinations of any or
all of them, as well as co-adventurers with others.
TWENTY-THIRD: Anything to the contrary in the said Agreement of Indemnity
notwithstanding the term "Indemnitor" referred to herein is defined to
include without limitations the parties listed herein:
MK Rail Corporation
M.K. GAIN, S.A. DE C.V.
Morrison Knudsen Corporation, a Delaware Corporation
Morrison Knudsen Corporation, an Ohio Corporation
TWENTY-FOURTH: Whereas, Surety has heretofore executed bonds on the
express condition, promise and understanding, that the Indemnitors would
provide indemnity therefor, and in further consideration of the Surety's
agreement to execute other bonds (subject to Paragraph Tenth of this
agreement), this indemnity shall apply to any bond or bonds executed on or
after June 22, 1994.
IN WITNESS WHEREOF, we have signed and sealed the day and year first above
written.
MK Rail Corporation
Attest: /s/ James P. O'Donnell, By: /s/ J. F. Cleary, Jr.
----------------------------- -----------------------------------
James P. O'Donnell, J. F. Cleary, Jr.
Secretary Executive Vice President
M.K. GAIN, S.A. DE C.V.
Attest: By: /s/ C. Vidaurreta
---------------------------- ------------------------------------
C. Vidaurreta
Director General
Morrison Knudsen Corporation,
a Delaware Corporation
By: /s/ R. A. Tinstman
------------------------------------
R. A. Tinstman, President and CEO
Attest: /s/ D. A. Channer By: /s/ S. G. Hanks
----------------------------- -------------------------------------
David A. Channer, S. G. Hanks, Executive Vice President
Assistant Secretary
Morrison Knudsen Corporation,
an Ohio Corporation
By: /s/ R. A. Tinstman
-------------------------------------
R. A. Tinstman, President and CEO
Attest: /s/ D. A. Channer By: /s/ S. G. Hanks
----------------------------- -------------------------------------
David A. Channer, S. G. Hanks, Executive Vice President
Assistant Secretary
<PAGE>
FOR ACKNOWLEDGEMENT OF CONTRACTOR'S SIGNATURE
INDIVIDUAL ACKNOWLEDGEMENT
STATE OF
--------------------------------------------)
COUNTY OF ) SS.
--------------------------------------------)
On this day of , 19 , before me, the subscriber,
------------ ------------ ---
personally appeared
-------------------------------------------------------------
to me personally known, and known by me to be the person described in, and
---
who executed, the foregoing instrument and acknowledged same to be
act and deed.
- ------------------------
My Commission Expires
----------------------------- ----------------------------
(Notary Public)
PARTNERSHIP ACKNOWLEDGEMENT
STATE OF
--------------------------------------------)
COUNTY OF ) SS.
--------------------------------------------)
On this day of , 19 , before me,
------------ ------------ ---
personally appeared
-------------------------------------------------------------
a member of the co-partnership of
-----------------------------------------------
to me known and known to me to be the person who is described in and who
executed the foregoing instrument, and acknowledged to me that he executed
the same as and for the act and deed of the said co-partnership.
My Commission Expires
----------------------------- ----------------------------
(Notary Public)
CORPORATE ACKNOWLEDGEMENT
STATE OF Pennsylvania
--------------------------------------------)
COUNTY OF Allegheny ) SS.
--------------------------------------------)
On this 10th day of March , 19 95 , before me, the subscriber,
----------- ----------- ----
personally appeared James F. Cleary, Jr.
-------------------------------------------------------------
(Insert here name of officer who signs for the corporation)
to me personally known, who, being duly sworn, did depose and say that he
resided in the city of Pittsburgh , that he is
--------------------
the Executive Vice President of MK Rail Corporation the corporation
--------------------- ------------------------
described in, and which executed, the within instrument; the he knows the
seal of said corporation; that the seal affixed to said instrument is
such corporate seal; that it was so affixed by order of the Board of Directors
of said corporation, and that he signed his name thereto by like order;
and the deponent further said that he is acquainted
with James P. O'Donnell , and knows that
---------------------------------------------------------
(Insert here name of officer who attests for corporation)
he is the Secretary of said corporation and that he
---------------------
subscribed his name to within instrument by a like order of the said Board
of Directors.
My Commission Expires July 29, 1996 Kelly A. McQuaid
----------------------------- ----------------------------
(Notary Public)
FOR ACKNOWLEDGEMENT OF INDEMNITOR'S SIGNATURES
INDIVIDUAL ACKNOWLEDGEMENT
STATE OF
--------------------------------------------)
COUNTY OF ) SS.
--------------------------------------------)
On this day of , 19 , before me, the subscriber,
------------ ------------ ---
personally appeared
-------------------------------------------------------------
to me personally known, and known by me to be the person described in, and
---
who executed, the foregoing instrument and acknowledged same to be
act and deed.
- ------------------------
My Commission Expires
----------------------------- ----------------------------
(Notary Public)
INDIVIDUAL ACKNOWLEDGEMENT
STATE OF
--------------------------------------------)
COUNTY OF ) SS.
--------------------------------------------)
On this day of , 19 , before me, the subscriber,
------------ ------------ ---
personally appeared
-------------------------------------------------------------
to me personally known, and known by me to be the person described in, and
---
who executed, the foregoing instrument and acknowledged same to be
act and deed.
- ------------------------
My Commission Expires
----------------------------- ----------------------------
(Notary Public)
PARTNERSHIP ACKNOWLEDGEMENT
STATE OF
--------------------------------------------)
COUNTY OF ) SS.
--------------------------------------------)
On this day of , 19 , before me, personally
------------ ----------- ---
appeared
-----------------------------------------------------------------------
a member of the co-partnership of
----------------------------------------------
to me known and known by me to be the person who is described in and who
executed the foregoing instrument, and acknowledged to me that he executed
the same as and for the act and deed of the said co-partnership.
My Commission Expires
----------------------------- ----------------------------
(Notary Public)
CORPORATE ACKNOWLEDGEMENT
STATE OF Idaho
--------------------------------------------)
COUNTY OF Ada ) SS.
--------------------------------------------)
On this 14th day of March , 1995, before me, the subscriber,
----------- ----------- --
personally appeared Robert A. Tintsman and Stephen G. Hanks
-------------------------------------------------------------
(Insert here name of officer who signs for the corporation)
to me personally known, who, being duly sworn, did depose and say that they
reside in the city of Boise, Idaho , that they are
--------------------
the CEO and Exec. Vice President respectively of
-----------------------
Morrison Knudsen Corporation the corporation described in, and which
- ----------------------------------
executed, the within instrument; that he knows the seal of said corporation;
that the seal affixed to said instrument is such corporate seal; that it was so
affixed by order of the Board of Directors of said corporation, and that he
signed his name thereto by like order; and the deponent further said that he
is acquainted with David A. Channer ,
-------------------------------------------------------------
(Insert here name of officer who attests for corporation)
and knows that he is the Assistant Secretary of said corporation
-----------------------
and that he subscribed his name to within instruments by a like order of the
said Board of Directors.
My commission expires November 13, 1997 /s/ Tawny Aldrich
----------------------------- ----------------------------
(Notary Public)
<PAGE>
Exhibit 10.18
EXECUTION COPY
STOCK PURCHASE AGREEMENT
This STOCK PURCHASE AGREEMENT (the "Agreement") is made and entered
into as of this 12th day of May, 1995, by and among LEUCADIA NATIONAL
CORPORATION, a New York corporation ("Buyer") and MORRISON KNUDSEN CORPORATION,
a Delaware corporation ("Seller"). The Buyer and Seller are referred to
collectively herein as the "Parties."
RECITALS
A. Seller is the owner of 9,000,000 shares of common stock
(the "Target Shares") of MK Gold Company, a Delaware corporation (the "Target").
B. This Agreement contemplates a transaction in which
Buyer will purchase from Seller and Seller will sell to Buyer the Target Shares
for the purchase price set forth in Section 2 hereof.
OPERATIVE PROVISIONS
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants, agreements and conditions herein
contained, and intending to be legally bound, the Parties agree as follows:
1. DEFINITIONS
1.1. "ADVERSE CONSEQUENCES". Shall mean all actions, suits,
proceedings, investigations, charges, complaints, claims, demands, liabilities,
damages, costs, losses, expenses, and fees, including court costs and reasonable
attorneys' fees and expenses.
1.2. "AFFILIATE". Has the meaning set forth in Rule 12b-2 of the
regulations promulgated under the Securities Exchange Act.
1.3. "BUYER". Has the meaning set forth in the preface above.
1.4. "CLOSING". Has the meaning set forth in Section 2.3 below.
1.5. "CLOSING DATE". Has the meaning set forth in Section 2.3
below.
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1.6. "CONFIDENTIAL INFORMATION". Shall mean any information
concerning the businesses and affairs of the Target and that (i) is not or does
not legitimately become generally available to the public, or (ii) is not or
does not legitimately become available to a person on a nonconfidential basis
from a source other than the Parties.
1.7. "ESCROW AGENT". Has the meaning set forth in Section 2.1.1
below.
1.8. "GAAP". Shall mean United States generally accepted
accounting principles as in effect from time to time.
1.9. "HART-SCOTT-RODINO". Shall mean the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended.
1.10. "INDEMNIFIED PARTY". Has the meaning set forth in Section 8
below.
1.11. "INDEMNIFYING PARTY". Has the meaning set forth in Section
8 below.
1.12. "INTERCOMPANY CONTRACTS". Shall mean those contracts
between Seller and Target listed on Exhibit "A".
1.13. "KNOWLEDGE". Shall mean actual knowledge after reasonable
investigation.
1.14. "ORDINARY COURSE OF BUSINESS". Shall mean the ordinary
course of business consistent with past custom and practice (including with
respect to quantity and frequency).
1.15. "PARTY". Has the meaning set forth in the preface above.
1.16. "PERSON". Shall mean an individual, a partnership, a
corporation, a limited liability company, an association, a joint stock company,
a trust, a joint venture, an unincorporated organization, or a governmental
entity (or any department, agency, or political subdivision thereof).
1.17. "PURCHASE PRICE". Has the meaning set forth in Section 2.2
below.
1.18. "SECURITIES ACT". Shall mean the Securities Act of 1933, as
amended.
1.19. "SECURITIES EXCHANGE ACT". Shall mean the Securities
Exchange Act of 1934, as amended.
1.20. "SECURITY INTEREST". Shall mean any mortgage, pledge, lien,
encumbrance, charge, or other security interest, other than (a) mechanic's,
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materialmen's, and similar liens, (b) liens for Taxes not yet due and payable or
for Taxes that the taxpayer is contesting in good faith through appropriate
proceedings, (c) purchase money liens and liens securing rental payments under
capital lease arrangements, and (d) other liens arising in the Ordinary Course
of Business and not incurred in connection with the borrowing of money.
1.21. "SELLER". Has the meaning set forth in the preface above.
1.22. "TARGET". Has the meaning set forth in the preface above.
1.23. "TARGET SHARES". Has the meaning set forth in the preface
above.
1.24. "TAX". Shall mean any federal, state, local or foreign
income, gross receipts, license, payroll employment, excise, severance, stamp,
occupation, premium, windfall profits, customs duties, franchise, profits,
withholding, social security (or similar), unemployment, disability, real
property, personal property, sales, use, transfer, registration, value added,
alternative or add-on minimum, estimated or other tax of any kind whatsoever,
including any interest, penalty, or addition thereto, whether disputed or not.
1.25 "THIRD PARTY CLAIM". Has the meaning set forth in Section 8
below.
2. PURCHASE AND SALE OF TARGET SHARES.
2.1. BASIC TRANSACTION. On and subject to the terms and conditions
of this Agreement, the Buyer agrees to purchase from the Seller and the Seller
agrees to sell to the Buyer, all of the Target Shares for the consideration
specified below in this Section 2.
2.2. PURCHASE PRICE. The purchase price for the Target Shares shall
be equal to $22,500,000 (the "Purchase Price"). At Closing, Buyer and Seller
shall cause Escrow Agent to release (i) to Seller, by certified or bank
cashier's check (or wire transfer), the Purchase Price payable in United States
Dollars and (ii) to Buyer, the Target Shares, with stock powers duly executed in
blank, and the Distributions (as defined in Section 5.3 hereof) if any,
allocable to the Target Shares.
2.2.1. ESCROW. On the business day following notice to Buyer
of the satisfaction or waiver by Seller of the conditions set forth in Section
7.2.7 hereof, (i) Seller shall deposit with the Escrow Agent certificates
representing the Target Shares, with stock powers duly executed in blank (the
"Escrowed Shares"), and (ii) Buyer shall deposit with the Escrow Agent
immediately available funds equal to the Purchase Price (the "Escrowed Funds").
If Seller receives any Distributions allocable
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to the Target Shares on or after the date hereof and prior to the Closing,
Seller shall promptly deposit such Distributions with the Escrow Agent (the
"Escrowed Distributions"). The Escrowed Shares, the Escrowed Distributions and
the Escrowed Funds shall be held in escrow pursuant to the terms hereof and the
terms of the Escrow Agreement (as defined herein).
2.2.2. ESCROW OF ESCROWED SHARES AND ESCROWED FUNDS. Buyer
and Seller hereby consent to the appointment of and hereby appoint Weil, Gotshal
& Manges as Escrow Agent (the "Escrow Agent"), to serve as escrow agent in
accordance with the terms of the Escrow Agreement, dated May 12, 1995 among
Weil, Gotshal & Manges, Buyer and Seller (the "Escrow Agreement"), annexed
hereto as Exhibit B, the terms of which shall govern the rights and obligations
of the parties hereto with respect to the Escrowed Property (as defined in the
Escrow Agreement).
2.3. THE CLOSING. The closing of the transactions contemplated by
this Agreement (the "Closing") shall take place at the offices of Weil, Gotshal
& Manges, 767 Fifth Avenue, New York, New York at 9:00 a.m., local time on the
third business day following satisfaction or waiver of the conditions set forth
in Section 7 hereof or such other time and place as the Parties agree upon, and
such date is referred to in this Agreement as the "Closing Date".
2.4. DELIVERY OF DISBURSING INSTRUCTIONS TO ESCROW AGENT. On or
before the second business day following the satisfaction or waiver of the
conditions set forth in Section 7 hereof, Buyer and Seller shall complete and
execute the disbursing instructions annexed to the Escrow Agreement as Annex A
and deliver such disbursing instructions to Escrow Agent.
2.5. DELIVERIES AT THE CLOSING. At the Closing, (i) the Seller will
deliver to the Buyer the various certificates, instruments, and documents
referred to in Section 7.1 below, (ii) the Buyer will deliver to the Seller the
various certificates, instruments, and documents referred to in 7.2 below, (iii)
the Seller will, subject to the terms and conditions of the Escrow Agreement,
will cause to be delivered by Escrow Agent to the Buyer stock certificates
representing all the Target Shares, with stock powers duly endorsed in blank or
accompanied by duly executed assignment documents, and the Escrowed
Distributions, if any, and (iv) the Buyer will, subject to the terms and
conditions of the Escrow Agreement, cause to be delivered by Escrow Agent to the
Seller the Purchase Price.
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3. REPRESENTATIONS AND WARRANTIES CONCERNING THE TRANSACTION.
3.1. REPRESENTATIONS AND WARRANTIES OF THE SELLER. The Seller represents
and warrants to the Buyer that the statements contained in this Section 3.1 are
correct and complete as of the date of this Agreement and will be correct and
complete as of the Closing Date (as though made then and as though the Closing
Date were substituted for the date of this Agreement throughout this Section
3.1).
3.1.1. ORGANIZATION OF SELLER. Seller is a corporation, is
duly organized, validly existing, and in good standing under the laws of the
jurisdiction of its incorporation.
3.1.2. AUTHORIZATION OF TRANSACTION. The Seller has full
power and authority to execute and deliver this Agreement and to perform its
obligations hereunder. This Agreement constitutes the valid and legal binding
obligation of the Seller, enforceable in accordance with its terms. Except as
provided in this Agreement with respect to Hart-Scott-Rodino and except for
filings required under the Securities Exchange Act, the Seller need not give any
notice to, make any filing with, or obtain any authorization, consent, or
approval of any United States governmental agency in order to consummate the
transactions contemplated by this Agreement.
3.1.3. NONCONTRAVENTION. Neither the execution and the
delivery of this Agreement, nor the consummation of the transactions
contemplated hereby, will (A) violate any constitution, statute, regulation,
rule, injunction, judgment, order, decree, ruling, charge, or other restriction
of any United States government, governmental agency, or court to which the
Seller is subject or, any provision of its charter or bylaws or (B) except as
set forth on Schedule 3.1.3, conflict with, result in a breach of, constitute a
default under, result in the acceleration of, create in any party the right to
accelerate, terminate, modify, or cancel, or require any notice under any
agreement, contract, lease, license, instrument, or other arrangement to which
the Seller or, to the actual knowledge of Seller without due inquiry, the Target
is a party or by which it is bound or to which any of its assets is subject,
except where such conflict, breach, default, acceleration, right or notice would
not have a material adverse effect upon the Target Shares or Target.
3.1.4. TARGET SHARES. The Seller holds of record and owns
beneficially 9,000,000 shares of Target's common stock which represents Forty-
Six and One Half percent (46.5%) of the issued and outstanding shares of the
Target common stock, exclusive of shares of Target common stock reserved for
issuance pursuant to the Target's Stock Incentive Plan and Stock Option Plan for
Non-Employee Directors. The Target Shares constitute all of the shares of
capital stock of Target owned by Seller of record or beneficially. The Target
Shares are free and
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clear of any restrictions (except under applicable securities laws) on transfer,
Security Interests, options, warrants, purchase rights, contracts, commitments,
equities, claims, and demands. The Seller is not a party to any option,
warrant, purchase right, or other contract or commitment that requires the
Seller to sell, transfer, or otherwise dispose of any of the Target Shares
(other than this Agreement). The Seller is not a party to any voting trust,
proxy, or other agreement or understanding with respect to the voting of any
capital stock of the Target. The Target Shares will be sold and delivered to
Buyer free and clear of any and all liens, pledges, charges, equities,
restrictions (except under applicable securities laws), encumbrances, agreements
and claims of any nature and upon Closing Buyer will acquire good an marketable
title to the Target Shares.
3.2. REPRESENTATIONS AND WARRANTIES OF THE BUYER. The Buyer
represents and warrants to the Seller that the statements contained in this
Section are correct and complete as of the date of this Agreement and will be
correct and complete as of the Closing Date (as though made then and as though
the Closing Date were substituted for the date of this Agreement throughout this
Section 3.2).
3.2.1 ORGANIZATION OF THE BUYER. The Buyer is a
corporation duly organized, validly existing, and in good standing under the
laws of the jurisdiction of its incorporation.
3.2.2. AUTHORIZATION OF TRANSACTION. The Buyer has full
power and authority to execute and deliver this Agreement and to perform its
obligations hereunder. This Agreement constitutes the valid and legally binding
obligation of the Buyer, enforceable in accordance with its terms. Except as
provided in this Agreement with respect to Hart-Scott-Rodino and except for
filings required under the Securities Exchange Act, the Buyer need not give any
notice to, make any filing with, or obtain any authorization, consent, or
approval of any government or governmental agency in order to consummate the
transactions contemplated by this Agreement.
3.2.3. NONCONTRAVENTION. Neither the execution and the
delivery of this Agreement, nor the consummation of the transactions
contemplated hereby, will (A) violate any constitution, statute, regulation,
rule, injunction, judgment, order, decree, ruling, charge, or other restrictions
of any government, governmental agency, or court to which the Buyer is subject
or any provision of its charter or bylaws or (B) conflict with, result in a
breach of, constitute a default under, result in the acceleration of, create in
any party the right to accelerate, terminate, modify, or cancel, or require any
notice under any agreement, contract, lease, license, instrument, or other
arrangement to which the Buyer is a party or by which it is bound or to which
any of its assets is subject.
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3.2.4. PURCHASE FOR INVESTMENT. The Target Shares to be
purchased pursuant to this Agreement will be so purchased for Buyer's own
account, for investment and not with a view toward the distribution or resale
thereof, except in compliance with the requirements of all applicable securities
laws, including without limitation the Securities Act. Buyer is a sophisticated
purchaser that has such knowledge and experience in financial and business
matters that it is capable of evaluating the merits and risks of the purchase of
the Target Shares and has reviewed Target's filings with the Securities and
Exchange Commission.
Buyer has no, and has taken no action which could result in,
liability or obligation to pay any fees or commissions to any broker, finder or
agent with respect to the transactions contemplated by this Agreement for which
Seller could become liable or obligated.
4. NO OTHER REPRESENTATIONS AND WARRANTIES.
4.1 THE PARTIES HERETO EXPRESSLY ACKNOWLEDGE AND AGREE THAT EXCEPT AS
SET FORTH IN SECTIONS 3.1 AND 3.2 OF THIS AGREEMENT, THERE ARE NO OTHER
REPRESENTATIONS OR WARRANTIES (WHETHER EXPRESS OR IMPLIED) MADE ON BEHALF OF ANY
PARTY HERETO.
5. PRE-CLOSING COVENANTS.
The Parties agree that prior to the Closing:
5.1 GENERAL. Each of the Parties will use its best efforts to take
all action and to do all things necessary in order to consummate and make
effective the transactions contemplated by this Agreement (including
satisfaction, but not waiver, of the closing conditions set forth in Section 7
below).
5.2 NOTICES AND CONSENTS. The Parties will, and Seller will use its
best efforts to cause the Target to, give any notices to third parties, and each
of the Parties will, and the Seller will uses its best efforts to cause the
Target to, use its best efforts to obtain any third- party consents that may be
required in connection with the transaction contemplated in this Agreement.
Each of the Parties will and the Seller will use its best efforts to cause the
Target to, given any notices to, make any filings with, and use its best efforts
to obtain any authorizations, consents, and approvals of governments and
governmental agencies as may be required in connection with the transactions
contemplated in this Agreement. Without limiting the generally of the
foregoing, each of the Parties will file (and the Seller will use its best
efforts to cause the Target to file), any Notification and Report Forms and
related material that it may be required to file with the Federal Trade
Commission and the Antitrust Division of
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the United States Department of Justice under the Hart-Scott-Rodino Act, each of
the Parties will use their best efforts to obtain (and the Seller will use its
best efforts to cause the Target to use its best efforts to obtain) an early
termination of the applicable waiting period (it being understood that this
covenant shall not be deemed to be breach if such early termination is not
obtained), and will make (and the Seller will use its best efforts to cause the
Target to make) any further filings pursuant thereto that may be necessary in
connection therewith.
5.3 OPERATION OF BUSINESS. The Seller will use its best effort to
cause the Target not to engage in any practice, take any action, or enter into
any transaction outside the Ordinary Course of Business. Without limiting the
generality of the foregoing, the Seller will use its best efforts to cause the
Target not to declare, set aside, or pay any dividend or make any distribution
with respect to its capital stock or redeem, purchase, or otherwise acquire any
of its capital stock (a "Distribution"). It is the intention of the Parties
that any Distribution allocable to the Target Shares shall be for the benefit of
Buyer. Consequently, (i) Distributions received by Seller prior to the Closing
shall be deposited by Seller with the Escrow Agent to be held in accordance with
the terms of the Escrow Agreement, and (ii) Distributions received after the
Closing shall be delivered to Buyer upon receipt by Seller.
5.4 PRESERVATION OF BUSINESS. The Seller will use its best efforts
to cause the Target to keep its business and properties substantially intact,
including its present operations, physical facilities, working conditions, and
relationships with lessors, licensors, suppliers, customers, employees, partners
and joint venturers.
5.5 FULL ACCESS. The Seller will permit, and the Seller will use its
best efforts to cause the Target to permit, representatives of the Buyer to have
full access at all reasonable times, and in a manner so as not to interfere with
the normal business operations of the Target to all premises, properties,
personnel, books records (including Tax records), contracts, and documents of or
pertaining to the Target.
5.6 NOTICE OF DEVELOPMENT. Each Party will give prompt written
notice to the other of any material adverse development causing a breach of any
representations and warranties in Section 3 or 4 above. No disclosure by any
Party pursuant to this Section 5.6, however, shall be deemed to amend or
supplement the Schedules hereto or to prevent or cure any misrepresentations,
breach of warranty, or breach of covenant.
5.7 EXCLUSIVITY. Except as may be required in the exercise of its
fiduciary duties, (a) the Seller will not (and the Seller will use its best
efforts to cause the Target not to) (i) solicit, initiate, or encourage the
admission of any proposal or offer from any Person relating to the assets of,
the Target (including any acquisition structured as a merger, consolidation, or
share exchange) or (ii) participate in any
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discussions or negotiation regarding, furnish any information with respect to,
assist or participate in, or facilitate in any other manner any effort or
attempt by any Person to do or seek any of the foregoing and (b) the Seller will
not vote its Target Shares in favor of any such acquisition structured as a
merger, consolidation, or share exchange. The Seller will notify the Buyer
immediately if Seller becomes aware of any Person that makes any bona fide
proposal, offer, inquiry, or contact with respect to any of the foregoing.
5.8. WAIVER OF CONFIDENTIALITY AGREEMENT. Seller hereby waives the
provisions of paragraph 9 of the Confidentiality Agreement dated May 4, 1995
between Seller and Buyer (though its representative, CS First Boston
Corporation) (the "May 4, 1995 Confidentiality Agreement") and acknowledges that
Seller shall not seek to enforce such paragraph 9 against Buyer and will use its
best efforts to cause the Target to waive the provisions of such paragraph 9 and
to acknowledge that Target will not seek to enforce such paragraph 9 against
Buyer.
5.9. MATTERS CONCERNING NOMINEES FOR DIRECTOR.
5.9.1. Upon the request of Buyer, Seller shall promptly notify Target
of its intention to nominate up to three persons designated by Buyer for
election at the 1995 annual meeting of stockholders of Target (the "1995 Annual
Meeting") as directors whose terms expire in 1998. In such event, Seller agrees
that it shall use its best efforts promptly to take all steps necessary to
comply with Target's nominating procedures. Buyer agrees that at the time of
its request it will provide Seller with all information concerning such
designees and consents required pursuant to Target's nominating procedures.
Buyer and Seller agree that they will consult in the preparation of any
disclosure required by Target's nominating procedures.
5.9.2. Buyer shall have the right to require that Seller retain 100
of the Target Shares at no reduction of the Purchase Price, so that Seller shall
remain a stockholder of record of Target until after the date of the 1995 Annual
Meeting, or any adjournment or adjournments thereof. Seller shall vote all
Target Shares owned of record by Seller in favor of Buyer's designees at the
1995 Annual Meeting and any adjournment or adjournments thereof or provide Buyer
with an irrevocable proxy to vote such Target Shares therefor, as Buyer may
request. After the 1995 Annual Meeting, at Buyer's request Seller shall deliver
to Buyer the 100 shares of Target so retained by Seller, with stock powers duly
executed in blank, for no additional consideration.
6. POST-CLOSING COVENANTS.
The Parties agree as follows with respect to the period following the
Closing.
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6.1. GENERAL. In case at any time after the Closing any further
action is necessary or desirable to carry out the purposes of this Agreement,
each of the Parties will take such further action (including the execution and
delivery of such further instruments and documents) as any other Party may
reasonably request, all at the sole cost and expense of the requesting Party
(unless the requesting Party is entitled to indemnification therefor under
Section 8 below).
6.2. LITIGATION SUPPORT. In the event and for so long as any Party
actively is contesting or defending against any action, suit, proceeding,
hearing, investigation, charge, complaint, claim, or demand in connection with
(i) any transaction contemplated under this Agreement or event, incident,
action, failure to act, or transaction on or prior to the Closing Date involving
the Target, each of the other Parties will cooperate with it and its counsel in
the contest or defense, make available their personnel, and provide such
testimony and access to their books and records as shall be necessary in
connection with the contest of defense, all at the sole cost and expense of the
contesting or defending Party (unless the contesting or defending Party is
entitled to indemnification therefor under Section 8 below).
6.3. TRANSITION. The Seller will not take any action that is designed
or intended to have the effect of discouraging any lessor, licensor, customer,
supplier, partner, joint venturer or other business associate of the Target from
maintaining the same business relationships with the Target after the Closing as
is maintained with the Target prior the Closing. The Seller will refer all
inquiries relating to the business of the Target to the Target from and after
the Closing. In connection with the Jerooy Gold Projects, for a period of one
(1) year from the date of this Agreement, Seller agrees to provide and make
itself available to provide, such assistance as Target may reasonably request
to: (i) preserve and maintain Target's interest in the Jerooy Gold Project, (ii)
preserve and maintain Target's agreements with Concern Kyrghyzaltan, and (iii)
assist with any matters relating to the Republic of Kyrghyz, including any
transition or transfers resulting from the transaction contemplated by this
Agreement; provided, however, (a) Seller makes no representation or warranty
with respect to such services, and (b) in advance of Seller providing such
services to Target, Target agrees (x) to promptly reimburse Seller for any such
services provided within ten (10) business days after Seller submits an invoice
for such services, and (y) to indemnify Seller for any Adverse Consequences
resulting from, relating to or arising from Seller's acts or omissions with
respect to such services.
6.4. CONFIDENTIALITY. The Seller will treat and hold as such all of
the Confidential Information, refrain from using any of the Confidential
Information except in connection with this Agreement, and deliver promptly to
the Buyer or destroy, at the request and option of the Buyer, all tangible
embodiments (and all copies) of the Confidential Information which are in its
possession except as may be required for (i) tax, accounting or other similar
purposes, and (ii) legal purposes. In
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the event that the Seller is requested or required (by oral question or request
for information or documents in any legal proceeding, interrogatory, subpoena,
civil investigative demand, or similar process) to disclose any Confidential
Information, that Seller will notify the Buyer promptly of the request or
requirement so that the Buyer may seek an appropriate protective order or waive
compliance with the provisions of this Section 6.4. If, in the absence of a
protective order or the receipt of a waiver hereunder, the Seller is, on the
advice of counsel, compelled to disclosed any Confidential Information to the
tribunal or else stand liable for contempt, Seller may disclose the Confidential
Information to the tribunal; provided, however, that Seller shall use its best
efforts to obtain, at the request of the Buyer, an order or other assurance that
confidential treatment will be accorded to such portion of the Confidential
Information required to be disclosed as the Buyer shall designate. The
foregoing provisions shall not apply to any Confidential Information which is
generally available to the public immediately prior to the time of disclosure.
6.5. INTERCOMPANY CONTRACT. For a period of two (2) years from and
after the Closing: Seller waives any rights, if any, to terminate the
Intercompany Contracts.
7. CONDITIONS TO OBLIGATION TO CLOSE.
7.1. CONDITIONS TO OBLIGATION OF THE BUYER. The obligation of the
Buyer to consummate the transactions to be performed by it in connection with
the Closing is subject to satisfaction of the following conditions:
7.1.1. The representations and warranties set forth in
Section 3.1 above shall be true and correct in all material respects at and as
of the Closing Date;
7.1.2. The Seller shall have performed and complied with
all of its covenants hereunder in all material respects through the Closing;
7.1.3. No final, nonappealable injunction or other order by
any United States court having proper jurisdiction which prevents the
consummation of the transactions contemplated by Section 2 shall have been
issued and remain in effect;
7.1.4. The Seller shall have delivered to the Buyer a
certificate to the effect that each of the conditions specified above in Section
7.1.1, 7.1.2 and 7.1.6 is satisfied in all respects;
7.1.5. All applicable waiting periods (and any extensions
thereof) under the Hart-Scott-Rodino Act shall have expired or otherwise been
terminated;
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The Buyer may waive any condition specified in this Section 7.1 if it executes a
writing so stating at or prior to the Closing
7.2. CONDITIONS TO OBLIGATION OF THE SELLER. The obligation of the
Seller to consummate the transactions to be performed by them in connection with
the Closing is subject to satisfaction of the following conditions:
7.2.1. The representations and warranties set forth in
Section 3.2 above shall be true and correct in all material respects at and as
of the Closing Date;
7.2.2. The Buyer shall have performed and complied with all
of its covenants hereunder in all material respects through the Closing;
7.2.3. No final, nonappealable injunctions or other order
by any United States court having proper jurisdiction which prevents the
consummation of the transactions contemplated by Section 2 shall have been
issued and remain in effect;
7.2.4. The Buyer shall have delivered to the Seller a
certificate to the effect that each of the conditions specified above in
Sections 7.2.1, 7.2.2 and 7.2.6 is satisfied in all respects;
7.2.5. All applicable waiting periods (and any extensions
thereof) under the Hart-Scott-Rodino Act shall have expired or otherwise been
terminated;
7.2.6. Effective as of the Closing Date, Buyer shall have
purchased from CIBC, Inc. (the "Lender") all of Lender's interest in and under
the $20 million Credit Agreement dated September 2, 1993 by and among the
Seller, the Target and the Lender (the "CIBC Facility") for a purchase price
equal to 100% of amounts outstanding thereunder, plus accrued but unpaid
interest thereon, and Buyer shall cause Seller and Seller's Affiliates (other
than Target) to be released from any Adverse Consequences or Liabilities in
respect of the CIBC Facility, including guarantees in respect thereof.
7.2.7. On or prior to the close of business on May 17,
1995, Seller shall have received approval of the Executive Committee of Seller's
Board of Directors and Seller's Bank Steering Committee for this Agreement and
the transactions contemplated hereby.
The Seller may waive any condition specified in this Section 7.2 if it executes
a writing so stating at or prior to the Closing.
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8. EXCLUSIVE REMEDIES FOR BREACHES OF THIS AGREEMENT.
8.1. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All of the
representations and warranties of the Parties contained in Section 3 of this
Agreement shall survive the Closing and continue in full force and effect for a
period of two years thereafter.
8.2. INDEMNIFICATION PROVISIONS FOR BENEFIT OF THE BUYER.
8.2.1. In the event the Seller breaches any of its
covenants in Section 2.1 above or any of its representations and warranties in
Section 3.1 above, and, if there is an applicable survival period pursuant to
Section 8.1 above, provided that the Buyer makes a written claim for
indemnification against the Seller pursuant to Section 10.7 below within such
survival period, then the Seller agrees to indemnify the Buyer from and against
the entirety of any Adverse Consequences the Buyer may suffer before, through
and after the date of the claim for indemnification (including any Adverse
Consequences the Buyer may suffer after the end of any applicable survival
period) resulting from, arising out of, relating to, in the nature of, or caused
by the breach. Notwithstanding any provision herein to the contrary, the
obligation of Seller pursuant to this Section 8 shall not exceed, in the
aggregate, the Purchase Price.
8.3. INDEMNIFICATION PROVISIONS FOR BENEFIT OF THE SELLER.
8.3.1. In the event the Buyer breaches any of its
representations, warranties, and covenants contained herein, and, if there is an
applicable survival period pursuant to Section 8.1 above, provided that the
Seller makes a written claim for indemnification against the Buyer pursuant to
Section 10.7 below within such survival period, then the Buyer agrees to
indemnify the Seller from and against the entirety of any Adverse Consequences
the Seller may suffer before, through and after the date of the claim for
indemnification (including any Adverse Consequences the Seller may suffer after
the end of any applicable survival period) resulting from, arising out of,
relating to, in the nature of, or caused by the breach.
Buyer agrees that it will not take any action to prevent the release
of Seller from any of Seller's obligations with respect to Target, provided
that, in connection therewith, Buyer shall not be required to incur or undertake
any obligation and Target shall not be required to modify any existing rights or
obligations.
8.4. MATTERS INVOLVING THIRD PARTIES.
8.4.1. If any third party shall notify any Party (the
"Indemnified Party") with respect to any matter (a "Third Party Claim") which
may give rise to a claim for indemnification against any other Party (the
"Indemnifying Party") under this Section 8, then the Indemnified Party shall
promptly notify each Indemnifying
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Party thereof in writing; provided, however, that no delay on the part of the
Indemnified Party thereof in writing; provided, however, that no delay on the
part of the Indemnifying Party shall relieve the Indemnifying Party from any
obligation hereunder unless (and then solely to the extent) the Indemnifying
Party thereby is prejudiced.
8.4.2. Any Indemnifying Party will have the right to defend
the Indemnified Party against the Third Party Claim with counsel of its choice
reasonably satisfactory to the Indemnified Party so long as (A) the Indemnifying
Party notifies the Indemnified Party in writing within fifteen (15) days after
the Indemnified Party has given notice of the Third Party Claim that the
Indemnifying Party will indemnify the Indemnified Party from and against the
entirety of any Adverse Consequences the Indemnified Party may suffer resulting
from, arising out of, relating to, in the nature of, or caused by the Third
Party Claim, (B) the Indemnifying party provides the Indemnified Party with
evidence reasonably acceptable to the Indemnified Party that the Indemnifying
Party will have the financial resources to defend against the Third Party Claim
and fulfill its indemnification obligations hereunder, (C) the Third Party Claim
involves only money damages and does not seek an injunction or other equitable
relief, (D) settlement of, or an adverse judgment with respect to, the Third
Party Claim is not, in the good faith judgment of the Indemnified Party, likely
to establish a precedental custom or practice materially adverse to the
continuing business interests of the Indemnified Party, and (E) the Indemnifying
Party conducts the defense of the Third Party Claim actively and diligently.
8.4.3. So long as the Indemnifying Party is conducting the
defense of the Third Party Claim in accordance with Section 8.4.2 above, (A) the
Indemnified Party may retain separate co-counsel at its sole cost and expense
and participate in the defense of the Third Party Claim, (B) the Indemnified
Party will not consent to the entry of any judgment or enter into any settlement
with respect to the Third Party Claim without the prior written consent of the
Indemnifying Party (not to be withheld unreasonably), and (C) the Indemnifying
Party will not consent to the entry of any judgment or enter into any settlement
with respect to the Third Party Claim without the prior written consent of the
Indemnified Party (not to be withheld unreasonably).
8.4.4. In the event any of the conditions in Section 8.4.2
above is or becomes unsatisfied, however, (A) the Indemnified Party may defend
against the Third Party Claim in any manner it reasonably may deem appropriate
(and the Indemnified Party need not consult with, or obtain any consent from,
the Indemnifying Party in connection therewith), (B) the Indemnifying Party will
reimburse the Indemnified Party promptly and periodically for the costs of
defending against the Third Party Claim (including reasonable attorneys' fees
and expenses), and (C) the Indemnifying Party will remain responsible for any
Adverse Consequences the Indemnified Party may suffer resulting from, arising
out of, relating to, in the nature
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of, or caused by the Third Party Claim to the fullest extent provided in this
Section 8. In all cases, the Indemnified Party will take all reasonable actions
so as to mitigate any Adverse Consequences.
8.5. DETERMINATION OF ADVERSE CONSEQUENCES. The Parties shall take
into account the time cost of money in determining Adverse Consequences for
purposes of this Section 8. All indemnification payments under this Section 8
shall be deemed adjustments to the Purchase Price.
8.6. OTHER INDEMNIFICATION PROVISIONS. Each of the parties agrees
that, except as expressly contemplated by Section 10.14, the rights provided in
this Section 8 shall be the exclusive right and remedy for any Adverse
Consequence resulting from a breach of this Agreement.
9. TERMINATION.
9.1 TERMINATION OF AGREEMENT. Certain of the Parties may terminate
this Agreement as provided below:
9.1.1 The Buyer and the Seller may terminate this Agreement
by mutual written consent at any time prior to the Closing;
9.1.2. The Buyer may terminate this Agreement by giving
written notice to the Seller at any time prior to the Closing (A) in the event
the Seller has breached any material representation, warranty, or covenant
contained in this Agreement in any material respect, the Buyer has notified the
Seller of the breach, and the breach has continued without cure for a period of
five (5) business days after the notice of breach or (B) if the Closing shall
not have occurred on or before July 14, 1995, by reason of the failure of any
condition precedent under Section 7.1 hereof (unless the failure results
primarily from the Buyer itself breaching any representation, warranty, or
covenant contained in this Agreement); and
9.1.3. The Seller may terminate this Agreement by giving
written notice to the Buyer at any time prior to the Closing (A) in the event
the Buyer has breached any material representation, warranty, or covenant
contained in this Agreement in any material respect, the Seller has notified the
Buyer of the breach, and the breach has continued without cure for a period of
five (5) business days after the notice of breach or (B) if the Closing shall
not have occurred on or before July 14, 1995, by reason of the failure of any
condition precedent under Section 7.2 hereof (unless the failure primarily from
the Seller itself breaching any representation, warranty, or covenant contained
in this Agreement).
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9.1.4. EFFECT OF TERMINATION. If any Party terminates this
Agreement pursuant to Section 9.1 above, all rights and obligations of the
Parties hereunder shall terminate without any liability of any Party to any
other Party (except for any liability of any Party then in breach).
10. MISCELLANEOUS.
10.1. PRESS RELEASES AND PUBLIC ANNOUNCEMENTS. No Party shall
issue any press release or make any public announcement relating to the subject
matter of this Agreement without the prior written approval of the Buyer and the
Seller; provided, however, that any Party may make any public disclosure it
believes in good faith is required by applicable law or any listing or trading
agreement concerning its publicly-traded securities (in which case the
disclosing Party will use its best efforts to advise the other Party prior to
making the disclosure).
10.2. NO THIRD-PARTY BENEFICIARIES. This Agreement shall not
confer any rights or remedies upon any Person other than the Parties and their
respective successors and permitted assigns.
10.3. ENTIRE AGREEMENT. This Agreement (including the documents
referred to herein) constitutes the entire agreement among the Parties and
supersedes any prior understandings, agreements, or representations by or among
the Parties, written or oral, to the extent they related in any way to the
subject matter hereof.
10.4. SUCCESSION AND ASSIGNMENT. This Agreement shall be binding
upon and inure to the benefit of the Parties named herein and their respective
successors and permitted assigns. No Party may assign either this Agreement or
any of its rights,interests, or obligations hereunder without the prior written
approval of the Buyer and the Seller, provided, however, that the Buyer may
assign any or all of its right to purchase the Target Shares (but no other right
or obligation) to one or more of its Affiliates.
10.5. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
10.6. HEADINGS. The section headings contained in this Agreement
are inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
10.7. NOTICES. All notices, requests, demands, claims, and other
communications hereunder will be in writing. Any notice, request, demand,
claim, or other communication hereunder shall be deemed duly given if (and then
two (2)
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business days after) it is sent by registered or certified mail, return receipt
requested, postage prepaid, and addressed to the intended recipient as set forth
below:
If to the Buyer: LEUCADIA NATIONAL CORPORATION
315 Park Avenue South
New York, New York 10010
Attn: Joseph S. Steinberg, President
With Copy to: WEIL, GOTSHAL & MANGES
767 Fifth Avenue
New York, New York 10153
Attn: Stephen E. Jacobs, Esq.
If to the Seller: MORRISON KNUDSEN CORPORATION
720 Park Boulevard
Boise, Idaho 93729
Attn: Stephen G. Hanks
With Copy to: MORRISON KNUDSEN CORPORATION
720 Park Boulevard
Boise, Idaho 93729
Attn: Jonathan M. Robertson
With Copy to: JONES, DAY, REAVIS & POGUE
555 West 5th Street, Suite 4600
Los Angeles, California 90013
Attn: Robert Dean Avery, Esq.
Any Party may send any notice, request, demand, claim, or other communication
hereunder to the intended recipient at the address set forth above using any
other means (including personal delivery, expedited courier, messenger service,
edge, telex, ordinary mail, or electronic mail), but no such notice, request,
demand, claim, or other communication shall be deemed to have been duly given
unless and until it actually is received by the intended recipient. Any Party
may change the address to which notices, requests, demands, claims, and other
communications hereunder are to be deliver by giving the other Parties notice in
the manner herein set forth.
10.8. GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the domestic laws of the State of New York without
giving effect to any choice or conflict of law provision or rule (whether of the
State of New York or any other jurisdiction) that would cause the application of
the laws of any jurisdiction other than the State of New York.
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10.9. AMENDMENTS AND WAIVERS. No amendment of any provision of
this Agreement shall be valid unless the same shall be in writing and signed by
the Buyer and the Seller. No waiver by any Party of any default,
misrepresentation, or breach of warranty or covenant hereunder, whether
intentional or not, shall be deemed to extend to any prior or subsequent
default, misrepresentations, or breach of warranty or covenant hereunder or
affect in any way any rights arising by virtue of any prior or subsequent such
occurrence.
10.10. SEVERABILITY. Any term or provision of this Agreement that is
invalid or unenforceable in any situation in any jurisdiction shall not affect
the validity or enforceability of the remaining terms and provisions hereof or
the validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction.
10.11. EXPENSES. Each of the Parties will bear its own costs and
expenses (including legal fees and expenses) incurred in connection with this
Agreement and the transactions contemplated hereby. The Seller agrees that the
Target has not borne or will not bear any of the Seller's costs and expenses
(including any of their legal fees and expenses) in connection with this
Agreement or any of the transaction contemplated hereby.
10.12. CONSTRUCTION. The Parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the Parties and no presumption or burden of proof shall
arise favoring any Party by virtue of the authorship of any of the provisions of
this Agreement. Any reference to any federal, state, local, or foreign statute
or law shall be deemed also to refer to all rules and regulations promulgated
thereunder, unless the context requires otherwise. The word "including" shall
mean including without limitation. The Parties intend that each representation,
warranty, and covenant contained herein shall have independent significance. If
any Party has breached any representation, warranty, or covenant contained
herein in any respect, the fact that there exists another representation,
warranty, or covenant relating to the same subject matter (regardless of the
relative levels of specificity) which the Party has not breached shall not
detract from or mitigate the fact that the Party is in breach of the first
representation, warranty, or covenant.
10.13. INCORPORATION OF EXHIBITS AND SCHEDULES. The Exhibits and
Schedules identified in this Agreement are incorporated herein by reference and
made a part hereof.
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10.14. SPECIFIC PERFORMANCE. Each of the Parties acknowledges and
agrees that the other Party would be damaged irreparably in the event any of the
provisions of this Agreement are not performed in accordance with their specific
terms or other wise are breached. Accordingly, each of the Parties agrees that
the other Party shall be entitled to an injunction or injunctions to prevent
breaches of the provisions of this Agreement and to enforce specifically this
Agreement and the terms and provisions hereof in any action instituted in any
court of the United States or any state thereof having jurisdiction over the
Parties and the matter in addition to any other remedy to which they may be
entitled, at law or in equity.
10.15 SUBMISSION TO JURISDICTION. Each of the Parties submits to the
jurisdiction of any state or federal court sitting in New York, New York in any
action or proceeding arising out of or relating to this Agreement and agrees
that all claims in respect of the action or proceeding may be heard and
determined in any such court. Each of the Parties waives any defense of
inconvenient forum to the maintenance of any action or proceeding so brought and
waives any bond, surety or other security that might be required of any other
Party with respect thereto. Any Party may make service or any other Party by
sending or delivering a copy of the process to the Party to be served at the
address and in the manner provided for the giving of notices in Section 10.7.
Nothing in Section 10.15, however, shall affect the right of any Party to bring
any action or proceeding arising out of or relating to this Agreement in any
other court or to serve legal process in any other manner permitted by law or
at equity. Each Party agrees that a final judgment in any action or proceeding
so brought shall be conclusive and may be confirmed by suit as the judgment or
in any other manner provided by law or at equity.
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IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as
of the date first above written.
"BUYER"
LEUCADIA NATIONAL CORPORATION,
a New York corporation
By: /s/ Joseph S. Steinberg
--------------------------
Title: President
"SELLER"
MORRISON KNUDSEN CORPORATION,
a Delaware corporation
By: /s/ Stephen G. Hanks
-----------------------
Title: Executive Vice President
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EXHIBIT "A"
INTERCOMPANY AGREEMENT
1. Support Services Agreement dated December 20, 1993, by and
between MK Gold Company, a Delaware corporation and Morrison
Knudsen Corporation, a Delaware corporation.
2. Professional Services Agreement December 20, 1993, by and between
MK Gold Company, a Delaware corporation and Morrison Knudsen
Corporation, a Delaware corporation.
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EXHIBIT B
ESCROW AND SECURITY AGREEMENT
ESCROW AND SECURITY AGREEMENT, dated as of May 12, 1995, by and among
LEUCADIA NATIONAL CORPORATION, a New York corporation ("Buyer"), MORRISON
KNUDSEN CORPORATION, a Delaware corporation ("Seller") and Weil, Gotshal &
Manges (a partnership including professional corporations) ("Escrow Agent").
W I T N E S S E T H :
WHEREAS, pursuant to an agreement made as of the 12th day of May 1995
between Seller and Buyer (the "Stock Purchase Agreement") Seller has agreed to
sell to Buyer and Buyer has agreed to purchase from Seller an aggregate of
9,000,000 shares of the outstanding common stock, par value $.01 per share, of
MK Gold Company, a Delaware corporation ("Target") (the "Target Shares"); and
WHEREAS, the Stock Purchase Agreement provides for the deposit (a) by
Buyer of US$22,500,000 (the "Escrowed Funds") into an escrow account (the "Cash
Escrow Account"), (b) by Sellers of the Target Shares, with stock powers duly
endorsed in blank (the "Escrowed Shares") into an escrow account (the "Share
Escrow Account"), in each case to be released in accordance with the provisions
of Section 3 hereof; and
WHEREAS, the Stock Purchase Agreement also provides that any
dividends, distributions, redemptions, purchases or other acquisitions of any
shares of capital stock of Target (a "Distribution") received in respect of the
Target Shares shall be for the benefit of Buyer and, if received by Seller on or
after the date of the Stock Purchase Agreement and prior to the Closing (as
defined in the Stock Purchase Agreement) shall be deposited with the Escrow
Agent (the "Escrowed Distributions") as follows: any cash portion of the
Escrowed Distributions shall be deposited in the Cash Escrow Account with the
balance of the Escrowed Distributions to be deposited into an escrow account
(the "Distributions Escrow Account") to be released in accordance with the
provisions of Section 3 hereof; and
WHEREAS, the Escrow Agent is willing to serve as Escrow Agent and hold
the Escrowed Shares and the Escrowed Funds, plus any interest earned thereon,
(collectively, the "Escrowed
<PAGE>
Property") in accordance with and subject to the terms and conditions hereof.
NOW, THEREFORE, in consideration of the foregoing and other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, and intending to be legally bound, the parties hereto agree as
follows:
1. Seller and Buyer each hereby consent to the appointment of and
hereby appoint Weil, Gotshal & Manges as Escrow Agent, to serve as escrow agent
in accordance with the terms and conditions herein set forth, and Escrow Agent
hereby accepts such appointment.
2. The Escrowed Funds, the Escrowed Distributions, if any, and the
Escrowed Shares shall be deposited with Escrow Agent as follows:
(a) On the business day next following the satisfaction or waiver of
the conditions set forth in Section 7.2.7. of the Stock Purchase Agreement and
notice thereof to Buyer (or, with respect to any Escrowed Distributions, on the
business day next following receipt thereof by Seller), Buyer shall deliver to
Escrow Agent the Escrowed Funds and Seller shall deliver to Escrow Agent the
Escrowed Shares, with stock powers duly endorsed in blank, and the Escrowed
Distributions, if any. Escrow Agent shall not be liable or responsible for the
collection of the proceeds of any check payable or endorsed to Escrow Agent
hereunder.
(b) Escrow Agent, in accordance with direction provided by Buyer,
shall deposit the Escrowed Funds and the cash portion of any Escrowed
Distributions in certificates of deposit or interest bearing accounts of Morgan
Guaranty Trust Company or any other bank or trust company, incorporated under
the laws of the United States of America or any state, which has combined
capital and surplus of not less than $100,000,000.
(c) No interest earned on the Escrowed Funds shall become part of the
Escrowed Funds. All interest earned on the Escrowed Funds shall be the property
of Buyer and shall be payable to Buyer at its written request. Any interest
earned on the cash portion of the Escrowed Distributions shall be added to and
become part of the Escrowed Distributions.
3. The Escrowed Property shall be released by the Escrow Agent as
follows:
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(a) On the business day immediately following receipt by Escrow Agent
of Disbursing Instructions in the form attached as Annex A hereto executed by
both Buyer and Seller, Escrow Agent (i) shall release to Seller from the
Escrowed Funds the purchase price set forth in the Stock Purchase Agreement and
(ii) shall release to Buyer the Escrowed Shares, with stock powers duly endorsed
in blank, and the Escrowed Distributions, if any, including the balance
remaining in the Cash Escrow Account after release of funds to Seller pursuant
to (a)(i) above; and
(b) Upon receipt by the Escrow Agent of Disbursing Instructions in
the form attached as Annex B hereto executed by both Seller and Buyer, Escrow
Agent shall release to Seller the Escrowed Shares, with stock powers duly
endorsed in blank, and the Escrowed Distributions, if any, (including any cash
portion of the Escrowed Distributions and any interest earned thereon) and shall
release to Buyer the Escrowed Funds; and
(c) If the Escrow Agent shall not have received Disbursing
Instructions in the form attached as Annex A or Annex B hereto duly executed in
accordance herewith on or prior to August 1, 1995, Escrow Agent shall release to
Seller the Escrowed Shares with stock powers duly endorsed in blank, and the
Escrowed Distributions, if any, (including any cash portion of the Escrowed
Distributions and any interest earned thereon), and shall release to Buyer the
Escrowed Funds;
4. Any notice or certificate given to Escrow Agent under Section 3
shall be by hand or overnight delivery to the parties at the addresses set forth
in Section 15 of this Agreement. Any notice received by Escrow Agent hereunder
after 11:00 A.M. New York City time shall be deemed to have been received on the
next following business day. In the event of any dispute, Escrow Agent shall
retain the Escrowed Property until the dispute is resolved by the final order or
judgment of a court having jurisdiction with respect thereto. Reasonable fees
and costs of the other party or parties shall be advanced by the party giving
notice of a dispute, and shall be borne by the party or parties not prevailing
in the action.
5. Escrow Agent shall be entitled to rely upon, and shall be fully
protected from all liability, loss, cost, damage or expense in acting or
omitting to act pursuant to, any instruction, order, judgment, certification,
affidavit, demand, notice, opinion, instrument or other writing delivered to it
hereunder without being required to determine the authenticity of such document,
the correctness of any fact stated therein, the propriety of the service thereof
or the capacity, identity or
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<PAGE>
authority of any party purporting to sign or deliver such document.
6. The duties of Escrow Agent are only as herein specifically
provided, and are purely ministerial in nature. Escrow Agent shall neither be
responsible for, or under, nor chargeable with knowledge of, the terms and
conditions of any other agreement, instrument or document in connection
herewith, including, without limitation, the agreements referred to in the
preamble to this Agreement, and shall be required to act in respect of the
Escrowed Property only as provided in this Agreement. This Agreement sets forth
all the obligations of Escrow Agent with respect to any and all matters
pertinent to the escrow contemplated hereunder and no additional obligations of
Escrow Agent shall be implied from the terms of this Agreement or any other
agreement. Escrow Agent shall incur no liability in connection with the
discharge of its obligations under this Agreement or otherwise in connection
therewith, except such liability as may arise from the willful misconduct or
gross negligence of Escrow Agent.
7. Escrow Agent may consult with counsel of its choice, which may
include attorneys in the firm of Weil, Gotshal & Manges, and shall not be liable
for any action taken or omitted to be taken by Escrow Agent in accordance with
the advice of such counsel.
8. Escrow Agent shall not be bound by any modification, cancellation
or rescission of this Agreement unless in writing and signed by Escrow Agent.
9. Escrow Agent shall have no tax reporting duties with respect to
the Escrowed Property, or income thereon, such duties being the responsibility
of the party or parties which receive, or have the right to receive, any taxable
income hereunder. Notwithstanding the foregoing, Escrow Agent has the authority
to comply with the provisions of Section 468B(g) of the Internal Revenue Code of
1986, as amended, and any regulations promulgated thereunder. Such authority
shall include, without limitation, (i) the filing of tax returns (including
information returns) with respect to the Escrowed Property, or income thereon,
(ii) the payment of any tax, interest or penalties imposed thereon, (iii) the
withholding of any amounts which are required to be withheld and (iv) the
payment over of such withheld amounts to the appropriate taxing authority. The
parties to this Agreement, other than Escrow Agent, shall provide Escrow Agent
with all information necessary to enable Escrow Agent to comply with the
foregoing. Escrow Agent may withdraw
4
<PAGE>
from the Cash Escrow Account amounts necessary to pay all applicable income or
withholding taxes (plus interest and penalties thereon) that are required to be
paid. The parties hereto acknowledge that (a) the Escrowed Funds shall remain
the property of Buyer unless and until disbursed to Seller pursuant to Section 3
hereof and (b) the Escrowed Shares and the Escrowed Distributions shall remain
Seller's property unless and until disbursed to Buyer pursuant to Section 3
hereof.
10. Escrow Agent is acting as a stakeholder only with respect to the
Escrowed Property. If any dispute arises as to whether Escrow Agent is
obligated to deliver the Escrowed Property or as to whom the Escrowed Property
are to be delivered or the amount thereof, Escrow Agent shall not be required to
make any delivery, but in such event Escrow Agent may hold the Escrowed Property
until receipt by Escrow Agent of instructions in writing, signed by all parties
which have, or claim to have, an interest in the Escrowed Property, directing
the disposition of the Escrowed Property, or in the absence of such
authorization, Escrow Agent may hold the Escrowed Property until receipt of a
certified copy of a final judgment of a court of competent jurisdiction
providing for the disposition of the Escrowed Property. Escrow Agent may
require, as a condition to the disposition of the Escrowed Property pursuant to
written instructions, indemnification and/or opinions of counsel, in form and
substance satisfactory to Escrow Agent, from each party providing such
instructions. If such written instructions, indemnification and opinions are
not received, or proceedings for such determination are not commenced within 30
days after receipt by Escrow Agent of notice of any such dispute and diligently
continued, or if Escrow Agent is uncertain as to which party or parties are
entitled to the Escrowed Property, Escrow Agent may either (i) hold the Escrowed
Property until receipt of (A) such written instructions and indemnification or
(B) a certified copy of a final judgment of a court of competent jurisdiction
providing for the disposition of the Escrowed Property, or (ii) deposit the
Escrowed Property in the registry of a court of competent jurisdiction;
PROVIDED, HOWEVER, that notwithstanding the foregoing, Escrow Agent may, but
shall not be required to, institute legal proceedings of any kind.
11. Buyer and Seller, jointly and severally, agree to reimburse
Escrow Agent on demand for, and to indemnify and hold Escrow Agent harmless
against and with respect to, any and all loss, liability, damage, or expense
(including, without limitation, taxes, attorneys' fees and costs) that Escrow
Agent may suffer or incur in connection with the entering into of this Agreement
and performance of its obligations under this Agreement
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<PAGE>
or otherwise in connection therewith, except to the extent such loss, liability,
damage or expense arises from the willful misconduct of Escrow Agent. Escrow
Agent, after not less than ten days prior written notice to the other parties
hereto, shall have the right at any time and from time from time to charge, and
reimburse itself from, the Escrowed Property for all amounts to which it is
entitled pursuant this Agreement. Escrow Agent shall not receive a fee for its
services rendered as Escrow Agent hereunder.
12. Escrow Agent and any successor escrow agent may at any time
resign as such by delivering the Escrowed Property to either (i) any successor
escrow agent designated by all the parties hereto (other than Escrow Agent) in
writing, or (ii) any court having competent jurisdiction. Upon its resignation
and delivery of the Escrowed Property as set forth in this paragraph, Escrow
Agent shall be discharged of, and from, any and all further obligations arising
in connection with the escrow contemplated by this Agreement.
13. Escrow Agent shall have the right to represent any party hereto
in any dispute between the parties hereto with respect to the Escrowed Property
or otherwise.
14. This Agreement shall inure to the benefit of, and be binding
upon, the parties hereto and their respective permitted successors and assigns.
Nothing in this Agreement, express or implied, shall give to anyone, other than
the parties hereto and their respective permitted successors and assigns, any
benefit, or any legal or equitable right, remedy or claim, under or in respect
of this Agreement or the escrow contemplated hereby.
15. Except as specifically provided otherwise herein, any notice
authorized or required to be given to a party hereto pursuant to this Agreement
shall be deemed to have been given when hand-delivered, or when mailed by United
States certified or registered mail, postage prepaid, return receipt requested,
addressed to the parties at the following addresses:
If to Buyer, to:
Leucadia National Corporation
315 Park Avenue South
New York, New York
Attention: Joseph S. Steinberg, President
6
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with a copy to:
Weil, Gotshal & Manges
767 Fifth Avenue
New York, New York 10153
Attention: Stephen E. Jacobs, Esq.
If to Seller, to:
Morrison Knudsen Corporation
720 Park Boulevard
Boise, Idaho 93729
Attention: Stephen G. Hanks
with a copy to:
Jones, Day, Reavis & Pogue
5555 West 5th Street, Suite 4600
Los Angeles, California 90015
Attention: Robert Dean Avery, Esq.
If to Escrow Agent, to:
Weil, Gotshal & Manges
767 Fifth Avenue
New York, New York 10153
Attention: Stephen E. Jacobs, Esq.
Any party may change its respective address by giving notice thereof in writing
to the other parties hereto in the same manner as set forth above.
16. This Agreement shall terminate on the date on which all Escrowed
Property has been fully disbursed or release herefrom in accordance with Section
3 hereof.
17. This Agreement shall be construed and enforced in accordance with
the laws of the State of New York. All actions against Escrow Agent arising
under or relating to this Agreement shall be brought against Escrow Agent
exclusively in the appropriate court in the County of New York, State of New
York. Each of the parties hereto agrees to submit to personal jurisdiction and
to waive any objection as to venue in the County of New York, State of New York.
Service of process on any party hereto in any action arising out of or relating
to this Agreement shall be effective if mailed to such party and such party's
counsel as set forth in Section 15 hereof.
7
<PAGE>
18. TO THE FULL EXTENT PERMITTED BY LAW, EACH OF THE PARTIES HERETO
HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES THE RIGHT IT MAY HAVE TO
A TRIAL BY JURY IN RESPECT TO ANY LITIGATION BASED HEREON, OR ARISING OUT OF,
UNDER OR IN CONNECTION WITH THIS AGREEMENT, OR ANY COURSE OF CONDUCT, COURSE OF
DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN) OR ACTIONS OF ANY PARTY HERETO.
THIS PROVISION IS A MATERIAL INDUCEMENT FOR ESCROW AGENT ENTERING INTO THIS
AGREEMENT.
19. This Agreement may be executed in any number of separate
counterparts, each of which shall, collectively and separately, constitute one
agreement.
20. All pronouns and any variations thereof shall be deemed to refer
to the masculine, feminine or neuter, singular or plural, as the identity of the
parties hereto taken within context may require.
21. The rights of Escrow Agent contained in this Agreement, including
without limitation the right to indemnification, shall survive the resignation
of Escrow Agent and the termination of the escrow contemplated hereunder.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as of the day and year first written above.
LEUCADIA NATIONAL CORPORATION
By: _______________________________
Title: President
MORRISON KNUDSEN CORPORATION
By:________________________________
Title:_____________________________
ESCROW AGENT: WEIL, GOTSHAL & MANGES
By:________________________________
(A Member of the Firm)
8
<PAGE>
ANNEX A
Disbursing Instructions for Release
of Escrow Property upon
SATISFACTION OR WAIVER OF CONDITIONS
Weil, Gotshal & Manges
767 Fifth Avenue
New York, New York 10153
Attn: Stephen E. Jacobs, Esq.
Reference is made to that certain Escrow Agreement, dated as of
May __, 1995 by and among Leucadia National Corporation ("Buyer"), Morrison
Knudsen Corporation ("Seller") and Weil, Gotshal & Manges as Escrow Agent (the
"Escrow Agreement"). All capitalized terms used herein without definition shall
have the meanings ascribed thereto in the Escrow Agreement.
Pursuant to and in accordance with the Escrow Agreement, you are
hereby directed (a) to release to Seller US$22,500,000 of the Escrowed Funds
from the Cash Escrow Account established under the Escrow Agreement, (b) to
release to Buyer (i) the Escrowed Shares, together with stock powers duly
endorsed in blank, from the Share Escrow Account established under the Escrow
Agreement, and (ii) the Escrowed Distributions, if any, including the balance
remaining in the Cash Escrow Account after release of funds to Seller pursuant
to (a) above.
LEUCADIA NATIONAL CORPORATION
By: _____________________
Title:__________________
MORRISON KNUDSEN CORPORATION
By: _____________________
Title:__________________
9
<PAGE>
ANNEX B
Disbursing Instructions upon
SECTION 9 EVENT
Weil, Gotshal & Manges
767 Fifth Avenue
New York, New York 10153
Attn: Stephen E. Jacobs, Esq.
Reference is made to that certain Escrow Agreement, dated as of
May ___, 1995 by and among Leucadia National Corporation ("Buyer"), Morrison
Knudsen Corporation ("Seller") and Weil, Gotshal & Manges as Escrow Agent (the
"Escrow Agreement"). All capitalized terms used herein without definition shall
have the meanings ascribed thereto in the Escrow Agreement.
Pursuant to and in accordance with the Escrow Agreement, you are
hereby directed to (a) to release to Buyer the Escrowed Funds from the Cash
Escrow Account established under the Escrow Agreement and (b) to release to
Seller (i) the Escrowed Shares, together with stock powers duly endorsed in
blank, from the Share Escrow Account established under the Escrow Agreement and
(ii) the Escrowed Distributions, if any, including the balance remaining in the
Cash Escrow Account after release of the Escrowed Funds to Buyer.
LEUCADIA NATIONAL CORPORATION
By: _____________________
Title:__________________
MORRISON KNUDSEN CORPORATION
By: _____________________
Title:__________________
10
<PAGE>
Amendment No. 1 to Stock Purchase Agreement
Reference is made to the Stock Purchase Agreement dated May 12, 1995 ("the
Stock Purchase Agreement") by and between Leucadia National Corporation
("Buyer") and Morrison Knudsen Corporation ("Seller").
All capitalized terms used herein without definition shall have the
meanings ascribed thereto in the Stock Purchase Agreement.
Buyer and Seller hereby agree to amend Section 7.2.7 of the Stock Purchase
Agreement so that it shall read in its entirety as follows:
"7.2.7. On or prior to the close of business on May 19, 1995, Seller shall
have received approval of the Executive Committee of the Seller's Board of
Directors and Seller's Bank Steering Committee for this Agreement and the
transactions contemplated hereby."
IN WITNESS WHEREOF, the parties hereto have executive this Agreement as of
this 17th day of May 1995.
LEUCADIA NATIONAL CORPORATION
By: /s/ Joseph S. Steinberg
----------------------------
Title: President
MORRISON KNUDSEN CORPORATION
By: /s/ Stephen G. Hanks
----------------------------
Title: Executive Vice President
<PAGE>
Amendment No. 2 to Stock Purchase Agreement
Reference is made to the Stock Purchase Agreement dated May 12, 1995
(the "Stock Purchase Agreement") by and between Leucadia National Corporation
("Buyer") and Morrison Knudsen Corporation ("Seller").
All capitalized terms used herein without definition shall have the
meanings ascribed thereto in the Stock Purchase Agreement.
Buyer and Seller hereby agree as follows:
1. Section 2.3. of the Stock Purchase Agreement shall be amended to
read in its entirety as follows:
"2.3. THE CLOSING. The closing of the transactions
contemplated by this Agreement (the "Closing") shall take place
at the offices of Weil, Gotshal & Manges, 767 Fifth Avenue, New
York, New York at 9:00 a.m., local time on the third business day
following satisfaction or waiver of the conditions set forth in
Section 7 hereof (or if later, the first such other date as may
be required under the Escrow Agreement), or such other time and
place as the Parties agree upon, and such date is referred to in
this Agreement as the "Closing Date".
2. Section 2.4. of the Stock Purchase Agreement shall be amended to
read in its entirety as follows:
"2.4. DELIVERY OF DISBURSING INSTRUCTIONS TO ESCROW
AGENT. On the business day on which the conditions set forth in
Section 7 hereof have been satisfied or waived, Buyer shall
execute and deliver to the Escrow Agent the disbursing
instructions annexed to the Escrow Agreement as Annex A ."
3. Section 7.2.6. of the Stock Purchase Agreement shall be amended
to read in its entirety as follows:
"7.2.6. Effective as of the Closing Date, Seller and Seller's
Affiliates (other than Target) shall
<PAGE>
have been released from any Adverse Consequences or liabilities
in respect of the $20 million Credit Agreement dated September 2,
1993 by and among the Seller, the Target and CIBC, Inc. (the
"Lender"), as amended (the "CIBC Facility"), including guarantees
thereof, whether in connection with (i) the purchase by Buyer all
of Lender's interest in and under the CIBC Facility for a
purchase price of 100% of amounts outstanding thereunder, plus
accrued but unpaid interest thereon, or (ii) the prepayment by
Target of the CIBC Facility upon receipt by Target from Buyer of
a financing commitment satisfactory to Target, in an amount not
to exceed $15 million."
4. Section 7.2.7. of the Stock Purchase Agreement shall be amended
to read in its entirety as follows:
"7.2.7. On or prior to the close of business on May 25, 1995,
Seller shall have received approval of the Executive Committee of
Seller's Board of Directors and approval by the requisite
percentage of lenders (the "Bank Consent") party to the Credit
Agreement dated as of April 11, 1995 by and between Morrison
Knudsen Corporation, an Ohio corporation, and Seller, as
Borrowers, Mellon Bank, N.A. as Administrative Agent (the
"Administrative Agent") and Mellon Bank, N.A. and Bank of America
National Trust and Savings Association, as Co-Agents (the "Co-
Agents"), and the other banks and other financial institutions
named therein (the "MK Lenders") for this Agreement and the
transactions contemplated hereby. The Bank Consent may be
delivered on behalf of the MK Lenders in escrow to be released at
the Closing."
2
<PAGE>
In all other respects, the Stock Purchase Agreement as amended hereby
shall remain in full force and effect.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of this 22nd day of May, 1995.
LEUCADIA NATIONAL CORPORATION
By: /s/ Joseph A. Orlando
--------------------------------
Title: Vice President
-----------------------------
MORRISON KNUDSEN CORPORATION
By: /s/ Stephen G. Hanks
--------------------------------
Title: Executive Vice President
-----------------------------
3
<PAGE>
Amendment No. 3 to Stock Purchase Agreement
Reference is made to the Stock Purchase Agreement dated May 12, 1995
(the "Stock Purchase Agreement") by and between Leucadia National Corporation
("Buyer") and Morrison Knudsen Corporation ("Seller").
All capitalized terms used herein without definition shall have the
meanings ascribed thereto in the Stock Purchase Agreement.
Buyer and Seller hereby agree as follows:
1. Exhibit B shall be amended to substitute therefor the Amended and
Restated Escrow Agreement dated as of May 12, 1995 by and among Buyer,
Seller, Mellon Bank, N.A. as Collateral Agent and Weil, Gotshal &
Manges, as escrow agent, a copy of which is attached hereto as Exhibit
A.
In all other respects, the Stock Purchase Agreement as amended hereby
shall remain in full force and effect.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of this 24th day of May, 1995.
LEUCADIA NATIONAL CORPORATION
By: /s/ Joseph A. Orlando
--------------------------------
Title: Vice President
MORRISON KNUDSEN CORPORATION
By: /s/ Stephen G. Hanks
--------------------------------
Title: Executive Vice President
-----------------------------
<PAGE>
Exhibit A
AMENDED AND RESTATED ESCROW AND SECURITY AGREEMENT
AMENDED AND RESTATED ESCROW AND SECURITY AGREEMENT, dated as of May
12, 1995, by and among LEUCADIA NATIONAL CORPORATION, a New York corporation
("Buyer"), MORRISON KNUDSEN CORPORATION, a Delaware corporation ("Seller"),
MELLON BANK, N.A., as Collateral Agent (as defined herein) for the MK Lenders
(as defined herein) and Weil, Gotshal & Manges (a partnership including
professional corporations) ("Escrow Agent").
W I T N E S S E T H :
WHEREAS, pursuant to an agreement made as of the 12th day of May 1995
between Seller and Buyer (the "Stock Purchase Agreement") Seller has agreed to
sell to Buyer and Buyer has agreed to purchase from Seller an aggregate of
9,000,000 shares of the outstanding common stock, par value $.01 per share, of
MK Gold Company, a Delaware corporation ("Target") (the "Target Shares"); and
WHEREAS, the Stock Purchase Agreement provides for the deposit (a) by
Buyer of US$22,500,000 (the "Escrowed Funds") into an escrow account (the "Cash
Escrow Account"), (b) by Sellers of the Target Shares, with stock powers duly
endorsed in blank (the "Escrowed Shares") into an escrow account (the "Share
Escrow Account"), in each case to be released in accordance with the provisions
of Section 3 hereof; and
WHEREAS, the Stock Purchase Agreement also provides that any
dividends, distributions, redemptions, purchases or other acquisitions of any
shares of capital stock of Target (a "Distribution") received in respect of the
Target Shares shall be for the benefit of Buyer and, if received by Seller on or
after the date of the Stock Purchase Agreement and prior to the Closing (as
defined in the Stock Purchase Agreement) shall be deposited with the Escrow
Agent (the "Escrowed Distributions") as follows: any cash portion of the
Escrowed Distributions shall be deposited in the Cash Escrow Account with the
balance of the Escrowed Distributions to be deposited into an escrow account
(the "Distributions Escrow Account") to be released in accordance with the
provisions of Section 3 hereof; and
<PAGE>
WHEREAS, Seller has entered into a Credit Agreement dated as of April
11, 1995 by and between Morrison Knudsen Corporation, an Ohio corporation and
Seller, as borrowers (collectively, "Borrowers"), Mellon Bank, N.A. as
Administrative Agent (the "Administrative Agent"), Mellon Bank, N.A. and Bank of
America National Trust and Savings Association, as Co-Agents (the "Co-Agents"),
and the other banks and other financial institutions named therein, as lenders
(the "MK Lenders"), as amended as of April 25, 1995 (the "MK Credit Agreement")
and the Pledge and Security Agreement dated as of April 11, 1995 by and between
Seller as pledgor, in favor of the Collateral Agent on behalf of the MK Lenders,
the Administrative Agent and the Co-Agents (the "MK Pledge Agreement"); and
WHEREAS, Seller pledged the Escrowed Shares to the Collateral Agent
for the ratable benefit of the MK Lenders, to secure the Obligations (as defined
in the MK Credit Agreement) under the MK Credit Agreement: and
WHEREAS, the Collateral Agent has been informed that it is a condition
under the Stock Purchase Agreement that the MK Lenders consent to the purchase
of the Escrowed Shares by Buyer pursuant to and as contemplated by the Stock
Purchase Agreement (the "MK Lenders' Consent") and that the Escrowed Shares be
deposited into the escrow established hereunder; and
WHEREAS, the Escrow Agent is willing to serve as Escrow Agent and hold
the Escrowed Shares, the Escrowed Distributions, if any, and the Escrowed Funds,
plus any interest earned thereon, (collectively, the "Escrowed Property") in
accordance with and subject to the terms and conditions hereof.
NOW, THEREFORE, in consideration of the foregoing and other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, and intending to be legally bound, the parties hereto agree as
follows:
1. Seller, Buyer and the Collateral Agent, on behalf of the MK
Lenders, each hereby consent to the appointment of and hereby appoint Weil,
Gotshal & Manges as Escrow Agent, to serve as escrow agent in accordance with
the terms and conditions herein set forth, and Escrow Agent hereby accepts such
appointment.
2. The Escrowed Funds, the Escrowed Distributions, if any, the MK
Lenders' Consent and the Escrowed Shares shall be deposited with Escrow Agent as
follows:
2
<PAGE>
(a) On the business day next following the satisfaction or waiver of
the conditions set forth in Section 7.2.7. of the Stock Purchase Agreement and
notice thereof to Buyer (or, with respect to any Escrowed Distributions, on the
business day next following receipt thereof by Seller), Buyer shall deliver to
Escrow Agent the Escrowed Funds and the Collateral Agent shall deliver to Escrow
Agent the MK Lenders' Consent and the Escrowed Shares, with stock powers duly
endorsed in blank, and Seller shall deliver to Escrow Agent the Escrowed
Distributions, if any. Escrow Agent shall not be liable or responsible for the
collection of the proceeds of any check payable or endorsed to Escrow Agent
hereunder.
(b) Escrow Agent, in accordance with direction provided by Buyer,
shall deposit the Escrowed Funds and the cash portion of any Escrowed
Distributions in certificates of deposit or interest bearing accounts of Morgan
Guaranty Trust Company or any other bank or trust company, incorporated under
the laws of the United States of America or any state, which has combined
capital and surplus of not less than $100,000,000.
(c) No interest earned on the Escrowed Funds shall become part of the
Escrowed Funds. All interest earned on the Escrowed Funds shall be the property
of Buyer and shall be payable to Buyer at its written request. Any interest
earned on the cash portion of the Escrowed Distributions shall be added to and
become part of the Escrowed Distributions.
(d) Each of the parties hereto acknowledge its understanding that
pursuant to the terms of the MK Pledge Agreement, Seller has pledged the
Escrowed Shares (and all proceeds thereof) to the Collateral Agent, for the
ratable benefit of the MK Lenders, to secure the Obligations (as defined in the
MK Credit Agreement) under the MK Credit Agreement and further acknowledges the
security interest in the Escrowed Shares, (and any proceeds thereof), in favor
of and held by the MK Lenders (the "MK Lenders' Security Interest") and hereby
agrees that until all of the terms and conditions of this escrow agreement have
been satisfied or waived, the Escrow Agent will hold the Escrowed Shares (and
any proceeds thereof) subject to the MK Lenders' Security Interest. The parties
hereto acknowledge that Escrow Agent is holding the Escrowed Shares (and any
proceeds thereof) as agent for the Collateral Agent on behalf of the MK Lenders,
the Administrative Agent and the Co-Agents for the limited purpose of continuing
uninterrupted the MK Lenders' Security Interest in and to the Escrowed Shares
(and any proceeds thereof).
3
<PAGE>
Seller and the Collateral Agent on behalf of the MK Lenders
hereby acknowledge that no action or inaction on the part of the Escrow Agent or
the Buyer shall in any way alter the relative rights and obligations of Seller,
the Collateral Agent and the MK Lenders in and with respect to the Escrowed
Shares and the proceeds of the sale thereof pursuant to the Stock Purchase
Agreement, it being understood that such rights and obligations shall be
governed exclusively by the MK Credit Agreement and the MK Pledge Agreement.
3. The Escrowed Property shall be released by the Escrow Agent as
follows:
(a) On the business day immediately following receipt by Escrow Agent
of Disbursing Instructions in the form attached as Annex A hereto executed by
Buyer, Escrow Agent shall send to Seller and the Collateral Agent notice in the
form attached hereto as Annex A-1 of receipt of such Disbursing Instructions.
If within two business days of receipt of such Disbursing Instructions, Escrow
Agent has not received notice from Seller or the Collateral Agent that it
disputes the release of the Escrowed Property in accordance with such Disbursing
Instructions, on the third business day following receipt by Escrow Agent of
such Disbursing Instructions, Escrow Agent (i) shall release to the Collateral
Agent from the Cash Collateral Account the US $22,500,000 purchase price set
forth in the Stock Purchase Agreement and (ii) shall release to Buyer the
Escrowed Shares, with stock powers duly endorsed in blank, and the Escrowed
Distributions, if any, including the balance remaining in the Cash Escrow
Account after release of funds to Seller pursuant to (a)(i) above and (iii)
shall release to Seller the MK Lenders' Consent; and
(b) Upon receipt by the Escrow Agent of Disbursing Instructions in
the form attached as Annex B hereto executed by both Seller and Buyer, Escrow
Agent shall release to the Collateral Agent the MK Lenders' Consent and the
Escrowed Shares, with stock powers duly endorsed in blank, shall release to the
Seller the Escrowed Distributions, if any, (including any cash portion of the
Escrowed Distributions and any interest earned thereon) and shall release to
Buyer the Escrowed Funds; and
(c) If the Escrow Agent shall not have received Disbursing
Instructions in the form attached as Annex A or Annex B hereto duly executed in
accordance herewith on or prior to July 18, 1995, Escrow Agent shall release to
the Collateral Agent the MK Lenders' Consent and the Escrowed Shares with stock
powers duly endorsed in blank, shall release to the Seller the Escrowed
4
<PAGE>
Distributions, if any, (including any cash portion of the Escrowed Distributions
and any interest earned thereon), and shall release to Buyer the Escrowed Funds;
4. Any notice or certificate given to Escrow Agent under Section 3
shall be delivered either by facsimile transmission, by hand or by overnight
delivery to the parties at the addresses set forth in Section 15 of this
Agreement; provided that facsimile transmission shall not be effective unless
receipt is telephonically confirmed by the addressees or confirmed in writing
(which may be facsimile transmitted) by the addressees. Any notice requiring
disbursement of cash by Escrow Agent received by Escrow Agent hereunder after
11:00 A.M. New York City time shall be deemed to have been received on the next
following business day. In the event of any dispute, Escrow Agent shall retain
the Escrowed Property until the dispute is resolved by the final order or
judgment of a court having jurisdiction with respect thereto. Reasonable fees
and costs of the other party or parties shall be advanced by the party giving
notice of a dispute, and shall be borne by the party or parties not prevailing
in the action.
5. Escrow Agent shall be entitled to rely upon, and shall be fully
protected from all liability, loss, cost, damage or expense in acting or
omitting to act pursuant to, any instruction, order, judgment, certification,
affidavit, demand, notice, opinion, instrument or other writing delivered to it
hereunder without being required to determine the authenticity of such document,
the correctness of any fact stated therein, the propriety of the service thereof
or the capacity, identity or authority of any party purporting to sign or
deliver such document.
6. The duties of Escrow Agent are only as herein specifically
provided, and are purely ministerial in nature. Escrow Agent shall neither be
responsible for, or under, nor chargeable with knowledge of, the terms and
conditions of any other agreement, instrument or document in connection
herewith, including, without limitation, the agreements referred to in the
preamble to this Agreement, and shall be required to act in respect of the
Escrowed Property only as provided in this Agreement. This Agreement sets forth
all the obligations of Escrow Agent with respect to any and all matters
pertinent to the escrow contemplated hereunder and no additional obligations of
Escrow Agent shall be implied from the terms of this Agreement or any other
agreement. Escrow Agent shall incur no liability in connection with the
discharge of its obligations under this Agreement or otherwise in connection
therewith, except such
5
<PAGE>
liability as may arise from the willful misconduct or gross negligence of Escrow
Agent.
7. Escrow Agent may consult with counsel of its choice, which may
include attorneys in the firm of Weil, Gotshal & Manges, and shall not be liable
for any action taken or omitted to be taken by Escrow Agent in accordance with
the advice of such counsel.
8. No party shall be bound by any modification, cancellation or
rescission of this Agreement unless in writing and signed by all parties hereto.
9. Escrow Agent shall have no tax reporting duties with respect to
the Escrowed Property, or income thereon, such duties being the responsibility
of the party or parties which receive, or have the right to receive, any taxable
income hereunder. Notwithstanding the foregoing, Escrow Agent has the authority
to comply with the provisions of Section 468B(g) of the Internal Revenue Code of
1986, as amended, and any regulations promulgated thereunder. Such authority
shall include, without limitation, (i) the filing of tax returns (including
information returns) with respect to the Escrowed Property, or income thereon,
(ii) the payment of any tax, interest or penalties imposed thereon, (iii) the
withholding of any amounts which are required to be withheld and (iv) the
payment over of such withheld amounts to the appropriate taxing authority. The
parties to this Agreement, other than Escrow Agent, shall provide Escrow Agent
with all information necessary to enable Escrow Agent to comply with the
foregoing. Escrow Agent may withdraw from the Cash Escrow Account amounts
necessary to pay all applicable income or withholding taxes (plus interest and
penalties thereon) that are required to be paid. The parties hereto acknowledge
that (a) the Escrowed Funds shall remain the property of Buyer unless and until
disbursed to the Collateral Agent pursuant to Section 3 hereof and (b) the
Escrowed Distributions and, subject to the MK Lenders' Security Interest
therein, the Escrowed Shares shall remain Seller's property, unless and until
disbursed to Buyer pursuant to Section 3 hereof.
10. Except as otherwise provided herein, Escrow Agent is acting as a
stakeholder only with respect to the Escrowed Property. If any dispute arises
as to whether Escrow Agent is obligated to deliver the Escrowed Property or as
to whom the Escrowed Property are to be delivered or the amount thereof, Escrow
Agent shall not be required to make any delivery, but in such event Escrow Agent
may hold the Escrowed Property until receipt by Escrow Agent of instructions in
writing, signed by all
6
<PAGE>
parties which have, or claim to have, an interest in the Escrowed Property,
directing the disposition of the Escrowed Property, or in the absence of such
authorization, Escrow Agent may hold the Escrowed Property until receipt of a
certified copy of a final judgment of a court of competent jurisdiction
providing for the disposition of the Escrowed Property. Escrow Agent may
require, as a condition to the disposition of the Escrowed Property pursuant to
written instructions, indemnification and/or opinions of counsel, in form and
substance satisfactory to Escrow Agent, from each party providing such
instructions. If such written instructions, indemnification and opinions are
not received, or proceedings for such determination are not commenced within 30
days after receipt by Escrow Agent of notice of any such dispute and diligently
continued, or if Escrow Agent is uncertain as to which party or parties are
entitled to the Escrowed Property, Escrow Agent may hold the Escrowed Property
until receipt of (A) such written instructions and indemnification or (B) a
certified copy of a final judgment of a court of competent jurisdiction
providing for the disposition of the Escrowed Property; PROVIDED, HOWEVER, that
notwithstanding the foregoing, Escrow Agent may, but shall not be required to,
institute legal proceedings of any kind.
11. Buyer and Seller, and not the Collateral Agent, jointly and
severally, agree to reimburse Escrow Agent on demand for, and to indemnify and
hold Escrow Agent harmless against and with respect to, any and all loss,
liability, damage, or expense (including, without limitation, taxes, attorneys'
fees and costs) that Escrow Agent may suffer or incur in connection with the
entering into of this Agreement and performance of its obligations under this
Agreement or otherwise in connection therewith, except to the extent such loss,
liability, damage or expense arises from the willful misconduct of Escrow Agent.
Escrow Agent, after not less than ten days prior written notice to the other
parties hereto, shall have the right at any time and from time from time to
charge, and reimburse itself from, the Escrowed Property for all amounts to
which it is entitled pursuant this Agreement. Escrow Agent shall not receive a
fee for its services rendered as Escrow Agent hereunder.
12. Escrow Agent and any successor escrow agent may at any time
resign as such by delivering the Escrowed Property to any successor escrow agent
designated by all the parties hereto (other than Escrow Agent) in writing. Upon
its resignation and delivery of the Escrowed Property as set forth in this
paragraph, Escrow Agent shall be discharged of, and from, any and all further
obligations arising in connection with the escrow contemplated by this
Agreement.
7
<PAGE>
13. Escrow Agent shall have the right to represent any party hereto
in any dispute between the parties hereto with respect to the Escrowed Property
or otherwise.
14. This Agreement shall inure to the benefit of, and be binding
upon, the parties hereto and their respective permitted successors and assigns.
Nothing in this Agreement, express or implied, shall give to anyone, other than
the parties hereto and their respective permitted successors and assigns, any
benefit, or any legal or equitable right, remedy or claim, under or in respect
of this Agreement or the escrow contemplated hereby.
15. Except as specifically provided otherwise herein, any notice
authorized or required to be given to a party hereto pursuant to this Agreement
shall be deemed to have been given when hand-delivered, or when mailed by United
States certified or registered mail, postage prepaid, return receipt requested,
addressed to the parties at the following addresses:
If to Buyer, to:
Leucadia National Corporation
315 Park Avenue South
New York, New York
Attention: Joseph S. Steinberg, President
Facsimile No.: 212 598-3245
with a copy to:
Weil, Gotshal & Manges
767 Fifth Avenue
New York, New York 10153
Attention: Stephen E. Jacobs, Esq.
Facsimile No.: 212 310-8007
If to Seller, to:
Morrison Knudsen Corporation
720 Park Boulevard
Boise, Idaho 93729
Attention: Stephen G. Hanks
Facsimile No.: 208 386-7186
with a copy to:
Jones, Day, Reavis & Pogue
5555 West 5th Street, Suite 4600
8
<PAGE>
Los Angeles, California 90015
Attention: Robert Dean Avery, Esq.
Facsimile No.: 213 243-2539
If to the Collateral Agent, to:
Mellon Bank, N.A.
One Mellon Bank Center
Pittsburgh, Pennsylvania 15258-0001
Attention: Alan Kopolow
Facsimile No.: 412 236-1174
with a copy to:
Murphy, Weir & Butler
101 California Street
San Francisco, California 94111
Attention: Ellen A. Friedman, Esq.
Facsimile No.: 415 421-7879
If to Escrow Agent, to:
Weil, Gotshal & Manges
767 Fifth Avenue
New York, New York 10153
Attention: Stephen E. Jacobs, Esq.
Facsimile No.: 212 310-8007
Any party may change its respective address by giving notice thereof in writing
to the other parties hereto in the same manner as set forth above.
16. This Agreement shall terminate on the date on which all Escrowed
Property has been fully disbursed or release herefrom in accordance with Section
3 hereof.
17. This Agreement shall be construed and enforced in accordance with
the laws of the State of New York. All actions against Escrow Agent arising
under or relating to this Agreement shall be brought against Escrow Agent
exclusively in the appropriate court in the County of New York, State of New
York. Each of the parties hereto agrees to submit to personal jurisdiction and
to waive any objection as to venue in the County of New York, State of New York.
Service of process on any party hereto in any action arising out of or relating
to this Agreement shall be effective if mailed to such party and such party's
counsel as set forth in Section 15 hereof.
9
<PAGE>
18. The Collateral Agent shall incur no liability in connection with
its execution, delivery or performance of its obligations under this Agreement,
except such liability as may arise from the wilful misconduct or gross
negligence of Collateral Agent. The execution by the Collateral Agent of this
Agreement and delivery of Escrowed Shares pursuant hereto shall not create in
the Collateral Agent any responsibility for or obligation with respect to (a)
the execution, validity or enforceability of this Agreement by any other party
hereto or (b) the underlying contractual relationships of the parties hereto.
19. TO THE FULL EXTENT PERMITTED BY LAW, EACH OF THE PARTIES HERETO
HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES THE RIGHT IT MAY HAVE TO
A TRIAL BY JURY IN RESPECT TO ANY LITIGATION BASED HEREON, OR ARISING OUT OF,
UNDER OR IN CONNECTION WITH THIS AGREEMENT, OR ANY COURSE OF CONDUCT, COURSE OF
DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN) OR ACTIONS OF ANY PARTY HERETO.
THIS PROVISION IS A MATERIAL INDUCEMENT FOR ESCROW AGENT ENTERING INTO THIS
AGREEMENT.
20. This Agreement may be executed in any number of separate
counterparts, each of which shall, collectively and separately, constitute one
agreement.
21. All pronouns and any variations thereof shall be deemed to refer
to the masculine, feminine or neuter, singular or plural, as the identity of the
parties hereto taken within context may require.
10
<PAGE>
22. The rights of Escrow Agent contained in this Agreement, including
without limitation the right to indemnification, shall survive the resignation
of Escrow Agent and the termination of the escrow contemplated hereunder.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as of the day and year first written above.
LEUCADIA NATIONAL CORPORATION
By: /s/ Joseph A. Orlando
-------------------------------
Title: Vice President
-------------------------------
MORRISON KNUDSEN CORPORATION
By: /s/ Stephen G. Hanks
-------------------------------
Title: Executive Vice President
-----------------------------
MELLON BANK, N.A., as Collateral
Agent for the MK Lenders
By: /s/ Alan Kopolow
-------------------------------
Title: Vice President
-----------------------------
ESCROW AGENT: WEIL, GOTSHAL & MANGES
By: /s/ Stephen E. Jacobs, P.C.
--------------------------------
(A Member of the Firm)
11
<PAGE>
ANNEX A
Disbursing Instructions for Release
of Escrow Property upon
Satisfaction or Waiver of Conditions
------------------------------------
Weil, Gotshal & Manges
767 Fifth Avenue
New York, New York 10153
Attn: Stephen E. Jacobs, Esq.
Reference is made to that certain Amended and Restated Escrow
Agreement, dated as of May 12, 1995 by and among Leucadia National Corporation
("Buyer"), Morrison Knudsen Corporation ("Seller"), Mellon Bank, N.A. as
Collateral Agent and Weil, Gotshal & Manges as Escrow Agent (the "Escrow
Agreement"). All capitalized terms used herein without definition shall have
the meanings ascribed thereto in the Escrow Agreement.
All conditions to closing under the Stock Purchase Agreement have
been satisfied and accordingly, pursuant to and in accordance with the Escrow
Agreement, you are hereby directed (a) to release to the Collateral Agent
US$22,500,000 of the Escrowed Funds from the Cash Escrow Account established
under the Escrow Agreement, (b) to release to Buyer (i) the Escrowed Shares,
together with stock powers duly endorsed in blank, from the Share Escrow Account
established under the Escrow Agreement, and (ii) the Escrowed Distributions, if
any, including the balance remaining in the Cash Escrow Account after release of
funds to Seller pursuant to (a) above and (c) shall release to Seller the MK
Lenders' Consent.
LEUCADIA NATIONAL CORPORATION
By:
----------------------------------
Title:
---------------------------------
12
<PAGE>
ANNEX A-1
Morrison Knudsen Corporation
720 Park Boulevard
Boise, Idaho 93729
Attention: Stephen G. Hanks
Mellon Bank, N.A.
Attention:
Gentlemen:
Reference is made to that certain Amended and Restated Escrow
Agreement, dated as of May 12, 1995 by and among Leucadia National Corporation
("Buyer"), Morrison Knudsen Corporation ("Seller"), Mellon Bank, N.A. as
Collateral Agent and Weil, Gotshal & Manges as Escrow Agent (the "Escrow
Agreement"). All capitalized terms used herein without definition shall have the
meanings ascribed thereto in the Escrow Agreement.
On ______, 1995, Escrow Agent received the attached Disbursing
Instructions executed by Buyer stating that all conditions to closing under the
Stock Purchase Agreement have been satisfied and instructing the Escrow Agent
to disburse the Escrowed Property in accordance with such Disbursing
Instructions. In accordance with the terms of the Escrow Agreement, if Escrow
Agent does not receive notice from Seller or the Collateral Agent that it
disputes the release of the Escrowed Property in accordance with such Disbursing
Instructions, on or before _______, 1995, Escrow Agent shall (a) release to the
Collateral Agent US$22,500,000 of the Escrowed Funds from the Cash Escrow
Account established under the Escrow Agreement, and (b) release to Buyer (i) the
Escrowed Shares, together with stock powers duly endorsed in blank, from the
Share Escrow Account established under the Escrow Agreement, and (ii) the
Escrowed Distributions, if any, including the balance remaining in the Cash
Escrow Account after release of funds to Seller pursuant to (a) above.
WEIL, GOTSHAL & MANGES
By: _______________________
(A Member of the Firm)
13
<PAGE>
ANNEX B
Disbursing Instructions upon
Section 9 Event
---------------
Weil, Gotshal & Manges
767 Fifth Avenue
New York, New York 10153
Attn: Stephen E. Jacobs, Esq.
Reference is made to that certain Amended and Restated Escrow
Agreement, dated as of May 12, 1995 by and among Leucadia National Corporation
("Buyer"), Morrison Knudsen Corporation ("Seller") and Mellon Bank, N.A. as
Collateral Agent and Weil, Gotshal & Manges as Escrow Agent (the "Escrow
Agreement"). All capitalized terms used herein without definition shall have
the meanings ascribed thereto in the Escrow Agreement.
Pursuant to and in accordance with the Escrow Agreement, you are
hereby directed to (a) to release to Buyer the Escrowed Funds from the Cash
Escrow Account established under the Escrow Agreement and (b) to release to
the Collateral Agent the MK Lenders' Consent and the Escrowed Shares, together
with stock powers duly endorsed in blank, from the Share Escrow Account
established under the Escrow Agreement and (c) to release to Seller the Escrowed
Distributions, if any, including the balance remaining in the Cash Escrow
Account after release of the Escrowed Funds to Buyer.
LEUCADIA NATIONAL CORPORATION
By:
-----------------------------------
Title:
---------------------------------
MORRISON KNUDSEN CORPORATION
By:
----------------------------------
Title:
---------------------------------
14
<PAGE>
Exhibit 10.19
STOCK PURCHASE AGREEMENT
DATED AS OF JUNE 2, 1995
BY AND BETWEEN
WESTERN ACQUISITION CORP.
AND
MORRISON KNUDSEN CORPORATION
<PAGE>
TABLE OF CONTENTS
PAGE
1. PURCHASE OF STOCK . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
(a) SHARES TO BE PURCHASED . . . . . . . . . . . . . . . . . . . . . . . 1
(b) PURCHASE PRICE AND METHOD OF PAYMENT . . . . . . . . . . . . . . . . 1
(c) ASSETS TO BE OWNED BY COMPANY. . . . . . . . . . . . . . . . . . . . 4
(d) CLOSING. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2. REPRESENTATIONS AND WARRANTIES OF SHAREHOLDERS. . . . . . . . . . . . . . 5
(a) DISCLOSURE SCHEDULE. . . . . . . . . . . . . . . . . . . . . . . . . 5
(b) CORPORATE ORGANIZATION . . . . . . . . . . . . . . . . . . . . . . . 5
(c) CAPITALIZATION . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
(d) AUTHORIZATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
(e) NON-CONTRAVENTION. . . . . . . . . . . . . . . . . . . . . . . . . . 6
(f) CONSENTS AND APPROVALS . . . . . . . . . . . . . . . . . . . . . . . 7
(g) FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . 8
(h) LOSS CONTINGENCIES; OTHER NON-ACCRUED LIABILITIES. . . . . . . . . . 8
(i) ABSENCE OF CERTAIN CHANGES . . . . . . . . . . . . . . . . . . . . . 8
(j) REAL PROPERTIES. . . . . . . . . . . . . . . . . . . . . . . . . . .10
(k) MACHINERY, EQUIPMENT, VEHICLES AND PERSONAL PROPERTY . . . . . . . .11
(l) INVENTORIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . .11
(m) RECEIVABLES AND PAYABLES . . . . . . . . . . . . . . . . . . . . . .12
(n) INTELLECTUAL PROPERTY RIGHTS . . . . . . . . . . . . . . . . . . . .13
(o) LITIGATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13
(p) TAX RETURNS. . . . . . . . . . . . . . . . . . . . . . . . . . . . .13
(q) INSURANCE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .17
(r) BENEFIT PLANS. . . . . . . . . . . . . . . . . . . . . . . . . . . .17
(s) BANK ACCOUNTS; POWERS OF ATTORNEY. . . . . . . . . . . . . . . . . .20
(t) CONTRACTS AND COMMITMENTS; NO DEFAULT. . . . . . . . . . . . . . . .21
(u) ORDERS, COMMITMENTS AND RETURNS. . . . . . . . . . . . . . . . . . .23
(v) LABOR MATTERS. . . . . . . . . . . . . . . . . . . . . . . . . . . .23
(w) DEALERS, SUPPLIERS AND CUSTOMERS . . . . . . . . . . . . . . . . . .24
(x) PERMITS AND OTHER OPERATING RIGHTS . . . . . . . . . . . . . . . . .24
(y) COMPLIANCE WITH LAW. . . . . . . . . . . . . . . . . . . . . . . . .24
(z) ASSETS OF BUSINESS . . . . . . . . . . . . . . . . . . . . . . . . .25
(aa) BUSINESS GENERALLY . . . . . . . . . . . . . . . . . . . . . . . . .25
(bb) ENVIRONMENTAL AND SAFETY MATTERS . . . . . . . . . . . . . . . . . .25
(cc) BROKERS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .27
(dd) SHAREHOLDER REPRESENTATIONS. . . . . . . . . . . . . . . . . . . . .27
(ee) ACCURACY OF INFORMATION. . . . . . . . . . . . . . . . . . . . . . .27
3. REPRESENTATIONS AND WARRANTIES OF PURCHASER . . . . . . . . . . . . . . .27
(a) CORPORATE ORGANIZATION . . . . . . . . . . . . . . . . . . . . . . .27
(b) AUTHORIZATION. . . . . . . . . . . . . . . . . . . . . . . . . . . .27
(c) NON-CONTRAVENTION. . . . . . . . . . . . . . . . . . . . . . . . . .28
(d) ACCURACY OF INFORMATION. . . . . . . . . . . . . . . . . . . . . . .28
(e) BROKERS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .28
4. COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .29
(a) AGREEMENTS AS TO SPECIFIED MATTERS . . . . . . . . . . . . . . . . .29
<PAGE>
(b) CONDUCT OF COMPANY BUSINESS. . . . . . . . . . . . . . . . . . . . .31
(c) NO SOLICITATION OF ALTERNATE TRANSACTION . . . . . . . . . . . . . .31
(d) FULL ACCESS TO PURCHASER . . . . . . . . . . . . . . . . . . . . . .31
(e) CONFIDENTIALITY. . . . . . . . . . . . . . . . . . . . . . . . . . .32
(f) FILINGS; CONSENTS; REMOVAL OF OBJECTIONS . . . . . . . . . . . . . .33
(g) FURTHER ASSURANCES; COOPERATION; NOTIFICATION. . . . . . . . . . . .33
(h) SUPPLEMENTS TO DISCLOSURE SCHEDULE . . . . . . . . . . . . . . . . .34
(i) PUBLIC ANNOUNCEMENTS . . . . . . . . . . . . . . . . . . . . . . . .34
(j) TRANSACTIONAL TAX UNDERTAKINGS . . . . . . . . . . . . . . . . . . .34
(k) ENVIRONMENTAL AUDIT. . . . . . . . . . . . . . . . . . . . . . . . .35
(l) TITLE INSURANCE COMMITMENT . . . . . . . . . . . . . . . . . . . . .35
(m) PAYMENT OF FUNDS INTO ESCROW . . . . . . . . . . . . . . . . . . . .35
(n) ASSIGNMENT OF AIRCRAFT LEASES. . . . . . . . . . . . . . . . . . . .36
(o) CONTINUATION OF LIABILITY INSURANCE COVERAGE . . . . . . . . . . . .36
(p) APPRAISAL OF REAL PROPERTY . . . . . . . . . . . . . . . . . . . . .36
(q) EMPLOYEE AND EMPLOYEE BENEFIT MATTERS. . . . . . . . . . . . . . . .37
(r) ASSIGNMENT OF AIRPORT LEASES . . . . . . . . . . . . . . . . . . . .38
(s) ASSIGNMENT OF TWO-WAY RADIO LICENSES . . . . . . . . . . . . . . . .38
(t) CONSENT OF LENDERS . . . . . . . . . . . . . . . . . . . . . . . . .39
5. CONDITIONS TO OBLIGATIONS OF PURCHASER. . . . . . . . . . . . . . . . . .39
(a) REPRESENTATIONS AND WARRANTIES TRUE. . . . . . . . . . . . . . . . .39
(b) PERFORMANCE. . . . . . . . . . . . . . . . . . . . . . . . . . . . .39
(c) ADVERSE CHANGES. . . . . . . . . . . . . . . . . . . . . . . . . . .39
(d) NO PROCEEDING OR LITIGATION. . . . . . . . . . . . . . . . . . . . .40
(e) OPINION OF SHAREHOLDER'S COUNSEL . . . . . . . . . . . . . . . . . .40
(f) LEGISLATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . .40
(g) ACCEPTANCE BY COUNSEL TO PURCHASER . . . . . . . . . . . . . . . . .40
(h) CERTIFICATES . . . . . . . . . . . . . . . . . . . . . . . . . . . .40
(i) DUE DILIGENCE. . . . . . . . . . . . . . . . . . . . . . . . . . . .40
(j) TITLE COMMITMENTS. . . . . . . . . . . . . . . . . . . . . . . . . .40
(k) RESIGNATION OF OFFICERS AND DIRECTORS. . . . . . . . . . . . . . . .40
(l) DELIVERY OF SHARE CERTIFICATES . . . . . . . . . . . . . . . . . . .40
(m) CONSENT OF NATIONSBANC LEASING CORPORATION . . . . . . . . . . . . .40
(n) SECURING OF LIABILITY INSURANCE COVERAGE . . . . . . . . . . . . . .41
(o) ASSIGNMENT OF AIRPORT LEASES . . . . . . . . . . . . . . . . . . . .41
(p) NO BANKRUPTCY. . . . . . . . . . . . . . . . . . . . . . . . . . . .41
(q) CONSENT OF LENDER. . . . . . . . . . . . . . . . . . . . . . . . . .41
6. CONDITIONS TO OBLIGATIONS OF SHAREHOLDER. . . . . . . . . . . . . . . . .41
(a) REPRESENTATIONS AND WARRANTIES TRUE. . . . . . . . . . . . . . . . .41
(b) PERFORMANCE. . . . . . . . . . . . . . . . . . . . . . . . . . . . .41
(c) NO PROCEEDING OR LITIGATION. . . . . . . . . . . . . . . . . . . . .41
(d) CERTIFICATES . . . . . . . . . . . . . . . . . . . . . . . . . . . .42
(e) ACCEPTANCE BY COUNSEL. . . . . . . . . . . . . . . . . . . . . . . .42
(f) CERTAIN APPROVALS. . . . . . . . . . . . . . . . . . . . . . . . . .42
7. TERMINATION AND ABANDONMENT . . . . . . . . . . . . . . . . . . . . . . .42
(a) METHODS OF TERMINATION . . . . . . . . . . . . . . . . . . . . . . .42
(b) PROCEDURE UPON TERMINATION . . . . . . . . . . . . . . . . . . . . .42
ii
<PAGE>
8. SURVIVAL AND INDEMNIFICATION. . . . . . . . . . . . . . . . . . . . . . .43
(a) SURVIVAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .43
(b) INDEMNIFICATION BY SHAREHOLDER . . . . . . . . . . . . . . . . . . .44
(c) INDEMNIFICATION BY PURCHASER . . . . . . . . . . . . . . . . . . . .46
(d) CLAIMS FOR INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . .47
9. TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .48
(a) TAX INDEMNIFICATION. . . . . . . . . . . . . . . . . . . . . . . . .48
(b) PROCEDURES RELATING TO INDEMNIFICATION OF TAX CLAIMS . . . . . . .48
(c) RETURN FILINGS, REFUNDS AND CREDITS. . . . . . . . . . . . . . . . .50
(d) TAX ELECTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . .51
(e) CLEARANCE CERTIFICATES . . . . . . . . . . . . . . . . . . . . . . .51
(f) TERMINATION OF TAX SHARING AGREEMENTS. . . . . . . . . . . . . . . .51
(g) TAX CLAIMS RESULTING IN CHANGE OF TAX BASIS. . . . . . . . . . . . .51
10. MISCELLANEOUS PROVISIONS. . . . . . . . . . . . . . . . . . . . . . . . .52
(a) EXPENSES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .52
(b) AMENDMENT AND MODIFICATION . . . . . . . . . . . . . . . . . . . . .52
(c) WAIVER OF COMPLIANCE; CONSENTS . . . . . . . . . . . . . . . . . . .52
(d) NO THIRD PARTY BENEFICIARIES . . . . . . . . . . . . . . . . . . . .53
(e) NOTICES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .53
(f) ASSIGNMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . .54
(g) GOVERNING LAW. . . . . . . . . . . . . . . . . . . . . . . . . . . .54
(h) COUNTERPARTS . . . . . . . . . . . . . . . . . . . . . . . . . . . .54
(i) HEADINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .54
(j) ENTIRE AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . . .54
(k) INJUNCTIVE RELIEF. . . . . . . . . . . . . . . . . . . . . . . . . .55
(l) KNOWLEDGE OF SHAREHOLDER . . . . . . . . . . . . . . . . . . . . . .55
(m) ORDINARY COURSE OF BUSINESS. . . . . . . . . . . . . . . . . . . . .55
iii
<PAGE>
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT ("Agreement"), dated June 2, 1995 is by and
between Western Acquisition Corp., a Minnesota corporation ("WAC" or
"Purchaser") and Morrison Knudsen Corporation, an Ohio corporation ("M-K" or
"Shareholder").
A. The parties hereto wish to provide for the terms and conditions upon
which Purchaser will acquire all of the issued and outstanding shares of the
capital stock of Western Aircraft, Inc., a Nevada corporation (the "Company").
B. The parties hereto wish to make certain representations, warranties,
covenants and agreements in connection with such acquisition of stock.
Accordingly, and in consideration of the representations, warranties,
covenants, agreements and conditions herein contained, the parties hereto agree
as follows:
SECTION 1
1. PURCHASE OF STOCK.
(a) SHARES TO BE PURCHASED. Upon satisfaction of all conditions to the
obligations of the parties contained herein (other than such conditions as shall
have been waived in accordance with the terms hereof), Shareholder shall sell,
transfer, assign and deliver to Purchaser, and Purchaser shall purchase from
such Shareholder, at the Closing, all of the then issued and outstanding shares
of the Company (the "Shares").
(b) PURCHASE PRICE AND METHOD OF PAYMENT.
(i) INITIAL PURCHASE PRICE. The "Initial Purchase Price" shall
be Five Million Four Hundred Fifty Thousand Dollars ($5,450,000) less (A)
the actual cost to Company (or Purchaser, as the case may be) of obtaining
the liability insurance policy contemplated by Section 4(o) herein, and(B)
the amount of any account receivable due the Company from Shareholder (or
any affiliate of Shareholder) as of the Closing Date.
(ii) INITIAL PAYMENT. On the Closing Date, Purchaser shall pay
the Initial Purchase Price less Seven Hundred Thousand Dollars ($700,000)
to the Shareholder at the Closing. Such payment shall be made by federal
wire transfer on the Closing Date in immediately available funds pursuant
to written instructions given to Purchaser at least four (4) business days
prior to Closing.
1
<PAGE>
(iii) FINAL PURCHASE PRICE. The "Final Purchase Price" shall be
determined by increasing or decreasing, as the case may be, the Initial
Purchase Price on a dollar-for-dollar basis, by the amount that the Net
Book Value of the Company (as defined below) on the Closing Date exceeds or
is less than Seven Million Four Hundred Thirty-Six Thousand, Three Hundred
and Seven Dollars ($7,436,307). "Net Book Value" of the Company shall mean
the total shareholder's equity shown on a balance sheet of the Company
prepared as of the Closing Date in accordance with generally accepted
accounting principles consistently applied (without notes) and consistent
with the Latest Balance Sheet (as defined in Section 2(g) herein) (the
"Closing Date Balance Sheet") as adjusted below. For purposes of
calculating the Net Book Value of the Company on the Closing Date, there
shall be added to the total shareholders equity on the Closing Date Balance
Sheet an amount equal to the liabilities less assets related to the
NationsBanc aircraft leases and related subleases with the U.S. Navy,
Markey MIA, and Tuxla Gutierrez shown on the Closing Date Balance Sheet
(which amount, for reference purposes, is $664,022 on the Latest Balance
Sheet, consisting of the following accounts on the Latest Balance Sheet:
Assets: Certificate of Deposit, $100,000; Accrued Revenue - Mexico
Aircraft Lease, $30,000; Deferred Finder's Fee - Australia, $32,625;
Liabilities: Accrued Virginia Use Tax, $53,340; Accrued Aircraft Virginia
Property Tax, $3,333; Aircraft Engine Reserve, $29,325; Accrued Finder's
Fee, Mexico, $1,500; Markey MIA Deposit, $60,000; Advance CD, $100,000;
Deferred Income, $579,149. For illustration purposes only, an example of
the Final Purchase Price calculation using the balance sheet of the Company
for the period ended April 28, 1995 is attached hereto as Exhibit 1(b). A
reserve shall be established on the Closing Date Balance Sheet in the
amount of $76,260, representing one-third of the accrued sick pay due
employees of the Company as of the Closing Date. For purposes of
calculating the Net Book Value of the Company on the Closing Date, no
adjustment shall be made to the book value of British Aerospace Inventory,
Dunlop inventory, Airsearch inventory, Cessna Single Point Kits, and
Aerospatiale Helicopter Parts for market value being less than book value.
Purchaser and Shareholder agree that the extent to which market value of
this inventory is less than book value is reflected in the Purchase Price.
Unless otherwise agreed by the Shareholder and Purchaser pursuant to the
negotiations described in this Section, notwithstanding anything to the
contrary anywhere else in this Agreement, the Closing Date Balance Sheet
shall reflect a provision for federal and state income taxes equal to the
amount reflected on the Latest Balance Sheet (i.e., ($295,615.85) for
federal income taxes and $164,552.82 for state income taxes), adjusted only
for the operations of the Company between February 24, 1995 and the Closing
Date (in a manner consistent with the
2
<PAGE>
adjustments that have already occurred on the April 28, 1995 balance sheet
provided to the Purchaser). It is agreed and acknowledged by the parties
that this reflection on the Closing Date Balance Sheet may not be
consistent with GAAP. Purchaser acknowledges that Shareholder contends
that an increase in tax reserves would be created by the preparation of
GAAP financial statements, which increase is valuable to the Company and
Purchaser because it will enable the Company to avoid future income tax
liability. Purchaser contends that the tax adjustments would not have
affected its original Purchase Price calculation. The parties intend to
continue negotiations regarding this issue prior to the time that the final
adjustments made to the Purchase Price pursuant to the Closing Date Balance
Sheet. Between the date of this Agreement and that time, Shareholder will
present evidence to Purchaser regarding these reserves and their value to
the Company and Purchaser. Purchaser agrees to negotiate with Shareholder
regarding this issue in good faith. In the event, however, an agreement
cannot be reached between the parties, the Closing Date Balance Sheet shall
reflect the income tax provisions described above.
(iv) PREPARATION OF CLOSING DATE BALANCE SHEET. Within twenty
(20) days after the Closing Date, Shareholder shall cause the Closing Date
Balance Sheet to be prepared for the Company. During this period,
Shareholder shall have full access to the books, records, and personnel of
the Company for the purpose of preparing the Closing Date Balance Sheet.
Shareholder shall deliver a copy of the Closing Date Balance Sheet to
Purchaser upon its completion. Purchaser shall have ten (10) days after
receipt within which to object to any item or items on the Closing Date
Balance Sheet. If no timely objection by Purchaser is made, such Closing
Date Balance Sheet shall be final. If a timely objection is made by
Purchaser, the parties agree to negotiate in good faith a resolution of
such objection. Notwithstanding the above, any tax related information
(including federal and state pro-forma returns or schedules similar to the
information provided pursuant to the last sentence of Section 2(p)(ii)
hereof for the taxable year ended December 31, 1994, and the short period
tax returns for the Company for the year 1995) which is unavailable within
twenty (20) days after the Closing Date shall be provided by Shareholder
and delivered to Purchaser no later than 120 days after the Closing Date.
Such information shall include copies of the tax workpapers used by the
Shareholder to prepare the Company's tax returns for year 1994, and the
short period for year 1995. Furthermore, and notwithstanding anything to
the contrary, Shareholder shall provide and deliver to Purchaser a schedule
no later than August 31, 1996 showing for the short tax year 1995 any and
all adjustments for net operating losses or alternative minimum tax credit
allocable to the Company.
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(v) PAYMENT OF PURCHASE PRICE ADJUSTMENT. To the extent that
the Final Purchase Price is less than the Initial Payment, Shareholder
shall pay such amount to Purchaser within thirty (30) days after the
Closing Date Balance Sheet has been prepared. In addition, Shareholder
shall deliver a written instruction to the Escrow Agent to distribute the
remaining balance held in escrow to Purchaser. To the extent that the
Final Purchase Price exceeds the Initial Payment by more than Three Hundred
Thousand Dollars ($300,000.00) (the "Holdback"), Purchaser shall deliver a
written instruction to the Escrow Agent to distribute such excess amount to
Shareholder, and, to the extent such funds are inadequate to pay the
additional purchase price, pay such additional amount to Shareholder within
thirty (30) days after the Closing Date Balance Sheet has been prepared,
PROVIDED, HOWEVER, that if the Purchaser timely objects to any item on the
Closing Date Balance Sheet, Purchaser shall promptly cause to be paid to
Shareholder the portion of the increase that is not disputed, and the
disputed portion of the increase shall be paid to Shareholder promptly upon
final resolution of such dispute. Shareholder shall deliver a written
instruction to Escrow Agent to pay any amount in excess of the Holdback
(after making payment to Shareholder) to Purchaser. The Hold-Back will be
paid to Shareholder in accordance with Section 1(b)(vi), herein.
(vi) FINAL PAYMENT. The parties intend that the Hold-Back shall
be used as the initial means to satisfy Purchaser's claims for
indemnification under Sections 8 and 9 herein. Payment of the Hold-Back
(or such reduced amount to the extent indemnification claims have been paid
from such amount) shall be made to Shareholder on the date that is one year
after the Closing Date.
(c) ASSETS TO BE OWNED BY COMPANY. Except as provided below, as of the
Closing Date, the Company shall own free and clear of all mortgages, pledges,
liens, security interests or encumbrances, restrictions, adverse claims or
charges of any kind, all of the assets contained on the Closing Date Balance
Sheet and all other assets used in the business of the Company, whether or not
contained on the Closing Date Balance Sheet. The parties hereto acknowledge and
agree that as of the Closing Date, Shareholder shall assume and become
responsible for all noncurrent liabilities relating to the deferred gain on the
aircraft sale and leaseback transactions with NationsBanc Leasing corporation.
In addition, any account receivable due from Shareholder (or an affiliate of
Shareholder) that reduces the Initial Purchase Price pursuant to Section 1(b)(i)
shall be extinguished.
(d) CLOSING. Unless this Agreement shall have been terminated and the
transactions contemplated herein shall have been abandoned pursuant to Section 7
hereof, a closing (the "Closing") will be held on June 16, 1995 ("Closing
Date"). The Closing shall
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be held at the offices of Elam & Burke, counsel for Shareholder, or such other
place as the parties may agree, at 9:00 a.m., at which time and place the
documents and instruments necessary or appropriate to effect the transactions
contemplated herein will be exchanged by the parties.
SECTION 2
2. REPRESENTATIONS AND WARRANTIES OF SHAREHOLDERS.
Shareholder hereby represents and warrants to Purchaser as of the date
hereof as follows:
(a) DISCLOSURE SCHEDULE. The disclosure schedule marked as Exhibit 2
hereto (the "Disclosure Schedule") is divided into Sections which correspond to
the subsections of this Section 2. The Disclosure Schedule is accurate and
complete. For purposes of the Disclosure Schedule, disclosure in one subsection
shall not constitute disclosure as to any other subsection; provided, however,
that a cross-reference to a specific disclosure item in another subsection shall
constitute adequate disclosure for the subsection in which the specific cross-
reference is made.
(b) CORPORATE ORGANIZATION. Company is a corporation duly organized,
validly existing and in good standing under the law of the state of Nevada, has
full corporate power and authority to carry on its business as it is now
being conducted and to own, lease and operate its properties and assets, is duly
qualified or licensed to do business as a foreign corporation in good standing
in every other jurisdiction in which the character or location of the properties
and assets owned, leased or operated by it or the conduct of its business
requires such qualification or licensing, except in such jurisdictions in which
the failure to be so qualified or licensed and in good standing would not,
individually or in the aggregate, have a material adverse effect on its
condition, working capital, assets, properties, liabilities, obligations,
reserves, businesses, prospects, goodwill or going concern value; and has
heretofore delivered to Purchaser complete and correct copies of its articles or
certificates of incorporation and bylaws, as presently in effect. The
Disclosure Schedule includes a list of all jurisdictions in which the Company is
qualified or licensed to do business.
Except as set forth on the Disclosure Schedule, the Company owns no shares
of Capital Stock and has no other equity interest in any other corporation or
entity. Except as set forth in the Disclosure Schedule, during the seven years
immediately preceding the date of this Agreement, the Company did not own shares
of capital stock in any other corporation, or any other interest in any
partnership (limited or general) or any other entity.
(c) CAPITALIZATION. The authorized capital stock of Company
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is set forth in the Disclosure Schedule. The number of shares of capital stock
of Company outstanding is 25,955. All issued and outstanding shares of capital
stock of Company are duly authorized, validly issued, fully paid, nonassessable
and are without, and were not issued in violation of, preemptive rights. Except
as set forth on the Disclosure Schedule:
(i) there are no shares of capital stock or other equity
securities outstanding or any securities convertible into or exchangeable
for such shares, securities or rights;
(ii) there are no outstanding options, warrants, conversion
privileges or other rights to purchase or acquire any capital stock or
other equity securities or any securities convertible into or exchangeable
for such shares, securities or rights; and
(iii) there are no contracts, commitments, understandings,
arrangements or restrictions by which Company is bound to issue, sell,
transfer or to purchase or acquire any additional shares of its capital
stock or other equity securities or any options, warrants, conversion
privileges or other rights to purchase or acquire any capital stock or
other equity securities or any securities convertible into or exchangeable
for such shares, securities or rights.
(d) AUTHORIZATION. Shareholder has the legal capacity to enter into this
Agreement and to carry out the transactions contemplated herein, including
without limitation the legal capacity to execute, deliver and perform the
agreements or contracts, if any, required by Section 5 to be executed and
delivered by it as a condition to the Closing. This Agreement has been duly and
validly executed by Shareholder and is the valid and binding legal obligation of
Shareholder, enforceable against Shareholder in accordance with its terms,
subject to the effect of applicable bankruptcy, reorganization, insolvency,
moratorium, fraudulent conveyance and other laws affecting the rights of
creditors generally or the availability of specific performance, injunctive
relief and other equitable remedies, and to general principles of equity
(regardless of whether such principles are considered in a proceeding in equity
or at law).
(e) NON-CONTRAVENTION. Except as set forth in the Disclosure Schedule,
neither the execution, delivery and performance of this Agreement nor the
consummation of the transactions contemplated herein will:
(i) violate or be in conflict with any provision of the articles
or certificates of incorporation or bylaws of Company or Shareholder; or
(ii) except for such violations, conflicts,
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defaults, accelerations, terminations, cancellations, impositions of fees
or penalties, mortgages, pledges, liens, security interests, encumbrances,
restrictions and charges which would not, individually or in the aggregate,
have a material adverse effect on the business of the Company taken as a
whole, be in conflict with, or constitute a default, however defined (or an
event which, with the giving of due notice or lapse of time, or both, would
constitute such a default), under, or cause or permit the acceleration of
the maturity of, or give rise to any right of termination, cancellation,
imposition of fees or penalties under, any debt, note, bond, lease,
mortgage, indenture, license, obligation, contract, commitment, franchise,
permit, instrument or other agreement or obligation to which Company or
Shareholder is a party or by which it or Shareholder or any of its or
Shareholder's properties or assets is or may be bound (unless with respect
to which defaults or other rights, requisite waivers or consents shall have
been obtained at or prior to the Closing) or result in the creation or
imposition of any mortgage, pledge, lien, security interest, encumbrance,
restriction, adverse claim or charge of any kind, upon any property or
assets of Company or Shareholder under any debt, obligation, contract,
agreement or commitment to which Company or Shareholder is a party or by
which Company or Shareholder or any of its or a Shareholder's assets or
properties is or may be bound; or
(iii) to the knowledge of Shareholder, violate any statute,
treaty, law, judgment, writ, injunction, decision, decree, order,
regulation, ordinance or other similar authoritative matters of any
foreign, federal, state or local governmental or quasi-governmental,
administrative, regulatory or judicial court, department, commission,
agency, board, bureau, instrumentality or other authority (hereinafter
sometimes separately referred to as an "Authority" and sometimes
collectively as "Authorities") (sometimes hereinafter separately referred
to as a "Law" and sometimes collectively as "Laws").
(f) CONSENTS AND APPROVALS. Except as set forth in the Disclosure
Schedule, with respect to Company and Shareholder, and except for consents,
approvals, orders, authorizations, registrations, notifications, declarations,
or filings which will be obtained prior to Closing, no consent, approval, order
or authorization of or from, or registration, notification, declaration or
filing with (hereinafter sometimes separately referred to as a "Consent" and
sometimes collectively as "Consents") any individual or entity, including
without limitation any Authority, is required in connection with the execution,
delivery or performance of this Agreement by Shareholder or the consummation by
Shareholder of the transactions contemplated herein, other than any Consent
which, if not made or obtained, will
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not, individually or in the aggregate, have a material adverse effect on the
business of the Company taken as a whole.
(g) FINANCIAL STATEMENTS. There have been furnished to Purchaser the
balance sheets and statements of operations (or income or loss), changes in
shareholders' equity and changes in cash flow (or financial position) of the
Company for the year ended December 31, 1994, and the period ended February 24,
1995, all of which are prepared in accordance with generally accepted accounting
principles consistently applied for all periods. The February 24, 1995, balance
sheet of the Company (a copy of which is contained in the Disclosure Schedule)
is referred to herein as the "Latest Balance Sheet." Except as disclosed
therein, the aforesaid financial statements (i) are in accordance with the books
and records of Company and have been prepared in conformity with generally
accepted accounting principles consistently applied for all periods, and (ii)
accurately present the financial position of Company in all material respects as
of the respective dates thereof, and the results of operations (or income or
loss), changes in shareholders' equity and changes in cash flow (or financial
position) for the periods then ended, all in accordance with generally accepted
accounting principles consistently applied for all periods; excepting that all
financial statements furnished to Purchaser are without notes. Moreover, the
Closing Balance Sheet will not include adjustments in the inventory balances
that represent discounts to the inventory book value negotiated between
Purchaser and Shareholder in the Purchase Price.
(h) LOSS CONTINGENCIES; OTHER NON-ACCRUED LIABILITIES. Except as accrued
on the Latest Balance Sheet, and to the best of the knowledge of Shareholder,
Company does not have:
(i) any Loss Contingencies which are not required by generally
accepted accounting principles to be accrued;
(ii) any Loss Contingencies involving an unasserted claim or
assessment which are not required by generally accepted accounting
principles to be disclosed because the potential claimants have not
manifested to Company an awareness of a possible claim or assessment; or
(iii) any categories of liabilities or obligations (other than
non-pension post-retirement medical care, dental care, life insurance or
other benefits) which are not required by generally accepted accounting
principles to be accrued.
For purposes of this Agreement, "Loss Contingency" shall have the meaning
accorded to it by generally accepted accounting principles.
(i) ABSENCE OF CERTAIN CHANGES. Except as set forth in the Disclosure
Schedule, since the date of the Latest Balance Sheet,
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Company has owned and operated its assets, properties and businesses in the
ordinary course of business and consistent with past practice; without limiting
the generality of the foregoing, Company has not, subject to the aforesaid
exceptions and except in the ordinary course of business:
(i) suffered any material adverse change in its condition,
working capital, assets, properties, liabilities, obligations, reserves,
businesses, prospects, goodwill or going concern value or experienced any
event or failed to take any action which, to Shareholder's knowledge,
reasonably could be expected to result in such a material adverse change;
(ii) suffered any material loss, damage, destruction or other
casualty (whether or not covered by insurance) or suffered any loss of
officers, employees, dealers, distributors, independent contractors,
customers, or suppliers or other favorable business relationships except
those losses that would not have a material adverse effect on the Company
taken as whole;
(iii) declared, set aside, made or paid any dividend or other
distribution in respect of its capital stock; or, purchased or redeemed any
shares of its capital stock;
(iv) issued or sold any shares of its capital stock, or any
options, warrants, conversion, exchange or other rights to purchase or
acquire any such shares or any securities convertible into or exchangeable
f or such shares;
(v) incurred any indebtedness for borrowed money;
(vi) mortgaged, pledged, or subjected to any lien, lease,
security interest or other charge or encumbrance any of its properties or
assets, tangible or intangible;
(vii) acquired or disposed of any assets or properties, the value
of which individually exceeds $5,000;
(viii) forgiven or cancelled any debts or claims, or waived any
rights;
(ix) entered into any material transaction;
(x) granted to any officer or salaried employee or any other
employee any increase in compensation in any form or paid any severance
or termination pay;
(xi) entered into any commitment for capital expenditures for
additions to plant, property or equipment; or
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(xii) agreed, whether in writing or otherwise, to take any action
described in this subsection.
(j) REAL PROPERTIES. Except as set forth in the Disclosure Schedule,
Company has good and marketable fee simple record title in and to, all of its
real property assets and fixtures reflected in the Latest Balance Sheet and all
of its real property assets and fixtures purchased or otherwise acquired since
the date of the Latest Balance Sheet. Documents have been provided to Purchaser
which contain the legal description of all real property owned or leased by the
Company (the "Real Property"). Except as set forth in the Disclosure Schedule,
all leasehold interests in the Real Property are valid and in full force and
effect and enforceable in accordance with their terms, subject to the effect of
applicable bankruptcy, reorganization, insolvency, moratorium, fraudulent
conveyance, and other laws affecting the rights of creditors generally, or the
availability of specific performance, injunctive relief and other equitable
remedies. There does not exist any material violation, breach or default, of or
under such leasehold interests caused by Shareholder or Company. To the best of
the knowledge of Shareholder, no such material violation, breach or default has
been caused by any other party. No such leasehold interests contain any
provision that would be triggered or cause a breach or right to terminate such
leasehold interest upon a change in control (or change in ownership) of the
lessee. None of the Real Property is subject to any mortgage, pledge, lien,
security interest, encumbrance, easement, right-of-way, tenancy, covenant,
encroachment, or restriction of any kind or nature (whether or not of record),
except the following (herein called "Permitted Liens"):
(i) liens securing specified liabilities or obligations shown on
the Latest Balance Sheet with respect to which no breach, violation or
default exists;
(ii) mechanics', carriers', workers' and other similar liens
arising in the ordinary course of business;
(iii) minor imperfections of title which do not impair the
existing use of such real property assets or fixtures; and
(iv) liens for current taxes not yet due and payable or being
contested in good faith by appropriate proceedings.
Except as set forth in the Disclosure Schedule, to the knowledge of the
Shareholder, the Real Property is free from structural defects, in good
operating condition and repair, with no material maintenance, repair or
replacement having been deferred or neglected, suitable for its present use and
free from other material defects, normal wear and tear excepted. Except as set
forth in the Disclosure Schedule, the Real property and its present use conform
in all material respects to all occupational, safety or
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health, environmental, zoning, planning, subdivision, platting and similar Laws,
and there is, to the knowledge of Shareholder, no such Law contemplated that
would affect materially adversely the right of Company to own or lease and
operate and use such Real Property. All public utilities necessary for the use
and operation of any facilities on the aforesaid Real Property are available for
use or access at such properties and there is no material legal or physical
impairment to free ingress or egress from any of such facilities or Real
Property. Company is not a foreign person and is not controlled by a foreign
person, as the term foreign person is defined in Section 1445(f)(3) of the Code.
(k) MACHINERY, EQUIPMENT, VEHICLES AND PERSONAL PROPERTY. Except as set
forth in the Disclosure Schedule, Company has good and merchantable right, title
and interest in and to, or a leasehold interest in and to, all its machinery,
equipment, vehicles and other personal property reflected in the Latest Balance
Sheet and purchased or otherwise acquired since the date of the Latest Balance
Sheet (except for such items sold or leased in the ordinary course of business
since the date of the Latest Balance Sheet). All such vehicles or other
personal property required by any law to be registered with any Authority are so
properly registered. Except as set forth in the Disclosure Schedule, all of such
leasehold interests relating to machinery, equipment, vehicles and other
personal property are valid and in full force and effect and enforceable in
accordance with their terms subject to the effect of applicable bankruptcy,
reorganization, insolvency, moratorium, fraudulent conveyance and other laws
affecting the rights of creditors generally or the availability of specific
performance, injunctive relief and other equitable remedies. There does not
exist any material violation, breach or default thereof or thereunder caused by
Shareholder or Company. To the best of the knowledge of Shareholder, no such
material violation, breach or default has been caused by any other party. The
Disclosure Schedule contains a complete and accurate list of each item of
machinery, equipment, vehicles and other personal property owned or leased by
the Company, the value of which item is over $500. Except as set forth in the
Disclosure Schedule, none of such machinery, equipment, vehicles or other
personal property owned by Company is subject to any mortgage, pledge, lien or
security interest of any kind or nature (whether or not of record) except
Permitted Liens. Except as set forth in the Disclosure Schedule, to the
knowledge of the Shareholder, the machinery, equipment, vehicles and other
personal property of Company which are necessary to the conduct of its business
are in good operating condition and repair, normal wear and tear excepted, fit
for the present purposes thereof, and no material maintenance, replacement or
repair has been deferred or neglected.
(l) INVENTORIES. Except as set forth in the Disclosure Schedule,
substantially all inventory of Company, reflected in the Latest Balance Sheet,
consists of a quality and quantity usable and
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salable in the ordinary course of business, and the present quantities of all
inventory of Company are reasonable in the present circumstances of the
businesses as currently conducted.
(m) RECEIVABLES AND PAYABLES.
(i) Except as set forth on the Disclosure Schedule,
(A) Company has good right, title and interest in and to all its
accounts and notes receivable and trade notes and trade accounts
reflected in the Latest Balance Sheet and those acquired and generated
since the date of the Latest Balance Sheet (except for those paid
since the date of the Latest Balance Sheet), and the Disclosure
Schedule contains a list of aging of all such accounts receivable and
trade notes and accounts receivable as of the date of the Latest
Balance Sheet which is true and correct in all material respects;
(B) None of such accounts and notes receivable and trade notes
and trade accounts is subject to any mortgage, pledge, lien or
security interest of any kind or nature (whether or not of record);
(C) Except to the extent of applicable reserves shown in the
Latest Balance Sheet (which reserves are adequate), all of the
accounts and notes receivable, trade notes and trade accounts owing to
Company constitute valid and enforceable claims arising from bona fide
transactions in the ordinary course of business, and there are no
material claims, refusals to pay or other rights of set-off against
any thereof subject to the effect of applicable bankruptcy,
reorganization, insolvency, moratorium, fraudulent conveyance and
other laws affecting the rights of creditors generally or the
availability of specific performance, injunctive relief and other
equitable remedies;
(D) No account or note debtor whose account or note balance
exceeds the amount set forth in the Disclosure Schedule at the date
set forth therein was delinquent in payment by more than ninety days;
(E) The aging schedule of the accounts and notes receivable and
trade notes and trade accounts of Company previously furnished to
Purchaser is complete and accurate as of the date stated therein in
all material respects; and
(F) To the best of the knowledge of Shareholder, there is no
reason why any account or note receivable or trade note or trade
account will not be collected in
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accordance with its terms, other than for such accounts and notes
which are not in excess of the reserves established therefor, all as
reflected in the Latest Balance Sheet.
(ii) All accounts payable and notes payable by Company arose in
bona fide transactions in the ordinary course of business and no such
account payable or note payable is delinquent by more than ninety days in
its payment.
(n) INTELLECTUAL PROPERTY RIGHTS. The Disclosure Schedule sets forth an
accurate and complete list of the intellectual property rights owned or used by
the Company, including without limitation all patents, patent applications,
patent rights, trademarks, trademark applications, trade names, service marks,
service mark applications, copyrights, computer programs and other computer
software, inventions, know-how, trade secrets, technology, proprietary processes
and formulae (collectively, "Intellectual Property Rights") Except as set
forth on the Disclosure Schedule, to the knowledge of Shareholder the use of the
Intellectual Property Rights does not infringe or violate or allegedly infringe
or violate the intellectual property rights of any person or entity. Except as
described on the Disclosure Schedule, and except those computer programs and
other computer software commercially available from retail outlets, Company does
not own or use any Intellectual Property Rights pursuant to any written license
agreement and has not granted any person or entity any rights, pursuant to
written license agreement or otherwise, to use the Intellectual Property Rights.
(o) LITIGATION. Except as set forth in the Disclosure Schedule, there is
no material legal, administrative, arbitration, or other proceeding, suit, claim
or action of any nature or investigation, review or audit of any kind (including
without limitation a proceeding, suit, claim or action, or an investigation,
review or audit, involving any environmental Law or matter), judgment, decree,
decision, injunction, writ or order pending, noticed, scheduled or, to the
knowledge of Shareholder, threatened or contemplated by or against or involving
Company, its assets, properties or businesses or its directors, officers, agents
or employees (but only in their capacity as such), whether at law or in equity,
before or by any person or entity or Authority, or which questions or challenges
the validity of this Agreement or any action taken or to be taken by the parties
hereto pursuant to this Agreement or in connection with the transactions
contemplated herein.
(p) TAX RETURNS.
(i) For purposes of this Agreement (A) "Taxes" shall mean all
taxes, charges, fees, levies or other assessments, including, without
limitation, all net income,
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gross income, gross receipts, sales, use, AD VALOREM, transfer, franchise,
profits, license, withholding, payroll, employment, excise, estimated,
severance, stamp, occupation, property or other taxes, fees, assessments or
charges of any kind whatsoever, together with any interest and any
penalties, additions to tax or additional amounts imposed by any taxing
authority (domestic or foreign), including any liability for Taxes of any
other person or entity under Section 1.1502-6 of the Treasury Regulations
(or any similar provision of state, local or foreign law), (B) "Return"
shall mean any return, report, information return or other document or
schedule (including any related or supporting information) with respect to
Taxes, including, without limitation, consolidated Returns and Unitary
Returns, (C) "Consolidated Return" shall mean any consolidated federal
income Tax Return filed by the Affiliated Group (as defined below), and D)
"Unitary Return" shall mean any Return with respect to any Taxes, other
than federal income Taxes, filed, or required to be filed, on a
consolidated, combined, or unitary basis by any group of corporations of
which Company is a member.
(ii) Except as set forth in the Disclosure Schedule, Company
and/or the Affiliated Group, within the meaning of Section 1504 of the
Internal Revenue Code of 1986, as amended (the "Code"), of which Company is
a member and Shareholder is the common parent (the "Affiliated Group"),
have (A) timely filed in accordance with all applicable laws (taking into
account all extensions of due dates) all Returns for any federal, state,
local or foreign Taxes required to be filed on or before the date hereof
other than those Returns the failure of which to file would not have a
material adverse effect on the business, assets, operations, prospects or
financial condition of Company, (B) paid in full all Taxes whether or not
such Taxes were shown to be due and payable on such filed Returns, and (C)
paid all Taxes for which a notice of, or assessment or demand for, payment
has been received from a taxing authority. All of such filed Returns are
true, correct and complete in all material respects and there is no
material omission, deficiency, error, misstatement, or misrepresentation,
whether innocent, intentional or fraudulent, in any such Tax Return nor
have any reporting positions been taken therein that if challenged by any
governmental authority will result in an assessment against Company. In
connection with the execution of this Agreement, Buyer has been given a
true, correct and complete copy of any tax sharing agreements or
arrangements to which Company is a party and a true, correct and complete
description of any such tax sharing agreements or arrangements not reduced
to writing (collectively, the "Tax Sharing Agreements"). True, correct and
complete copies of (x) pro forma separate federal income Tax Returns for
Company as a member of the Affiliated Group and (y) state, local and
foreign Tax Returns of Company or,
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with respect to Unitary Returns and in lieu of providing copies thereof, a
schedule showing the modifications to the Company's federal taxable income
and other relevant information sufficient to compute the Company's state
taxable income for each of the years ended December 31, 1991 through
December 31, 1993 have heretofore been delivered to Purchaser and such pro
forma Tax Returns or schedules set forth a computation of the amount of
taxable income of the Company actually included in the applicable federal
Consolidated Return or state Unitary Return.
(iii) Except as set forth in the Disclosure Schedule, all Tax
deficiencies asserted or assessed by a taxing authority against Company or
the Affiliated Group (to the extent assets of Company may be required to
pay any such Taxes) have been paid or finally settled or are being
contested by appropriate proceedings (which proceedings, to the extent they
directly or indirectly affect Company, have been set forth on the
Disclosure Schedule). Company and the Affiliated Group have made all
payments of estimated Taxes required to be made with respect to any of them
under Section 6655 of the Code and any comparable provisions of state,
local or foreign law. There are no liens for Taxes due and owing upon any
property or assets of the Company. All amounts that are required to be
collected or withheld by Company or the Affiliated Group with respect to
Taxes have been duly collected or withheld, and all such amounts that are
required to be remitted to any taxing authority have been remitted on a
timely basis without the imposition of interest or penalties. All
Consolidated Returns and Unitary Returns, and all state, local and foreign
income Tax Returns of Company and the Affiliated Group have been closed by
applicable statutes of limitation for all taxable years ending on or before
the periods set forth in the Disclosure Schedule.
(iv) Except as set forth on the Disclosure Schedule (A) there are
no outstanding requests for any extension of time within which to pay Taxes
not yet paid, (B) there have been no waivers or extensions of any
applicable statute of limitations for the assessment or collection of any
Taxes, (C) neither Company nor the Affiliated Group (to the extent such
notice would directly affect Company) has received any written notice of
pending or threatened actions, audits, proceedings, or investigations for
the assessment or collection of Taxes, (D) there are no requests for
rulings with respect to Taxes outstanding, (E) no power of attorney has
been granted by Company or the Affiliated Group with respect to any matter
relating to Taxes which is currently in force with respect to Company, (F)
no consent has been filed under Section 341(f) of the Code with respect to
Company or the Affiliated Group, (G) no payment which will or may be made
by Company or the Affiliated Group to any individual in connection with the
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transactions contemplated by this Agreement will constitute an "excess
parachute payment" within the meaning of Section 28OG(b)(1) of the Code,
(H) neither Company nor the Affiliated Group has incurred or assumed any
corporate acquisition indebtedness, as defined in Section 279(b) of the
Code, and (I) from the date of its acquisition by Shareholder, Company has
always been a member of the Affiliated Group.
(v) The Disclosure Schedule sets forth the following information
with respect to the Company as of the most recent practicable date as well
as on an estimated pro forma basis as of the Closing Date giving effect to
the consummation of the transactions contemplated hereby: (A) an estimate
of the book/tax differences in the basis of the assets and liabilities and
an estimate of the book/tax differences in the basis of the assets and
liabilities as of February 24, 1995, together with a description of the
general depreciation lives and methods with respect to such assets and
liabilities; (B) the amount of any net operating loss, net capital loss,
unused investment or other credit, unused foreign tax credit, or excess
charitable contributions allocable to the Company; (C) a summary of all
material Federal income Tax elections to which the Company is bound; and
(D) the amount of any def erred gain or loss allocable to the Company
arising out of any deferred intercompany transaction pursuant to Section
1502 of the Treasury Regulations. After closing, Shareholder shall provide
a schedule showing the information described in paragraphs (A), (B) and (D)
above as of the Closing Date as that information becomes available, but in
no event, later than 120 days after the Closing Date. Notwithstanding the
above, Shareholder shall have until August 31, 1996, to provide a schedule
showing adjustments for net operating losses and alternative minimum tax
credits allocable to the Company through the date of Closing. The
information provided no later than 120 days after the date of Closing,
together with the Company's books and records, which the Purchaser shall
acquire, shall be sufficient for the Purchaser to compute the adjusted tax
basis of all assets and the related depreciation or amortization live and
methods of the assets on an ongoing basis from the Closing Date.
(vi) The unpaid Taxes of the Company (A) did not, as of the date
hereof, exceed the reserve for the Tax liability (rather than any reserve
for deferred Taxes established to reflect timing differences between book
and taxable income) set forth on the face of the Latest Balance Sheet of
the Company (rather than in any notes thereto) and (B) will not exceed that
reserve as adjusted for the passage of time through the Closing Date in
accordance with the past custom and practice of the Company in filing its
Tax Returns and preparing its financial statements.
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(q) INSURANCE. The Disclosure Schedule contains an accurate and complete
list of all policies of fire and other casualty, general liability, theft, life,
workers' compensation, health, directors and officers, business interruption and
other forms of insurance owned or held by Company specifying the insurer, the
policy number, the term of the coverage and, in the case of any "claims made"
coverage, the same information as to predecessor policies for the previous seven
years. All present policies are in full force and effect and all premiums with
respect thereto have been paid. Company has not been denied any form of
insurance and no policy of insurance has been revoked or rescinded during the
past seven years, except as described on the Disclosure Schedule.
(r) BENEFIT PLANS. Except as set forth in the Disclosure Schedule:
(i) Neither the Company nor any other "person" within the
meaning of Section 7701(a) (1) of the Internal Revenue Code of 1986, as
amended (the "Code") , that together with the Company is considered a
single employer pursuant to Sections 414(b), (c), (m) or (o) of the Code or
Sections 3(5) or 4001(b)(1) of the Employee Retirement Income Security Act
of 1974, as amended ("ERISA") (an "Affiliated Organization") sponsors,
maintains, contributes to, is required to contribute to or has or could
have any liability of any nature, whether known or unknown, fixed or
contingent, with respect to, any "employee pension benefit plan" ("Pension
Plan") as such term is defined in Section 3(2) of ERISA, including without
limitation, any such plan that is excluded from coverage by Section 4(b)(5)
of ERISA . Each such Pension Plan set out in the Disclosure Schedule has
been operated in all material respects in accordance with its terms and in
compliance with the applicable provisions of ERISA, the Code and all other
applicable Law. All Pension Plans which the Company operates as plans that
are qualified under the provisions of Section 401(a) of the Code satisfy in
form and operation the requirements of Section 401(a) and all other
applicable Sections of the Code incorporated therein, including without
limitation Sections 401(k) and 401(m) of the Code.
(ii) Neither the Company nor any Affiliated Organization has or
could have any liability of any nature, whether known or unknown or fixed
or contingent, to any Pension Plan, the Pension Benefit Guaranty
Corporation ("PBGC") or any other person, arising directly or indirectly
under Title IV of ERISA. No "reportable event," within the meaning of
Section 4043(b) of ERISA, has occurred with respect to any Pension Plan
covered under Title IV of ERISA. Neither the Company nor any Affiliated
Organization has been a party to a sale of assets to which Section 4204 of
ERISA applied with respect to which it could incur any withdrawal liability
(including any contingent or secondary withdrawal liability)
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to any Multiemployer Plan. Neither the Company nor any Affiliated
Organization has incurred any withdrawal liability within the meaning of
Section 4201 of ERISA or suffered or otherwise caused a "complete
withdrawal" or "partial withdrawal," as such terms are defined respectively
in Sections 4203 and 4205 of ERISA, with respect to a Multiemployer Plan,
and nothing has occurred that is reasonably likely to result in such a
complete or partial withdrawal.
(iii) Neither the Company nor any Affiliated Organization
sponsors, maintains, contributes to, is required to contribute to or has or
could have any liability of any nature, whether known or unknown, fixed or
contingent, with respect to, any "employee welfare benefit plan" ("Welfare
Plan") as such term is defined in Section 3(l) Of ERISA, whether insured or
otherwise. Each Welfare Plan set out in the Disclosure Schedule has been
operated in all material respects in accordance with its terms and in
compliance with the applicable provisions of ERISA, the Code and all other
applicable Law. Neither the Company nor any Affiliated Organization has
established or contributed to, is required to contribute to or has or could
have any liability of any nature, whether known or unknown, fixed or
contingent, with respect to any "voluntary employees' beneficiary
association" within the meaning of Section 501(c)(9) of the Code, "welfare
benefit fund" within the meaning of Section 419 of the Code, "qualified
asset account" within the meaning of Section 419 of the Code, "qualified
asset account" within the meaning of Section 419A of the Code or "multiple
employer welfare arrangement" within the meaning of Section 3(40) or ERISA.
Except with respect to such Welfare Plans set out in the Disclosure
Statement, neither the Company nor any Affiliated Organization maintains,
contributes to or has or could have any liability of any nature, whether
known or unknown, or fixed or contingent, with respect to medical, health,
life or other welfare benefits for present or future terminated employees
or their spouses or dependents other than as required by Part 6 of Subtitle
B of Title I of ERISA or any comparable state law.
(iv) Neither the Company nor any Affiliated Organization is a
party to, maintains, contributes to, is required to contribute to, or has
or could have any liability of any nature, whether known or unknown, fixed
or contingent, with respect to, any bonus plan, incentive plan, stock plan
or any other current or deferred compensation, separation, retention,
severance or similar agreement, arrangement or policy, or any individual
employment agreement ("Compensation Plans"). Each Compensation Plan
disclosed on the Disclosure Statement has been operated in all material
respects in accordance with its terms and in compliance with the
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applicable provisions of all applicable Law.
(v) To the best of knowledge of the Shareholder, there are no
facts or circumstances which could, directly or indirectly, subject the
Company to any (1) excise tax or other liability under Chapters 43, 46 or
47 of Subtitle D of the Code, (2) penalty tax or other liability under
Chapter 68 of Subtitle F of the Code or (3) civil penalty arising under
Section 502 of ERISA.
(vi) Full payment has been made of all amounts which the Company
or any Affiliated organization is required, under applicable Law, the terms
of any Pension Plan, Welfare Plan or Compensation Plan, or any agreement
relating to any Pension Plan or Welfare Plan or Compensation Plan, to have
paid as a contribution, premium or other remittance thereto or benefit
thereunder. No Pension Plan is subject to Part 3 of Subtitle B of Title I
of ERISA or Section 412 of the Code. The Company and each Affiliated
Organization has made adequate provisions for reserves or accruals in
accordance with generally accepted accounting principles to meet
contribution benefit or funding obligations arising under applicable Law or
the terms of any Pension Plan or Welfare Plan or Compensation Plan or
related agreement. There will be no change on or before Closing in the
operation of any Pension Plan, Welfare Plan or Compensation Plan or any
documents with respect thereto which will result in an increase in the
benefit liabilities under such plans, except as may be required by law.
(vii) The Company and each Affiliated Organization has timely
complied with all reporting and disclosure obligations with respect to the
Pension Plans, Welfare Plans and Compensation Plans imposed by Title I of
ERISA or other applicable Law.
(viii) There are no pending or, to Shareholder's or the Company's
knowledge, threatened audits, investigations, claims, suits, grievances or
other proceedings concerning employees of the Company, and there are no
facts that could give rise thereto, involving, directly or indirectly, any
Pension Plan, Welfare Plan, or Compensation Plan, or any rights or benefits
thereunder, other than the ordinary and usual claims for benefits by
participants, dependents or beneficiaries, concerning Employees of the
Company.
(ix) The transactions contemplated herein do not result in the
acceleration of accrual, vesting, funding or payment of any contribution or
benefit under any Pension Plan, Welfare Plan or Compensation Plan.
(x) Neither the Company nor any director, officer, employee, or
agent thereof, nor the Purchaser, may in any way
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amend, merge, or terminate any Pension Plan, Welfare Plan or Compensation
Plan. Purchaser, however, may terminate its participation in any Pension
Plan, Welfare Plan, or Compensation Plan. Nothing in this Agreement limits
in any way Purchaser's ability after Closing to amend, merge, alter, or
terminate any employee benefit plan (as defined at section 3(3) of ERISA)
or any other agreement, policy or understanding, between the Company and
employees of the Company.
(xi) In connection with the termination of any Pension Plan and
without limiting the applicability of the foregoing representations to such
Pension Plan: (i) nothing done or omitted to be done has or could subject
the Company or any Affiliated Organization to any liability, loss, cost,
charge, expense or expenditure of any nature or result in the imposition of
any Lien in favor of the PBGC or any other person; (ii) the Company has
received a determination letter from the Internal Revenue Service, based on
complete and accurate disclosure by the Company in all material respects,
that such termination did not adversely affect the qualified status of such
Pension Plan under Section 401(a) of the Code or the tax exempt status of
its related trust under Section 501(a) of the Code; (iii) all notices and
other filings required to be submitted to the PBGC were submitted in a
timely manner and were complete and accurate in all material respects and
no distributions were made until receipt of PBGC approval in the form of a
notice of sufficiency or by lapse of any applicable time period without
notice of PBGC objection, as the case may be; (iv) all participants,
beneficiaries of deceased participants, alternate payees and other
interested parties received all notices and disclosures required by
applicable Law in a timely manner and all such notices and disclosures were
complete and accurate in all material respects and satisfied the
requirements imposed by all applicable Laws; (v) no portion of the assets
of the Plan reverted to the Company or any Affiliated Organization; (vi)
the selection of annuity contracts and the process employed in connection
therewith satisfied all applicable Laws, including without limitation
ERISA, and each and all of the issuers of such contracts have fully
satisfied all of its or their obligations thereunder and (vii) the
termination in all material respects satisfied all applicable Laws.
(s) BANK ACCOUNTS; POWERS OF ATTORNEY. The Disclosure Schedule sets
forth:
(i) the names of all financial institutions, investment banking
and brokerage houses, and other similar institutions at which the Company
maintains accounts, deposits, safe deposit boxes of any nature, and the
names of all persons authorized to draw thereon or make withdrawals
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therefrom;
(ii) the material terms and conditions thereof and any
limitations or restrictions as to use, withdrawal or otherwise; and
(iii) the names of all persons or entities holding general or
special powers of attorney from Company and a SUMMARY of the terms thereof.
(t) CONTRACTS AND COMMITMENTS; NO DEFAULT.
(i) Except as set forth in the Disclosure Schedule, the Company:
(A) has no written contract, commitment, agreement or
arrangement with any person or, to Shareholder's or Company's
knowledge, any oral contract, commitment, agreement or arrangement
which (1) requires payments individually in excess of Five Thousand
Dollars ($5,000) annually or in excess of Twenty-Five Thousand Dollars
($25,000) over its term (including without limitation periods covered
by any option to extend or renew by either party) and (2) is not
terminable on thirty (30) days' or less notice without cost or other
liability;
(B) pays no person or entity cash remuneration at the annual
rate (including without limitation guaranteed bonuses) of more than
Twenty-Five Thousand Dollars ($25,000) for services rendered;
(C) is not restricted by agreement from carrying on its
businesses or any part thereof anywhere in the world or from competing
in any line of business with any person or entity;
(D) is not subject to any obligation or requirement to provide
funds to or make any investment (in the form of a loan, capital
contribution or otherwise) in any person or entity;
(E) is not a party to any agreement, contract, commitment or
loan to which any of its directors, officers or shareholders or any
"affiliate" or "associate" (as defined in Rule 405 as promulgated
under the Securities Act of 1933, as amended) (or former affiliate or
associate) thereof is a party;
(F) is not subject to any outstanding sales or purchase
contracts, commitments , or proposals which will result in any loss
upon completion or performance thereof which would have a material
adverse effect on the
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business of the Company taken as a whole;
(G) is not a party to any purchase or sale contract or agreement
that calls for aggregate purchases or sales in excess over the course
of such contract or agreement of Fifty Thousand Dollars ($50, 000) or
which continues for a period of more than twelve (12) months
(including without limitation periods covered by any option to renew
or extend by either party) which is not terminable on sixty (60) days'
or less notice without cost or other Liability at or any time after
the Closing;
(H) is not subject to any contract, commitment, agreement or
arrangement with any "disqualified individual" (as defined in Section
28OG(c) of the Code) which contains any severance or termination pay
Liabilities which would result in a disallowance of the deduction for
any "excess parachute payment" (as defined in Section 2BOG(b)(1) of
the Code) under Section 28OG of the Code;
(I) has no material distributorship, dealer, manufacturer's
representative, franchise or similar sales contract relating to the
payment of a commission; and
(J) is not subject to any material contract, commitment,
agreement or arrangement that contains a provision that would be
triggered or cause a breach or right to terminate upon a change in
control (or change in ownership) of the Company.
(ii) True and complete copies (or summaries, in the case of oral
items) of all items disclosed pursuant to Section 2(t)(i) have been made
available to Purchaser for review. Except as set forth in the Disclosure
Schedule, all such items are valid and enforceable by and, to Shareholder's
knowledge, against Company in accordance with their respective terms
subject to the effect of applicable bankruptcy, reorganization, insolvency,
moratorium, fraudulent conveyance and other laws affecting the rights of
creditors generally or the availability of specific performance, injunctive
relief and other equitable remedies: Company is not in breach, violation or
default, however defined, in the performance of any of their obligations
thereunder, and no facts and circumstances exist which, whether with the
giving of due notice, lapse of time, or both, would constitute such a
breach, violation or default thereunder or thereof, except for an
insignificant breach, violation, or default which will not result in a
material loss to the Company; and, to the knowledge of Shareholder, no
other parties thereto are in a breach, violation or default, however
defined, thereunder or thereof, and no facts or circumstances exist which,
whether
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with the giving of due notice, lapse of time, or both, would constitute
such a breach, violation or default thereunder or thereof, except for an
insignificant breach, violation, or default which will not result in a
material loss to the Company.
(u) ORDERS, COMMITMENTS AND RETURNS. Except as set forth in the
Disclosure Schedule, all accepted and unfulfilled orders for the sale of
products and the performance of services entered into by Company and all
outstanding contracts or commitments for the purchase of supplies, materials and
services were made in bona fide transactions in the ordinary course of business.
Except as set forth in the Disclosure Schedule, there are no claims by or
against Company to return products by reason of alleged over-shipments,
defective products or otherwise, or of products in the hands of customers,
retailers or distributors under an understanding that such products would be
returnable.
(v) LABOR MATTERS. Except as set forth in the Disclosure Schedule:
(i) Company is and has been in material compliance with all
applicable Laws respecting employment and employment practices, terms and
conditions of employment and wages and hours, including without limitation
any such Laws respecting employment discrimination and occupational safety
and health requirements, and have not and are not engaged in any unfair
labor practice;
(ii) there is no unfair labor practice complaint against the
Company pending or, to Shareholder's knowledge, threatened before the
National Labor Relations Board or any other comparable Authority;
(iii) there is no labor strike, dispute, slowdown or stoppage
actually pending or, to Shareholder's knowledge, threatened against or
directly affecting company;
(iv) no labor representation question exists respecting the
employees of Company and there is not pending or, to Shareholder's
knowledge, threatened any activity intended or likely to result in a labor
representation vote respecting the employees of the Company;
(v) no grievance or any arbitration proceeding arising out of or
under collective bargaining agreements is pending and no claims therefor
exist or, to Majority Shareholder's knowledge, have been threatened;
(vi) no collective bargaining agreement is binding and in force
against Company or currently being negotiated by Company;
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(vii) Company has not experienced any significant work stoppage or
other significant labor difficulty;
(viii) Company is not delinquent in payments to any persons for any
wages, salaries, commissions, bonuses or other direct or indirect
compensation for any services performed by them or amounts required to be
reimbursed to such persons, including without limitation any amounts due
under any Pension Plan, Welfare Plan or Compensation Plan; and
(ix) upon termination of the employment of any person, neither
Company nor Purchaser will, by reason of anything done at or prior to or as
of the Closing Date, be liable to any of such persons for so-called
"severance pay" or any other payments, except to the extent of applicable
reserves shown on the Latest Balance Sheet. The Disclosure Schedule
contains a list of all employees (full and part time) employed as of the
date hereof by the Company.
(w) DEALERS, SUPPLIERS AND CUSTOMERS. Except as set forth in the
Disclosure Schedule, there has not been in the twelve month period prior to the
date hereof any change in the business relationship of Company with any dealer,
supplier or Customer to Company which would have a material adverse effect on
the business of the Company taken as a whole.
(x) PERMITS AND OTHER OPERATING RIGHTS. Except as set forth in the
Disclosure Schedule, Company does not require the Consent of any Authority to
permit it to operate in the manner in which it presently is being operated, and
possesses all permits and other authorizations from all Authorities presently
required necessary to permit it to operate its business in the manner in which
it presently is conducted, other than a permit or authorization which, if not
obtained, will not, individually or in the aggregate, have a material adverse
effect on the business of the Company taken as a whole. Except as set forth in
the Disclosure Schedule, no such permits or other authorizations contain a
provision that would be triggered or cause a breach or a right to terminate such
permit or authorization upon a change in control (or change in ownership) of the
Company.
(y) COMPLIANCE WITH LAW. Except as set forth in the Disclosure Schedule,
and without limiting the scope of any other representations or warranties
contained in this Agreement, but without intending to duplicate the scope of
such other representations and warranties, the assets, properties, businesses
and operations of Company are and have been in material compliance with all Laws
in effect and as interpreted as of the date of this Agreement, the Closing Date
and any date prior to the Closing Date, each as applicable, to the ownership and
conduct of its assets, properties, businesses and operations at such time,
except for such noncompliance has not, and will not, have a material adverse
effect
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on the business of the Company taken as a whole.
(z) ASSETS OF BUSINESS. Except as set forth on the Disclosure Schedule,
the assets owned or leased by Company constitute all of the assets held for use
or used primarily in connection with their businesses and are adequate to carry
on such businesses as presently conducted.
(aa) BUSINESS GENERALLY. To Shareholder's knowledge, except as set forth
in the Disclosure Schedule, there has been no event, transaction or information
which has come to the attention of Company which, as it relates directly to the
businesses of Company, could, individually or in the aggregate, reasonably be
expected to have a material adverse effect on the business of the Company.
(bb) ENVIRONMENTAL AND SAFETY MATTERS. Except as set forth in the
Disclosure Schedule:
(i) Neither the Company, any former subsidiaries of the Company,
nor (to Shareholder's knowledge) any previous owner, tenants, occupants or
users of any property owned or leased by or to the Company or by or to any
former subsidiaries (the "Properties") engaged in or permitted, direct or
indirect operations or activities upon, or any use or occupancy of the
Properties, or any portion thereof, for the purpose of or in any way
involving the handling, manufacture, treatment, storage, use, generation,
emission release, discharge, refining, dumping or disposal of any
Environmentally Regulated Materials (whether legal or illegal, accidental
or intentional, direct or indirect) on, under, in or about the Properties,
or transported any Environmentally Regulated Materials to, from or across
the Properties, nor are any Environmentally Regulated Materials presently
constructed, deposited, stored, placed or otherwise located on, under, in
or about the Properties, nor, to the knowledge of the Shareholder, have any
Environmentally Regulated Materials migrated from the Properties upon or
beneath other properties, nor, to the knowledge of the Shareholder, have
any Environmentally Regulated Materials migrated or threatened to migrate
from other properties upon, about or beneath the Properties. No
aboveground treatment or storage tanks, pumps, water, gas or oil wells, or
related piping, conduits or other structures are or, to the knowledge of
the Shareholder, are there any underground treatment or storage tanks,
pumps, water, gas or oil wells, or related piping, conduits or other
structures, nor to Shareholder's knowledge, have any such aboveground or
underground facilities ever been located on or under the Properties. No
such underground facilities have been placed on or under any of the
Properties during the time that the Company or any former subsidiaries of
the Company occupied, used, owned, or leased the Properties.
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(ii) (A) No enforcement, investigation, cleanup, removal, remediation
or response or other governmental or regulatory actions have been
asserted or, to the knowledge of the Shareholder, threatened with
respect to operations conducted on the Properties or the Properties
itself or against the Company and its former subsidiaries with respect
to or in any way regarding the Properties (or with respect to past
Properties and Properties of former subsidiaries) pursuant to any
Environmental and Occupational Safety and Health Laws;
(B) The Company has not violated or failed to comply with any
Environmental and Occupational Safety and Health Laws. To the
knowledge of the Shareholder, no violation or noncompliance with such
laws has occurred with respect to the Properties (or with respect to
past Properties and Properties of former subsidiaries) or operations
conducted thereon;
(C) no claims or settlements against the Company and its former
subsidiaries with respect to the Properties or operations conducted
thereon, relating to or arising out of Environmental Occupational
Safety and Health Laws or Environmentally Regulated Substances, have
been made or been threatened by any third party, including any
governmental entity, agency or representative, nor does there exist
any basis for any such claim. To Shareholder's knowledge, no such
claims or settlements have been made with respect to the Properties,
nor does there exist any basis for such claim.
The term "Environmental and Occupational Safety and Health Law" as used in
paragraphs (i) and (ii) above in this Agreement means any statute, rule,
regulation, law, ordinance or code, whether local, state, federal, international
or otherwise in effect and as interpreted as of the date of this Agreement, the
Closing Date and any date prior to the closing Date each as applicable, that (A)
regulates, creates standards for or imposes liability or standards of conduct
concerning any element, compound, pollutant, contaminant, or toxic or hazardous
substance, material or waste, or any mixture thereof, or relates in any way to
emissions or releases into the environment or ambient environmental conditions,
or conduct affecting such matters or (B) is designed to provide safe and
healthful working conditions or reduce occupational safety and health hazards.
Such laws shall include, but not be limited to, the National Environmental
Policy Act (NEPA), 42 U.S.C. Sections 4321 ET seq., the Comprehensive
Environmental Response, Compensation and Liability Act (CERCLA), 42 U.S.C.
Section 9601 ET seq., the Resource Conservation and Recovery Act (RCRA), 42
U.S.C. Sections 6901 ET SEQ., the Federal Water Pollution Control Act (FWPCA),
33 U.S.C. Sections 1251 ET SEQ., the Federal Clean Air Act (CAA), 42 U.S.C.
Sections 7401 ET
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SEQ., the Toxic Substances Control Act (TSCA) , 15 U.S.C. Sections 2601 ET SEQ.,
the Emergency Planning and Community Right to Know Act (SARA Title III), 42
U.S.C. I 11001, the Hazard Communication Act Sections 651 ET SEQ., the Federal
Insecticide, Fungicide and Rodenticide Act (FIFRA) , 7 U.S.C. Section 136, and
any amendments or restatements thereof or similar enactment thereof, as is now
or at any time hereafter may be in effect, as well as their international, state
and local counterparts. The term "Environmentally Regulated Materials" as use
in paragraphs (i) and (ii) above and this Agreement means any element, compound
pollutant, contaminant, substance, material or waste, or any mixture thereof,
designated, listed, referenced, regulated or identified pursuant to any
Environmental and Occupational Safety and Health Law.
(cc) BROKERS. Except as set forth in the Disclosure Schedule, neither
Company nor Shareholder its Subsidiaries, nor any of their directors, officers
or employees has employed any broker, finder, or financial advisor or incurred
any liability for any brokerage fee or commission, finder's fee or financial
advisory fee, in connection with the transactions contemplated hereby, nor is
there any basis known to Company for any such fee or commission to be claimed by
any person or entity.
(dd) SHAREHOLDER REPRESENTATIONS. Shareholder has full legal right, power
and authority to sell, transfer, assign and deliver the Shares to Purchaser at
Closing and delivery of the Shares at Closing will transfer to Purchaser valid
legal and beneficial ownership thereto free and clear of all claims, security
interests, liens, charges and encumbrances of any kind or nature whatsoever.
(ee) ACCURACY OF INFORMATION. No representation or warranty by Shareholder
in this Agreement (including the Disclosure Schedule) contains any untrue
statement of material fact or omits to state any material fact necessary in
order to make the statements herein or therein, in light of the circumstances
under which they were made, not misleading as of the date of the representation
or warranty.
SECTION 3
3. REPRESENTATIONS AND WARRANTIES OF PURCHASER.
Purchaser represents and warrants to Shareholder as of the date hereof as
follows:
(a) CORPORATE ORGANIZATION. Purchaser is a corporation duly organized,
validly existing and in good standing under the law of the State of Minnesota.
(b) AUTHORIZATION. Purchaser has full corporate power and authority to
enter into this Agreement and to carry out the transactions contemplated herein.
The Board of Directors of
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Purchaser has taken all action required by law, its articles or certificate of
incorporation and bylaws or otherwise to authorize the execution, delivery and
performance of this Agreement and the consummation of the transactions
contemplated herein. This Agreement is the valid and binding legal obligation
of Purchaser enforceable against it in accordance with its terms.
(c) NON-CONTRAVENTION. Neither the execution, delivery and performance of
this Agreement nor the consummation of, the transactions contemplated herein
will:
(i) violate any provision of the articles or certificates of
incorporation or bylaws of Purchaser; or
(ii) except for such violations, conflicts, defaults,
accelerations, terminations, cancellations, impositions of fees or
penalties, mortgages, pledges, liens, security interests, encumbrances,
restrictions and charges which would not, individually or in the aggregate,
have a material adverse affect on the business of Purchaser taken as a
whole, (A) violate, be in conflict with, or constitute a default, however
defined (or an event which, with the giving of due notice or lapse of time,
or both, would constitute such a default), under, or cause or permit the
acceleration of the maturity of, or give rise to, any right of termination,
cancellation, imposition of fees or penalties under, any debt, note, bond,
lease, mortgage, indenture, license, obligation, contract, commitment,
franchise, permit, instrument or other agreement or obligation to which
Purchaser is a party or by which it or any of its properties or assets is
or may be bound (unless with respect to which defaults or other rights,
requisite waivers or consents shall have been obtained at or prior to the
Closing) or (B) result in the creation or imposition of any mortgage,
pledge, lien, security interest, encumbrance, restriction or charge of any
kind, upon any property or assets of Purchaser under any debt, obligation,
contract, agreement or commitment to which Purchaser is a party or by which
Purchaser or any of its assets or properties is or may be bound; or
(iii) to the knowledge of Purchaser, violate any Law.
(d) ACCURACY OF INFORMATION. No representation or warranty by Purchaser
in this Agreement contains or will contain any untrue statement of material fact
or omits or will omit to state any material fact necessary in order to make the
statements herein or therein, in light of the circumstances under which made,
not misleading as of the date of the representation or warranty.
(e) BROKERS. Neither Purchaser nor any of its directors, officers or key
employees have employed any broker, finder or financial advisor, or incurred any
liability for any brokerage fee
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or commission, finder's fee or financial advisory fee, in connection with the
transactions contemplated hereby, nor is there any basis known to Purchaser for
any such fee or commission to be claimed by any person or entity.
SECTION 4
4. COVENANTS.
(a) AGREEMENTS AS TO SPECIFIED MATTERS. Except as specifically set forth
on the Disclosure Schedule, except in the ordinary course of business and
consistent with past practice, and except as may be otherwise agreed in writing
by Purchaser which consent will not be unreasonably withheld, from the date
hereof until the Closing, Shareholder shall not permit Company to:
(i) Amend its articles or certificate of incorporation or
bylaws;
(ii) Borrow or agree to borrow any funds;
(iii) Incur, assume, suffer or become subject to, whether directly
or by way of guarantee or otherwise, any claims, obligations, liabilities
or loss contingencies which, individually or in the aggregate, are material
to the conduct of the businesses of Company or have or would have a
material adverse effect on the financial condition of Company;
(iv) Pay, discharge or satisfy any material claims, liabilities
or obligations;
(v) Permit or allow any of its properties or assets material to
the operation of its businesses to be subjected to any mortgage, pledge,
lien, security interest, encumbrance, or restriction of any kind, except
Permitted Liens;
(vi) Write down the value of any inventory or write off as
uncollectible any notes or accounts receivable or any trade accounts or
trade notes;
(vii) Cancel or amend any debts, waive any claims or rights or
sell, transfer or otherwise dispose of any properties or assets, other than
for such debts, claims, rights, properties or assets which, individually or
in the aggregate, are not material to the conduct of its businesses;
(viii) License, sell, transfer, pledge, modify, disclose, dispose
of or permit to lapse any right to the use of any Intellectual Property
Rights other than for such Intellectual Property Rights which, individually
or in the aggregate, are not material to the conduct of its businesses;
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(ix) (A) Terminate, enter into, adopt, institute or otherwise become
subject to or amend in any material respect any collective bargaining
agreement or employment or similar agreement or arrangement with any
of its directors, officers or employees;
(B) Terminate, enter into, adopt, institute or otherwise become
subject to or amend in any material respect any Compensation Plan;
(C) Contribute, set aside for contribution or authorize the
contribution of any amounts for any such Compensation Plan except as
required (and not discretionary) by the terms of such Compensation
Plan; or
(D) Grant or become obligated to grant any general increase in
the compensation of any directors, officers or employees (including
without limitation any such increase pursuant to any Compensation
Plan);
(x) Make or enter into any commitment for capital expenditures for
additions to property, plant or equipment individually in excess of Ten
Thousand Dollars ($10,000.00);
(xi) (A) Declare, pay or set aside for payment any dividend or other
distribution in respect of its capital stock or other securities
(including without limitation distributions in redemption or
liquidation) or redeem, purchase or otherwise acquire any shares of
its capital stock or other securities;
(B) Issue, grant or sell any shares of its capital stock or
equity securities of any class, or any options, warrants, conversion
or other rights to purchase or acquire any such shares or equity
securities or any securities convertible into or exchangeable for such
shares or equity securities;
(C) Become a party to any merger, exchange, reorganization,
recapitalization, liquidation, dissolution or other similar corporate
transaction; or
(D) Organize any new subsidiary, acquire any capital stock or
other equity securities or other ownership interest in, or assets of,
any person or entity or otherwise make any investment by purchase of
stock or securities, contributions to capital, property transfer or
purchase of any properties or assets of any person or entity;
(xii) Pay, lend or advance any amounts to, or sell, transfer or lease
any properties or assets to, or enter into
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any agreement or arrangement with, any director, officer, employee or
shareholder;
(xiii) Terminate, enter into or amend in any material respect any item
identified in Section 2(t) of the Disclosure Schedule, or take any action
or omit to take any action which will cause a breach, violation or default
(however defined) under any such item; or
(xiv) Agree, whether in writing or otherwise, to take any action
described in this subsection.
(b) CONDUCT OF COMPANY BUSINESS. Except as otherwise contemplated in this
Agreement, Shareholder shall cause Company to maintain its assets and properties
and carry on its businesses and operations only in the ordinary course in
substantially the same manner as planned and previously operated and to use its
best efforts to preserve intact its business organizations, existing business
relationships (including without limitation its relationships with officers,
employees, dealers, distributors, independent contractors, customers and
suppliers), good will and going concern value.
(c) NO SOLICITATION OF ALTERNATE TRANSACTION. Shareholder shall not, and
shall ensure that Company and its directors, officers and employees, independent
contractors, consultants, counsel, accountants, investment advisors and other
representatives and agents do not, directly or indirectly, solicit, initiate or
encourage discussions or negotiations with, provide any nonpublic information
to, or enter into any agreement with, any third party concerning (or concerning
the business of Company in connection with) any tender offer (including a self
tender offer), exchange offer, merger, consolidation, sale of substantial assets
or of a significant amount of assets, sale of securities, acquisition of
beneficial ownership of or the right to vote securities of Company, liquidation,
dissolution or similar transactions involving Company (such proposals,
announcements or transactions being called herein "Acquisition Proposals").
Shareholder shall immediately inform Purchaser of any unsolicited offer,
including the terms thereof and the identity of the person or entity making such
offer.
(d) FULL ACCESS TO PURCHASER. Shareholder shall cause Company to afford
to Purchaser and its directors, officers, employees, counsel, accountants,
investment advisors and other authorized representatives and agents free and
full access to the facilities, properties, books and records of Company in order
that Purchaser may have full opportunity to make such investigations as it shall
desire including, without limitation, the right to conduct and environmental
audit of the Real Property. PROVIDED, HOWEVER, that any such investigation
shall be conducted in such a manner as not to interfere unreasonably with
business operations and Purchaser shall be required to restore all Real Property
to the
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condition it was in prior to Purchaser's investigation; and Shareholder shall
cause Company to furnish such additional financial and operating data and other
information as Purchaser shall, from time to time, reasonably request; and,
PROVIDED, FURTHER, that any such investigation shall not affect or otherwise
diminish or obviate in any respect any of the representations and warranties of
Shareholder herein.
(e) CONFIDENTIALITY. Each of the parties hereto agrees that it will not
use, or permit the use of, any of the information relating to any other party
hereto furnished to it in connection with the transactions contemplated herein
("Information") in a manner or for a purpose detrimental to such other party or
otherwise than in connection with the transaction, and that they will not
disclose, divulge, provide or make accessible (collectively, "Disclose," and the
Information that is Disclosed, "Disclosure"), or permit the Disclosure of, any
of the Information to any person or entity, other than their responsible
directors, officers, employees, investment advisors, accountants, counsel and
other authorized representatives and agents, except as may be required by
judicial or administrative process or, in the opinion of such party's regular
counsel, by other requirements of Law; PROVIDED, HOWEVER, that prior to any
Disclosure of any Information permitted hereunder, the disclosing party shall
first obtain the recipients' undertaking to comply with the provisions of this
subsection with respect to such information, and the disclosing party shall
notify the other party in writing pursuant to Section 9(e) herein setting forth
the time, place and persons to whom such Disclosure was made, the Information so
disclosed and the purpose of the Disclosure. The term "Information" as used
herein shall not include any information relating to a party which the party
disclosing such information can show:
(i) to have been in its possession prior to its receipt from
another party hereto;
(ii) to be now or to later become generally available to the
public through no fault of the disclosing party;
(iii) to have been available to the public at the time of its
receipt by the disclosing party;
(iv) to have been received separately by the disclosing party in
an unrestricted manner from a person entitled to disclose such information;
or
(v) to have been developed independently by the disclosing party
without regard to any information received in connection with this
transaction; PROVIDED, HOWEVER, that nothing contained herein shall in any
way diminish the obligation of Alan G. Hoyt to maintain the confidentiality
of
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information regarding the Company or the Shareholder to the extent any such
duty existed prior to the commencement of negotiations regarding the
transactions contemplated herein.
Each party hereto also agrees to promptly return to the party from whom
originally received all original and duplicate copies of written materials
containing Information should the transactions contemplated herein not occur. A
party hereto shall be deemed to have satisfied its obligations to hold the
Information confidential if it exercises the same care as it takes with respect
to its own similar information.
(f) FILINGS; CONSENTS; REMOVAL OF OBJECTIONS. Subject to the terms and
conditions herein provided, the parties hereto shall use their best efforts to
take or cause to be taken all actions and do or cause to be done all things
necessary, proper or advisable under applicable Laws to consummate and make
effective, as soon as reasonably practicable, the transactions contemplated
hereby, including without limitation obtaining all Consents of any person or
entity, whether private or governmental, required in connection with the
consummation of the transactions contemplated herein. In furtherance, and not
in limitation of the foregoing, it is the intent of the parties to consummate
the transactions contemplated herein at the earliest practicable time, and they
respectively agree to exert their best efforts to that end, including without
limitation:
(i) the removal or satisfaction, if possible, of any objections
to the validity or legality of the transactions contemplated herein; and
(ii) the satisfaction of the conditions to consummation of the
transactions contemplated hereby.
(g) FURTHER ASSURANCES; COOPERATION; NOTIFICATION.
(i) Each party hereto shall, before, at and after Closing,
execute and deliver such instruments and take such other actions as the
other party or parties, as the case may be, may reasonably require in order
to carry out the intent of this Agreement.
(ii) Until the Closing Date, Shareholder shall cause Company to
cooperate with Purchaser to promptly develop plans for the management of
the businesses after the Closing, including without limitation plans
relating to productivity, marketing, operations and improvements.
Shareholder shall cooperate in good faith with Purchaser after the
Closing; provided, however, that Shareholder shall be under no obligation
to assist Purchaser in the operation of its business after Closing except
as such obligation may exist under any covenant or other provision of this
Agreement.
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Subject to applicable Law, until the Closing Date Shareholder shall cause
Company to confer on a regular and reasonable basis with one or more
representatives of Purchaser to report on material operational matters and
the general status of ongoing operations.
(h) At all times from the date hereof until the Closing, each party
shall promptly notify the other in writing of the occurrence of any event
which it reasonably believes will or may result in a failure by such party
to satisfy the conditions specified in Section 5 and Section 6 hereof.
(i) SUPPLEMENTS TO DISCLOSURE SCHEDULE. Prior to the Closing, Shareholder
shall supplement or amend the Disclosure Schedule with respect to any event or
development which, if existing or occurring at or prior to the date of this
Agreement, would have been required to be set forth or described in the
Disclosure Schedule or which is necessary to correct any information in the
Disclosure Schedule or in any representation and warranty of Shareholder which
has been rendered inaccurate by reason of such event or development. For
purposes of determining the accuracy as of the date hereof of the
representations and warranties of Shareholder contained in Section 2 hereof in
order to determine the fulfillment of the conditions set forth in Section 5(a),
the Disclosure Schedule shall be deemed to exclude any information contained in
any supplement or amendment hereto delivered after the delivery of the
Disclosure Schedule.
(i) PUBLIC ANNOUNCEMENTS. Neither Shareholder nor Purchaser shall make
any public statements, including, without limitation, any press releases, with
respect to this Agreement and the transactions contemplated hereby, without the
prior written consent of the other party (which consent shall not be
unreasonably withheld) except as may be required by applicable Law; by the
rules, regulations or practices of the Securities and Exchange commission; or
the New York Stock Exchange; in connection with Purchaser notifying its (or an
affiliates) shareholders of this Agreement or the transactions contemplated
hereby; or in connection with Purchaser obtaining financing in connection with
the transactions contemplated hereby. If a public statement is required to be
made by Law, the parties shall consult with each other, to the extent reasonably
practicable in advance as to the contents and timing thereof.
(j) TRANSACTIONAL TAX UNDERTAKINGS.
(i) The parties hereto shall cooperate to make any necessary
filings with state and local taxing authorities and to furnish any required
supplemental information to any state and local tax liabilities resulting
from the CONSUMMATION of the transactions contemplated herein.
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(ii) In the event that any sales or use tax, or any tax in the
nature of a sales or use tax, or any transactional tax is payable or
assessed relative to the transactions contemplated herein, Shareholder and
Purchaser shall each bear one-half of all such taxes.
(k) ENVIRONMENTAL AUDIT. Purchaser has retained Residuals Management,
Inc. ("RMI") to conduct a Phase I environmental investigation relating to the
Real Property. Such Phase I environmental investigation will be in accordance
with industry standards. The cost of such Phase I environmental investigation
shall be paid by Purchaser. In the event the Phase I environmental assessment
identifies an area of concern, Purchaser shall be entitled to terminate this
Agreement unless Shareholder agrees in writing to address the item at
Shareholder's sole cost and expense.
(l) TITLE INSURANCE COMMITMENT. At least five (5) days prior to Closing,
the Shareholder, at its sole cost and expense, shall cause the Company to
furnish to Purchaser a title commitment (the "Title Commitment") from a company
to be selected by Purchaser, which company shall be acceptable to
Shareholder(the "Title Company"). The Title Commitment shall:
(i) show good and marketable title to all of the Real Property
currently owned or leased;
(ii) commit to ensure good and marketable title to such Real
Property;
(iii) contain an endorsement to delete, upon receipt of a
satisfactory survey, the standard exceptions.
The Title Commitment shall be accompanied by legible copies of all
documents referred to therein affecting title to such Real Property. If
Purchaser objects to any item not contained in the Title Commitment but included
in the final title insurance policy to be issued by Title Company, Shareholder
shall, at its sole cost and expense, cure such defects. Shareholder's
obligations to cure any such defect shall, if such methods are acceptable to
Purchaser as to any specific defect, include the obligation to obtain title
insurance protection for Purchaser against such defect and to pay any additional
premiums or costs which the Title Company charges for such protection. If each
of such defects has not been cured by Shareholder or waived by Purchaser prior
to the Closing Date, Purchaser may, at its sole option, be entitled to terminate
this Agreement or delay the Closing Date.
(m) PAYMENT OF FUNDS INTO ESCROW. No later than three (3) business days
after the execution of the Escrow Agreement, as hereinafter defined, by the
parties hereto, Purchaser shall deposit Seven Hundred Thousand Dollars
($700,000) in escrow with Norwest Bank ("Escrow Agent"). Such funds shall at
all time be
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subject to escrow agreement in the form of Exhibit 4(m) attached hereto (the
"Escrow Agreement"). At the Closing all funds held in escrow by the Escrow
Agent shall be used as partial payment of the Initial Purchase Price in
accordance with Section 1(b)(iv) herein. It is intended that the amount held in
escrow under this Section 4(m) will be adjusted after the Final Purchase Price
has been calculated to equal the amount of the Hold-Back. Any amount held in
escrow in excess of the Hold-Back shall be immediately distributed to Purchaser.
(n) ASSIGNMENT OF AIRCRAFT LEASES. Prior to the Closing Date, Shareholder
shall use its best efforts to obtain the consent of NationsBanc Leasing
Corporation for the assignment to Shareholder of the leases currently in effect
between the Company and NationsBanc Leasing Corporation. In addition,
Shareholder shall use its best efforts to obtain a release from NationsBanc
Leasing Corporation on behalf of Company from any liability or obligation the
Company may have with respect to such leases. Shareholder shall then cause
Company to assign to Shareholder all subleases of the aircraft subject to such
leases. After the Closing Date the Company shall, if requested by Shareholder,
act as Shareholder's servicing agent with respect to the collection of rent on
such subleases and shall be paid a mutually agreeable monthly service fee for
providing such service.
(o) CONTINUATION OF LIABILITY INSURANCE COVERAGE. Unless otherwise agreed
by the Shareholder and Purchaser pursuant to the negotiations described in this
Section, prior to the Closing Date, Purchaser, on behalf of the Company, shall
obtain liability insurance in the amount of $100,000,000 for a period of five
years after the Closing Date covering any acts or omissions of the Company prior
to the Closing Date. The premium for such insurance coverage shall be paid by
the Purchaser and shall result in a reduction of the Initial Purchase Price in
accordance with Section 1(b)(i) herein. At least three (3) days prior to the
Closing Date, Purchaser shall deliver to Shareholder a letter indicating the
full cost of obtaining such insurance coverage. After receiving such letter, if
Shareholder is able to secure such liability insurance for the Company at a
lower cost, Shareholder shall be entitled to do so. Purchaser acknowledges that
Shareholder contends that $100,000,000 of liability insurance for the pre-
Closing period is not necessary and is not justified by valid business
considerations. Between the date of this Agreement and Closing, Shareholder
will present evidence to Purchaser that a lesser amount of insurance is
appropriate. Purchaser agrees to negotiate with Shareholder regarding this
issue in good faith; provided, however, that if the parties are unable to agree,
then the amount of coverage shall be $1,000,000.
(p) APPRAISAL OF REAL PROPERTY. Purchaser will retain an appraiser
suitable to Shareholder to prepare an appraisal of the Real Property. Such
appraisal shall be done in accordance with
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industry standards and shall be in a form satisfactory to Purchaser. The cost
of such appraisal shall be borne by Purchaser.
(q) EMPLOYEE AND EMPLOYEE BENEFIT MATTERS.
(i) On the Closing Date, Shareholder shall pay to each of the
employees of Company employed on the Closing Date all accrued but unpaid
vacation pay. At least three (3) days prior to the Closing Date
Shareholder shall cause Company to deliver to Purchaser an accurate
accounting of the accrued but unpaid vacation pay as of the Closing Date
for all employees of the Company employed on the Closing Date. Shareholder
hereby certifies that the calculation provided to Purchaser hereunder will,
in all material respects, be accurate and complete. The payment by
Shareholder of such accrued vacation pay shall not increase the Net Book
Value of the Company.
(ii) Purchaser shall not be obligated to assume, continue, maintain or
make contributions to any Pension Plan, Welfare Plan or Compensation Plan,
or any other plan that comes within the definition of Section 3(3) of
ERISA, that is sponsored or maintained, or that in the past has been
sponsored or maintained, by the Shareholder or any of its Affiliated
Organizations. However, Purchaser shall promptly pay to Shareholder any
amounts due that are applicable to the participation of the Company's
employees in the above plans for the payroll period including the Closing
Date, such as payroll deductions, premiums, and Company contributions.
Purchaser shall make available to Shareholder any information reasonably
requested by Shareholder that is necessary for Shareholder to comply with
any reporting or disclosure requirement applicable to any of the above
plans. Purchaser shall allow Shareholder reasonable access to Company's
employees for any communications necessary with respect to the above plans.
(iii) To the extent applicable and required by law, the
Shareholder and any of its Affiliated Organizations shall provide any
notices to employees of the Company or any other persons, and shall take
any and all other action, in accordance with, or which shall be required
by, the Consolidated Budget Reconciliation Act of 1985, as amended
("COBRA"). The Shareholder and any of its Affiliated Organizations shall
be jointly and severally liable, and shall indemnify Purchaser, for any and
all violations of COBRA arising in connection with any qualifying event (as
defined in Code Section 4980B(f)(3) which occurs on or prior to Closing.
(iv) COBRA continuation coverage for all "covered employees" (as
defined in Code Section 4980B(f)(7) of the Company who, on or before the
Closing, experience a
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"qualifying event" as defined by Code Section 4980B(f)(3), shall be the
Shareholder's sole responsibility and will be provided COBRA continuation
coverage under the Shareholder's "group health plan" (as defined in Code
Section 4980B(g)(2)).
(v) Except as otherwise provided in this Agreement, the Welfare
Plans and other benefit arrangements maintained by the Shareholder or any
of its Affiliated Organizations prior to Closing shall be responsible for
providing benefits in accordance with their terms (determined as of the
Closing) with respect to claims incurred at or before the Closing. For the
purposes of this Section, a claim is deemed to have been incurred as set
forth in the applicable plan documents.
(vi) With respect to any disability benefits, the Shareholder's
Welfare Plans that provide long term disability benefits shall be
responsible for payment of any and all benefits (regardless of whether
payment is required to be made before or after the Closing) for: (a) any
individual who is in receipt of such benefits as of the Closing, (b) any
individual who becomes disabled prior to the Closing and who remains
disabled for the length of any qualifying disability period; and (c) any
individual described in (a) and (b) above (i) whose disability ceases after
the Closing and (ii) whose disability (i.e., the disability referred to in
clause (i) above) reoccurs. Nothing in this paragraph shall cause the
Shareholder or its Welfare Plans to provide any benefit not otherwise due
and payable under the terms of such Welfare Plans determined as of the
Closing.
(vii) Notwithstanding anything contained herein, Purchaser shall
not be obligated to provide retiree medical welfare benefits to any
employee of the Company or any of its Affiliated Organizations. To the
extent that the Shareholder has an obligation to provide retiree medical
welfare benefits, all retiree medical benefits provided at any time by the
Company or the Shareholder or any of their Affiliated Organizations,
including without limitation such benefits provided under the Company's
retiree medical plan, shall be the sole responsibility of the Shareholder.
(r) ASSIGNMENT OF AIRPORT LEASES. Prior to the Closing Date, Shareholder
shall use its best efforts to obtain the consent of the landlord to assign
Shareholder's interest in each of the leases to which it is a party at the
Boise, Idaho airport to Company. Such consent and assignment shall include a
statement from the landlord that Shareholder is not in default under any of the
terms of such leases.
(s) ASSIGNMENT OF TWO-WAY RADIO LICENSES. Prior to the Closing Date,
Shareholder shall use its best efforts to either, (i) to the extent permitted,
assign each of the two-way radio
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licenses currently in Shareholder's name to Company, or (ii) obtain new two-way
radio license permits in the name of Company.
(t) CONSENT OF LENDERS. The Seller will obtain an estoppel certificate in
form and substance satisfactory to Purchaser from any and all entities ("Lender"
whether one or more) holding a lien or liens encumbering the Shares or any of
the assets of the Company in which Lender shall certify the following:
(1) Lender has been fully apprised of the terms of the transaction contemplated
by this Agreement and has obtained any and all information it has requested
concerning the value of the Company and the consideration to be paid for the
Shares; (2) Lender consents to the transaction contemplated herein; and
(3) Lender shall not commence any action or otherwise seek to avoid, rescind,
unwind or otherwise disturb the transaction after the Closing. In addition,
Lender shall release any such lien or liens encumbering the shares or any of the
assets of the Company.
SECTION 5
5. CONDITIONS TO OBLIGATIONS OF PURCHASER.
Notwithstanding any other provision of this Agreement to the contrary, the
obligations of Purchaser to effect the transactions contemplated herein shall be
subject to the satisfaction at or prior to the Closing of each of the following
conditions:
(a) REPRESENTATIONS AND WARRANTIES TRUE. The representations and
warranties of Shareholder contained in this Agreement, including without
limitation in the Disclosure Schedule initially delivered to Purchaser as
Exhibit 2 and the Schedules attached hereto (and not including any changes or
additions delivered to Purchaser pursuant to Section 4(h)), shall be in all
material respects true, complete and accurate as of the date when made and at
and as of the Closing as though such representations and warranties were made at
and as of such time, except for changes specifically permitted or contemplated
by this Agreement, and except insofar as the representations and warranties
relate expressly and solely to a particular date or period, in which case they
shall be true and correct in all material respects at the Closing with respect
to such date or period.
(b) PERFORMANCE. Shareholder and Company shall have performed and complied
in all material respects with all agreements, covenants, obligations and
conditions required by this Agreement to be performed or complied with by
Shareholder and Company on or prior to the Closing.
(c) ADVERSE CHANGES. No change since the date of the Latest Balance
Sheet shall have occurred in the businesses of the Company or the financial
condition of the Shareholder that would have a material adverse effect on the
Company taken as a whole, or upon
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Purchaser's rights and remedies under this Agreement.
(d) NO PROCEEDING OR LITIGATION. No suit, action, allegation, or other
proceeding by any Authority or other person or entity shall have been instituted
or threatened which questions the validity or legality of the transactions
contemplated hereby or which, if successfully asserted, would individually or in
the aggregate, otherwise have a material adverse effect on the conduct of the
businesses of the Company.
(e) OPINION OF SHAREHOLDER'S COUNSEL. Purchaser shall have received an
opinion of Shareholder's counsel, Elam & Burke, P.A., dated the Closing Date,
substantially in the form and substance set forth as Exhibit 5(e) hereto.
(f) LEGISLATION. No Law shall have been enacted which prohibits,
restricts or delays the consummation of the transactions contemplated hereby or
any of the conditions to the consummation of such transaction.
(g) ACCEPTANCE BY COUNSEL TO PURCHASER. The form and substance of all
legal matters contemplated hereby and of all papers delivered hereunder shall be
reasonably acceptable to Oppenheimer Wolff & Donnelly, counsel to Purchaser.
(h) CERTIFICATES. Purchaser shall have received such certificates of the
Shareholder, in a form and substance reasonably satisfactory to Purchaser, dated
the Closing Date, to evidence compliance with the conditions set forth in this
Section 5 and such other matters as may be reasonably requested by Purchaser.
(i) DUE DILIGENCE. Purchaser shall have received all information
reasonably requested by it pursuant to Section 4(d).
(j) TITLE COMMITMENTS. Shareholder shall have obtained and delivered the
Title Commitments in a form and substance satisfactory to Purchaser.
(k) RESIGNATION OF OFFICERS AND DIRECTORS. Shareholder shall deliver to
Purchaser the written resignation of each of the officers and directors of the
Company dated as of the Closing Date.
(l) DELIVERY OF SHARE CERTIFICATES. Shareholder shall have delivered to
Purchaser share certificates representing all of the Shares, endorsed by
Shareholder in blank, or with stock transfer power executed by each Shareholder
in blank attached.
(m) CONSENT OF NATIONSBANC LEASING CORPORATION. Shareholder shall have
obtained and delivered to Purchaser the written consent and release of
NationsBanc Leasing Corporation as required by Section 4(n) herein.
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(n) SECURING OF LIABILITY INSURANCE COVERAGE. Purchaser shall have
obtained the additional liability insurance coverage naming Company as an
additional insured in accordance with Section 4(o) herein.
(o) ASSIGNMENT OF AIRPORT LEASES. Shareholder shall have obtained and
delivered to Purchaser the written consent of the Landlord with respect to the
Airport leases as required by Section 4(r).
(p) NO BANKRUPTCY. No bankruptcy, reorganization, debt arrangement or
other case or proceeding under any bankruptcy or insolvency law, including but
not limited to a proceeding under Title 11 of the United States Code, or any
dissolution or liquidation proceeding shall have been commenced by or against
Shareholder or the Company.
(q) CONSENT OF LENDER. Shareholder shall have obtained from Lender and
delivered to Purchaser the estoppel certificate as required by Section 4(u)
herein.
SECTION 6
6. CONDITIONS TO OBLIGATIONS OF SHAREHOLDER.
Notwithstanding anything in this Agreement to the contrary, the obligation
of Shareholder to effect the transactions contemplated herein shall be subject
to the satisfaction at or prior to the Closing of each of the following
conditions:
(a) REPRESENTATIONS AND WARRANTIES TRUE. The representations and
warranties of Purchaser contained in this Agreement shall be in all material
respects true, complete and accurate as of the date when made and at and as of
the Closing, as though such representations and warranties were made at and as
of such time, except for changes permitted or contemplated in this Agreement,
and except insofar as the representations and warranties relate expressly and
solely to a particular date or period, in which case they shall be true and
correct in all material respects at the Closing with respect to such date or
period.
(b) PERFORMANCE. Purchaser shall have performed and complied in all
material respects with all agreements, covenants, obligations and conditions
required by this Agreement to be performed or complied with by Purchaser at or
prior to the closing.
(c) NO PROCEEDING OR LITIGATION. No suit, action, investigation, inquiry
or other proceeding by any Authority or other person or entity shall have been
instituted or threatened which questions the validity or legality of the
transactions contemplated hereby.
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(d) CERTIFICATES. Purchaser shall have furnished Shareholder with such
certificates of Purchaser's officers, in a form and substance reasonably
acceptable to Shareholder, dated the Closing Date, to evidence compliance with
the conditions set forth in this Section 6 and such other matters as may be
reasonably requested by Shareholder.
(e) ACCEPTANCE BY COUNSEL. The form and substance of all legal matters
contemplated hereby and of all papers delivered hereunder shall be reasonably
acceptable to Elam & Burke, P.A. counsel to Shareholder.
(f) CERTAIN APPROVALS. The transactions contemplated herein shall have
been approved by Shareholder's board of directors and the committee of banks
overseeing Shareholder's current activities and transactions.
SECTION 7
7. TERMINATION AND ABANDONMENT.
(a) METHODS OF TERMINATION. This Agreement may be terminated and the
transactions contemplated herein may be abandoned prior to Closing:
(i) By mutual written consent of Purchaser and Shareholder;
(ii) By Purchaser or Shareholder if the Closing shall not have
occurred on or before June 30, 1995, or as further extended by mutual
consent of the Purchaser and Shareholder;
(iii) By Purchaser, prior to June 16, 1995 , if its due diligence
investigation discloses a risk which, in Purchaser's sole and absolute
discretion, is unacceptable to Purchaser.
(iv) By Purchaser, in the event that the consummation of the
transaction contemplated is, or becomes, subject to the approval of any
court or other authority; and
(v) By Purchaser, in the event that a bankruptcy,
reorganization, debt arrangement or other case proceeding under any
bankruptcy or insolvency law, including but not limited to a proceeding
under Title 11 of the United States Code, or any dissolution or liquidation
proceeding shall have been commenced by or against Shareholder or the
Company.
(b) PROCEDURE UPON TERMINATION. In the event of termination and
abandonment pursuant to Section 7(a), written notice thereof shall forthwith be
given to the other party or parties, and the
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provisions of this Agreement (except to the extent provided in Section 9(a))
shall terminate, and the transactions contemplated herein shall be abandoned,
without further action by any party hereto. If this Agreement is terminated
as provided herein:
(i) each party will redeliver all documents, work papers and
other material of any other party (and all new documents and copies
thereof created containing confidential information about the other party)
relating to the transactions contemplated herein, whether so obtained
before or after the execution hereof, to the party furnishing the same;
(ii) the confidentiality obligations of Section 4(e) shall
continue to be applicable; and
(iii) except as provided in this subsection, no party shall have
any liability for a breach of any representation, warranty, agreement,
covenant or other provision of this Agreement, unless such breach was due
to a willful or bad faith action or omission of such party or any
representative, agent, employee or independent contractor thereof.
SECTION 8
8. SURVIVAL AND INDEMNIFICATION.
(a) SURVIVAL. The representations and warranties of each of the parties
hereto shall survive the Closing for a period of twelve (12) months thereafter
except:
(i) the representations and warranties of Shareholder contained
in Section 2(p) with respect to tax matters (including returns or reports
due under ERISA) shall survive until the expiration of the applicable
statutory period of limitation;
(ii) the representations and warranties of Shareholder contained
in Section 2(bb) (relating to environmental matters) shall survive for a
period equal to the expiration of all applicable statutory limitation
periods;
(iii) the representations and warranties of Shareholder contained
in Section 2(r) relating to benefit plans) shall survive until the
expiration of all applicable statutory limitation periods;
(iv) the representations and warranties contained in Section
2(dd) with respect to Shareholder's power and authority to transfer the
shares shall survive until the expiration of the applicable statutory
limitation periods (if any); and
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(v) in the case of fraud, the representations and warranties
shall survive for a period of six months after the fraud is discovered by
Purchaser.
Upon the expiration of the applicable period, Shareholder shall have no
liability under the indemnification provisions of this Agreement or otherwise
unless Purchaser gives written notice to Shareholder of its claim for any such
liability in accordance with the indemnification provisions of this Agreement.
(b) INDEMNIFICATION BY SHAREHOLDER.
(i) In addition to indemnification contained in Section 9
(relating to tax matters), Shareholder agrees to indemnify and hold
harmless Purchaser and the Company from and against any and all loss,
liability or damage suffered or incurred by it (or them) by reason of:
(A) Any untrue representation of, or breach of warranty by,
Shareholder in this Agreement (including all exhibits and schedules);
(B) Any nonfulfillment of any covenant, agreement or undertaking
of Shareholder or Company in this Agreement which by its terms is to
remain in effect after the Closing and has not been specifically
waived in writing at the Closing by the party or parties hereto
entitled to the benefits thereof;
(C) Any liability of the Company not disclosed on the Closing
Date Balance Sheet that results within twelve (12) months from the
Closing Date from an act or omission of the Company prior to the
Closing Date;
(D) Any liability arising out of or related to the events,
circumstances or conditions described in Section 2(bb) to the
Disclosure Schedule; or any liability arising out of or related to any
pollution or threat to human health or safety or the environment or
violation of any Environmental and Occupational Safety and Health Law
that is related in any way to the Company's or any previous owner's or
operator's management, use, control, ownership or operation of, or the
Properties or the Company's business prior to the Closing Date,
including all on-site and off-site activities involving
Environmentally Regulated Materials, whether or not the pollution or
threat to human health or safety or the environment or violation of
any Environmental and Occupational Safety and Health Laws is described
in the Disclosure Schedule; provided, however, that in the event the
Phase I environmental assessment described in Section 4(k) identifies
any facts which might give rise to a
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claim by Purchaser under this Section, Shareholder shall be entitled
to terminate this Agreement before (but not after) Closing.
(E) Any liability of the Company relating to its agreement with
NationsBanc Leasing Corporation involving the lease of aircraft for
any period prior to the Closing Date; and
(F) Any liability of the Company relating to or arising out of
the litigation or potential litigation disclosed on Disclosure
Schedule 2(o);
(G) Any liability of the Company relating to or arising out of
(i) the multi-employer pension plans (including, but not limited to,
withdrawal liability), or (ii) the Company's failure to distribute the
Summary Annual Reports relating to the Pension Plans or the Welfare
Benefits Plans, disclosed on Disclosure Schedule 2(r);
(H) Any liability of the Company for state or local income,
sales or use, or personal property taxes for periods prior to the
Closing Date; and
(I) Any and all costs and expenses, including without limitation
legal fees and expenses, in connection with enforcing the
indemnification rights of Purchaser pursuant to this Section 8.
(ii) In the event that Shareholder becomes liable to Purchaser under
the provisions of this Agreement or otherwise, Shareholder shall be
entitled to a credit or offset against any such liability of an amount
equal to (A) a "liability cushion" in the cumulative amount of $37,500;
and (B) to the extent that the total amount exceeds the liability cushion
of $37,500, the sum of (1) the value of any asset of the Company which
existed on the Closing Date but was not reflected as an asset on the
Closing Date Balance Sheet, (2) the amount, if any, by which the actual
amount of any liability shown on the Closing Date Balance Sheet is less
than the amount at which such liability or the reserve therefor is recorded
thereon; and (3) the value of any net tax benefit realized by Purchaser in
connection with the loss or damage suffered by Purchaser which forms the
basis of Shareholder's liability hereunder; provided, however that in the
event Shareholder claims a credit for any amounts under Sections
8(b)(ii)(B)(1),(2), or (3), the Shareholder shall bear the burden of proof
regarding such credits.
(iii) Except as provided below, Shareholder's indemnification
obligation under Sections 8 and 9 herein shall
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be limited to $5,350,000 (Five Million Three Hundred Fifty Thousand
Dollars). This limitation on Shareholder's indemnification obligation
shall not apply to Shareholder's indemnification obligation pursuant to
Section 8(b)(i)(D) (relating to environmental matters) nor to Shareholder's
indemnification obligation with respect to claims involving products
liability.
(iv) If Purchaser or the Company suffers any loss, liability,
damage or expense (a "Violation Based Expense") for which Purchaser is
entitled to indemnification under the provisions of this Agreement by
reason of the fact or allegation that Shareholder or the Company is or was
violating any statute, law, rule, regulation, or order, (collectively, a
"Legal Requirement"), then, notwithstanding anything to the contrary
contained in this Agreement, the Shareholder's liability under the
indemnification provisions of this Section 8 or otherwise shall be limited
as stated herein for any misrepresentation or warranty or covenant under
this Agreement arising out of or based upon any such actual or alleged
violation of a Legal Requirement (a "Violation Based Liability") if the
discovery of such violation or the incurring of the Violation Based Expense
resulting therefrom was initiated by Purchaser or the Company, or any of
its shareholders, directors, officers, employees, representatives or
agents, or their respective affiliates, and such discovery resulted from a
request for an inspection or investigation to determine whether a violation
of a Legal Requirement exists(a "Purchaser Initiated Violation Expense");
except that a Purchaser Initiated Violation Expense shall not include an
expense which was incurred because the Purchaser, the Company, or its
shareholders, directors, officers, employees, or agents were under legal
duty to report the existence of a violation of law to a governmental
agency or to correct such violation of law. In the event that Shareholder
becomes liable to Purchaser under the provisions of this Agreement because
of Purchaser Initiated Violation Expense then, notwithstanding any
contrary provision contained in this Agreement, the aggregate liability of
Shareholder with respect thereto (including without limitation its
liability for costs, expenses and attorneys' fees paid or incurred by
Purchaser or the Company in connection therewith) shall be limited to
reimbursing Purchaser an amount equal to 50% of the total claim , but such
reimbursement obligation of Shareholder shall be subject to all other
limitations and credits to which Seller is entitled pursuant to the
provisions contained in this Section 8 or elsewhere in this Agreement. The
parties hereto agree that any expense incurred as a result of the Phase I
environmental investigation pursuant to Section 4(k) herein shall not be a
Purchaser Initiated Violation Expense.
(c) INDEMNIFICATION BY PURCHASER. Purchaser agrees to
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indemnify Shareholder from and against any and all loss, liability or damage
suffered or incurred by them by reason of:
(i) any untrue representation of, or breach of warranty by
Purchaser in this Agreement (including all exhibits and schedules);
(ii) any nonfulfillment of any covenant, agreement or undertaking
of Purchaser in this Agreement which by its terms is to remain in affect
after the Closing and has not been specifically waived in writing at the
Closing by the party or parties hereto entitled to the benefits thereof;
and
(iii) any and all costs and expenses, including without limitation
legal fees and expenses, in connection with enforcing the indemnification
rights of Shareholder pursuant to this Section 8.
(d) CLAIMS FOR INDEMNIFICATION. The parties intend that all
indemnification claims hereunder be made as promptly as practicable by the party
seeking indemnification (the "Indemnified Party") and in any case within thirty
(30) days after the survival period of the applicable representation or
warranty. Whenever any claim shall arise for indemnification hereunder the
Indemnified Party shall promptly notify the other party ("Indemnifying Party")
of the claim in writing and, when known, the facts constituting the basis for
such claim and such notice shall include copies of all information and
documentation relating to the claim (including invoices and bills substantiating
the claim amount to the extent that they exist). The notice of claim to the
Indemnifying Party shall specify, if known, the amount or an estimate of the
amount of the liability arising therefrom. The Indemnified Party shall be
required to notify the Indemnifying Party in writing of any written claim within
thirty (30) days after the receipt of such notice; provided, that if such notice
is not given timely then the Indemnified Party shall not be foreclosed from
indemnification herein, but the amount of such indemnification shall be reduced
by the amount of damages suffered by the Indemnifying Party as a result of the
delay in providing notice. The Indemnified Party shall not settle or compromise
any claim by a third party for which it is entitled to indemnification hereunder
without the prior written consent of the Indemnifying Party, which shall not be
unreasonably withheld or delayed. If the Indemnifying Party admits to the
Indemnified Party and agrees in writing that it will be liable for the full
amount of the claim, the Indemnifying Party shall be entitled, at its own cost
and expense, to assume defense of any third party claim with counsel of its own
choosing and the Indemnified Party shall cooperate with the Indemnifying Party
and make reasonably available such information and facilities as may be
necessary for the contest of the claim. If the Indemnifying Party is of the
opinion that the Indemnified Party is not entitled to indemnification, or is not
entitled to indemnification in the
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amount claimed in such notice, it shall deliver, within twenty (20) business
days after the receipt of such notice, a written objection to such claim and
written specifications in reasonable detail of the aspects or details objected
to, and the grounds for such objection. If the Indemnifying Party shall file
timely written notice of objection to any claim for indemnification, the
Indemnified Party shall have no further claim against the Indemnifying Party
unless the Indemnified Party commences a legal action or proceeding against the
Indemnifying Party within six (6) months after the giving of such notice of
objection.
SECTION 9
9. TAXES.
(a) TAX INDEMNIFICATION.
(i) Notwithstanding any other provisions of this Agreement to
the contrary, Shareholder shall indemnify Purchaser and its affiliates
(including Company) and hold them harmless for, from and against all
liability for Taxes of Company (except as provided in the immediately
following paragraph) for all taxable periods ending on or before the
Closing Date and the portion of any taxable period ending on the Closing
Date that includes (but does not end on) the Closing Date (the "Pre-Closing
Tax Period"), including, without limitation, any liability for Taxes
imposed upon Company pursuant to Treasury Regulations Section 1.1502-6 (and
any comparable provisions under applicable state or local law) as a result
of being a member of the Affiliated Group or any combined or unitary group.
(ii) Purchaser shall indemnify or cause Company to indemnify
Shareholder and its affiliates and hold them harmless for, from and against
all liability for Taxes of Company for any taxable period ending after the
Closing Date (except to the extent such taxable period began before the
Closing Date, in which case Purchaser's indemnity will cover only that
portion of any such Taxes that are not for the Pre-Closing Tax Period).
(iii) In the case of any taxable period that includes (but does
not end on) the Closing Date (a "Straddle Period"), the Taxes of Company
for the Pre-Closing Tax Period shall be computed as if such taxable period
ended on and included the Closing Date.
(b) PROCEDURES RELATING TO INDEMNIFICATION OF TAX CLAIMS.
(i) If a claim for Taxes shall be made by any taxing authority
in writing, which, if successful, might result in an indemnity payment
pursuant to Section 9(a), the
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party seeking indemnification (the "Tax Indemnified Party") shall promptly
notify the other party (the "Tax Indemnifying Party") in writing of such
claim (a "Tax Claim"). If notice of a Tax Claim ("Tax Notice") is not
given to the Tax Indemnifying Party within a reasonably sufficient period
of time to allow the Tax Indemnifying Party effectively to contest such Tax
Claim, or in reasonable detail to apprise the Tax Indemnifying Party of the
nature of the Tax Claim, taking into account the facts and circumstances
with respect to such Tax Claim, the Tax Indemnifying Party shall not be
liable to the Tax Indemnified Party or any of its affiliates to the extent
that the Tax Indemnifying Party's position is actually prejudiced as a
result thereof.
(ii) With respect to any Tax Claim which might result in an
indemnity payment to Purchaser pursuant to Section 9(a) (other than a Tax
Claim relating to Taxes of Company for a Straddle Period), Shareholder or
its affiliates shall control all proceedings taken in connection with such
Tax Claim and, without limiting the foregoing, may in its sole discretion
and at its sole expense pursue or forego any and all administrative
appeals, proceedings, hearings and conferences with any taxing authority
with respect thereto, and may, in its sole discretion, either pay the Tax
claimed and sue for a refund where applicable law permits such refund suits
or contest such Tax Claim in any permissible manner. In no case shall
Purchaser or Company settle or otherwise compromise any Tax Claim referred
to in the immediately preceding sentence without Shareholder's prior
written consent, which consent shall not be unreasonably withheld.
Shareholder shall, however, promptly notify the Company in writing if, in
connection with any such inquiry, examination or proceeding, any
governmental authority proposes in writing to make any assessment or
adjustment with respect to any Tax item of the Company, which assessments
or adjustments could affect the Company following the Closing Date, and
shall not agree to such assessment or adjustment without the prior written
consent of the Company (which consent may not be unreasonably withheld).
Purchaser, Company and each of their affiliates shall cooperate with
Shareholder and its affiliates in contesting such Tax Claim, which
cooperation shall include, without limitation, the reasonable retention and
(upon Shareholder's request) the provision to Shareholder of records and
information which are reasonably relevant to such Tax Claim, at
Shareholder's sole cost and expense.
(iii) The contest of any Tax Claim that relates to Taxes of
Company for a Straddle Period and for taxable periods ending after the
Closing Date (to the extent such periods do not constitute Straddle
Periods) shall be controlled by Purchaser, and Shareholder agrees, and
agrees to cause its affiliates, to cooperate with Purchaser and its
affiliates in
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pursuing such contest. Shareholder shall be kept informed of any such
contest that relates to a Straddle Period. Purchaser shall not settle a
Tax Claim relating solely to Taxes of Company for a Straddle Period without
Shareholder's prior written consent, which consent shall not be
unreasonably withheld.
(c) RETURN FILINGS, REFUNDS AND CREDITS.
(i) Shareholder or its affiliates shall prepare or cause to be
prepared and file or cause to be filed on a timely basis (in each case, at
its own cost and expense and in a manner consistent with past practice) all
Returns with respect to Company for taxable periods ending on or prior to
the Closing Date. Shareholder shall provide Company with copies of such
Returns covering any taxable period beginning on January 1, 1995 and ending
on or prior to the Closing Date, on or prior to the due date thereof
(including any extensions thereto). Shareholder shall pay or cause to be
paid all Taxes shown on all such Returns.
(ii) Purchaser shall prepare or cause to be prepared and shall
file or cause to be filed on a timely basis all other Returns with respect
to Company. In connection therewith, Company shall be responsible for and
shall pay any Taxes for which Shareholder has agreed to indemnify Purchaser
pursuant to Section 9(a). Purchaser shall provide Shareholder with copies
of any such Returns covering the Taxes described in Section 9(a) at least
ten (10) days prior to the due date thereof (giving effect to any
extensions thereto), accompanied by a statement calculating Shareholder's
(and its affiliates) indemnification obligation pursuant to Section 9(a).
Shareholder shall pay to Purchaser the amount of Shareholder's
indemnification obligation at least two (2) business days prior to the due
date thereof (giving effect to any extensions thereto) unless the parties
are unable to agree on the amount of Shareholder's indemnification
obligation hereunder in which case such dispute shall be resolved by
independent accountants acceptable to both parties whose fees and expenses
shall be paid by Purchaser and Shareholder in proportion to each party's
respective liability for Taxes as determined by such accountants, and
Shareholder shall pay the amount determined by such accountants within two
days of such determination.
(iii) Shareholder and Purchaser shall reasonably cooperate, and
shall cause their respective affiliates, officers, employees, agents,
auditors and representatives reasonably to cooperate, in preparing and
filing all Returns (including amended returns and claims for refund),
including maintaining and making available to each other all records
necessary in connection with Taxes and in resolving all disputes and audits
with respect to all taxable periods
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relating to Taxes.
(iv) Any refunds or credits of Taxes of Company for any taxable
period ending on or before the Closing Date shall be for the account of
Shareholder. Any refunds or credits of Taxes of Company for any taxable
period beginning after the Closing Date shall be for the account of
Purchaser and shall be paid by Shareholder to Purchaser within ten (10)
days after Shareholder receives such refund. Any refunds or credits of
Taxes of Company for any Straddle Period shall be apportioned between
Shareholder and Purchaser on the basis of an "interim closing of the
books."
(d) TAX ELECTIONS. No new elections with respect to Taxes, or any changes
in current elections with respect to Taxes, affecting the Company shall be made
after the date of this Agreement without the prior written consent of Purchaser.
(e) CLEARANCE CERTIFICATES. As a condition precedent to the consummation
of the transactions contemplated by this Agreement, Company or Shareholder shall
provide Purchaser with any clearance certificates or similar documents) which
may be required by any state or local taxing authority in order to relieve
Purchaser of any obligation to withhold any portion of the Purchase Price.
(f) TERMINATION OF TAX SHARING AGREEMENTS. Shareholder and its affiliates
hereby agree and covenant that any obligation of Company pursuant to any Tax
Sharing Agreement shall be terminated on or before the Closing Date, with no
continuing liability of Company whatsoever, and no payments pursuant to any such
Tax Sharing Agreement shall be made after such termination.
(g) TAX CLAIMS RESULTING IN CHANGE OF TAX BASIS. Any Tax Claim which
results in a change to the amounts set forth on the Disclosure Schedule
described in Section 2(p)(v) for (A) the adjusted tax basis of the Company in
its assets and the related depreciation or amortization lives and methods
thereof; or (B) the amount of any net operating loss, net capital loss, unused
investment or other credit, unused foreign tax credit, or excess charitable
contributions allocable to the Company shall require an adjusting payment
between the Shareholder and the Purchaser to reflect the impact of the change on
the Company's tax liability following the Closing Date. Where the change
results in an increase in the Company's tax liability, Shareholder will pay the
amount of the increase to the Purchaser. Where the change results in a decrease
in the Company's tax liability, Purchaser will pay the amount of the decrease to
the Shareholder. Purchaser will notify Shareholder of taxes resulting from such
a change within ten (10) days of filing the tax return affected by the change.
Purchaser will supply Shareholder with calculations and sufficient documentation
to support the tax impact resulting from the change. Within ten (10) days of
receiving notice from Purchaser,
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Shareholder will notify Purchaser of Shareholder's agreement or disagreement
with the calculations. Where Shareholder agrees with the calculation, the party
owing the money shall make payment to the other party within ten (10) days.
Where the parties are unable to agree on the calculations, the dispute shall be
resolved by independent accountants acceptable to both parties. Payment shall
be made within two (2) days following the determination by the independent
accountant. With respect to any tax year, the provisions of this Section 9(g)
shall apply if, and only if, the aggregate adjustments for such tax year would
result in a net payment between the Shareholder and the Purchaser in an amount
equal to or greater than the sum of $25,000.
SECTION 10
10. MISCELLANEOUS PROVISIONS.
(a) EXPENSES. Except as otherwise provided herein, each of the parties
hereto shall bear its own costs, fees and expenses in connection with the
negotiation, preparation, execution, delivery and performance of this Agreement
and the consummation of the transactions contemplated hereby, including without
limitation fees, commissions and expenses payable to brokers, finders,
investment bankers, consultants, exchange or transfer agents, attorneys,
accountants and other professionals, whether or not the transactions
contemplated herein is consummated; provided, however, that in the event the
transactions contemplated herein are not consummated for any reason, Shareholder
shall reimburse Purchaser for Purchaser's expenses in obtaining the Phase I
environmental assessment, the appraisal, and a structural audit, not to exceed
Ten Thousand Dollars ($10,000).
(b) AMENDMENT AND MODIFICATION. Subject to applicable Law, this Agreement
may be amended or modified by the parties hereto at any time prior to the
Closing with respect to any of the terms contained herein; PROVIDED, HOWEVER,
that all such amendments and modifications must be in writing duly executed by
all of the parties hereto.
(c) WAIVER OF COMPLIANCE; CONSENTS. Any failure of a party to comply with
any obligation, covenant, agreement or condition herein may be expressly waived
in writing by the party entitled hereby to such compliance, but such waiver or
failure to insist upon strict compliance with such obligation, covenant,
agreement or condition shall not operate as a waiver of, or estoppel with
respect to, any subsequent or other failure. No single or partial exercise of
a right or remedy shall preclude any other or further exercise thereof or of any
other right or remedy hereunder. Whenever this Agreement requires or permits
the consent by or on behalf of a party, such consent shall be given in writing
in the same manner as for waivers of compliance.
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(d) NO THIRD PARTY BENEFICIARIES. Nothing in this Agreement shall entitle
any person or entity (other than a party hereto and his, her or its respective
successors and assigns permitted hereby) to any claim, cause of action, remedy
or right of any kind.
(e) NOTICES. All notices, requests, demands and other communications
required or permitted hereunder shall be made in writing and shall be deemed to
have been duly given and effective:
(i) on the date of delivery, if delivered personally;
(ii) on the earlier of the fifth day after mailing or the date of
the return receipt acknowledgement, if mailed, postage prepaid, by
certified or registered mail, return receipt requested; or
(iii) on the date of transmission, if sent by facsimile, telecopy,
telegraph, telex or other similar telegraphic communications equipment:
If to Shareholder:
To: Morrison Knudsen Corporation
One Morrison Knudsen Plaza
P.O. Box 73
Boise, Idaho 83729
Attn:
--------------------
Fax:
----------------
With a copy to:
Elam & Burke, P.A.
Key Financial Center
708 West Idaho
P.O. Box 1699
Boise, Idaho 83701
Attn: William J. Batt
Fax: (208) 384-5844
or to such other person or address as Majority Shareholders shall furnish to the
other parties hereto in writing in accordance with this subsection.
If to Purchaser:
To: Western Acquisition Corp.
2530 Xenium Lane North
Minneapolis, MN 55441
Attn: Al Hilde, Jr.
Fax: 612-553-1905
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With a copy to:
Oppenheimer Wolff & Donnelly
45 South Seventh Street
Suite 3400
Minneapolis, MN 55402
Attn: Kevin M. Klemz
Fax: 612-344-9457
or to such other person or address as Purchaser shall furnish to the other
parties hereto in writing in accordance with this subsection.
(f) ASSIGNMENT. This Agreement and all of the provisions hereof shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors and permitted assigns, but neither this Agreement nor any of the
rights, interests or obligations hereunder shall be assigned (whether
voluntarily, involuntarily, by operation of law or otherwise) by any of the
parties hereto without the prior written consent of the other parties, PROVIDED,
HOWEVER, that Purchaser or Shareholder may assign this Agreement, in whole or in
any part, and from time to time, to an affiliate, if such assigning party
remains bound hereby.
(g) GOVERNING LAW. This Agreement and the legal relations among the
parties hereto shall be governed by and construed in accordance with the
internal substantive laws of the State of Idaho (without regard to the laws of
conflict that might otherwise apply) as to all matters, including without
limitation matters of validity, construction, effect, performance and remedies.
(h) COUNTERPARTS. This Agreement may be executed simultaneously in one or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
(i) HEADINGS. The table of contents and the headings of the Sections and
subsections of this Agreement are inserted for convenience only and shall not
constitute a part hereof.
(j) ENTIRE AGREEMENT. The Disclosure Schedule and the exhibits,
schedules and other writings referred to in this Agreement are part of this
Agreement, together they embody the entire agreement and understanding of the
parties hereto in respect of the transactions contemplated by this Agreement and
together they are referred to as "this Agreement" or the "Agreement." This
Agreement supersedes all prior agreements and understandings between the parties
with respect to the transaction or transactions contemplated by this Agreement.
There are no restrictions, promises, warranties, agreements, covenants or
undertakings, other than those expressly set forth or referred to in this
Agreement.
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Provisions of this Agreement shall be interpreted to be valid and enforceable
under applicable law to the extent that such interpretation does not materially
alter this Agreement; PROVIDED, HOWEVER, that if any such provision shall become
invalid or unenforceable under applicable law such provision shall be stricken
to the extent necessary and the remainder of such provisions and the remainder
of this Agreement shall continue in full force and effect.
(k) INJUNCTIVE RELIEF. It is expressly agreed among the parties hereto
that monetary damages would be inadequate to compensate a party hereto for any
breach by any other party of its covenants and agreements in Sections 4(c) and
4(e) hereof. Accordingly, the parties agree and acknowledge that any such
violation or threatened violation will cause irreparable injury to the other and
that, in addition to any other remedies which may be available, such party shall
be entitled to injunctive relief against the threatened breach of Sections 4(c)
and 4(e) hereof or the continuation of any such breach without the necessity or
proving actual damages and may seek to specifically enforce the terms thereof.
(l) KNOWLEDGE OF SHAREHOLDER. Where any representation or warranty
contained in this Agreement is expressly qualified by reference to the knowledge
of Shareholder, such term shall include the actual present knowledge of officers
or other managing employees of either Shareholder or the Company (including
without limitation the on-site general manager, if any) of the Company.
(m) ORDINARY COURSE OF BUSINESS. The phrase "ordinary course of business"
when used in this Agreement shall mean the ordinary course of business
consistent with past custom and practice (including with respect to quantity and
frequency).
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
WESTERN ACQUISITION CORP.
By /s/ Al Hilde, Jr.
----------------------------
Its CEO
---------------------------
MORRISON KNUDSEN CORPORATION
By /s/ Brent D. Brandon
----------------------------
Its Vice President
---------------------------
55
<PAGE>
EXHIBITS
The registrant agrees to provide the Securities and Exchange
Commission, upon request, with copies of the Exhibits and Schedules
hereto.
<PAGE>
EXHIBIT 10.31
MORRISON KNUDSEN CORPORATION
DEFERRED COMPENSATION PLAN FOR NON-EMPLOYEE DIRECTORS
EFFECTIVE NOVEMBER 7, 1980
RESTATED AS OF APRIL 19, 1995 TO INCLUDE AMENDMENTS 1-5
<PAGE>
MORRISON KNUDSEN CORPORATION
NON-EMPLOYEE DIRECTORS DEFERRED COMPENSATION PLAN
TABLE OF CONTENTS
Article 1 - Establishment of Plan. . . . . . . . . . . . . . . . . . . . . . 1
Article 2 - Effective Date . . . . . . . . . . . . . . . . . . . . . . . . . 1
Article 3 - Election to Participate in the Plan. . . . . . . . . . . . . . . 1
Article 4 - Establishment of Deferred Compensation Accounts. . . . . . . . . 1
Article 5 - Allocations to Deferred Compensation Accounts. . . . . . . . . . 2
Article 6 - Method of Participation. . . . . . . . . . . . . . . . . . . . . 2
Article 7 - Stock Election . . . . . . . . . . . . . . . . . . . . . . . . . 2
Article 8 - Cash Election. . . . . . . . . . . . . . . . . . . . . . . . . . 4
Article 9 - Designation of Beneficiaries . . . . . . . . . . . . . . . . . . 5
Article 10 - Participant's Rights Unsecured. . . . . . . . . . . . . . . . . 5
Article 11 - Non-Alienation of Benefits. . . . . . . . . . . . . . . . . . . 5
Article 12 - Amendment or Termination of Plan. . . . . . . . . . . . . . . . 5
<PAGE>
MORRISON KNUDSEN CORPORATION
NON-EMPLOYEE DIRECTORS DEFERRED COMPENSATION PLAN
(Restated as of April 19, 1995)
ARTICLE 1 - ESTABLISHMENT OF PLAN
There is hereby established for the benefit of the non-employee directors
of Morrison Knudsen Corporation ("Company") an unfunded plan of voluntary
deferred compensation to be known as the "Non-Employee Directors Deferred
Compensation Plan" (the "Plan").
ARTICLE 2 - EFFECTIVE DATE
The Plan shall become effective on November 7, 1980.
ARTICLE 3 - ELECTION TO PARTICIPATE IN THE PLAN
(A) A non-employee director of the Company may elect to defer all or a
specified part of his or her retainer or meeting attendance fee ("Compensation")
otherwise payable to him or her during a calendar year in accordance with the
further provisions hereof. The term "participant" as used herein refers to any
non-employee director who shall have made such an election.
(B) In order to participate in the Plan during any single calendar year,
then on or before December 31 of the preceding calendar year, a non-employee
director must file with the Controller of the Company ("Controller") written
notice of his or her intention to participate in the Plan.
Notwithstanding the foregoing, during 1995 only, a non-employee director
may file with the Controller, no later than March 30, 1995, written notice of
his or her intention to participate in the Plan by deferring all of his or her
Compensation into a stock unit account, effective for any Compensation earned
after the date of the filing of the election.
(C) Each election shall continue from year to year, unless specifically
limited, until terminated by a signed request in the same manner in which an
election is made. However, any such termination shall not become effective
until the end of the calendar year in which notice of termination is given.
ARTICLE 4 - ESTABLISHMENT OF DEFERRED COMPENSATION ACCOUNTS
There shall be established for each participant an account to be designated
as that participant's deferred compensation account.
-1-
<PAGE>
ARTICLE 5 - ALLOCATIONS TO DEFERRED COMPENSATION ACCOUNTS
There shall be allocated to each participant's deferred compensation
account, an amount equal to his or her compensation for that quarter which that
participant shall have elected to have deferred pursuant to Article 3(A) above.
ARTICLE 6 - METHOD OF PARTICIPATION
There are provided herein two (2) methods of participation in the Plan.
One method is to elect to have the deferred compensation credited to a
participant's deferred compensation account in common stock of the Company
("stock election"). The other method is to elect to have the deferred
compensation credited to a participant's deferred compensation account in cash
("cash election"). A participant may elect to place a percentage of deferred
compensation in each of the two methods of participation.
ARTICLE 7 - STOCK ELECTION
(A) STOCK UNITS AND STOCK UNIT ACCOUNTS. A participant may elect to have
all deferred compensation or such percentage as he or she may specify converted
into stock units. Such stock units shall be computed by dividing the deferred
compensation by the fair market value of the Company's common stock on the date
of the Board meeting to which the compensation is related. The fair market
value shall be the mean between the high and the low selling price on the New
York Stock Exchange on the Board meeting date or the preceding date if such
exchange is not open or no sales occurred. The number of stock units, so
determined, rounded to the nearest one-hundredth of a share, shall be credited
to a "stock unit account" to be established for the participant, and the
aggregate value thereof as of the valuation date shall be charged to the
participant's deferred compensation account.
(B) CASH DIVIDEND CREDITS. Additional stock units shall be credited to a
participant's stock unit account in amounts equal to the cash dividends (or the
fair market value of dividends paid in property other than dividends payable in
common stock of the Company) which the participant would have received had the
participant been the owner on the record dates for the payment of such dividends
of the number of shares of the Company's common stock equal to the number of
units in the participant's stock unit account.
(C) STOCK DIVIDEND CREDITS. Additional stock units shall be credited to a
participant's stock unit account of a number of units equal to the number of
shares of the Company's common stock, rounded to the nearest one-hundredth
share, which the participant would have received as stock dividends had he or
she been the owner on the record dates for the payments of such stock dividends
of the number of shares of the company's common stock equal to the number of
units credited to his or her stock unit account.
(D) RECAPITALIZATION. If, as a result of a recapitalization of the
Company (including a stock split), the Company's outstanding shares of common
stock shall be
-2-
<PAGE>
changed into a greater or smaller number of shares, the number of units then
credited to a participant's stock unit account shall be appropriately adjusted
on the same basis.
(E) DISTRIBUTION. The Company shall distribute to the participant the
number of full shares of the common stock of the company which shall equal the
total number of units accumulated in the participant's stock unit account as of
the close of the fiscal year in which the participant terminated as a director.
At the time the participant gives notice of his election to defer compensation,
he shall also specify whether the compensation deferred by such election shall
be distributed in one lump distribution or in annual installments of not less
than five (5) and not more than twenty (20). The installments shall be of as
nearly equal number of shares as practicable, adjusted to reflect any changes
pursuant to Article 7(B), 7(C) and 7(D) in the number of units remaining in the
participant's stock unit account. The lump distribution, or the first
installment, shall be distributed within sixty (60) days after the close of the
fiscal year in which the participant terminated as a director. The remaining
installments shall be distributed at annual intervals thereafter. Anything
herein to the contrary notwithstanding, the Company shall have the option, in
lieu of making such distribution in annual installments as set forth above, with
the participant's consent to distribute such stock or any remaining installments
thereof or the cash equivalent thereof, determined as provided above, in a
single distribution at any time following the close of the fiscal year in which
the participant terminated as a director. Distribution of stock made hereunder
may be made from shares of common stock held in the treasury and/or from shares
of authorized but previously unissued shares of common stock. Upon final
distribution, any remaining fractional shares of the Company's common stock
represented by the remaining stock units shall be distributed in cash.
(F) If a deferred distribution option selected by the participant provides
for a lump distribution to be made, or the first installment thereunder to be
distributed, before the date the participant subsequently ceases to be a member
of the Board of Directors of the Company, such deferred distribution option,
subject only to Article 9, shall be irrevocable. If a deferred distribution
option selected by the participant provides for a lump distribution to be made,
or the first installment thereunder to be distributed, on or after the date the
participant subsequently ceases to be a member of the Board of Directors of the
Company, such deferred distribution option may be revoked at anytime during a
period beginning 365 days prior to, and ending 90 days prior to, the date the
participant ceases to be a member of the Board of Directors. Such option may be
revoked by giving to the Controller written notice thereof accompanied by a
written statement specifying which of the other deferred distribution options
available under Article 7(E) above will apply in place of the revoked deferred
distribution option.
(G) The Controller shall keep a record of all sums which each participant
has elected to allocate to a stock unit account and dividends thereon. Within
sixty (60) days after the close of each calendar year, the Controller shall
furnish each participant who has participated in the Plan for at least one
calendar year, a statement of all stock units which have accrued to the stock
unit account of such participant as of December 31 of the preceding calendar
year.
-3-
<PAGE>
ARTICLE 8 - CASH ELECTION
(A) ACCRUAL OF INTEREST. A participant may elect to have all director
compensation or such percentage of director compensation as he or she may
specify allocated to a cash account. Interest on each participant's cash
account will be compounded on the last day of each calendar quarter based upon
the balance of each participant's cash account on that date at a rate of
interest equal to prime rate of Citibank, N.A. in effect at the beginning of
such quarter.
(B) ACCOUNTING. No fund or escrow deposit shall be established for any
deferred compensation payable pursuant to this Plan. However, the Controller
shall keep a record of all sums which each participant has elected to allocate
to a cash account and interest accrued thereon. Within sixty (60) days after
the close of each calendar year, the Controller shall furnish each participant
who has participated in the Plan for at least one calendar year, a statement of
all sums, including interest, which have accrued to the cash account of such
participant as of December 31 of the preceding calendar year.
(C) PAYMENT. Participants shall have the option of electing to receive
payment of their deferred compensation on an annual or a quarterly basis. At
the time the participant gives notice of his election to defer compensation, he
shall also specify whether the compensation deferred by such election shall be
distributed in one lump sum payment, or in annual or quarterly installments over
a period of years of not less than five (5), and not more than twenty (20).
Deferred compensation shall be paid to each participant in payments equal to the
total amount of deferred compensation (including interest accrued to such
participants cash account) divided by the number of years or quarters selected
by the participant. Payment shall commence on the last day of the calendar year
or quarter in which the participant terminated as a director, and on the last
day of each calendar year or quarter thereafter until all such deferred
compensation (including interest accrued thereon) has been paid in full.
(D) If a deferred payment option selected by the participant provides for
a lump-sum payment to be made, or the first installment thereunder to be paid,
before the date the participant subsequently ceases to be a member of the Board
of Directors of the Company, such deferred payment option, subject only to
Article 9, shall be irrevocable. If a deferred payment option selected by the
participant provides for lump-sum payment to be made, or the first installment
thereunder to be paid, on or after the date the participant subsequently ceases
to be a member of the Board of Directors of the Company, such deferred payment
option may be revoked at any time during a period beginning 365 days prior to,
and ending 90 days prior to, the date the participant ceases to be a member of
the Board of Directors. Such option may be revoked by giving to the Controller
written notice thereof accompanied by a written statement specifying which of
the other deferred payment options available under Article 8(C) above will apply
in place of the revoked deferred payment option.
-4-
<PAGE>
ARTICLE 9 - DESIGNATION OF BENEFICIARIES
(A) Each participant shall file with the Controller a notice in writing
designating one or more beneficiaries to whom payments otherwise due him or her
shall be made in the event of the participants death prior to receiving payment
of all deferred compensation hereunder.
(B) Payments or distributions of shares of the Company's common stock due
to beneficiaries under Article 9(A) shall be made in a lump sum or single
distribution.
ARTICLE 10 - PARTICIPANT'S RIGHTS UNSECURED
The right of any participant to receive distributions under this Plan shall
be an unsecured claim against the general assets of the Company. The Company
may, but shall not be obligated to, acquire shares of its outstanding common
stock from time to time in anticipation of its obligation to make distributions,
but no participant shall have any rights in or against any shares of stock so
acquired by the Company. Any such stock shall constitute general assets of the
Company and may be disposed of by the Company at such time and for such purposes
as it may deem appropriate.
ARTICLE 11 - NON-ALIENATION OF BENEFITS
No right or benefit under this Plan shall be subject to anticipation,
alienation, sale, assignment, pledge, encumbrance or change, and any attempt to
alienate, sell, assign, pledge, encumber or change the same shall be void. No
right or benefit hereunder shall in any manner be liable for or subject to the
debts, contracts, liabilities or torts of the person entitled to such right or
benefit.
ARTICLE 12 - AMENDMENT OR TERMINATION OF PLAN
The Board of Directors of the Company may amend or terminate this Plan at
any time; provided, however, any amendment or termination of this Plan shall not
affect the rights of participants or beneficiaries to distribution of stock in
accordance with Article 7, or to cash payment in accordance with Article 8, of
amounts accrued to such participant or beneficiaries at the time of such
amendment to termination.
-5-
<PAGE>
SCHEDULE TO EXHIBIT 10.34
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
Carmichael, Gilbert E. March 28, 1994
Channer, David A. February 9, 1995
Clark, William P. May 13, 1994
Cleary, James F. (Jr.) August 6, 1993
Fox, Lindsay E. February 28, 1992
Gorman, Edmund J. February 9, 1990
Grant, Stephen R. May 5, 1989
Hanks, Stephen G. February 9, 1990
Hemmeter, C. B. May 5, 1989
Howland, Mark E. February 8, 1994
Kealey, Thomas F. October 6, 1994
Lynch, Peter S. May 5, 1989
McCabe, Robert A. February 13, 1987
Miller, Robert S. (Jr.) April 1, 1995
Peden, Irene C. August 3, 1990
Roche, Gerard R. August 3, 1990
Rogers, John W. February 5, 1993
Sarsten, Gunnar E. October 10, 1990
Slavich, Denis M. March 8, 1995
Tinstman, Robert A. February 9, 1995
Ueberroth, Peter V. August 3, 1989
<PAGE>
SCHEDULE TO EXHIBIT 10.35
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
Sarsten, Gunnar E. October 10, 1990
Tinstman, Robert A. August 3, 1990
<PAGE>
SCHEDULE TO EXHIBIT 10.36
MORRISON KNUDSEN CORPORATION
SCHEDULE OF EMPLOYMENT AGREEMENTS
Name Date of Agreement
---- -----------------
Hanks, Stephen G. January 1, 1993
Kealey, Thomas F. July 11, 1994
Tinstman, Robert A. January 1, 1993
Zarges, Thomas H. January 1, 1994
<PAGE>
Exhibit 10.42
AGREEMENT
THIS AGREEMENT is made as of this 24th day of October 1994 between Morrison
Knudsen Corporation, a Delaware Corporation ("MK" or the "Company") and Stephen
R. Grant ("Employee").
R E C I T A L S
At the end of 1994, Employee will have been employed by MK for six years;
and he will have served as General Counsel and, most recently, as Senior Vice
President of the Company responsible for MK's operations in Australia and South
East Asia. In his various capacities with the Company, Employee has become
familiar with the operations of the Company in its domestic and international
markets, particularly as they relate to civil construction and the business of
McConnell Dowell Corporation ("MDC") of which Employee has acted as Chairman of
the Board since November 1993.
As of 31 December 1994, Employee will cease being a Senior Vice President
of the Company and his employment will switch from regular full time salaried
status to regular part time salaried status. Absent this Agreement, Employee's
employment would have ended 31 December 1994 for reasons other than cause.
As a regular part time employee of MK, and in accordance with the terms of
this Agreement, Employee shall serve as Chairman of the Board of MDC and, if MDC
is sold prior to the expiration of this Agreement, Employee shall assist MK in
such other matters as the parties mutually may agree upon. Employee agrees to
serve as the Chairman of MDC and to provide such assistance on the terms below.
NOW, THEREFORE, it is agreed:
1. TERM. The term of this Agreement shall commence on the day of its
execution and expire on the 31st day of December 1996, unless otherwise extended
by agreement of the parties.
2. SERVICES.
a) In the performance of the services hereunder, Employee shall report to
MK's Executive Vice President.
b) For the period prior to December 31, 1994, Employee's principal duty
will be to enhance the value of MK's interest in MDC by continuing to serve as
the Chairman of MDC; assisting in the resolution of outstanding claims and
litigation, including the
<PAGE>
disputes with MDC's term banks; working with MDC to establish independent
banking relationships which do not depend upon the financial support of MK; and
performing such other duties relating to MDC which may be assigned to him in
writing from time to time. In connection therewith, Employee shall prepare and
submit in advance a budget each year to MK's Executive Vice President for
approval.
c) For the period from January 1, 1995 to December 31, 1996, Employee's
principal duties will continue to be those described in subparagraph (b) ,
above, except that if MK should sell its interest in MDC prior to the expiration
of this Agreement, Employee's duties shall be such as may be mutually agreed
upon between Employee and MK (the "Services") .
3. TIME. Employee will continue to be employed on a "full time" basis
until 31 December 1994; and, thereafter, he will be employed on a "part time"
basis.
a) During the period from the date hereof until 31 December, 1994,
Employee will devote such time to the performance of the Services as is
consistent with his duties hereunder.
b) During the period January 1, 1995 - December 31, 1996, Employee will
be expected to perform approximately 500 hours of Services during each year of
this Agreement. Services which Employee may be asked to perform in excess of
500 hours per annum will be scheduled only with the consent of Employee.
c) The precise times and increments in which Employee shall perform the
Services may be established by MK in writing after consultation with Employee.
4. COMPENSATION. During the term of this Agreement, Employee shall be
compensated as follows:
a) For the period prior to 31 December 1994, Employee shall be paid his
existing salary of $325,000 per annum, plus such additional benefits and
bonuses for the year as are due or payable under the MK executive compensation
and benefit plans in which Employee currently participates.
b) For the first 500 hours of Services during each calendar year for the
period January 1, 1995 - December 31, 1996, Employee shall be paid the sum of
$140,000 per annum ("Base Compensation") payable in the normal course of MK's
payroll practices.
c) For each hour of Services performed in excess of 500 hours during any
calendar year commencing after January 1, 1995, Employee will be paid monthly in
arrears additional compensation calculated at the rate of $185/hour (the
"Additional Compensation") . Invoices for Additional Compensation shall be
submitted by Employee within 30 days following the performance of the Services
covered by them; and such invoices shall be paid by the Company within 30 days
of
<PAGE>
their submission.
d) In addition, (i) Employee will be reimbursed monthly for his normal
business expenses reasonably incurred in the performance of the Services,
including First Class transportation on international flights; (ii) he will be
provided with health, dental and insurance coverage comparable to that currently
provided to him under the benefit plans and practices offered by the Company to
its senior executives (including, basic life insurance of $325,000; travel
accident insurance of $350,000; and long term disability benefits of
$23,250/month), except that Employee's participation in the Supplemental
Executive Life Insurance program shall cease on 31 December 1994; and (iii) he
shall be provided with adequate office space, parking, and secretarial
assistance, in San Francisco and a computer and modem for a branch office in
Occidental.
e) Employee's existing stock option awards shall remain in effect and be
exercisable in accordance with their terms throughout the term of this
Agreement.
5. DEFERRED COMPENSATION.
a) Effective 1 January 1989, the Company entered into a Deferred Compensation
Agreement with Employee, as amended as of 15 July 1993 (the "Amended Deferred
Compensation Agreement") . The Parties agree that none of the benefits of that
agreement are waived by the execution of this Agreement and, except as otherwise
provided herein, the terms of the Amended Deferred Compensation Agreement shall
remain in full force and effect throughout the term hereof.
b) If this Agreement is terminated by the Company before 31 December 1996
for reasons other than Cause, Employee immediately shall be entitled to receive
such payments under the Amended Deferred Compensation Agreement as would be due
him if this Agreement had been so terminated on December 31, 1996. To reflect
their early receipt, such benefit payments shall be actuarialy reduced if they
commence prior to December 31, 1996. The reduction shall be accomplished using
the actuarial assumptions employed by Hewitt Associates contained in Exhibits A
and B.
c) If Employee so elects in writing prior to 31 December 1994, upon the
expiration of this Agreement on December 31, 1996, (or upon its earlier
termination by the Company for reasons other than Cause), in lieu of the
deferred compensation benefits which otherwise would be owing under the terms of
the Amended Deferred Compensation Agreement (including the benefit, if
applicable, that would be owing pursuant to the provisions of paragraph 5. b)
above) (the "Settlement Amount"), Company shall deposit the Settlement Amount to
Employee's John Hancock deferred compensation account.
(d) Hewitt Associates has calculated the deferred compensation benefits
Employee is entitled to receive if he elects early retirement, both as a monthly
benefit for life and as a lump
<PAGE>
sum payment. The parties agree that the calculations made by Hewitt Associates
are accurate and shall be used for purposes of establishing the amounts due
Employee under this paragraph 5. Copies of such calculations are attached as
Exhibits A and B. The parties acknowledge however, that the calculations set
forth in Exhibits A and B do not set forth all possible combinations of
retirement dates, monthly benefits and lump sum values. Nevertheless, when
calculating benefits involving combinations not included in Exhibits A and B,
the parties agree that the actuarial assumptions, data and methods used by
Hewitt Associates in Exhibits A and B, shall be used for such combinations.
6. RIGHTS UPON EARLY TERMINATION.
If, prior to the expiration of this Agreement on December 31, 1996, the
Agreement is terminated by the Company without Cause, within 30 days following
the date of notice of such termination, Employee shall be paid (a) an amount
equal to the sum of the monthly payments due under paragraph 4 of this Agreement
from the date of such notice until December 31, 1996; and (b) deferred
compensation in such form and in such amount as would be due to Employee in
accordance with the provisions of paragraph 5 of this Agreement.
7. NON-COMPETITION. During the term of this Agreement, Employee shall
not perform services for a person or entity which competes with any business in
which the Company is then engaged with respect to any matter as to which the
Company and such person or entity are then in direct competition without the
prior written consent of MK, which consent will not be unreasonably withheld.
8. NON-ASSIGNABILITY. Unless otherwise provided herein, the rights and
obligations of the parties hereunder may not be assigned to a third party
without the consent of the party whose rights are affected.
9. ENTIRE AGREEMENT; NO MODIFICATION. This Agreement, together with the
Amended Deferred Compensation Agreement, express the entire agreement of the
parties on the subjects covered hereunder; both such agreements shall be
construed as complementary and consistent with one another; and neither
agreement may be modified or amended except by a writing signed by the party to
be charged.
10. DEFINITION. As used herein, the term "Cause" shall have the same
meaning as in the amendments to the Company's Supplemental Executive Incentive
Plan, a copy of which is attached to Employee's Deferred Compensation Agreement.
Wherefore, the parties have executed this Agreement as of the date first
above written.
<PAGE>
ATTEST MORRISON KNUDSEN CORPORATION
/s/ David A. Channer By /s/ Stephen G. Hanks
- ------------------------------ ------------------------------
David A. Channer Stephen G. Hanks
EMPLOYEE
/s/ Stephen R. Grant
------------------------------
Stephen R. Grant
<PAGE>
Exhibit A
to Agreement between
Morrison Knudsen Corporation
and Stephen R. Grant
dated as of October 24, 1994
<PAGE>
HEWITT ASSOCIATES
October 13, 1994
PRIVATE AND CONFIDENTIAL
Mr. David A. Channer
Morrison Knudsen Corporation
Morrison Knudsen Plaza
720 Park Boulevard
Boise, ID 83729
Dear Dave:
Re: Deferred Compensation Agreement Pension Benefit Calculation for Stephen
Grant
This letter provides the pension calculation you requested for Mr. Grant. These
calculations are identical to the calculations in our October 11 letter except
we have used December 31, 1996 for the benefit commencement date and lump sum
calculation date. Thus, the benefits for 12/31/94 and 12/31/95 are based on
service earned through those dates, but assuming the monthly benefit won't start
until 12/31/96 (i.e., 1/1/97). The benefit for 12/31/2001 assumes benefits will
start 12/31/2001, but the lump sum value is calculated as of 12/31/96.
ESTIMATED DEFERRED COMPENSATION AGREEMENT PENSION BENEFITS
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
BENEFIT
COMMENCEMENT LUMP SUM VALUE
TERMINATION DATE DATE MONTHLY BENEFIT* AS OF 12/31/96
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
12/31/1994 12/31/1996 $ 5,270.82 $ 699,000
12/31/1995 12/31/1996 $ 6,206.10 $ 823,000
12/31/1996 12/31/1996 $ 7,138.71 $ 946,000
12/31/2001 12/31/2001 $ 16,717.89 $ 1,380,000
<FN>
- -------------------------------
*Payable as a five-year certain and life annuity.
The frozen MKRP benefit has been subtracted.
- --------------------------------------------------------------------------------
</TABLE>
The lump sum values are based on the same actuarial assumptions used for the
1993 year-end disclosure of the Deferred Compensation and Supplemental
Retirement Benefit Agreements, i.e., 7% interest and the 1983 Group Annuity
Mortality Table.
<PAGE>
HEWITT ASSOCIATES
Mr. David A. Channer
Page 2
October 13, 1994
The table below shows the details of the benefit calculation.
CALCULATION OF MONTHLY BENEFIT
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
12/31/94 12/31/95 12/31/96 12/31/2001
- -----------------------------------------------------------------------------------------------------
Benefit Commencement Date 12/31/96 12/31/96 12/31/96 12/31/2001
<S> <C> <C> <C> <C>
(1) Age at Benefit Commencement 57 57 57 62
(2) Years of Service at Termination 6 7 8 13
(3) Months of Service 72 84 96 156
(4) Highest Monthly Average
Compensation
($532,589.60 DIVIDED BY 12) $ 44,382.47 $ 44,382.47 $ 44,382.47 $ 44,382.47
(5) Monthly Age 65 Primary
Social Security Benefit $ 1,284.00 $ 1,333.00 $ 1,385.00 $ 1,733.00
(6) Total Morrison Knudsen
Provided Retirement Benefit
Payable at Age 65
[50% x (4) - 50% x (5)] x
(3) DIVIDED BY 192 $ 8,080.96 $ 9,417.07 $ 10,749.37 $ 17,326.35
(7) Early Retirement Reduction
Factor, as if Rule of 80
were Satisfied (6% Reduction
per Year from Age 62) 70% 70% 70% 100%
(8) Total Benefit at Early
Retirement (6) x (7) $ 5,656.67 $ 6,591.95 $ 7,524.56 $ 17,326.35
(9) Frozen Age 65 MKRP Benefit $ 742.02 $ 742.02 $ 742.02 $ 742.02
(10) MKRP Early Retirement
Reduction Factor (6%
Reduction Per Year From
Age 65) 52% 52% 52% 82%
(11) MKRP Benefit Payable at
Early Retirement (9) x (10) $ 385.85 $ 385.85 $ 385.85 $ 608.46
(12) Net Nonqualified Benefit
Payable at Early Retirement
Immediately After Termination)
(8) - (11) $ 5,270.82 $ 6,206.10 $ 7,138.71 $ 16,717.89
----------- ---------- ----------- -----------
----------- ---------- ----------- -----------
- -----------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
HEWITT ASSOCIATES
Mr. David A. Channer
Page 3
October 13, 1994
The following table shows the calculation of the high five-year average
compensation. For this calculation, 1989 through 1993 are assumed to be the
highest five years. For the December 31, 2001 retirement, 1989 through 1991
compensation cannot be included in the average, because they are more than ten
years before retirement. However, for purposes of calculating a benefit
estimate for December 31, 2001, we have assumed the final average compensation
will remain at $532,589.60, as you requested.
AVERAGE COMPENSATION
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------
AVERAGE OF
MOST RECENT HIGHEST FIVE YEAR
END OF YEAR FIVE YEARS AVERAGE OUT OF
YEAR AGE SERVICE COMPENSATION COMPENSATION LAST 10 YEARS
(1) (2) (3) (4) (5) (6)
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1989 50 1 $ 468,170.00
1990 51 2 $ 474,988.00
1991 52 3 $ 618,270.00
1992 53 4 $ 503,250.00
1993 54 5 $ 598,270.00 $532,589.60 $532,589.60
1994 55 6 $532,589.60
1995 56 7 $532,589.60
1996 57 8 $532,589.60
- --------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
HEWITT ASSOCIATES
Mr. David A. Channer
Page 4
October 13, 1994
Finally, the data and assumptions used in the calculation are as follows:
DATE OF BIRTH December 14, 1939
DATE OF HIRE January 1, 1989
FROZEN MONTHLY MKRP BENEFIT
IN 5-YEAR CERTAIN AND
LIFE NORMAL FORM
Basic $ 526.18
Excess 215.84
Prior Plan Offset (UPL Annuity) (0.00)
--------
Total $ 742.02
ASSUMED FUTURE COMPENSATION
No compensation past 1993 was used in the calculation.
ACTUARIAL ASSUMPTIONS FOR 7% interest and the 1983 Group Annuity
LUMP SUM VALUES Mortality Table
SOCIAL SECURITY ASSUMPTIONS
COLA's 3.5% Per Year
National Average Wage Increases 4.0% Per Year
<PAGE>
HEWITT ASSOCIATES
Mr. David A. Channer
Page 5
October 13, 1994
Please call if you have any questions.
Sincerely,
Hewitt Associates LLC
/s/ Steve
Steven P. Lindblad
SPL:sa
cc: Mr. Thomas M. Jarrett, Hewitt Associates
<PAGE>
Exhibit B
to Agreement between
Morrison Knudsen Corporation
and Stephen R. Grant
dated as of October 24, 1994
<PAGE>
HEWITT ASSOCIATES
October 11, 1994
PRIVATE AND CONFIDENTIAL
Mr. David A. Channer
Morrison Knudsen Corporation
Morrison Knudsen Plaza
720 Park Boulevard
Boise, ID 83729
Dear Dave:
Re: Deferred Compensation Agreement Pension Benefit Calculation for Stephen
Grant
This letter provides the pension calculation you requested for Mr. Grant. These
calculations are identical to those in our letters of October 10 except we have
shown all four retirement dates (1994, 1995, 1996, and 2001), and for the 1994
and 1995 retirements, we have returned to the use of the Rule of 80 early
retirement reduction factors.
ESTIMATED DEFERRED COMPENSATION AGREEMENT PENSION BENEFITS
<TABLE>
<CAPTION>
- ----------------------------------------------------------------
LUMP SUM VALUE
RETIREMENT DATE MONTHLY BENEFIT* AS OF 12/31/94
- ----------------------------------------------------------------
<S> <C> <C>
December 31, 1994 $ 4,390.15 $ 600,000
December 31, 1995 $ 5,685.59 $ 711,000
December 31, 1996 $ 7,138.71 $ 816,000
December 31, 2001 $ 16,717.89 $ 1,190,000
- ----------------------------------------------------------------
<FN>
*Payable as a five-year certain and life annuity.
The frozen MKRP benefit has been subtracted.
- ----------------------------------------------------------------
</TABLE>
The lump sum values are based on the same actuarial assumptions used for the
1993 year-end disclosure of the Deferred Compensation and Supplemental
Retirement Benefit Agreements, i.e., 7% interest and the 1983 Group Annuity
Mortality Table.
<PAGE>
HEWITT ASSOCIATES
Mr. David A. Channer
Page 2
October 11, 1994
The table below shows the details of the benefit calculation.
CALCULATION OF MONTHLY BENEFIT
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------
12/31/94 12/31/95 12/31/96 12/31/2001
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
(1) Retirement Age 55 56 57 62
(2) Years of Service 6 7 8 13
(3) Months of Service 72 84 96 156
(4) Highest Monthly Average
Compensation
($532,389.60 DIVIDED BY 12) $ 44,382.47 $ 44,382.47 $ 44,382.47 $ 44,382.47
(5) Monthly Age 65 Primary
Social Security Benefit $ 1,284.00 $ 1,333.00 $ 1,385.00 $ 1,733.00
(6) Total Morrison Knudsen
Provided Retirement Benefit
Payable at Age 65
[50% x (4) - 50% x (5)]
x (3) DIVIDED BY 192 $ 8,080.96 $ 9,417.07 $ 10,749.37 $ 17,326.35
(7) Early Retirement Reduction
Factor, as if Rule of 80
were Satisfied (6%
Reduction per Year from
Age 62) 58% 64% 70% 100%
(8) Total Benefit at Early
Retirement (6) x (7) $ 4,686.96 $ 6,026.92 $ 7,524.56 $ 17,326.35
(9) Frozen Age 65 MKRP Benefit $ 742.02 $ 742.02 $ 742.02 $ 742.02
(10) MKRP Early Retirement
Reduction Factor (6%
Reduction Per Year From
Age 65) 40% 46% 52% 82%
(11) MKRP Benefit Payable at
Early Retirement (9) x (10) $ 296.81 $ 341.33 $ 385.85 $ 608.46
(12) Net Nonqualified Benefit
Payable at Early Retirement
Immediately After Termination)
(8) - (11) $ 4,390.15 $ 5,685.59 $ 7,138.71 $ 16,717.89
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
- ----------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
HEWITT ASSOCIATES
Mr. David A. Channer
Page 3
October 11, 1994
The following table shows the calculation of the high five-year average
compensation. For this calculation, 1989 through 1993 are assumed to be the
highest five years. For the December 31, 2001 retirement, 1989 through 1991
compensation cannot be included in the average, because they are more than ten
years before retirement. However, for purposes of calculating a benefit
estimate for December 31, 2001, we have assumed the final average compensation
will remain at $532,589.60, as you requested.
AVERAGE COMPENSATION
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
AVERAGE OF
MOST RECENT HIGHEST FIVE YEAR
END OF YEAR FIVE YEARS AVERAGE OUT OF
YEAR AGE SERVICE COMPENSATION COMPENSATION LAST 10 YEARS
(1) (2) (3) (4) (5) (6)
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1989 50 1 $ 468,170.00
1990 51 2 $ 474,988.00
1991 52 3 $ 618,270.00
1992 53 4 $ 503,250.00
1993 54 5 $ 598,270.00 $532,589.60 $532,589.60
1994 55 6 $532,589.60
1995 56 7 $532,589.60
1996 57 8 $532,589.60
- --------------------------------------------------------------------------------
</TABLE>
<PAGE>
HEWITT ASSOCIATES
Mr. David A. Channer
Page 4
October 11, 1994
Finally, the data and assumptions used in the calculation are as follows:
<TABLE>
<CAPTION>
<S> <C>
DATE OF BIRTH December 14,1939
DATE OF HIRE January 1, 1989
FROZEN MONTHLY MKRP BENEFIT
IN 5-YEAR CERTAIN AND
LIFE NORMAL FORM
Basic $ 526.18
Excess 215.84
Prior Plan Offset (UPL Annuity) (0.00)
--------
Total $ 742.02
ASSUMED FUTURE COMPENSATION
No compensation past 1993 was used in the calculation.
ACTUARIAL ASSUMPTIONS FOR 7% interest and the 1983 Group Annuity
LUMP SUM VALUES Mortality Table
SOCIAL SECURITY ASSUMPTIONS
COLA's 3.5% Per Year
National Average Wage Increases 4.0% Per Year
</TABLE>
<PAGE>
EXHIBIT 10.43
MORRISON KNUDSEN CORPORATION
EXECUTIVE OFFICE
MORRISON KNUDSEN PLAZA
P. O. BOX 73/BOISE, IDAHO U.S.A. 83729
PHONE: (208)386-5000/TELEX:368439
April 1, 1995
Mr. Robert Stevens Miller, Jr.
23 Maury Mountain Lane
P.O. Box 4130
Sunriver, OR 97707-1130
RE: CHAIRMAN OF THE BOARD
Dear Steve:
On behalf of Morrison Knudsen Corporation (the "Company"), I am pleased to
invite you to join the Company's Board of Directors as Chairman, pursuant to the
terms and conditions set forth in this Agreement (the "Agreement").
1. POSITION AND SERVICES TO BE RENDERED. The Company hereby agrees to retain
your services as the Chairman of the Board of Directors effective April 1,
1995 (the "Effective Date"). Your position as chairman will be a non-
executive position with the Company. You accept such position and agree
that for the first six months you will devote substantially all of your
available working hours to the Company's interests, with the exact amount
of time being devoted to the Company's interests dependent upon the facts
and circumstances. Thereafter, the parties envision and agree that the
hours required to be devoted to the Company's interests will diminish and
ultimately result in service that is more in line with a typical board
member who serves as chairman. You will report to the Board of Directors
for as long as you continue in such position.
2. FEES. You will receive an annual fee of $180,000 commencing as of the
Effective Date. Your annual fee will be divided into monthly increments of
$15,000 each, less applicable taxes, if any. Such payment shall be made on
the first Monday of each month. After twelve (12) months your compensation
will be reviewed by the Executive Compensation & Nominating Committee of
the Company's Board of Directors and adjusted to a level that is more in
line with the typical non-executive chairman of a company similarly
situated to that of Morrison Knudsen Corporation.
3. STOCK OPTIONS. You will be granted options to purchase 250,000 shares of
the Company's common stock at a price per share equal to the closing price
on
<PAGE>
Mr. Miller
April 1, 1995
Page 2
March 31, 1995, the effective date of the grant. The option shall vest as
to 100,000 shares on April 1, 1996, an additional 100,000 shares on
April 1, 1997 and the final 50,000 shares on April 1, 1998. In keeping
with the provisions applicable to grants of stock options to other
directors of the Company: (i) if you should cease to be a non-employee
director for any reason except termination for cause, all vested options
then held shall be exercisable for three years and all unvested options
shall immediately terminate; and (ii) if you should cease to be a non-
employee director for cause, all vested options shall be exercisable for a
period of 30 days and all unvested options shall automatically terminate.
The options shall have a ten year life.
4. RESTRICTED STOCK. You will be granted 20,000 shares of restricted common
stock of the Company effective April 1, 1995. The restrictions on such
shares shall lapse in their entirety as of October 1, 1995.
5. TRAVEL AND OTHER EXPENSES. You will be reimbursed for your travel expenses
to and from Sunriver, OR and Boise, ID. Also, you will be reimbursed for
reasonable travel, food and lodging expenses that you incur in connection
with the Company's business pursuant to the Company's standard travel
policy. You will also be reimbursed for reasonable lodging expenses
incurred in renting an apartment in Boise, ID.
6. TERM. The term of this Agreement shall run from April 1, 1995 through
April 1, 1998. The term of the agreement may be extended by written
agreement of the parties at any time prior to the expiration thereof.
7. NONASSIGNMENT. The rights and duties of a party hereunder shall not be
assignable by that party; provided, however, that this Agreement shall be
binding upon and inure to the benefit of any successor of the Company, and
any such successor shall be deemed substituted for the Company under the
terms of this Agreement. The term successor as used herein shall include
any person, firm, corporation or other business entity which at any time,
by merger, purchase or otherwise, acquires all or substantially all of the
assets or business of the Company.
8. MERGER CLAUSE. With respect to the matters specified herein, this
Agreement contains the entire agreement between the parties and supersedes
all prior oral and written agreements, understandings and commitments
between the parties. This Agreement shall not affect the provisions of any
other compensation, retirement or other benefit programs of the Company to
which you are a party
<PAGE>
Mr. Miller
April 1, 1995
Page 3
or of which you are a beneficiary. No amendments to this Agreement may be
made except through a written document signed by both parties.
9. VALIDITY. In the event that any provision of this Agreement is held to be
invalid, void or unenforceable, the same shall not affect, in any respect
whatsoever, the validity of any other provision of the Agreement.
10. CONSTRUCTION. Paragraphs or other headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretations of this Agreement.
By accepting this position, you agree to the terms and conditions established
herein. To indicate your acceptance of this invitation, please sign the
facsimile copy of this Agreement and return it to me. An original will be
provided for your signature at a later date. If you have any questions, please
do not hesitate to contact me.
Very truly yours, AGREED AND ACCEPTED:
/s/ Robert Stevens Miller, Jr.
/s/ Stephen G. Hanks _______________________________
Robert Stevens Miller, Jr.
April 1, 1995
RAT/dac
cc: Robert A. McCabe
<PAGE>
EXHIBIT 10.44
MORRISON KNUDSEN CORPORATION
MORRISON KNUDSEN CORPORATION
P. O. BOX 73/BOISE, IDAHO U.S.A. 83729
PHONE: (208)386-6060/TELEX:368439
WILLIAM P. CLARK
ACTING CHAIRMAN
March 9, 1995
Mr. Denis Slavich
Flour Daniel, Inc.
3333 Michelson Drive
Irvine, CA 92730
RE: OFFER OF EMPLOYMENT
Dear Denis:
On behalf of Morrison Knudsen Corporation (the "Company"), I am pleased to offer
you employment pursuant to the terms and conditions set forth in this Agreement
(the "Agreement").
1. POSITION AND SERVICES TO BE RENDERED. The Company hereby agrees to employ
you as Executive Vice President and Chief Financial Officer, effective
April 9, 1995 (the "Effective Date"). You accept such employment and agree
to devote your full time and attention exclusively to rendering services to
the Company. You will report to the Acting Chairman of the Board of
Directors for as long as he continues in such position. Thereafter, you
will report to the Company's Chief Executive Officer.
2. SALARY. You will receive an annual base salary of $300,000 commencing as
of the Effective Date, payable in accordance with the Company's normal
payroll practice (i.e., every two weeks). Your position will be a regular
full-time position and you will be assigned a Grade Level of 23. The
Company will review your base salary annually to determine any increase.
3. ANNUAL CASH BONUS. You will be considered for an annual cash bonus at the
end of each calendar year as determined by the Executive Compensation &
Nominating Committee of the Board of Directors.
4. STOCK OPTIONS. You will be granted options to purchase 100,000 shares of
the Company's common stock under the Company's Stock Compensation Plan at a
price equal $8.00 per share--which was the per share closing price of the
Company's common stock as of March 8, 1995. The option shall vest 100%
<PAGE>
Denis M. Slavich
March 9, 1995
Page 2
immediately. Such option shall be subject to the terms and conditions of
the Stock Compensation Plan and such additional conditions as the Executive
Compensation & Nominating Committee may impose.
5. FRINGE BENEFITS. You will be entitled to the Company's standard relocation
assistance when you move from San Francisco to Boise, 401(k) Savings Plan,
ESOP, group medical and dental plan, and all other group plans and other
benefits that are normally offered to regular full-time salaried employees.
Prior to your move to Boise, you will receive two coach fare round trip
tickets per month from San Francisco to Boise, not to exceed four months
from the Effective Date. In addition, you shall be entitled to receive all
other, if any, perquisites and fringe benefits normally offered to
executives of the Company who are part of its senior management.
6. EXECUTIVE LIFE AND DISABILITY. In addition to the fringe benefits set
forth in paragraph 5 herein, during your employment, you will be provided
with supplemental benefits at no cost to you which shall result in the
following levels of coverage, inclusive of any coverage provided by basic
Company-sponsored benefits:
a. Pre-retirement (up to age 65) life insurance equal to three times
your annual base salary;
b. Post-retirement (age 65) life insurance equal to one times your annual
base salary as of the date of your retirement; and
c. Disability coverage from all Company-sponsored and government sources
equal to 60% of the sum of your base salary plus annual Executive
Incentive Plan bonus, less any offsets under the terms of such
disability programs.
7. RIGHTS UPON TERMINATION.
a. During the term of this Agreement, you may be terminated by the
Company only for Cause. For purposes of this Agreement, Cause shall
mean (i) your willful refusal to follow a lawful written order of the
Chief Executive Officer of the Company with respect to any material
aspect of the Company's business, (ii) your willful and continued
failure to perform your duties under this Agreement (except due to
your incapacity because of physical or mental illness) after a written
demand is delivered to you by
<PAGE>
Denis M. Slavich
March 9, 1995
Page 3
the Chief Executive Officer of the Company specifically identifying
the manner in which you have failed to perform your duties, (iii) your
willful engagement in conduct materially injurious to the Company, or
(iv) your conviction for any crime involving moral turpitude. For
purposes of clauses (i), (ii) and (iii) of this definition, no act or
failure to act on your part shall be deemed "willful" unless it was
done, or omitted to be done, not in good faith and without reasonable
belief that your act or failure to act was in the best interests of
the Company. In the event you are terminated for Cause prior to the
expiration of the term hereunder, no amounts shall be due and payable.
b. In the event of your death, total and permanent disability, retirement
or voluntary resignation during the term of this Agreement, the
Agreement shall terminate and you shall be entitled to be compensated
in accordance with the provisions of this Agreement through the date
of such termination, but shall not be entitled to receive any
compensation for the remainder of the term of the Agreement.
c. In the event your employment is terminated during the term of this
Agreement due to (i) reasons other than those identified in
subparagraphs 6 a. and b. above, or (ii) reasons constituting a
"Constructive Termination" (as defined in paragraph d. below), you
shall be entitled to receive your annual base salary for a period of
two years. You shall not be required to mitigate the amount of any
payment provided for in this Agreement by seeking employment or self-
employment nor to offset the amount of any payment provided for in
this agreement by amounts earned as a result of your employment or
self-employment during the period that you are entitled to such
payment. The severance payment due you under this paragraph 6. c.
shall be paid in either the normal course of the Company's payroll
practices or in a single lump sum, as determined by the Company in its
sole discretion.
d. For purposes of this Agreement, "Constructive Termination" shall have
the following meaning: Your voluntary termination of employment within
ninety (90) days following the occurrence of one or more of the
following events, unless such event is approved in writing by you in
advance of such event or thereafter:
<PAGE>
Denis M. Slavich
March 9, 1995
Page 2
(i) A failure by the Company to abide by any part of this Agreement
that is not remedied within ten (10) business days after you
notify the Company of such failure; or
(ii) A reduction in your title or responsibilities below that agreed
to in paragraph 1 herein.
8. TERM. The term of this Agreement shall run from March 8, 1995 (unless the
parties mutually agree to an earlier date) through March 7, 1999.
9. CONTINGENCIES. This employment offer must be contingent upon the following
contingencies:
a. Your passing of a drug screening test, pursuant to the Company's
Substance Abuse Prevention Program, and your continued compliance with
such program. After reporting to work, you will also be required to
complete an "Employment Certification" form that complies with the
passing of the Drug-Free Workplace Act of 1988.
b. Your compliance with the following laws:
- In accordance with Public Law 99-603, The Immigration and
Naturalization Act of 1986, this offer is made pending receipt of
verifiable documentation from you confirming your eligibility for
employment under the terms and conditions of this Act. Proof of U.S.
citizenship or adequate identification is required before any hire can
be processed. You must present acceptable documents for employment
eligibility verifications when you report for your first day of work.
- In accordance with Public Law 100-679, the Office of Federal
Procurement Policy Act Amendments of 1988, the Company is prohibited
for a period of two years from hiring former government officials or
employees (military or civilian) who participated personally and
substantially in the conduct of any Federal agency procurement.
Consequently, this offer is contingent upon receipt of information
from you that your employment with the Company will not result in a
violation of the Procurement Policy Act. You will be required to
complete an employee certification form verifying your prior
employment before your employment with the Company begins.
<PAGE>
Denis M. Slavich
March 9, 1995
Page 5
10. NONASSIGNMENT. The rights and duties of a party hereunder shall not be
assignable by that party; provided, however, that this Agreement shall be
binding upon and inure to the benefit of any successor of Company, and any
such successor shall be deemed substituted for Company under the terms of
this Agreement. The term successor as used herein shall include any
person, firm, corporation or other business entity which at any time, by
merger, purchase or otherwise, acquires all or substantially all of the
assets or business of Company.
11. MERGER CLAUSE. With respect to the matters specified herein, this
Agreement contains the entire agreement between the parties and supersedes
all prior oral and written agreements, understandings and commitments
between the parties. This Agreement shall not affect the provisions of any
other compensation, retirement or other benefit programs of Company to
which you a party or of which you are a beneficiary. No amendments to this
Agreement may be made except through a written document signed by both
parties.
12. VALIDITY. In the event that any provision of this Agreement is held to be
invalid, void or unenforceable, the same shall not affect, in any respect
whatsoever, the validity of any other provision of the Agreement.
13. CONSTRUCTION. Paragraphs or other headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretations of this Agreement.
14. RECONSIDERATION. In addition to the foregoing, as mentioned over the
telephone, once the Company is "through the rapids" I will recommend to the
Board of Directors that your title and compensation be revisited.
By accepting this employment offer, you agree to the terms and conditions
established herein. To indicate your acceptance of this offer, please sign the
facsimile copy of this Agreement and return it to me. An original will be
provided for your signature at a later date. If you have any questions, please
do not hesitate to contact me.
Very truly yours, AGREED AND ACCEPTED:
/s/ William P. Clark /s/ D. M. Slavich
_______________________________
William P. Clark Denis M. Slavich
March 9, 1995
WPC/dac
<PAGE>
Exhibit 21
MORRISON KNUDSEN CORPORATION
Subsidiaries of the Registrant
Consolidated, subsidiaries of the
registrant, Morrison Knudsen Corporation (Delaware)
and its consolidated subsidiaries.
STATE OR COUNTRY OF
INCORPORATION
-------------------
Atascosa Mining Co. Nevada
Black Construction Corporation Guam
Black Micro Corporation Northern Mariana Islands
Broadway Insurance Company Ltd. Bermuda
Centennial Engineering, Inc. Colorado
CF Systems Corporation Massachusetts
E.E. Black, Ltd. Hawaii
Ferguson MK River, Ltd. England
McConnell Dowell Corporation, Ltd. Australia
MK Engine Systems New York
MK-Ferguson of Idaho Company Idaho
MK Ferguson of Oak Ridge Company Tennessee
MK Rail Corporation Delaware
Morrison Knudsen Corporation Ohio
Morrison-Knudsen Financial Company, Inc. Nevada
Motor Coils Manufacturing Company Pennsylvania
National Projects, Inc. Nevada
Navasota Mining Company, Inc. Nevada
Northern Construction Company, Ltd. Canada
Power Parts Company Nevada
Western Aircraft, Inc. Nevada
The names of particular subsidiaries have been excluded because when considered
in the aggregate as a single subsidiary, as of December 31, 1994, they would not
constitute a significant subsidiary under Rule 1-02 of Regulation S-X.
<PAGE>
Exhibit 23
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in Registration Statements No.
2-48200 on Form S-1 and Nos. 33-32413, 33-32414, and 33-32415 on Form S-8 of our
report dated June 26, 1995 (which includes explanatory paragraphs relating to
(i) the outcome of certain litigation matters which cannot presently be
determined (ii) the substantial doubt about the Corporation's ability to
continue as a going concern and (iii) the emphasis of a matter concerning cost
estimates on certain transit car contracts) appearing in this Annual Report on
Form 10-K of Morrison Knudsen Corporation for the year ended December 31, 1994.
/s/ Deloitte & Touche, LLP
- ------------------------------------------
DELOITTE & TOUCHE, LLP
Boise, Idaho
June 26, 1995
<PAGE>
EXHIBIT 24
POWER OF ATTORNEY
KNOWN ALL MEN BY THESE PRESENTS, that the undersigned hereby constitutes
and appoints S. G. Hanks, T. F. Kealey and M. E. Howland, and each of them, his
true and lawful attorneys-in-fact and agents, with full power of substitution
and resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign on his behalf as a director or officer or both, as the case
may be, of Morrison Knudsen Corporation, a Delaware corporation, Form 10-K
Annual Report for year ended December 31, 1994, and any and all amendments
thereto, and to file the same, with all exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission, granting unto
said attorneys-in-fact and agents, and each of them, full power and authority to
do and perform each and every act and thing requisite and necessary to be done
in and about the premises, as fully to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that said attorneys-in-
fact and agents, or any of them, or their substitute or substitutes, may
lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Power of Attorney has been signed below on the 9th day of February, 1995.
/s/ John Arrillaga
______________________________________
John Arrillaga
Director
<PAGE>
POWER OF ATTORNEY
KNOWN ALL MEN BY THESE PRESENTS, that the undersigned hereby constitutes
and appoints S. G. Hanks, T. F. Kealey and M. E. Howland, and each of them, his
true and lawful attorneys-in-fact and agents, with full power of substitution
and resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign on his behalf as a director or officer or both, as the case
may be, of Morrison Knudsen Corporation, a Delaware corporation, Form 10-K
Annual Report for year ended December 31, 1994, and any and all amendments
thereto, and to file the same, with all exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission, granting unto
said attorneys-in-fact and agents, and each of them, full power and authority to
do and perform each and every act and thing requisite and necessary to be done
in and about the premises, as fully to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that said attorneys-in-
fact and agents, or any of them, or their substitute or substitutes, may
lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Power of Attorney has been signed below on the 9th day of February, 1995.
/s/ Lindsay E. Fox
______________________________________
Lindsay E. Fox
Director
<PAGE>
POWER OF ATTORNEY
KNOWN ALL MEN BY THESE PRESENTS, that the undersigned hereby constitutes
and appoints S. G. Hanks, T. F. Kealey and M. E. Howland, and each of them, his
true and lawful attorneys-in-fact and agents, with full power of substitution
and resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign on his behalf as a director or officer or both, as the case
may be, of Morrison Knudsen Corporation, a Delaware corporation, Form 10-K
Annual Report for year ended December 31, 1994, and any and all amendments
thereto, and to file the same, with all exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission, granting unto
said attorneys-in-fact and agents, and each of them, full power and authority to
do and perform each and every act and thing requisite and necessary to be done
in and about the premises, as fully to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that said attorneys-in-
fact and agents, or any of them, or their substitute or substitutes, may
lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Power of Attorney has been signed below on the 9th day of February, 1995.
/s/ Christopher B. Hemmeter
______________________________________
Christopher B. Hemmeter
Director
<PAGE>
POWER OF ATTORNEY
KNOWN ALL MEN BY THESE PRESENTS, that the undersigned hereby constitutes
and appoints S. G. Hanks, T. F. Kealey and M. E. Howland, and each of them, his
true and lawful attorneys-in-fact and agents, with full power of substitution
and resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign on his behalf as a director or officer or both, as the case
may be, of Morrison Knudsen Corporation, a Delaware corporation, Form 10-K
Annual Report for year ended December 31, 1994, and any and all amendments
thereto, and to file the same, with all exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission, granting unto
said attorneys-in-fact and agents, and each of them, full power and authority to
do and perform each and every act and thing requisite and necessary to be done
in and about the premises, as fully to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that said attorneys-in-
fact and agents, or any of them, or their substitute or substitutes, may
lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Power of Attorney has been signed below on the 9th day of February, 1995.
/s/ Peter S. Lynch
______________________________________
Peter S. Lynch
Director
<PAGE>
POWER OF ATTORNEY
KNOWN ALL MEN BY THESE PRESENTS, that the undersigned hereby constitutes
and appoints S. G. Hanks, T. F. Kealey and M. E. Howland, and each of them, his
true and lawful attorneys-in-fact and agents, with full power of substitution
and resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign on his behalf as a director or officer or both, as the case
may be, of Morrison Knudsen Corporation, a Delaware corporation, Form 10-K
Annual Report for year ended December 31, 1994, and any and all amendments
thereto, and to file the same, with all exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission, granting unto
said attorneys-in-fact and agents, and each of them, full power and authority to
do and perform each and every act and thing requisite and necessary to be done
in and about the premises, as fully to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that said attorneys-in-
fact and agents, or any of them, or their substitute or substitutes, may
lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Power of Attorney has been signed below on the 9th day of February, 1995.
/s/ Robert A. McCabe
______________________________________
Robert A. McCabe
Director
<PAGE>
POWER OF ATTORNEY
KNOWN ALL MEN BY THESE PRESENTS, that the undersigned hereby constitutes
and appoints S. G. Hanks, T. F. Kealey and M. E. Howland, and each of them, her
true and lawful attorneys-in-fact and agents, with full power of substitution
and resubstitution, for her and in her name, place and stead, in any and all
capacities, to sign on her behalf as a director or officer or both, as the case
may be, of Morrison Knudsen Corporation, a Delaware corporation, Form 10-K
Annual Report for year ended December 31, 1994, and any and all amendments
thereto, and to file the same, with all exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission, granting unto
said attorneys-in-fact and agents, and each of them, full power and authority to
do and perform each and every act and thing requisite and necessary to be done
in and about the premises, as fully to all intents and purposes as she might or
could do in person, hereby ratifying and confirming all that said attorneys-in-
fact and agents, or any of them, or their substitute or substitutes, may
lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Power of Attorney has been signed below on the 9th day of February, 1995.
/s/ Irene C. Peden
______________________________________
Irene C. Peden
Director
<PAGE>
POWER OF ATTORNEY
KNOWN ALL MEN BY THESE PRESENTS, that the undersigned hereby constitutes
and appoints S. G. Hanks, T. F. Kealey and M. E. Howland, and each of them, his
true and lawful attorneys-in-fact and agents, with full power of substitution
and resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign on his behalf as a director or officer or both, as the case
may be, of Morrison Knudsen Corporation, a Delaware corporation, Form 10-K
Annual Report for year ended December 31, 1994, and any and all amendments
thereto, and to file the same, with all exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission, granting unto
said attorneys-in-fact and agents, and each of them, full power and authority to
do and perform each and every act and thing requisite and necessary to be done
in and about the premises, as fully to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that said attorneys-in-
fact and agents, or any of them, or their substitute or substitutes, may
lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Power of Attorney has been signed below on the 9th day of February, 1995.
/s/ Gerard R. Roche
______________________________________
Gerard R. Roche
Director
<PAGE>
POWER OF ATTORNEY
KNOWN ALL MEN BY THESE PRESENTS, that the undersigned hereby constitutes
and appoints S. G. Hanks, T. F. Kealey and M. E. Howland, and each of them, his
true and lawful attorneys-in-fact and agents, with full power of substitution
and resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign on his behalf as a director or officer or both, as the case
may be, of Morrison Knudsen Corporation, a Delaware corporation, Form 10-K
Annual Report for year ended December 31, 1994, and any and all amendments
thereto, and to file the same, with all exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission, granting unto
said attorneys-in-fact and agents, and each of them, full power and authority to
do and perform each and every act and thing requisite and necessary to be done
in and about the premises, as fully to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that said attorneys-in-
fact and agents, or any of them, or their substitute or substitutes, may
lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Power of Attorney has been signed below on the 9th day of February, 1995.
/s/ John W. Rogers, Jr.
______________________________________
John W. Rogers, Jr.
Director
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
accompanying audited consolidated financial statements and notes thereto of
Morrison Knudsen Corporation at December 31, 1994 and for the year then ended,
and is qualified in its entirety by reference to such audited financial
statements and notes:
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> DEC-31-1994
<CASH> $79,400
<SECURITIES> 0
<RECEIVABLES> 244,239
<ALLOWANCES> (16,361)
<INVENTORY> 268,580
<CURRENT-ASSETS> 865,655
<PP&E> 481,032
<DEPRECIATION> (263,771)
<TOTAL-ASSETS> 1,272,909
<CURRENT-LIABILITIES> 1,005,269
<BONDS> 7,873
<COMMON> 55,818
0
0
<OTHER-SE> 1,978
<TOTAL-LIABILITY-AND-EQUITY> 1,272,909
<SALES> 501,095
<TOTAL-REVENUES> 2,504,999
<CGS> 756,879
<TOTAL-COSTS> 2,859,193
<OTHER-EXPENSES> 38,255
<LOSS-PROVISION> 16,600
<INTEREST-EXPENSE> 11,658
<INCOME-PRETAX> (442,146)
<INCOME-TAX> 76,259
<INCOME-CONTINUING> (349,635)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (349,635)
<EPS-PRIMARY> (10.75)
<EPS-DILUTED> 0
</TABLE>
