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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
NOVEMBER 30, 1996
Commission File Number 1-12054
[Logo] -Registered Trademark-MORRISON KNUDSEN CORPORATION
(FORMERLY WASHINGTON CONSTRUCTION GROUP, INC.)
A Delaware Corporation
IRS Employer Identification No. 33-0565601
MORRISON KNUDSEN PLAZA, BOISE, IDAHO 83729
208 / 386-5000
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SECURITIES REGISTERED AND NUMBER OF REGISTRANT'S COMMON SHARES OUTSTANDING
At February 5, 1997, 53,836,291 shares of the registrant's $.01 par value common
stock were outstanding. Such common stock and warrants to purchase an aggregate
of 2,765,000 shares of such common stock are listed on the New York Stock
Exchange and registered pursuant to Section 12(b) of the Securities Exchange
Act. The registrant has no securities registered under Section 12(g) of the
Securities Exchange Act.
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 (or for
such shorter period that the registrant was required to file such reports) and
has been subject to such filing requirements for the past 90 days.
/x/ Yes / / No
DISCLOSURE PURSUANT TO ITEM 405 OF REGULATION S-K
Disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not
contained herein, and will not be contained, to the best of registrant's
knowledge, in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this Form 10-K.
/x/ Yes / / No
AGGREGATE MARKET VALUE OF VOTING STOCK HELD BY NONAFFILIATES
At February 5, 1997, the aggregate market value of the registrant's common
stock held by nonaffiliates of the registrant, based on the New York Stock
Exchange closing price therefor on February 5, 1997, was approximately
$323,223,439, excluding $194,950,862 market value of 20,254,635 shares which
are assumed to be held by affiliates of the registrant for the purposes of
this calculation.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant's definitive proxy statement for its annual meeting
of stockholders to be held on April 11, 1997, which is expected to be filed with
the Securities and Exchange Commission not later than March 31, 1997, are
incorporated by reference into Part III of this Annual Report on Form 10-K. In
the event such proxy statement is not so filed by March 31, 1997, the required
information will be filed as an amendment to this Annual Report on Form 10-K no
later than such date.
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MORRISON KNUDSEN CORPORATION
(FORMERLY WASHINGTON CONSTRUCTION GROUP, INC.)
ANNUAL REPORT ON FORM 10-K FOR THE
YEAR ENDED NOVEMBER 30, 1996
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION
PAGE
PART I
Item 1. Business I-1
Item 2. Properties I-4
Item 3. Legal Proceedings I-4
Item 4. Submission of Matters to a Vote of Security Holders I-4
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-7
Item 9. Change in and Disagreements with Accountants on Accounting
and Financial Disclosure II-30
PART III
Item 10. Directors and Executive Officers of the Registrant III-1
Item 11. Executive Compensation III-1
Item 12. Security Ownership of Certain Beneficial Owners and Management III-1
Item 13. Certain Relationships and Related Transactions III-1
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on
Form 8-K IV-1
SIGNATURES
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THIS ANNUAL REPORT ON FORM 10-K AND OTHER REPORTS AND STATEMENTS FILED BY
MORRISON KNUDSEN CORPORATION ("THE CORPORATION") FROM TIME TO TIME WITH THE
SECURITIES AND EXCHANGE COMMISSION (COLLECTIVELY, "SEC FILINGS") CONTAIN OR MAY
CONTAIN FORWARD-LOOKING STATEMENTS. WHEN USED IN SEC FILINGS, THE WORDS
"ANTICIPATE," "BELIEVE," "ESTIMATE," "EXCEPT," "FUTURE," "INTEND," "PLAN,"
"SHOULD" AND SIMILAR EXPRESSIONS IDENTIFY SUCH FORWARD-LOOKING STATEMENTS. SUCH
FORWARD-LOOKING STATEMENTS ARE NECESSARILY BASED ON VARIOUS ASSUMPTIONS AND
ESTIMATES AND ARE INHERENTLY SUBJECT TO VARIOUS RISKS AND UNCERTAINTIES,
INCLUDING, IN ADDITION TO ANY RISKS AND UNCERTAINTIES DISCLOSED IN THE TEXT
SURROUNDING SUCH STATEMENTS OR ELSEWHERE IN THE SEC FILINGS, RISKS AND
UNCERTAINTIES RELATING TO THE POSSIBLE INVALIDITY OF THE UNDERLYING ASSUMPTIONS
AND ESTIMATES AND POSSIBLE CHANGES OR DEVELOPMENTS IN SOCIAL, ECONOMIC,
BUSINESS, INDUSTRY, MARKET, LEGAL AND REGULATORY CIRCUMSTANCES AND CONDITIONS
AND ACTIONS TAKEN OR OMITTED TO BE TAKEN BY THIRD PARTIES, INCLUDING THE
CORPORATION'S CUSTOMERS, SUPPLIERS, BUSINESS PARTNERS AND COMPETITORS AND
LEGISLATIVE, REGULATORY, JUDICIAL AND OTHER GOVERNMENTAL AUTHORITIES AND
OFFICIALS. SHOULD THE CORPORATION'S ASSUMPTIONS OR ESTIMATES PROVE TO BE
INCORRECT, OR SHOULD ONE OR MORE OF THESE RISKS OR UNCERTAINTIES MATERIALIZE,
ACTUAL AMOUNTS, RESULTS, EVENTS AND CIRCUMSTANCES MAY VARY SIGNIFICANTLY FROM
THOSE REFLECTED IN SUCH FORWARD-LOOKING STATEMENTS.
PART I
ITEM 1. BUSINESS
(IN THOUSANDS OF DOLLARS)
UNLESS THE CONTEXT OTHERWISE REQUIRES, REFERENCES TO 1996, 1995 AND 1994
ARE REFERENCES TO THE CORPORATION'S FISCAL YEARS ENDED NOVEMBER 30, 1996, 1995
AND 1994, RESPECTIVELY.
GENERAL
The Corporation is an international provider of (i) engineering and construction
management services to industrial companies, electric utilities and public
agencies, (ii) comprehensive environmental and hazardous substance remediation
services to governmental and private-sector clients, (iii) diverse heavy
construction services for the highway, airport, water resource, railway and
commercial building industries, and (iv) mine planning, engineering and contract
mining services for diverse customers. In providing such services, the
Corporation 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 fixed price for each unit of
work performed, under each of which both risk and anticipated income are the
highest; and cost-type contracts providing for reimbursement of costs plus a fee
under which risk is minimal and anticipated income is earned through the fee.
Engineering, construction management and environmental and hazardous substance
remediation contracts are typically awarded on a cost-plus-fee basis.
The Corporation also participates in construction joint ventures, often as
sponsor and manager of projects, which are formed for the sole purpose of
bidding, negotiating and completing specific projects. In addition, the
Corporation participates in the following mining ventures: Westmoreland
Resources, Inc., a coal mining company in Montana, and MIBRAG mbH, a company
that operates lignite coal mines, process and power plants in Germany. See Note
6. "Ventures" of Notes to Consolidated Financial Statements in Part II of this
Annual Report on Form 10-K ("Notes to Consolidated Financial Statements").
The Corporation was originally formed in Delaware on April 28, 1993 under
the name Kasler Holding Company to become the parent company of WCG Holdings,
Inc. ("WCG") and Kasler Corporation ("Kasler"), companies active in the
infrastructure, contract mining, environmental remediation, commercial
construction and construction materials markets. In May 1996, the name of the
Corporation was changed from Kasler Holding Company to Washington Construction
Group, Inc.
The Corporation's executive offices are located at Morrison Knudsen Plaza,
Boise, Idaho 83729, and its telephone number is (208) 386-5000.
ACQUISITION OF OLD MK
(IN THOUSANDS OF DOLLARS EXCEPT PER SHARE DATA)
On September 11, 1996, the Corporation acquired the net assets and the
engineering and construction operations of Morrison Knudsen Corporation, a
Delaware corporation ("Old MK"), in a transaction structured as a merger of Old
MK
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with and into the Corporation and changed its name to Morrison Knudsen
Corporation. The acquisition of Old MK was an integral part of the
reorganization of Old MK pursuant to a plan of reorganization (the "Plan") filed
by Old MK in the United States Bankruptcy Court for the District of Delaware
(the "Bankruptcy Court"), which Plan was confirmed by the Bankruptcy Court on
August 26, 1996, and became effective concurrently with the Merger on September
11, 1996 (the "Effective Date").
On the Effective Date, substantially all of Old MK's senior debt
obligations were discharged and all of Old MK's outstanding common stock was
canceled. In exchange thereof, the following distributions, among others, were
made pursuant to the Plan to or for the benefit of certain creditors and for
stockholders of Old MK: (i) $47,930 in cash (including $13,300 of cash of the
Corporation); (ii) 24,161,421 newly issued shares of the Corporation's common
stock; (iii) 1,800,000 newly issued shares of preferred stock of the Corporation
entitling the holders thereof to receive up to $18,000 (subject to adjustment)
of certain tax refunds when received by the Corporation as successor to Old MK;
and (iv) warrants exercisable during a term of six and one-half years to
purchase from the Corporation an aggregate of 2,765,000 shares of the
Corporation's common stock at an exercise price of $12.00 per share (subject to
adjustment).
PROJECT RISKS
The Corporation's engineering and construction operations are exposed to
significant risks and uncertainties in the performance of fixed-price or unit
price contracts over extended periods of time. Inherent in fixed-price or unit
price contracts is the risk of loss, resulting from uncertainties inherent in
the estimation of contract completion costs, changed conditions during
construction, contract modifications by customers, failure of subcontractors and
joint-venture partners to perform and unforseen events and conditions. 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.
Because of the size and complexity of major infrastructure projects, a
relatively small number of projects may provide a significant percentage of the
Corporation's revenues in a given year. The loss of one or more major contracts
or a financial loss incurred by the Corporation with respect to its performance
under one or more major contracts could have a material adverse effect on the
Corporation's financial position, results of operations and cash flows.
ENVIRONMENTAL MATTERS
The Corporation's environmental and hazardous substance remediation and contract
mining services involve risks of liability under federal, state and local
environmental laws and regulations, including the Comprehensive Environmental
Response, Compensation, and Liability Act ("CERCLA"). The Corporation performs
environmental remediation at Superfund sites as a response action contractor for
the United States Environmental Protection Agency (the "EPA") and, in such
capacity, is exempt from liability under any federal law, including CERCLA,
unless its conduct was negligent; moreover, the Corporation may be entitled to
indemnification from the United States against liability arising out of
negligent performance of work in such capacity. While the Corporation believes
that it is in material compliance with environmental laws and regulations, a
determination that the Corporation is liable under environmental laws and
regulations for the cost of environmental remediation could have a material
adverse effect on the financial position, results of operations and cash flows
of the Corporation. Amendments to, or more stringent implementation of, current
environmental laws and regulations also could have such adverse effects.
From July 1985 to June 1989, a subsidiary of the Corporation performed
certain contract mining services at the Summitville mine near Del Norte,
Colorado. The EPA has notified the Corporation and approximately 20 other
parties that each is a potentially responsible party ("PRP") with regard to
hazardous substances generated or disposed of at the Summitville Mine Superfund
Site (the "Site"). The EPA has not commenced any litigation or other proceedings
against the Corporation. The Corporation has had only preliminary discussions
with the EPA, but has been informally advised that the EPA does not consider the
Corporation eligible for a de minimis settlement (the basis for settlement by
several PRPs considered to have contributed less than 3% volume and toxicity of
the hazardous substances at the Site). See Item 7. Management's Discussion and
Analysis of Financial Condition and Results of Operations -- "Environmental
Matters," Note 13. "Contingencies and Commitments -- Summitville Environmental
Matters" and "Other Environmental Matters" of Notes to Consolidated Financial
Statements.
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RAW MATERIALS
Raw materials and components necessary for the rendering of construction,
environmental and hazardous substance remediation and contract mining services
are generally available from numerous sources. The Corporation does not foresee
any unavailability of raw materials and components which would have a material
adverse effect on its business in the near term.
FOREIGN OPERATIONS
(IN THOUSANDS OF DOLLARS)
The Corporation operates outside the United States through foreign and domestic
subsidiaries and with foreign venture partners. Foreign operations are subject
to uncertain political and economic environments, evolving legal and
environmental regulatory climates, potential incompatibility between venture
partners, foreign currency controls and fluctuations, civil disturbances and
labor strikes, as well as other uncertainties.
The Corporation recorded revenue from foreign operations of $69,170 in
1996. See Note 12. "Geographic and Customer Information" of Notes to
Consolidated Financial Statements.
BACKLOG
(IN THOUSANDS OF DOLLARS)
Backlog consists of uncompleted portions of engineering and construction
contracts including the Corporation's proportionate share of construction
joint-venture contracts and its share of revenues from mining service contracts
and ventures for the next five years. Backlog of all uncompleted contracts at
November 30, 1996 totaled $3,519,700, including the backlog of $3,162,300
obtained in the acquisition of Old MK, compared with backlog of $286,300 at
November 30, 1995. Approximately $1,681,400 or 48% of the backlog at November
30, 1996 was comprised of U.S. government contracts which are subject to
termination by the government; $1,178,800 of such contracts has not been funded.
Terminations for convenience of the government generally provide for recovery of
contract costs and related earnings. Approximately $1,408,000 or 40% of 1996
year-end backlog is expected to be recognized as revenue in 1997. There can be
no assurance that contract cancellations or modifications will not reduce the
backlog and future revenues.
GOVERNMENT CONTRACTS
Government contracts are a significant part of the Corporation's business. The
Corporation has a number of cost reimbursement contracts with various agencies
of the U.S. government, the allowable costs of which are subject to audit by the
U.S. government. As a result of such audits, U.S. government auditors assert
from time to time that certain costs claimed as reimbursable under government
contracts either were not allowable costs or were not allocable in accordance
with federal government regulations. The resolution of these audits may result
in various sanctions, including repayments of amounts previously paid by the
U.S. government to the Corporation. Some audits have resulted in cost
disallowances and claims for reimbursement by the government. See "Backlog"
above for the relative significance of U.S. government contracts included in
year-end 1996 backlog. See Note 13. "Contingencies and Commitments -- Contract
Related Matters" of Notes to Consolidated Financial Statements.
COMPETITION
Engineering and construction is a highly competitive business, particularly for
contracts obtained by competitive bidding. The Corporation competes based
primarily on price, reputation and reliability with other general and specialty
contractors, both foreign and domestic. Some of the Corporation's competitors
may have substantially greater financial and other resources than the
Corporation. 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.
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EMPLOYEES
The Corporation's total worldwide employment varies widely with the volume, type
and scope of operations under way at any given time and other factors.
At November 30, 1996, the Corporation employed a total of approximately
8,200 employees -- including 6,200 project direct-hire craft employees and 2,000
covered by collective bargaining agreements.
ITEM 2. PROPERTIES
(IN THOUSANDS OF DOLLARS)
At November 30, 1996, the Corporation owned more than 3,595 units of heavy and
light mobile construction, environmental remediation and contract mining
equipment.
The Corporation does not own significant real property. The two principal
administrative office facilities in Boise, Idaho, and Cleveland, Ohio, of
approximately 143,800 square feet and 246,700 square feet, respectively, are
leased under long-term, noncancelable leases expiring in 2004 and 2010,
respectively. The Corporation's long-term rental obligations for the Boise and
Cleveland facilities under these noncancelable leases approximate $5,900
annually for each of the next five years.
Annual rental payments on real estate and equipment leased by the
Corporation during the year ended November 30, 1996 aggregated $11,780. See Note
13. "Contingencies and Commitments -- Long-Term Leases" of Notes to Consolidated
Financial Statements.
Construction, environmental remediation and mining equipment and leased
administrative and engineering facilities are considered by the Corporation to
be well maintained and suitable for current operations.
ITEM 3. LEGAL PROCEEDINGS
(IN THOUSANDS OF DOLLARS)
LITIGATION: Former shareholders (the plaintiffs) of TMS, Inc. ("TMS"), which
was acquired by Old MK in December 1992, filed an action on December 22, 1995
alleging they were induced to enter into an agreement to exchange TMS shares for
common stock of Old MK (the defendant) and also enter into noncompete agreements
by the defendants' allegedly false statements. Plaintiffs seek compensatory
damages of $7,500, treble damages, punitive damages of $5,000, pre and
postjudgment interest and attorneys' fees. The Corporation's motion to dismiss
the action is pending before the court. The Corporation believes that it has
insurance coverage for all or a substantial part of any damages that may be
awarded in this matter. Although the ultimate outcome of this matter cannot be
predicted with certainty, management believes that the outcome will not have a
material adverse effect on the Corporation's financial position, results of
operations and cash flows.
SECURITIES AND EXCHANGE COMMISSION INVESTIGATIONS: The Corporation, as
successor to Old MK (Commission File No. 1-8889), is subject to a formal
investigation by the Pacific Regional Office of the SEC regarding the management
and operations of Old MK, primarily its former Transit business, prior to
September 12, 1996. The Corporation continues to provide documents in response
to discovery requests and otherwise cooperate with the Commission's staff in
connection with this investigation.
On October 4, 1996, the Central Regional Offices of the SEC notified the
Corporation that its staff inquiry in the matter of Denver International Airport
revenue bonds, in which Old MK had been named as a respondent, had been
terminated, without any enforcement action.
OTHER: There are other claims, lawsuits, disputes with third parties,
investigations and administrative proceedings against the Corporation and its
subsidiaries relating to matters in the ordinary course of its business
activities that are not expected to have a material adverse effect on the
Corporation's financial position, results of operations and cash flows.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Information is set forth under Item 4 "Submission of Matters to a Vote of
Security Holders" in the Corporation's Quarterly Report on Form 10-Q for the
quarter ended August 31, 1996 which is incorporated herein by this reference.
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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 Stock Exchange under the symbol "MK." At the close of business on February
5, 1997, the Corporation had 53,836,291 shares of common stock issued and
outstanding.
The New York Stock Exchange composite high and low sales prices of the
Corporation's common stock traded on the New York Stock Exchange for each
quarterly period within the two most recent fiscal years are set forth under the
caption "Quarterly Financial Data" in Part II of this Annual Report on Form
10-K.
HOLDERS: The number of record holders of the Corporation's voting common stock
at February 5, 1997 was approximately 1,575 and does not include beneficial
owners of the Corporation's common stock held in the name of nominees.
DIVIDENDS: The Corporation has not paid a cash dividend since the first quarter
of fiscal 1994 and does not anticipate payment of dividends in the near term.
The Corporation is not restricted from paying dividends if an event of default
does not exist under the facility. See Note 8. "Credit Arrangements" of Notes to
Consolidated Financial Statements.
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ITEM 6. SELECTED FINANCIAL DATA
(IN THOUSANDS EXCEPT PER SHARE DATA)
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<TABLE>
<CAPTION>
OPERATIONS SUMMARY 1996(a) 1995 1994 1993(b) 1992
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<S> <C> <C> <C> <C> <C>
Revenue $659,100 $228,537 $258,739 $210,184 $133,555
Gross profit 33,344 24,113 19,849 20,121 28,704
Operating income (loss) (8,594) 7,926 1,724 9,702 20,771
Net income (loss) (4,780) 8,165 657 6,937 13,271
Income (loss) per common share (.14) .28 .02 .39 1.28
Shares used to compute income (loss) per
common share 34,821 29,478 29,435 17,815 10,400
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FINANCIAL POSITION SUMMARY
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Current assets $459,249 $ 85,721 $111,184 $118,340 $ 52,253
Total assets 839,637 185,301 182,618 185,761 76,011
Current liabilities 400,604 42,188 47,005 52,538 20,896
Stockholders' equity 312,004 128,951 119,956 120,390 53,425
Stockholders' equity per common share 5.80 4.37 4.08 4.09 5.14
Dividends declared per share -- -- .05 .05 .99
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(a) On September 11, 1996, the Corporation acquired Old MK in a transaction
accounted for as a purchase. The Corporation's results of operations include Old
MK's results for only the period September 12 to November 30, 1996. See Item 1.
Business -- "General" in Part I of this Annual Report on Form 10-K and Note 2.
"Business Combination" of Notes to Consolidated Financial Statements.
(b) On July 12, 1993, the Corporation became the parent company of WCG Holdings,
Inc. ("WCG") and Kasler Corporation ("Kasler") in a transaction accounted for as
a purchase by WCG of Kasler. See Item 1. Business -- "General" in Part I of this
Annual Report on Form 10-K.
CERTAIN RECLASSIFICATIONS HAVE BEEN MADE TO CONFORM TO THE 1996 PRESENTATION.
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The Corporation's financial condition as of November 30, 1996 and results of
operations for the quarter and year then ended were significantly impacted by
the acquisition of Old MK on September 11, 1996 and are not comparable to the
Corporation's financial position, results of operations and cash flows for prior
periods.
RESULTS OF OPERATIONS
1996 COMPARED TO 1995
THE CONSOLIDATED RESULTS OF OPERATIONS FOR THE QUARTER AND YEAR ENDED NOVEMBER
30, 1996 INCLUDE THE RESULTS OF OLD MK FOR ONLY THE PERIOD SEPTEMBER 12 TO
NOVEMBER 30, 1996.
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QUARTER ENDED YEAR ENDED
NOVEMBER 30, NOVEMBER 30,
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(IN MILLIONS) 1996 1995 1996 1995
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Revenue $416.7 $68.3 $659.1 $228.5
Gross profit 19.0 7.2 33.3 24.1
General and administrative expenses (8.4) (4.0) (22.6) (15.8)
Impairment loss on long-lived assets -- -- (18.2) --
Goodwill amortization (.8) (.1) (1.2) (.4)
Investment income 1.5 1.0 3.7 4.1
Interest expense (.4) (.1) (1.0) (.2)
Other income, net .6 .1 .6 .4
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REVENUE AND GROSS PROFIT: Revenue and gross profit for the fourth quarter and
year ended November 30, 1996 increased significantly, principally due to the
acquisition of Old MK. Gross profit, as a percent of revenue, was 5.1% for 1996
and 10.6% for 1995. Before the acquisition of Old MK, the Corporation was
engaged almost exclusively in fixed-price work. After the acquisition of Old MK,
the Corporation derived approximately 37% of its revenue from fee-type/cost plus
engineering, construction management and environmental response services which
typically involve less risk and therefor receive lower margins than fixed-price
work.
At November 30, 1996, backlog of $3,519.7 million was comprised of
$2,034.5 million (58%) revenue from fee-type contracts and $1,485.2 million
(42%) revenue from fixed-price contracts and share of revenue from mining
ventures. At November 30, 1995, backlog of $286.3 million included $282.6
million revenue from fixed-price contracts and $3.7 million revenue from
fee-type contracts. Contract cancellations and modifications may reduce backlog
and future revenues.
GENERAL AND ADMINISTRATIVE EXPENSES: General and administrative expenses for
the fourth quarter and year ended November 30, 1996 increased $4.4 million and
$6.8 million, respectively, compared to the comparable periods of 1995, due
principally to the acquisition of Old MK. In addition, the Corporation recorded
$1.5 million of expenses in the first quarter of 1996 for termination and other
costs related to the reorganization and consolidation of certain corporate
functions from Montana to California and $.9 million of expenses in the fourth
quarter of 1996 related to nonrecurring executive severance pay. As a result of
the acquisition of Old MK, the Corporation has expanded its engineering,
construction, mining and environmental response services both domestically and
internationally. The Corporation has retained the administrative support
functions of Old MK, and has relocated the corporate headquarters to Boise,
Idaho.
IMPAIRMENT OF LONG-LIVED ASSETS: In the third quarter of 1996, the Corporation
adopted Statement of Financial Accounting Standards No. 121 ACCOUNTING FOR THE
IMPAIRMENT OF LONG-LIVED ASSETS AND LONG-LIVED ASSETS TO BE DISPOSED OF ("SFAS
No. 121"). As of August 31, 1996, the Corporation recognized aggregate
impairment losses of $18.2 million on certain real property held for sale or use
and operating assets of a non-core subsidiary held for sale. See Note 3. "Change
in Accounting Principle" of Notes to Consolidated Financial Statements.
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COST IN EXCESS OF NET ASSETS ACQUIRED ("GOODWILL"): Goodwill amortization for
the quarter and year ended November 30, 1996 increased to $.8 million and $1.2
million, respectively, from $.1 million and $.4 million in the comparable
periods of 1995, respectively, reflecting the $125.1 million goodwill recorded
in connection with the acquisition of Old MK, which is being amortized under the
straight-line method over 40 years. Goodwill amortization for 1997 is estimated
to be $3.5 million. However, resolution of certain preacquisition contingencies
may result in adjustments to the amount of goodwill originally recorded and
affect the related amortization.
OTHER INCOME AND EXPENSE: For the year ended November 30, 1996, investment
income decreased to $3.7 million from $4.1 million in 1995 due to reduced
interest-bearing cash and equivalents and notes receivable. For the fourth
quarter of 1996, investment income of $1.5 million increased $.5 million from
the prior year's fourth quarter due to the interest-bearing cash and equivalents
obtained in the acquisition of Old MK. Interest expense for the year ended
November 30, 1996 increased to $1.0 million from $.2 million in 1995, reflecting
the cessation of interest capitalization upon completion of construction in
progress in 1995 and an increase in costs and fees associated with the
Corporation's revolving credit facilities in 1996. Other income for the quarter
and year ended November 30, 1996 includes $.6 million of gain on adjustment of
insurance premiums paid in prior periods.
INCOME TAXES: The income tax benefit of $.5 million for 1996 reflects estimated
recoverable federal income taxes net of foreign and state income tax expense.
The income tax expense of $4.0 million for 1995 is net of a $1.0 million benefit
arising from a change in prior year estimate.
1995 COMPARED TO 1994
REVENUE: Revenue decreased $30.2 million in 1995 from $258.7 million to $228.5
million. In 1994, revenue of $26.0 million was recognized on an emergency
earthquake contract. Revenue in 1995 decreased due to heavy rain and snow storms
which delayed work in California and in certain western mountain regions.
Revenue from mining service contracts increased by $9.5 million in 1995, while
environmental and other contract revenue in 1995 decreased $14.8 million
compared to 1994.
In 1995, the Corporation commenced operations at its aggregate mining
operation in Las Vegas. The Corporation's operations in construction materials
and commercial construction together comprised 12% of 1995's revenue and
constitute 6% of the Corporation's November 30, 1995 contract backlog.
Contract mining increased as a source of revenue for the Corporation in
1995, comprising 16% of revenue. Mining contracts comprised 15% of the
Corporation's November 30, 1995 contract backlog. In 1995, the Corporation's
environmental remediation revenue decreased to 5% of total revenue and comprised
1% of backlog at November 30, 1995.
GROSS PROFIT: Gross profit increased $4.3 million from $19.8 million in 1994 to
$24.1 million in 1995. As a percentage of revenue, the gross profit margin
improved to 10.6% compared to a margin of 7.7% in 1994. The improved margin
allowed gross profit to increase despite a reduction in revenue of $30.2
million. Contributing to the improved operating margin in 1995 was a decrease in
contract loss provisions resulting from cost overruns. Gross profit was also
positively affected by the recognition of profits from work completed in prior
periods as a result of changes in estimates and settlements of claims.
GENERAL AND ADMINISTRATIVE EXPENSES: General and administrative expenses
decreased by $1.9 million from $17.7 million in 1994 to $15.8 million in 1995,
due principally to a decrease of $1.4 million in charges relating to management
changes and of $.3 million in higher profit-sharing expense. As a percentage of
revenue, general and administrative expenses were 6.9% in 1995 compared with
6.8% in 1994.
OTHER INCOME AND EXPENSES: Investment income increased by $1.1 million to $4.1
million in 1995 compared to $3.0 million in 1994, reflecting increased
interest-bearing notes receivable, interest-bearing securities and higher
interest rates on the Corporation's cash and equivalents.
Interest expense increased by $.1 million in 1995 primarily reflecting
amortization of costs and fees on the Corporation's line of credit.
II-4
<PAGE>
Other expenses decreased by $4.1 million in 1995 as compared to 1994, when
a $3.9 million loss was recognized on the Corporation's investment in a real
estate development partnership. The Corporation acquired its partner's interest
and did not incur losses on the real estate development in 1995.
PROVISION FOR INCOME TAXES: The provision for income taxes increased $3.6
million in 1995, primarily as a result of increased earnings.
FINANCIAL CONDITION
The Corporation has three principal sources of near-term liquidity: (i) existing
cash and equivalents; (ii) cash generated by its operations, and (iii) the
revolving loan borrowings under its credit facility. Management believes the
Corporation's liquidity and capital resources should be sufficient to meet its
reasonably foreseeable working capital, capital expenditure and other
anticipated cash requirements.
Cash flow from operations and net cash obtained in connection with the
acquisition of Old MK provided the principal source of the Corporation's
liquidity in 1996, increasing cash and equivalents at November 30, 1996 to $48.3
million, an $18.3 million increase over the prior year-end balance. Working
capital was $58.6 million at the end of 1996 compared to $43.5 million at the
end of 1995.
On October 31, 1996, the Corporation obtained a five-year, $200.0 million
revolving loan and letter of credit facility from the Bank of Montreal. Under
the credit facility, outstanding revolving loan borrowings are limited to $125.0
million. At November 30, 1996, the Corporation had no outstanding borrowings
under the facility and was in compliance with its covenants, the most
restrictive of which is fixed charge coverage. The Corporation is not restricted
from paying dividends if an event of default does not exist under the facility.
The Corporation anticipates capital expenditures for major construction
equipment of approximately $26.0 million during 1997 to meet equipment
requirements of its expanded backlog.
The Corporation may pursue opportunities to complement existing operations
through business combinations and participation in ventures, which may require
additional financing and utilization of the Corporation's capital resources.
Depending upon conditions in the capital markets and other factors, the
Corporation may from time to time consider the possible issuance of long-term
debt or other securities or other capital markets transactions.
ENVIRONMENTAL CONTINGENCY
From July 1985 to June 1989, a subsidiary of the Corporation performed certain
contract mining services at the Summitville mine near Del Norte, Colorado. The
United States Environmental Protection Agency ("EPA") has notified the
Corporation and approximately 20 other parties that each is a potentially
responsible party ("PRP") with regard to hazardous substances generated or
disposed of at the Summitville Mine Superfund Site. The EPA has not commenced
any litigation or other proceedings against the Corporation. The Corporation has
had only preliminary discussions with the EPA but has been informally advised
that the EPA does not consider the Corporation eligible for a de minimis
settlement (the basis for settlement by several PRPs considered to have
contributed less than 3% volume and toxicity of the hazardous substances at the
Site).
According to a report published in August 1996, the EPA estimated that the
total remediation costs incurred and to be incurred at the Site will be $120
million. The Corporation is not a party to any agreement regarding an allocation
of responsibility, and the EPA has not made an allocation of responsibility
among the PRPs. The Corporation's share, if any, of the aggregate environmental
liability associated with the Site is not presently determinable and depends
upon, among other things, the manner in which liability may be allocated to or
among the Corporation or other PRPs associated with the Site, the efficacy of
any defenses that the Corporation or such other PRPs may have to any assertion
of liability, the willingness and ability of such other PRPs to discharge such
liability as may be allocated to them and the outcome of any negotiations or
settlement discussions between the Corporation and the EPA and/or such other
PRPs. Accordingly, no remediation costs have been accrued at November 30, 1996.
Management believes that the ultimate resolution of this matter could have
a material adverse effect on the Corporation's financial position and could
materially and adversely effect its results of operations and cash flows in one
or more periods.
II-5
<PAGE>
QUARTERLY FINANCIAL DATA
(IN THOUSANDS EXCEPT PER SHARE DATA)
- --------------------------------------------------------------------------------
Selected quarterly financial data for the two years ended November 30, 1996 are
presented below. Income (loss) per share is computed separately for each
quarterly and annual period presented.
- --------------------------------------------------------------------------------
1996 QUARTERS ENDED FEBRUARY 28 MAY 31 AUGUST 31 NOVEMBER 30
- --------------------------------------------------------------------------------
Revenue $62,006 $82,693 $97,750 $416,651
Gross profit 3,462 5,796 5,052 19,034
Net income (loss) (788) 1,614 (11,222) 5,616
Income (loss) per share (.03) .06 (.38) .11
- --------------------------------------------------------------------------------
Market price
High $ 8.13 $11.00 $10.88 $10.00
Low 5.38 7.88 8.13 8.38
- --------------------------------------------------------------------------------
FIRST QUARTER: Includes $1,500 in pre-tax expenses related to the
reorganization and consolidation of corporate functions.
THIRD QUARTER: Includes $18,200 of pre-tax impairment loss on long-lived
assets.
FOURTH QUARTER: Includes the operating results of Old MK for the period
September 12 to November 30, 1996.
- --------------------------------------------------------------------------------
1995 QUARTERS ENDED FEBRUARY 28 MAY 31 AUGUST 31 NOVEMBER 30
- --------------------------------------------------------------------------------
Revenue $36,785 $51,604 $71,873 $68,275
Gross profit 3,974 5,718 7,186 7,235
Net income 662 1,572 3,011 2,920
Income per share .02 .06 .10 .10
- --------------------------------------------------------------------------------
Market price
High $6.13 $6.75 $6.38 $6.25
Low 3.88 5.00 5.13 5.38
- --------------------------------------------------------------------------------
II-6
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEX TO FINANCIAL STATEMENTS
MORRISON KNUDSEN CORPORATION AND SUBSIDIARIES
Consolidated Financial Statements as of November 30, 1996 and 1995, and for
each of the three years in the period ended November 30, 1996
PAGE(S)
Report of Independent Accountants II-8
Report of Independent Public Accountants II-9
Consolidated Statements of Operations II-10
Consolidated Balance Sheets II-11, II-12
Consolidated Statements of Cash Flows II-13
Consolidated Statements of Stockholders' Equity II-14
Notes to Consolidated Financial Statements II-15 to II-29
II-7
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Stockholders and Board of Directors
Morrison Knudsen Corporation
We have audited the accompanying consolidated balance sheet of Morrison Knudsen
Corporation and subsidiaries (the "Corporation") as of November 30, 1996 and the
related consolidated statements of operations, stockholders' equity and cash
flows for the year then ended and 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 audit.
We conducted our audit 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 audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Morrison Knudsen
Corporation and subsidiaries at November 30, 1996, and their consolidated
results of operations and cash flows for the year then ended in conformity with
generally accepted accounting principles. In addition, in our opinion, the
financial statement schedule referred to above, when considered in relation to
the basic consolidated financial statements taken as a whole, presents fairly,
in all material respects, the information required to be included therein.
As discussed in Note 3 to the consolidated financial statements, the Corporation
changed its method of accounting for impairment of long-lived assets in 1996 to
conform with Statement of Financial Accounting Standards No. 121.
As discussed in Note 13 to the consolidated financial statements, the
Corporation has been named as a potentially responsible party at the Summitville
Mine Superfund Site. The Corporation's share, if any, of the ultimate
environmental liability at the site is not presently determinable and,
accordingly, no remediation costs have been accrued in the accompanying
financial statements.
/s/ Coopers & Lybrand L.L.P
COOPERS & LYBRAND L.L.P.
Boise, Idaho
February 24, 1997
II-8
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders and the Board of Directors
of Kasler Holding Company
We have audited the accompanying consolidated balance sheet of Kasler Holding
Company and subsidiaries (the "Company") as of November 30, 1995, and the
related consolidated statements of earnings, shareholders' equity, and cash
flows for each of the years in the two-year period ended November 30, 1995.
These consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform our 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, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Kasler Holding
Company and subsidiaries as of November 30, 1995, and the results of their
operations and their cash flows for each of the years in the two-year period
ended November 30, 1995, in conformity with generally accepted accounting
principles.
/s/ KPMG Peat Marwick LLP
KPMG Peat Marwick LLP
Los Angeles, California
January 12, 1996
II-9
<PAGE>
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS EXCEPT PER SHARE DATA)
- --------------------------------------------------------------------------------
YEAR ENDED NOVEMBER 30, 1996 1995 1994
- --------------------------------------------------------------------------------
Revenue $ 659,100 $ 228,537 $ 258,739
Cost of revenue (625,756) (204,424) (238,890)
- --------------------------------------------------------------------------------
Gross profit 33,344 24,113 19,849
General and administrative expenses (22,574) (15,767) (17,705)
Impairment loss on long-lived assets (18,200) -- --
Goodwill amortization (1,164) (420) (420)
- --------------------------------------------------------------------------------
Operating income (loss) (8,594) 7,926 1,724
Investment income 3,679 4,061 3,039
Interest expense (993) (189) (86)
Other income (expense), net 634 389 (3,667)
- --------------------------------------------------------------------------------
Income (loss) before income taxes (5,274) 12,187 1,010
Income tax (expense) benefit 494 (4,022) (353)
- --------------------------------------------------------------------------------
Net income (loss) $ (4,780) $ 8,165 $ 657
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Income (loss) per share $ (.14) $ .28 $ .02
- --------------------------------------------------------------------------------
Common shares used to compute
income (loss) per share 34,821 29,478 29,435
- --------------------------------------------------------------------------------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
II-10
<PAGE>
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS EXCEPT PER SHARE DATA)
- --------------------------------------------------------------------------------
NOVEMBER 30, 1996 1995
- --------------------------------------------------------------------------------
ASSETS
- --------------------------------------------------------------------------------
CURRENT ASSETS
Cash and cash equivalents $ 48,310 $ 30,035
Accounts receivable, including retentions
of $28,348 and $14,513 222,341 41,327
Unbilled receivables 101,564 5,033
Refundable income taxes 10,806 --
Current portion of notes receivable 3,000 3,576
Investments in and advances to construction
joint ventures 24,538 1,846
Deferred income taxes 31,291 514
Other 17,399 3,390
- --------------------------------------------------------------------------------
Total current assets 459,249 85,721
- --------------------------------------------------------------------------------
INVESTMENTS AND OTHER ASSETS
Securities available for sale, at fair value 30,494 --
Investments in mining ventures 56,210 --
Land held for sale or lease -- 8,266
Assets held for sale 18,853 --
Cost in excess of net assets acquired,
net of accumulated amortization of $2,177
and $1,013 140,677 15,777
Long-term notes receivable, net of current portion 5,087 7,935
Deferred income taxes 31,555 --
Other 12,178 886
- --------------------------------------------------------------------------------
Total investments and other assets 295,054 32,864
- --------------------------------------------------------------------------------
PROPERTY AND EQUIPMENT, AT COST
Construction equipment 179,483 99,608
Land and improvements 7,110 28,374
Buildings and improvements 25,062 1,941
Equipment and fixtures 30,388 576
- --------------------------------------------------------------------------------
Total property and equipment 242,043 130,499
LESS ACCUMULATED DEPRECIATION (156,709) (63,783)
- --------------------------------------------------------------------------------
Property and equipment, net 85,334 66,716
- --------------------------------------------------------------------------------
Total assets $839,637 $185,301
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
II-11
<PAGE>
- --------------------------------------------------------------------------------
NOVEMBER 30, 1996 1995
- --------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
- --------------------------------------------------------------------------------
CURRENT LIABILITIES
Accounts payable $ 68,926 $10,195
Subcontracts payable, including retentions
of $27,006 and $9,778 75,036 16,658
Billings in excess of cost and estimated earnings
on uncompleted contracts 49,626 4,789
Advances from customers 11,280 --
Estimated costs to complete long-term contracts 100,832 --
Accrued salaries, wages and benefits 49,136 8,718
Income taxes payable 8,255 501
Other accrued liabilities 37,513 1,327
- --------------------------------------------------------------------------------
Total current liabilities 400,604 42,188
- --------------------------------------------------------------------------------
NON-CURRENT LIABILITIES
Postretirement benefit obligation 53,433 --
Accrued workers' compensation 26,061 --
Pension and deferred compensation liabilities 20,563 --
Environmental remediation obligations 8,972 --
Long-term debt -- 5,042
Deferred income taxes -- 9,120
- --------------------------------------------------------------------------------
Total non-current liabilities 109,029 14,162
- --------------------------------------------------------------------------------
CONTINGENCIES AND COMMITMENTS (Note 13)
- --------------------------------------------------------------------------------
REDEEMABLE PREFERRED STOCK, issued 1,800 shares
of Series A 18,000 --
- --------------------------------------------------------------------------------
STOCKHOLDERS' EQUITY
Preferred stock, authorized 10,000 shares, issued
and outstanding 1,800 redeemable shares of Series A
Common stock, par value $.01, authorized 100,000
shares, issue and outstanding 53,809 and 29,484
shares 538 295
Capital in excess of par value 242,669 62,134
Stock purchase warrants 6,564 --
Retained earnings 61,827 66,607
Unearned compensation - restricted stock (19) (85)
Cumulative translation adjustments (154) --
Net unrealized gain on securities available for sale 579 --
- --------------------------------------------------------------------------------
Total stockholders' equity 312,004 128,951
- --------------------------------------------------------------------------------
Total liabilities and stockholders' equity $839,637 $185,301
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
II-12
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
YEAR ENDED NOVEMBER 30, 1996 1995 1994
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income (loss) $ (4,780) $ 8,165 $ 657
Adjustments to reconcile net income (loss) to cash provided
by operating activities:
Provision for impairment of long-lived assets 18,200 -- --
Depreciation of property and equipment 11,773 8,477 8,793
Amortization of goodwill 1,164 420 420
Loss on real estate development partnership -- -- 3,882
Provision for losses on uncompleted contracts, net 8,860 -- --
Deferred income taxes 703 -- --
Equity in net income of mining ventures less dividends received (2,636) -- --
Accrued workers' compensation 1,966 -- --
Gain on sale of assets (694) (1,236) (1,235)
Other investments and assets (2,860) 204 340
Changes in other assets and liabilities, net of effects of business
combination:
Receivables and unbilled receivables (3,541) 454 1,297
Investment in and advances to construction joint ventures (9,522) (1,876) 1,941
Other assets (43) (349) 178
Accounts payable, accrued salaries, other accrued liabilities,
subcontracts payable and customer advances (6,925) (259) (8,147)
Billings in excess of costs and estimated earnings 4,599 (4,143) (1,276)
Income taxes (3,052) 1,291 (1,138)
- ---------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 13,212 11,148 5,712
- ---------------------------------------------------------------------------------------------------------------------
INVESTING ACTIVITIES
Property and equipment acquisitions (26,172) (22,255) (14,783)
Property and equipment disposals 11,013 2,625 2,446
Purchase of securities available for sale (1,096) -- --
Cash acquired in business combination 52,640 -- --
Collection of notes receivable 7,595 -- --
Other investing activities 1,257 (37) (884)
- ---------------------------------------------------------------------------------------------------------------------
Net cash provided (used) by investing activities 45,237 (19,667) (13,221)
- ---------------------------------------------------------------------------------------------------------------------
FINANCING ACTIVITIES
Borrowing under credit agreement 30,000 -- --
Repayments under credit agreement (63,839) -- --
Long-term borrowings -- -- 6,000
Payments of long-term borrowings (5,042) (7,562) (98)
Other (1,293) (4) (1,495)
- ---------------------------------------------------------------------------------------------------------------------
Net cash provided (used) by financing activities (40,174) (7,566) 4,407
- ---------------------------------------------------------------------------------------------------------------------
Increase (decrease) in cash and cash equivalents 18,275 (16,085) (3,102)
Cash and cash equivalents at beginning of period 30,035 46,120 49,222
- ---------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of period $48,310 $30,035 $46,120
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
II-13
<PAGE>
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(IN THOUSANDS EXCEPT PER SHARE DATA)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CAPITAL IN STOCK UNEARNED
COMMON EXCESS OF PURCHASE RETAINED COMPENSATION -
STOCK PAR VALUE WARRANTS EARNINGS RESTRICTED STOCK OTHER
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
DECEMBER 1, 1993 $294 $61,781 $59,261 $(946)
Net income 657
Dividend ($.05 per share) (1,476)
Restricted stock activity, net (132) 517
- ------------------------------------------------------------------------------------------------------------------------------------
NOVEMBER 30, 1994 294 61,649 58,442 (429)
Net income 8,165
Shares issued under stock award plan 1 485 344
- ------------------------------------------------------------------------------------------------------------------------------------
NOVEMBER 30, 1995 295 62,134 66,607 (85)
Net loss (4,780)
Shares issued under stock award plan 1 413 66
Shares and warrants issued for
business combination 242 180,122 $6,564
Foreign currency translation adjustments $(154)
Net unrealized gain on securities available
for sale 579
- ------------------------------------------------------------------------------------------------------------------------------------
NOVEMBER 30, 1996 $538 $242,669 $6,564 $61,827 $ (19) $ 425
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
II-14
<PAGE>
MORRISON KNUDSEN CORPORATION
(FORMERLY WASHINGTON CONSTRUCTION GROUP, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS OF DOLLARS EXCEPT SHARE DATA)
1. SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION: The consolidated balance sheet includes the
accounts of the Corporation and all of its majority-owned subsidiaries,
including the accounts of Morrison Knudsen Corporation and its engineering and
construction subsidiaries ("Old MK") acquired on September 11, 1996. Investments
in 20%- to 50%-owned companies and all joint ventures are accounted for by the
equity method. The Corporation's proportionate share of construction joint
venture and mining venture revenue, cost of revenue and gross profit (loss) is
included in the consolidated statements of operations. Intercompany accounts and
transactions have been eliminated.
REVENUE RECOGNITION: Revenue on fixed-price construction contracts, including
those of construction joint ventures, is recognized on the
percentage-of-completion method, generally based on the proportion of costs
incurred to total estimated contract costs. Engineering and construction
management contract revenue is recognized on the accrual method. For certain
long-term contracts, principally those involving environmental and hazardous
substance remediation, revenue is recognized based on units of production or
time and material costs incurred. Recognition of earnings on certain long-term
construction contracts is deferred until progress reaches a level of completion
sufficient to estimate reasonably the probable outcome.
Revisions of estimates of contract revenue and completion costs are
reflected in the accounting period when known. Such estimates may change in the
near term, and the effects may be material. Anticipated losses on uncompleted
contracts are recognized when determinable. Claims for additional revenue are
generally not recognized until settled.
The Corporation has a substantial history of making reasonably dependable
estimates of the extent of progress towards completion, contract revenue and
contract completion costs on its long-term construction contracts. However, due
to uncertainties inherent in the estimation process, it is at least reasonably
possible that actual completion costs may vary from estimates in the near term.
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 date and the reported amounts of
revenue and costs during the reporting periods. Actual results could differ in
the near term from those estimates.
UNBILLED RECEIVABLES: Unbilled receivables at November 30, 1996 arise from the
use of the percentage-of-completion method of accounting, cost
reimbursement-type contracts and routine lags in billing. Substantially all the
unbilled receivables at November 30, 1996 are expected to be billed and
collected within one year.
CLASSIFICATION OF CURRENT ASSETS AND LIABILITIES: The Corporation includes in
current assets and liabilities amounts realizable and payable under engineering
and construction contracts that extend beyond one year. Accounts receivable at
November 30, 1996 include approximately $5,900 of contract retentions which are
not expected to be collected within one year. Accounts receivable at November
30, 1996 include $9,519 of short-term marketable securities jointly held with
customers as contract retentions, the market value of which approximated the
carrying amounts. The Corporation recognizes interest income from marketable
securities as earned. Advances from customers are non-interest bearing.
CASH EQUIVALENTS: Cash equivalents consist of liquid securities with original
maturities of three months or less.
FINANCIAL INSTRUMENTS: Financial instruments which potentially subject the
Corporation to concentrations of credit risk consist of cash and equivalents,
accounts receivable, unbilled receivables and securities available for sale.
Concentrations of credit risk with respect to accounts receivable and unbilled
receivables are believed to be limited due to the number and character of the
obligers with respect thereto and the Corporation's credit evaluation process.
Historically, the Corporation has not required collateral for such obligations.
II-15
<PAGE>
COST IN EXCESS OF NET ASSETS ACQUIRED: Cost in excess of net assets acquired in
business combinations ("goodwill") is amortized under the straight-line method
over 40 years. The Corporation recognizes an impairment loss on the unamortized
cost whenever events or changes in circumstances indicate such cost is not
recoverable.
DEPRECIATION AND AMORTIZATION OF PROPERTY AND EQUIPMENT: Depreciation of
construction equipment is provided under straight-line and accelerated methods,
after an allowance for estimated salvage value, over estimated lives of five to
ten years. Depreciation of buildings is provided under the straight-line method
over 10 years, and improvements are amortized over the shorter of the asset life
or lease term. Depreciation of equipment, principally systems, is provided under
the straight-line method generally over three years. Upon disposition, cost and
related accumulated depreciation of property and equipment are removed from the
accounts and gain or loss is reflected in operations.
FOREIGN CURRENCY TRANSLATION: The functional currency for foreign operations is
generally the local currency. Translation of assets and liabilities to U.S.
dollars is based on exchange rates at the balance sheet date. Translation of
revenue and expenses to U.S. dollars is based on a weighted average exchange
rate during the period. Translation gains or losses, net of income tax effects
are reported as a component of stockholders' equity.
ENVIRONMENTAL LIABILITIES: Accruals for estimated costs of response actions for
environmental matters are recorded when it is probable that a liability has been
incurred and the amount of the liability can be reasonably estimated. On a
quarterly basis, the Corporation reviews estimates of costs of response actions
at various sites, including sites in respect of which government agencies have
designated the Corporation as a potentially responsible party. Accrued
liabilities may be discounted and are exclusive of claims for recovery, if any.
INCOME TAXES: Deferred income tax assets and liabilities are recognized for the
effects of temporary differences between the carrying amounts and the income tax
basis of assets and liabilities using enacted tax rates. A valuation allowance
is established when it is more likely than not that net deferred tax assets will
not be realized.
INCOME (LOSS) PER SHARE: Income (loss) per share is based on the weighted
average number of outstanding common and equivalent shares outstanding during
the applicable period. Income (loss) per share is computed separately for each
quarterly and annual period presented.
PREACQUISITION CONTINGENCIES: The Corporation allocated the purchase price of
Old MK to the assets acquired and liabilities assumed, including preacquisition
contingencies, on the basis of estimated fair values at September 11, 1996. The
effects of resolution of preacquisition contingencies within one year of the
acquisition date will be included in the allocation of the purchase price as an
adjustment to the amount of goodwill recorded as of September 11, 1996. The
effects of resolution of preacquisition contingencies after one year of the
acquisition date will be recognized in the determination of net income.
Preacquisition contingencies in connection with the acquisition of Old MK on
September 11, 1996 include long-term contract obligations, claims for additional
revenue, performance guarantees, letters of credit, environmental liabilities,
results of government audits and legal proceedings.
RECLASSIFICATIONS: Certain reclassifications have been made in prior period
financial statements to conform to the 1996 presentation.
2. BUSINESS COMBINATION
On September 11, 1996, the Corporation (which was then known as Washington
Construction Group, Inc., and which had formerly been known as Kasler Holding
Company) acquired the net assets and the engineering and construction operations
of Old MK for $221,736, and changed its name to Morrison Knudsen Corporation.
The purchase price consisted of (i) $13,300 of cash, (ii) 24,161,421 newly
issued shares of common stock of the Corporation valued at $180,364 in the
aggregate, or $7.465 per share, (iii) 1,800,000 newly issued shares of preferred
stock valued at $18,000, (iv) warrants to purchase 2,952,848 shares of the
Corporation's common stock at $12.00 per share exercisable after September 11,
1996 valued at $6,564, and (v) $3,508 of acquisition costs. The acquisition of
Old MK was structured as a merger of Old MK with and into the Corporation and
was accounted for using the purchase method of accounting. The purchase price
was allocated to the assets acquired and liabilities assumed based on estimated
II-16
<PAGE>
fair values at September 11, 1996. Such estimates of fair values are subject to
change based on resolution of preacquisition contingencies. The consolidated
results of operations for the quarter and year ended November 30, 1996 include
the results of Old MK for only the period September 12 to November 30, 1996. The
cost in excess of the net assets acquired of $125,065 is being amortized under
the straight-line method over 40 years.
- --------------------------------------------------------------------------------
PURCHASE PRICE ALLOCATION NOVEMBER 30, 1996
- --------------------------------------------------------------------------------
Net working capital $ 38,226
Investments and other assets 136,778
Cost in excess of net assets acquired 125,065
Property and equipment 28,730
Non-current liabilities (107,063)
- --------------------------------------------------------------------------------
Purchase price $221,736
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
The following unaudited pro forma information presents the consolidated
results of operations as if the acquisition of Old MK had occurred on December
1, 1994 and after giving effect to certain adjustments including amortization of
goodwill, depreciation expense, reduction in investment income and related tax
effects. The unaudited pro forma results of operations include Old MK's results
of operations for the eleven months ended November 30, 1996 and the year ended
December 31, 1995. The pro forma results of operations do not purport to be
indicative of operating results that would have been reported had the
acquisition of Old MK occurred on December 1, 1994 or of future operating
results.
- --------------------------------------------------------------------------------
PRO FORMA RESULTS OF OPERATIONS (UNAUDITED)
PERIOD ENDED NOVEMBER 30, 1996 1995
- --------------------------------------------------------------------------------
Revenue $1,657,371 $1,780,685
Income from continuing operations 16,447 2,491
Income per common share .31 .05
- --------------------------------------------------------------------------------
3. CHANGE IN ACCOUNTING PRINCIPLE
In the third quarter of 1996, the Corporation adopted Statement of Financial
Accounting Standards No. 121 ACCOUNTING FOR THE IMPAIRMENT OF LONG-LIVED ASSETS
AND LONG-LIVED ASSETS TO BE DISPOSED OF which requires that long-lived assets
and certain identifiable intangible assets (i) be reviewed for impairment
whenever events or changes in circumstances indicate that the carrying amount of
an asset may not be recoverable and (ii) if impaired, be reported at the lower
of the carrying amount or fair value thereof, if applicable, less the estimated
costs of disposal. As of August 31, 1996, the Corporation recognized aggregate
impairment losses of $18,200 on certain real property held for sale or use and
operating assets of a non-core subsidiary held for sale.
4. STATEMENT OF FINANCIAL ACCOUNTING STANDARDS
The Financial Accounting Standards Board Statement No. 123 ACCOUNTING FOR
STOCK-BASED COMPENSATION ("SFAS No. 123") became effective December 1, 1996.
SFAS No. 123 defines a fair value based method of accounting for an employee
stock option or similar equity instrument and encourages all entities to adopt
that method of accounting for all of their employee stock compensation plans.
However, SFAS No. 123 also allows continued use of the intrinsic value based
method of accounting prescribed by Accounting Principles Board Opinion 25
ACCOUNTING FOR STOCK ISSUED TO EMPLOYEES ("APB 25"). The Corporation has
elected to continue accounting for stock-based compensation in accordance with
APB 25, and to make pro forma disclosures of net income and income per share for
periods beginning after November 30, 1996 as if the fair value based method of
accounting had been applied. SFAS No. 123 will not have a material effect on the
Corporation's financial position or results of operations.
II-17
<PAGE>
5. SECURITIES AVAILABLE FOR SALE
Securities available for sale are reported at fair value and consisted primarily
of debt securities at November 30, 1996. Gross unrealized gains and losses were
$693 and $114, respectively, at November 30, 1996. Unrealized gains and losses,
net of income tax effects, are reported as a component of stockholders' equity.
- --------------------------------------------------------------------------------
November 30, 1996
Maturities of securities Fair value Cost
- --------------------------------------------------------------------------------
1997 $ 6,881 $ 5,869
1998 - 2002 19,445 20,059
2003 - 2007 4,168 3,987
- --------------------------------------------------------------------------------
Totals $30,494 $29,915
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Securities available for sale are held in a captive insurance subsidiary
which insures workers' compensation risks of the Corporation. Securities
available for sale having a fair value of $16,106 at November 30, 1996 are
pledged as collateral for the Corporation's guarantees of third party letters of
credit.
6. VENTURES
CONSTRUCTION JOINT VENTURES: The Corporation participates in joint ventures,
generally as sponsor and manager of the projects, which are formed to bid,
negotiate and complete specific projects. The size, scope and duration of
joint-venture projects vary among periods.
- --------------------------------------------------------------------------------
COMBINED FINANCIAL POSITION OF CONSTRUCTION JOINT VENTURES
NOVEMBER 30, 1996 1995
- --------------------------------------------------------------------------------
Current assets $ 247,869 $ 13,341
Property and equipment, net 5,684 --
Current liabilities (216,763) (9,905)
- --------------------------------------------------------------------------------
Net assets $ 36,790 $ 3,436
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
COMBINED RESULTS OF OPERATIONS OF CONSTRUCTION JOINT VENTURES
YEAR ENDED NOVEMBER 30, 1996 1995 1994
- --------------------------------------------------------------------------------
Revenue $ 246,636 $ 12,729 $ 21,621
Cost of revenue (229,836) (11,580) (20,193)
- --------------------------------------------------------------------------------
Gross profit $ 16,800 $ 1,149 $ 1,428
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
CORPORATION'S SHARE OF RESULTS OF OPERATIONS OF CONSTRUCTION JOINT VENTURES
YEAR ENDED NOVEMBER 30, 1996 1995 1994
- --------------------------------------------------------------------------------
Revenue $ 103,709 $ 5,327 $ 9,058
Cost of revenue (95,953) (4,886) (8,266)
- --------------------------------------------------------------------------------
Gross profit $ 7,756 $ 441 $ 792
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
II-18
<PAGE>
Combined financial position and results of operations of joint ventures for
1996 reflect ownership interests in and operating results of joint ventures
acquired as a result of the acquisition of Old MK for the period September 12 to
November 30, 1996.
MINING VENTURES: At November 30, 1996, the Corporation had ownership interests
in two mining ventures, MIBRAG mbH (33%) and Westmoreland Resources, Inc.
("Westmoreland Resources") (20%). On September 30, 1996, the Corporation sold 4%
of its 24% ownership interest in Westmoreland Resources to Westmoreland Coal
Company ("Westmoreland Coal") and reduced its ownership interest to 20%. The
Corporation provides contract mining services to these ventures.
- --------------------------------------------------------------------------------
COMBINED FINANCIAL POSITION OF MINING VENTURES
NOVEMBER 30, 1996
- --------------------------------------------------------------------------------
Current assets $ 352,586
Non-current assets 114,835
Property and equipment, net 509,919
Current liabilities (128,435)
Long-term debt (259,084)
Other non-current liabilities (411,432)
- --------------------------------------------------------------------------------
Net assets $ 178,389
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
COMBINED RESULTS OF OPERATIONS OF MINING VENTURES
YEAR ENDED NOVEMBER 30, 1996
- --------------------------------------------------------------------------------
Revenue $ 102,701
Cost of revenue (92,071)
- --------------------------------------------------------------------------------
Gross profit $ 10,630
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
CORPORATION'S SHARE OF RESULTS OF OPERATIONS OF MINING VENTURES
YEAR ENDED NOVEMBER 30, 1996
- --------------------------------------------------------------------------------
Revenue $ 32,786
Cost of revenue (29,385)
- --------------------------------------------------------------------------------
Gross profit $ 3,401
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
On December 23, 1996, Westmoreland Coal and four subsidiaries, including
Westmoreland Resources, filed for protection under Chapter 11 of the United
States Bankruptcy Code. At November 30, 1996, the carrying amount of the
Corporation's ownership interest in Westmoreland Resources was $5,186. The
Corporation cannot presently predict with any certainty to what extent, if any,
the ownership interest in Westmoreland Resources will ultimately be impaired,
but any loss is not expected to have a material adverse effect on the
Corporation's financial position, results of operations and cash flows.
7. ASSETS HELD FOR SALE
At November 30, 1996, assets held for sale are stated at the lower of cost or
fair value less cost of disposal and are comprised of (i) substantially all of
the operating assets of a non-core subsidiary with a carrying amount of $10,783,
(ii) land with a carrying amount of $2,826, and (iii) a 29.5% stock ownership
interest in a foreign bank with a carrying amount of $5,244. The Corporation has
offered these assets for sale because they are not a part of its core business,
but is unable
II-19
<PAGE>
to predict disposal dates. In 1996, the Corporation recognized aggregate
impairment losses of $12,100 on assets held for sale and $6,100 on assets held
for use. Included in the Corporation's 1996 results of operations were revenue
and net loss from the non-core subsidiary of $5,400 and $(1,700), respectively,
excluding the estimated impairment loss of $6,500.
8. CREDIT ARRANGEMENTS
On October 31, 1996, the Corporation obtained from the Bank of Montreal a five-
year, $200,000 revolving loan and letter of credit facility (the "facility").
Revolving loan borrowings under the facility are limited to $125,000. At October
31, 1997, and annually thereafter, the facility may, upon approval, be extended
by an additional year. The Corporation paid a $1,100 underwriting fee to the
bank and is required to pay commitment and letters of credit fees.
Substantially all of the assets of the Corporation and certain of its
material domestic subsidiaries are pledged as collateral until such time as the
Corporation obtains an investment grade credit rating. The facility covenants
require the maintenance of financial ratios, the most restrictive of which is
fixed charge coverage and minimum levels of net worth and place limitations on,
among other things, additional indebtedness, investments and loans guarantees.
At November 30, 1996, the Corporation had no outstanding borrowings under the
facility and was in compliance with its covenants. The Corporation is not
restricted from paying dividends if an event of default does not exist.
The facility provides for loans bearing interest, payable quarterly, at the
applicable LIBOR rate or the base rate, as defined, plus an additional margin.
The additional margin ranges from 3/4% to 1 1/8% for the LIBOR rate and zero to
1/4% for the base rate, based on the ratio of earnings before interest, taxes,
depreciation and amortization to the Corporation's funded debt.
9. TAXES ON INCOME
The components of the U.S. federal, state and foreign income tax expense
(benefit) were as follows:
- --------------------------------------------------------------------------------
YEAR ENDED NOVEMBER 30, 1996 1995 1994
- --------------------------------------------------------------------------------
Currently payable
U.S. federal $ (10) $2,217 $ 1,418
State 108 723 369
Foreign 1,019 -- --
- --------------------------------------------------------------------------------
Current 1,117 2,940 1,787
- --------------------------------------------------------------------------------
Deferred
U.S. federal (1,459) 844 (1,096)
State (361) 238 (338)
Foreign 209 -- --
- --------------------------------------------------------------------------------
Deferred (1,611) 1,082 (1,434)
- --------------------------------------------------------------------------------
Income tax expense (benefit) $ (494) $4,022 $ 353
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
II-20
<PAGE>
- --------------------------------------------------------------------------------
DEFERRED TAX ASSETS AND LIABILITIES
NOVEMBER 30, 1996 ASSETS LIABILITIES TOTAL
- --------------------------------------------------------------------------------
Employee benefit plans $ 35,087 $ -- $ 35,087
Estimated loss accruals 66,948 -- 66,948
Revenue recognition 5,659 -- 5,659
Alternative minimum tax 13,902 -- 13,902
Joint ventures 4,293 -- 4,293
Depreciation -- (6,587) (6,587)
Basis difference in affiliates -- (11,016) (11,016)
Self-insurance accruals 22,963 -- 22,963
Loss carryforwards acquired in the
business combination 83,336 -- 83,336
Valuation allowance (126,878) -- (126,878)
Other, net -- (24,861) (24,861)
- --------------------------------------------------------------------------------
Total deferred tax assets (liabilities) $105,310 $(42,464) $ 62,846
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
DEFERRED TAX ASSETS AND LIABILITIES
NOVEMBER 30, 1995 ASSETS LIABILITIES TOTAL
- --------------------------------------------------------------------------------
Estimated loss accruals $2,281 $ -- $ 2,281
Joint ventures -- (635) (635)
Depreciation -- (6,494) (6,494)
Purchase accounting adjustments -- (2,861) (2,861)
Other, net -- (897) (897)
- --------------------------------------------------------------------------------
Total deferred tax assets (liabilities) $2,281 $(10,887) $(8,606)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
At November 30, 1996, the Corporation had consolidated regular tax net
operating loss carryforwards for federal, state and foreign tax purposes of
approximately $211,669, $138,922 and $1,201, respectively, which expire in the
years 2000 through 2012. In addition, the Corporation had alternative minimum
tax credits of $13,902 at November 30, 1996 which carry forward indefinitely.
The ability of the Corporation to use the net operating loss carryforwards and
tax credits prior to expiration is limited. The $126,878 valuation allowance
reduces these net operating loss carryforwards and other deferred tax assets to
a level which management believes will, more likely than not, be realized based
on estimated future taxable income. Acquired tax assets that are not recognized
at September 11, 1996 but which are recognized in subsequent periods by a
reduction in the valuation allowance established at September 11, 1996, will
result in an adjustment to the amount of goodwill originally recorded and affect
the related amortization. The valuation allowance is subject to change based on
the occurrence of future events, and any such change could be material. As of
November 30, 1996, U.S. federal income tax returns for the years 1987 through
1993 were in the process of examination. Management believes that adequate
provision has been made for probable tax assessments. Years prior to 1987 are
closed to examination.
Income tax expense (benefit) differed from income taxes at the U.S. federal
statutory tax rate of 35% as follows:
- --------------------------------------------------------------------------------
YEAR ENDED NOVEMBER 30, 1996 1995 1994
- --------------------------------------------------------------------------------
Tax expense (benefit) at 35% U.S. federal
statutory rate $(1,846) $4,266 $344
State income tax, net of federal benefit (165) 624 20
Foreign income tax, net of federal benefit 799 -- --
Nondeductible expenses (nontaxable
income), net 447 (1,024) 323
Other 271 156 (334)
- --------------------------------------------------------------------------------
Income tax expense (benefit) $ (494) $4,022 $353
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
II-21
<PAGE>
Nondeductible expenses (nontaxable income), net was comprised principally
of goodwill amortization, tax exempt interest income, meals and entertainment
expense and a change in estimate benefit in 1995.
Income (loss) before income taxes was comprised of a domestic source loss
of $(11,786) and foreign source income of $6,512 in 1996 and domestic source
income in 1995 and 1994.
10. BENEFIT PLANS
PENSION PLAN: The Corporation succeeded Old MK as sponsor of a defined benefit
pension plan under which benefits have been frozen and no further benefits have
been accrued since 1991. Management expects to terminate sponsorship of the plan
and effect a settlement of the plan's accumulated benefit obligation through
lump-sum cash payments and the purchase of nonparticipating annuities.
Accordingly, the accumulated benefit obligation at November 30, 1996 reflects
the Corporation's estimate of the ultimate termination benefits to be settled
with the cash proceeds from liquidation of the plan's assets and additional
contributions by the Corporation, if required. Pending such settlement, the plan
continues to hold assets, pay benefits and, if required, receive additional
employer contributions.
- --------------------------------------------------------------------------------
FUNDED STATUS OF THE PLAN NOVEMBER 30, 1996
- --------------------------------------------------------------------------------
Accumulated vested termination benefit obligation $(57,492)
Plan assets at fair value 54,266
- --------------------------------------------------------------------------------
Accumulated vested termination benefit obligation
in excess of plan assets (3,226)
Unrecognized net gain (1,635)
- --------------------------------------------------------------------------------
Accrued pension benefit obligation $ (4,861)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
At November 30, 1996, approximately 53% of plan assets were invested in
equity securities, 40% in fixed-income (corporate and U.S. government)
securities and 7% in cash equivalents. The discount rate used in determining the
actuarial present value of the accumulated vested termination benefit obligation
was 7% for anticipated annuity settlements and 6.75% for anticipated lump-sum
payments. The expected rate of return on plan assets was 8.0%.
MULTIEMPLOYER PENSION PLANS: The Corporation participates in and makes
contributions to numerous construction-industry multiemployer pension plans.
Generally, the plans provide defined benefits to substantially all employees
covered by collective bargaining agreements. The Corporation's cost of the plans
was $4,972 in 1996, $2,460 in 1995 and $2,851 in 1994. Under the Employee
Retirement Income Security Act, a contributor to a multiemployer plan is liable,
upon termination or withdrawal from a plan, for its proportionate share a plan's
unfunded vested liability. Based on the most recent information available from
the United States Department of Labor, the Corporation has estimated that its
share of the plans' unfunded vested liabilities upon termination or withdrawal
would be approximately $7,000. The Corporation currently has no intention of
withdrawing from any of the multiemployer pension plans in which it
participates.
ACCRUED PENSION LIABILITIES: The Corporation has assumed the pension
liabilities to former employees and former non-employee directors of Old MK as
follows:
- --------------------------------------------------------------------------------
STATUS OF THE UNFUNDED PENSION PLANS NOVEMBER 30, 1996
- --------------------------------------------------------------------------------
Accumulated vested benefit obligation,
discounted at 7.25% $(14,612)
Unrecognized net loss 703
- --------------------------------------------------------------------------------
Accrued pension liabilities $(13,909)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
The interest expense on the unfunded accumulated vested benefit obligation
for the period September 12 to November 30, 1996 was $207.
II-22
<PAGE>
POSTRETIREMENT HEALTH CARE PLAN: The Corporation succeeded Old MK as sponsor of
an unfunded plan to provide certain health care benefits for employees of Old MK
who retired before July 1, 1993 including their surviving spouses and dependent
children. Employees who retired after July 1, 1993 are not eligible for
postretirement health care benefits. Prior to November 30, 1996, the Corporation
changed its postretirement health care plan to increase retirees' required cash
contributions, effective January 1, 1997, and the effect of such change was
reflected in the accumulated postretirement benefit obligation ("APBO") at
November 30, 1996. The plan was amended in past years, and the Corporation
reserves the right to amend or terminate the postretirement health care benefits
currently provided under the plan and may increase retirees' cash contributions
at any time. The interest expense on the unfunded APBO for the period September
12 to November 30, 1996 was $803.
- --------------------------------------------------------------------------------
ACCRUED POSTRETIREMENT BENEFIT OBLIGATION NOVEMBER 30, 1996
- --------------------------------------------------------------------------------
Accumulated benefit obligation $(50,265)
Unrecognized prior service credit (4,976)
Unrecognized actuarial net loss 1,808
- --------------------------------------------------------------------------------
Accrued postretirement benefit obligation $(53,433)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
The unrecognized prior service credit of $4,976 will be amortized to
periodic health care expense over the 13-year average future expected lifetime
of retirees and their surviving spouses beginning in fiscal 1997.
The APBO was determined using the projected unit credit method and an
assumed discount rate of 7.25%. In addition, an annual rate increase of 9.5% in
the per capita cost of health care benefits was assumed, gradually declining to
5.25% in the year 2006 and continuing thereafter at that rate over the projected
payout period of the benefits. The health care cost trend rate assumption has a
significant effect on the APBO. For example, a 1% increase in the health care
cost trend rate would increase the APBO at November 30, 1996 by approximately
$4,970, increase the 1996 postretirement health care expense by approximately
$80 and increase estimated 1997 postretirement health care expense of $3,140 by
approximately $360.
OTHER RETIREMENT PLANS: The Corporation also sponsors a number of defined
contribution retirement plans. Participation in these plans is available to
substantially all salaried employees and to certain groups of hourly employees.
The Corporation's cash contributions to these plans are based on either a
percentage of employee contributions or on a specified amount per hour based on
the provisions of each plan. The cost of these plans was $3,192 in 1996, $630 in
1995 and $923 in 1994.
11. TRANSACTIONS WITH AFFILIATES
The Corporation purchased goods and services from affiliates of a principal
stockholder and Chairman of the Board of Directors of the Corporation as
follows:
- --------------------------------------------------------------------------------
YEAR ENDED NOVEMBER 30, 1996 1995 1994
- --------------------------------------------------------------------------------
Capital expenditures - equipment $1,063 $1,545 $ 1,933
Cost of revenue 318 5,901 8,006
General and administrative expense 1,688 2,446 2,461
- --------------------------------------------------------------------------------
II-23
<PAGE>
The Corporation performed construction services, rented equipment and
realized gains on sales of equipment to affiliates of a principal stockholder
and Chairman of the Board of Directors of the Corporation as follows:
- --------------------------------------------------------------------------------
YEAR ENDED NOVEMBER 30, 1996 1995 1994
- --------------------------------------------------------------------------------
Construction services $4,696 $848 $7,316
Equipment rental 346 194 190
Gain on sales of equipment, net 466 586 537
- --------------------------------------------------------------------------------
In 1996 and 1995, the Corporation participated in a construction joint
venture with an entity controlled by a principal stockholder and Chairman of the
Board of Directors of the Corporation and recognized revenue of $2,103 and
earnings of $393 in 1996 and revenue of $1,800 and earnings of $382 in 1995. The
Corporation's investment in the joint venture was $1,080 at November 30, 1996
and $582 at November 30, 1995.
The Corporation paid $650 in fees and expenses in 1996 to affiliates of a
principal stockholder and Chairman of the Board of Directors of the Corporation
for financial and advisory services in connection with the acquisition of Old
MK.
The Corporation paid premiums of $11,508 and $3,901 to a brokerage firm
owned by a member of the Board of Directors of the Corporation and to
insurance and bonding companies for insurance and surety bonds arranged
through the brokerage firm in 1996 and 1995, respectively. The brokerage firm
received approximately $875 and $430 in commissions for services provided in
1996 and 1995, respectively. In January 1997, the Corporation and the
brokerage firm concluded an agreement for insurance brokerage services
covering the period August 1, 1996 through December 31, 1997, pursuant to
which the brokerage firm receives an annual fee of $1,280 which includes
commissions earned on insurance. Of the $875 in commissions set forth above,
$424 is covered by such agreement.
In 1996, the Corporation paid $992 in fees and expenses and issued stock
purchase warrants to purchase 110,500 shares of the Corporation's common stock
with a fair value of $543 at September 12, 1996, to a financial advisory firm
affiliated with a member of the Board of Directors of the Corporation for
financial and advisory services in connection with the acquisition of Old MK.
12. GEOGRAPHIC AND CUSTOMER INFORMATION
The Corporation operates in the engineering and construction industry in the
following geographic areas:
- --------------------------------------------------------------------------------
GEOGRAPHIC DATA NOVEMBER 30,
YEAR ENDED 1996
- --------------------------------------------------------------------------------
Revenue
United States $589,930
International 69,170
- --------------------------------------------------------------------------------
Total revenue $659,100
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Operating income (loss)
United States $(11,787)
International 3,193
- --------------------------------------------------------------------------------
Operating loss $ (8,594)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Identifiable assets
United States $405,123
International 154,083
Corporate assets 280,431
- --------------------------------------------------------------------------------
Total assets $839,637
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Corporate assets include cash and equivalents, refundable income taxes, deferred
tax assets, securities available for sale, assets held for sale and cost in
excess of net assets acquired. Revenue from international operations and
identifiable assets
II-24
<PAGE>
of international operations in 1996 were in numerous geographic areas without
significant concentration, and in 1995 and 1994 were less than 10% of
consolidated revenue and assets, respectively.
Ten percent or more of the Corporation's revenues for the three years in
the period ended November 30, 1996 were derived from contracts and subcontracts
with the following customers:
- --------------------------------------------------------------------------------
YEAR ENDED NOVEMBER 30, 1996 1995 1994
- --------------------------------------------------------------------------------
California Department of Transportation $147,598 $109,033 $117,144
United States Department of Energy 69,614 2,226 13,646
Other U.S. government agencies 36,439 20,537 42,400
- --------------------------------------------------------------------------------
13. CONTINGENCIES AND COMMITMENTS
SUMMITVILLE ENVIRONMENTAL MATTERS: From July 1985 to June 1989, a subsidiary of
the Corporation performed certain contract mining services at the Summitville
mine near Del Norte, Colorado. The United States Environmental Protection Agency
(the "EPA") has notified the Corporation and approximately 20 other parties that
each is a potentially responsible party ("PRP") with regard to hazardous
substances generated or disposed of at the Summitville Mine Superfund Site (the
"Site"). The EPA has not commenced any litigation or other proceedings against
the Corporation. The Corporation has had only preliminary discussions with the
EPA but has been informally advised that the EPA does not consider the
Corporation eligible for a de minimis settlement (the basis for settlement by
several PRPs considered to have contributed less than 3% volume and toxicity of
the hazardous substances at the Site).
According to a report published in August 1996, the EPA estimated that the
total remediation costs incurred and to be incurred at the Site will be
$120,000. The Corporation is not a party to any agreement regarding an
allocation of responsibility, and the EPA has not made an allocation of
responsibility among the PRPs. The Corporation's share, if any, of the
aggregate environmental liability associated with the Site is not presently
determinable and depends upon, among other things, the manner in which liability
may be allocated to or among the Corporation or other PRPs associated with the
Site, the efficacy of any defenses that the Corporation or such other PRPs may
have to any assertion of liability, the willingness and ability of such other
PRPs to discharge such liability as may be allocated to them and the outcome of
any negotiations or settlement discussions between the Corporation and the EPA
and/or such other PRPs. Accordingly, no remediation costs have been accrued at
November 30, 1996.
Management believes that the ultimate resolution of this matter could have
a material adverse effect on the Corporation's financial position and could
materially and adversely effect its results of operations and cash flows in one
or more periods.
OTHER ENVIRONMENTAL MATTERS: The Corporation assumed a liability of Old MK of
$4,000 for the estimated costs of monitoring and treatment of ground water
contamination at or adjacent to rail facilities in Boise, Idaho, previously
owned by Old MK. In December 1996, the current owner and operator of the
facilities qualified for a post closure permit and assumption of related
monitoring and treatment obligations for such facilities. The Corporation has
not adjusted the accrued liability pending fulfillment of the obligation by the
current owner. The cost, and the Corporation's share thereof, if any, of
remediation of the contamination at the facilities cannot be estimated at this
time and, accordingly, no liability has been accrued.
The Corporation has been identified as a PRP and is contingently liable for
remediation liabilities in connection with Old MK's former Transit business. The
Corporation agreed to indemnify the buyer of the Transit business for
remediation costs and assumed an estimated undiscounted liability of $3,000. It
is possible that the ultimate cost, which cannot be determined at this time,
could exceed the Corporation's recorded liability by a material amount.
The Corporation has assumed an undiscounted liability of Old MK which at
November 30, 1996 was $1,972 for environmental cleanup activities at four other
sites. The Corporation estimates that such costs could range from $1,550 to
$3,300 in the aggregate.
CONTRACT RELATED MATTERS: In 1995, Old MK entered into a fixed-price contract
with the Texas Natural Resource Conservation Commission ("TNRCC") for
construction of a solvent-extraction facility and remediation of contaminated
soil at a Superfund site in Texas. The facility is required to meet certain
specified performance criteria. If the facility does not meet the performance
criteria, the contract may be terminated and TNRCC may recover up to $13,619 of
advances
II-25
<PAGE>
through a letter of credit issued at the request of the Corporation. Management
believes it is probable that the required performance can be achieved.
Accordingly, no provision for loss has been recognized at November 30, 1996.
In connection with a 1989 sale of Old MK's ownership interest of a
shipbuilding subsidiary, the Corporation assumed a guarantee of port facility
bonds of $21,000 through 2002. The former subsidiary has collateralized the
bonds with certain assets and has established a sinking fund of $2,030 for the
bonds. The Corporation does not anticipate a loss as a result of this guarantee.
The Corporation is contingently liable under a residual value guarantee at
the termination of a long-term locomotive lease agreement in 2005 between a
third-party equipment lessor and one of Old MK's customers relating to the sale
by Old MK of 25 remanufactured locomotives to the equipment lessor. The
estimated range of the contingent liability is from $1,500 at November 30, 1996
increasing over the lease term to $11,300 in 2005. The Corporation does not
anticipate a loss as a result of this guarantee.
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 of the Corporation's
allocation of periodic costs of self-insurance programs and general and
administrative expenses for years ended 1987 through 1995 are in progress.
Proposed claims and cost disallowances aggregate approximately $27,000. The
Corporation believes that the government's claims and disallowances are
overstated and has accrued a liability at November 30, 1996 of approximately
$18,000. It is possible that the ultimate cost, which cannot be determined at
this time, could exceed the Corporation's recorded liability.
LETTERS OF CREDIT: In the normal course of business, the Corporation causes
letters of credit to be issued in connection with contract performance
obligations which are not reflected in the balance sheet. The Corporation is
obligated to reimburse the issuer of such letters of credit for any payments
made thereunder. At November 30, 1996, $33,669 in face amount of such letters of
credit were outstanding, including a $13,619 letter of credit issued in
connection with the contract performance obligation to TNRCC discussed above.
The Corporation has pledged securities available for sale as collateral for its
reimbursement obligations in respect of $16,106 in face amount of certain
letters of credit.
EMPLOYMENT AGREEMENTS AND SEVERANCE PAY PLANS: The Corporation has employment
agreements with several key employees which generally provide for salary
continuation and certain benefits in the event of termination of employment
without cause (as defined) following a change of control in the Corporation (as
defined). If all employees subject to such agreements at November 30, 1996 were
to be terminated under circumstances giving rise to such salary continuation and
benefits, the Corporation's aggregate liability would be approximately $4,300.
As a result of the acquisition of Old MK, several employees were terminated,
resulting in cash payments of $1,400 and an accrued liability of $519 at
November 30, 1996.
In addition, the Corporation is committed to pay enhanced severance
benefits to certain covered employees who are involuntarily terminated prior to
December 31, 1997. If all covered employees were to be terminated, the
Corporation's aggregate liability would be approximately $6,800.
LONG-TERM LEASES: Total rental payments for real estate and equipment under
lease charged to operations in 1996, 1995 and 1994 were $11,780, $4,514 and
$5,451, respectively. Future minimum rental payments under operating leases,
some of which contain renewal or escalation clauses, with remaining
noncancelable terms in excess of one year at November 30, 1996 were as follows:
- --------------------------------------------------------------------------------
REAL ESTATE EQUIPMENT TOTAL
- --------------------------------------------------------------------------------
YEAR ENDING NOVEMBER 30, 1997 $ 9,516 $2,583 $12,099
1998 8,205 1,492 9,697
1999 7,483 938 8,421
2000 7,992 482 8,474
2001 6,040 80 6,120
2002 and after 48,768 67 48,835
- --------------------------------------------------------------------------------
Totals $88,004 $5,642 $93,646
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
II-26
<PAGE>
Administrative and engineering facilities in Boise, Idaho, and Cleveland,
Ohio, are leased under long-term, non-cancelable leases expiring in 2004 and
2010, respectively, with aggregate lease obligations of $11,800 and $66,600 for
the Boise facility and Cleveland facility, respectively.
OTHER: Former shareholders (the plaintiffs) of TMS, Inc. ("TMS"), which was
acquired by Old MK in December 1992, filed an action on December 22, 1995
alleging they were induced to enter into an agreement to exchange TMS shares for
common stock of Old MK (the defendant) and also enter into noncompete agreements
by the defendants' allegedly false statements. Plaintiffs seek compensatory
damages of $7,500, treble damages, punitive damages of $5,000, pre and
postjudgment interest and attorneys' fees. The Corporation's motion to dismiss
the action is pending before the court. The Corporation believes that it has
insurance coverage for all or a substantial part of any damages that may be
awarded in this matter. Although the ultimate outcome of this matter cannot be
predicted with certainty, management believes that the outcome will not have a
material adverse effect on the Corporation's financial position, results of
operations and cash flows.
There are other claims, lawsuits, disputes with third parties,
investigations and administrative proceedings against the Corporation and its
subsidiaries relating to matters in the ordinary course of its business
activities that are not expected to have a material adverse effect on the
Corporation's financial position, results of operations and cash flows.
14. SUPPLEMENTAL CASH FLOW INFORMATION
- --------------------------------------------------------------------------------
YEAR ENDED NOVEMBER 30, 1996 1995 1994
- --------------------------------------------------------------------------------
SUPPLEMENTAL CASH FLOW INFORMATION
Interest paid $ 993 $ 189 $ 86
Income taxes paid 1,877 3,861 753
- --------------------------------------------------------------------------------
SUPPLEMENTAL NONCASH INVESTING ACTIVITIES
Land, plant and equipment classified as
assets held for sale $25,709
- --------------------------------------------------------------------------------
Business combination:
Fair value of assets $701,188
Liabilities assumed (479,452)
Redeemable preferred stock issued (18,000)
Equity securities issued (186,928)
- --------------------------------------------------------------------------------
Total cash paid, including acquisition
cost of $3,508 $ 16,808
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
15. REDEEMABLE PREFERRED STOCK
On September 11, 1996, the Corporation issued 1,800,000 shares of Series A
preferred stock in connection with the acquisition of Old MK. Redemptions of the
Series A preferred stock, not to exceed $18,000 in the aggregate, will be made
from amounts, if any, received by the Corporation in respect of certain federal
income tax refunds (including related interest). Such refunds are reflected in
the Corporation's November 30, 1996 balance sheet. The U.S. Internal Revenue
Service has informally advised the Corporation that it is in agreement with the
amount of the income tax refund claims and is preparing a report in respect of
such claims to the Joint Committee on Taxation of the U.S. Congress. The
Corporation does not presently know the timing of submission of the such report.
If the Series A preferred stock has not been redeemed and canceled through the
distribution of $18,000 within five years of the issuance of the Series A
preferred stock, the Corporation must redeem all shares of Series A preferred
stock at a per share redemption price equal to the greater of $.01 or a pro rata
portion of any undistributed amounts of such refunds. Similarly, upon the
liquidation, dissolution or winding up of the affairs of the Corporation, the
holders of shares of Series A preferred stock will be entitled to receive,
before an amount is paid or distributed to any holders of common stock, a per
share amount equal to the greater of $.01 or a pro rata share of any
undistributed amounts of such refunds.
Holders of Series A preferred stock are entitled to vote together with
holders of common stock as a single class on all
II-27
<PAGE>
matters with respect to which the holders of common stock are entitled to vote.
Each share of Series A preferred stock has 1/10,000 of a vote.
16. CAPITAL STOCK, STOCK PURCHASE WARRANTS AND STOCK COMPENSATION PLAN
CAPITAL STOCK: On September 11, 1996, the Corporation's stockholders approved
certain amendments to the Corporation's Certificate of Incorporation including
increases in the number of total authorized shares of the Corporation's (i)
common stock from 39,000,000 to 100,000,000 and (ii) preferred stock from
1,000,000 to 10,000,000. Preferred stock may be issued at any time or from time
to time in one or more series with such designations, powers, preferences and
rights, qualifications, limitations or restriction thereof as determined by the
Board of Directors of the Corporation.
STOCK PURCHASE WARRANTS: At November 30, 1996, the Corporation had outstanding
stock purchase warrants to acquire 2,952,848 shares of the Corporation's common
stock at an exercise price of $12.00 per share. Warrants to purchase 2,765,000
shares expire in March 2003, and warrants to purchase 187,848 shares expire in
September 2001.
STOCK COMPENSATION PLAN: The Corporation has a Stock compensation Plan for
employees and non-employee directors as amended (the "1994 plan") which provides
for grants by the Board of Directors in the form of nonqualified stock options
or incentive stock options ("ISOs") and restricted stock awards. Additional
shares of common stock available each year for grants under the 1994 plan are
equal to 3% of the outstanding shares as of December 1. Grant prices per share
for nonqualified stock options are determined by the Board. Grant prices per
share for ISOs are at the fair market value of the Corporation's common stock at
the date of grant. Stock options extend for and vest over periods of up to ten
years as determined by the Board. The Board may accelerate the vesting period
after award of an option. The number of shares available for grant of ISOs may
not exceed 2,900,000 shares, and no individual shall be granted stock options or
restricted stock awards for more than 5,000,000 shares over any three year
period.
The terms and conditions of restricted stock awards issued to key employees
are determined by the Board. Upon termination of employment, shares that remain
subject to restriction are forfeited. At November 30, 1996, there were 3,675
restricted shares outstanding with restriction periods ranging from January 1997
to January 1998. No restricted stock awards were made in 1996 and 1995.
Non-employee directors may elect to forego receipt in cash of certain fees
earned during any year in return for an option with a grant price equal to 80%
of the fair market value of the Corporation's common stock, a term and vesting
period of up to ten years as determined by the Board. Non-employee directors
elected options for 50,461 and 55,386 shares in lieu of fees earned in 1996 and
1995, respectively.
- --------------------------------------------------------------------------------
OPTIONS OUTSTANDING, EXERCISABLE AND AVAILABLE
FOR GRANT UNDER THE 1994 PLAN NUMBER OF SHARES
- --------------------------------------------------------------------------------
Outstanding at November 30, 1994 641,900
Granted 340,386
Canceled (41,300)
- --------------------------------------------------------------------------------
Outstanding at November 30, 1995 940,986
Granted 360,461
Canceled (26,875)
Exercised ($5.25 per share) (166,667)
- --------------------------------------------------------------------------------
Outstanding at November 30, 1996 ($4.625 - $10.00 per share) 1,107,905
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Exercisable at November 30, 1996 ($4.625 - $10.00 per share) 718,782
- --------------------------------------------------------------------------------
Available for grant at November 30, 1996 1,375,948(a)
- --------------------------------------------------------------------------------
(a) Available for grant includes shares which may be granted as either stock
options or restricted stock awards, as determined by the Board. On December 1,
1996, 1,608,090 additional shares became available for grant.
On April 11, 1997, the Corporation's stockholders will vote upon the
adoption of the 1997 Stock Option and Incentive Plan for Non-employee Directors
(the "1997 plan") which is expected to provide for grants in the form of
nonqualified stock options and restricted stock awards. Grant prices per share
for stock options will be at fair market value at the date
II-28
<PAGE>
of grant. The number of shares available for grant as options and restricted
stock awards will be 500,000 and 100,000, respectively. Grants of nonqualified
stock options and restricted stock awards to the non-employee directors under
the 1997 plan will not preclude grants under the 1994 plan.
17. FINANCIAL INSTRUMENTS
The estimated fair values of financial instruments at November 30, 1996 have
been determined by the Corporation, using available market information and
valuation methodologies believed to be appropriate. However, judgment is
necessary in interpreting market data to develop the estimates of fair values.
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
November 30, 1996 and 1995 were as follows:
- --------------------------------------------------------------------------------
NOVEMBER 30, 1996 1995
- --------------------------------------------------------------------------------
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
- --------------------------------------------------------------------------------
FINANCIAL ASSETS
Cash and cash equivalents $ 48,310 $ 48,310 $ 30,035 $ 30,035
Accounts receivable, excluding
customer retentions 193,993 193,993 26,814 26,814
Customer retentions 28,348 27,444 14,513 13,806
Unbilled receivables 101,564 101,564 5,033 5,033
Notes receivable 8,087 9,101 11,511 12,292
Securities available for sale 30,494 30,494 -- --
FINANCIAL LIABILITIES
Subcontracts payable, excluding
retentions 48,030 48,030 6,880 6,880
Subcontract retentions 27,006 26,145 9,778 9,449
Advances from customers 11,280 10,920 -- --
- --------------------------------------------------------------------------------
The fair value of cash and cash equivalents, accounts receivable excluding
customer retentions, unbilled receivables and subcontracts payable excluding
retentions approximate cost because of the immediate or short-term maturity of
these financial instruments. The fair value of securities available for sale is
based on quoted market prices of the securities at the balance sheet date. The
fair value of notes receivable, customer retentions, subcontract retentions and
customer advances is estimated by discounting expected cash flows at rates
currently available to the Corporation for instruments with similar risks and
maturities.
II-29
<PAGE>
ITEM 9. CHANGE IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
On September 12, 1996, the Board of Directors of the Corporation, upon
recommendation by the Audit Committee thereof, approved the engagement of
Coopers & Lybrand L.L.P. ("C&L") to make an examination of the consolidated
financial statements of the Corporation and its subsidiaries for the fiscal year
ended November 30, 1996. C&L replaced KPMG Peat Marwick LLP ("KPMG") which was
concurrently dismissed.
During the period from December 1, 1993 through September 11, 1996, there
were no disagreements with KPMG on any matters of accounting principles or
practices, financial statement disclosure or auditing scope or procedure which,
if not resolved to KPMG's satisfaction, would have caused such firm to make
reference to the subject matter thereof in connection with its report on the
Corporation's financial statements. During the period from December 1, 1993
through September 11, 1996, the Corporation did not consult with C&L regarding
the application of accounting principles to any completed or proposed
transaction or the type of opinion that might be rendered on the Corporation's
financial statements. KPMG's report on the Corporation's financial statements
for the past two fiscal years did not contain an adverse opinion or a disclaimer
of opinion and was not qualified or modified as to uncertainty, audit scope or
accounting principles.
II-30
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information called for by this Item is set forth under the captions
"Directors" and "Executive Officers" in the Corporation's definitive proxy
statement to be filed not later than March 31, 1997 and incorporated herein by
this reference.
ITEM 11. EXECUTIVE COMPENSATION
The information called for by this Item is set forth under the caption "Report
of the Compensation Committee on Executive Compensation for 1996" in the
Corporation's definitive proxy statement to be filed not later than March 31,
1997, and incorporated herein by this reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information called for by this Item is set forth under the caption "Voting
Securities and Principal Holders Thereof" in the Corporation's definitive proxy
statement to be filed not later than March 31, 1997, and incorporated herein by
this reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information called for by this Item is set forth under the caption "Certain
Relationships and Related Transactions" in the Corporation's definitive proxy
statement to be filed not later than March 31, 1997, and incorporated herein by
this reference.
III-1
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) DOCUMENTS FILED AS A PART OF THIS ANNUAL REPORT ON FORM 10-K.
PAGE(S)
1. The Consolidated Financial Statements, together with
the reports thereon of Coopers & Lybrand L.L.P. dated
February 24, 1997, and KPMG Peat Marwick LLP dated
January 12, 1996 are included in Part II, Item 8 of
this Annual Report on Form 10-K
Report of Independent Accountants II-8
Report of Independent Public Accountants II-9
Consolidated Statements of Operations for each of
the three years in the period ended November 30, 1996 II-10
Consolidated Balance Sheets at November 30, 1996
and 1995 II-11, II-12
Consolidated Statements of Cash Flows for each of
the three years in the period ended November 30, 1996 II-13
Consolidated Statements of Stockholders' Equity for
each of the three years in the period ended
November 30, 1996 II-14
Notes to Consolidated Financial Statements II-15 to II-29
2. Financial Statement Schedule as of November 30, 1996
Part IV of this Annual Report on Form 10-K IV-1
Valuation and Qualifying Accounts
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.
The registrant filed a Current Report on Form 8-K dated September 11, 1996
to report the acquisition of Old MK and related events under the following
items: Item 1. Changes in Control of Registrant; Item 2. Acquisition or
Disposition of Assets; Item 4. Changes in Registrant's Certifying
Accountant; and Item 7. Financial Statements, Pro forma Financial
Information and Exhibits.
The registrant filed a Current Report on Form 8-K dated October 1, 1996 to
report (under Item 5. Other Events) the resignation of its chief financial
officer and controller.
The registrant filed a Current Report on Form 8-K dated October 4, 1996 to
report (under Item 5. Other Events) that the Central Regional office of the
Securities and Exchange Commission notified the Registrant that its staff
inquiry of Old MK (Commission file Number 1-8889) in the matter of the
Denver International Airport Revenue Bonds was terminated, and no
enforcement action has been recommended by the Commission.
The registrant filed a Current Report on Form 8-K dated October 21, 1996 to
report (under Item 5. Other Events) that the registrant filed a Form 12b-25
Notification of Late Filing of its Quarterly Report on Form 10-Q for the
quarter ended August 31, 1996.
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
February 26, 1997.
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 February 26, 1997 by the following persons on
behalf of the Corporation in the capacities indicated.
President and Chief Executive Officer and Director
/s/ R.A. Tinstman (Principal Executive Officer)
- -----------------------------
Executive Vice President and Chief Legal Officer
/s/ S.G. Hanks (Principal Financial Officer)
- -----------------------------
Acting Controller
/s/ J.E. McCallum (Principal Accounting Officer)
- -----------------------------
/s/ D.H. Batchelder* Director
- -----------------------------
/s/ L.R. Judd* Director
- -----------------------------
/s/ W.C. Langley* Director
- -----------------------------
/s/ R.S. Miller* Director
- -----------------------------
/s/ D. Parkinson* Director
- -----------------------------
/s/ T.W. Payne* Director
- -----------------------------
/s/ J.D. Roach* Director
- -----------------------------
/s/ D.R. Washington* Director
- -----------------------------
* 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
<PAGE>
MORRISON KNUDSEN CORPORATION
SCHEDULE II. VALUATION AND QUALIFYING AND RESERVE ACCOUNTS
FOR THE YEAR ENDED NOVEMBER 30, 1996
(IN THOUSANDS)
ALLOWANCE FOR DOUBTFUL ACCOUNTS RECEIVABLES DEDUCTED IN THE BALANCE SHEET FROM
ACCOUNTS RECEIVABLE
Balance at Provisions Balance at
Beginning Charged to End of
Year Ended of Year Operations Other (1) Deductions Period
- --------------------------------------------------------------------------------
November 30, 1996 $ -- $ (275) $(8,210) $ 600 $(7,885)
DEFERRED INCOME TAX ASSET VALUATION ALLOWANCE DEDUCTED IN THE BALANCE SHEET
FROM DEFERRED INCOME TAX ASSET
Balance at Provisions Balance at
Beginning Charged to End of
Year Ended of Year Operations Other (1) Deductions Period
- --------------------------------------------------------------------------------
November 30, 1996 $ -- $ -- $(126,878) $ -- $(126,878)
ESTIMATED COSTS TO COMPLETE LONG-TERM CONTRACTS
REFLECTED IN THE BALANCE SHEET
Balance at Provisions Balance at
Beginning Charged to End of
Year Ended of Year Operations Other (1) Deductions Period
- --------------------------------------------------------------------------------
November 30, 1996 $(3,184) $(23,283) $(86,450) $12,085 $(100,832)
- ------------------
(1) Assumed in connection with the acquisition of Old MK.
<PAGE>
EXHIBIT INDEX
COPIES OF EXHIBITS WILL BE SUPPLIED UPON REQUEST. 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
- ------- --------
2.1 First Amended Plan of Reorganization confirmed on August 26, 1996
under Chapter 11 of the United States Bankruptcy Code for the District
of Delaware, Case No. 96-1006(PJW) as filed by Morrison Knudsen
Corporation (Commission File No. 1-8889 - "Old MK") prior to its
merger on September 11, 1996 with and into Washington Construction
Group, Inc. (the "registrant") with the registrant being the surviving
corporation in the merger and being renamed "Morrison Knudsen
Corporation" (filed as Exhibit 2.1 to Old MK's Form 10-Q Quarterly
Report for the quarter ended June 30, 1996 and incorporated herein by
reference).
2.2 Restructuring and Merger Agreement dated May 28, 1996 by and between
the registrant and Old MK (filed as Exhibit 1 to the registrant's
Proxy Statement dated September 11, 1996 and incorporated herein by
reference).
3.1 The registrant's Restated and Amended Certificate of Incorporation,
including all amendments thereto (filed as Exhibit 3.1 to the
registrant's Form 10-Q Quarterly Report for quarter ended August 31,
1996 and incorporated herein by reference).
3.2 The registrant's Restated and Amended Bylaws, including all amendments
thereto (filed as Exhibit 3.2 to the registrant's Form 10-Q Quarterly
Report for quarter ended August 31, 1996 and incorporated herein by
reference).
4.1 * Specimen certificate for the registrant's Common Stock.
4.2 Specimen certificate for the registrant's Warrants to expire on March
11, 2003 (filed as Exhibit 4.2 to the registrant's Form 10-Q
Quarterly Report for quarter ended August 31, 1996 and incorporated
herein by reference).
4.3 Specimen certificate for the registrant's Series A Preferred Stock
(filed as Exhibit 4.3 to the registrant's Form 10-Q Quarterly Report
for quarter ended August 31, 1996 and incorporated herein by
reference).
4.4 Warrant Agreement dated September 11, 1996 by and between the
registrant and Norwest Bank Minnesota, N.A. (filed as Exhibit 4.4 to
the registrant's Form 10-Q Quarterly Report for quarter ended August
31, 1996 and incorporated herein by reference).
4.5 Registration Rights Agreement dated September 11, 1996 by and between
the registrant and the Holders of Stock to be listed on Schedule 1
thereof (filed as Exhibit 4.5 to the registrant's Form 10-Q Quarterly
Report for quarter ended August 31, 1996 and incorporated herein by
reference).
4.6 Warrant Agreement dated September 11, 1996 among the registrant,
Batchelder & Partners, Inc. and Schroder Wertheim & Co. Incorporated,
including the form of certificate attached thereto as Exhibit A for
certain registrant Warrants to expire on September 11, 2001 (filed as
Exhibit 4.6 to the registrant's Form 10-Q Quarterly Report for quarter
ended August 31, 1996 and incorporated herein by reference).
E-1
<PAGE>
4.7 Registration Rights Agreement dated September 11, 1996 among the
registrant, Batchelder & Partners, Inc. and Schroder Wertheim & Co.
Incorporated (filed as Exhibit 4.7 to the registrant's Form 10-Q
Quarterly Report for quarter ended August 31, 1996 and incorporated
herein by reference).
10.1 * Credit Agreement dated October 8, 1996 among the registrant, Bank
of Montreal, individually and as Agent, and the Banks which are
parties thereto ("Credit Agreement") (filed as Exhibit 10.2 to the
registrant's Form 10-Q Quarterly Report for quarter ended August
31, 1996 and incorporated herein by reference) and Amendment No. 1
dated January 31, 1997 to the Credit Agreement (filed herewith).
10.2 * The registrant's agreement with Batchelder & Partners, Inc. dated
April 1, 1996.
10.3 * General and Administrative Services Agreement dated as of August 1,
1993 between the registrant and Washington Corporations.
10.4 * Information Systems (IS) Services Agreement dated as of August 1, 1993
between the registrant and Washington Corporations.
10.5 * The registrant's Environmental Indemnification Agreement with
Washington Corporations dated July 8, 1993.
10.6 * 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. [Filed herewith in redacted form
subject to Freedom of Information Act request for confidential
treatment.]
10.7 Form of Guaranty by Old MK, as Guarantor, in favor of Morgan Guaranty
Trust Company of New York, as Trustee (filed as Exhibit 4.2 to
Amendment No. 1 to Old MK's Form S-3 Registration Statement No.
33-50046 filed on October 30, 1992 and incorporated herein by
reference).
10.8 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 Old MK's Form S-3 Registration Statement No.
33-50046 filed on October 30, 1992 and incorporated herein by
reference).
10.9 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 Old MK's Form S-3 Registration Statement No. 33-50046 filed on
October 30, 1992 and incorporated herein by reference).
MANAGEMENT CONTRACT OR COMPENSATORY PLAN OR ARRANGEMENT WHICH IS
SEPARATELY IDENTIFIED IN ACCORDANCE WITH ITEM 14(a)(3) OF FORM 10-K.
10.10 * The registrant's Amended and Restated Stock Option Agreement.
10.11 * The registrant's 1997 Stock Option and Incentive Plan for
Non-Employee Directors.
10.12 Old MK's Stock Compensation Plan, as amended (filed as Appendix I
to Old MK's Proxy Statement dated April 4, 1994 and incorporated
herein by reference).
10.13 Old MK's Stock Incentive Plan, as amended (filed as Exhibit 10.16
to Old MK's Form 10-K Annual Report for year ended December 31,
1992 and incorporated herein by reference).
10.14 Old MK's 1996 Retention Severance Pay Plan adopted on April 10,
1996 (filed as Exhibit 10.3 to Old MK Form 10-Q Quarterly Report
for quarter ended June 30, 1995, and incorporated herein by
reference).
E-2
<PAGE>
10.15 The registrant's Long-Term Incentive Plan for Corporate
Executives (filed as Exhibit 10.3 to Old MK's Form 10-Q Quarterly
Report for quarter ended March 31, 1994 and incorporated herein
by reference.)
10.17 The registrant's Long-Term Incentive Plan for the Mining Group
(filed as Exhibit 10.50 to Old MK's Form 10-K Annual Report for
year ended December 31, 1995 and incorporated herein by
reference.)
10.18 The registrant's Key Executive Disability Insurance Plan (filed
as Exhibit 10.12 to Old MK's Form 10-K Annual Report for year
ended December 31, 1992 and incorporated herein by reference.)
10.19 The registrant's Key Executive Life Insurance Plan (filed as
Exhibit 10.13 to Old MK's Form 10-K Annual Report for year ended
December 31, 1992 and incorporated herein by reference).
10.20 * Form of registrant's Indemnification Agreement [A schedule
listing the individuals with whom the registrant has entered into
such agreements is filed herewith.]
10.21 * The registrant's employment agreement with Robert A. Tinstman
dated as of January 1, 1993, and and Amendment thereto dated
April 22, 1996.
10.22 * The registrant's Nonqualified Stock Option Agreement with Robert
A. Tinstman dated as of January 10, 1997.
10.23 * The registrant's Supplemental Retirement Benefit Agreement with
Robert A. Tinstman dated as of August 3, 1990.
10.24 * The registrant's employment agreement with Stephen G. Hanks dated
as of January 1, 1993 and Amendments thereto dated as of August
9, 1993 and April 22, 1996.
10.25 * The registrant's Nonqualified Stock Option Agreement with Stephen
G. Hanks dated as of January 10, 1997.
10.26 * The registrant's employment agreement with Thomas H. Zarges dated
as of January 1, 1994.
10.27 * The registrant's Nonqualified Stock Option Agreement with Thomas
H. Zarges dated as of January 10, 1997.
10.28 * The registrant's employment agreement with Douglas L. Brigham
dated as of April 26, 1996.
10.29 * The registrant's employment agreement with Alvia L. Henderson
dated as of April 26, 1996.
16.1 Letter from KPMG Peat Marwick LLP to the registrant dated
September 17, 1996 (filed as Exhibit 16.1 to the registrant's Form
8-K Current Report dated September 11, 1996 and incorporated
herein by reference).
21. * Subsidiaries of the registrant.
24. * Powers of Attorney.
27. * Financial Data Schedule.
E-3
<PAGE>
EXHIBIT 4.1
<TABLE>
<CAPTION>
<S><C>
COMMON STOCK COMMON STOCK
[GRAPHIC]
MK
SEE REVERSE FOR CERTAIN DEFINITIONS
CUSIP 61844A 1D 9
INCORPORATED UNDER THE LAWS MORRISON KNUDSEN CORPORATION THIS CERTIFICATE IS TRANSFERABLE IN MINNEAPOLIS,
OF THE STATE OF DELAWARE MINNESOTA OR IN NEW YORK, NEW YORK
THIS CERTIFIES THAT
IS THE OWNER OF
FULLY PAID AND NON-ASSESSABLE SHARES OF COMMON STOCK, $.01 PAR VALUE.. OF
(illegible)
* WITNESS THE FACSIMILE SIGNATURES OF ITS DULY AUTHORIZED OFFICERS
DATED:
1/27/97 1/27/97
/s/ (illegible signature) /s/ (illegible signature)
EXECUTIVE VICE-PRESIDENT, [LOGO] PRESIDENT AND CHIEF EXECUTIVE OFFICER
CHIEF LEGAL OFFICER AND SECRETARY
COUNTERSIGNED AND REGISTERED
NORWEST BANK OF MINNESOTA, N.A.
TRANSFER AGENT AND REGISTRAR
BY
AUTHORIZED SIGNATURE
</TABLE>
<PAGE>
THE CORPORATION WILL FURNISH WITHOUT CHARGE TO EACH STOCKHOLDER WHO SO
REQUESTS A STATEMENT OR SUMMARY OF THE POWERS, DESIGNATIONS, PREFERENCES AND
RELATIVE, PARTICIPATING, OPTIONAL OR OTHER SPECIAL RIGHTS OF EACH CLASS OF
STOCK OR SERIES THEREOF AND THE QUALIFICATIONS, LIMITATIONS OR RESTRICTIONS
OF SUCH PREFERENCES AND/OR RIGHTS SO FAR AS THE SAME HAVE BEEN FIXED AND
DETERMINED. ANY SUCH REQUEST SHOULD BE ADDRESSED TO THE SECRETARY OF THE
CORPORATION AT ITS PRINCIPAL OFFICE OR TO THE TRANSFER AGENT NAMED ON THE
FACE OF THIS CERTIFICATE.
The following abbreviations, when used in the inscription on the face of
this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM - as tenants in common
TEN ENT - as tenants by the entireties
JT TEN - as joint tenants with right of survivorship and not as tenants
in common.
UNIF GIFT MIN ACT -- ...................Custodian...................
(Cust) (Minor)
under Uniform Gifts to Minors
Act ...........................................
(State)
UNIF TRF MIN ACT -- ...............Custodian (UNTIL AGE ...........)
(Cust)
....................... under Uniform Transfers
(Minor)
to Minor's Act ................................
(State)
ADDITIONAL ABBREVIATIONS MAY ALSO BE USED THOUGH NOT IN THE ABOVE LIST.
FOR VALUE RECEIVED, __________________ hereby sell, assign and transfer
unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
- ---------------------------------------
- ---------------------------------------
- --------------------------------------------------------------------------------
(PLEASE PRINT OR TYPE NAME AND ADDRESS, INCLUDING ZIP CODE, OF ASSIGNEE)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Shares
- --------------------------------------------------------------------------
of the common stock represented by the within Certificate, and do hereby
irrevocably constitute and appoint
Attorney
- ------------------------------------------------------------------------
to transfer the said stock on the books of the within named Corporation with
full power of substitution in the premises.
Dated
-----------------------
X
--------------------------------------
X
--------------------------------------
NOTICE: THE SIGNATURE(S) TO THIS ASSIGNMENT
MUST CORRESPOND WITH THE NAME(S) AS
WRITTEN UPON THE FACE OF THE
CERTIFICATE IN EVERY PARTICULAR,
WITHOUT ALTERATION OR ENLARGEMENT OR
ANY CHANGE WHATEVER.
Signature(s) Guaranteed
By
-----------------------------------------
THE SIGNATURE(S) SHOULD BE GUARANTEED BY AN
ELIGIBLE GUARANTOR INSTITUTION (BANKS,
STOCKBROKERS, SAVINGS AND LOAN ASSOCIATIONS
AND CREDIT UNIONS WITH MEMBERSHIP IN AN
APPROVED MEDALLION SIGNATURE GUARANTEE PROGRAM,
PURSUANT TO S.E.C. RULE 17A6-15.
<PAGE>
EXHIBIT 10.1
FIRST AMENDMENT TO CREDIT AGREEMENT
To Each of the Banks Signatory Hereto
Ladies and Gentlemen:
Reference is hereby made to that certain Credit Agreement dated as of
October 8, 1996 (the "CREDIT AGREEMENT"), between the undersigned, Morrison
Knudsen Corporation, a Delaware corporation (the "COMPANY"), Bank of Montreal,
as agent for the Banks (the "AGENT"), and you (the "BANKS"). All capitalized
terms used herein without definition shall have the same meanings herein as such
terms have in the Credit Agreement.
In connection with one or more proposed assignments pursuant to Section
11.12 of the Credit Agreement, the Company and the Banks have agreed to amend
the covenants set forth in Section 8 of the Credit Agreement on the terms and
conditions set forth in this First Amendment.
1. AMENDMENTS.
Upon your acceptance hereof in the space provided for that purpose below,
the Credit Agreement shall be and hereby is amended as follows:
(a) Section 1.1 of the Credit Agreement shall be amended to include
two new definitions which shall read as follows:
" "FIXED CHARGES" means, with reference to any period, the sum of
(i) all payments of principal due within 12 calendar months on and
after the last day of such period with respect to the current portion
of long-term funded debt of the Company and its Subsidiaries (as
determined in accordance with GAAP), PLUS (ii) Interest Expense for
the period then ended, PLUS (iii) Capital Expenditures of the Company
and its Subsidiaries for the period then ended.
"CAPITAL EXPENDITURES" means, with respect to any Person for any
period, the aggregate amount of all expenditures (whether paid in cash
or accrued as a liability) by such Person during that
-1-
<PAGE>
period which, in accordance with GAAP, are or should be included
as "additions to property, plant or equipment" or similar items
reflected on the statement of cash flows of such Person."
(b) The definition of "REQUIRED BANKS" appearing in Section 1.1 of
the Credit Agreement shall be amended and restated to read as follows:
" "REQUIRED BANKS" shall mean Banks holding 66.7% or more of the
outstanding principal amount of the Loans and the credit risks to the
Letters of Credit, or, if no Loans or Letters of Credit are
outstanding, Banks granting 66.7% or more of the Commitments."
(c) Section 5.1 of the Credit Agreement shall be amended by deleting
the amount "$5,000,000" appearing in clause (vii) therein and inserting the
amount "$9,000,000" in lieu thereof.
(d) Section 8.11 of the Credit Agreement shall be amended by deleting
the phrase "Letters of Credit" appearing therein and inserting the phrase
"financial letters of credit" in lieu thereof.
(e) Section 8.16 of the Credit Agreement shall be amended and
restated to read as follows:
"SECTION 8.16. SALE OF ASSETS. The Company will not, nor
will it permit any Restricted Subsidiary to, sell, lease or otherwise
dispose of all or any substantial part of its property or assets
(including any disposition of property as part of a sale and leaseback
transaction, but excluding the leasing of property by WCG Leasing,
Inc., a Montana corporation, made in the ordinary course of its
business) or in any event sell or discount (whether through factoring,
securitization or otherwise), with or without recourse, any of its
notes or accounts receivable; PROVIDED, that nothing contained therein
shall prohibit (i) sales of inventory in the ordinary course of
business; (ii) sales or dispositions of obsolete or worn out tangible
property disposed of in the ordinary course of business; (iii) sales
of individual items of Collateral or other assets
-2-
<PAGE>
(other than notes or accounts receivable) with a book value of less
than (x) $10,000,000 in the aggregate during the fiscal year ending on
or about November 30, 1997, and (y) $15,000,000 in the aggregate
during any other fiscal year; and (iv) the sale of delinquent notes or
accounts receivable in the ordinary course of business for purposes of
collection only. In the event the Company sells CF Systems
Corporation during the fiscal year ending on or about November 30,
1997, such sale shall not count against the $10,000,000 permitted
amount provided for in clause (iii)(x) above for purposes of this
Section 8.16 or Section 8.19 below. At the request of the Company, so
long as no Default or Event of Default then exists or would arise as a
result of such disposition, the Agent is hereby authorized and
directed to release its lien on any property sold pursuant to the
forgoing provisions."
(f) Section 8 of the Credit Agreement shall be amended by inserting
two new Sections at the end thereof which shall read as follows:
"SECTION 8.25. MINIMUM EBITDA. As of the last day of each
fiscal quarter of the Company, Earnings Before Interest, Taxes,
Depreciation and Amortization shall not be less than (a) $10,000,000
as of February 28, 1997, for the fiscal quarter then ended, (b)
$15,000,000 as of May 31, 1997, for the fiscal quarter then ended, (c)
$15,000,000 as of August 31, 1997, for the fiscal quarter then ended,
(d) $15,000,000 as of November 30, 1997, for the fiscal quarter then
ended, (e) notwithstanding the quarterly tests set forth in clauses
(a)-(d) above, $60,000,000 as of November 30, 1997, for the four
fiscal quarters then ended and (f) $65,000,000 as of the last day of
each fiscal quarter ending after November 30, 1997, for the four
fiscal quarters then ended.
SECTION 8.26. FIXED CHARGE COVERAGE RATIO. As of the last day
of each fiscal quarter of the Company ending during the periods
-3-
<PAGE>
specified below, the Company shall maintain a ratio of (a) Earnings
Before Interest, Taxes, Depreciation and Amortization for the four
fiscal quarters of the Company then ended to (b) Fixed Charges for the
same four fiscal quarters then ended (the "FIXED CHARGE COVERAGE
RATIO") of not less than:
FIXED CHARGE COVERAGE
FROM AND TO AND RATIO SHALL
INCLUDING INCLUDING NOT BE LESS THAN
12/01/96 11/30/97 1.50 to 1.0
12/01/97 11/30/98 1.75 to 1.0
12/01/98 and at all times 2.00 to 1.0
thereafter
; PROVIDED that (i) such ratio shall be computed on February 28, 1997,
for the quarter then ended, with Earnings Before Interest, Taxes,
Depreciation and Amortization, Interest Expense, and Capital
Expenditures each computed by multiplying the actual amount thereof
during such period by a fraction, the numerator of which is 365 and
the denominator of which is the number of days elapsed since November
30, 1996; on May 31, 1997, for the two quarters then ended, with
Earnings Before Interest, Taxes, Depreciation and Amortization,
Interest Expense, and Capital Expenditures each computed by
multiplying the actual amount thereof during such period by a
fraction, the numerator of which is 365 and the denominator of which
is the number of days elapsed since November 30, 1996; and on August
31, 1997, for the three
-4-
<PAGE>
quarters then ended, with Earnings Before Interest, Taxes,
Depreciation and Amortization, Interest Expense, and Capital
Expenditures each computed by multiplying the actual amount thereof
during such period by a fraction, the numerator of which is 365 and
the denominator of which is the number of days elapsed since November
30, 1996. Notwithstanding anything to the contrary set forth above,
if as of the last day of any fiscal quarter of the Company, the
Company has a Moody's Rating of at least Baa3 or a S & P Rating of at
least BBB-, then the Company shall maintain a Fixed Charge Coverage
Ratio for the four fiscal quarters of the Company then ended of not
less than 1.75 to 1.0."
(g) Section 11.12 of the Credit Agreement shall be amended by
deleting the amount "$2,000" appearing in clause (iii) therein (Assignment
Agreement recording and processing fee) and inserting the amount "$3,500"
in lieu thereof.
(h) Section 11.13 of the Credit Agreement shall be amended and
restated to read as follows:
"SECTION 11.13. WAIVERS, MODIFICATIONS AND AMENDMENTS. Any
provision hereof or of any of the other Loan Documents may be amended,
modified, waived or released and any Default or Event of Default and its
consequences may be rescinded and annulled upon the written consent of the
Required Banks; PROVIDED, HOWEVER, that without the consent of all Banks no
such amendment, modification or waiver shall (i) increase the amount or
extend the terms of any Bank's Commitment, (ii) reduce the interest rate
applicable to or extend the maturity of any Loan, fee or other obligation
owed to it or reduce the amount of the fees to which it is entitled
hereunder, (iii) release any Material Subsidiary from its obligations under
the Guaranty (except for releases expressly contemplated by this
Agreement), (iv) release any substantial (in value) part of the collateral
security afforded by the Collateral
-5-
<PAGE>
Documents (except in connection with a sale or other disposition required
to be effected by the provisions hereof or of the Collateral Documents and
except for releases of the Agent's lien thereon expressly contemplated by
this Agreement) or permit the sale or discount of notes or accounts
receivable except as permitted by Section 8.16(iv) hereof, (v) change this
Section 11.13, or (vi) change the definition of "REQUIRED BANKS" or change
the number of Banks required to take any action hereunder or under any of
the other Loan Documents; it being understood (x) that waivers or
modifications of covenants, Defaults or Events of Default (other than those
set forth in Section 9.1(j) and (k) hereof) or of a mandatory reduction in
the Commitments or of a mandatory prepayment may be made at the discretion
of the Required Banks and shall not constitute an increase of the
Commitment of any Bank, and that any resulting increase in the available
portion of any Commitment of any Bank shall not constitute an increase in
the Commitment of such Bank, and (y) any waiver of applicability of any
post-default increase in interest rates may be made at the discretion of
the Required Banks. No amendment, modification or waiver of the Agent's or
an Issuing Bank's protective provisions shall be effective without the
prior written consent of the Agent or the relevant Issuing Bank."
2. CONDITIONS PRECEDENT.
The effectiveness of this First Amendment is subject to the satisfaction of
all of the following conditions precedent:
(a) The Company, the Agent and the Banks shall have executed and
delivered this First Amendment.
(b) Legal matters incident to the execution and delivery of this
First Amendment shall be satisfactory to the Banks and their counsel.
(c) Each Material Subsidiary shall have executed and delivered to the
Banks its
-6-
<PAGE>
consent to this First Amendment in the form set forth below.
3. REPRESENTATIONS.
In order to induce the Banks to execute and deliver this First Amendment,
the Company hereby represents to the Banks that as of the date hereof, and after
giving effect to this First Amendment, the representations and warranties set
forth in Section 6 of the Credit Agreement are and shall be and remain true and
correct (except that the representations contained in Section 6.4 shall be
deemed to refer to the most recent financial statements of the Company delivered
to the Banks) and the Company is in full compliance with all of the terms and
conditions of the Credit Agreement and no Default or Event of Default has
occurred and is continuing under the Credit Agreement or shall result after
giving effect to this First Amendment.
4. MISCELLANEOUS.
(a) Except as specifically amended herein, the Credit Agreement shall
continue in full force and effect in accordance with its original terms.
Reference to this specific First Amendment need not be made in the Credit
Agreement, the Notes, or any other instrument or document executed in connection
therewith, or in any certificate, letter or communication issued or made
pursuant to or with respect to the Credit Agreement, any reference in any of
such items to the Credit Agreement being sufficient to refer to the Credit
Agreement as amended hereby.
(b) The Company agrees to pay on demand all costs and expenses of or
incurred by the Agent in connection with the negotiation, preparation, execution
and delivery of this First Amendment, including the fees and expenses of counsel
for the Agent.
(c) This Amendment may be executed in any number of counterparts, and by
the different parties on different counterpart signature pages, all of which
taken together shall constitute one and the same agreement. Any of the parties
hereto may execute this Amendment by signing any such counterpart and each of
such counterparts shall for all purposes be deemed to be an original. This
Amendment shall be governed by the internal laws of the State of Illinois.
Dated as of January 31, 1997.
MORRISON KNUDSEN CORPORATION
-7-
<PAGE>
By /s/ Douglas L. Brigham
----------------------------------
Douglas L. Brigham
Its Vice President and Treasurer
-8-
<PAGE>
Accepted and agreed to as of the date and year last above written.
BANK OF MONTREAL, individually and as
Agent
By /s/ J. K. Harche
------------------------------------
J. K. Harche
Its Director
-9-
<PAGE>
GUARANTORS' CONSENT
The undersigned, Morrison Knudsen Corporation, an Ohio corporation, Atascosa
Mining Co., Centennial Engineering, Inc., CF Systems Corporation, MK-Ferguson of
Oak Ridge Company, WCG Holdings, Inc., Kasler Corporation, Pomeroy Corporation,
Washington Contractors Group, Inc., Conda Mining, Inc., Washington Construction
Co., Pro Builders, Corp., and WCG Leasing, Inc., heretofore executed and
delivered to the Agent and the Banks an Amended and Restated Guaranty Agreement
dated as of October 8, 1996, and certain other Loan Documents in connection
therewith, and hereby consent to the First Amendment to the Credit Agreement as
set forth above and confirm that the Guaranty Agreement, and all other Loan
Documents executed by the undersigned, or any one or more of them, and all of
the obligations of the undersigned thereunder, remain in full force and effect.
MORRISON KNUDSEN CORPORATION,
an Ohio corporation
By /s/ Douglas L. Brigham
----------------------------------------
Douglas L. Brigham
Vice President and Treasurer
ATASCOSA MINING CO.
By /s/ Douglas L. Brigham
----------------------------------------
Douglas L. Brigham
Vice President and Treasurer
CENTENNIAL ENGINEERING, INC.
By /s/ Douglas L. Brigham
----------------------------------------
Douglas L. Brigham
Vice President and Treasurer
-10-
<PAGE>
CF ENVIRONMENTAL CORPORATION
By /s/ Douglas L. Brigham
----------------------------------------
Douglas L. Brigham
Vice President and Treasurer
MK-FERGUSON OF OAK RIDGE COMPANY
By /s/ Douglas L. Brigham
----------------------------------------
Douglas L. Brigham
Vice President and Treasurer
WCG HOLDINGS, INC.
By /s/ Jonathan M. Robertson
----------------------------------------
Jonathan M. Robertson
Assistant Secretary
KASLER CORPORATION
By /s/ Jonathan M. Robertson
----------------------------------------
Jonathan M. Robertson
Assistant Secretary
POMEROY CORPORATION
By /s/ Jonathan M. Robertson
----------------------------------------
Jonathan M. Robertson
Assistant Secretary
WASHINGTON CONTRACTORS GROUP, INC.
By /s/ Jonathan M. Robertson
----------------------------------------
Jonathan M. Robertson
Assistant Secretary
-11-
<PAGE>
CONDA MINING, INC.
By /s/ Jonathan M. Robertson
----------------------------------------
Jonathan M. Robertson
Assistant Secretary
WASHINGTON CONSTRUCTION CO.
By /s/ Jonathan M. Robertson
----------------------------------------
Jonathan M. Robertson
Assistant Secretary
PRO BUILDERS CORP.
By /s/ Jonathan M. Robertson
----------------------------------------
Jonathan M. Robertson
Assistant Secretary
WCG LEASING, INC.
By /s/ Jonathan M. Robertson
----------------------------------------
Jonathan M. Robertson
Assistant Secretary
-12-
<PAGE>
EXHIBIT 10.2
BATCHELDER & PARTNERS, INC.
4330 La Jolla Village Drive, Suite 200
San Diego, California 92122
David H. Batchelder Telephone: (619) 456-6655
President Telecopier: (619) 456-7969
April 1, 1996
Mr. Dorn Parkinson
Washington Construction Group, Inc.
101 International Way
Missoula, Montana 59802
Dear Dorn:
This is to confirm our understanding that you have engaged Batchelder &
Partners, Inc. to act as your advisor with respect to the acquisition of stock,
assets or any subsidiary of Morrison Knudsen Corporation (the "Company").
In connection with this assignment, we will provide advice and assistance
in executing an acquisition strategy, including negotiating the terms of
specific transactions, assisting in identifying and arranging financing and any
other such advice and assistance as you may require to achieve your objective.
Specifically, we will as requested by you provide advice and assistance in (i)
performance of due diligence regarding the Company, (ii) development of
acquisition strategies, (iii) negotiations with the Company, its creditors and
shareholders regarding an Acquisition, (iv) negotiations of financing
arrangements with investment and commercial banks, (v) preparation in
consultation with your legal counsel of required legal documentation, (vi)
preparation of materials for bankruptcy proceedings, and (vii) preparation of
proxy materials.
Our aggregate compensation for the services referred to above will be as
follows:
(i) In the event that you and/or any entity substantially owned by you or
any partnership, affiliate or joint venturer (singly or collectively,
"Acquiror") is successful in effecting an acquisition, directly or
indirectly, of a majority of the stock or assets of the Company by way
of merger, consolidation or other negotiated business combination, in
one transaction or a series of transactions (an "Acquisition"), you
shall pay to us a fee of $800,000, plus;
(ii) Upon the consummation of an Acquisition, you shall issue to Batchelder
& Partners warrants to purchase 110,500 shares of common stock of the
surviving entity. Such warrants shall have an exercise price of
$12.00 per share and shall have piggyback registration rights and be
exercisable at any time after issuance for a period of 5 years; or
(iii) In the event that you do not consummate an Acquisition, but receive a
break fee or topping fee from the Company, you shall pay us a fee in
cash equal to $675,000.
<PAGE>
- 2 -
Washington Construction Group, Inc. will be liable for all agreed
compensation for services, costs and indemnity. Washington Construction Group,
Inc. will designate what entity will pay such compensation or fees when paid.
In addition to the foregoing compensation, you shall reimburse us (or cause
us to be reimbursed) for our reasonable out-of-pocket third party expenses,
which shall include the fees and disbursements of our counsel. We shall not
incur significant expense items in excess of $25,000 without your prior written
approval.
Since we will be acting on your behalf, Washington Construction Group, Inc.
is agreeing to provide us with indemnification pursuant to the letter of even
date herewith from you to us.
It is understood that our services may be terminated by you upon notice to
us at any time and without liability or continuing obligation to us (except for
any compensation theretofore earned hereunder and expenses theretofore incurred
and except that if you terminate our services and within 12 months thereafter
Acquiror effects an Acquisition or receives a break fee or topping fee from the
Company then we shall be entitled to compensation pursuant to this Agreement to
the same extent as if our services had not been terminated). If you terminate
our services for cause, all amounts to be paid shall be reduced by the
compensation paid or required to be paid to any replacement advisor necessary to
accomplish an Acquisition. Notwithstanding the foregoing, the indemnity
provisions described in the preceding paragraph shall survive such termination.
Except as required by law, any advice (written or oral) rendered by us
pursuant to this letter may not be disclosed publicly without our prior written
consent, which consent shall not be unreasonably withheld.
Please confirm that the foregoing is in accordance with your understanding
by signing and returning the duplicate of this letter attached hereto, which
shall thereupon constitute a binding agreement.
Very truly yours,
BATCHELDER & PARTNERS, INC.
By: /s/ D. H. Batchelder
----------------------------------------
Title: President
Confirmed:
WASHINGTON CONSTRUCTION GROUP, INC.
By: /s/ W. J. Orze
------------------------------
Title: Secretary
Date: June 14, 1996
<PAGE>
April 1, 1996
Batchelder & Partners, Inc.
4330 La Jolla Village Drive, Suite 200
San Diego, California 92122
Gentlemen:
In connection with your engagement to consult with Washington Construction
Group, Inc. its subsidiaries and/or assignees, with respect to the matters
contemplated by the letter from you to us of even date herewith, we hereby agree
to indemnify and hold harmless you and your affiliates, the respective
directors, officers, partners, agents and employees of you and your affiliates
and each other persons, if any, controlling you or any of your affiliates, to
the full extent lawful, from and against all losses, claims, damages,
liabilities and expenses incurred by you and such other persons (including
reasonable fees and disbursements of counsel) which (A) are related to or arise
out of (i) actions taken or omitted to be taken (including any untrue statements
made or any statements omitted to be made) by us or (ii) actions taken or
omitted to be taken by an indemnified person with our consent or in conformity
with our actions or omissions or (B) are otherwise related to or arise out of
your activities on our behalf under your engagement, and we will reimburse you
and any other person indemnified hereunder for all expenses (including
reasonable fees and disbursements of counsel) as they are incurred by you or
such other indemnified person in connection with investigating, preparing or
defending any such action or claim, whether or not in connection with pending or
threatened litigation in which you or any other indemnified person is a party.
We will not be responsible, however, for any losses, claims, damages,
liabilities or expenses pursuant to clause (B) of the preceding sentence to the
extent they have resulted from the bad faith or gross negligence of the person
seeking indemnification hereunder (although it is expressly intended that we
will be responsible for any thereof that result from the negligence, other than
gross negligence, of such person). We also agree that neither you, nor any of
your affiliates, nor any director, officer, partner, agent or employee of you or
any of your affiliates, nor any person controlling you or any of your
affiliates, shall have any liability to us for or in connection with such
engagement except for such liability for losses, claims, damages, liabilities or
expenses incurred by us which is finally judicially determined to have resulted
primarily from your bad faith or gross negligence as herein described. The
foregoing agreement shall be in addition to any rights that you or any
indemnified person may have at common law or otherwise, including, but not
limited to, any right to contribution.
<PAGE>
Batchelder & Partners -2- April 1, 1996
If any action, claim proceeding, or investigation is instituted or
threatened against you in respect of which indemnity may be sought against us
hereunder, you shall promptly notify us thereof in writing, but the omission so
to notify us shall not relieve us from any other obligation or liability that we
may have to you under this letter or otherwise, except to the extent that we
demonstrate actual damage caused by such omission. You will have the right to
retain counsel of your choice to represent you in connection with any such
action, claim, proceeding or investigation, provided that such counsel shall be
reasonably satisfactory to us and provided that you shall not have the right to
retain more than one counsel for all indemnified parties in connection with any
action or separate but similar or related actions in the same jurisdiction
arising out of the same general allegations or circumstances. We will not be
liable hereunder for any settlement thereof by you without our written consent,
which will not be unreasonably withheld.
It is understood that, in connection with your engagement, you may also be
engaged to act for us in one or more additional capacities, and that the terms
of the original engagement or any such additional engagement may be embodied in
one or more separate written agreements. This indemnification shall apply to
the original engagement, any such additional engagement and any modification of
the original engagement or such additional engagement and shall remain in full
force and effect following the completion or termination of your engagement(s).
Very truly yours,
WASHINGTON CONSTRUCTION
GROUP, INC.
/s/ W. J. Orze
-----------------------------------
Title: Secretary
Date: June 14, 1996
Accepted:
BATCHELDER & PARTNERS, INC.
By: /s/ D. H. Batchelder
------------------------------
Date: April 1, 1996
<PAGE>
EXHIBIT 10.3
GENERAL AND ADMINISTRATIVE SERVICES AGREEMENT
Washington Corporations ("WC") and Washington Contractors Group, Inc. and
it's designees ("WCGI"), together referred to as the "Parties," on this first
day of August, 1993, agree as follows:
1. PAYMENT:
WCGI shall pay a monthly fee of $94,000 to WC for the services provided
hereunder. This fee shall be due twenty (20) days following the last day of
each month this Agreement is in effect.
2. SERVICES PROVIDED BY WC:
(a) WC shall continue to provide General and Administrative Services,
it has historically provided to WCGI. WC shall provide consulting and/or
technical expertise in the following areas as services (generally
classified as General and Administrative Services) under this Agreement.
(i) ACCOUNTING
WC shall provide accounting systems, policies and
procedures to be utilized as directed by WCGI. WC personnel will
perform internal audits and training at periodic intervals to
assist WCGI in implementing these systems, policies and
procedures. WC shall negotiate outside audit contracts and
provide support in technical areas where assistance is needed.
(ii) CASH MANAGEMENT
WC shall provide cash management services to WCGI. WC's
treasurer shall assist in the administration of accounts and with
borrowing and investment decisions.
(iii) TAX
WC shall provide planning and tax review services. These
services will include: Calculation of quarterly estimated tax
payments, filing of extensions, preparation and filing of annual
state and Federal returns, and researching tax considerations for
proposed business transactions. WC shall help coordinate the use
of outside tax consultants.
1
<PAGE>
(iv) LEGAL
WC shall help coordinate and direct ongoing legal actions,
advise companies in their daily operations and provide other forms
of legal advice. If requested, the WC legal department shall
provide review of or recommend outside review of contracts, sales
and purchase documents, and employee relations agreements.
(v) PROPERTY MANAGEMENT CONSULTING
WC shall provide property management consulting services
which will assist in real estate activities, real estate
acquisitions, leases, and sales of property as directed by WCGI.
WC will also provide assistance in real estate filings, deed
recordation, property tax matters, and other aspects of real
estate management.
(vi) EQUIPMENT MANAGEMENT CONSULTING
WC shall provide assistance in decision making regarding
acquisition and disposal of equipment. WC's equipment management
consultant will assist in negotiations with vendors regarding
price, warranty, production guarantees, etc.
(vii) PUBLIC AND GOVERNMENT RELATIONS
WC shall provide consultation services to WCGI to assist
WCGI in the areas of Public Relations and Legislative and
Government Relations.
(viii) FINANCIAL AND BUSINESS CONSULTING
WC shall provide consulting services to WCGI where it
request advice in financing or acquiring new business and/or
operations.
(ix) AVIATION AND HANGAR SERVICES
In consideration for WC making additional aircraft and
hanger facilities available to WCGI, certain airplane ownership
costs and hangar costs, not included in the Aviation Services
Agreement, shall be provided and are included in the amount
charged under this Agreement.
(b) In addition to providing the above services, WCGI may request and
WC may provide such other services and for such other considerations as
mutually agreed upon by WC and WCGI.
2
<PAGE>
3. MISCELLANEOUS:
(a) It is intended that WC will provide the same services as it
previously provided to WCGI. By providing these services, WC doe snot
assume any obligation to WCGI except that of a consultant.
(b) Nothing in this Agreement shall be construed to require WC to
provide all services required by WCGI.
(c) Except as otherwise provided in this Agreement, no Party hereto
shall assign this Agreement or any rights or obligations hereunder
without the prior written consent of the other Party hereto and any such
attempted assignment without such prior written consent shall be void and
of no force and effect. This Agreement shall inure to the benefit of and
shall be binding upon the successors and permitted assigns of the Parties
hereto.
(d) In the event that any provision of this Agreement is declared by
any court or other judicial or administrative body to be null, void, or
unenforceable, such provision shall survive to the extent it is not
declared to be null, void or unenforceable, and all of the other
provisions of this Agreement shall remain in full force and effect.
(e) This Agreement shall be construed, performed and enforced in
accordance with, and governed by, the internal laws of the State of
Montana, without giving effect to the principles of conflict of laws
thereof.
(f) WCGI indemnifies WC against any liabilities which may arise from
WC's performance of this Agreement.
(g) This Agreement shall be in effect from the date hereof until
cancelled by either party upon thirty (30) days written notice to the
other party.
(h) The monthly charges described herein may be renegotiated annually
effective on January 1, 1994 and each January 1 thereafter.
WASHINGTON CONTRACTORS GROUP, INC.
/s/ Darrol N. Groven
-----------------------------------------
Darrol N. Groven, President
WASHINGTON CORPORATIONS
/s/ Mike Haight
-----------------------------------------
Mike Haight, Vice President - Accounting
3
<PAGE>
EXHIBIT 10.4
INFORMATION SYSTEMS (IS) SERVICES AGREEMENT
Washington Corporations (WC) and Washington Contractors Group, Inc., (WCGI)
together referred to as the "Parties", on this first day of August, 1993 agree
as follows:
1. SERVICES TO BE PROVIDED BY WC:
(a) While this agreement is in effect, WC shall provide WCGI access to
WC's data processing center in accordance with the access and data
processing services routinely and customarily received by WCGI (including
processing of general ledge, accounts payable, payroll, inventory, work
orders, and other system available as of August 1, 1993).
(b) WC shall retain ownership of all equipment used to provide the
services except for those personal computers already purchased by WCGI.
WCGI shall at any time have the right to purchase the hardware and software
charged hereunder at its depreciated or amortized cost.
2. WCGI RESPONSIBILITIES:
(a) WCGI shall be responsible for all charges associated with WCGI's
personal computers, including maintenance, software licensing, hardware and
software updates.
(b) WCGI shall also be responsible for any cost, task or obligation not
specifically assumed by WC under this agreement.
3. PAYMENT FOR WC SERVICES AND EQUIPMENT USE:
(a) Access to the AS/400 and associated equipment (printer, modems,
terminals, etc.) and maintenance for same will be $6,000 per month.
(b) Access to AS/400 software (OS/400 operating system, JDE systems,
Washington Corp. developed software) shall be $6,000 per month.
(c) Support services for the AS 400 hardware and software and support for
WCGI's pc hardware and software, shall be $7,000 per month.
(d) IS operations and management shall be $6,000 per month.
(e) Monthly fixed charges for items (a) through (d) for WCGI's use at the
current level on the AS/400 system totals $25,000 per month.
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(f) Custom programming and program enhancement shall be reimbursed as
incurred at an hourly rate. Based on historical use, the average amount
will be $4,000 per month for 160 hours of programmer time ($25 per hour).
Additional services and hardware shall be charged at a price to be
negotiated between the parties or at hourly billing rates and charges for
equipment, materials, supplies, travel costs, etc.
(g) Payments are due twenty (20) days following the last day of each month
this Agreement is in effect. The fees described herein may be renegotiated
annually effective January 1, 1994 and each January 1 thereafter.
4. MISCELLANEOUS:
(a) Except as otherwise provided, the Parties shall not assign this
agreement nor any rights or obligations hereunder without the prior written
consent of the non-assigning party.
(b) Nothing in this agreement shall be construed so as to require WC to
provide all necessary or requested data processing services to WCGI.
(c) It is the intent of the parties that the services provided under this
contract at the same level as services formerly provided by WC. Therefore
in event of a dispute regarding disagreement, the prior practices of the
Parties shall be considered.
(d) Neither party shall be liable to the other for any consequential
damages due to any breach of this Agreement.
(e) This Agreement shall be effective from the date hereof until canceled
by either party upon thirty (30) days written notice to the other party.
WASHINGTON CONTRACTORS GROUP, INC.
/s/ Darrol N. Groven
-------------------------------------
Darrol N. Groven, President
WASHINGTON CORPORATIONS
/s/ Mike Ragbourn
-------------------------------------
Mike Ragbourn, Vice President - MIS
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EXHIBIT 10.5
ENVIRONMENTAL INDEMNIFICATION AGREEMENT
THIS AGREEMENT is made as of July 8, 1993, by and between Washington
Corporations ("WC"), a Montana corporation, with its principal place of business
at 101 International Way, Missoula, Montana 59802, and Washington Contractors
Group, Inc. ("WCGI"), a Montana corporation, with its principal place of
business at 101 International Way, Missoula, Montana 59802.
WHEREAS, WCGI was formerly a wholly owned subsidiary of Washington
Corporations, and currently pursuant to an Agreement and Plan of Reorganization
dated March 11, 1993, the common stock of WCGI is held by WCG Holdings, Inc.
WHEREAS, WCGI and WC desire to enter into an agreement relating to the
indemnification against certain liabilities that each party hereto shall extend
to the other party hereto from and after the date of such reorganization (the
"Reorganization Date");
BOW, THEREFORE, the parties hereto agree as follows:
1. EFFECTIVE DATE. This Agreement shall become effective on the Reorganization
Date.
2. DEFINITIONS. As used in this Agreement, capitalized terms defined
immediately after their use shall have the respective meanings thereby
provided, and the following terms shall have the following meanings (such
meanings to be equally applicable to both the singular and plural forms of
the terms defined):
ACTION: Any action, claim, suit, arbitration, inquiry, proceeding, or
investigation by or before any court, any governmental or other regulatory
or administrative agency or commission or any arbitration tribunal.
AFFILIATE: With respect to any specified person, a person that, directly or
indirectly, through one or more intermediaries, controls, or is controlled
by, or is under common control with, such specified person; PROVIDED,
HOWEVER, that for purposes of this Agreement (i) Affiliates of WCGI shall
ONLY be deemed to include Pro Builders, Inc., Washington Construction
Company, Industrial Constructors Corp., Conda Mining, Inc., or subsidiaries
or joint ventures thereof, or any other subsidiary or joint venture of
WCGI, and (ii) Affiliates of WC shall not be deemed to include WCGI or any
of its subsidiaries and joint ventures.
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ENVIRONMENTAL LAW: Any federal, state or local law (including common law),
statute, ordinance, regulation, rule, policy, order (judicial or
administrative), decree, judgment, decision, ruling, permit, or
authorization (each as may be in effect from time to time) relating or
applicable to pollution, human health or safety associated with the
environment, or the environment, including, without limitation, any of the
foregoing relating or applicable to emissions, discharges, spills, releases
of threatened releases of, or human exposures to, Materials of
Environmental Concern, or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport, or
handling or Materials of Environmental Concern.
ENVIRONMENTAL LIABILITY: Any liability or obligation (including, without
limitation, liability for investigatory costs, oversight costs, cleanup
costs, governmental or private response costs, natural resource damages,
civil or criminal penalties or forfeitures, and attorneys' fees or other
costs of defending a claim of Environmental Liability) under any
Environmental Law.
INDEMNIFIABLE LOSSES: With respect to any claim by an Indemnitee for
indemnification authorized pursuant to this Agreement, any and all losses,
liabilities, claims, damages, obligations, payments, costs, and expenses
(including, without limitation, the costs and expenses of any and all
Actions, demands, assessments, judgments, settlements, and compromises
relating thereto and reasonable attorneys' fees and expenses in connection
therewith) suffered by such Indemnitee with respect to such claim.
INDEMNIFYING PARTY: Any party who is required to pay any other person
pursuant to Sections 3 and 4 hereof.
INDEMNITEE: Any party who is entitled to receive payment from an
Indemnifying Party pursuant to Sections 3 and 4 hereof.
INDEMNITY PAYMENT: The amount an Indemnifying Party is required to pay an
Indemnitee pursuant to Sections 3 and 4 hereof.
MATERIAL OF ENVIRONMENTAL CONCERN: (i) Any substance, the presence of which
requires investigation or remediation under any Environmental Law or under
common law; (ii) any dangerous, toxic, explosive, corrosive, flammable,
infectious, radioactive, carcinogenic, mutagenic, or otherwise hazardous
substance which is regulated by any Environmental Law; (iii) any substance,
the presence of which causes or threatens to cause a nuisance upon the
property where it is located, or
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to adjacent properties or poses or threatens to pose a hazard to the health
and safety of persons on or about the property where it is located; and
(iv) urea-formaldehyde, polychlorinated biphenyls, asbestos or
asbestos-containing materials, petroleum and petroleum products.
SUBSIDIARY OF WCGI: Subsidiaries of WCGI include Pro Builders, Industrial
Constructors Corp., Washington Construction Company and Conda Mining, Inc.
3. INDEMNIFICATION
(a) Except as otherwise provided herein, WCGI shall indemnify, defend and
hold harmless WC and its Affiliates and each of their respective directors,
officers, employees, and agents from and against any and all Indemnifiable
Losses arising out of or based upon Environmental Liability which is
alleged to be, or which is, directly or indirectly, caused by, related to
or a result of, the operation of the business of WCGI or any of its
Affiliates or the ownership of property by WCGI or any of its Affiliates;
and
(b) Except as otherwise provided herein, WC shall indemnify, defend and
hold harmless WCGI and its Affiliates and each of their respective
directors, officers, employees, and agents from and against any and all
Indemnifiable Losses arising out of or based upon any Environmental
Liability which is alleged to be, or which is, directly or indirectly,
caused by, related to or a result of, the operation of the business of WCGI
or any of its Affiliates or the ownership of property by WC or any of its
Affiliates.
4. PROCEDURE FOR INDEMNIFICATION
(a) If an Indemnitee shall receive notice of the assertion by a person who
is not a party to this Agreement of any claim or of the commencement by any
such person of any Action (a "Third Party Claim") with respect to which an
Indemnifying Party is or may be obligated to make an Indemnity Payment,
such Indemnitee shall give such Indemnifying Party prompt notice thereof
after becoming aware 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 any Indemnitee to give notice as provided in this Section 4
shall not relieve the related Indemnifying Party of its obligations under
this Agreement, except to the extent that such Indemnifying Party is
actually prejudiced by such failure to give notice.
(b) An Indemnifying Party may elect to defend, at such Indemnifying
Party's own expense and by such Indemnifying Party's own counsel, any Third
Party Claim. If
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an Indemnifying Party elects to defend a Third Party Claim, it shall,
within 10 days of notice of such Third Party Claim (or sooner, if the
nature of such Third Party Claim so requires), notify the related
Indemnitee of its intent to do so, and such Indemnitee shall cooperate in
the defense of such Third Party Claim. Such Indemnifying Party shall pay
such Indemnitee's actual out-of-pocket expenses (other than officers' or
employees' salaries) reasonably incurred in connection with such
cooperation as such expenses are incurred. After notice from an
Indemnifying Party to an Indemnitee of its election to assume the defense
of a Third Party Claim, such Indemnifying Party shall not be liable to such
Indemnitee under this Agreement for any legal or other expenses
subsequently incurred by such Indemnitee in connection with the defense
thereof; PROVIDED, HOWEVER, that such Indemnitee shall have the right to
employ separate counsel to represent such Indemnitee if, in such
Indemnitee's reasonable judgment, a conflict of interest between such
Indemnitee and such Indemnifying Party exists in respect of such claim, and
in that event the reasonable fees and expenses of such separate counsel
shall be paid by such Indemnifying Party as such fees and expenses are
incurred. Except as so provided, if an Indemnitee desires to participate
in the defense of a Third Party Claim, it may do so but it shall not
control the defense and such participation shall be at its sole cost and
expense. If an Indemnifying Party elects not to defend against a Third
Party Claim, or fails to notify an Indemnitee of its election as provided
in this Section 4, such Indemnitee may defend, compromise and settle such
Third Party Claim; PROVIDED, HOWEVER, that no such Indemnitee may
compromise or settle any such Third Party Claim without prior written
notice to such Indemnifying Party and except by payment of monetary damages
or other money payments. No Indemnifying Party shall consent to entry of
any judgment or enter into any compromise or settlement which does not
include as an unconditional term thereof the giving by the claimant or
plaintiff to such Indemnitee of a release from all liability in respect to
such Third Party Claim.
(c) If any Indemnifying Party chooses to defend any claim, the Indemnitee
shall make available to such Indemnifying Party any personnel or any books,
records or other documents within its control that are necessary or
appropriate for such defense (the cost of copying thereof to be paid by the
Indemnifying Party).
(d) Upon any final determination of a Third Party Claim pursuant to this
Section 4, the Indemnifying Party shall pay promptly on behalf of the
Indemnitee, or to the Indemnitee in reimbursement of any amount theretofore
required to be paid by it, the amount so determined. Upon the payment in
full by the Indemnifying Party of any such amount the Indemnifying Party
shall be subrogated to the rights of such Indemnitee, to the extent not
waived in settlement, against the person who made such Third Party Claim
with respect to the subject matter of such claim.
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(e) Except to the extent expressly provided otherwise herein, 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 or the responsibility with
respect thereto or, solely by virtue of the indemnification provisions
hereof, provide any subrogation rights respect thereto.
(f) Any claim on account of an Indemnifiable Loss which does not result
from a Third Party Claim shall be asserted by written notice given by the
related Indemnitee to the related Indemnifying Party. Such Indemnifying
Party shall have a period of 30 days within which to respond thereto. If
such Indemnifying Party does not respond with such 30-day period, such
Indemnifying Party shall be deemed to have accepted responsibility to make
payment and shall have not further right to contest the validity of such
claim. If such Indemnifying Party does respond within such 30-day period
and rejects such claim in whole or in part, such Indemnitee shall be free
to pursue all available legal actions.
(g) If the indemnification provided for in this Agreement is unavailable
or insufficient to hold harmless an Indemnitee in respect of any
Indemnifiable Loss, then the "Indemnifying Party shall contribute to the
amount paid or payable by such Indemnitee as a result of such Indemnifiable
Loss, in such proportion as is appropriate to reflect the relative fault of
WCGI and its Affiliates on the one hand and WC and its Affiliates on the
other hand in connection with the circumstances which resulted in such
Indemnifiable Loss. The amount paid or payable by an Indemnitee as a
result of the Indemnifiable Loss referred to above in this subsection (g)
shall be deemed to include any legal or other expenses reasonably incurred
by such Indemnitee in connection with investigating or defending any such
action or claim.
5. NOTICES
All notices, requests, demands, and other communications under this
Agreement shall be in writing and shall be deemed to have been duly given (i) on
the date of service if served personally on the party to whom notice is to be
given, (ii) on the day of transmission if sent via facsimile transmission to the
facsimile number given below, and telephonic confirmation of receipt is obtained
promptly after completion of transmission, (iii) on the day after delivery to
Federal Express or similar overnight courier or the Express Mail services
maintained by the United States Postal Service, or (iv) on the fifth day after
mailing, if mailed to the party to whom notice is to be given, by first class
mail, registered or certified, postage prepaid and properly addressed, to the
party as follows:
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If to WC: Corporate Secretary
P. O. Box 8182
Missoula, MT 59807
Fax No. (406) 721-4794
If to WCGI: Corporate Secretary
P. O. Box 8148
Missoula, MT 59807
Fax No. (406) 728-9265
Any party may change its address for the purpose of this Section by giving
the other party written notice of its new address in the manner set forth above.
G. GENERAL
(a) Except as otherwise provided in this Agreement, no party hereto shall
assign this Agreement or any rights or obligations hereunder without the
prior written consent of the other party hereto and any such attempted
assignment without such prior written consent shall be void and of no force
and effect. This Agreement shall be binding upon, and inure solely to the
benefit of, the parties hereto and, to the extent provided herein, their
respective Affiliates and the directors, officers, employees, and agents of
the parties hereto and their respective Affiliates, and their heirs,
personal representatives, successors, and permitted assigns.
(b) This Agreement may be amended or modified and any of the terms and
conditions hereof may be waived, only by a written instrument executed by
the parties hereto, or in the case of a waiver, by the party waiving
compliance. Any waiver by either party hereto of any conditions, or of the
breach of any provision or term in any one or more instances, shall not be
deemed to be nor construed as further or continuing waiver of any such
condition, or of the breach of any other provision or term of this
Agreement.
(c) This Agreement contains the entire understanding between the parties
hereto with respect to the matters specified herein and supersedes and
replaces all prior and contemporaneous agreements and understandings, oral
or written, with regard to such matters.
(d) In the event that any provision of this Agreement is declared by any
court or other judicial or administrative body to be null, void or
unenforceable, such provision shall survive to the extent it is not so
declared, and all of the other provisions of this Agreement shall remain in
full force and effect.
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(e) Nothing in this Agreement is intended to confer any rights or remedies
under or by reason of this Agreement on any persons other than WC or WCGI
and, to the extent provided herein, WC's and WCGI's respective directors,
officers, employees, agents, and Affiliates and their respective heirs,
executors, administrators, successors, and permitted assigns. Nothing in
this Agreement is intended to relieve or discharge the obligations or
liability of any third persons to WC or WCGI. No provision of this
Agreement shall give any third persons any right of subrogation or action
over or against WC or WCGI or their respective directors, officers,
employees, agents, and Affiliates.
(f) This Agreement shall be construed, performed and enforced in
accordance with, and governed by, the internal laws of the State of
Montana, without giving effect to the principles of conflicts of laws
thereof.
(g) The section and paragraph headings in this Agreement are for reference
purposes only and shall not affect the meaning or interpretation of this
Agreement.
(h) This Agreement may be executed in counterparts, each of which shall be
deemed an original, but all of which shall constitute the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized as of the date
first above written.
WASHINGTON CORPORATIONS
/s/ LeRoy Wilkes
-----------------------------
LeRoy Wilkes, Vice President
WASHINGTON CONTRACTORS GROUP, INC.
/s/ Darrol N. Groven
-----------------------------
Darrol Groven, President
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EXHIBIT 10.6
REDACTED COPY
SHAREHOLDERS AGREEMENT
SHAREHOLDERS AGREEMENT, dated December 18, 1993 ("Agreement"), by and among:
(1) Morrison Knudsen BV, a company incorporated in the Netherlands, whose
registered office is at Amsterdam ("MK");
(2) LAMBIQUE BEHEER BV, a company incorporated in the Netherlands, whose
registered office is at Amsterdam ("NRG"); and
(3) ERGON OVERSEAS HOLDINGS LIMITED, a company incorporated in England, whose
registered office is at London ("PowerGen").
RECITALS
A. MK, NRG and PowerGen each own one third (1/3) of all the issued shares of
MIBRAG BV, a company incorporated in the Netherlands (herein referred to as
either "MIBRAG BV" or the "Company"), which has agreed, pursuant to the Sale and
Purchase Agreement of even date herewith (Urkundennummer ______/1993 of the
notary Axel Rodert, Cologne) among the Company, the Treuhandanstalt ("THA"),
Mitteldeutsche Braunkohlengesellschaft mbH, a company incorporated under the
laws of the Federal Republic of Germany, whose registered office will be in
Bitterfeld ("MIBRAG GmbH"), and Mitteldeutsche Bergbau-Verwaltungsgesellschaft
mbH ("MBV") to acquire 99% of the shares of MIBRAG GmbH.
B. MK, NRG and PowerGen are entering into this Agreement in order to set out,
among other things, the terms governing their relationship as shareholders in
the Company, as well as the Company's exercise of its rights as a shareholder to
MIBRAG GmbH.
IT IS AGREED, therefore, as follows:
<PAGE>
2
INTERPRETATION
DEFINITIONS
1.1 In this Agreement, the following expressions shall (unless the context
requires otherwise) have the following meanings:
Articles of Association: the articles of association of the Company;
Audited Accounts: the audited consolidated balance sheet and consolidated
profit and loss account in respect of a particular Fiscal Year;
Aufsichtsrat: the Aufsichtsrat (or supervisory board) of MIBRAG GmbH;
Budget: the capital and operating budget for the MIBRAG Group and each of its
undertakings for a particular Fiscal Year as determined by the Geschaftsfuhrung
and agreed hereunder;
Business Day: a day (other than a Saturday) on which banks generally are open
in Amsterdam, Berlin, London and New York for a full range of business;
Business Plan: the rolling business plan for the MIBRAG Group for a particular
Fiscal Year and the four (4) succeeding Fiscal Years as determined from time to
time by the Geschaftsfuhrung of MIBRAG GmbH and agreed hereunder;
Business: the business to be carried on by the MIBRAG Group, as defined in
clause 4.1;
Company: MIBRAG BV and its successors and assigns;
Event of Default: the events set forth in clause 8.1;
<PAGE>
3
Fiscal Year: the financial period of the Company commencing (other than in the
case of the initial financial period) on January 1 and ending on December 31;
Geschaftsfuhrer: The Geschaftsfuhrer/managing director of MIBRAG GmbH;
Geschaftsfuhrung: the Geschaftsfuhrung (or management board) of MIBRAG GmbH;
Group: at the relevant time in relation to a Party, that Party and its
Subsidiaries, any undertaking (Holding Undertaking) of which that Party is a
Subsidiary (whether directly or indirectly) and any undertaking which is a
Subsidiary of such Holding Undertaking;
Joint Aufsichtsrat Members: the members of the Aufsichtsrat designated jointly
by the Parties;
Lippendorf Coal Contract(s): the two coal supply agreements, dated March 8,
1993, having identical terms, one among MIBRAG AG, Bayernwerk AG,
Energieversorgung Schwaben AG and Badenwerk AG and the second one between MIBRAG
AG and Vereinigte Energiewerke AG;
MIBRAG AG: MIBRAG Vereinigte Mitteldeutsche Braunkohlenwerke
Aktiengesellschaft, a stock corporation incorporated under the laws of the
Federal Republic of Germany;
MIBRAG Group: The Company and any undertakings in which the Company has an
interest after the Spaltungsplan has become effective;
Mining Services Agreement: the Agreement for the Provision of Mining
Consultancy Services to be executed between MIBRAG GmbH and MK GmbH for certain
services with respect to the operation and maintenance of the mining business of
the MIBRAG Group;
<PAGE>
4
MK Aufsichtsrat Member: The Aufsichtsrat Member designed by MK;
MK GmbH: Morrison Knudsen Deutschland GmbH, a company incorporated under the
laws of the Federal Republic of Germany, whose registered office is in
Frankfurt, Germany;
NRG Aufsichtsrat Member: The Aufsichtsrat Member designated by NRG;
Parties: Morrison Knudsen BV, Lambique Beheer BV and Ergon Overseas Holdings
Limited (and Party shall be construed accordingly);
Power Services Agreement: the Agreement for the Provision of Consultancy
Services to be executed between MIBRAG GmbH and SES for certain services with
respect to the operation and maintenance of the power stations of the MIBRAG
Group;
PowerGen Aufsichtsrat Member: The Aufsichtsrat Member designated by PowerGen;
Sale and Purchase Agreement: the agreement ("Kaufvertrag") of even date
herewith (Urkundennummer _____/1993 of the notary Axel Rodert, Cologne) among
the Company, THA, MIBRAG GmbH and MBV relating to the acquisition by the Company
of 99 % of the shares in MIBRAG GmbH and certain mining proprietary rights;
Satzung: the Satzung (or constitutional documents) of MIBRAG GmbH;
SES: Saale Energie GmbH Services i.G., a company incorporated under the laws of
the Federal Republic of Germany, whose registered office will be in Schkopau, an
indirect joint undertaking of the NRG Group and the PowerGen Group;
<PAGE>
5
Shareholders: such members of the MK Group, the NRG Group and the PowerGen
Group as are at the relevant time holders of shares of the Company (and
Shareholder shall be construed accordingly);
Shareholder Aufsichtsrat Members: the members of the Aufsichtsrat nominated by
the Shareholders, namely the MK Aufsichtsrat Member, the NRG Aufsichtsrat
Member, the PowerGen Aufsichtsrat Member and the Joint Aufsichtsrat Members;
Spaltungsplan: as such term is defined in the Sale and Purchase Agreement;
Subsidiary: in relation to a Party, any other undertaking in which the Party
(or persons acting on its or their behalf) for the time being directly or
indirectly holds or controls either:
(a) a majority of the voting rights exercisable at general meetings of the
members of that undertaking on all, or substantially all, matters; or
(b) the right to appoint or remove directors having a majority of the voting
rights exercisable at meetings of the board of directors of that
undertaking on all, or substantially all, matters,
and any undertaking which is a Subsidiary of another undertaking shall also be a
Subsidiary of any further undertaking of which that other is a Subsidiary;
undertaking: a body corporate or partnership or an unincorporated association
carrying on trade or a business with or without a view to profit;
Transition Agreement: the Transition Agreement dated December 18, 1993 between
the Company and THA relating to the period from the execution of the Sale and
Purchase Agreement to transfer of title to 99 % of the shares in MIBRAG GmbH to
the Company;
Vorsitzender: The Vorsitzender (or Chairman) of the Aufsichtsrat.
<PAGE>
6
INTERPRETATION
1.2 For the purposes of this Agreement:
(a) clause and paragraph headings in this Agreement and the Appendices are
inserted for convenience only and shall not affect the construction of this
Agreement;
(b) any reference to an amount in Dutch Guilders or Deutsche Marks shall
include an equivalent amount at the relevant time in any other currency or
combination of currencies;
(c) any reference to an agreed draft is to the form of the relevant document as
agreed between the Parties and signed on their behalf for the purpose of
identification (with such amendments, if any, as may subsequently be agreed
in writing between the Parties).
EXERCISE OF POWERS OF CONTROL
1.3 Where any obligation in this Agreement is expressed to be undertaking or
assumed by any Party, such obligation shall be construed as requiring that Party
to exercise all rights and powers of control over the affairs of any other
person which that Party is able to exercise (whether directly or indirectly) in
order to secure performance of such obligation.
1.4 Each Party undertakes to exercise its rights and powers as a shareholder
and member of the management board of the Company, in furtherance of the
Company's objectives in accordance with the Articles of Association and the
provisions of Dutch law, to cause the Company to exercise all its rights and
powers available under the Satzung and the laws of the Federal Republic of
Germany (with respect to MIBRAG GmbH) to procure that to the greatest extent
possible effect is given to the matters agreed herein, in the Sale and Purchase
Agreement, the Transition Agreement, the Mining Services Agreement and the Power
Services Agreement.
<PAGE>
7
SCOPE OF BUSINESS AND MANAGEMENT OF THE COMPANY
BUSINESS OF THE COMPANY
2.1 Unless Unanimously agreed otherwise by the Parties, the sold business of
the Company shall be the holding of the shares in MIBRAG GmbH ( and the exercise
of the related shareholder rights), the exercise of any rights or claims under
the Sale and Purchase Agreement accruing to the Company as the purchase
thereunder and the fulfillment of the Company's commitments and obligations
thereunder. The acquisition or disposition by the Company of any shares of, or
any other participation in, any undertakings shall require the unanimous consent
of the Parties.
CAPITALIZATION OF THE COMPANY
[REDACTED COPY]
<PAGE>
8
[Reducted Copy]
MANAGEMENT OF THE COMPANY
2.7 The Company will be managed by a management board, which shall consist of
all of the Parties. The rights and obligations of the Parties as shareholders
and members of the management board of the Company are set forth in the Articles
of Association and in this Agreement.
2.8 The Parties agree that the Company shall not exercise any of its rights nor
take any other action regarding MIBRAG GmbH (including the exercise of its
voting rights or other rights, including those rights exercised through the
Shareholder Aufsichtsrat Members) unless such action shall have previously been
approved by the management board of the Company.
MEETINGS OF THE MANAGEMENT BOARD
2.9 The Parties shall appoint a Chairman and a Vice Chairman of the management
board. The Vice Chairman shall replace the Chairman in the event the Chairman
is prevented from performing his duties. The appointment of Chairman and Vice
Chairman shall be for a term of one year unless otherwise revoked by a decision
of the management board.
<PAGE>
9
2.10 Meetings of the management board shall be called by the Chairman of the
management board by giving seven days written notice (unless an immediate action
of the management board is required, in which case a meeting shall be called
upon 48 hours written notice setting forth the matter of urgency) to all Parties
and shall be held at the registered office of the Company or at such other place
outside of the Federal Republic of Germany as may be agreed between the Parties.
Upon request of a Party, the Chairman is obliged to call a meeting of the
management board.
2.11 The management board cannot take any decisions or other actions unless all
the Parties are represented, whether in person, by telephone or by proxy. The
Chairman shall ascertain whether a quorum is present. In the event that no
quorum is present, the Chairman shall call a new meeting concerning the same
agenda within 48 hours with a notice period of at least four days to and
exclusive of the new date of the meeting. The meeting of the management board
convened thereupon constitutes a quorum irrespective of the Parties represented.
2.12 The Chairman shall lead the meeting of the management board. There shall
be minutes of each meeting, which shall be kept at the registered office of the
Company. The minutes shall be signed by the Chairman and shall be immediately
passed on to the other members of the management board for approval.
CHANGE IN CONTROL OVER A PARTY
OPTION TO PURCHASE
3.1 In the event of a change in control over any Party, each of the other
Parties shall be entitled to purchase any or all of the shares of such Party in
the Company (the "Option") proportionate to their shareholdings at a price to be
agreed or, if no agreement can be reached, at a fair market value price
established by an
<PAGE>
10
independent expert, who shall be designated by the appointed auditor of the
Company.
CHANGE IN CONTROL
3.2 A change in control shall be deemed to have occurred if 50% or more of any
kind of shareholder's rights with respect to any Party or any undertaking
directly or indirectly controlling the Party within the meaning of Article 24
(a) of Book 2 of the Dutch Civil Code shall transfer to a third party.
NOTIFICATION AND METHOD OF EXERCISE
3.3 Promptly, but in no case later than 10 days after any change in control,
each Party shall inform the other Parties in writing about such change in
control. Within a period of 60 days after receipt of such written notice or the
date on which the other Parties obtain knowledge of such change in control,
whichever is later, the other Parties can exercise their option by written
notice to the relevant Party. In the event that no all of the other Parties
exercise their option to purchase in full, all shares of the relevant Party may
be acquired proportionate to the shares held by the Parties exercising their
rights.
THE COMPANY AS SHAREHOLDER OF MIBRAG GMBH
BUSINESS OF THE MIBRAG GROUP
4.1 The Parties agree that the business of the MIBRAG Group shall be to carry
on and develop the business of brown coal mining and electrical and thermal
energy production (as further described in the Satzung) on sound, commercial,
profit-making principles in accordance with the general principles of the
Business Plan and in accordance with the Budget. The Business Plan and the
Budget shall be reviewed by the Parties at the end of each quarter (or such
<PAGE>
11
other period as the Parties may agree) and shall be updated annually.
GOOD FAITH
4.2 Each Party shall act in good faith towards the Company, the other Parties
and MIBRAG GmbH in order to promote the success of the Company and the MIBRAG
Group, and, to the extent it is within its power, it shall procure that the
other members of its Group do likewise.
SERVICES AGREEMENTS
4.3 The Parties shall use best efforts to procure that MIBRAG GmbH will (i)
execute, as soon as practicable after the execution of this Agreement, the
Mining Services Agreement in the form attached as EXHIBIT A hereto and the Power
Services Agreement in the form attached as EXHIBIT B hereto, (ii) make such
amendments as may be required pursuant to Article 29.2.3 of the Sale and
Purchase Agreement and (iii) continue to perform its obligations under these
Services Agreements. In the event any of these Services Agreements is invalid,
terminated (for reasons not set forth in such Services Agreement) or contested
pursuant to the Sale and Purchase Agreement, the Company shall use best efforts
to cause MIBRAG GmbH to execute as soon as possible an agreement with terms as
near as possible to those contemplated by such Services Agreement.
CAPITALIZATION OF MIBRAG GMBH
4.4 The Parties agree that the Company shall contribute to MIBRAG GmbH such
additional capital as is required under Article 29 of the Sale and Purchase
Agreement.
<PAGE>
12
ACTIONS OF THE COMPANY AS SHAREHOLDER AND PURCHASER OF MIBRAG GMBH
4.5 The following decisions and actions of the Company shall require a majority
vote of the management board unless otherwise specified herein or in the
Articles of Association:
(a) all decisions and actions of the Company as a shareholder of MIBRAG
GmbH; and
(b) the taking of any action of the Company permitted or required under
the Sale and Purchase Agreement (other than the actions set forth in
clause 4.6 hereof) after the Legal Transfer Date, including, without
limitation, the rights and options under Articles 8, 21.6, 30.2 and
40.3 of the Share and Purchase Agreement.
UNANIMOUS CONSENT
4.6 In addition to the decisions and actions of the Company set forth in the
Articles of Association and in clauses 2.1, 5.1, 6.1 and 6.2 of this Agreement,
the following decisions and actions shall require the prior unanimous consent of
al Parties represented on the management board:
[REDACTED COPY]
<PAGE>
13
[REDACTED COPY]
<PAGE>
14
[REDACTED COPY]
5.1 The Parties shall cause the Company to use its rights and powers to
procure, so far as legally possible, that the Geschaftsfuhrung of MIBRAG GmbH
shall submit to the Company by
<PAGE>
15
October 1 of each year for review, revision (if necessary) and approval, a draft
of the Business Plan and Budget for the next Fiscal Year. The Parties shall use
their best efforts to unanimously agree on the draft Business Plan and Budget by
December 15 in each year, to instruct the Company to adopt the same at a
shareholders' meeting as the Business Plan and Budget of the Company and to
procure that the MIBRAG Group shall conduct the Business in accordance with the
Business Plan and Budget. Any provisions in a Business Plan or a Budget
providing for a mandatory increase of the stated capital of the Company or any
other additional funding by the Parties shall require the unanimous consent of
all Parties as set forth in clause 6.2.
5.2 Each Party may propose at any time that the Business Plan and/or Budget be
amended (which amendment may take the form of a supplement), submit such
amendment to the Parties for approval and request that all corporate action of
the Company be initiated to implement such amendment.
5.3 If by December 15 no agreement has been reached by the Parties on the
Business Plan for the following Fiscal Year, the Parties shall cause the Company
to permit the MIBRAG Group to proceed with the matters agreed in respect of that
particular Fiscal Year in the then current Business Plan.
5.4 If by December 31 in a relevant year no agreement has been reached on the
Budget, the Parties shall:
(a) cause the Company to permit the MIBRAG Group to proceed with those
matters and incur those costs and expenditures in respect of which
agreement had been reached;
(b) cause the Company to permit the MIBRAG Group to discharge liabilities
and obligations the non-performance of which would render the MIBRAG
Group or any member of it liable
<PAGE>
16
to court action (including, without limitation, the payment of any
rent or any other periodic payment);
(c) use all reasonable endeavors to reach agreement on the relevant Budget
as soon as possible thereafter.
5.5 If it appears to any Party that an undertaking of the MIBRAG Group may
exceed its budget, or the budgeted amount for any specific item with a budgeted
value in excess of DM 1,000,000, by more that 10 %, such Party may notify the
other Parties and require that a management meeting of the Company be convened
to consider the matter. Pending such meeting and until the budget for the
relevant item is increased (if it is increased), the Parties shall cause the
Company to use its reasonable endeavors to procure that, except for liabilities
and obligations referred to in paragraph (b) of clause 5.4, the MIBRAG Group
does not exceed the total budget or the amount provided in the budget for such
item, as the case may be, by more than 10 %.
[REDACTED COPY]
<PAGE>
17
BUSINESS PLAN, BUDGET AND DIVIDEND POLICY OF THE COMPANY
5.7 The business plan, budget and dividend policy of the Company shall be
discussed and implemented together with the Business Plan, the Budget and the
dividend policy of MIBRAG GmbH.
CAPITAL AND ADDITIONAL FUNDING
ISSUANCE OF NEW SHARES
6.1 The issued share capital of the Company may from time to time be increased
by such amount as shall be unanimously agreed between the Parties
proportionately to the number of shares they hold immediately prior to such
increase.
FUNDING SUPPORT BY THE PARTIES
6.2 It is the intention of the Parties that the Company and MIBRAG GmbH should
be self-financing and should obtain additional funds from third parties without
recourse to their respective shareholders. However, the Parties recognize the
need to support the Company in accordance with the Business Plan and Budget from
time to time and to provide additional funding as unanimously agreed by the
Parties to ensure the adequate funding of the Company and the MIBRAG Group and
to support their short and long term objectives. The Parties shall not
unreasonably withhold their consent to any additional funding required to
perform the obligations of the Company under the Sale and Purchase Agreement.
AUFSICHTSRAT OF MIBRAG GMBH
MEMBERS
7.1 For as long as the Aufsichtsrat of MIBRAG GmbH shall comprise a maximum of
eleven (11) members, each Party shall:
<PAGE>
18
(a) be entitled to designate one (1) Member of the Aufsichtsrat: and
(b) be entitled to designate jointly with the other Parties two (2)
Members to the Aufsichtsrat (the Joint Aufsichtsrat Members).
ELECTION AND REMOVAL
7.2 Each of the Parties agrees to cause the Company to vote in favor of the
election to the Aufsichtsrat of the persons designated by the Parties under
clause 7.1 above and in favor of any person designated pursuant to clause
7.1 to replace any such person.
7.3 Each of the Parties agrees to cause the Company to remove and replace the
Joint Aufsichtsrat Members in accordance with the provisions of the Satzung
and this Agreement.
7.4 The Parties shall cause the Company to procure that their respective
Aufsichtsrat Members and the Joint Aufsichtsrat Members vote jointly in the
election of the Vorsitzender.
DEFAULT
EVENTS OF DEFAULT
8.1 It shall be an Event of Default in relation to a Party if:
(a) proceedings shall have been commenced or a resolution passed to wind
up a Party (other than for the purpose only of solvent amalgamation or
solvent reconstruction previously approved in writing by the other
Parties);
(b) any step is taken and not withdrawn within 90 (ninety) days to appoint
a manager, receiver in bankruptcy (curator), administrator,
administrative receiver, or any
<PAGE>
19
similar officer in respect of any assets of that Party or in respect
of the shares in that Party or any undertaking of which that Party is
a Subsidiary;
(c) any distress, execution, sequestration or other process is levied or
enforced (and not discharged within 7 (seven) days) against any
substantial part of the assets of that Party;
(d) that Party shall become insolvent, enter into suspension of payments
(surceance van betaling) or otherwise be unable to pay its debts as
and when they fall due as defined pursuant to Dutch or English law, as
it is applicable to that Party;
(e) that Party shall cease or threaten to cease to carry on a substantial
part of its business (other than for the purpose only of solvent
amalgamation or solvent reconstruction previously approved in writing
by the other Parties) and such cessation would adversely affect to a
substantial degree its ability to discharge its obligations under this
Agreement from time to time;
(f) that Party convenes a meeting of its creditors or makes or proposes
any arrangement or composition with, or any assignment for the benefit
of, its creditors;
(g) the equivalent of any of (a) to (f) above occurs in respect of any
Party under the laws of England, the Netherlands or the United States;
(h) that Party fails to pay within 30 (thirty) Business Days of the due
date any amount payable by it under clause 6.2 of this Agreement in
the manner in which it is expressed to be payable in this Agreement or
the resolution authorizing such payment; or
<PAGE>
20
(i) that Party commits a material breach of any provision of this
Agreement and fails to remedy the same within 30 (thirty) days of
notice to do so being given by the other Parties (and in which the
other Parties express their intention to exercise their rights under
this clause);
and for the purposes of this clause 8, any reference to Party shall include any
member of that Party's Group.
ACTIONS FOLLOWING AN EVENT OF DEFAULT
8.2 If an Event of Default applies in relation to a Party (the "Defaulting
Party"), then, without prejudice to any provision of Dutch law or contained in
the Articles of Association, until such Event of Default is cured or waived in
writing by the other Parties (the "Non-Defaulting Parties"):
(a) the Non-Defaulting Parties shall be entitled by notice in writing to
the Defaulting Party to require that any consent or approval required
of a Party pursuant to this Agreement shall not hereafter be required
of the Defaulting Party or any of its appointed representatives;
(b) the Defaulting Party shall be deemed to have nominated one of the
Non-Defaulting Parties' Aufsichtsrat Members as the alternate to the
Defaulting Party's Aufsichtsrat Member, to attend and vote meetings of
the Aufsichtsrat in his place (such alternate to act pursuant only to
the joint instructions of the Non-Defaulting Parties); and
(c) The Non-Defaulting Parties shall have the right to exercise an option
to purchase any or all of the shares of the Defaulting Party
proportionate to the ratio of their shareholdings at a fair market
value price (less
<PAGE>
21
adjustments for any failure of the Defaulting Party to make payments
duly authorized pursuant to clause 6.2) as established by an
independent expert who shall be designated by the appointed auditor of
the Company. The Non-Defaulting Parties must exercise their option to
purchase the shares of the Defaulting Party by written notice to the
Defaulting Party. Such notice shall include the price to be paid for
the shares. In the event that not all of the Non-Defaulting Parties
exercise their right to acquire in full, all shares of the Defaulting
Party may be acquired proportionately to the ratio of the shares held
by the Non-Defaulting Parties exercising their rights.
NON-COMPETITION
MIBRAG CUSTOMERS
9.1 Each of the Parties undertakes that, for so long as it or any member of its
Group is beneficially interested in any share in the capital of the Company and
for a period of one year thereafter, it shall procure (to the extent it is
legally able to do so) that neither it, nor any member of its Group (whether
alone or jointly with others, or whether as principal agent, shareholder or
otherwise and whether for its own benefit or that of others) entices away or
endeavors to entice away any material customer of the MIBRAG Group.
CONFIDENTIALITY
CONFIDENCE INFORMATION
10.1 Each of the Parties undertakes that for so long as it or any member of its
Group is beneficially interested in any shares in the
<PAGE>
22
capital of the Company and for a period of one year thereafter, it shall use
(and to the extent it is legally able shall ensure that each of the members of
its Group shall use) all reasonable endeavors to keep confidential (and to
ensure that its and their officers, employees, agents and professional and other
advisers keep confidential) any information:
(a) which it may have or acquire (whether before or after the date of this
Agreement) in relation to the customers, business, assets or affairs
of any member of the MIBRAG Group (including, without limitation, any
information provided pursuant to the Business Plan and Budget); or
(b) which, in consequence of the negotiations relating to this Agreement
or of being a shareholder of the Company or having appointees on the
Aufsichtsrat of MIBRAG GmbH or the exercise of its rights or
performance of its obligations hereunder, it may have or acquire
(whether before or after the date of this Agreement) in relations to
the customers, business, assets or affairs of another Party or any
member of another Party's Group; or
(c) which relates to the contents of this Agreement, the Mining Services
Agreement, the Power Services Agreement, or any agreement or
arrangement entered into pursuant to this Agreement.
None of the Parties shall use for its own business purposes or disclose to any
third party any such information (collectively, Confidential Information)
without the consent of the other Parties.
<PAGE>
23
EXCEPTIONS FROM CONFIDENTIALITY OBLIGATION
10.2 The obligation under clause 10.1 shall not apply to:
(a) the disclosure of information on a "need to know" basis to a company
which is another member of a Party's Group where such disclosure is
for a purpose reasonably incidental to this Agreement;
(b) information which is independently developed by the relevant Party or
acquired from a third party to the extent that it is acquired with the
right to disclose the same;
(c) the disclosure of information to the extent required to be disclosed
by law, any stock exchange regulation or any binding judgement, order
or requirement of any court or other competent authority;
(d) the disclosure of information to any tax authority to the extent
required by law for the purposes of the tax affairs of the Party
concerned or any member of its Group;
(e) the disclosure in confidence to a Party's professional advisers;
(f) information which is or becomes within the public domain (otherwise
than as a result of a breach of this clause 10); or
(g) any announcement made in accordance with the terms of clause 18.
10.3 For the purposes of this clause 10, any reference to Party shall include
any member of that Party's Group.
<PAGE>
24
EFFECTIVE DATE AND TERM
11.1 This Agreement shall have effect from the date of execution and shall
continue until (i) all but one (1) of the Parties have transferred all their
shares in the Company outside their Group or (ii) the Company has sold all its
shares in MIBRAG GmbH, whichever event occurs first.
11.2 The termination of this Agreement for any reason shall not:
(a) relieve any Party from any liability or obligation in respect of any
matters, undertaking or conditions which have not been done, observed
or performed by that Party prior to such determination; or
(b) affect the terms of any Agreement entered into between the Parties, or
any successor of them holding shares of the Company, to replace this
Agreement; or
(c) affect the terms of clause 10 of this Agreement.
NON-ASSIGNMENT
12.1 Each of the Parties may assign any or all of its shares in the Company in
accordance with the provisions set forth in the Articles of Association and in
this Agreement. A Party desiring to transfer its shares in the Company
undertakes to procure that any new shareholder shall agree in writing to be
bound by the terms of this Agreement before such transfer becomes effective.
12.2 The Parties agree that, in the event a Party desires to transfer its
shares in the Company and its rights hereunder within its group, the other
Parties shall not exercise any right of first refusal under the Articles of
Association or this Agreement.
<PAGE>
25
WAIVER OF RIGHTS
13. No waiver by a Party of a failure by another Party to perform any provision
of this Agreement shall operate or be construed as a waiver in respect of any
other failure whether of a like or different character.
AMENDMENTS
14. This Agreement may be amended only by an instrument in writing signed by
duly authorized representatives of each of the Parties.
INVALIDITY
15. If any of the provisions of this Agreement is or becomes invalid, illegal
or unenforceable, (a) the validity, legality or enforceability of the remaining
provisions of this Agreement shall not in any way be affected or impaired, and
(b) the Parties shall negotiate in good faith in order to agree on terms of a
mutually satisfactory provision, achieving as closely as possible the same
commercial effect, to be substituted for the provision found to be void, illegal
or unenforceable.
NO PARTNERSHIP OR AGENCY
16.1 Nothing in this Agreement (or any of the arrangements contemplated hereby)
shall be deemed to constitute a partnership between the Parties for any matters
other than those set forth in this Agreement, no, save as may be expressly set
out herein, constitute any Party the agent of any other Party or Parties for any
purpose.
<PAGE>
26
16.2 In addition, unless otherwise agreed in writing between the Parties, none
of them shall enter into any contracts with third parties as agent for any
member of the MIBRAG Group or for any other Party no shall any Party describe
itself as such an agent or in any way hold itself out as being such an agent.
ARTICLES OF ASSOCIATION OF THE COMPANY AND OF MIBRAG GMBH
17.1 The Parties agree that as soon as practicable after the date of execution
of this Agreement, they will procure that (i) the Articles of Association of the
Company are amended in accordance with EXHIBIT C to this Agreement, and (ii) the
articles of association (Gesellschaftsvertrag) or MIBRAG GmbH are amended to
read substantially as set forth in EXHIBIT D to this Agreement.
17.2 In the event of any conflict between the provision of this Agreement and
the Articles of Association of the Company, the provision of the Articles of
Association shall prevail. The Parties shall exercise all voting and other
rights and powers available to them so as to give effect to the provisions of
this Agreement and shall procure to the extent within their power that any
amendment is made to the Articles of Association of the Company as may be
necessary for this purpose.
ANNOUNCEMENTS
18. No announcement in connection with the subject matter of this Agreement
shall be made or issued by or on behalf of nay Party (or any member of its
Group) without the prior written approval of all other Parties (such approval
not to be unreasonably withheld or delayed) except for any announcement required
by law, any stock exchange regulation or by any binding judgment, order or
requirement of any court or other competent authority. The relevant Party
shall, to the extent reasonable practicable, give the other Parties an
opportunity to comment on any such announcement before it is made or issued.
<PAGE>
27
COSTS
19. Each of the Parties shall pay its own costs, charges and expenses incurred
in connection with the preparation and implementation of this Agreement and the
transactions contemplated by it.
ENTIRE AGREEMENT
20.1 This Agreement together with the Articles of Association, the Sale and
Purchase Agreement (including exhibits), the Transition Agreement, the Mining
Services Agreement and the Power Services Agreement constitute the entire
agreement and understanding of the Parties with respect to the subject matter
hereof and none of the Parties has entered into this Agreement in reliance upon
any representation, warranty or undertaking by or on behalf of any Party which
is not expressly set out herein.
20.2 Without prejudice to the generality of clause 20.1, the Parties agree that
this Agreement superseded any or all prior agreements, understandings,
arrangements, promises, representations, warranties and/or contracts of any form
or nature whatsoever (whether oral or in writing and whether explicit or
implicit) which may have been entered into prior to the date hereof between the
Parties or on their behalf as to the subject matter of this Agreement including,
without limitation, the provisions of the Memorandum of Understanding dated 7/21
October 1992 between NRG Energy, Inc. and PowerGen plc., and the letter from
Morrison Knudsen Corporation to NRG Energy, Inc. of 4 June 1993 as amended on 11
June 1993, PROVIDED, however, that the execution of this Agreement shall not
relieve any Party from any claims of another Party existing at the time of the
execution.
<PAGE>
28
NOTICES
ADDRESS FOR NOTICES
21.1 Any notice or other communication to be given under this Agreement shall
be sent by telefax or courier mail as follows:
if to MK: Morrison Knudsen B.V.
Weena 70
3012CM Rotterdam
Attention:
Robert A. Tinstman
if to NRG: Lambique Beheer B.V.
Vijzelstreet 32
1017 H1 Amsterdam
Attention:
David H. Peterson
if to Powergen: Ergon Overseas Holdings Limited
53 New Broad Street
London EC2M 1JJ
Attention:
David J. Jackson
CHANGES
21.2 A Party may change the address, fax number of the name of the person for
whose attention notices are to be addressed by serving a notice on the other in
accordance with the clause 21.
DEEMED SERVICE
21.3 All notices given in accordance with clause 21.1 shall be deemed to have
been served as follows:
<PAGE>
29
(a) if delivered by courier, at the time of receiving confirmation of
delivery by the courier; and
(b) if communicated by telefax, at the time of receiving confirmation by
the recipient.
SETTLEMENT OF DISPUTES
LEGAL DISPUTES
22.1 If any dispute arises between the Parties in connection with this
Agreement or any associated agreement entered into pursuant to this Agreement (a
Dispute), they shall use all reasonable endeavors to resolve the matter on an
amicable basis. If one Party serves formal written notice on the other that a
material Dispute of such a description has arisen and the Parties are unable to
resolve the Dispute within a period of thirty (30) days from the service of such
notice, then the Dispute shall be referred to the respective senior officers of
the Group of each Party. No recourse to arbitration under clause 22.2 by one
Party against the other under this Agreement shall take place unless and until
such procedure has been followed.
ARBITRATION
22.2 If the senior officers of the Group of each Party shall have been unable
to resolve a Dispute within 30 days after it has been referred to them under
clause 22.1, such Dispute shall be referred to and finally settled by
arbitration under and in accordance with the Rules of Conciliation and
Arbitration of the International Chamber of Commerce by three arbitrators
appointed in accordance with those Rules. The place of arbitration shall be
Amsterdam. The language of the arbitration proceedings shall be English.
Reasonable expenses of the arbitration shall be payable by the Parties in such
proportions as shall be determined by the arbitrators.
<PAGE>
30
GOVERNING LAW
23. This Agreement shall be governed by and construed in accordance with the
laws of the Netherlands.
AS WITNESS this Agreement has been signed by the duly authorized representatives
of the Parties on the day and year first before written.
MORRISON KNUDSEN BV ERGON OVERSEAS HOLDINGS LIMITED
/s/ Terry K. Eller /s/ Roy Adair
By: By:
-------------------------------- --------------------------------
Terry K. Eller Roy Adair
(under a power-of-attorney (under a power-of attorney
attached as Exhibit E) attached as Exhibit F)
LAMBIQUE BEHEER BV
/s/ Carl A. Carreca
By:
--------------------------------
Carl A. Carreca,
Managing Director
(bestuurder)
<PAGE>
31
SHAREHOLDERS AGREEMENT
EXHIBITS
[The Registrant agrees to provide the Securities and Exchange
Commission, upon request, with copies of the Exhibits hereto.]
<PAGE>
EXHIBIT 10.10
THE MORRISON KNUDSEN CORPORATION
AMENDED AND RESTATED STOCK OPTION PLAN
EFFECTIVE JANUARY 19, 1994
AMENDED AND RESTATED AS OF JANUARY 10, 1997
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS...............................................................1
1.1 Award Limit ....................................................1
1.2 Beneficiary.....................................................1
1.3 Board...........................................................2
1.4 Code............................................................2
1.5 Common Stock....................................................2
1.6 Company.........................................................2
1.7 Director Fees...................................................2
1.8 Employee........................................................2
1.9 Expiration Date.................................................2
1.10 Exchange Act....................................................2
1.11 Fair Market Value...............................................2
1.12 Incentive Stock Option..........................................3
1.13 Non-Employee Director...........................................3
1.14 Non-Qualified Stock Option......................................3
1.15 Option..........................................................3
1.16 Optionee........................................................3
1.17 Plan............................................................3
1.18 Restricted Stock................................................3
1.19 Restricted Stockholder..........................................3
1.20 Rule 16b-3......................................................4
1.21 Subsidiary......................................................4
1.22 Termination of Directorship.....................................4
1.23 Termination of Employment.......................................4
ARTICLE II
SHARES SUBJECT TO PLAN....................................................5
ARTICLE III
AWARDING OF OPTIONS.......................................................5
3.1 Eligibility.....................................................5
3.2 Disqualification for Stock Ownership............................5
3.3 Qualification of Incentive Stock Options........................5
3.4 Awards of Options to Employees..................................6
i
<PAGE>
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ARTICLE IV
TERMS OF OPTIONS..........................................................7
4.1 Option Agreement................................................7
4.2 Option Price....................................................7
4.3 Option Term.....................................................7
4.4 Option Vesting..................................................7
4.5 Exercise of Option after Termination of Employment or
Directorship....................................................8
4.6 Consideration...................................................9
ARTICLE V
EXERCISE OF OPTIONS.......................................................9
5.1 Partial Exercise................................................9
5.2 Manner of Exercise..............................................9
5.3 Conditions to Issuance of Stock Certificates...................10
5.4 Rights as Stockholders.........................................11
5.5 Ownership and Transfer Restrictions............................11
ARTICLE VI
AWARD OF RESTRICTED STOCK................................................11
6.1 Eligibility....................................................11
6.2 Awards of Restricted Stock.....................................11
ARTICLE VII
TERMS OF RESTRICTED STOCK................................................12
7.1 Restricted Stock Agreement.....................................12
7.2 Consideration to the Company...................................12
7.3 Rights as Stockholders.........................................12
7.4 Restriction....................................................12
7.5 Repurchase of Restricted Stock.................................13
7.6 Escrow.........................................................13
7.7 Legend.........................................................13
7.8 Section 83(b)..................................................13
ARTICLE VIII
ADMINISTRATION...........................................................13
8.1 Administration by the Board; Delegation........................13
8.2 Administrative Powers..........................................14
8.3 Professional Assistance; Good Faith Actions....................14
8.4 Delegation of Authority........................................14
8.5 No Liability...................................................14
ii
<PAGE>
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8.6 Indemnification................................................14
ARTICLE IX
MISCELLANEOUS PROVISIONS.................................................15
9.1 Not Transferable...............................................15
9.2 Amendment, Suspension or Termination of this Plan..............15
9.3 Adjustments....................................................16
9.4 Tax Withholding................................................16
9.5 Loans..........................................................16
9.6 Limitations Applicable to Section 16 Persons...................17
9.7 Effect of Plan Upon Options and Compensation Plans.............17
9.8 Compliance with Laws...........................................17
9.9 Titles; Gender and Number......................................17
9.10 Governing Law..................................................18
iii
<PAGE>
THE MORRISON KNUDSEN CORPORATION
AMENDED AND RESTATED STOCK OPTION PLAN
(AS AMENDED AND RESTATED AS OF JANUARY 10, 1997)
Morrison Knudsen Corporation, a Delaware corporation (the "Company"), is
the successor to Kasler Holding Company, a corporation, which adopted The 1994
Stock Option and Incentive Plan for Officers, Directors and Key Employees of
Kasler Holding Company, effective January 19, 1994, for the benefit of its key
employees and directors. The stockholders of Kasler Holding Company approved
the Plan at the 1994 annual meeting of stockholders. The purposes of the Plan
are:
(1) to provide an additional incentive for directors and key employees
to further the growth, development and financial success of the Company by
personally benefiting through the ownership of Company and
(2) to enable the Company to obtain and retain the services of
directors and key employees considered essential to the long range success of
the Company by offering them an opportunity to own stock in the Company.
ARTICLE I
DEFINITIONS
In addition to the other terms defined elsewhere herein, wherever the
following terms are used in this Plan with initial capital letters, they shall
have the meanings specified below, unless the context clearly indicates
otherwise.
1.1 AWARD LIMIT
"Award Limit" shall mean not more than 5,000,000 shares of Common Stock.
1.2 BENEFICIARY
"Beneficiary" shall mean the person or persons properly designated by the
Optionee, including his spouse or heirs at law, to exercise such Optionee's
rights under this Plan in the event of the Optionee's death, or if the Optionee
has not designated such person or persons, or such person or persons shall all
have pre-deceased the Optionee, the executor or administrator of the Optionee's
estate. Designation, revocation and redesignation of Beneficiaries must be made
in writing in accordance with rules established by the Board and shall be
effective upon delivery to the Board.
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1.3 BOARD
"Board" shall mean the Board of Directors of the Company.
1.4 CODE
"Code" shall mean the Internal Revenue Code of 1986, as amended.
1.5 COMMON STOCK
"Common Stock" shall mean the common stock of the Company, par value $.01 per
share, and any security into which such common stock may be converted or for
which such common stock may be exchanged by reason of any transaction or event
of the type described in Section 9.3 of this Plan.
1.6 COMPANY
"Company" shall mean Morrison Knudsen Corporation, a Delaware corporation, and
shall include its successors.
1.7 DIRECTOR FEES
"Director Fees" shall mean the annual retainer fees, including committee or
subcommittee chairperson fees, payable in cash by the Company to a Non Employee
Director, but excluding fees paid on the basis of attendance at meetings of the
Board or any committee or subcommittee.
1.8 EMPLOYEE
"Employee" shall mean any officer or other employee of the Company, or of any
corporation which is then a Subsidiary.
1.9 EXPIRATION DATE
"Expiration Date" shall mean the last day of the term of an Option as
established pursuant to Section 4.3 of this Plan.
1.10 EXCHANGE ACT
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended.
1.11 FAIR MARKET VALUE
"Fair Market Value" shall mean either (a) the closing price of the Common Stock
on the date in question (or if there was no sale on the date in question, the
closing price of the Common Stock on the most recent date on which there was a
sale) on the New York Stock Exchange as published in the Western Edition of THE
WALL STREET JOURNAL, or (b) if there is no trading of Common Stock on
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such Exchange, the fair market value of the Common Stock as determined by the
Board from time to time.
1.12 INCENTIVE STOCK OPTION
"Incentive Stock Option" shall mean an option which conforms to the applicable
provisions of Section 422 of the Code and which is designated as an Incentive
Stock Option by the Board.
1.13 NON-EMPLOYEE DIRECTOR
"Non-Employee Director" shall mean a member of the Board who is not an officer
or other employee of the Company, or of any corporation which is then a
Subsidiary or parent of the Company.
1.14 NON-QUALIFIED STOCK OPTION
"Non-Qualified Stock Option" shall mean an Option which is not designated as an
Incentive Stock Option by the Board.
1.15 OPTION
"Option" shall mean a stock option awarded pursuant to this Plan. An Option
awarded under this Plan shall, as determined by the Board, be either a
Non-Qualified Stock Option or an Incentive Stock Option; PROVIDED, HOWEVER, that
all Options awarded to Non-Employee Directors shall be Non-Qualified Stock
Options.
1.16 OPTIONEE
"Optionee" shall mean an Employee or Non-Employee Director to whom an Option is
awarded under this Plan.
1.17 PLAN
"Plan" shall mean the Morrison Knudsen Corporation Amended and Restated Stock
Option Plan, as amended and restated as of January 10, 1997, and as the same may
be further amended or restated.
1.18 RESTRICTED STOCK
"Restricted Stock" shall mean Common Stock awarded pursuant to Article VI of
this Plan.
1.19 RESTRICTED STOCKHOLDER
"Restricted Stockholder" shall mean an Employee to whom Restricted Stock has
been awarded under this Plan.
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1.20 RULE 16b-3
"Rule 16b-3" shall mean Rule 16b-3 under the Exchange Act, as such Rule may be
in effect from time to time, or any successor rule to the same effect.
1.21 SUBSIDIARY
"Subsidiary" shall mean any corporation in an unbroken chain of corporations
beginning with the Company if each of the corporations other than the last
corporation in the unbroken chain then owns stock possessing 50 percent or more
of the total combined voting power of all classes of stock in one of the other
corporations in such chain.
1.22 TERMINATION OF DIRECTORSHIP
"Termination of Directorship" shall mean the time when an Optionee who is a
Non-Employee Director ceases to be a Director, for any reason, including,
without limitation, a termination by resignation, failure to be elected, death
or retirement. If a Non-Employee Director becomes an Employee while continuing
to serve as a Director, that fact alone shall not result in a Termination of
Directorship or otherwise impair the rights such Director may have under any
Option outstanding under this Plan. The Board shall determine the effect of all
matters and questions relating to Termination of Directorship.
1.23 TERMINATION OF EMPLOYMENT
"Termination of Employment" shall mean the time when the employer-employee
relationship between the Company or a Subsidiary and an Optionee or Restricted
Stockholder is terminated for any reason, including (without limitation) a
termination by resignation, discharge, death, permanent and total disability or
retirement, but excluding (a) terminations where there is a simultaneous
reemployment or continuing employment of an Optionee or Restricted Stockholder
by the Company or a Subsidiary and (b) in the discretion of the Board,
terminations which result in a temporary severance of the employer-employee
relationship that does not exceed one year. The Board shall determine the
effect of all matters and questions relating to Termination of Employment,
including (without limitation) the question of whether a Termination of
Employment resulted from a discharge for good cause, and all questions of
whether particular leaves of absence constitute Terminations of Employment;
PROVIDED, HOWEVER, that with respect to Incentive Stock Options, a leave of
absence shall constitute a Termination of Employment if, and to the extent that,
such leave of absence interrupts employment for the purposes of Section
422(a)(2) of the Code and the then applicable regulations and revenue rulings
under such Section. Notwithstanding any other provision of this Plan, the
Company or any Subsidiary has an absolute and unrestricted right to terminate an
Employee's employment at any time for any reason whatsoever or for no reason,
with or without cause, except to the extent expressly otherwise agreed by the
Company or Subsidiary in writing.
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ARTICLE II
SHARES SUBJECT TO PLAN
The number of shares of Common Stock available for issuance under this
Plan for each fiscal year from and including the fiscal year beginning December
1, 1993, shall be a number of shares equal to the amount of 3% of the total
number of issued and outstanding shares of Common Stock as of December 1 of such
fiscal year (the "3% Limit"). In addition, (a) any shares available pursuant to
the last sentence of this Article II and (b) any unused portion of the 3% Limit
for any fiscal year, shall be added to the aggregate number of shares available
for issuance in each fiscal year under the Plan. In no event, except pursuant
to adjustments as provided in Section 9.3 of this Plan, shall the aggregate
number of such shares which cumulatively may be available for issuance upon
exercise of Incentive Stock Options exceed 2,900,000. No individual shall
receive Restricted Stock or Options for more than the Award Limit over any
three-year period. The shares of Common Stock issuable upon exercise of an
Option, or awarded as Restricted Stock, may be either previously authorized but
unissued shares or issued shares which have been repurchased by the Company.
If any Option expires or is canceled without having been fully exercised,
the number of shares subject to such Option but as to which such Option was not
exercised prior to its expiration or cancellation shall again be available for
issuance hereunder.
ARTICLE III
AWARDING OF OPTIONS
3.1 ELIGIBILITY
Subject to the Award Limit, any Employee selected by the Board pursuant to
Section 3.4(a)(i) of this Plan shall be eligible to be awarded an Option. Each
Non-Employee Director shall be eligible to receive Options at the times and in
the manner set forth in Section 3.5 of this Plan.
3.2 DISQUALIFICATION FOR STOCK OWNERSHIP
No person may be awarded an Incentive Stock Option under this Plan if such
person, at the time the Incentive Stock Option is awarded, owns stock possessing
more than ten percent (10%) of the total combined voting power of all classes of
stock of the Company or any then existing Subsidiary unless such Incentive Stock
Option conforms to the applicable provisions of Section 422 of the Code.
3.3 QUALIFICATION OF INCENTIVE STOCK OPTIONS
No Incentive Stock Option shall be awarded unless such Option, when awarded,
qualifies as an "incentive stock option" under Section 422 of the Code.
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3.4 AWARDS OF OPTIONS TO EMPLOYEES
(a) The Board may from time to time, in its sole and absolute discretion:
(i) Make awards of Options to the key Employees it may select including
(without limitation) Employees to whom Options or shares of
Restricted Stock have previously been awarded;
(ii) Determine the number of shares of Common Stock to be subject to
such Options awarded to the selected key Employees;
(iii) Determine whether such Options are to be Incentive Stock Options or
Non-Qualified Stock Options; and
(iv) Determine the terms and conditions of such Options, consistent with
this Plan.
(b) Upon the award of an Option by the Board, the officers of the Company
shall be authorized to issue the Option subject to such conditions on the
award of the Option as the Board may deem appropriate.
(c) Any Incentive Stock Option awarded under this Plan may be modified by the
Board without the consent of the Optionee to disqualify such option from
treatment as an "incentive stock option" under Section 422 of the Code.
3.5 AWARDS TO NON-EMPLOYEE DIRECTOR
Each non-employee director may elect to forgo cash payments of all or any
portion of the Director Fees to be paid to such non-employee director during any
given year (the fees subject to such election in any given year being
hereinafter referred to as "Discount Fees") and receive an Option with a price
per share equal to 80% of the Fair Market Value of a share of Common Stock on
December 1 of the calendar year prior to the scheduled payment of such Discount
Fees. The number of shares of Common Stock subject to such Option shall be the
number of shares (rounded to the nearest whole share) determined by multiplying
the Fair Market Value of a share of Common Stock on December 1 of the calendar
year prior to the scheduled payment of such Discount Fees by .20 and dividing
the product into the amount of the Discount Fees; provided, however, that the
number of shares of Common Stock subject to the Option with respect to the
Discount Fees to be paid during the calendar year 1997 will be determined using
the Fair Market Value of a share of Common Stock on December 31, 1996, and the
price per share for such Options shall be equal to 80% of the Fair Market Value
of a share of Common Stock on December 31, 1996. An election pursuant to this
Section 3.5 shall be made prior to December 1st of the calendar year prior to
the scheduled payment of the Discount Fees, and such election shall be
irrevocable for the fiscal year commencing on such date and ending on
November 30 of the following calendar year; PROVIDED, HOWEVER, that with respect
only to the Discount Fees that would otherwise be paid during the fiscal year
commencing December 1, 1996, such election may be made at any time prior to
December 31, 1996.
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ARTICLE IV
TERMS OF OPTIONS
4.1 OPTION AGREEMENT
Each Option shall be evidenced by a written Stock Option Agreement, which shall
be executed by the Optionee and an authorized officer of the Company and which
shall contain such terms and conditions as the Board shall determine, consistent
with this Plan.
4.2 OPTION PRICE
The price per share of the shares of Common Stock subject to each Option shall
be set by the Board; PROVIDED, HOWEVER, that such price shall be no less than
the par value of a share of Common Stock, and in the case of Incentive Stock
Options, such price shall not be less than 100% of the Fair Market Value of a
share of Common Stock on the date the Option is awarded; and PROVIDED, FURTHER,
that the price of the shares subject to each Option awarded to a Non-Employee
Director pursuant to Section 3.5 of this Plan shall be determined in accordance
with such Section.
4.3 OPTION TERM
The term of an Option shall be set by the Board; PROVIDED, HOWEVER, that no such
term shall exceed a reasonable time period, and in the case of Incentive Stock
Options, the term shall not be more than 10 years from the date the Incentive
Stock Option is awarded; and PROVIDED, FURTHER, the term of each such Option
awarded to a Non-Employee Director pursuant to Section 3.5 shall be 10 years,
subject to the provisions of Section 4.5(b) of this Plan.
4.4 OPTION VESTING
(a) The period during which the right to exercise an Option in whole or in
part vests in the Optionee shall be set by the Board and the Board may
determine that an Option may not be exercised in whole or in part for a
specified period after it is awarded; PROVIDED, HOWEVER, that, one-fourth
of the shares covered by an Option awarded to a Non-Employee Director
shall become exercisable upon the first date Discount Fees would have been
paid in the calendar year following the election made pursuant to Section
3.5 above, and thereafter only to the extent of one-fourth of the shares
covered thereby at the conclusion of each fiscal quarter during the fiscal
year for which such election was made. At any time after award of an
Option to an Employee, the Board may, subject to whatever terms and
conditions it selects, accelerate the period during which an Option
awarded to an Employee vests.
(b) No portion of an Option which is unexercisable at Termination of
Employment or Termination of Directorship shall thereafter become
exercisable, except as may be otherwise provided by the Board either in
the Stock Option Agreement or in a resolution adopted following the award
of such Option.
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(c) To the extent that the aggregate Fair Market Value of stock with respect
to which "incentive stock options" (within the meaning of Section 422 of
the Code, but without regard to Section 422(d) of the Code) are
exercisable for the first time by an Optionee during any fiscal year
(under the Plan and all other incentive stock option plans of the Company
or any Subsidiary) exceeds $100,000, such Options shall be treated as
Non-Qualified Options to the extent required by Section 422 of the Code.
The rule set forth in the preceding sentence shall be applied by taking
Options into account in the order in which they were awarded. For
purposes of this Section 4.4(c), the Fair Market Value of stock shall be
determined as of the time the Option with respect to such stock is
awarded.
4.5 EXERCISE OF OPTION AFTER TERMINATION OF EMPLOYMENT OR DIRECTORSHIP.
(a) Subject to the following provisions of this Section 4.5(a), an Option
awarded to an Employee pursuant to Section 3.4(a) is exercisable by an
Optionee only while he is an Employee, except as may be otherwise provided
by the Board either in the Stock Option Agreement or in a resolution
adopted following the award of the Option.
(i) If the Optionee dies while an Option is exercisable under the terms
of this Plan, the Optionee's Beneficiary may exercise such rights,
to the extent the Optionee could have done so immediately preceding
his death. Any such Option must be exercised within 12 months
after the Optionee's death and the Board may extend such period to
accommodate such exercise; PROVIDED, HOWEVER, that an Option may
not be exercised later than the Expiration Date.
(ii) If the Optionee's employment is terminated due to his permanent and
total disability, as defined in Section 22(e)(3) of the Code, or in
the case of a Non-Qualified Stock Option, upon retirement at or
after age 65, the Optionee may exercise his Option, to the extent
exercisable as of his Termination of Employment, within twelve (12)
months after termination, but no later than the Option's Expiration
Date.
(iii) If the Optionee's employment is terminated for any reason other
than those set forth in Section 4.5(a)(i) or (ii) above, the
Optionee may exercise his Option, to the extent exercisable as of
his Termination of Employment, within 3 months after Termination of
Employment, unless the Employee dies within said 3-month period,
but no later than the Option's Expiration Date.
(b) No Option awarded to a Non-Employee Director pursuant to Section 3.5 may
be exercised to any extent by anyone after the first to occur of the
following events:
(i) The expiration of 12 months from the date of the Optionee's death,
but no later than the Option's Expiration Date; or
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(ii) The expiration of 12 months from the date of the Optionee's
Termination of Directorship by reason of his permanent and total
disability (within the meaning of Section 22(e)(3) of the Code),
but no later than the Option's Expiration Date; or
(iii) The expiration of 3 months from the date of the Optionee's
Termination of Directorship for any reason other than such
Optionee's death or his permanent and total disability, unless the
Optionee dies within said three-month period, but no later than the
Option's Expiration Date; or
(iv) The expiration of 10 years from the date the Option was awarded.
4.6 CONSIDERATION
In consideration of the awarding of an Option, the Optionee shall agree, in the
written Stock Option Agreement, to remain in the employ of the Company or a
Subsidiary (or to serve as a Non-Employee Director of the Company) for a period
of at least 1 year after the Option is awarded (or until the next annual meeting
of the stockholders of the Company, in the case of a Non-employee Director).
Nothing in this Plan or in any Stock Option Agreement hereunder shall confer
upon any Optionee any right to continue in the employ of the Company or any
Subsidiary or as a Director of the Company.
ARTICLE V
EXERCISE OF OPTIONS
5.1 PARTIAL EXERCISE
An exercisable Option may be exercised in whole or in part. However, an Option
shall not be exercisable with respect to fractional shares and the Board may
require that, by the terms of the Option, a partial exercise be with respect to
a minimum number of shares.
5.2 MANNER OF EXERCISE
An exercisable Option shall be deemed exercised upon delivery of all of the
following to the Secretary of the Company or his office:
(a) A written notice complying with the applicable rules established by the
Board stating that the Option, or a portion thereof, is exercised. The
notice shall be signed by the Optionee or other person then entitled to
exercise the Option or such portion;
(b) Such other documents as the Board may deem necessary or advisable to
effect compliance with all applicable provisions of the Securities Act of
1933, as amended, and any other federal or state securities laws or
regulations. The Board may also take whatever additional actions it deems
appropriate to effect such compliance, including (without limitation)
placing legends on share certificates and issuing stop-transfer notices to
agents and registrars; and
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(c) In the event that the Option shall be exercised pursuant to Section 4.5 of
this Plan by any person or persons other than the Optionee, appropriate
proof of the right of such person or persons to exercise the Option; and
(d) Full cash payment to the Secretary of the Company for the shares with
respect to which the Option is exercised. However, at the discretion of
the Board, the terms of the Option may
(i) allow payment, in whole or in part, through the actual or
constructive delivery of shares of Common Stock owned by the
Optionee with a Fair Market Value on the date of delivery equal to
the aggregate exercise price;
(ii) allow payment, in whole or in part, through the surrender of shares
of Common Stock then issuable upon exercise of the Option having a
Fair Market Value on the date of Option exercise equal to the
aggregate exercise price.; or
(iii) allow payment through any combination of cash and the consideration
provided in the foregoing subparagraphs (i) and (ii).
Any award may also provide for the payment of the exercise price of any Option
from the proceeds of sale through a broker of some or all of the shares of
Common Stock to which the exercise relates.
5.3 CONDITIONS TO ISSUANCE OF STOCK CERTIFICATES
The Company shall not be required to issue or deliver any certificate or
certificates for shares of stock purchased upon the exercise of any Option or
portion thereof prior to fulfillment of all of the following conditions
described below:
(a) The admission of such shares to listing on all stock exchanges on which
the shares of Common Stock are then listed;
(b) The completion of any registration or other qualification of such shares
under any state or federal law, or under the rulings or regulations of the
Securities and Exchange Commission or any other governmental regulatory
body which the Board shall necessary or advisable;
(c) The obtaining of any approval or other clearance from any state or federal
governmental agency which the Board shall determine to be necessary or
advisable;
(d) The lapse of such reasonable period of time following the exercise of the
Option as the Board may establish from time to time for reasons of
administrative convenience; and
(e) The receipt by the Company of full payment for such shares, including
(without limitation) payment of any applicable withholding tax in
accordance with Section 9.4 hereof.
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5.4 RIGHTS AS STOCKHOLDERS
The holders of Options shall not be, nor have any of the rights or privileges
of, stockholders of the Company in respect of any shares of Common Stock
purchasable upon the exercise of any part of an Option unless and until
certificates representing such shares have been issued by the Company to such
holders.
5.5 OWNERSHIP AND TRANSFER RESTRICTIONS
The Board may impose such restrictions on the ownership and transferability of
the shares purchasable upon the exercise of an Option as it deems appropriate.
Any such restriction shall be set forth in the respective Stock Option Agreement
and may be referred to on the certificates evidencing such shares. The Board
may require an Employee to give the Company prompt notice of any disposition of
shares of Common Stock acquired by exercise of an Incentive Stock Option within
(a) 2 years from the date of awarding such Option to such Employee or (b) 1 year
after the transfer of such shares to such Employee. The Board may direct that
the certificates evidencing shares acquired by exercise of an Option refer to
such requirement to give prompt notice of disposition.
ARTICLE VI
AWARD OF RESTRICTED STOCK
6.1 ELIGIBILITY
Subject to the Award Limit, Restricted Stock may be awarded to any Employee whom
the Board determines is a key Employee.
6.2 AWARDS OF RESTRICTED STOCK
(a) The Board may from time to time, in its sole and absolute discretion:
(i) Make awards of Restricted Stock to the key Employees it may select
(including Employees to whom Options or shares of Restricted Stock
have previously been awarded; and
(ii) Determine the cash purchase price, if any, and other terms and
conditions applicable to such Restricted Stock, consistent with
this Plan.
(b) Subject to Section 7.2 hereof, the Board shall establish the consideration
and form of payment thereof for Restricted Stock; PROVIDED, HOWEVER, that
the value of such consideration shall be no less than the par value of the
Common Stock to be purchased. In all cases, legal consideration shall be
required for each issuance of Restricted Stock.
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(c) Upon the making of an award of Restricted Stock by the Board, the officers
of the Company shall be authorized to issue such Restricted Stock subject
to such conditions on the issuance of such Restricted Stock as the Board
deems appropriate.
ARTICLE VII
TERMS OF RESTRICTED STOCK
7.1 RESTRICTED STOCK AGREEMENT
Restricted Stock shall be issued only pursuant to a written Restricted Stock
Agreement, which shall be executed by the selected key Employee and an
authorized officer of the Company and which shall contain such terms and
conditions as the Board shall determine, consistent with this Plan.
7.2 CONSIDERATION TO THE COMPANY
As consideration for the issuance of Restricted Stock, in addition to payment of
the purchase price, in cash, the selected key Employee shall agree, in the
Restricted Stock Agreement, to remain in the employ of the Company or a
Subsidiary for a period of at least one year after the Restricted Stock is
awarded. Nothing in this Plan or in any Restricted Stock Agreement hereunder
shall confer on any Restricted Stockholder any right to continue in the employ
of the Company or any Subsidiary.
7.3 RIGHTS AS STOCKHOLDERS
Upon delivery of the shares of Restricted Stock to the escrow holder pursuant to
Section 7.6 of this Plan, the Restricted Stockholder shall have all the rights
of a stockholder with respect to such shares, subject to the restrictions in his
Restricted Stock Agreement, including (without limitation) the right to vote the
shares and to receive all dividends and other distributions paid or made with
respect to the shares; PROVIDED, HOWEVER, that unless otherwise determined by
the Board, any extraordinary distributions with respect to the Common Stock
shall be subject to the restrictions set forth in Section 7.4.
7.4 RESTRICTION
All shares of Restricted Stock issued under this Plan including (without
limitation) any shares received by holders thereof with respect to shares of
Restricted Stock as a result of stock dividends, stock splits or any other
corporate transaction or event, shall be subject to such restrictions as the
Board shall provide, which restrictions may include (without limitation)
restrictions concerning voting rights and transferability and restrictions based
on duration of employment with the Company, or any Subsidiary or Company,
Subsidiary or unit performance or individual performance; provided, however,
that by a resolution adopted after the Restricted Stock is issued, the Board
may, on such terms and conditions as it may determine to be appropriate, remove
any or all of the restrictions imposed by the terms of the Restricted Stock
Agreement. Restricted Stock may not be sold or encumbered until all
restrictions are terminated or expire. Unless provided otherwise by the Board,
a Restricted Stockholder's rights in unvested Restricted Stock shall lapse upon
Termination of
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Employment or, if determined by the Board to be applicable, upon the termination
of his consulting relationship with the Company.
7.5 REPURCHASE OF RESTRICTED STOCK
The Board may provide in any individual Restricted Stock Agreement that the
Company shall have the right to repurchase from the Restricted Stockholder the
Restricted Stock then subject to restrictions under the Restricted Stock
Agreement immediately upon a Termination of Employment for any reason at a cash
price per share equal to the cash price paid by the Restricted Stockholder for
such Restricted Stock. In the discretion of the Board, provision may be made
that no such right of repurchase shall exist in the event of a Termination of
Employment without cause or because of the Restricted Stockholder's retirement,
death or permanent and total disability.
7.6 ESCROW
The Secretary of the Company or such other escrow holder as the Board may
appoint shall retain physical custody of each certificate representing
Restricted Stock until all of the restrictions imposed under the Restricted
Stock Agreement with respect to the shares evidenced by such certificate expire
or shall have been removed.
7.7 LEGEND
In order to enforce the restrictions imposed upon shares of Restricted Stock
hereunder, the Board may cause a legend or legends to be placed on certificates
representing all shares of Restricted Stock that are still subject to
restrictions under Restricted Stock Agreements, which legend or legends shall
make appropriate reference to the conditions imposed thereby.
7.8 SECTION 83(b)
A Restricted Stockholder may make an election under Section 83(b) of the Code.
ARTICLE VIII
ADMINISTRATION
8.1 ADMINISTRATION BY THE BOARD; DELEGATION
This Plan shall be administered by the Board, which may form time to time
delegate all or any part of its authority under this Plan to a committee or
subcommittee of not less than two Directors appointed by the Board. To the
extent that the Board delegates to any such committee or subcommittee authority
with respect to awards to individuals who are or are likely to become officers
who are subject to Section 16 of the Exchange Act, the members of such committee
or subcommittee shall be "Non-Employee Directors" within the meaning of that
term as defined in Rule 16b-3. To the extent of any delegation by the Board
under this Plan, references in this Plan to the Board shall also refer to the
applicable committee or subcommittee. The majority of any such committee or
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subcommittee shall constitute a quorum, and the action of a majority of its
members present at any meeting at which a quorum is present, or acts unanimously
approved in writing, shall be the acts of such committee or subcommittee.
8.2 ADMINISTRATIVE POWERS
The Board shall have the power to interpret this Plan, the Options and the
Restricted Stock, and the agreements pursuant to which the Options and
Restricted Stock are awarded, and to adopt such rules for the administration,
interpretation, and application of this Plan as are consistent therewith and to
interpret, amend or revoke any such rules. Any award under this Plan need not
be the same with respect to each Optionee or Restricted Stockholder. Any such
interpretations and rules with respect to Incentive Stock Options shall be
consistent with the provisions of Section 422 of the Code.
8.3 PROFESSIONAL ASSISTANCE; GOOD FAITH ACTIONS
All expenses and liabilities which members of the Board incur in connection with
the administration of this Plan shall be borne by the Company. The Board may
employ attorneys, consultants, accountants, appraisers, brokers, or other
persons. The Board, the Company and the Company's officers and Directors shall
be entitled to rely upon the advice, opinions or valuations of any such persons.
All actions taken and all interpretations and determinations made by the Board
in good faith shall be final and binding upon all Optionees, Restricted
Stockholders, the Company and all other interested persons. No members of the
Board shall be personally liable for any action, determination or interpretation
made in good faith with respect to this Plan, any Option or any Restricted
Stock, and all members of the Board shall be fully protected by the Company in
respect of any such action, determination or interpretation.
8.4 DELEGATION OF AUTHORITY
The Board may delegate to the Chief Executive Officer of the Company or the
Secretary of the Company, or both, any or all of the administrative duties and
authority of the Board under this Plan, other than the authority to make awards
under this Plan to Employees who are officers of the Company within the meaning
of Section 16 of the Exchange Act.
8.5 NO LIABILITY
No member of the Board or officer or employee of the Company or any Subsidiary
shall be liable, responsible or accountable in damages or otherwise for any
determination made or other action taken or any failure to act by such person so
long as such person is not determined to be guilty by a final adjudication of
willful misconduct with respect to such determination, action or failure to act.
8.6 INDEMNIFICATION
To the fullest extent permitted by law, each of the members of the Board and
each of the directors, officers and employees of the Company or any Subsidiary
shall be held harmless and be indemnified by the Company for any liability,
loss, including (without limitation) amounts paid in settlement, damages or
expenses, including (without limitation) reasonable attorneys' fees suffered by
virtue of
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any determinations, acts or failures to act, or alleged acts or failures to act,
in connection with the administration of this Plan so long as such person is not
determined by a final adjudication to be guilty of willful misconduct with
respect to such determination, action or failure to act.
ARTICLE IX
MISCELLANEOUS PROVISIONS
9.1 NOT TRANSFERABLE
(a) Except as may be otherwise determined by the Board, Options and Restricted
Stock awards under this Plan may not be sold, pledged, assigned, or
transferred in any manner other than by will or the laws of descent and
distribution, unless and until such rights and awards have been exercised,
or the shares underlying such rights or awards have been issued, and all
restrictions applicable to such shares have lapsed. No Option or
Restricted Stock award or interest or right therein shall be liable for
the debts, contracts or engagements of the Optionee or Restricted
Stockholder or his successors in interest or shall be subject to
disposition by transfer, alienation, anticipation, pledge, encumbrance,
assignment or any other means whether such disposition be voluntary or
involuntary or by operation of law by judgment, levy, attachment,
garnishment or any other legal or equitable proceedings, including
(without limitation) bankruptcy, and any attempted disposition thereof
shall be null and void and of no effect.
(b) Except as may be otherwise determined by the Board, during the lifetime of
the Optionee, only he or his guardian or legal representative may exercise
an Option or other right or award (or any portion thereof) awarded to him
under the Plan. After the death of the Optionee, any exercisable portion
of an Option or other right or award may, prior to the time when such
portion becomes unexercisable under the Plan or the applicable Stock
Option Agreement or other agreement, be exercised by his Beneficiary, or
if no Beneficiary exists, any person empowered to do so under the deceased
Optionee's will or under the then applicable laws of descent and
distribution.
9.2 AMENDMENT, SUSPENSION OR TERMINATION OF THIS PLAN
This Plan may be wholly or partially amended or otherwise modified, suspended or
terminated at any time or from time to time by the Board. However, without
approval of the Company's stockholders given within 12 months before or after
the action by the Board, no action of the Board may, except as provided in
Section 9.3 of this Plan , increase the limits imposed in Article II on the
maximum number of shares which may be issued under this Plan or which may be
issued upon exercise of Incentive Stock Options, and no action of the Board may
be taken that would otherwise require stockholder approval as a matter of
applicable law, regulation or rule. No amendment, suspension or termination of
this Plan shall, without the consent of the holder of an Option or Restricted
Stock, alter or impair any rights or obligations under any Option or Restricted
Stock theretofore awarded, unless the award itself otherwise expressly so
provides. No Option or Restricted Stock may be awarded during any period of
suspension nor after termination of this Plan, and in no event may any
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Incentive Stock Option be awarded under this Plan after the first to occur of
the following events: (a) the expiration of 10 years from the date the Plan is
adopted by the Board; or (b) the expiration of 10 years from the date the Plan
was originally approved by the Company's stockholders.
9.3 ADJUSTMENTS
The Board may make or provide for such adjustments in the (a) number of shares
of Common Stock covered by outstanding Options awarded hereunder, (b) prices per
share applicable to such Options, and (c) kind of shares (including shares of
another issuer) covered thereby, as the Board in its sole discretion may in good
faith determine to be equitably required in order to prevent dilution or
enlargement of the rights of Optionees, that otherwise would result from (x) any
stock dividend, stock split, combination of shares, recapitalization or other
change in the capital structure of the Company, (y) any merger, consolidation,
spin-off, split-off, split-up, reorganization, partial or complete liquidation
or other distribution of assets, issuance of rights or warrants to purchase
securities or (z) any other corporate transaction or event having an effect
similar to any of the foregoing. In the event of any such transaction or event,
the Board may provide in substitution for any or all outstanding awards under
this Plan such alternative consideration as it may in good faith determine to be
equitable under the circumstances and may require in connection therewith the
surrender of all awards so replaced. The Board may also make or provide for
such adjustments in the number and kind of shares specified in Article II of
this Plan as the Board may in good faith determine to be appropriate in order to
reflect any transaction or event described in this Section 9.3. If any
adjustment of the type described above is made to an Incentive Stock Option
under this Section, the adjustment will be made in a manner which will not be
considered a "modification" under the provisions of subsection 424(h)(3) of the
Code.
9.4 TAX WITHHOLDING
The Company shall be entitled to require payment in cash or deduction from other
compensation payable to each Optionee or Restricted Stockholder of any sums
required by federal, state or local tax law to be withheld with respect to the
issuance, vesting or exercise of any Option or Restricted Stock. The Board may
in its discretion and in satisfaction of the foregoing requirement allow such
Optionee or Restricted Stockholder to elect to have the Company withhold shares
of Common Stock (or allow the return of shares of Common Stock) having a Fair
Market Value equal to the sums required to be withheld. The Company and any
Optionee or Restricted Stockholder may make similar arrangements with respect to
the payment of any taxes with respect to which withholding is not required.
9.5 LOANS
The Board may extend one or more loans to key Employees in connection with the
exercise or receipt of outstanding Options awarded under this Plan, or the
issuance of Restricted Stock awarded under this Plan. The terms and conditions
of any such loan shall be set by the Board.
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9.6 LIMITATIONS APPLICABLE TO SECTION 16 PERSONS
Notwithstanding any other provision of this Plan, this Plan, and any Option or
Restricted Stock awarded, to a key Employee who is then subject to Section 16 of
the Exchange Act, shall be subject to any additional limitations set forth in
any applicable exemptive rule under Section 16 of the Exchange Act (including
any amendment to Rule 16b-3 of the Exchange Act) that are requirements for the
application of such exemptive rule. Furthermore, notwithstanding any other
provision of this Plan, any Option intended to qualify as performance-based
compensation as described in Section 162(m)(4)(C) of the Code shall be subject
to any additional limitations set forth in Section 162(m) of the Code (including
any amendment to Section 162(m) of the Code) or any regulations or rulings
issued thereunder that are requirements for qualification as performance-based
compensation as described in Section 162(m)(4)(C) of the Code, and this Plan
shall be deemed amended to the extent necessary to conform to such requirements.
9.7 EFFECT OF PLAN UPON OPTIONS AND COMPENSATION PLANS
The adoption of this Plan shall not affect any other compensation or incentive
plans in effect for the Company or any Subsidiary. Nothing in this Plan shall
be construed to limit the right of the Company (a) to establish any other forms
of incentives or compensation for employees and Directors of the Company or any
Subsidiary or (b) to award or assume options or other rights otherwise than
under this Plan in connection with any proper corporate or partnership purpose,
including (without limitation) the award or assumption of options in connection
with the acquisition by purchase, lease, merger, consolidation or otherwise, of
the business, stock or assets of any corporation, partnership, firm or
association.
9.8 COMPLIANCE WITH LAWS
This Plan, the awarding and vesting of Options or Restricted Stock under this
Plan and the issuance and delivery of shares of Common Stock and the payment of
money under this Plan or under Options or Restricted Stock awarded hereunder are
subject to compliance with all applicable federal and state laws, rules and
regulations, including (without limitation) to state and federal securities law
and federal margin requirements) and to such approvals by any listing,
regulatory or governmental authority as may, in the opinion of counsel for the
Company, be necessary or advisable in connection therewith. Any securities
delivered under this Plan shall be subject to such restrictions, and the person
acquiring such securities shall, if requested by the Company, provide such
assurances and representations to the Company as the Company may deem necessary
or desirable to assure compliance with all applicable legal requirements. To
the extent permitted by applicable law, the Plan, Options and Restricted Stock
awarded hereunder shall be deemed amended to the extent necessary to conform to
such laws, rules and regulations.
9.9 TITLES; GENDER AND NUMBER
Titles are provided herein for convenience only and are not to serve as a basis
for interpretation or construction of this Plan. Wherever the masculine gender
is used it shall include the feminine and neuter and wherever a singular pronoun
is used it shall include the plural, unless the context clearly indicates
otherwise.
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9.10 GOVERNING LAW
This Plan and any agreements hereunder shall be administered, interpreted and
enforced under the internal substantive laws of the State of Delaware.
9.11 EFFECT OF RESTATEMENT ON OUTSTANDING AWARDS
This Amendment and Restatement of the Plan shall become effective as of the date
set forth on the cover page hereof. Except as may be otherwise determined by
the Board from time to time, the changes in the Plan effected by this Amendment
and Restatement shall apply to all awards outstanding under the plan as of such
date.
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IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their officers duly authorized on this 10th day of January, 1997.
MORRISON KNUDSEN CORPORATION
By:
-----------------------------------
Stephen G. Hanks
Executive Vice President
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EXHIBIT 10.11
THE 1997 STOCK OPTION AND INCENTIVE PLAN FOR
NON-EMPLOYEE DIRECTORS OF
MORRISON KNUDSEN CORPORATION
<PAGE>
TABLE OF CONTENTS
PAGE
----
1. Purpose...................................................................1
2. Definitions...............................................................1
3. Shares Available under the Plan...........................................2
4. Option Rights.............................................................3
5. Restricted Stock..........................................................4
6. Transferability. ........................................................6
7. Adjustments...............................................................6
8. Fractional Shares.........................................................6
9. Withholding Taxes.........................................................6
10. Certain Terminations of Directorships.....................................7
11. Administration. ..........................................................7
12. Amendment, Suspension, Termination and Other Matters......................8
13. Termination of the Plan...................................................9
<PAGE>
THE 1997 STOCK OPTION AND INCENTIVE PLAN FOR
NON-EMPLOYEE DIRECTORS OF
MORRISON KNUDSEN CORPORATION
1. PURPOSE. The purposes of the Plan are (1) to provide an
additional incentive for Non-Employee Directors of Morrison Knudsen Corporation,
a Delaware corporation (the "Company") to further the growth, development and
financial success of the Company by personally benefiting through the ownership
of Company stock, and (2) to enable the Company to obtain and retain the
services of Non-Employee Directors, which services are considered essential to
the long range success of the Company, by offering them an opportunity to own
stock in the Company.
2. DEFINITIONS. In addition to the other terms defined elsewhere
herein, wherever the following terms are used in this Plan with initial capital
letters, they shall have the meanings specified below, unless the context
clearly indicates otherwise.
"1994 PLAN" shall mean The 1994 Stock Option and Incentive Plan for
Officers, Directors and Key Employees of Morrison Knudsen Corporation, as
Amended and Restated as of January 10, 1997.
"BOARD" shall mean the Board of Directors of the Company.
"CODE" shall mean the Internal Revenue Code of 1986, as amended.
"COMMON STOCK" shall mean the common stock of the Company, par value
$.01 per share, and any security into which such common stock may be converted
or for which such common stock may be exchanged by reason of any transaction or
event of the type described in Section 7 of this Plan.
"COMPANY" shall mean Morrison Knudsen Corporation, a Delaware
corporation, and shall include its successors.
"DATE OF AWARD" shall mean the date specified by the Board on which an
award of Option Rights or Restricted Stock shall become effective, which shall
not be earlier than the date on which the Board takes action with respect
thereto.
"EMPLOYEE" shall mean any officer or other employee of the Company or
of any corporation which is then a Subsidiary.
"MARKET VALUE PER SHARE" shall mean either (a) the closing price of a
share of Common Stock on the date in question (or if there was no sale on the
date in question, the closing price of a share of Common Stock on the most
recent date on which there was a sale) on the New York Stock Exchange, as
published in the Western Edition of THE WALL STREET JOURNAL, or (b) if there is
no trading of Common Stock on such Exchange, the fair market value of a share of
Common Stock as determined by the Board from time to time.
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"NON-EMPLOYEE DIRECTOR" shall mean a member of the Board who is not an
officer or other employee of the Company or of any corporation which is then a
Subsidiary.
"OPTIONEE" shall mean a Non-Employee Director to whom an Option Right
is awarded under this Plan.
"OPTION PRICE" shall mean the purchase price payable upon the exercise
of an Option Right.
"OPTION RIGHT" shall mean the right to purchase shares of Common Stock
from the Company upon the exercise of an option awarded hereunder.
"PARTICIPANT" shall mean a Non-Employee Director (or a person who has
agreed to commence serving in such capacity) who is selected by the Board to
receive benefits under this Plan.
"PERFORMANCE OBJECTIVES" shall mean the achievement or performance
objectives that may be established by the Board pursuant to this Plan for
Participants who have received Restricted Stock or, when so determined by the
Board, Option Rights.
"PLAN" shall mean The 1997 Stock Option and Incentive Plan for
Non-Employee Directors of Morrison Knudsen Corporation as set forth herein, as
the same may be amended or restated from time to time.
"RESTRICTED STOCK" shall mean Common Stock awarded pursuant to Section
5 of this Plan as to which neither the substantial risk of forfeiture nor the
restrictions on transfer referred to in Section 5 hereof have expired.
"RESTRICTED STOCKHOLDER" shall mean a Non-Employee Director to whom
Restricted Stock has been awarded under this Plan.
"SUBSIDIARY" shall mean any corporation in an unbroken chain of
corporations beginning with the Company if each of the corporations other than
the last corporation in the unbroken chain then owns stock possessing 50 percent
or more of the total combined voting power of all classes of stock in one of the
other corporations in such chain.
"TERMINATION OF DIRECTORSHIP" shall mean the time when a Participant
ceases to be a Director for any reason, including (without limitation) a
termination by resignation, failure to be elected, death or retirement.
3. SHARES AVAILABLE UNDER THE PLAN. Subject to adjustment as
provided in Section 7 of this Plan, the number of shares of Common Stock issued
or transferred and not forfeited under this Plan shall not in the aggregate
exceed 500,000 shares, which may be shares of original issuance or shares held
in treasury or a combination thereof; PROVIDED, HOWEVER, that the number of
shares awarded as Restricted Stock (and not forfeited) shall not exceed 100,000,
subject to adjustment as provided in Section 7 of this Plan.
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4. OPTION RIGHTS. The Board may from time to time authorize awards
to Participants of options to purchase shares of Common Stock upon such terms
and conditions as the Board may determine in accordance with the following
provisions:
(a) Each award shall specify the number of shares of Common
Stock to which it pertains.
(b) Each award shall specify an Option Price per share of Common
Stock, which shall be equal to or greater than the Market Value per Share
on the Date of Award.
(c) Each award shall specify the form of consideration to be
paid in satisfaction of the Option Price and the manner of payment of such
consideration, which may include (i) cash in the form of currency or check
or other cash equivalent acceptable to the Company, (ii) nonforfeitable,
nonrestricted shares of Common Stock, which are already owned by the
Optionee and have a value at the time of exercise that is equal to the
Option Price, (iii) any other legal consideration that the Board may deem
appropriate, including (without limitation) any form of consideration
authorized under Section 4(d) below, on such basis as the Board may
determine in accordance with this Plan, and (iv) any combination of the
foregoing.
(d) On or after the Date of Award of any Option Right, the Board
may determine that payment of the Option Price may also be made in whole or
in part in the form of shares of Restricted Stock or other shares of Common
Stock that are subject to risk of forfeiture or restrictions on transfer.
Unless otherwise determined by the Board on or after the Date of Award,
whenever any Option Price is paid in whole or in part by means of any of
the forms of consideration specified in this Section 4(d), the shares of
Common Stock received by the Optionee upon the exercise of the Option Right
shall be subject to the same risks of forfeiture or restrictions on
transfer as those that applied to the consideration surrendered by the
Optionee; PROVIDED, HOWEVER, that such risks of forfeiture and restrictions
on transfer shall apply only to the same number of shares of Common Stock
received by the Optionee as applied to the forfeitable or restricted shares
of Common Stock surrendered by the Optionee.
(e) Any award may provide for deferred payment of the Option
Price from the proceeds of sale through a broker of some or all of the
shares of Common Stock to which the exercise relates.
(f) Successive awards may be made to the same Participant
regardless of whether any Option Rights previously awarded to the
Participant remain unexercised.
(g) Each award shall specify the period or periods of continuous
service as a Non-Employee Director by the Optionee that are necessary
before the Option Rights or installments thereof shall become exercisable,
and any award may provide for the earlier exercise of the Option Rights in
the event of a change in control of the Company or other transaction or
event.
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(h) Any award of Option Rights may specify Performance
Objectives that must be achieved as a condition to the exercise of such
rights.
(i) On or after the Date of Award of any Option Right, the Board
may provide for the payment to the Optionee of dividend equivalents thereon
in cash or shares of Common Stock on a current, deferred or contingent
basis, or the Board may provide that any dividend equivalents shall be
credited against the Option Price.
(j) The term of an Option Right shall be set by the Board;
PROVIDED, HOWEVER, that no Option Right awarded pursuant to this Section 4
may have a term of more than 10 years from the Date of Award.
(k) Each award shall be evidenced by a written Stock Option
Agreement, which shall be executed on behalf of the Company by any officer
thereof and delivered to and accepted by the Optionee and shall contain
such terms and provisions as the Board may determine consistent with this
Plan.
5. RESTRICTED STOCK. The Board may also authorize awards or sales to
Participants of shares of Restricted Stock upon such terms and conditions as the
Board may determine in accordance with the following provisions:
(a) Each award or sale shall constitute an immediate transfer of
the ownership of shares of Common Stock to the Participant in consideration
of the performance of services, entitling such Participant to dividend,
voting and other ownership rights, subject to the substantial risk of
forfeiture and restrictions on transfer hereinafter referred to.
(b) Each award or sale shall provide that the shares of
Restricted Stock covered thereby shall be subject to a "substantial risk of
forfeiture" within the meaning of Section 83 of the Code for a period to be
determined by the Board on the Date of Award, and any sale may provide for
the earlier termination of such period in the event of a change in control
of the Company or other transaction or event.
(c) Each award or sale shall provide that, during the period for
which such substantial risk of forfeiture is to continue, the
transferability of the shares of Restricted Stock shall be prohibited or
restricted in the manner and to the extent prescribed by the Board on the
Date of Award. Such restrictions may include (without limitation) rights
of repurchase or first refusal in the Company or provisions subjecting the
shares of Restricted Stock to a continuing substantial risk of forfeiture
in the hands of any transferee.
(d) Any award or sale may be made in consideration of payment by
the Participant of an amount that is less than the Market Value per Share
on the Date of Award, but in no event shall the value of the consideration
provided with respect to any award or sale be less than the par value per
share of Common Stock.
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<PAGE>
(e) Any award or sale may require that any or all dividends or
other distributions paid on the shares of Restricted Stock during the
period of such restrictions be automatically sequestered and reinvested on
an immediate or deferred basis in additional shares of Common Stock, which
may be subject to the same restrictions as the underlying award or such
other restrictions as the Board may determine.
(f) Each award or sale shall be evidenced by a Restricted Stock
Agreement, which shall be executed on behalf of the Company by any officer
thereof and delivered to and accepted by the Participant and shall contain
such terms and provisions as the Board may determine consistent with this
Plan. Unless otherwise directed by the Board, all certificates
representing shares of Restricted Stock, together with a stock power that
shall be endorsed in blank by the Participant with respect to the shares of
Restricted Stock, shall be held in custody by the Company until all
restrictions thereon lapse.
(g) Any Restricted Stock Agreement may specify one or more
Performance Objectives, and to the extent that any Restricted Stock
Agreement so specifies one or more Performance Objectives:
(i) it shall also specify a minimum level of acceptable
achievement, below which all of the shares of Restricted Stock covered
by the award shall be forfeited, and shall set forth a formula for
determining the number of shares of Restricted Stock to be retained by
the Restricted Stockholder if performance is at or above the minimum
level of acceptable achievement, but falls short of full achievement
of the specified Performance Objectives; and
(ii) the Board may adjust the specified Performance
Objectives and the related minimum level of acceptable achievement if,
in the sole judgment of the Board, events or transactions have
occurred after the Date of Award that result in distortion of the
specified Performance Objectives or the related minimum level of
acceptable achievement.
(h) The Board may provide, at or after the Date of Award of any
Restricted Stock, for the payment of a cash award intended to offset the
amount of tax that the Participant may incur in connection with such
Restricted Stock, including (without limitation) tax on the receipt of such
cash award.
(i) The Board may provide in any individual Restricted Stock
Agreement that the Company shall have the right to repurchase from the
Restricted Stockholder the Restricted Stock then subject to restrictions
under the Restricted Stock Agreement immediately upon a Termination of
Directorship for any reason at a cash price per share equal to the cash
price paid by the Restricted Stockholder for such Restricted Stock. In the
discretion of the Board, provision may be made that no such right of
repurchase shall exist in the event of a Termination of Directorship
without cause or because of the Restricted Stockholder's retirement, death
or permanent and total disability.
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<PAGE>
6. TRANSFERABILITY.
(a) Except as may be otherwise determined by the Board, Option
Rights awarded under this Plan may be transferred by a Participant only by
will or the laws of descent and distribution and Option Rights may not be
exercised during a Participant's lifetime except by the Participant or, in
the event of the Participant's legal incapacity, by his guardian or legal
representative acting in a fiduciary capacity on behalf of the Participant
under state law and court supervision.
(b) Any award made under this Plan may provide that all or any
part of the shares of Common Stock that are to be issued or transferred by
the Company upon the exercise of Option Rights, or are no longer subject to
the substantial risk of forfeiture and restrictions on transfer referred to
in Section 5 of this Plan, shall be subject to further restrictions upon
transfer.
7. ADJUSTMENTS. The Board may make or provide for such adjustments
in the (a) number of shares of Common Stock covered by outstanding Option Rights
awarded hereunder, (b) prices per share applicable to such Options Rights, and
(c) kind of shares (including (without limitation) shares of another issuer)
covered thereby, as the Board in its sole discretion may in good faith determine
to be equitably required in order to prevent dilution or enlargement of the
rights of Optionees that otherwise would result from (x) any stock dividend,
stock split, combination of shares, recapitalization or other change in the
capital structure of the Company, (y) any merger, consolidation, spin-off,
split-off, split-up, reorganization, partial or compete liquidation or other
distribution of assets, issuance of rights or warrants to purchase securities or
(z) any other corporate transaction or event having an effect similar to any of
the foregoing. In the event of any such transaction or event, the Board may
provide in substitution for any or all outstanding awards under this Plan such
alternative consideration as it may in good faith determine to be equitable
under the circumstances and may require in connection therewith the surrender of
all awards so replaced. The Board may also make or provide for such adjustments
in the numbers and kind of shares specified in Section 3 of this Plan as the
Board may in good faith determine to be appropriate in order to reflect any
transaction or event described in this Section 7.
8. FRACTIONAL SHARES. The Company shall not be required to issue
any fractional shares of Common Stock pursuant to this Plan. The Board may
provide for the elimination of fractions or for the settlement thereof in cash.
9. WITHHOLDING TAXES. To the extent, if any, that the Company is
required to withhold federal, state, local or foreign taxes in connection with
any payment made or benefit realized by a Participant or other person under this
Plan, and the amounts available to the Company for the withholding are
insufficient, it shall be a condition to the receipt of any such payment or the
realization of any such benefit that the Participant or such other person make
arrangements satisfactory to the Company for payment of the balance of any taxes
required to be withheld. At the discretion of the Board, any such arrangements
may include relinquishment of a portion of any such payment or benefit. The
Company and any Participant or such other person may also make similar
arrangements with respect to the payment of any taxes with respect to which
withholding is not required.
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10. CERTAIN TERMINATIONS OF DIRECTORSHIPS.
(a) Notwithstanding any other provision of this Plan to the
contrary, in the event of Termination of Directorship by reason of death,
disability, or in the event of hardship or other special circumstances, of
a Participant who holds an Option Right that is not immediately and fully
exercisable or any Restricted Stock as to which the substantial risk of
forfeiture or the prohibition or restriction on transfer has not lapsed,
the Board may in its sole discretion take any action that it deems to be
equitable under the circumstances or in the best interests of the Company,
including (without limitation) waiving or modifying any limitation or
requirement with respect to any award under this Plan.
(b) If a Non-Employee Director becomes an Employee while
continuing to serve as a Director, that fact alone shall not result in a
Termination of Directorship or otherwise impair the rights such Director
may have under this Plan, including (without limitation) the rights such
Director may have under any Option Right outstanding under this Plan, but
such Director shall no longer be eligible to receive any further awards
under this Plan.
11. ADMINISTRATION.
(a) ADMINISTRATION BY THE BOARD; DELEGATION. This Plan shall be
administered by the Board, which may from time to time delegate all or any
part of its authority under this Plan to a committee or subcommittee of not
less than two Directors appointed by the Board who are "Non-Employee
Directors" within the meaning of that term as defined in Rule 16b-3 under
the Securities Exchange Act of 1934, or any successor rule to the same
effect. To the extent of any delegation by the Board under this Plan,
references in this Plan to the Board shall also refer to the applicable
committee or subcommittee. The majority of any such committee or
subcommittee shall constitute a quorum, and the action of a majority of its
members present at any meeting at which a quorum is present, or acts
unanimously approved in writing, shall be the acts of such committee or
subcommittee.
(b) ADMINISTRATIVE POWERS. The Board shall have the power to
interpret this Plan, the Option Rights and the Restricted Stock, and the
agreements pursuant to which the Option Rights and Restricted Stock are
awarded, and to adopt such rules for the administration, interpretation and
application of this Plan as are consistent therewith and to interpret,
amend or revoke any such rules. Any award under this Plan need not be the
same with respect to each Optionee or Restricted Stockholder.
(c) PROFESSIONAL ASSISTANCE; GOOD FAITH ACTIONS. All expenses
and liabilities which members of the Board incur in connection with the
administration of this Plan shall be borne by the Company. The Board may
employ attorneys, consultants, accountants, appraisers, brokers or other
persons. The Board, the Company and the Company's officers and Directors
shall be entitled to rely upon the advice, opinions or valuations of any
such persons. All actions taken and all interpretations and determinations
made by the Board in good faith shall be final and binding upon all
Optionees, Restricted
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<PAGE>
Stockholders, the Company and all other interested persons. No members of
the Board shall be personally liable for any action, determination or
interpretation made in good faith with respect to this Plan, any Option or
any Restricted Stock, and all members of the Board shall be fully protected
by the Company in respect of any such action, determination or
interpretation.
(d) DELEGATION TO CHIEF EXECUTIVE OFFICER. The Board may
delegate to the Chief Executive Officer of the Company or the Secretary of
the Company, or both, any or all of the administrative duties and authority
of the Board under this Plan.
(e) NO LIABILITY. No member of the Board, or officer or
employee of the Company or any Subsidiary shall be liable, responsible or
accountable in damages or otherwise for any determination made or other
action taken or any failure to act by such person so long as such person is
not determined to be guilty by a final adjudication of willful misconduct
with respect to such determination, action or failure to act.
(f) INDEMNIFICATION. To the fullest extent permitted by law,
each of the members of the Board and each of the directors, officers and
employees of the Company or any Subsidiary shall be held harmless and be
indemnified by the Company for any liability, loss, including (without
limitation) amounts paid in settlement, damages or expenses, including
(without limitation) reasonable attorneys' fees suffered by virtue of any
determinations, acts or failures to act, or alleged acts or failures to
act, in connection with the administration of this Plan so long as such
person is not determined by a final adjudication to be guilty of willful
misconduct with respect to such determination, action or failure to act.
12. AMENDMENT, SUSPENSION, TERMINATION AND OTHER MATTERS.
(a) This Plan may be wholly or partially amended or otherwise
modified, suspended or terminated at any time or from time to time by the
Board. However, without further approval of the stockholders of the
Company, no action of the Board may, except as provided in Section 7 of
this Plan, increase the limits imposed in Section 3 on the maximum number
of shares of Common Stock and shares of Restricted Stock which may be
issued under this Plan, and no action of the Board may be taken that would
otherwise require stockholder approval as a matter of applicable law or the
rules of any U.S. stock exchange on which the Common Stock may be listed
for trading. No amendment, suspension or termination of this Plan shall,
without the consent of the holder of an Option Right or Restricted Stock,
alter or impair any rights or obligations under any Option Right or
Restricted Stock theretofore awarded, unless the award itself otherwise
expressly so provides.
(b) The Board shall not, without further approval of the
stockholders of the Company, authorize the amendment of any outstanding
Option Right to reduce the Option Price. Furthermore, no Option Rights
awarded under this Plan shall be canceled and replaced with awards having a
lower Option Price without the further approval of the stockholders of the
Company.
8
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(c) The Board may make under this Plan any award or combination
of awards authorized under this Plan in exchange for the cancellation of an
award that was not made under this Plan.
(d) The making of one or more awards to a Non-Employee Director
under this Plan shall not preclude the making of awards to such
Non-Employee Director under the 1994 Plan, or under any other stock option
or incentive plan previously or subsequently adopted by the Board, nor
shall the fact that a Non-Employee Director has received one or more awards
under the 1994 Plan or under any other stock option or incentive plan of
the Company preclude such Non-Employee Director from receiving awards under
this Plan.
13. TERMINATION OF THE PLAN. No further awards shall be made under
this Plan after the passage of 10 years from the date on which this Plan is
first approved by the stockholders of the Company.
9
<PAGE>
EXHIBIT 10.20
[LOGO] MORRISON KNUDSEN CORPORATION
INDEMNIFICATION AGREEMENT
This INDEMNIFICATION AGREEMENT is made as of the ____ day of _____________,
______, by and between Morrison Knudsen Corporation, a Delaware corporation (the
"Corporation"), and the individual whose name appears on the signature page
hereof (such individual being referred to herein as the "Indemnified
Representative" and, together with other persons who may execute similar
agreements, as "Indemnified Representatives").
WHEREAS, the Indemnified Representative currently is and will be in the
future serving in one or more capacities as a director, officer, employee or
agent of the Corporation or, at the request of the Corporation, as a director,
officer, employee, agent fiduciary or trustee of, or in a similar capacity for,
another corporation, partnership, joint venture, trust, employee benefit plan or
other entity, and in so doing is and will be performing a valuable service to or
on behalf of the Corporation;
WHEREAS, the Board of Directors of the Corporation has determined that, in
order to attract and retain qualified individuals, the Corporation will attempt
to maintain, at its sole expense, liability insurance to protect persons serving
the Corporation and its subsidiaries from certain liabilities. Although the
furnishing of such insurance has been a customary and widespread practice among
United States-based corporations and other business enterprises, the Corporation
believes that, given current market conditions and trends, such insurance may be
available to it in the future only at higher premiums and with more exclusions.
At the same time, directors, officers and other persons in service to
corporations or business enterprises are being increasingly subjected to
expensive and time-consuming litigation relating to, among other things, matters
that traditionally would have been brought only against the Corporation or
business enterprise itself;
WHEREAS, the Indemnified Representative is willing to continue to serve and
to undertake additional duties and responsibilities for and on behalf of the
Corporation on the condition that he be indemnified contractually by the
Corporation; and
WHEREAS, as an inducement to the Indemnified Representative to continue to
serve the Corporation, and in consideration for such continued service, the
Corporation has agreed to indemnify the Indemnified Representative upon the
terms set forth herein.
NOW, THEREFORE, in consideration of the promises and mutual covenants
contained herein, and intending to be legally bound hereby, the Corporation and
the Indemnified Representative agree as follows:
1. AGREEMENT TO SERVE. The Indemnified Representative agrees to serve or
continue to serve for or on behalf of the Corporation in each Official
Capacity (as hereinafter defined) held now or in the future for so long as
the Indemnified Representative is duly elected or appointed or until such
time as the Indemnified Representative tenders a resignation in
<PAGE>
writing. This Agreement shall not be deemed an employment contract between
the Corporation or any of its subsidiaries and any Indemnified
Representative who is an employee of the Corporation or any of its
subsidiaries. The Indemnified Representative specifically acknowledges
that the Indemnified Representative's employment with the Corporation or
any of its subsidiaries, if any, is at will, and that the Indemnified
Representative may be discharged at any time for any reason, with or
without cause, except as may be otherwise provided in any written
employment contract between the Indemnified Representative and the
Corporation or any of its subsidiaries, other applicable formal severance
policies duly adopted by the board of directors of the Indemnified
Representative's employer or, with respect to service as a director of the
Corporation, by the Corporation's Certificate of Incorporation, By-Laws and
the Delaware General Corporation Law. The foregoing notwithstanding, this
Agreement shall continue in force after the Indemnified Representative has
ceased to serve in any Official Capacity for or on behalf of the
Corporation or any of its subsidiaries.
2. INDEMNIFICATION.
a. Except as provided in Sections 3 and 5 hereof, the Corporation shall
indemnify the Indemnified Representative against any Liability (as
hereinafter defined) incurred by or assessed against the Indemnified
Representative in connection with any Proceeding (as hereinafter
defined) in which the Indemnified Representative may be involved, as a
party or otherwise, by reason of the fact that the Indemnified
Representative is or was serving in any Official Capacity held now or
in the future, including, without limitation, any Liability resulting
from actual or alleged breach or neglect of duty, error, misstatement,
misleading statement, omission, negligence, act giving rise to strict
or product liability, act giving rise to liability for environmental
contamination, or other act or omission, whether occurring prior to or
after the date of this Agreement. As used in this Agreement:
(1) "Liability" means any damage, judgment, amount paid in
settlement, fine, penalty, punitive damage or expense of any
nature (including attorneys' fees and expenses);
(2) "Proceeding" means any threatened, pending or completed action,
suit, appeal, arbitration or other proceeding of any nature,
whether civil, criminal, administrative or investigative, whether
formal or informal, and whether brought by or in the right of the
Corporation, a class of its security holders, or any other party;
and
(3) "Official Capacity" means service to the Corporation as a
director or officer or, at the request of the Corporation, as a
director, officer, employee, agent, fiduciary or trustee of, or
in a similar capacity for another corporation, partnership, joint
venture, trust, employee benefit plan (including a plan qualified
under the Employee Retirement Income Security Act of 1974), or
other entity.
Indemnification Agreement - Page 2
<PAGE>
b. Notwithstanding Section 2a hereof, except for a Proceeding brought
pursuant to Section 5d of this Agreement, the Corporation shall not
indemnify the Indemnified Representative under this Agreement for any
Liability incurred in a Proceeding initiated by the Indemnified
Representative unless the Proceeding is authorized, either before or
after commencement of the Proceeding, by the majority vote of a quorum
of the Board of Directors of the Corporation. An affirmative defense
or counterclaim of an Indemnified Representative shall not be deemed
to constitute a Proceeding initiated by the Indemnified
Representative.
3. EXCLUSIONS.
a. The Corporation shall not be liable under this Agreement to make any
payment in connection with any Liability incurred by the Indemnified
Representative:
(1) to the extent payment for such Liability is made to the
Indemnified Representative under an insurance policy obtained by
the Corporation;
(2) to the extent payment is made to the Indemnified Representative
for such Liability by the Corporation under its Certification of
Incorporation, By-Laws, the Delaware General Corporation Law or
otherwise than pursuant to this Agreement;
(3) to the extent such Liability is determined in a final
determination pursuant to Section 5d hereof to be based upon or
attributable to the Indemnified Representative gaining any
personal profit to which such Indemnified Representative was not
legally entitled;
(4) for any claim by or on behalf of the Corporation for recovery of
profits resulting from the purchase and sale or sale and purchase
by such Indemnified Representative of equity securities of the
Corporation pursuant to Section 16(b) of the Securities Exchange
Act of 1934, as amended;
(5) for which the conduct of the Indemnified Representative has been
determined in a final determination pursuant to Section 5d hereof
to constitute bad faith or active and deliberate dishonesty, in
either such case material to the cause of action or claim at
issue in the Proceeding; or
(6) to the extent such indemnification has been determined in a final
determination pursuant to Section 5d hereof to be unlawful.
b. Any act, omission, liability, knowledge or other fact of or relating
to any other person, including any other person who is also an
Indemnified Representative, shall not be imputed to the Indemnified
Representative for the purposes of determining the applicability of
any exclusion set forth herein.
Indemnification Agreement - Page 3
<PAGE>
c. The termination of a proceeding by judgment, order, settlement,
conviction or upon a plea of NOLO CONTENDERE or its equivalent shall
not, of itself, create a presumption that the Indemnified
Representative is not entitled to indemnification under this
Agreement.
4. ADVANCEMENT OF EXPENSES. The Corporation shall pay any Liability in the
nature of an expense (including attorneys' fees and expenses) incurred in
good faith by the Indemnified Representative in advance of the final
disposition of a Proceeding within 30 days of receipt of a demand for
payment by the Indemnified Representative; provided, however, that the
Indemnified Representative shall repay such amount if it shall ultimately
be determined, pursuant to Section 5d hereof, that the Indemnified
Representative is not entitled to be indemnified by the Corporation
pursuant to this Agreement. The financial ability of the Indemnified
Representative to repay an advance shall not be a prerequisite to the
making to such advance.
5. INDEMNIFICATION PROCEDURE.
a. The Indemnified Representative shall use his best efforts to notify
promptly the Secretary of the Corporation of the commencement of any
Proceeding or the occurrence of any event which might give rise to a
Liability under this Agreement, but the failure to so notify the
Corporation shall not relieve the Corporation of any obligation which
it may have to the Indemnified Representative under this Agreement or
otherwise.
b. The Corporation shall be entitled, upon notice to the Indemnified
Representative, to assume the defense of any Proceeding with counsel
reasonably satisfactory to the Indemnified Representative involved in
such Proceeding or, if there be more than one Indemnified
Representative involved in such Proceeding, to a majority of the
Indemnified Representatives involved in such Proceeding. If, in
accordance with the foregoing, the Corporation defends the Proceeding,
the Corporation shall not be liable for the expenses (including
attorneys' fees and expenses) of the Indemnified Representative
incurred in connection with the defense of such Proceeding subsequent
to the required notice, unless (i) such expenses (including attorneys'
fees) have been authorized by the Corporation or (ii) the Corporation
shall not in fact have employed counsel reasonably satisfactory to
such Indemnified Representative, or to the majority of Indemnified
Representatives if more than one is involved, to assume the defense of
such Proceeding. The foregoing notwithstanding, the Indemnified
Representative may elect to retain counsel at the Indemnified
Representative's own cost and expense to participate in the defense of
such Proceeding.
c. The Corporation shall not be required to obtain the consent of the
Indemnified Representative to the settlement of any Proceeding which
the Corporation has undertaken to defend if the Corporation assumes
full and sole responsibility for such settlement and the settlement
grants the Indemnified Representative a complete and unqualified
release in respect of the potential Liability. The Corporation shall
not be
Indemnification Agreement - Page 4
<PAGE>
liable for any amount paid by an Indemnified Representative in
settlement of any Proceeding that is not defended by the Corporation,
unless the Corporation has consented to such settlement, which consent
shall not be unreasonably withheld.
d. Except as set forth herein, any dispute concerning the right to
indemnification under this Agreement and any other dispute arising
hereunder, including but not limited to matters of validity,
interpretation, application and enforcement, shall be determined
exclusively by and through final and binding arbitration in
Wilmington, Delaware, each party hereto expressly and conclusively
waiving its, his or her right to proceed to a judicial determination
with respect to such matter; provided, however, that in the event that
a claim for indemnification against liabilities arising under the
Securities Act of 1933 (the "Act") (other than the payment by the
Corporation of expenses incurred or paid by a director, officer or
controlling person of the Corporation in the successful defense of any
action, suit or proceeding) is asserted by a director, officer or
controlling person in connection with securities being registered
under the Act, the Corporation will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit
to a court of competent jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act
and will be governed by the final adjudication of such issue. The
arbitration shall be conducted in accordance with the commercial
arbitration rules then in effect of the American Arbitration
Association before a panel of three arbitrators, one of whom shall be
selected by the Corporation, the second of whom shall be selected by
the Indemnified Representative, and the third of whom shall be
selected by the other two arbitrators. If for any reason arbitration
under the arbitration rules of the American Arbitration Association
cannot be initiated, the necessary arbitrator or arbitrators shall be
selected by the presiding judge of the state court of general
jurisdiction in Wilmington, Delaware. Each arbitrator selected as
provided herein is required to be serving or to have served as a
director or an executive officer of a corporation whose shares of
common stock, during at least one year of such service, were quoted in
the NASDAQ National Market System or listed on the New York Stock
Exchange or the American Stock Exchange. It is expressly understood
and agreed by the parties that a party may compel arbitration pursuant
to this Section 5d through an action for specific performance and that
any award entered by the arbitrators may be enforced, without further
evidence or proceedings, in any court of competent jurisdiction.
c. Upon a payment under this Agreement to the Indemnified Representative
with respect to any Liability, the Corporation shall be subrogated to
the extent of such payment to all of the rights of the Indemnified
Representative to recover against any person with respect to such
Liability, and the Indemnified Representative shall execute all
documents and instruments required and shall take such other actions
as may be necessary to secure such rights, including the execution of
such documents as may be necessary for the Corporation to bring suit
to enforce such rights.
6. FEES AND EXPENSES OF ENFORCEMENT. It is the intent of the Corporation that
the Indemnified Representative not be required to incur the expenses
associated with the enforcement of his
Indemnification Agreement - Page 5
<PAGE>
rights under this Agreement by litigation, arbitration or other legal
action because the cost and expense thereof would substantially detract
from the benefits intended to be extended to the Indemnified Representative
hereunder. Accordingly, if it should appear to the Indemnified
Representative that the Corporation has failed to comply with any of its
obligations under this Agreement or in the event that the Corporation or
other person takes any action to declare this Agreement void or
unenforceable, or institutes any action, suit or proceeding designed (or
having the effect of being designed) to deny, or to recover from, the
Indemnified Representative the benefits intended to be provided to the
Indemnified Representative hereunder, the Corporation irrevocably
authorizes the Indemnified Representative from time to time to retain
counsel of his choice, at the expense of the Corporation as hereafter
provided, to represent the Indemnified Representative in connection with
the initiation or defense of any litigation, arbitration or other legal
action, whether by or against the Corporation or any director, officer,
stockholder or other person affiliated with the Corporation, in any
jurisdiction. Regardless of the outcome thereof, the Corporation shall pay
and be solely responsible for any and all costs, charges and expenses
including, without limitation, attorneys' and others' fees and expenses,
reasonably incurred by the Indemnified Representative (i) as a result of
the Corporation's failure to perform this Agreement or any provision
thereof or (ii) as a result of the Corporation or any person contesting the
validity or enforceability of this Agreement or any provision thereof as
aforesaid.
7. CONTRIBUTION. If the indemnification provided for in this Agreement is
unavailable for any reason to hold harmless an Indemnified Representative
in respect of any Liability or portion thereof, the Corporation shall
contribute to such Liability or portion thereof in such proportion as is
appropriate to reflect the relative benefits received by the Corporation
and Indemnified Representative from the transaction giving rise to the
Liability.
8. NON-EXCLUSIVITY. The rights granted to the Indemnification Representative
pursuant to this Agreement shall not be deemed exclusive of any other
rights to which the Indemnified Representative may be entitled under
statute, the provisions of any certificate of incorporation, by-laws or
agreement, a vote of stockholders or directors, or otherwise, both as to
action in an Official Capacity and in any other capacity.
9. RELIANCE ON PROVISIONS. The Indemnified Representative shall be deemed to
be acting in any Official Capacity in reliance upon the rights of
indemnification provided by this Agreement. Without limiting the
generality of the foregoing, the Corporation and the Indemnified
Representative acknowledge the existence of Article V of the Corporation's
By-Laws as restated and adopted by the Board of Directors on September 12,
1996, and confirm that the Indemnified Representative is also acting in
reliance thereon.
10. SEVERABILITY AND REFORMATION. Any provision of this Agreement which is
determined to be invalid or unenforceable in any jurisdiction or under any
circumstances shall be ineffective only to the extent of such invalidity or
unenforceability and shall be deemed reformed to the extent necessary to
conform to the applicable law of such jurisdiction and still give maximum
effect to the intent of the parties hereto. Any such determination shall
Indemnification Agreement - Page 6
<PAGE>
not invalidate or render unenforceable such provision in any other
jurisdiction or under any other circumstances.
11. NOTICES. Any notice, claim, request or demand required or permitted
hereunder shall be in writing and shall be deemed given if delivered
personally or sent by telegram or by registered or certified mail, first
class, postage prepaid: (i) if to the Corporation, to Morrison Knudsen
Corporation, P. O. Box 73, Boise, Idaho 83729, Attention: Secretary, or
(ii) if to any Indemnified Representative, to the address of such
Indemnified Representative, to the address of such Indemnified
Representative listed on the signature page hereof, or to such other
address as any party hereto shall have specified in a notice duly given in
accordance with this Section 10.
12. AMENDMENTS; BINDING EFFECT. No amendment, modification, termination or
cancellation of this Agreement shall be effective as to the Indemnified
Representative unless signed in writing by the Corporation and the
Indemnified Representative. This Agreement shall be binding upon the
Corporation and its successors and assigns and shall inure to the benefit
of the Indemnified Representative's heirs, executors, administrators and
personal representatives.
13. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware, without regard to the
conflict of laws provisions thereof.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the
day and year first set forth above.
(Corporate Seal) MORRISON KNUDSEN CORPORATION
By
-------------------------------------
Attest:
- ----------------------------------------
INDEMNIFIED REPRESENTATIVE
By
-------------------------------------
Witness:
- ----------------------------------------
Indemnification Agreement - Page 7
<PAGE>
MORRISON KNUDSEN CORPORATION
SCHEDULE OF INDEMNIFICATION AGREEMENTS
Name Date of Agreement
---- -----------------
David H. Batchelder September 12, 1996
Douglas L. Brigham September 12, 1996
Peter N. Forbini September 12, 1996
Darrol N. Groven September 12, 1996
Stephen G. Hanks September 12, 1996
Alvia L. Henderson September 12, 1996
Leonard R. Judd September 12, 1996
William C. Langley September 12, 1996
James E. McCallum October 1, 1996
Robert S. Miller, Jr. September 12, 1996
Dorn Parkinson September 12, 1996
Richard D. Parry September 12, 1996
Terry W. Payne September 12, 1996
John D. Roach September 12, 1996
Jonathan M. Robertson September 12, 1996
Lisa H. Ross September 12, 1996
Charles W. Simpson September 12, 1996
Robert A. Tinstman September 12, 1996
Dennis R. Washington September 12, 1996
Thomas H. Zarges September 12, 1996
Indemnification Agreement - Page 8
<PAGE>
EXHIBIT 10.21
EMPLOYMENT AGREEMENT
This Employment Agreement ("Agreement") is made as of the 1st day of January,
1993, by and between Morrison Knudsen Corporation, an Ohio corporation
("Company"), and Robert A. Tinstman, an executive employee of the Company
("Executive").
WHEREAS, Executive has rendered valuable services to Company, and has acquired
an extensive background in and knowledge of Company's business; and
WHEREAS, Company desires to continue the services of Executive in such executive
capacity as the parties may mutually agree.
NOW, THEREFORE, in consideration of the foregoing, Company and Executive agree
as follows:
ARTICLE 1 - TERM
1.1 Company shall employ Executive and Executive accepts such employment for
a term beginning on the effective date of this Agreement and ending December 31,
1997, upon the terms and conditions set forth herein, unless such employment is
earlier terminated in accordance with the provisions herein.
1.2 Notwithstanding the foregoing, if this Agreement shall not have been
terminated in accordance with the provisions herein on or before December 31,
1997, the Agreement shall be extended such that at each and every moment of time
thereafter, the remaining term of the Agreement shall be one year unless (a) the
Agreement is terminated earlier in accordance with the provisions herein or (b)
on or after January 1, 1997, Company's Board of Directors notifies Executive in
writing of its determination to have the term of this Agreement expire one year
from the date of notification.
ARTICLE 2 - DEFINITIONS
For purposes of this Agreement, the following terms shall have the meanings set
forth below:
2.1 "BASE COMPENSATION" shall mean an amount per annum equal to the sum of
(i) the annual base salary rate in effect for Executive immediately preceding
termination of employment (excluding any reduction in base salary made in breach
of this Agreement), (ii) an amount equal to the product of (A) and (B), where
(A) equals the percentage derived by dividing the cumulative bonus paid to
Executive under the Executive Incentive Plan or Group Incentive Plan, whichever
is applicable, for the three most recently completed calendar years prior to
termination (including any bonus amounts deferred by Executive under any Company
deferred compensation plan or arrangement) by the cumulative base salary paid to
Executive for the same three-year period (including any base salary deferred by
Executive under any Company deferred compensation plan or arrangement), and (B)
equals the amount set forth in 2.1(i) above, (iii) continued participation
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in all basic and supplemental life, accident, disability, medical, dental and
other Company-sponsored welfare benefit programs provided to Executive
immediately preceding termination (or, if continued participation in one or more
of these benefits is not possible per the terms of the plan or applicable law,
an amount of money that would enable Executive to purchase similar benefits),
and (iv) continuance of vesting and benefit accrual under any Company-sponsored
basic and supplemental retirement programs in effect for Executive immediately
prior to termination (or, if continued participation in such programs is not
possible per the terms of the plan or applicable law, the monetary value of such
benefits).
2.2 "CAUSE" shall mean (i) willful refusal by Executive to follow a lawful
written order of the Chief Executive Officer, (ii) Executive's willful and
continued failure to perform his duties under this Agreement (except due to
Executive's incapacity due to physical or mental illness) after a written demand
is delivered to Executive by the Chief Executive Officer specifically
identifying the manner in which the Chief Executive Officer believes that
Executive has failed to perform his duties, (iii) Executive's willful engagement
in conduct materially injurious to the Company, or (iv) Executive's conviction
for any felony involving moral turpitude. For purposes of clauses (i), (ii),
and (iii) of this definition, no act, or failure to act on Executive's part
shall be deemed "willful" unless done, or omitted to be done, by Executive not
in good faith and without reasonable belief that Executive's act, or failure to
act, was in the best interests of Company.
2.3 "CONSTRUCTIVE TERMINATION" shall mean Executive's 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 Executive in
advance of such event:
(i) A failure by the Company to abide by any part of this Agreement that is
not remedied within ten (10) business days of notification by Executive
of such failure, including any violation of Executive's rights as
described in Section 3 of this Agreement unless such rights are replaced
by alternative rights of approximately equal value;
(ii) A reduction in Executive's title or responsibilities below that agreed to
in Section 6.1; or
(iii) Relocation of Executive's primary place of business more than fifty (50)
miles from its location as of the effective date of this Agreement.
2.4 "DISABILITY" shall be deemed to have occurred if Executive makes
application for disability benefits under any Company-sponsored long-term
disability program (whether insured or self-insured, basic or supplemental)
covering Executive and qualifies for such benefits.
2.5 "RETIREMENT" shall mean Executive's termination of service with Company
on or after his Early Retirement Date or Normal Retirement Date as defined in
the Morrison Knudsen Corporation Retirement Plan, established January 1, 1988
and frozen December 31, 1991 (the "MKRP"), assuming that the MKRP had never been
frozen.
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ARTICLE 3 - COMPENSATION AND BENEFITS
Executive shall receive the annual base salary set by Company, which salary
shall be commensurate with Executive's duties and consistent with the
compensation policies of the Executive Compensation and Nominating Committee of
Company's Board of Directors. Such salary shall be, at a minimum, the amount of
base salary in effect for Executive as of the date this Agreement is executed.
At least annually, Company will review Executive's base salary to determine the
amount of any increase. Upon any such increase in Executive's base salary, such
increased rate shall thereafter constitute Executive's annual base salary for
all purposes of this Agreement. The foregoing to the contrary notwithstanding,
the Company may reduce Executive's annual base salary during any year by not
more than 10% below the base salary in effect at the beginning of the year as
part of any general salary reduction which applies to all officers of the
Company.
Executive shall be entitled to participate in the Company's Key Executive
Long-Term Incentive Plan applicable to his Group or corporate position ("5-Year
Plan"), as the case may be. Upon being finalized, the 5-Year Plan shall contain
Executive's sharing percentages and performance targets, shall be executed by
Executive and shall be attached hereto and made a part hereof.
Executive shall also be entitled to participate in the Company's Long-Term
Performance Compensation Benefit Plan ("3-Year Plan") to the extent such plan is
continued by Company. A copy of the 3-Year Plan has heretofore been provided to
Executive and by this reference, made a part hereof.
Executive also shall be entitled to participate in either the Group Incentive
Plan for his Group or the Executive Incentive Plan applicable to his corporate
position, as the case may be, a copy of which has heretofore been provided to
Executive and by this reference made a part hereof.
Executive also shall be eligible to participate in all perquisites and health
and welfare benefits generally available to other executive officers of Company.
In addition, during his employment, Executive shall be provided with
supplemental benefits at no cost to Executive which shall result in the
following levels of coverage, inclusive of any coverage provided by basic
Company-sponsored benefits:
a. Pre-Retirement life insurance equal to three time Executive's annual
base salary;
b. Post-Retirement life insurance equal to two times Executive's annual
base salary as of the date of Executive's retirement; and
c. Disability coverage from all Company-sponsored and government
sources equal to 60% of the sum of base salary plus annual Group Incentive Plan
bonus or Executive Incentive Plan bonus, which ever is applicable, less any
offsets under the terms of such disability programs.
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ARTICLE 4 - EXECUTIVE'S RIGHTS UPON TERMINATION
In the event that Executive's employment with Company is terminated for any
reason other than (a) death, (b) Disability, (c) Cause, (d) voluntary
resignation by Executive not constituting Constructive Termination or (e)
Retirement, Company will pay to Executive Base Compensation for a period of two
years. In addition, Company will fully and immediately vest all unvested stock
options and restricted stock awards previously granted by Company to Executive
and fully vest and immediately pay to Executive any accrued award earned by
Executive under the 5-Year Plan applicable to his Group or corporate position,
as the case may be, or any other Company-sponsored long-term cash incentive plan
in which Executive is a participant.
Base Compensation payments shall be made when payments would otherwise have been
made to Executive if he were still employed by Company, except in such cases
where a different payment schedule is provided for in other Company-sponsored
plans or programs.
In the event Executive's employment with Company is terminated for death,
Disability, Cause, voluntary resignation not constituting Constructive
Termination or Retirement, Executive shall not be entitled to any benefits under
this Agreement. This statement, however, shall not preclude Executive from any
payments or benefits available to Executive from participation in
Company-sponsored plans or programs that are generally applicable to salaried
personnel.
ARTICLE 5 - DESIGNATION OF BENEFICIARIES
If Executive should die while receiving payments pursuant to Article 4, the
remaining payments which would have been paid to Executive if he had lived shall
be paid as designated by Executive on the attached Beneficiary Designation Form.
Such payments shall be made at the same time and in the same manner as if
Executive were alive to receive the payments, except in such cases where a
different payment schedule is provided for in other Company-sponsored plans or
programs. The filing of a new Beneficiary Designation Form will cancel all
designations previously filed. The spouse of a married Executive shall join in
any designation of a beneficiary other than the spouse.
If Executive fails to designate a beneficiary as provided for above, then
Company shall direct the distribution of any benefits under this Agreement to
Executive's estate.
ARTICLE - 6 DUTIES OF EXECUTIVE
6.1 Executive agrees to serve as the President of Company's Mining Group, or
in such other executive capacity as the parties may mutually agree, and to
perform the duties and services appertaining to such office and such other
duties or services he may be reasonably directed to perform from time to time by
the Chief Executive Officer of Company.
6.2 Executive agrees, during the period of his employment by Company, to
devote his primary business time, energy and best efforts to the business and
affairs of Company and, except with the consent of the Chief Executive Officer,
not to engage in any other business activity (except passive personal
investments).
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ARTICLE 7 - MITIGATION AND OFFSET
Executive shall not be required to mitigate the amount of any payment provided
for in this Agreement by seeking employment or otherwise, nor to offset the
amount of any payment provided for in this Agreement by amounts earned as a
result of Executive's employment or self-employment during the period he is
entitled to such payment.
ARTICLE 8 - TAX "GROSS-UP" PROVISION
If any payments due Executive under this Agreement result in Executive's
liability for an excise tax under Section 4999 of the Internal Revenue Code of
1986 as amended ("parachute tax"), the Company will pay Executive, after
deducting any Federal, state or local income tax imposed on the payment, an
amount sufficient to fully satisfy the parachute tax liability. Such payment
shall be made to Executive no later than 30 days prior to the date of the
parachute tax.
ARTICLE 9 - SUCCESSORS
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.
ARTICLE 10 - ENTIRE AGREEMENT
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 or agreements of Company to which Executive is a party or of
which he is a beneficiary, except the Key Executive Long-Term Incentive Plan
established April 1991 (the LTIP"). In the case of the LTIP, Executive agrees
that this Agreement is entered into in exchange for, and in lieu of, his
participation in the LTIP and that Executive shall have no interest whatsoever
in such LTIP or be entitled to receive any benefit therefrom. No amendments to
this Agreement may be made except through a written document signed by both
parties.
ARTICLE 11 - 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.
ARTICLE 12 - ARTICLES AND HEADINGS
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.
-5-
<PAGE>
ARTICLE 13 - NOTICES
Any notice or demand required or permitted to be given under this Agreement
shall be made in writing and shall be deemed effective upon the personal
delivery thereof if delivered or, if mailed, 48 hours after having been
deposited in the United States mail, postage prepaid, and addressed in the case
of Company to its then principal place of business, presently Morrison-Knudsen
Plaza, 720 Park Blvd., Boise, Idaho 83729, and in the case of Executive to
Morrison Knudsen Corporation, Morrison-Knudsen Plaza, P. O. Box 73, Boise, ID
83729. Either party may change the address to which such notices are to be
addressed by giving the other party notice in the manner herein set forth.
ARTICLE 14 - ATTORNEY'S FEES
In any action at law or in equity to enforce any of the provisions or rights
under this Agreement, the unsuccessful party to such litigation, as determined
by the Court in a final judgment or decree, shall pay the successful party or
parties all costs, expenses and reasonable attorneys' fees incurred therein by
such party or parties (including without limitation such costs, expenses and
fees on any appeals), and if such successful party or parties shall recover
judgment in any such action or proceeding, such costs, expenses and attorneys'
fees shall be included as part of such judgment.
Notwithstanding the foregoing provision, in no event shall the successful party
or parties be entitled to recover an amount from the unsuccessful party for
costs, expenses and attorneys' fees that exceeds the unsuccessful party's costs,
expenses and attorneys' fees in connection with the action or proceeding.
ARTICLE 15 - TAXES
To the extent required by law, the Company shall withhold from any payments
under this Agreement any applicable federal, state or local taxes.
ARTICLE 16 - APPLICABLE LAW
To the full extent controllable by stipulation of the parties, this Agreement
shall be interpreted and enforced under Idaho law.
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<PAGE>
IN WITNESS WHEREOF, Company has executed this Agreement by a duly authorized
officer, and Executive this 26 day of August, 1993.
ATTEST MORRISON KNUDSEN CORPORATION
/s/ Stephen G. Hanks By: /s/ William J. Agee
- ----------------------------------- -----------------------------------
Stephen G. Hanks, William J. Agee,
Sr. Vice President, Secretary Chairman and Chief Executive
and General Counsel Officer
EXECUTIVE
/s/ Robert A. Tinstman
----------------------------------------
Robert A. Tinstman
-7-
<PAGE>
AMENDMENT TO EMPLOYMENT AGREEMENT
This Amendment to Employment Agreement (the "Amendment") is made as of
this 22nd day of April, 1996 by and between Morrison Knudsen Corporation, a
Delaware corporation ("Company") and Robert A. Tinstman, an executive employee
of the Company ("Executive").
WHEREAS, the Company and Executive are parties to a certain Employment
Agreement made as of January 1, 1993 (the "Agreement"); and
WHEREAS, under the Agreement, Executive is entitled to receive a
severance benefit equal to twice his annual base compensation upon involuntary
termination (which includes annual base salary in effect immediately preceding
the termination of employment) and
WHEREAS, in February 1995, due to the financial condition of the Company,
Executive agreed to accept a voluntary reduction in annual base salary to
$300,000, in exchange for a grant to Executive of certain stock options; and
WHEREAS, this voluntary reduction had the inadvertent effect of reducing
the severance benefits to Executive under the formula referenced above; and
WHEREAS, in order to avoid any ambiguity, the Company has agreed that the
Agreement should be amended to tie the severance benefits under the Agreement to
the greater of the Executive's original annual base salary in place immediately
prior to the voluntary reduction in February, 1995 or the Executive's base
salary in effect immediately prior to an involuntary termination.
NOW, THEREFORE, the Agreement is hereby amended by deleting Article 2.1
in its entirety and replacing it with the following:
"BASE COMPENSATION" shall mean an amount per annum equal to the sum
of (i) the annual base salary rate in effect for Executive
immediately preceding termination of employment, or if greater, the
annual base salary in effect for Executive immediately prior to the
Executive's voluntary salary reduction in February 1995 (each
excluding any reduction in base salary made in breach of this
Agreement), (ii) an amount equal to the product of (A) and (B),
where (A) equals the percentage derived by dividing the cumulative
bonus paid to Executive under the Executive Incentive Plan or Group
Incentive Plan, whichever is applicable, for the three most recently
completed calendar years prior to termination (including any bonus
amounts deferred by Executive under any Company deferred
compensation plan or arrangement) by the cumulative base salary paid
to Executive for the same three-year period, notwithstanding whether
or not such base salary is greater or lesser than the annual base
salary in effect immediately prior to February 1995 (including any
base salary deferred by Executive under any Company deferred
compensation plan or arrangement), and (B),
<PAGE>
equals the amount set forth in 2.1(i) above, (iii) continued
participation in all basic and supplemental life, accident,
disability, medical, dental and other Company-sponsored welfare
benefit programs provided to Executive immediately preceding
termination (or, if continued participation in one or more of these
benefits is not possible per the terms of the plan or applicable
law, an amount of money that would enable Executive to purchase
similar benefits), and (iv) continuance of vesting and benefit
accrual under any Company-sponsored basic and supplemental
retirement programs in effect for Executive immediately prior to
termination (or, if continued participation in such programs is not
possible per the terms of the plan or applicable law, the monetary
value of such benefits).
Except for the foregoing, the Agreement remains unamended and in full
force and effect.
IN WITNESS WHEREOF, the Executive and the Company have executed this
Amendment this 22nd day of April, 1996.
MORRISON KNUDSEN CORPORATION
/s/ Stephen G. Hanks
------------------------------------
By: Stephen G. Hanks
Its: Executive Vice President and
Chief Legal Officer
EXECUTIVE
/s/ Robert A. Tinstman
------------------------------------
Robert A. Tinstman
ATTEST:
- -----------------------------------
Name:
-----------------------------
- -----------------------------------
Name:
-----------------------------
<PAGE>
EXHIBIT 10.22
MORRISON KNUDSEN CORPORATION
AMENDED AND RESTATED STOCK OPTION PLAN
NONQUALIFIED STOCK OPTION AGREEMENT
THIS AGREEMENT (this "Agreement"), dated as of January 10, 1997, is made by
and between Morrison Knudsen Corporation, a Delaware corporation hereinafter
referred to as "Company," and ROBERT A. TINSTMAN, an employee of the Company or
Subsidiary of the Company, hereinafter referred to as "Optionee":
WHEREAS, the Company wishes to afford the Optionee the opportunity to
purchase shares of its $.01 par value Common Stock; and
WHEREAS, the Company wishes to carry out the Plan (as hereinafter defined),
the terms of which are hereby incorporated herein by reference and made a part
hereof; and
WHEREAS, the execution of a Nonqualified Stock Option Agreement in the form
hereof has been duly authorized by a resolution of the Board of Directors of the
Company duly adopted on January 10, 1997, and incorporated herein by reference;
and
WHEREAS, this Option is intended to be a nonqualified stock option and
shall not be treated as an "incentive stock option" within the meaning of that
term under Section 422 of the Code;
NOW, THEREFORE, in consideration of the mutual covenants herein contained
and other good and valuable consideration, receipt of which is hereby
acknowledged, the parties hereto do hereby agree as follows:
ARTICLE I
DEFINITIONS
Wherever the following terms are used in this Agreement with initial
capital letters, they shall have the meanings specified in the Plan unless the
context clearly indicates otherwise.
Section 1.1 - Beneficiary
Section 1.2 - Code
Section 1.3 - Common Stock
Section 1.4 - Company
Section 1.5 - Employee
Section 1.6 - Exchange Act
Section 1.7 - Fair Market Value
Section 1.8 - Subsidiary
Section 1.9 - Termination of Employment
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Wherever the following terms are used in this Agreement with initial
capital letters, they shall have the meanings specified below unless the context
clearly indicates otherwise. The masculine pronoun shall include the feminine
and neuter, and the singular the plural, where the context so indicates.
SECTION 1.10 - BOARD
"Board" shall mean the Board of Directors of the Company and shall include
any committee to which the Board of Directors may have delegated its authority
pursuant to Section 8.1 of the Plan.
SECTION 1.11 - OPTIONEE
"Optionee" shall mean the Employee named above to whom an Option is awarded
under this Agreement and the Plan.
SECTION 1.12 - PLAN
"Plan" shall mean The 1994 Stock Option and Incentive Plan for Officers,
Directors and Key Employees of Kasler Holding Company, as amended and restated
as of January 9, 1997, and as the same may be further amended or restated.
SECTION 1.14 - SECRETARY
"Secretary" shall mean the Secretary of the Company.
SECTION 1.15 - SECURITIES ACT
"Securities Act" shall mean the Securities Act of 1933, as amended.
ARTICLE II
AWARD OF OPTION
SECTION 2.1 - GRANT OF AWARD
In consideration of the Optionee's execution of this Agreement and for
other good and valuable consideration, on the date hereof the Company
irrevocably awards to the Optionee the option to purchase any part or all of an
aggregate of 200,000 shares of its $.01 par value Common Stock upon the terms
and subject to the conditions set forth in the Plan and in this Agreement.
2
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SECTION 2.2 - PURCHASE PRICE
The purchase price of the shares of stock covered by the Option shall be
$9.875 per share without commission or other charge.
SECTION 2.3 - CONSIDERATION TO COMPANY
In consideration of the awarding of this Option by the Company, the
Optionee agrees to render faithful and efficient services to the Company or a
Subsidiary, with such duties and responsibilities as the Company shall from time
to time prescribe, for a period of at least one (1) year from the date this
Option is awarded. Nothing in this Agreement or in the Plan shall confer upon
the Optionee any right to continue in the employ of the Company or any
Subsidiary, or shall interfere with or restrict in any way the rights of the
Company and its Subsidiaries, which are hereby expressly reserved, to discharge
the Optionee at any time for any reason whatsoever, with or without cause.
SECTION 2.4 - ADJUSTMENTS IN OPTION
The Board may make or provide for such adjustments in the (a) number of
shares of Common Stock covered by outstanding Options awarded hereunder, (b)
prices per share applicable to such Options, and (c) kind of shares (including
shares of another issuer) covered thereby, as the Board in its sole discretion
may in good faith determine to be equitably required in order to prevent
dilution or enlargement of the rights of Optionees, that otherwise would result
from (x) any stock dividend, stock split, combination of shares,
recapitalization or other change in the capital structure of the Company, (y)
any merger, consolidation, spin-off, split-off, split-up, reorganization,
partial or complete liquidation or other distribution of assets, issuance of
rights or warrants to purchase securities or (z) any other corporate transaction
or event having an effect similar to any of the foregoing. In the event of any
such transaction or event, the Board may provide in substitution for any or all
outstanding awards under this Agreement such alternative consideration as it may
in good faith determine to be equitable under the circumstances and may require
in connection therewith the surrender of all awards so replaced.
ARTICLE III
PERIOD OF EXERCISABILITY
SECTION 3.1 - COMMENCEMENT OF EXERCISABILITY
(a) This Option shall become exercisable in four (4) cumulative installments as
follows:
(i) The first installment shall consist of one-fourth (1/4) of the
shares covered by the Option and shall become exercisable on the
date that is one year from the date the Option was awarded.
3
<PAGE>
(ii) The second installment shall consist of one-fourth (1/4) of the
shares covered by the Option and shall become exercisable on the
date that is two years from the date the Option was awarded.
(iii) The third installment shall consist of one-fourth (1/4) of the
shares covered by the Option and shall become exercisable on the
date that is three years from the date the Option was awarded.
(iv) The fourth installment shall consist of one-fourth (1/4) of the
shares covered by the Option and shall become exercisable on the
date that is four years from the date the Option was awarded.
(b) No portion of the Option which is unexercisable at Termination of
Employment shall thereafter become exercisable except as set forth in
Section 3.4(a).
SECTION 3.2 - DURATION OF EXERCISABILITY
The installments provided for in Section 3.1 are cumulative. Each such
installment which becomes exercisable pursuant to Section 3.1 shall remain
exercisable until it becomes unexercisable under Section 3.3.
SECTION 3.3 - EXPIRATION OF OPTION
(a) The Option may not be exercised to any extent by anyone after the first to
occur of the following events:
(i) The expiration of ten (10) years from the date the Option was
awarded; or
(ii) Except as set forth in 3.3(a) (iii) and (iv), the expiration of
three (3) months after the Optionee's Termination of Employment; or
(iii) The expiration of twelve (12) months from the date of the Optionee's
Termination of Employment by reason of permanent and total
disability (within the meaning of Section 22(e) (3) of the Code) or
by reason of retirement as set forth in Section 3.4(a); or
(iv) If the Optionee dies while the Option is exercisable, the expiration
of twelve (12) months from the date of the Optionee's death.
(b) This Agreement shall amend that certain Employment Agreement dated as of
January 1, 1993 between the Optionee and the Company (the "Employment
Agreement"), in that, notwithstanding Article 4 of the Employment
Agreement, no portion of this Option that is unvested as of the date the
Optionee's employment with the Company is terminated for any reason shall
be exercisable.
4
<PAGE>
ARTICLE IV
EXERCISE OF OPTION
SECTION 4.1 - PERSON ELIGIBLE TO EXERCISE
During the lifetime of the Optionee, only he or his guardian or legal
representative may exercise the Option or any portion thereof. After the death
of the Optionee, any exercisable portion of the Option may, prior to the time
when the Option becomes unexercisable under Section 3.3, be exercised by his
personal representative or by any person empowered to do so under the Optionee's
will or under the then applicable laws of descent and distribution.
SECTION 4.2 - PARTIAL EXERCISE
Any exercisable portion of the Option or the entire Option, if then wholly
exercisable, may be exercised in whole or in part at any time prior to the time
when the Option or portion thereof becomes unexercisable under Section 3.3;
provided, however, that each partial exercise shall be for not less than one
hundred (100) shares and shall be for whole shares only.
SECTION 4.3 - MANNER OF EXERCISE
The Option or any exercisable portion thereof, may be exercised solely by
delivery to the Secretary or his office of all of the following prior to the
time when the Option or such portion becomes unexercisable under Section 3.3:
(a) Notice in writing signed by the Optionee or the other person then entitled
to exercise the Option or portion, stating that the Option or portion is
thereby exercised, such notice complying with all applicable rules
established by the Board; and
(b) Full payment for the shares with respect to which such option or portion is
exercised, which payment shall be (i) in cash, (ii) through the delivery of
shares of Common Stock owned by the Optionee for at least six months, duly
endorsed for transfer to the Company with a Fair Market Value on the date
of delivery equal to the aggregate exercise price of the Option or
exercised portion thereof, or (iii) subject to the timing requirements of
Section 5.3 of the Plan, through any combination of the consideration
provided in the foregoing subparagraphs (i) or (ii); and
(c) Such representations and documents as the Board deems necessary or
advisable to effect compliance with all applicable provisions of the
Securities Act of 1933, as amended, and any other federal or state
securities laws or regulations. The Board may also take whatever
additional actions it deems appropriate to effect such compliance including
(without limitation) placing legends on share certificates and issuing
stop-transfer notices to agents and registrars;
5
<PAGE>
(d) Full payment to the Company (or other employer corporation) of all amounts
which under federal, state or local tax law, it is required to withhold
upon exercise of the Option; PROVIDED, HOWEVER, the Company may permit the
Optionee, upon delivery of a written election to the Secretary of the
Company (or to such other person who may be designated by the Board) to
elect to have the Company withhold shares of Common Stock otherwise
issuable upon the exercise of the Option. Shares of Common Stock so
withheld will be credited against this tax obligation at their Fair Market
Value; and
(e) In the event the Option or portion shall be exercised pursuant to Section
4.1 by any person or persons other than the Optionee, appropriate proof of
the right of such person or persons to exercise the Option.
SECTION 4.4 - CONDITIONS TO ISSUANCE OF STOCK CERTIFICATES
The shares of stock deliverable upon the exercise of the Option, or any
portion thereof, may be either previously authorized but unissued shares or
issued shares which have then been repurchased by the Company. Such shares
shall be fully paid and non-assessable. The Company shall not be required to
issue or deliver any certificate or certificates for shares of stock purchased
upon the exercise of the Option or portion thereof prior to fulfillment of all
of the following conditions:
(a) The admission of such shares to listing on all stock exchanges on which
such class of stock is then listed; and
(b) The completion of any registration or other qualification of such shares
under any state or federal law or under rulings or regulations of the
Securities and Exchange Commission or of any other governmental regulatory
body, which the Board shall deem necessary or advisable; and
(c) The obtaining of any approval or other clearance from any state or federal
governmental agency which the Board shall determine to be necessary or
advisable; and
(d) The payment to the Company (or other employer corporation) of all amounts
which, under federal, state or local tax law, it is required to withhold
upon exercise of the Option; and
(e) The lapse of such reasonable period of time following the exercise of the
Option as the Board may from time to time establish for reasons of
administrative convenience.
SECTION 4.5 - RIGHTS AS SHAREHOLDER
The holder of the Option shall not be, nor have any of the rights or
privileges of, a shareholder of the Company in respect of any shares purchasable
upon the exercise of any part of the Option unless and until certificates
representing such shares shall have been issued by the Company to such holder.
6
<PAGE>
ARTICLE V
OTHER PROVISIONS
SECTION 5.1 - ADMINISTRATION
The Board shall have the power to interpret the Plan and this Agreement and
to adopt such rules for the administration, interpretation and application of
the Plan as are consistent therewith and to interpret, amend or revoke any such
rules. All actions taken and all interpretations and determinations made by the
Board in good faith shall be final and binding upon the Optionee, the Company
and all other interested persons. No member of the Board shall be personally
liable for any action, determination or interpretation made in good faith with
respect to the Plan or the Option.
SECTION 5.2 - OPTION NOT TRANSFERABLE
Options under the Plan may not be sold, pledged, assigned or transferred in
any manner other than by will or the laws of descent and distribution; PROVIDED,
HOWEVER, an Optionee may designate a Beneficiary to exercise his Option or other
rights under the Plan after his death. Neither the Option nor any interest or
right therein or part thereof shall be liable for the debts, contracts or
engagements of the Optionee or his successors in interest or shall be subject to
disposition by transfer, alienation, anticipation, pledge, encumbrance,
assignment or any other means whether such disposition be voluntary or
involuntary or by operation of law by judgment, levy, attachment, garnishment or
any other legal or equitable proceedings (including bankruptcy), and any
attempted disposition thereof shall be null and void and of no effect; PROVIDED,
HOWEVER, that this Section 5.2 shall not prevent transfers by will or by the
applicable laws of descent and distribution. An Option shall be exercised
during the Optionee's lifetime only by the Optionee or his guardian or legal
representative.
SECTION 5.3 - SHARES TO BE RESERVED
The Company shall at all times during the term of the Option reserve and
keep available such number of shares of stock as will be sufficient to satisfy
the requirements of this Agreement.
SECTION 5.4 - NOTICES
Any notice to be given under the terms of this Agreement to the Company
shall be addressed to the Company in care of its Secretary, and any notice to be
given to the Optionee shall be addressed to him at the address given beneath his
signature hereto. By a notice given pursuant to this Section 5.4, either party
may hereafter designate a different address for notices to be given to him. Any
notice which is required to be given to the Optionee shall, if the Optionee is
then deceased, be given to the Optionee's personal representative if such
representative has previously informed the Company of his status and address by
written notice under this Section 5.4. Any notice shall be deemed duly given
when enclosed in a properly sealed envelope or wrapper addressed as aforesaid,
deposited (with postage prepaid) in a post office or branch post office
regularly maintained by the United States Postal Service.
7
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SECTION 5.5 - TITLES
Titles are provided herein for convenience only and are not to serve as a
basis for interpretation or construction of this Agreement.
SECTION 5.6 - CONSTRUCTION
This Agreement shall be administered, interpreted and enforced under the
internal substantive laws of the State of Delaware.
SECTION 5.7 - CONFORMITY TO SECURITIES LAWS
The Optionee acknowledges that the Plan is intended to conform to the
extent necessary with all applicable federal and state laws, rules and
regulations, including provisions of the Securities Act and the Exchange Act and
any and all regulations and rules promulgated by the Securities and Exchange
Commission thereunder, including without limitation Rule 16b-3 under the
Exchange Act. Notwithstanding anything herein to the contrary, the Plan shall
be administered, and the Option is awarded and may be exercised, only in such a
manner as to conform to such laws, rules and regulations. To the extent
permitted by applicable law, the Plan and this Agreement shall be deemed amended
to the extent necessary to conform to such laws, rules and regulations.
8
<PAGE>
IN WITNESS WHEREOF, this Agreement has been executed and delivered by the
parties hereto.
MORRISON KNUDSEN CORPORATION
By: /s/ Stephen G. Hanks
-----------------------------------
Stephen G. Hanks
Executive Vice President
OPTIONEE
/s/ Robert A. Tinstman
----------------------------------------
Robert A. Tinstman
SPOUSAL CONSENT
The undersigned has read and is familiar with the preceding Agreement and
the Plan and hereby consents and agrees to be bound by all the terms of the
Agreement and the Plan. Without limiting the foregoing, the undersigned
specifically agrees that the Company may rely on any authorization, instruction
or election made under the Agreement by the Optionee alone and that all of his
or her right, title or interest, if any, in the shares of Common Stock purchased
by the Optionee under the Agreement, whether arising by operation of community
property law, by property settlement or otherwise, shall be subject to all of
such terms.
----------------------------------------
----------------------------------------
Printed Name
Exhibit A: Copy of the Plan
9
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EXHIBIT 10.23
SUPPLEMENTAL RETIREMENT BENEFIT AGREEMENT
THIS AGREEMENT (the "Agreement") is effective as of the 3rd day of August,
1990, by and between Morrison Knudsen Corporation, a Delaware corporation (the
"Company"), and ROBERT A. TINSTMAN (the "Executive").
RECITALS:
Company adopted the Morrison Knudsen Corporation Retirement Plan, effective
January 1, 1988 (the "Plan") for the benefit of its employees. Company now
desires to provide for the payment of additional retirement benefits to
Executive so that his total retirement benefits can be determined without regard
to certain limitations imposed by law on the Plan.
NOW, THEREFORE, it is agreed,
I.
PURPOSE OF THE AGREEMENT
1.01. PURPOSE. Company desires to recognize the value of Executive's
services to Company and to encourage his continued service with Company by
making adequate provision for his future retirement security. This Agreement is
necessitated by certain compensation and benefit limitations imposed by the
Employee Retirement Income Security Act of 1974, as amended ("ERISA") and by
Sections 401(a)(17) and 415 of the Internal Revenue Code of 1986, as amended
(the "Code").
II.
INCORPORATION OF THE PLAN
2.01 PLAN. The Plan, as amended through the date of adoption of this
Agreement, is attached hereto as Exhibit A and incorporated herein. Any
amendment made to the Plan by Company shall be incorporated by reference as of
its effective date and form a part of this Agreement. All capitalized terms
used in this Agreement shall have the meanings assigned to them under the Plan
unless otherwise provided herein.
III.
AMOUNT OF BENEFIT
3.01 THE ADDITIONAL BENEFIT. The benefit payable to Executive or his
beneficiary or beneficiaries under this Agreement (the "Additional Benefit")
shall be the actuarial equivalent of the excess, if any, of:
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<PAGE>
(a) the Retirement Income benefit which would have been payable to
Executive or his beneficiary or beneficiaries under the Plan, if the
provisions of the Plan were administered without regard to the
maximum retirement benefit limitation of Sections 415 of the Code
and the maximum compensation limitation of Section 401(a)(17) of the
Code,
over
(b) the Retirement Income benefit which is, in fact, payable to
Executive or his beneficiary or beneficiaries under the Plan.
3.02 ACTUARIAL EQUIVALENT. If the Additional Benefit is payable in any
form other than a 5-year certain and straight life annuity over the lifetime of
Executive, or if it commences at anytime prior to Executive's Normal Retirement
Date under the Plan, prior to payment, the Additional Benefit shall be adjusted
in accordance with the Plan's factors for determining actuarial equivalence in
the same manner that it would be adjusted if paid under the Plan.
3.03 CONDITION FOR BENEFITS. If Executive is not entitled to a benefit
under the Plan, Executive shall not be entitled to the Additional Benefit.
IV.
PAYMENT OF BENEFITS
4.01 TERMINATION OF EMPLOYMENT. Upon Executive's termination of
employment for any reason other than "Cause" (as defined in Section 4.02 below),
Executive or his beneficiary or beneficiaries shall be entitled to receive the
Additional Benefit in the same form and at the same time or times as benefits
are payable under the Plan.
4.02 CAUSE DEFINED. For purposes of Section 4.01 above, "Cause" shall
mean Executive's: (i) conviction of any criminal violation involving
dishonesty, fraud or breach of trust; (ii) willful engagement in any misconduct
in the performance of his duties that materially injures Company, monetarily or
otherwise; (iii) performance of any act which, if known to Company's customers,
clients or stockholders would materially and adversely affect Company's
business; or (iv) willful and substantial nonperformance of assigned duties
(other than any such failure resulting from Executive's incapacity due to
physical or mental illness) which has continued after Company's Board of
Directors has given written notice of such nonperformance to Executive, which
notice specifically identifies the manner in which the Board of Directors
believes that Executive has not substantially performed his duties and which
indicates the Board of Directors intention to terminate Executive's employment
because of such nonperformance. For purposes of clauses (ii) and (iv) of this
Section 4.02, no act or omission on Executive's part shall be deemed "willful"
if committed or omitted in good faith and with a reasonable belief his action
was in the best interest of Company.
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4.03 APPROVAL OF COMPANY. An election made by Executive under the Plan
with respect to the form, or the date for commencement of payment shall not
apply to the Additional Benefit, if any, unless approved in writing by the
Executive Compensation Committee of Company's Board of Directors (the
"Committee").
V.
EXECUTIVE'S RIGHTS
5.01 UNSECURED OBLIGATION. The Additional Benefit shall be a general,
unsecured obligation of Company. Company's obligation under this Agreement
shall not (i) impose any obligation upon the Plan's Trust Fund, (ii) be paid
from the Plan's Trust Fund, or (iii) have any effect upon the Plan or the
payment of benefits from the Plan's Trust Fund.
VI.
AMENDMENT
6.01 AMENDMENT. This Agreement may be amended only by an instrument in
writing signed by the parties hereto.
VII.
RESTRICTIONS ON ASSIGNMENT
7.01 ALIENATION. The interest of Executive or his beneficiary or
beneficiaries may not be sold, transferred, assigned or encumbered in any
manner, either voluntarily or involuntarily, and any attempt to so alienate,
sell, transfer, assign, pledge, encumber or charge the same shall be null and
void. No benefit hereunder, before it is paid, shall be liable for or subject
to the debts, contracts, liabilities, engagements or torts of any person to whom
such benefits or funds are payable, nor shall it be subject to garnishment,
attachment or other legal or equitable process.
VIII.
NATURE OF AGREEMENT
8.01 BENEFIT TRUST AGREEMENT. Company shall attach this Agreement, as
amended from time to time, to Exhibit A, as amended from time to time, of the
Morrison Knudsen Corporation Benefit Trust Agreement ("Benefit Trust Agreement).
8.02 UNFUNDED AGREEMENT. Except in the case of a Potential Change in
Control (as defined in Section 1.13 of the Benefit Trust Agreement), Company
shall not be required to set aside any funds or other assets to be used to
satisfy its obligation under this Agreement.
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8.03 NO SECURITY INTEREST. It is the intent of Company and Executive
that the amounts, if any, set aside shall not create a "funded" trust within the
meaning of the Code or ERISA and that such amounts, if any, shall remain at all
times subject to the claims of Company's general creditors. Accordingly,
Company shall not create a security interest in the amounts, if any, set aside
in favor of Executive or his beneficiary or beneficiaries, or any other
creditor.
8.04 DISTRIBUTION UNDER BENEFIT TRUST AGREEMENT. Distributions made
under the Benefit Trust Agreement to Executive or his beneficiary or
beneficiaries with respect to this Agreement shall, to the extent of such
distributions, satisfy Company's obligation under this Agreement.
IX.
CONTINUED EMPLOYMENT
9.01 NO ENLARGEMENT OF RIGHTS. This Agreement shall not be deemed to
constitute a contract of employment between the parties hereto, nor shall any
provision hereof be construed as restricting the right of Company to discharge
Executive or restrict the right of Executive to terminate his employment.
X.
BINDING ON COMPANY, EXECUTIVES AND THEIR SUCCESSORS
10.01 SUCCESSORS. This Agreement shall be binding upon and inure to the
benefit of Company, its successors and assigns and Executive, his heirs,
executors, administrators and legal representatives. If Company merges or
consolidates with any other corporation, the term "Company" as used in this
Agreement shall be deemed to refer to such successor or survivor corporation.
XI.
CLAIMS PROCEDURE
11.01 CLAIMS PROCEDURE. Except in the case where benefits are being paid
to Executive or his beneficiary or beneficiaries under the Benefit Trust
Agreement, the claims procedure set forth in the Plan shall govern any claim for
benefits under this Agreement; provided, however, wherever the term "Committee"
appears in the Plan, the term "Executive Compensation Committee of Company's
Board of Directors" shall be substituted therefor. Where benefits are being
paid under the Benefit Trust Agreement, the claims procedure set forth in
Sections 4.02 and 7.03 of the Benefit Trust Agreement shall govern any claim
regarding such benefits.
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XII.
COMMUNICATIONS
12.01 COMMUNICATIONS. Any notice or communication hereunder shall be made
in writing and may either be delivered personally or sent by first class mail to
the most recent address provided by each party to the other in writing.
XIII.
GENERAL PROVISIONS
13.01 UNCLAIMED BENEFIT. Executive shall keep Company informed of his
current address and the current address of his beneficiary or beneficiaries.
Company shall not be obligated to search for the whereabouts of Executive or
his beneficiary or beneficiaries. If the location of Executive or his
beneficiary or beneficiaries is not made known to Company within three (3) years
after the date on which payment of Executive's benefit under this Agrement would
otherwise commence, then Company shall have no further obligation to pay any
benefit hereunder to Executive or his beneficiary or beneficiaries and
entitlement to such benefit shall lapse.
13.02 GENDER AND NUMBER. Words used in the masculine gender shall be
construed as though they were also used in the feminine gender in all cases
where they would so apply; words used in the singular form, shall be construed
as though they were also used in the plural form in all cases where they would
so apply; words used in the plural form, shall be construed as though they were
also used in the singular form in all cases where they would so apply.
13.03 WITHHOLDING TAXES. To the extent required by law, Company may
withhold from any payments due hereunder all applicable federal, state or local
taxes.
13.04 HEADINGS. The headings and subheadings of this Agreement have been
inserted for convenience only and form no part of this Agreement.
13.05 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, but all of which
together constitute but one instrument, which may be sufficiently evidenced by
any counterpart.
13.06 GOVERNING LAW. This Agreement shall be construed in accordance with
and governed by the laws of the State of Idaho.
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IN WITNESS WHEREOF, Company and executive have executed this Agreement the
day and year first above written.
ATTEST: MORRISON KNUDSEN CORPORATION
/s/ Stephen G. Hanks BY: /s/ Michael J. Shirley
- ----------------------------------- -------------------------------
Stephen G. Hanks Michael J. Shirley
EXECUTIVE
/s/ Robert A. Tinstman
-----------------------------------
Robert A. Tinstman
-6-
<PAGE>
EXHIBITS
THE REGISTRANT AGREES TO PROVIDE TO THE
SECURITIES AND EXCHANGE COMMISSION, UPON REQUEST,
COPIES OF THE EXHIBITS HERETO.
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<PAGE>
EXHIBIT 10.24
EMPLOYMENT AGREEMENT
This Employment Agreement ("Agreement") is made as of the 1st day of January,
1993, by and between Morrison Knudsen Corporation, a Delaware corporation
("Company"), and Stephen G. Hanks, an executive employee of the Company
("Executive").
WHEREAS, Executive has rendered valuable services to Company, and has acquired
an extensive background in and knowledge of Company's business; and
WHEREAS, Company desires to continue the services of Executive in such executive
capacity as the parties may mutually agree.
NOW, THEREFORE, in consideration of the foregoing, Company and Executive agree
as follows:
ARTICLE 1 - TERM
1.1 Company shall employ Executive and Executive accepts such employment for
a term beginning on the effective date of this Agreement and ending December 31,
1997, upon the terms and conditions set forth herein, unless such employment is
earlier terminated in accordance with the provisions herein.
1.2 Notwithstanding the foregoing, if this Agreement shall not have been
terminated in accordance with the provisions herein on or before December 31,
1997, the Agreement shall be extended such that at each and every moment of time
thereafter, the remaining term of the Agreement shall be one year unless (a) the
Agreement is terminated earlier in accordance with the provisions herein or (b)
on or after January 1, 1997, Company's Board of Directors notifies Executive in
writing of its determination to have the term of this Agreement expire one year
from the date of notification.
ARTICLE 2 - DEFINITIONS
For purposes of this Agreement, the following terms shall have the meanings set
forth below:
2.1 "BASE COMPENSATION" shall mean an amount per annum equal to the sum of
(i) the annual base salary rate in effect for Executive immediately preceding
termination of employment (excluding any reduction in base salary made in breach
of this Agreement), (ii) an amount equal to the product of (A) and (B), where
(A) equals the percentage derived by dividing the cumulative bonus paid to
Executive under the Executive Incentive Plan or Group Incentive Plan, whichever
is applicable, for the three most recently completed calendar years prior to
termination (including any bonus amounts deferred by Executive under any Company
deferred compensation plan or arrangement) by the cumulative base salary paid to
Executive for the same three-year period (including any base salary deferred by
Executive under any Company deferred compensation plan or arrangement), and (B)
equals the amount set forth in 2.1(i) above, (iii) continued participation
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in all basic and supplemental life, accident, disability, medical, dental and
other Company-sponsored welfare benefit programs provided to Executive
immediately preceding termination (or, if continued participation in one or more
of these benefits is not possible per the terms of the plan or applicable law,
an amount of money that would enable Executive to purchase similar benefits),
and (iv) continuance of vesting and benefit accrual under any Company-sponsored
basic and supplemental retirement programs in effect for Executive immediately
prior to termination (or, if continued participation in such programs is not
possible per the terms of the plan or applicable law, the monetary value of such
benefits).
2.2 "CAUSE" shall mean (i) willful refusal by Executive to follow a lawful
written order of the Chief Executive Officer, (ii) Executive's willful and
continued failure to perform his duties under this Agreement (except due to
Executive's incapacity due to physical or mental illness) after a written demand
is delivered to Executive by the Chief Executive Officer specifically
identifying the manner in which the Chief Executive Officer believes that
Executive has failed to perform his duties, (iii) Executive's willful engagement
in conduct materially injurious to the Company, or (iv) Executive's conviction
for any felony involving moral turpitude. For purposes of clauses (i), (ii),
and (iii) of this definition, no act, or failure to act on Executive's part
shall be deemed "willful" unless done, or omitted to be done, by Executive not
in good faith and without reasonable belief that Executive's act, or failure to
act, was in the best interests of Company.
2.3 "CONSTRUCTIVE TERMINATION" shall mean Executive's 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 Executive in
advance of such event:
(i) A failure by the Company to abide by any part of this Agreement that is
not remedied within ten (10) business days of notification by Executive
of such failure, including any violation of Executive's rights as
described in Section 3 of this Agreement unless such rights are replaced
by alternative rights of approximately equal value;
(ii) A reduction in Executive's title or responsibilities below that agreed to
in Section 6.1; or
(iii) Relocation of Executive's primary place of business more than fifty (50)
miles from its location as of the effective date of this Agreement.
2.4 "DISABILITY" shall be deemed to have occurred if Executive makes
application for disability benefits under any Company-sponsored long-term
disability program (whether insured or self-insured, basic or supplemental)
covering Executive and qualifies for such benefits.
2.5 "RETIREMENT" shall mean Executive's termination of service with Company
on or after his Early Retirement Date or Normal Retirement Date as defined in
the Morrison Knudsen Corporation Retirement Plan, established January 1, 1988
and frozen December 31, 1991 (the "MKRP"), assuming that the MKRP had never been
frozen.
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ARTICLE 3 - COMPENSATION AND BENEFITS
Executive shall receive the annual base salary set by Company, which salary
shall be commensurate with Executive's duties and consistent with the
compensation policies of the Executive Compensation and Nominating Committee of
Company's Board of Directors. Such salary shall be, at a minimum, the amount of
base salary in effect for Executive as of the date this Agreement is executed.
At least annually, Company will review Executive's base salary to determine the
amount of any increase. Upon any such increase in Executive's base salary, such
increased rate shall thereafter constitute Executive's annual base salary for
all purposes of this Agreement. The foregoing to the contrary notwithstanding,
the Company may reduce Executive's annual base salary during any year by not
more than 10% below the base salary in effect at the beginning of the year as
part of any general salary reduction which applies to all officers of the
Company.
Executive shall be entitled to participate in the Company's Key Executive
Long-Term Incentive Plan applicable to his Group or corporate position ("5-Year
Plan"), as the case may be. Upon being finalized, the 5-Year Plan shall contain
Executive's sharing percentages and performance targets, shall be executed by
Executive and shall be attached hereto and made a part hereof.
Executive shall also be entitled to participate in the Company's Long-Term
Performance Compensation Benefit Plan ("3-Year Plan") to the extent such plan is
continued by Company. A copy of the 3-Year Plan has heretofore been provided to
Executive and by this reference, made a part hereof.
Executive also shall be entitled to participate in either the Group Incentive
Plan for his Group or the Executive Incentive Plan applicable to his corporate
position, as the case may be, a copy of which has heretofore been provided to
Executive and by this reference made a part hereof.
Executive also shall be eligible to participate in all perquisites and health
and welfare benefits generally available to other executive officers of Company.
In addition, during his employment, Executive shall be provided with
supplemental benefits at no cost to Executive which shall result in the
following levels of coverage, inclusive of any coverage provided by basic
Company-sponsored benefits:
a. Pre-Retirement life insurance equal to three time Executive's
annual base salary;
b. Post-Retirement life insurance equal to two times Executive's
annual base salary as of the date of Executive's retirement; and
c. Disability coverage from all Company-sponsored and government
sources equal to 60% of the sum of base salary plus annual Group Incentive Plan
bonus or Executive Incentive Plan bonus, which ever is applicable, less any
offsets under the terms of such disability programs.
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ARTICLE 4 - EXECUTIVE'S RIGHTS UPON TERMINATION
In the event that Executive's employment with Company is terminated for any
reason other than (a) death, (b) Disability, (c) Cause, (d) voluntary
resignation by Executive not constituting Constructive Termination or (e)
Retirement, Company will pay to Executive Base Compensation for a period of two
years. In addition, Company will fully and immediately vest all unvested stock
options and restricted stock awards previously granted by Company to Executive
and fully vest and immediately pay to Executive any accrued award earned by
Executive under the 5-Year Plan applicable to his Group or corporate position,
as the case may be, or any other Company-sponsored long-term cash incentive plan
in which Executive is a participant.
Base Compensation payments shall be made when payments would otherwise have been
made to Executive if he were still employed by Company, except in such cases
where a different payment schedule is provided for in other Company-sponsored
plans or programs.
In the event Executive's employment with Company is terminated for death,
Disability, Cause, voluntary resignation not constituting Constructive
Termination or Retirement, Executive shall not be entitled to any benefits under
this Agreement. This statement, however, shall not preclude Executive from any
payments or benefits available to Executive from participation in
Company-sponsored plans or programs that are generally applicable to salaried
personnel.
ARTICLE 5 - DESIGNATION OF BENEFICIARIES
If Executive should die while receiving payments pursuant to Article 4, the
remaining payments which would have been paid to Executive if he had lived shall
be paid as designated by Executive on the attached Beneficiary Designation Form.
Such payments shall be made at the same time and in the same manner as if
Executive were alive to receive the payments, except in such cases where a
different payment schedule is provided for in other Company-sponsored plans or
programs. The filing of a new Beneficiary Designation Form will cancel all
designations previously filed. The spouse of a married Executive shall join in
any designation of a beneficiary other than the spouse.
If Executive fails to designate a beneficiary as provided for above, then
Company shall direct the distribution of any benefits under this Agreement to
Executive's estate.
ARTICLE - 6 DUTIES OF EXECUTIVE
6.1 Executive agrees to serve as Company's Senior Vice President, Secretary
and General Counsel, or in such other executive capacity as the parties may
mutually agree, and to perform the duties and services appertaining to such
office and such other duties or services he may be reasonably directed to
perform from time to time by the Chief Executive Officer of Company.
6.2 Executive agrees, during the period of his employment by Company, to
devote his primary business time, energy and best efforts to the business and
affairs of Company and, except with the consent of the Chief Executive Officer,
not to engage in any other business activity (except passive personal
investments).
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ARTICLE 7 - MITIGATION AND OFFSET
Executive shall not be required to mitigate the amount of any payment provided
for in this Agreement by seeking employment or otherwise, nor to offset the
amount of any payment provided for in this Agreement by amounts earned as a
result of Executive's employment or self-employment during the period he is
entitled to such payment.
ARTICLE 8 - TAX "GROSS-UP" PROVISION
If any payments due Executive under this Agreement result in Executive's
liability for an excise tax under Section 4999 of the Internal Revenue Code of
1986 as amended ("parachute tax"), the Company will pay Executive, after
deducting any Federal, state or local income tax imposed on the payment, an
amount sufficient to fully satisfy the parachute tax liability. Such payment
shall be made to Executive no later than 30 days prior to the date of the
parachute tax.
ARTICLE 9 - SUCCESSORS
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.
ARTICLE 10 - ENTIRE AGREEMENT
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 Executive is a party or of which he is a
beneficiary, except the Key Executive Long-Term Incentive Plan established April
1991 (the LTIP"). In the case of the LTIP Executive agrees that this Agreement
is entered into in exchange for, and in lieu of, his participation in the LTIP
and that Executive shall have no interest whatsoever in such LTIP or be entitled
to receive any benefit therefrom. No amendments to this Agreement may be made
except through a written document signed by both parties.
ARTICLE 11 - 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.
ARTICLE 12 - ARTICLES AND HEADINGS
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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.
ARTICLE 13 - NOTICES
Any notice or demand required or permitted to be given under this Agreement
shall be made in writing and shall be deemed effective upon the personal
delivery thereof if delivered or, if mailed, 48 hours after having been
deposited in the United States mail, postage prepaid, and addressed in the case
of Company to its then principal place of business, presently Morrison-Knudsen
Plaza, 720 Park Blvd., Boise, Idaho 83729, and in the case of Executive to
Morrison Knudsen Corporation, Morrison-Knudsen Plaza, P. O. Box 73, Boise, ID
83729. Either party may change the address to which such notices are to be
addressed by giving the other party notice in the manner herein set forth.
ARTICLE 14 - ATTORNEY'S FEES
In any action at law or in equity to enforce any of the provisions or rights
under this Agreement, the unsuccessful party to such litigation, as determined
by the Court in a final judgment or decree, shall pay the successful party or
parties all costs, expenses and reasonable attorneys' fees incurred therein by
such party or parties (including without limitation such costs, expenses and
fees on any appeals), and if such successful party or parties shall recover
judgment in any such action or proceeding, such costs, expenses and attorneys'
fees shall be included as part of such judgment.
Notwithstanding the foregoing provision, in no event shall the successful party
or parties be entitled to recover an amount from the unsuccessful party for
costs, expenses and attorneys' fees that exceeds the unsuccessful party's costs,
expenses and attorneys' fees in connection with the action or proceeding.
ARTICLE 15 - TAXES
To the extent required by law, the Company shall withhold from any payments
under this Agreement any applicable federal, state or local taxes.
ARTICLE 16 - APPLICABLE LAW
To the full extent controllable by stipulation of the parties, this Agreement
shall be interpreted and enforced under Idaho law.
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IN WITNESS WHEREOF, Company has executed this Agreement by a duly authorized
officer, and Executive this 8th day of July, 1993.
ATTEST MORRISON KNUDSEN CORPORATION
/s/ David A. Channer /s/ William J. Agee
- ---------------------------- By: -------------------------------------
David A. Channer, William J. Agee,
Assistant Secretary Chairman and Chief Executive Officer
and Associate General Counsel
EXECUTIVE
/s/ Stephen G. Hanks
-------------------------------------------
Stephen G. Hanks
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MORRISON KNUDSEN CORPORATION
EXECUTIVE OFFICE
MORRISON KNUDSEN PLAZA
P. O. BOX 73/BOISE, IDAHO USA 83729
PHONE (208)386-5000/TELEX 368439
WILLIAM J. AGEE
CHAIRMAN AND
CHIEF EXECUTIVE OFFICER
August 7, 1993
Mr. Stephen G. Hanks
Sr. Vice President, Secretary &
General Counsel
P. O. Box 73
Boise, Idaho 83729
RE: AMENDMENT TO EMPLOYMENT AGREEMENT
Dear Steve:
Several weeks ago I had the pleasure of extending to you, on the Company's
behalf, a five year employment agreement. This agreement, which was modeled
after the agreement that I have with the Company, provides you with several key
benefits, including participation in a long-term incentive plan (5-year plan)
and two years severance benefits under specified circumstances.
Last week, I met with the Executive Compensation & Nominating Committee of the
Board of Directors (the "Committee") with respect to your employment agreement.
Upon my recommendation, the Committee endorsed your employment agreement with
one minor change: the Committee recommends that Section 2.3(iii) be deleted. I
believe when you read Section 2.3, you will agree that such changes does not
alter the key benefits of the employment agreement.
Accordingly, I ask that you acknowledge and agree to such amendments by signing
below and returning this letter to Dave Channer for the Company's records. You
will also want to make a copy of the letter for your own records. This letter
will then serve as a formal amendment to your agreement.
If you have any questions, please give me a call.
Very truly yours,
/s/ William J. Agee
William J. Agee
AGREED TO:
/s/ Stephen G. Hanks
- -----------------------------
Stephen G. Hanks
<PAGE>
AMENDMENT TO EMPLOYMENT AGREEMENT
This Amendment to Employment Agreement (the "Amendment") is made as of this
23rd day of April, 1996 by and between Morrison Knudsen Corporation, a Delaware
corporation ("Company") and Stephen G. Hanks, an executive employee of the
Company ("Executive").
WHEREAS, the Company and Executive are parties to a certain Employment
Agreement made as of January 1, 1993 (the "Agreement"); and
WHEREAS, under the Agreement, Executive is entitled to receive a severance
benefit equal to twice his annual base compensation upon involuntary termination
(which includes annual base salary in effect immediately preceding the
termination of employment) and
WHEREAS, in February 1995, due to the financial condition of the Company,
Executive agreed to accept a voluntary reduction in annual base salary to
$300,000, in exchange for a grant to Executive of certain stock options; and
WHEREAS, this voluntary reduction had the inadvertent effect of reducing
the severance benefits to Executive under the formula referenced above; and
WHEREAS, in order to avoid any ambiguity, the Company has agreed that the
Agreement should be amended to tie the severance benefits under the Agreement to
the greater of the Executive's original annual base salary in place immediately
prior to the voluntary reduction in February, 1995 or the Executive's base
salary in effect immediately prior to an involuntary termination.
NOW, THEREFORE, the Agreement is hereby amended by deleting Article 2.1 in
its entirety and replacing it with the following:
"BASE COMPENSATION" shall mean an amount per annum equal to the sum of
(i) the annual base salary rate in effect for Executive immediately
preceding termination of employment, or if greater, the annual base
salary in effect for Executive immediately prior to the Executive's
voluntary salary reduction in February 1995 (each excluding any
reduction in base salary made in breach of this Agreement), (ii) an
amount equal to the product of (A) and (B), where (A) equals the
percentage derived by dividing the cumulative bonus paid to Executive
under the Executive Incentive Plan or Group Incentive Plan, whichever
is applicable, for the three most recently completed calendar years
prior to termination (including any bonus amounts deferred by
Executive under any Company deferred compensation plan or arrangement)
by the cumulative base salary paid to Executive for the same
three-year period, notwithstanding whether or not such base salary is
greater or lesser than the annual base salary in effect immediately
prior to February 1995 (including any base salary deferred by
Executive under any Company deferred
<PAGE>
compensation plan or arrangement), and (B), equals the amount set
forth in 2.1(i) above, (iii) continued participation in all basic and
supplemental life, accident, disability, medical, dental and other
Company-sponsored welfare benefit programs provided to Executive
immediately preceding termination (or, if continued participation in
one or more of these benefits is not possible per the terms of the
plan or applicable law, an amount of money that would enable Executive
to purchase similar benefits), and (iv) continuance of vesting and
benefit accrual under any Company-sponsored basic and supplemental
retirement programs in effect for Executive immediately prior to
termination (or, if continued participation in such programs is not
possible per the terms of the plan or applicable law, the monetary
value of such benefits).
Except for the foregoing, the Agreement remains unamended and in full force
and effect.
IN WITNESS WHEREOF, the Executive and the Company have executed this
Amendment this 23rd day of April, 1996.
MORRISON KNUDSEN CORPORATION
/s/ Robert A. Tinstman
------------------------------------
By: Robert A. Tinstman
Its: President and Chief Executive
Officer
EXECUTIVE
/s/ Stephen G. Hanks
------------------------------------
Stephen G. Hanks
ATTEST:
- -------------------------------------
Name:
--------------------------------
- -------------------------------------
Name:
--------------------------------
<PAGE>
EXHIBIT 10.25
MORRISON KNUDSEN CORPORATION
AMENDED AND RESTATED STOCK OPTION PLAN
NONQUALIFIED STOCK OPTION AGREEMENT
THIS AGREEMENT (this "Agreement"), dated as of January 10, 1997, is made by
and between Morrison Knudsen Corporation, a Delaware corporation hereinafter
referred to as "Company," and STEPHEN G. HANKS, an employee of the Company or
Subsidiary of the Company, hereinafter referred to as "Optionee":
WHEREAS, the Company wishes to afford the Optionee the opportunity to
purchase shares of its $.01 par value Common Stock; and
WHEREAS, the Company wishes to carry out the Plan (as hereinafter defined),
the terms of which are hereby incorporated herein by reference and made a part
hereof; and
WHEREAS, the execution of a Nonqualified Stock Option Agreement in the form
hereof has been duly authorized by a resolution of the Board of Directors of the
Company duly adopted on January 10, 1997, and incorporated herein by reference;
and
WHEREAS, this Option is intended to be a nonqualified stock option and
shall not be treated as an "incentive stock option" within the meaning of that
term under Section 422 of the Code;
NOW, THEREFORE, in consideration of the mutual covenants herein contained
and other good and valuable consideration, receipt of which is hereby
acknowledged, the parties hereto do hereby agree as follows:
ARTICLE I
DEFINITIONS
Wherever the following terms are used in this Agreement with initial
capital letters, they shall have the meanings specified in the Plan unless the
context clearly indicates otherwise.
Section 1.1 - Beneficiary
Section 1.2 - Code
Section 1.3 - Common Stock
Section 1.4 - Company
Section 1.5 - Employee
Section 1.6 - Exchange Act
Section 1.7 - Fair Market Value
Section 1.8 - Subsidiary
Section 1.9 - Termination of Employment
1
<PAGE>
Wherever the following terms are used in this Agreement with initial
capital letters, they shall have the meanings specified below unless the context
clearly indicates otherwise. The masculine pronoun shall include the feminine
and neuter, and the singular the plural, where the context so indicates.
SECTION 1.10 - BOARD
"Board" shall mean the Board of Directors of the Company and shall include
any committee to which the Board of Directors may have delegated its authority
pursuant to Section 8.1 of the Plan.
SECTION 1.11 - OPTIONEE
"Optionee" shall mean the Employee named above to whom an Option is awarded
under this Agreement and the Plan.
SECTION 1.12 - PLAN
"Plan" shall mean The 1994 Stock Option and Incentive Plan for Officers,
Directors and Key Employees of Kasler Holding Company, as amended and restated
as of January 10, 1997, and as the same may be further amended or restated.
SECTION 1.14 - SECRETARY
"Secretary" shall mean the Secretary of the Company.
SECTION 1.15 - SECURITIES ACT
"Securities Act" shall mean the Securities Act of 1933, as amended.
ARTICLE II
AWARD OF OPTION
SECTION 2.1 - GRANT OF AWARD
In consideration of the Optionee's execution of this Agreement and for
other good and valuable consideration, on the date hereof the Company
irrevocably awards to the Optionee the option to purchase any part or all of an
aggregate of 60,000 shares of its $.01 par value Common Stock upon the terms and
subject to the conditions set forth in the Plan and in this Agreement.
2
<PAGE>
SECTION 2.2 - PURCHASE PRICE
The purchase price of the shares of stock covered by the Option shall be
$9.875 per share without commission or other charge.
SECTION 2.3 - CONSIDERATION TO COMPANY
In consideration of the awarding of this Option by the Company, the
Optionee agrees to render faithful and efficient services to the Company or a
Subsidiary, with such duties and responsibilities as the Company shall from time
to time prescribe, for a period of at least one (1) year from the date this
Option is awarded. Nothing in this Agreement or in the Plan shall confer upon
the Optionee any right to continue in the employ of the Company or any
Subsidiary, or shall interfere with or restrict in any way the rights of the
Company and its Subsidiaries, which are hereby expressly reserved, to discharge
the Optionee at any time for any reason whatsoever, with or without cause.
SECTION 2.4 - ADJUSTMENTS IN OPTION
The Board may make or provide for such adjustments in the (a) number of
shares of Common Stock covered by outstanding Options awarded hereunder, (b)
prices per share applicable to such Options, and (c) kind of shares (including
shares of another issuer) covered thereby, as the Board in its sole discretion
may in good faith determine to be equitably required in order to prevent
dilution or enlargement of the rights of Optionees, that otherwise would result
from (x) any stock dividend, stock split, combination of shares,
recapitalization or other change in the capital structure of the Company, (y)
any merger, consolidation, spin-off, split-off, split-up, reorganization,
partial or complete liquidation or other distribution of assets, issuance of
rights or warrants to purchase securities or (z) any other corporate transaction
or event having an effect similar to any of the foregoing. In the event of any
such transaction or event, the Board may provide in substitution for any or all
outstanding awards under this Agreement such alternative consideration as it may
in good faith determine to be equitable under the circumstances and may require
in connection therewith the surrender of all awards so replaced.
ARTICLE III
PERIOD OF EXERCISABILITY
SECTION 3.1 - COMMENCEMENT OF EXERCISABILITY
(a) This Option shall become exercisable in four (4) cumulative installments as
follows:
(i) The first installment shall consist of one-fourth (1/4) of the
shares covered by the Option and shall become exercisable on the
date that is one year from the date the Option was awarded.
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(ii) The second installment shall consist of one-fourth (1/4) of the
shares covered by the Option and shall become exercisable on the
date that is two years from the date the Option was awarded.
(iii) The third installment shall consist of one-fourth (1/4) of the
shares covered by the Option and shall become exercisable on the
date that is three years from the date the Option was awarded.
(iv) The fourth installment shall consist of one-fourth (1/4) of the
shares covered by the Option and shall become exercisable on the
date that is four years from the date the Option was awarded.
(b) No portion of the Option which is unexercisable at Termination of
Employment shall thereafter become exercisable except as set forth in
Section 3.4(a).
SECTION 3.2 - DURATION OF EXERCISABILITY
The installments provided for in Section 3.1 are cumulative. Each such
installment which becomes exercisable pursuant to Section 3.1 shall remain
exercisable until it becomes unexercisable under Section 3.3.
SECTION 3.3 - EXPIRATION OF OPTION
(a) The Option may not be exercised to any extent by anyone after the first to
occur of the following events:
(i) The expiration of ten (10) years from the date the Option was
awarded; or
(ii) Except as set forth in 3.3(a) (iii) and (iv), the expiration of
three (3) months after the Optionee's Termination of Employment; or
(iii) The expiration of twelve (12) months from the date of the Optionee's
Termination of Employment by reason of permanent and total
disability (within the meaning of Section 22(e) (3) of the Code) or
by reason of retirement as set forth in Section 3.4(a); or
(iv) If the Optionee dies while the Option is exercisable, the expiration
of twelve (12) months from the date of the Optionee's death.
(b) This Agreement shall amend that certain Employment Agreement dated as of
January 1, 1993 between the Optionee and the Company (the "Employment
Agreement"), in that, notwithstanding Article 4 of the Employment
Agreement, no portion of this Option that is unvested as of the date the
Optionee's employment with the Company is terminated for any reason shall
be exercisable.
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ARTICLE IV
EXERCISE OF OPTION
SECTION 4.1 - PERSON ELIGIBLE TO EXERCISE
During the lifetime of the Optionee, only he or his guardian or legal
representative may exercise the Option or any portion thereof. After the death
of the Optionee, any exercisable portion of the Option may, prior to the time
when the Option becomes unexercisable under Section 3.3, be exercised by his
personal representative or by any person empowered to do so under the Optionee's
will or under the then applicable laws of descent and distribution.
SECTION 4.2 - PARTIAL EXERCISE
Any exercisable portion of the Option or the entire Option, if then wholly
exercisable, may be exercised in whole or in part at any time prior to the time
when the Option or portion thereof becomes unexercisable under Section 3.3;
provided, however, that each partial exercise shall be for not less than one
hundred (100) shares and shall be for whole shares only.
SECTION 4.3 - MANNER OF EXERCISE
The Option or any exercisable portion thereof, may be exercised solely by
delivery to the Secretary or his office of all of the following prior to the
time when the Option or such portion becomes unexercisable under Section 3.3:
(a) Notice in writing signed by the Optionee or the other person then entitled
to exercise the Option or portion, stating that the Option or portion is
thereby exercised, such notice complying with all applicable rules
established by the Board; and
(b) Full payment for the shares with respect to which such option or portion is
exercised, which payment shall be (i) in cash, (ii) through the delivery of
shares of Common Stock owned by the Optionee for at least six months, duly
endorsed for transfer to the Company with a Fair Market Value on the date
of delivery equal to the aggregate exercise price of the Option or
exercised portion thereof, or (iii) subject to the timing requirements of
Section 5.3 of the Plan, through any combination of the consideration
provided in the foregoing subparagraphs (i) or (ii); and
(c) Such representations and documents as the Board deems necessary or
advisable to effect compliance with all applicable provisions of the
Securities Act of 1933, as amended, and any other federal or state
securities laws or regulations. The Board may also take whatever
additional actions it deems appropriate to effect such compliance including
(without limitation) placing legends on share certificates and issuing
stop-transfer notices to agents and registrars;
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(d) Full payment to the Company (or other employer corporation) of all amounts
which under federal, state or local tax law, it is required to withhold
upon exercise of the Option; PROVIDED, HOWEVER, the Company may permit the
Optionee, upon delivery of a written election to the Secretary of the
Company (or to such other person who may be designated by the Board) to
elect to have the Company withhold shares of Common Stock otherwise
issuable upon the exercise of the Option. Shares of Common Stock so
withheld will be credited against this tax obligation at their Fair Market
Value; and
(e) In the event the Option or portion shall be exercised pursuant to Section
4.1 by any person or persons other than the Optionee, appropriate proof of
the right of such person or persons to exercise the Option.
SECTION 4.4 - CONDITIONS TO ISSUANCE OF STOCK CERTIFICATES
The shares of stock deliverable upon the exercise of the Option, or any
portion thereof, may be either previously authorized but unissued shares or
issued shares which have then been repurchased by the Company. Such shares
shall be fully paid and non-assessable. The Company shall not be required to
issue or deliver any certificate or certificates for shares of stock purchased
upon the exercise of the Option or portion thereof prior to fulfillment of all
of the following conditions:
(a) The admission of such shares to listing on all stock exchanges on which
such class of stock is then listed; and
(b) The completion of any registration or other qualification of such shares
under any state or federal law or under rulings or regulations of the
Securities and Exchange Commission or of any other governmental regulatory
body, which the Board shall deem necessary or advisable; and
(c) The obtaining of any approval or other clearance from any state or federal
governmental agency which the Board shall determine to be necessary or
advisable; and
(d) The payment to the Company (or other employer corporation) of all amounts
which, under federal, state or local tax law, it is required to withhold
upon exercise of the Option; and
(e) The lapse of such reasonable period of time following the exercise of the
Option as the Board may from time to time establish for reasons of
administrative convenience.
SECTION 4.5 - RIGHTS AS SHAREHOLDER
The holder of the Option shall not be, nor have any of the rights or
privileges of, a shareholder of the Company in respect of any shares purchasable
upon the exercise of any part of the Option unless and until certificates
representing such shares shall have been issued by the Company to such holder.
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ARTICLE V
OTHER PROVISIONS
SECTION 5.1 - ADMINISTRATION
The Board shall have the power to interpret the Plan and this Agreement and
to adopt such rules for the administration, interpretation and application of
the Plan as are consistent therewith and to interpret, amend or revoke any such
rules. All actions taken and all interpretations and determinations made by the
Board in good faith shall be final and binding upon the Optionee, the Company
and all other interested persons. No member of the Board shall be personally
liable for any action, determination or interpretation made in good faith with
respect to the Plan or the Option.
SECTION 5.2 - OPTION NOT TRANSFERABLE
Options under the Plan may not be sold, pledged, assigned or transferred in
any manner other than by will or the laws of descent and distribution; PROVIDED,
HOWEVER, an Optionee may designate a Beneficiary to exercise his Option or other
rights under the Plan after his death. Neither the Option nor any interest or
right therein or part thereof shall be liable for the debts, contracts or
engagements of the Optionee or his successors in interest or shall be subject to
disposition by transfer, alienation, anticipation, pledge, encumbrance,
assignment or any other means whether such disposition be voluntary or
involuntary or by operation of law by judgment, levy, attachment, garnishment or
any other legal or equitable proceedings (including bankruptcy), and any
attempted disposition thereof shall be null and void and of no effect; PROVIDED,
HOWEVER, that this Section 5.2 shall not prevent transfers by will or by the
applicable laws of descent and distribution. An Option shall be exercised
during the Optionee's lifetime only by the Optionee or his guardian or legal
representative.
SECTION 5.3 - SHARES TO BE RESERVED
The Company shall at all times during the term of the Option reserve and
keep available such number of shares of stock as will be sufficient to satisfy
the requirements of this Agreement.
SECTION 5.4 - NOTICES
Any notice to be given under the terms of this Agreement to the Company
shall be addressed to the Company in care of its Secretary, and any notice to be
given to the Optionee shall be addressed to him at the address given beneath his
signature hereto. By a notice given pursuant to this Section 5.4, either party
may hereafter designate a different address for notices to be given to him. Any
notice which is required to be given to the Optionee shall, if the Optionee is
then deceased, be given to the Optionee's personal representative if such
representative has previously informed the Company of his status and address by
written notice under this Section 5.4. Any notice shall be deemed duly given
when enclosed in a properly sealed envelope or wrapper addressed as aforesaid,
deposited (with postage prepaid) in a post office or branch post office
regularly maintained by the United States Postal Service.
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SECTION 5.5 - TITLES
Titles are provided herein for convenience only and are not to serve as a
basis for interpretation or construction of this Agreement.
SECTION 5.6 - CONSTRUCTION
This Agreement shall be administered, interpreted and enforced under the
internal substantive laws of the State of Delaware.
SECTION 5.7 - CONFORMITY TO SECURITIES LAWS
The Optionee acknowledges that the Plan is intended to conform to the
extent necessary with all applicable federal and state laws, rules and
regulations, including provisions of the Securities Act and the Exchange Act and
any and all regulations and rules promulgated by the Securities and Exchange
Commission thereunder, including without limitation Rule 16b-3 under the
Exchange Act. Notwithstanding anything herein to the contrary, the Plan shall
be administered, and the Option is awarded and may be exercised, only in such a
manner as to conform to such laws, rules and regulations. To the extent
permitted by applicable law, the Plan and this Agreement shall be deemed amended
to the extent necessary to conform to such laws, rules and regulations.
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IN WITNESS WHEREOF, this Agreement has been executed and delivered by the
parties hereto.
MORRISON KNUDSEN CORPORATION
By: /s/ Robert A. Tinstman
-----------------------------------
Robert A. Tinstman
President
OPTIONEE
/s/ Stephen G. Hanks
----------------------------------------
Stephen G. Hanks
SPOUSAL CONSENT
The undersigned has read and is familiar with the preceding Agreement and
the Plan and hereby consents and agrees to be bound by all the terms of the
Agreement and the Plan. Without limiting the foregoing, the undersigned
specifically agrees that the Company may rely on any authorization, instruction
or election made under the Agreement by the Optionee alone and that all of his
or her right, title or interest, if any, in the shares of Common Stock purchased
by the Optionee under the Agreement, whether arising by operation of community
property law, by property settlement or otherwise, shall be subject to all of
such terms.
----------------------------------------
----------------------------------------
Printed Name
Exhibit A: Copy of the Plan
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EXHIBIT 10.26
EMPLOYMENT AGREEMENT
This Employment Agreement ("Agreement") is made as of the 1st day of January,
1994, by and between Morrison Knudsen Corporation, a Delaware corporation
("Company"), and Thomas H. Zarges, an executive employee of the Company
("Executive").
WHEREAS, Executive has rendered valuable services to Company, and has acquired
an extensive background in and knowledge of Company's business; and
WHEREAS, Company desires to continue the services of Executive in such executive
capacity as the parties may mutually agree.
NOW, THEREFORE, in consideration of the foregoing, Company and Executive agree
as follows:
ARTICLE 1 - TERM
1.1 Company shall employ Executive and Executive accepts such employment for
a term beginning on the effective date of this Agreement and ending December 31,
1998, upon the terms and conditions set forth herein, unless such employment is
earlier terminated in accordance with the provisions herein.
1.2 Notwithstanding the foregoing, if this Agreement shall not have been
terminated in accordance with the provisions herein on or before December 31,
1998, the Agreement shall be extended such that at each and every moment of time
thereafter, the remaining term of the Agreement shall be one year unless (a) the
Agreement is terminated earlier in accordance with the provisions herein or (b)
on or after January 1, 1998, Company's Board of Directors notifies Executive in
writing of its determination to have the term of this Agreement expire one year
from the date of notification.
ARTICLE 2 - DEFINITIONS
For purposes of this Agreement, the following terms shall have the meanings set
forth below:
2.1 "BASE COMPENSATION" shall mean an amount per annum equal to the sum of
(i) the annual base salary rate in effect for Executive immediately preceding
termination of employment (excluding any reduction in base salary made in breach
of this Agreement), (ii) an amount equal to the product of (A) and (B), where
(A) equals the percentage derived by dividing the cumulative bonus paid to
Executive under the Executive Incentive Plan or Group Incentive Plan, whichever
is applicable, for the three most recently completed calendar years prior to
termination (including any bonus amounts deferred by Executive under any Company
deferred compensation plan or arrangement) by the cumulative base salary paid to
Executive for the same three-year period (including any base salary deferred by
Executive under any Company deferred compensation plan
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or arrangement), and (B) equals the amount set forth in 2.1(i) above, (iii)
continued participation in all basic and supplemental life, accident,
disability, medical, dental and other Company-sponsored welfare benefit programs
provided to Executive immediately preceding termination (or, if continued
participation in one or more of these benefits is not possible per the terms of
the plan or applicable law, an amount of money that would enable Executive to
purchase similar benefits), and (iv) continuance of vesting and benefit accrual
under any Company-sponsored basic and supplemental retirement programs in effect
for Executive immediately prior to termination (or, if continued participation
in such programs is not possible per the terms of the plan or applicable law,
the monetary value of such benefits).
2.2 "CAUSE" shall mean (i) willful refusal by Executive to follow a lawful
written order of the Chief Executive Officer, (ii) Executive's willful and
continued failure to perform his duties under this Agreement (except due to
Executive's incapacity due to physical or mental illness) after a written demand
is delivered to Executive by the Chief Executive Officer specifically
identifying the manner in which the Chief Executive Officer believes that
Executive has failed to perform his duties, (iii) Executive's willful engagement
in conduct materially injurious to the Company, or (iv) Executive's conviction
for any felony involving moral turpitude. For purposes of clauses (i), (ii),
and (iii) of this definition, no act, or failure to act on Executive's part
shall be deemed "willful" unless done, or omitted to be done, by Executive not
in good faith and without reasonable belief that Executive's act, or failure to
act, was in the best interests of Company.
2.3 "CONSTRUCTIVE TERMINATION" shall mean Executive's 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 Executive in
advance of such event:
(i) A failure by the Company to abide by any part of this Agreement that is
not remedied within ten (10) business days of notification by Executive
of such failure, including any violation of Executive's rights as
described in Section 3 of this Agreement unless such rights are replaced
by alternative rights of approximately equal value; or
(ii) A reduction in Executive's title or responsibilities below that agreed to
in Section 6.1.
2.4 "DISABILITY" shall be deemed to have occurred if Executive makes
application for disability benefits under any Company-sponsored long-term
disability program (whether insured or self-insured, basic or supplemental)
covering Executive and qualifies for such benefits.
2.5 "RETIREMENT" shall mean Executive's termination of service with Company
on or after his Early Retirement Date or Normal Retirement Date as defined in
the Morrison Knudsen Corporation Retirement Plan, established January 1, 1988
and frozen December 31, 1991 (the "MKRP"), assuming that the MKRP had never been
frozen.
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ARTICLE 3 - COMPENSATION AND BENEFITS
Executive shall receive the annual base salary set by Company, which salary
shall be commensurate with Executive's duties and consistent with the
compensation policies of the Executive Compensation and Nominating Committee of
Company's Board of Directors. Such salary shall be, at a minimum, the amount of
base salary in effect for Executive as of the date this Agreement is executed.
At least annually, Company will review Executive's base salary to determine the
amount of any increase. Upon any such increase in Executive's base salary, such
increased rate shall thereafter constitute Executive's annual base salary for
all purposes of this Agreement. The foregoing to the contrary notwithstanding,
the Company may reduce Executive's annual base salary during any year by not
more than 10% below the base salary in effect at the beginning of the year as
part of any general salary reduction which applies to all officers of the
Company.
Executive shall be entitled to participate in the Company's Key Executive
Long-Term Incentive Plan applicable to his Group or corporate position ("5-Year
Plan"), as the case may be. Upon being finalized, the 5-Year Plan shall contain
Executive's sharing percentages and performance targets, shall be executed by
Executive and shall be attached hereto and made a part hereof.
Executive shall also be entitled to participate in the Company's Long-Term
Performance Compensation Benefit Plan ("3-Year Plan") to the extent such plan is
continued by Company. A copy of the 3-Year Plan has heretofore been provided to
Executive and by this reference, made a part hereof.
Executive also shall be entitled to participate in either the Group Incentive
Plan for his Group or the Executive Incentive Plan applicable to his corporate
position, as the case may be, a copy of which has heretofore been provided to
Executive and by this reference made a part hereof.
Executive also shall be eligible to participate in all perquisites and health
and welfare benefits generally available to other executive officers of Company.
In addition, during his employment, Executive shall be provided with
supplemental benefits at no cost to Executive which shall result in the
following levels of coverage, inclusive of any coverage provided by basic
Company-sponsored benefits:
a. Pre-Retirement life insurance equal to three time Executive's
annual base salary;
b. Post-Retirement life insurance equal to one times Executive's
annual base salary as of the date of Executive's retirement; and
c. Disability coverage from all Company-sponsored and government
sources equal to 60% of the sum of base salary plus annual Group Incentive Plan
bonus or Executive Incentive Plan bonus, which ever is applicable, less any
offsets under the terms of such disability programs.
ARTICLE 4 - EXECUTIVE'S RIGHTS UPON TERMINATION
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In the event that Executive's employment with Company is terminated for any
reason other than (a) death, (b) Disability, (c) Cause, (d) voluntary
resignation by Executive not constituting Constructive Termination or (e)
Retirement, Company will pay to Executive Base Compensation for a period of two
years. In addition, Company will fully and immediately vest all unvested stock
options and restricted stock awards previously granted by Company to Executive
and fully vest and immediately pay to Executive any accrued award earned by
Executive under the 5-Year Plan applicable to his Group or corporate position,
as the case may be, or any other Company-sponsored long-term cash incentive plan
in which Executive is a participant.
Base Compensation payments shall be made when payments would otherwise have been
made to Executive if he were still employed by Company, except in such cases
where a different payment schedule is provided for in other Company-sponsored
plans or programs.
In the event Executive's employment with Company is terminated for death,
Disability, Cause, voluntary resignation not constituting Constructive
Termination or Retirement, Executive shall not be entitled to any benefits under
this Agreement. This statement, however, shall not preclude Executive from any
payments or benefits available to Executive from participation in
Company-sponsored plans or programs that are generally applicable to salaried
personnel.
ARTICLE 5 - DESIGNATION OF BENEFICIARIES
If Executive should die while receiving payments pursuant to Article 4, the
remaining payments which would have been paid to Executive if he had lived shall
be paid as designated by Executive on the attached Beneficiary Designation Form.
Such payments shall be made at the same time and in the same manner as if
Executive were alive to receive the payments, except in such cases where a
different payment schedule is provided for in other Company-sponsored plans or
programs. The filing of a new Beneficiary Designation Form will cancel all
designations previously filed. The spouse of a married Executive shall join in
any designation of a beneficiary other than the spouse.
If Executive fails to designate a beneficiary as provided for above, then
Company shall direct the distribution of any benefits under this Agreement to
Executive's estate.
ARTICLE - 6 DUTIES OF EXECUTIVE
6.1 Executive agrees to serve as the Chief Executive Officer and President of
the Company's Engineering, Construction and Environmental Group, or in such
other executive capacity as the parties may mutually agree, and to perform the
duties and services appertaining to such office and such other duties or
services he may be reasonably directed to perform from time to time by the Chief
Executive Officer of Company.
6.2 Executive agrees, during the period of his employment by Company, to
devote his primary business time, energy and best efforts to the business and
affairs of Company and, except with the consent of the Chief Executive Officer,
not to engage in any other business activity (except passive personal
investments).
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ARTICLE 7 - MITIGATION AND OFFSET
Executive shall not be required to mitigate the amount of any payment provided
for in this Agreement by seeking employment or otherwise, nor to offset the
amount of any payment provided for in this Agreement by amounts earned as a
result of Executive's employment or self-employment during the period he is
entitled to such payment.
ARTICLE 8 - TAX "GROSS-UP" PROVISION
If any payments due Executive under this Agreement result in Executive's
liability for an excise tax under Section 4999 of the Internal Revenue Code of
1986 as amended ("parachute tax"), the Company will pay Executive, after
deducting any Federal, state or local income tax imposed on the payment, an
amount sufficient to fully satisfy the parachute tax liability. Such payment
shall be made to Executive no later than 30 days prior to the date of the
parachute tax.
ARTICLE 9 - SUCCESSORS
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.
ARTICLE 10 - ENTIRE AGREEMENT
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. No amendments
to this Agreement may be made except through a written document signed by both
parties.
ARTICLE 11 - 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.
ARTICLE 12 - ARTICLES AND HEADINGS
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.
ARTICLE 13 - NOTICES
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Any notice or demand required or permitted to be given under this Agreement
shall be made in writing and shall be deemed effective upon the personal
delivery thereof if delivered or, if mailed, 48 hours after having been
deposited in the United States mail, postage prepaid, and addressed in the case
of Company to its then principal place of business, presently Morrison-Knudsen
Plaza, 720 Park Blvd., Boise, Idaho 83729, and in the case of Executive to
Morrison Knudsen Corporation, Morrison-Knudsen Plaza, P. O. Box 73, Boise, ID
83729. Either party may change the address to which such notices are to be
addressed by giving the other party notice in the manner herein set forth.
ARTICLE 14 - ATTORNEY'S FEES
In any action at law or in equity to enforce any of the provisions or rights
under this Agreement, the unsuccessful party to such litigation, as determined
by the Court in a final judgment or decree, shall pay the successful party or
parties all costs, expenses and reasonable attorneys' fees incurred therein by
such party or parties (including without limitation such costs, expenses and
fees on any appeals), and if such successful party or parties shall recover
judgment in any such action or proceeding, such costs, expenses and attorneys'
fees shall be included as part of such judgment.
Notwithstanding the foregoing provision, in no event shall the successful party
or parties be entitled to recover an amount from the unsuccessful party for
costs, expenses and attorneys' fees that exceeds the unsuccessful party's costs,
expenses and attorneys' fees in connection with the action or proceeding.
ARTICLE 15 - TAXES
To the extent required by law, the Company shall withhold from any payments
under this Agreement any applicable federal, state or local taxes.
ARTICLE 16 - APPLICABLE LAW
To the full extent controllable by stipulation of the parties, this Agreement
shall be interpreted and enforced under Idaho law.
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IN WITNESS WHEREOF, Company has executed this Agreement by a duly authorized
officer, and Executive this 18 day of July, 1994.
ATTEST MORRISON KNUDSEN CORPORATION
/s/ Stephen G. Hanks, /s/ William J. Agee
- ---------------------------- By: -------------------------------------
Stephen G. Hanks, William J. Agee,
Secretary Chairman, President and Chief
Executive Officer
EXECUTIVE
/s/ Thomas H. Zarges
-------------------------------------------
Thomas H. Zarges
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EXHIBIT 10.27
MORRISON KNUDSEN CORPORATION
AMENDED AND RESTATED STOCK OPTION PLAN
NONQUALIFIED STOCK OPTION AGREEMENT
THIS AGREEMENT (this "Agreement"), dated as of January 10, 1997, is made by
and between Morrison Knudsen Corporation, a Delaware corporation hereinafter
referred to as "Company," and THOMAS H. ZARGES, an employee of the Company or
Subsidiary of the Company, hereinafter referred to as "Optionee":
WHEREAS, the Company wishes to afford the Optionee the opportunity to
purchase shares of its $.01 par value Common Stock; and
WHEREAS, the Company wishes to carry out the Plan (as hereinafter defined),
the terms of which are hereby incorporated herein by reference and made a part
hereof; and
WHEREAS, the execution of a Nonqualified Stock Option Agreement in the form
hereof has been duly authorized by a resolution of the Board of Directors of the
Company duly adopted on January 10, 1997, and incorporated herein by reference;
and
WHEREAS, this Option is intended to be a nonqualified stock option and
shall not be treated as an "incentive stock option" within the meaning of that
term under Section 422 of the Code;
NOW, THEREFORE, in consideration of the mutual covenants herein contained
and other good and valuable consideration, receipt of which is hereby
acknowledged, the parties hereto do hereby agree as follows:
ARTICLE I
DEFINITIONS
Wherever the following terms are used in this Agreement with initial
capital letters, they shall have the meanings specified in the Plan unless the
context clearly indicates otherwise.
Section 1.1 - Beneficiary
Section 1.2 - Code
Section 1.3 - Common Stock
Section 1.4 - Company
Section 1.5 - Employee
Section 1.6 - Exchange Act
Section 1.7 - Fair Market Value
Section 1.8 - Subsidiary
Section 1.9 - Termination of Employment
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Wherever the following terms are used in this Agreement with initial
capital letters, they shall have the meanings specified below unless the context
clearly indicates otherwise. The masculine pronoun shall include the feminine
and neuter, and the singular the plural, where the context so indicates.
SECTION 1.10 - BOARD
"Board" shall mean the Board of Directors of the Company and shall include
any committee to which the Board of Directors may have delegated its authority
pursuant to Section 8.1 of the Plan.
SECTION 1.11 - OPTIONEE
"Optionee" shall mean the Employee named above to whom an Option is awarded
under this Agreement and the Plan.
SECTION 1.12 - PLAN
"Plan" shall mean The 1994 Stock Option and Incentive Plan for Officers,
Directors and Key Employees of Kasler Holding Company, as amended and restated
as of January 10, 1997, and as the same may be further amended or restated.
SECTION 1.14 - SECRETARY
"Secretary" shall mean the Secretary of the Company.
SECTION 1.15 - SECURITIES ACT
"Securities Act" shall mean the Securities Act of 1933, as amended.
ARTICLE II
AWARD OF OPTION
SECTION 2.1 - GRANT OF AWARD
In consideration of the Optionee's execution of this Agreement and for
other good and valuable consideration, on the date hereof the Company
irrevocably awards to the Optionee the option to purchase any part or all of an
aggregate of 50,000 shares of its $.01 par value Common Stock upon the terms and
subject to the conditions set forth in the Plan and in this Agreement.
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SECTION 2.2 - PURCHASE PRICE
The purchase price of the shares of stock covered by the Option shall be
$9.875 per share without commission or other charge.
SECTION 2.3 - CONSIDERATION TO COMPANY
In consideration of the awarding of this Option by the Company, the
Optionee agrees to render faithful and efficient services to the Company or a
Subsidiary, with such duties and responsibilities as the Company shall from time
to time prescribe, for a period of at least one (1) year from the date this
Option is awarded. Nothing in this Agreement or in the Plan shall confer upon
the Optionee any right to continue in the employ of the Company or any
Subsidiary, or shall interfere with or restrict in any way the rights of the
Company and its Subsidiaries, which are hereby expressly reserved, to discharge
the Optionee at any time for any reason whatsoever, with or without cause.
SECTION 2.4 - ADJUSTMENTS IN OPTION
The Board may make or provide for such adjustments in the (a) number of
shares of Common Stock covered by outstanding Options awarded hereunder, (b)
prices per share applicable to such Options, and (c) kind of shares (including
shares of another issuer) covered thereby, as the Board in its sole discretion
may in good faith determine to be equitably required in order to prevent
dilution or enlargement of the rights of Optionees, that otherwise would result
from (x) any stock dividend, stock split, combination of shares,
recapitalization or other change in the capital structure of the Company, (y)
any merger, consolidation, spin-off, split-off, split-up, reorganization,
partial or complete liquidation or other distribution of assets, issuance of
rights or warrants to purchase securities or (z) any other corporate transaction
or event having an effect similar to any of the foregoing. In the event of any
such transaction or event, the Board may provide in substitution for any or all
outstanding awards under this Agreement such alternative consideration as it may
in good faith determine to be equitable under the circumstances and may require
in connection therewith the surrender of all awards so replaced.
ARTICLE III
PERIOD OF EXERCISABILITY
SECTION 3.1 - COMMENCEMENT OF EXERCISABILITY
(a) This Option shall become exercisable in four (4) cumulative installments as
follows:
(i) The first installment shall consist of one-fourth (1/4) of the
shares covered by the Option and shall become exercisable on the
date that is one year from the date the Option was awarded.
(ii) The second installment shall consist of one-fourth (1/4) of the
shares covered by the Option and shall become exercisable on the
date that is two years from the date the
3
<PAGE>
Option was awarded.
(iii) The third installment shall consist of one-fourth (1/4) of the
shares covered by the Option and shall become exercisable on the
date that is three years from the date the Option was awarded.
(iv) The fourth installment shall consist of one-fourth (1/4) of the
shares covered by the Option and shall become exercisable on the
date that is four years from the date the Option was awarded.
(b) No portion of the Option which is unexercisable at Termination of
Employment shall thereafter become exercisable except as set forth in
Section 3.4(a).
SECTION 3.2 - DURATION OF EXERCISABILITY
The installments provided for in Section 3.1 are cumulative. Each such
installment which becomes exercisable pursuant to Section 3.1 shall remain
exercisable until it becomes unexercisable under Section 3.3.
SECTION 3.3 - EXPIRATION OF OPTION
(a) The Option may not be exercised to any extent by anyone after the first to
occur of the following events:
(i) The expiration of ten (10) years from the date the Option was
awarded; or
(ii) Except as set forth in 3.3(a) (iii) and (iv), the expiration of
three (3) months after the Optionee's Termination of Employment; or
(iii) The expiration of twelve (12) months from the date of the Optionee's
Termination of Employment by reason of permanent and total
disability (within the meaning of Section 22(e)(3) of the Code) or
by reason of retirement as set forth in Section 3.4(a); or
(iv) If the Optionee dies while the Option is exercisable, the expiration
of twelve (12) months from the date of the Optionee's death.
(b) This Agreement shall amend that certain Employment Agreement dated as of
January 1, 1994 between the Optionee and the Company (the "Employment
Agreement"), in that, notwithstanding Article 4 of the Employment
Agreement, no portion of this Option that is unvested as of the date the
Optionee's employment with the Company is terminated for any reason shall
be exercisable.
4
<PAGE>
ARTICLE IV
EXERCISE OF OPTION
SECTION 4.1 - PERSON ELIGIBLE TO EXERCISE
During the lifetime of the Optionee, only he or his guardian or legal
representative may exercise the Option or any portion thereof. After the death
of the Optionee, any exercisable portion of the Option may, prior to the time
when the Option becomes unexercisable under Section 3.3, be exercised by his
personal representative or by any person empowered to do so under the Optionee's
will or under the then applicable laws of descent and distribution.
SECTION 4.2 - PARTIAL EXERCISE
Any exercisable portion of the Option or the entire Option, if then wholly
exercisable, may be exercised in whole or in part at any time prior to the time
when the Option or portion thereof becomes unexercisable under Section 3.3;
provided, however, that each partial exercise shall be for not less than one
hundred (100) shares and shall be for whole shares only.
SECTION 4.3 - MANNER OF EXERCISE
The Option or any exercisable portion thereof, may be exercised solely by
delivery to the Secretary or his office of all of the following prior to the
time when the Option or such portion becomes unexercisable under Section 3.3:
(a) Notice in writing signed by the Optionee or the other person then entitled
to exercise the Option or portion, stating that the Option or portion is
thereby exercised, such notice complying with all applicable rules
established by the Board; and
(b) Full payment for the shares with respect to which such option or portion is
exercised, which payment shall be (i) in cash, (ii) through the delivery of
shares of Common Stock owned by the Optionee for at least six months, duly
endorsed for transfer to the Company with a Fair Market Value on the date
of delivery equal to the aggregate exercise price of the Option or
exercised portion thereof, or (iii) subject to the timing requirements of
Section 5.3 of the Plan, through any combination of the consideration
provided in the foregoing subparagraphs (i) or (ii); and
(c) Such representations and documents as the Board deems necessary or
advisable to effect compliance with all applicable provisions of the
Securities Act of 1933, as amended, and any other federal or state
securities laws or regulations. The Board may also take whatever
additional actions it deems appropriate to effect such compliance including
(without limitation) placing legends on share certificates and issuing
stop-transfer notices to agents and registrars;
(d) Full payment to the Company (or other employer corporation) of all amounts
which under federal, state or local tax law, it is required to withhold
upon exercise of the Option; PROVIDED, HOWEVER, the Company may permit the
Optionee, upon delivery of a written election to the Secretary of the
Company (or to such other person who may be designated by the Board) to
elect to have the Company withhold shares of Common Stock otherwise
5
<PAGE>
issuable upon the exercise of the Option. Shares of Common Stock so
withheld will be credited against this tax obligation at their Fair Market
Value; and
(e) In the event the Option or portion shall be exercised pursuant to Section
4.1 by any person or persons other than the Optionee, appropriate proof of
the right of such person or persons to exercise the Option.
SECTION 4.4 - CONDITIONS TO ISSUANCE OF STOCK CERTIFICATES
The shares of stock deliverable upon the exercise of the Option, or any
portion thereof, may be either previously authorized but unissued shares or
issued shares which have then been repurchased by the Company. Such shares
shall be fully paid and non-assessable. The Company shall not be required to
issue or deliver any certificate or certificates for shares of stock purchased
upon the exercise of the Option or portion thereof prior to fulfillment of all
of the following conditions:
(a) The admission of such shares to listing on all stock exchanges on which
such class of stock is then listed; and
(b) The completion of any registration or other qualification of such shares
under any state or federal law or under rulings or regulations of the
Securities and Exchange Commission or of any other governmental regulatory
body, which the Board shall deem necessary or advisable; and
(c) The obtaining of any approval or other clearance from any state or federal
governmental agency which the Board shall determine to be necessary or
advisable; and
(d) The payment to the Company (or other employer corporation) of all amounts
which, under federal, state or local tax law, it is required to withhold
upon exercise of the Option; and
(e) The lapse of such reasonable period of time following the exercise of the
Option as the Board may from time to time establish for reasons of
administrative convenience.
SECTION 4.5 - RIGHTS AS SHAREHOLDER
The holder of the Option shall not be, nor have any of the rights or
privileges of, a shareholder of the Company in respect of any shares purchasable
upon the exercise of any part of the Option unless and until certificates
representing such shares shall have been issued by the Company to such holder.
6
<PAGE>
ARTICLE V
OTHER PROVISIONS
SECTION 5.1 - ADMINISTRATION
The Board shall have the power to interpret the Plan and this Agreement and
to adopt such rules for the administration, interpretation and application of
the Plan as are consistent therewith and to interpret, amend or revoke any such
rules. All actions taken and all interpretations and determinations made by the
Board in good faith shall be final and binding upon the Optionee, the Company
and all other interested persons. No member of the Board shall be personally
liable for any action, determination or interpretation made in good faith with
respect to the Plan or the Option.
SECTION 5.2 - OPTION NOT TRANSFERABLE
Options under the Plan may not be sold, pledged, assigned or transferred in
any manner other than by will or the laws of descent and distribution; PROVIDED,
HOWEVER, an Optionee may designate a Beneficiary to exercise his Option or other
rights under the Plan after his death. Neither the Option nor any interest or
right therein or part thereof shall be liable for the debts, contracts or
engagements of the Optionee or his successors in interest or shall be subject to
disposition by transfer, alienation, anticipation, pledge, encumbrance,
assignment or any other means whether such disposition be voluntary or
involuntary or by operation of law by judgment, levy, attachment, garnishment or
any other legal or equitable proceedings (including bankruptcy), and any
attempted disposition thereof shall be null and void and of no effect; PROVIDED,
HOWEVER, that this Section 5.2 shall not prevent transfers by will or by the
applicable laws of descent and distribution. An Option shall be exercised
during the Optionee's lifetime only by the Optionee or his guardian or legal
representative.
SECTION 5.3 - SHARES TO BE RESERVED
The Company shall at all times during the term of the Option reserve and
keep available such number of shares of stock as will be sufficient to satisfy
the requirements of this Agreement.
SECTION 5.4 - NOTICES
Any notice to be given under the terms of this Agreement to the Company
shall be addressed to the Company in care of its Secretary, and any notice to be
given to the Optionee shall be addressed to him at the address given beneath his
signature hereto. By a notice given pursuant to this Section 5.4, either party
may hereafter designate a different address for notices to be given to him. Any
notice which is required to be given to the Optionee shall, if the Optionee is
then deceased, be given to the Optionee's personal representative if such
representative has previously informed the Company of his status and address by
written notice under this Section 5.4. Any notice shall be deemed duly given
when enclosed in a properly sealed envelope or wrapper addressed as aforesaid,
deposited (with postage prepaid) in a post office or branch post office
regularly maintained by the United States Postal Service.
SECTION 5.5 - TITLES
7
<PAGE>
Titles are provided herein for convenience only and are not to serve as a
basis for interpretation or construction of this Agreement.
SECTION 5.6 - CONSTRUCTION
This Agreement shall be administered, interpreted and enforced under the
internal substantive laws of the State of Delaware.
SECTION 5.7 - CONFORMITY TO SECURITIES LAWS
The Optionee acknowledges that the Plan is intended to conform to the
extent necessary with all applicable federal and state laws, rules and
regulations, including provisions of the Securities Act and the Exchange Act and
any and all regulations and rules promulgated by the Securities and Exchange
Commission thereunder, including without limitation Rule 16b-3 under the
Exchange Act. Notwithstanding anything herein to the contrary, the Plan shall
be administered, and the Option is awarded and may be exercised, only in such a
manner as to conform to such laws, rules and regulations. To the extent
permitted by applicable law, the Plan and this Agreement shall be deemed amended
to the extent necessary to conform to such laws, rules and regulations.
8
<PAGE>
IN WITNESS WHEREOF, this Agreement has been executed and delivered by the
parties hereto.
MORRISON KNUDSEN CORPORATION
By: /s/ Stephen G. Hanks
-----------------------------------
Stephen G. Hanks
Executive Vice President
OPTIONEE
/s/ Thomas H. Zarges
----------------------------------------
Thomas H. Zarges
SPOUSAL CONSENT
The undersigned has read and is familiar with the preceding Agreement and
the Plan and hereby consents and agrees to be bound by all the terms of the
Agreement and the Plan. Without limiting the foregoing, the undersigned
specifically agrees that the Company may rely on any authorization, instruction
or election made under the Agreement by the Optionee alone and that all of his
or her right, title or interest, if any, in the shares of Common Stock purchased
by the Optionee under the Agreement, whether arising by operation of community
property law, by property settlement or otherwise, shall be subject to all of
such terms.
----------------------------------------
----------------------------------------
Printed Name
Exhibit A: Copy of the Plan
9
<PAGE>
EXHIBIT 10.28
EMPLOYMENT AGREEMENT
This Employment Agreement ("Agreement") is made as of the 26th day of April,
1996, by and between Morrison Knudsen Corporation, a Delaware corporation
("Company"), and DOUGLAS L BRIGHAM, an executive employee of the Company
("Executive").
WHEREAS, Executive has rendered valuable services to Company, and has acquired
an extensive background in and knowledge of Company's business; and
WHEREAS, Company desires to continue the services of Executive in such executive
capacity as the parties may mutually agree.
NOW, THEREFORE, in consideration of the foregoing, Company and Executive agree
as follows:
ARTICLE 1 - TERM
1.1 Company shall employ Executive and Executive accepts such employment for a
term beginning on the effective date of this Agreement and ending December 31,
1998, upon the terms and conditions set forth herein, unless such employment is
earlier terminated in accordance with the provisions herein.
ARTICLE 2 - DEFINITIONS
For purposes of this Agreement, the following terms shall have the meanings set
forth below:
2.1 "BASE COMPENSATION" shall mean an amount per annum equal to the annual
base salary rate in effect for Executive immediately preceding termination of
employment.
2.2 "CAUSE" shall mean (i) willful refusal by Executive to follow a lawful
written order of the Chief Executive Officer, (ii) Executive's willful and
continued failure to perform his duties under this Agreement (except due to
Executive's incapacity due to physical or mental illness) after a written demand
is delivered to Executive by the Chief Executive Officer specifically
identifying the manner in which the Chief Executive Officer believes that
Executive has failed to perform his duties, (iii) Executive's willful engagement
in conduct materially injurious to the Company, or (iv) Executive's conviction
for any felony involving moral turpitude. For purposes of clauses (i), (ii),
and (iii) of this definition, no act, or failure to act on Executive's part
shall be deemed "willful" unless done, or omitted to be done, by Executive not
in good faith and without reasonable belief that Executive's act, or failure to
act, was in the best interests of Company.
2.3 "CONSTRUCTIVE TERMINATION" shall mean Executive's 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 Executive in
advance of such event:
<PAGE>
i) A failure by the Company to abide by any part of this Agreement that is
not remedied within ten (10) business days of notification by Executive of
such failure, including any violation of Executive's rights as described
in Section 3 of this Agreement unless such rights are replaced by
alternative rights of approximately equal value; or
(ii) A reduction in Executive's title or responsibilities in effect on the
execution of this agreement.
2.4 "DISABILITY" shall be deemed to have occurred if Executive makes
application for disability benefits under any Company-sponsored long-term
disability program (whether insured or self-insured, basic or supplemental)
covering Executive and qualifies for such benefits.
2.5 "RETIREMENT" shall mean Executive's termination of service with Company on
or after his Early Retirement Date or Normal Retirement Date as defined in the
Morrison Knudsen Corporation Retirement Plan, established January 1, 1988 and
frozen December 31, 1991 (the "MKRP"), assuming that the MKRP had never been
frozen.
ARTICLE 3 - COMPENSATION AND BENEFITS
Executive shall receive the annual base salary set by Company, which salary
shall be commensurate with Executive's duties and consistent with the
compensation policies of the Executive Compensation and Nominating Committee of
Company's Board of Directors. Such salary shall be, at a minimum, the amount of
base salary in effect for Executive as of the date this Agreement is executed.
At least annually, Company will review Executive's base salary to determine the
amount of any increase. Upon any such increase in Executive's base salary, such
increased rate shall thereafter constitute Executive's annual base salary for
all purposes of this Agreement.
ARTICLE 4 - RIGHTS UPON TERMINATION
In the event that Executive's employment with Company is terminated for any
reason other than (a) death, (b) Disability, (c) Cause, (d) voluntary
resignation by Executive not constituting Constructive Termination or (e)
Retirement before the expiration of the term, Company will pay to Executive Base
Salary for a period of 9 months.
Base salary payments shall be made when payments would otherwise have been made
to Executive if he were still employed by Company.
In the event Executive's employment with Company is terminated for death,
Disability, Cause, voluntary resignation not constituting Constructive
Termination or Retirement, Executive shall not be entitled to any benefits under
this Agreement. This statement, however, shall not preclude Executive from any
payments or benefits available to Executive from participation in
Company-sponsored plans or programs that are generally applicable to salaried
personnel.
<PAGE>
ARTICLE 5 - MITIGATION AND OFFSET
Executive shall not be required to mitigate the amount of any payment provided
for in this Agreement by seeking employment or otherwise, nor to offset the
amount of any payment provided for in this Agreement by amounts earned as a
result of Executive's employment or self-employment during the period he is
entitled to such payment.
ARTICLE 6 - SUCCESSORS
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.
ARTICLE 9 - ENTIRE AGREEMENT
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 Executive is a party.
ARTICLE 10 - 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.
IN WITNESS WHEREOF, Company has executed this Agreement by a duly authorized
officer, and Executive this ____ day of _______, 1996.
EXECUTIVE MORRISON KNUDSEN CORPORATION
/s/ Douglas L. Brigham /s/ Stephen G. Hanks
- ----------------------------------- -----------------------------------
Signature By: Stephen G. Hanks
Its: Executive Vice President and
Chief Legal Officer
April 30, 1996 April 30, 1996
- ----------------------------------- -----------------------------------
Date Date
<PAGE>
EXHIBIT 10.29
EMPLOYMENT AGREEMENT
This Employment Agreement ("Agreement") is made as of the 26th day of April,
1996, by and between Morrison Knudsen Corporation, a Delaware corporation
("Company"), and ALVIA L HENDERSON, an executive employee of the Company
("Executive").
WHEREAS, Executive has rendered valuable services to Company, and has acquired
an extensive background in and knowledge of Company's business; and
WHEREAS, Company desires to continue the services of Executive in such executive
capacity as the parties may mutually agree.
NOW, THEREFORE, in consideration of the foregoing, Company and Executive agree
as follows:
ARTICLE 1 - TERM
1.1 Company shall employ Executive and Executive accepts such employment for a
term beginning on the effective date of this Agreement and ending December 31,
1998, upon the terms and conditions set forth herein, unless such employment is
earlier terminated in accordance with the provisions herein.
ARTICLE 2 - DEFINITIONS
For purposes of this Agreement, the following terms shall have the meanings set
forth below:
2.1 "BASE COMPENSATION" shall mean an amount per annum equal to the annual
base salary rate in effect for Executive immediately preceding termination of
employment.
2.2 "CAUSE" shall mean (i) willful refusal by Executive to follow a lawful
written order of the Chief Executive Officer, (ii) Executive's willful and
continued failure to perform his duties under this Agreement (except due to
Executive's incapacity due to physical or mental illness) after a written demand
is delivered to Executive by the Chief Executive Officer specifically
identifying the manner in which the Chief Executive Officer believes that
Executive has failed to perform his duties, (iii) Executive's willful engagement
in conduct materially injurious to the Company, or (iv) Executive's conviction
for any felony involving moral turpitude. For purposes of clauses (i), (ii),
and (iii) of this definition, no act, or failure to act on Executive's part
shall be deemed "willful" unless done, or omitted to be done, by Executive not
in good faith and without reasonable belief that Executive's act, or failure to
act, was in the best interests of Company.
<PAGE>
2.3 "CONSTRUCTIVE TERMINATION" shall mean Executive's 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 Executive in
advance of such event:
(i) A failure by the Company to abide by any part of this Agreement that is
not remedied within ten (10) business days of notification by Executive of
such failure, including any violation of Executive's rights as described
in Section 3 of this Agreement unless such rights are replaced by
alternative rights of approximately equal value; or
(ii) A reduction in Executive's title or responsibilities in effect on the
execution of this agreement.
2.4 "DISABILITY" shall be deemed to have occurred if Executive makes
application for disability benefits under any Company-sponsored long-term
disability program (whether insured or self-insured, basic or supplemental)
covering Executive and qualifies for such benefits.
2.5 "RETIREMENT" shall mean Executive's termination of service with Company on
or after his Early Retirement Date or Normal Retirement Date as defined in the
Morrison Knudsen Corporation Retirement Plan, established January 1, 1988 and
frozen December 31, 1991 (the "MKRP"), assuming that the MKRP had never been
frozen.
ARTICLE 3 - COMPENSATION AND BENEFITS
Executive shall receive the annual base salary set by Company, which salary
shall be commensurate with Executive's duties and consistent with the
compensation policies of the Executive Compensation and Nominating Committee of
Company's Board of Directors. Such salary shall be, at a minimum, the amount of
base salary in effect for Executive as of the date this Agreement is executed.
At least annually, Company will review Executive's base salary to determine the
amount of any increase. Upon any such increase in Executive's base salary, such
increased rate shall thereafter constitute Executive's annual base salary for
all purposes of this Agreement.
ARTICLE 4 - RIGHTS UPON TERMINATION
In the event that Executive's employment with Company is terminated for any
reason other than (a) death, (b) Disability, (c) Cause, (d) voluntary
resignation by Executive not constituting Constructive Termination or (e)
Retirement before the expiration of the term, Company will pay to Executive Base
Salary for a period of 9 months.
Base salary payments shall be made when payments would otherwise have been made
to Executive if he were still employed by Company.
<PAGE>
In the event Executive's employment with Company is terminated for death,
Disability, Cause, voluntary resignation not constituting Constructive
Termination or Retirement, Executive shall not be entitled to any benefits under
this Agreement. This statement, however, shall not preclude Executive from any
payments or benefits available to Executive from participation in
Company-sponsored plans or programs that are generally applicable to salaried
personnel.
ARTICLE 5 - MITIGATION AND OFFSET
Executive shall not be required to mitigate the amount of any payment provided
for in this Agreement by seeking employment or otherwise, nor to offset the
amount of any payment provided for in this Agreement by amounts earned as a
result of Executive's employment or self-employment during the period he is
entitled to such payment.
ARTICLE 6 - SUCCESSORS
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.
ARTICLE 9 - ENTIRE AGREEMENT
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 Executive is a party.
ARTICLE 10 - 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.
<PAGE>
IN WITNESS WHEREOF, Company has executed this Agreement by a duly authorized
officer, and Executive this ____ day of _______, 1996.
EXECUTIVE MORRISON KNUDSEN CORPORATION
/s/ Alvia L. Henderson /s/ Stephen G. Hanks
- ----------------------------------- -----------------------------------
Signature By: Stephen G. Hanks
Its: Executive Vice President and
Chief Legal Officer
May 1, 1996 May 1, 1996
- ----------------------------------- -----------------------------------
Date Date
<PAGE>
EXHIBIT 21
MORRISON KNUDSEN CORPORATION
(FORMERLY WASHINGTON CONSTRUCTION GROUP, INC.)
SUBSIDIARIES OF THE REGISTRANT
Consolidated subsidiaries of the registrant,
Morrison Knudsen Corporation (Delaware)
STATE OR COUNTRY OF INCORPORATION
---------------------------------
Atascosa Mining Co. Nevada
Blue Diamond Materials, Inc. Nevada
Centennial Engineering, Inc. Colorado
CF Systems Corporation Massachusetts
Conda Mining, Inc. Idaho
Industrial Contractors Corporation Montana
Kasler Corporation California
MK Ferguson of Oak Ridge Company Tennessee
Morrison Knudsen Corporation Ohio
Morrison Knudsen Deutschland GmbH Germany
National Projects, Inc. Nevada
Pomeroy Corporation California
Washington Construction Company Montana
Washington Contractors Group, Inc. Montana
The names of particular subsidiaries have been excluded because when considered
in the aggregate as a single subsidiary, as of November 30, 1996, they would not
constitute a significant subsidiary under Rule 1-02 of Regulation S-X.
<PAGE>
EXHIBIT 24
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned hereby constitutes and
appoints R. A. Tinstman, S. G. Hanks and James E. McCallum, 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
(formerly Washington Construction Group, Inc.), Form 10-K Annual Report for
fiscal year ended November 30, 1996, 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 each of them
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 10 day of January, 1997.
/s/ Dennis R. Washington
----------------------------------------
Dennis R. Washington, Chairman
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned hereby constitutes and
appoints R. A. Tinstman, S. G. Hanks and James E. McCallum, 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
(formerly Washington Construction Group, Inc.), Form 10-K Annual Report for
fiscal year ended November 30, 1996, 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 each of them
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 10 day of January, 1997.
/s/ David H. Batchelder
----------------------------------------
David H. Batchelder
Director
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned hereby constitutes and
appoints R. A. Tinstman, S. G. Hanks and James E. McCallum, 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
(formerly Washington Construction Group, Inc.), Form 10-K Annual Report for
fiscal year ended November 30, 1996, 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 each of them
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 10 day of January, 1997.
/s/ Leonard R. Judd
----------------------------------------
Leonard R. Judd
Director
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned hereby constitutes and
appoints R. A. Tinstman, S. G. Hanks and James E. McCallum, 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
(formerly Washington Construction Group, Inc.), Form 10-K Annual Report for
fiscal year ended November 30, 1996, 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 each of them
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 10 day of January, 1997.
/s/ William C. Langley
----------------------------------------
William C. Langley
Director
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned hereby constitutes and
appoints R. A. Tinstman, S. G. Hanks and James E. McCallum, 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
(formerly Washington Construction Group, Inc.), Form 10-K Annual Report for
fiscal year ended November 30, 1996, 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 each of them
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 10 day of January, 1997.
/s/ Robert S. Miller, Jr.
----------------------------------------
Robert S. Miller, Jr.
Director
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned hereby constitutes and
appoints R. A. Tinstman, S. G. Hanks and James E. McCallum, 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
(formerly Washington Construction Group, Inc.), Form 10-K Annual Report for
fiscal year ended November 30, 1996, 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 each of them
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 10 day of January, 1997.
/s/ Dorn Parkinson
----------------------------------------
Dorn Parkinson
Director
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned hereby constitutes and
appoints R. A. Tinstman, S. G. Hanks and James E. McCallum, 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
(formerly Washington Construction Group, Inc.), Form 10-K Annual Report for
fiscal year ended November 30, 1996, 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 each of them
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 10 day of January, 1997.
/s/ Terry W. Payne
----------------------------------------
Terry W. Payne
Director
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned hereby constitutes and
appoints R. A. Tinstman, S. G. Hanks and James E. McCallum, 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
(formerly Washington Construction Group, Inc.), Form 10-K Annual Report for
fiscal year ended November 30, 1996, 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 each of them
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 10 day of January, 1997.
/s/ John D. Roach
----------------------------------------
John D. Roach
Director
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
ACCOMPANYING CONSOLIDATED FINANCIAL STATEMENTS AND FINANCIAL STATEMENT FOOTNOTES
OF MORRISON KNUDSEN CORPORATION AT NOVEMBER 30, 1996 AND FOR THE YEAR THEN
ENDED, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH CONSOLIDATED
FINANCIAL STATEMENTS AND FINANCIAL STATEMENT FOOTNOTES.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> NOV-30-1996
<PERIOD-END> NOV-30-1996
<CASH> 48,310
<SECURITIES> 0
<RECEIVABLES> 225,341
<ALLOWANCES> 7,885
<INVENTORY> 0
<CURRENT-ASSETS> 459,249
<PP&E> 242,043
<DEPRECIATION> (156,709)
<TOTAL-ASSETS> 839,637
<CURRENT-LIABILITIES> 400,604
<BONDS> 0
18,000
0
<COMMON> 538
<OTHER-SE> 311,466
<TOTAL-LIABILITY-AND-EQUITY> 839,637
<SALES> 5,400
<TOTAL-REVENUES> 659,100
<CGS> 7,810
<TOTAL-COSTS> (625,756)
<OTHER-EXPENSES> (41,938)
<LOSS-PROVISION> (275)
<INTEREST-EXPENSE> (993)
<INCOME-PRETAX> (5,274)
<INCOME-TAX> 494
<INCOME-CONTINUING> (4,780)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (4,780)
<EPS-PRIMARY> (.14)
<EPS-DILUTED> 0
</TABLE>