FORM 8-K
Current Report Pursuant
to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of Earliest Event Reported): July 3, 1996 (June 20, 1996)
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MK RAIL CORPORATION
(Exact name of registrant as specified in its charter)
Delaware
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State or Other Jurisdiction of Incorporation
0-23802 82-0461010
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Commission File Number I.R.S. Employer
Identification No.
1200 Reedsdale Street, Pittsburgh, PA 15233
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Address of principal executive offices Zip Code
Registrant's telephone number, including area code: (412) 237-2250
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Item 5. Other Events
Note Cancellation Agreement
MK Rail Corporation, a Delaware corporation (the "Company"), executed a
definitive agreement to repurchase the debt the Company owes to Morrison Knudsen
Corporation, an Ohio corporation ("MKO"), pursuant to a Note Cancellation and
Restructuring Agreement dated June 20, 1996 by and among the Company, MKO and
Morrison Knudsen Corporation, a Delaware corporation ("MKC") (the "Note
Cancellation Agreement"). Under the Note Cancellation Agreement, the Company is
to repurchase the debt, which had as of June 1, 1996 an outstanding balance
including accrued interest of approximately $56.2 million, for a total of $34.5
million. The Company plans to finance the transaction with the proceeds from
previously announced asset sales, cash from operations, and proceeds from other
borrowings or non-essential asset sales.
The Note Cancellation Agreement provides that a first installment of
$6.9 million (plus interest calculated at prime from the date of execution of
the Note Cancellation Agreement) is to be paid ten days after MKC and MKO
(collectively, "MK") have obtained either Bankruptcy Court approval of the
transaction ("Bankruptcy Court Approval") or ten days after confirmation of a
Plan of Reorganization that includes certain provisions integrating the
transactions into the Plan (a "Conforming Plan"). In the event that Bankruptcy
Court Approval is obtained and is appealed during the ten-day period, the $6.9
million is to be paid into a court-approved escrow to be held pending
finalization of the Bankruptcy Court Approval or the expiration of ten days
following confirmation of a Conforming Plan, or termination of the Note
Cancellation Agreement. A second installment in the amount of $27.6 million is
to be paid either when the Bankruptcy Court Approval is a final order or ten
days after confirmation of a Conforming Plan (referred to in either case as the
"Disbursement Condition"). In addition, the Company's obligation to pay the
second installment is subject to a condition (which the Company can waive) that
the Company has sold Alert Manufacturing & Supply Co., Inc. ("Alert") and MK
Gain S.A. de C.V. ("MK Gain") pursuant to terms and at prices satisfactory to
the Company in its sole discretion. As described under "Sale of Alert
Manufacturing," below, the Company has entered into an agreement to sell the
assets of Alert. MK Rail and MK are currently discussing certain technical
amendments to the Note Cancellation Agreement relating to the definition of the
Disbursement Condition to account for the fact that MKO is not a party to MKC's
bankruptcy proceeding (as had been contemplated at the time the Note
Cancellation Agreement was executed).
The Note Cancellation Agreement also provides that if the Company has
not consummated the Alert and MK Gain transactions on or before the later of
August 30, 1996 or the date the Disbursement Condition is satisfied, the Company
must waive the condition that those transactions be consummated and close the
note cancellation, or MKC can terminate the Note Cancellation Agreement. If, by
December 31, 1996, the transaction has not fully closed for any reason other
than a default by MK, subject to certain notification provisions, MK can
terminate the Note Cancellation Agreement if the Company does not elect to
proceed and close the transactions.
Stockholders Agreement
The Company and MKO also entered into a Stockholders Agreement dated
June 20, 1996. The Stockholders Agreement provides demand registration rights to
certain creditors of MKO, who are to receive Company stock from MKO in
connection with its reorganization. Such holders are able to make four demands
over a five-year period, which period commences when the Company's Form 10-K for
its 1996 fiscal year is filed (i.e., on or about April 1, 1997). Expenses of
demand registrations (other than selling holder advisor fees and underwriting
discounts and commissions) are to be paid by the Company.
In addition, the Company is to file a shelf registration statement
during the summer of 1996 to permit nonunderwritten public resales by those
stockholders. Up to $75,000 of the costs of the shelf registration statement are
to be paid by MKO.
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Further, MKO has agreed that the stock held by MK creditors will be
subject to standstill and voting provisions which generally prohibit the
solicitation of proxies, initiation or inducement of tender offers and other
efforts to influence or control the management or policies of the Company. The
voting provisions require that for a specified period, during which a majority
of the Company's Board of Directors consists of independent directors, this
stock will be voted in favor of the Company's nominees to its board. This period
will end on the earlier of the date two years after MK distributes the stock, or
the date that stock subject to the standstill and voting provisions represents
less than 15 percent of the Company's outstanding common stock. Also, this stock
is subject to transfer restrictions under which transferees, other than those
receiving stock in certain registered offerings, must agree to be bound to these
provisions.
Second Amendment to Rights Plan
On June 20, 1996, the Company entered into a Second Amendment (the
"Second Amendment") to the Rights Agreement dated as of January 19, 1996, as
amended by the Amendment dated as of April 5, 1996, between the Corporation and
Chase Mellon Shareholder Services, L.L.C., formerly known as Chemical Mellon
Shareholder Services, L.L.C. (the "Rights Agent") (as amended, the "Rights
Agreement"). As a result of the Second Amendment, the shareholder rights under
the Rights Agreement will be exercisable and will trade separately from the
Company's common stock if a person or a group of persons becomes the beneficial
owner of 15 percent or more of the Company's common stock (rather than 10
percent or more, as was previously provided), or if a person commences a tender
offer or exchange offer, the consummation of which would result in such person
being the beneficial owner of 15 percent or more of the common stock (rather
than 10 percent or more, as was previously provided). The Second Amendment also
provides that a merger of MK will not constitute a "change of control event" as
defined in the Rights Agreement, provided certain conditions are satisfied,
including prompt distribution of the Company's common stock. The Second
Amendment also permits the solicitation of votes and the voting with respect to
the plan of reorganization of MK and the execution of the Note Cancellation
Agreement and the Stockholders Agreement.
Sale of Alert Manufacturing
On June 27, 1996, the Company and its subsidiary, Alert Manufacturing &
Supply Co. ("Alert"), entered into an Agreement for the Purchase and Sale of
Assets with All-State Industrial Rubber Co., Inc. ("All-State"), pursuant to
which substantially all of the assets of Alert are to be sold to All-State for a
purchase price of $4,500,000, subject to certain adjustments and the assumption
by All-State of trade payables of Alert in the amount of $750,000. Alert, based
in Elk Grove Village, Illinois, manufacturers a variety of rubber products,
primarily for the trucking industry. Alert, which had sales of approximately $10
million in 1995, is a subsidiary of Power Parts Co., which is a subsidiary of
the Company. All-State, based in West Des Moines, Iowa, is a privately held
manufacturer of rubber belting and other industrial rubber products. The
transaction is expected to close during the third quarter of 1996.
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Item 7. Financial Statements and Exhibits
(a) Financial statements of businesses aquired (None)
(b) Pro forma financial information (none)
(c) Exhibits
Exhibit No. Description Page
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4.1 Second Amendment dated as of June 20, 1996 to Rights Agreement
dated as of January 19, 1996 as amended as of April 5, 1996 by
and between MK Rail Corporation and Chase Mellon Shareholder
Services, L.L.C. (formerly known as Chemical Mellon Shareholder
Services, L.L.C.), as Rights Agent (filed as an exhibit to the
Company's Amendment No. 2 on Form 8-A/A dated July 3, 1996 and
incorporated herein by reference).
10.1 Note Cancellation and Restructuring Agreement dated as of June
20, 1996, by and among MK Rail Corporation, Morrison Knudsen
Corporation, a Delaware corporation, and Morrison Knudsen
Corporation, an Ohio corporation.
10.2 Stockholders Agreement dated as of June 20, 1996 between MK Rail
Corporation and Morrison Knudsen Corporation.
10.3 Agreement for the Purchase and Sale of Assets dated June 27, 1996
by and among MK Rail Corporation, Alert Manufacturing & Supply
Co. and All-State Industrial Rubber co., Inc.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act, of
1934, the Registrant has duly caused this Report to be signed on its behalf by
the undersigned, hereunto duly authorized.
MK RAIL CORPORATION
(Registrant)
Dated: July 3, 1996 By: /s/ William D. Grab
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William D. Grab
Vice President, Controller and
Principal Accounting Officer
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NOTE CANCELLATION AND RESTRUCTURING AGREEMENT
THIS NOTE CANCELLATION AND RESTRUCTURING AGREEMENT (this
"Agreement"), made and entered into as of the 20th day of June, 1996 by and
among MK Rail Corporation, a Delaware corporation ("MK Rail"), Morrison Knudsen
Corporation, an Ohio corporation ("MKO"), and Morrison Knudsen Corporation, a
Delaware corporation ("MKC").
W I T N E S S E T H:
WHEREAS, MKO owns approximately sixty-three percent (63%) of
the issued and outstanding Common Stock of MK Rail; WHEREAS, MKC owns all of the
outstanding Common Stock of MKO;
WHEREAS, pursuant to a Global Settlement Agreement (the
"Global Settlement Agreement") dated as of June 15, 1995 between MKO and MKC
(collectively, "MK") and MK Rail, MKO and MK Rail entered into a Note Agreement
dated as of June 26, 1995 (the "Note Agreement") under which MK Rail issued a
Note to MKO dated June 26, 1995 in the original principal amount of $52,200,000
(the "Note");
WHEREAS, the Note is subordinate to MK Rail's current credit
facilities with its senior lenders as well as any replacement financing thereof
(the "Senior Debt") pursuant to and in accordance with the Note Agreement and,
in connection with its current credit facilities, pursuant to the Loan and
Security Agreement (the "BABC Loan Agreement") dated as of August 31, 1995
between MK Rail and its subsidiaries and BankAmerica Business Credit, Inc.
("BABC"),
as agent for the financial institutions named therein, as amended, and a related
Subordination Agreement (the "Subordination Agreement") among MKC, BABC, as
agent, and MK Rail;
WHEREAS, MK Rail has not made any cash payment under the Note
due to restrictions contained in the BABC Loan Agreement and the Subordination
Agreement;
WHEREAS, as a result of certain adjustments, as of the date
hereof the principal amount of the Note is $52,094,568.
WHEREAS, as of May 24, 1996, interest in the amount of
$4,120,101 had accrued on the Note and such interest plus all interest accrued
on the Note since said date has not been paid;
WHEREAS, MK is presently planning to implement a
recapitalization of MK (the "Recapitalization") pursuant to a Plan of
Reorganization (the "Plan") to be filed with the United
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States Bankruptcy Court for the District of Delaware (the "Bankruptcy Court"), a
draft of which plan (the "Draft Plan") dated June 10, 1996 has been delivered to
MK Rail;
WHEREAS, pursuant to the Plan, among other things, it is
contemplated that the Common Stock of MK Rail presently held by MKO will be
distributed to certain holders of debt obligations of MKO and to a liquidating
trust to be established as a part of the Plan;
WHEREAS, MK has requested that MK Rail make certain amendments
to the Rights Agreement between MK Rail and Chemical Mellon Shareholder
Services, L.L.C. (the "Rights Agent") dated as of January 19, 1996, as amended
(the "Rights Plan"), to facilitate the obtaining by MK of the acceptances
required to confirm the Plan;
WHEREAS, in connection with the Recapitalization and to
facilitate the obtaining by MK of the acceptances needed to confirm the Plan, MK
has requested that certain registration rights be granted MKO that are
assignable to the parties that receive common stock of MK Rail as a part of the
Plan;
WHEREAS, MK Rail is willing to grant such registration rights
and to make the requested amendments to the Rights Plan in consideration for the
agreement of MKO to certain corporate governance provisions that are binding on
its transferees and in consideration for the agreement of MK to cancel the Note
in full pursuant and subject to the terms and conditions set forth in this
Agreement;
NOW, THEREFORE, in consideration of the premises and of the
covenants and agreements set forth below, the parties hereto, intending to be
legally bound, covenant and agree
as follows:
1. Concurrent Actions. Concurrently with the execution and
delivery hereof, the following have occurred:
1.1 Stockholders Agreement. MK Rail and MKO have executed and
delivered a Stockholders Agreement (the "Stockholders Agreement") in the form
attached hereto as Exhibit A.
1.2 Rights Amendment. MK has received a copy of a Second
Amendment to Rights Agreement (the "Rights Plan Amendment") in the form attached
hereto as Exhibit B executed by MK Rail and the Rights Agent.
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2. Conditions to Effectiveness and Actions Relating Thereto.
2.1 Conditions to Effectiveness. This Agreement and the
Stockholders Agreement shall not be in force or effect until the following
conditions have been satisfied (at which time they shall, automatically and
without necessity of any further action by MK, MK Rail
or any other person or entity, be in full force and effect):
(a) MK Rail has received a written consent or written consents
(the "MK Creditor Consent") in form and substance reasonably satisfactory to MK
Rail containing language substantially similar to the language set forth in
Exhibit C hereto executed by the MK Requisite Creditors (as defined herein)
whereby the MK Requisite Creditors consent to the execution and delivery by MKC
and MKO of this Agreement and the Stockholders Agreement and to the consummation
of the transactions contemplated hereby and thereby and undertake to support
said transactions. For purposes hereof, the term "MK Requisite Creditors" shall
mean the following creditors of MK: (a) creditors in each of the classes of
creditors referenced as Classes MK-3, MK-6, MKO-3, MKO-6, S-3 and S-6 in the
Draft Plan that constitute a majority in number and that hold at least
two-thirds (2/3) in amount of the claims of each such class voting to accept or
reject the Draft Plan and (b) the Majority Lenders, as defined in the Amended
and Restated Override Agreement dated on October 10, 1995 among MKC, MKO, the
Banks and Other Financial Institutions Named Therein, Mellon Bank, N.A., as
agent for said banks and financial institutions and Bank of America National
Trust and Savings Association, as Metra Agent (the "Override Agreement").
(b) Consent of BABC. MKC and MKO shall have received a written
consent in form and substance reasonably satisfactory to MKC and MKO (the "BABC
Consent") executed by BABC, acting as agent for MK Rail's secured lenders,
whereby MK Rail's secured lenders consent to the execution and delivery of this
Agreement and the Stockholders Agreement and to the consummation of the
transactions contemplated hereby and thereby.
(c) MKO shall have presented or caused to be presented to MK
Rail the certificate or certificates evidencing the shares of Common Stock of MK
Rail owned by MKO and a legend shall have been placed thereon in accordance with
the Stockholders Agreement.
2.2 Best Efforts to Obtain Consents. Each party agrees to use
its best efforts to obtain the consents required to satisfy the conditions set
forth in Section 2.1 hereof as promptly as practicable.
3. Motion to Bankruptcy Court. MK shall, within ten (10) days
after filing its initial petition in the Bankruptcy Court, submit to the
Bankruptcy Court a motion (the "Motion") in form and substance approved in
writing by MK Rail, (which approval shall not be unreasonably withheld)
requesting an order of the Bankruptcy Court in form and substance approved in
writing by MK Rail assuming this Agreement and the Stockholders Agreement and
approving the transactions contemplated hereby and thereby (the "Bankruptcy
Court Approval"), and shall use
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its best efforts to obtain such order as promptly as practicable thereafter.
Among other things, the Bankruptcy Court Approval shall approve an escrow
arrangement in form and substance satisfactory to MKO and MK Rail as
contemplated by Section 5.2 hereof.
4. Cancellation of Note. Subject to the terms and conditions
contained herein, the Note, including all principal thereof and interest accrued
thereon, shall be canceled and retired in full. The aggregate amount that must
be paid to so cancel and retire the Note in full (the "Cancellation Amount")
shall be Thirty-Four Million Five Hundred Thousand Dollars ($34,500,000). The
Cancellation Amount shall be paid in two installments as set forth herein.
5. First Closing of Note Cancellation.
5.1 Reduction Payment. On the First Closing Date (as defined
herein), MK Rail shall make a payment (the "Reduction Payment") in immediately
available funds in the amount of Six Million Nine Hundred Thousand Dollars
($6,900,000) plus interest accrued on said amount from the date hereof until the
First Closing Date, calculated at a rate per annum equal to the rate of interest
(the "Prime Rate") announced from time to time by PNC Bank, National Association
as its Prime Rate (which rate shall automatically change with and as of the date
of each announced change thereof).
5.2 Manner of Payment. If on the First Closing Date the
Distribution Condition (as defined herein) has been satisfied or waived by MK
Rail, the Reduction Payment shall be paid to or upon the order of MKO. If on the
First Closing Date, the Distribution Condition has not been satisfied or waived
by MK Rail, MK Rail shall pay the amount of the Reduction Payment to an escrow
agent reasonably satisfactory to MK Rail and MKO to be held in escrow for the
benefit of MKO and MK Rail in accordance with an escrow arrangement (the "Escrow
Arrangement") approved as a part of the Bankruptcy Court Approval under which
arrangement the amount held in escrow, including interest accrued thereon, shall
not be subject to any right of offset, claim, demand, cause of action or other
right any other party may have thereto, and under which arrangement (a) the
amount of the Reduction Payment, together with all interest accrued thereon
while it is held in escrow, will be disbursed to MKO upon satisfaction of the
Distribution Condition or waiver thereof by MK Rail and (b) said amount,
including all interest accrued thereon, will be disbursed to MK Rail if this
Agreement is terminated in accordance with its terms prior to the time the
Distribution Condition is satisfied or so waived, in which case there shall be
no Debt Reduction (as defined in Section 5.4 below).
5.3 Distribution Condition. For purposes of this Agreement:
(a) The term "Distribution Condition" shall mean satisfaction
of any one of the following conditions:
(i) The Bankruptcy Court Approval shall have been entered and
shall be a Final Order (as defined herein); or
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(ii) The first business day both (A) that is at least ten (10)
days after entry of an order by the Bankruptcy Court which
has not been stayed or set aside confirming a Plan that
contains in all substantial respects the provisions (the
"Mandatory Plan Provisions") set forth in Exhibit D hereto
and that does not contain any provisions that are
inconsistent with the terms hereof, the Stockholders
Agreement or the Mandatory Plan Provisions (a "Conforming
Plan") and (B) upon which all other conditions to the
Effective Date of the Conforming Plan, other than those
relating to the transactions contemplated hereby, have been
satisfied or waived.
(b) The Distribution Condition may be waived by MK Rail in its
sole discretion by a written notice or by payment of the Final Installment (as
defined herein) to MKO.
(c) The term "Final Order" shall mean an order of the
Bankruptcy Court which has not been reversed, stayed, modified or amended, and
as to which the time to appeal or seek certiorari has expired, and with respect
to which no appeal or petition for certiorari has been timely taken, or as to
which any appeal that has been taken or any petition for certiorari that has
been or may be filed has been dismissed or resolved by the highest court to
which the order was appealed or from which certiorari was sought.
5.4 Effect of Disbursement of Reduction Payment to MKC. After
the Reduction Payment is paid to MKO either directly by MK Rail or pursuant to
the Escrow Arrangement, it shall constitute the first installment of the
Cancellation Amount and shall, with no further action on the part of any party,
be applied to cancel Seven Million Six Hundred Sixty Thousand Dollars
($7,660,000) of the principal amount of the Note, together with all interest
accrued on said principal amount (the "Debt Reduction").
6. First Closing Date. The closing of the Debt Reduction (the
"First Closing") shall occur at the corporate headquarters of MK Rail at 10:00
a.m. local time on earliest of the following dates (the "First Closing Date"):
(a) the first business day to occur after ten (10) days have elapsed following
the issuance of the Bankruptcy Court Approval, (b) the date the Distribution
Condition is satisfied or waived by MK Rail, or (c) such other day as is
designated by MK Rail by at least three business days advance written notice to
MKO; provided, however, that in any such case, the obligation of MK Rail to
close the Debt Reduction shall be conditioned on satisfaction or waiver by MK
Rail on the First Closing Date of all of the MK Rail First Closing Conditions
(as defined herein) and the obligations of MKO to close the Debt Reduction shall
be conditioned upon satisfaction or waiver on said date of the MKO First Closing
Conditions (as defined herein).
7. Second Closing of Note Cancellation. On the Second Closing
Date (as defined herein), MK Rail shall pay to or upon the order of MKO the sum
of Twenty Seven Million Six Hundred Thousand Dollars ($27,600,000)
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in immediately available funds (the "Final Installment"), representing the
second and final installment of the Cancellation Amount, which shall fully
satisfy all obligations of MK Rail under the Note, and MKO shall deliver the
Note marked canceled to MK Rail (the "Note Cancellation"). In addition, in the
event the Second Closing has not occurred on or before September 30, 1996 and
such failure to close has not been caused by the default of MKC or MKO of any of
their material obligations hereunder, MK Rail shall also pay to or upon the
order of MKO, with the Final Installment, interest accrued on the amount of the
Final Installment from September 30, 1996 through the date of payment,
calculated at a per annum rate equal to the Prime Rate from time to time
announced during said period. Upon such payment of the Final Installment, plus
interest accrued thereon, if any, all obligations of the parties under the Note
and the Note Agreement shall terminate and be of no further force or effect.
8. Second Closing Date. The closing of the Note Cancellation
(the "Second Closing") shall occur at the corporate headquarters of MK Rail at
10:00 a.m. local time on the later of (a) the date the Distribution Condition
has been satisfied or waived by MK Rail or (b) the date two (2) business days
after the MK Rail Second Closing Conditions (as defined herein), other than the
Distribution Condition, have been satisfied or waived by MK Rail and the MKO
Second Closing Conditions have been satisfied or waived by MKO, or on such other
date or at such other time or place as is mutually agreed by the parties hereto
(the "Second Closing Date").
9. MK Rail First Closing Conditions. The obligations of MK
Rail to consummate the transactions contemplated to occur at the First Closing
are subject to the satisfaction on or prior to the First Closing Date, unless
waived by MK Rail, in its sole discretion, of each of the following conditions
(collectively referred to as the "MK Rail First Closing Conditions"), all of
which shall be deemed to be waived by consummation by MK Rail of its obligations
with respect to the said closing to the extent not satisfied:
9.1 Accuracy of Representations and Warranties. The
representations and warranties of MKO and MKC herein contained shall be true and
correct on and as of the First Closing Date in all material respects, with the
same force and effect as though made on and, except for any set forth as of a
specific date, as of such date, except as affected by the transactions
contemplated hereby.
9.2 Performance of Agreements. MKO and MKC shall have
performed all obligations and agreements and complied with all covenants and
conditions contained in this Agreement to be performed or complied with by them
at or prior to the First Closing Date.
9.3 Bankruptcy Court Action. The Bankruptcy Court Approval
shall have been issued or the Distribution Condition shall have been satisfied.
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9.4 No Injunctions. No judgment, order or decree shall have
been issued by a court of competent jurisdiction, governmental agency or other
tribunal that has the effect of enjoining, prohibiting or forbidding the
consummation of the transactions contemplated hereby.
10. MKO First Closing Conditions. The obligations of MKO to
consummate the transactions contemplated to be consummated at the First Closing
are subject to the satisfaction on or prior to the First Closing Date unless
waived by MKO, in its sole discretion, of each of the following conditions
(collectively referred to as the "MKO First Closing Conditions"), all of which
shall be deemed to be waived by consummation by MKO of its obligations with
respect to the said closing to the extent not satisfied:
10.1 Accuracy of Representations and Warranties. The
representations and warranties of MK Rail herein contained shall be true and
correct on and as of the First Closing Date in all material respects, with the
same force and effect as though made on and, except for any set forth as of a
specific date, as of such date, except as affected by the transactions
contemplated hereby.
10.2 Performance of Agreements. MK Rail shall have performed
all obligations and agreements and complied with all covenants and conditions
contained in this Agreement to be performed or complied with by it on or prior
to the First Closing Date.
10.3 No Injunctions. No judgment, order or decree shall have
been issued by a court of competent jurisdiction, government agency or other
tribunal that has effect of enjoining, prohibiting or forbidding the
consummation of the transactions contemplated hereby.
11. MK Rail Second Closing Conditions. The obligations of MK
Rail to consummate the transactions contemplated to occur at the Second Closing
are subject to the satisfaction on or prior to the Second Closing Date, unless
waived by MK Rail, in its sole discretion, of each of the following conditions
(collectively referred to as the "MK Rail Second Closing Conditions"), all of
which shall be deemed to be waived by consummation by MK Rail of its obligations
with respect to the said closing to the extent not satisfied:
11.1 Accuracy of Representations and Warranties. The
representations and warranties of MK herein contained shall be true and correct
on and as of the Second Closing Date in all material respects, with the same
force and effect as though made on and, except for any set forth as of a
specified date, as of such date, except as affected by the transactions
contemplated hereby.
11.2 Performance of Agreements. MKO and MKC shall have
performed all obligations and agreements and complied with all covenants and
conditions contained in this Agreement to be performed or complied with by them
at or prior to the Second Closing.
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11.3 Sale of Alert Mfg. and Supply Co., Inc. MK Rail shall
have consummated the sale, on terms and at a price satisfactory to MK Rail in
its sole discretion, of all of the stock or substantially all of the assets of
Alert Mfg. & Supply Co., Inc., an Illinois corporation and a wholly-owned
subsidiary of Power Parts Company, an Illinois corporation and a wholly-owned
subsidiary of MK Rail.
11.4 Sale of MK Gain, S.A. de C.V.. MK Rail shall have
consummated the sale, on terms and at a price satisfactory to MK Rail in its
sole discretion, of all of the stock or substantially all of the assets of MK
Gain, S.A. de C.V., a wholly-owned subsidiary of MK Rail that conducts its
business and operations in Mexico.
11.5 No Injunctions. No judgment, order or decree shall have
been issued by a court of competent jurisdiction, government agency or other
tribunal that has the effect of enjoining, prohibiting or forbidding the
consummation of the transactions contemplated to occur at the Second Closing.
11.6 Distribution Condition. The Distribution Condition shall
have been satisfied.
11.7 First Closing. The First Closing shall have occurred
prior to or concurrently with the Second Closing.
12. MKO Second Closing Conditions. The obligations of MKO to
consummate the transactions contemplated to occur at the Second Closing are
subject to the satisfaction on or prior to the Second Closing Date, unless
waived by MKO, in its sole discretion, of each of the following conditions
(collectively referred to as the "MKO Second Closing Conditions"), all of which
shall be deemed to be waived by consummation by MK of its obligations with
respect to the said closing to the extent not satisfied:
12.1 Accuracy of Representations and Warranties. The
representations and warranties of MK Rail herein contained shall be true and
correct on and as of the Second Closing Date in all material respects, with the
same force and effect as though made on and, except for any set forth as of a
specific date, as of such date, except as affected by the transactions
contemplated hereby.
12.2 Tender by MK Rail. MK Rail shall tender for payment to
MKO the full amount of the Final Installment.
12.3 No Injunction. No judgment, order or decree shall have
been issued by any court of competent jurisdiction, government agency or other
tribunal that has the effect of enjoining, prohibiting or forbidding the
consummation of the transactions contemplated hereby or by the Stockholders
Agreement.
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12.4 First Closing. The First Closing shall have occurred
prior to or concurrently with the Second Closing.
13. Affirmative Covenants.
13.1 Mandatory Plan Provisions. The Plan, when it becomes
effective, shall contain the Mandatory Plan Provisions and shall not contain any
provision that is inconsistent with the terms hereof, of the Stockholders
Agreement or of the Mandatory Plan Provisions.
13.2 Best Efforts to Satisfy Certain Closing Conditions. MK
Rail shall use its best efforts to cause the MK Rail Second Closing Conditions
set forth in Sections 11.3 and 11.4 to be satisfied or, if in its sole
discretion it determines that it is not in the best interests of MK Rail to
consummate either of such transactions, to obtain financing on terms
satisfactory to MK Rail in its sole discretion that will enable MK Rail to waive
said conditions; provided, however, that MK Rail shall not be obligated to
effect any transaction if in its sole discretion it determines in good faith
that such transaction is not in its best interests.
13.3 Copies of Bankruptcy Court Actions. MKO shall give MK
Rail copies of the motion requesting the Bankruptcy Court Approval, the
Bankruptcy Court Approval, the Plan and amendments thereto, any order issued by
the Bankruptcy Court confirming the Plan promptly after the filing or entry
thereof, and any other pleadings or filings affecting MK Rail or the
transactions contemplated herein.
13.4 Distribution of MK Rail Common Stock At the time any
Common - Stock of MK Rail is distributed by MKO to any party, MKO shall provide
to MK Rail an accurate list setting forth the name and address of each
beneficial owner known to MK receiving said stock from MKO, the number of shares
of Common Stock received by such owner and the number or numbers of the stock
certificates representing such shares and the names of any custodians, nominees
or agents holding shares for such beneficial owner (including, without
limitation, street names in which any such certificates are held).
14. Representations and Warranties of MKO and MKC. MKO and MKC
hereby jointly and severally represent and warrant to MK Rail as follows:
14.1 Organization; Power; Good Standing. MKO is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Ohio. MKC is a corporation duly organized and validly existing under
the laws of the State of Delaware. MKO and MKC have all requisite corporate
power and authority to enter into this Agreement and, in the case of MKO, the
Stockholders Agreement, and to perform their respective obligations hereunder
and thereunder.
14.2 Authority Relative to Agreement. The execution, delivery
and performance of this Agreement by MKO and MKC and of the Stockholders
Agreement by MKO have been duly
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and effectively authorized by all necessary corporate action. This Agreement and
the Stockholders Agreement have been duly executed by MKO and MKC, as the case
may be, and this Agreement and the Stockholders Agreement are the valid, legally
binding and enforceable obligations of
MKO
and MKC, as the case may be, except as they may be limited or otherwise affected
by applicable bankruptcy, reorganization, insolvency, moratorium, fraudulent
transfer and other similar laws of general application from time to time in
effect relating to or affecting creditors' rights. Copies of the Articles of
Incorporation, Code of Regulations and Resolutions of the Board of Directors of
MKO authorizing the execution and delivery by MKO of this Agreement and the
Stockholders Agreement and consummation of the transactions contemplated hereby
and thereby, certified by the Secretary or Assistant Secretary of MKO, together
with a Good Standing Certificate issued by the Secretary of State of Ohio with
respect to MKO within thirty (30) days of the date hereof and a certificate of
the Secretary or Assistant Secretary of MKO setting forth the names, signatures
and offices held by the officers authorized to execute this Agreement and the
Stockholders Agreement, have been delivered to MK Rail. Copies of the
Certificate of Incorporation, By-Laws and Resolutions of the Board of Directors
of MKC approving this Agreement and the transactions contemplated hereby,
certified by the Secretary or Assistant Secretary of MKC, together with a Good
Standing Certificate issued by the Secretary of State of Delaware with respect
to MKC within thirty (30) days of the date hereof and a certificate of the
Secretary or Assistant Secretary of MKC setting forth the names, signatures and
offices of the officers duly authorized to execute this Agreement have been
delivered to MK Rail.
14.3 Effect of Agreement. The execution, delivery and
performance of this Agreement and the Stockholders Agreement by MKO and MKC, as
the case may be, and the consummation of the transactions contemplated hereby
and thereby will not (a) require the consent, approval, authorization, license,
order, or permit of any person, corporation, partnership, joint venture or other
business association or public authority, other than the Bankruptcy Court
Approval and the MK Creditor Consent; (b) violate, with or without the giving of
notice or the passage of time, or both, any provisions of law or any statute or
any rule, regulation, order, award, judgment or decree of any court or
governmental authority now applicable to MKO or MKC; or (c) conflict with or
result in a breach or termination of any provision of, or constitute a default
under, or result in the creation of any lien, charge or encumbrance upon any of
the properties or assets of MKO or MKC pursuant to any corporate charter, bylaw,
indenture, mortgage, deed of trust, lease, contract, agreement or other
instrument, or any order, judgment, award, decree, statute, ordinance,
regulation or any other restriction of any kind or character, to which MKO or
MKC is a party, or by which MKO or MKC is bound.
14.4 Title to Note; No Prior Transfer. MKO is the owner of the
Note free and clear of any and all liens, claims and encumbrances of any kind or
nature whatsoever other than the pledge (the "Pledge") of the Note to Mellon
Bank, N.A. as agent under the Amended and Restated Credit Agreement dated as of
July 31, 1995 among MKC, MKO, the Banks and Other Financial Institutions Named
Therein and Mellon Bank as agent for said banks and financial institutions and
the Override Agreement. MKO has and will continue to have at the First Closing
Date and at the Second Closing Date good title to the Note and, subject to
satisfaction of the
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<PAGE>
Distribution Condition, the absolute right, power and authority to sell, assign,
transfer, cancel and deliver the Note to MK Rail, free and clear of all liens,
pledges, encumbrances, security interests or other restrictions, other than
those set forth in the Note Agreement and Subordination Agreement. Other than
the Pledge, MKO has not previously sold, assigned or otherwise transferred any
interest in the Note and no other party has any right, title or interest in and
to the Note. The Note constitutes Collateral identified in the Asset Disposition
Programs (as defined in the Override Agreement) and, accordingly, under the
Override Agreement, its release may be authorized by the Majority Lenders (as
defined therein).
15. Representations and Warranties of MK Rail. MK Rail hereby
represents and warrants to MKO and MKC as follows:
15.1 Organization; Power; Good Standing. MK Rail is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware. MK Rail has all requisite corporate power and
authority to enter into this Agreement and the Stockholders Agreement and to
perform its obligations hereunder and thereunder.
15.2 Authority Relative to Agreement. The execution, delivery
and performance of this Agreement and the Stockholders Agreement by MK Rail have
been duly and effectively authorized by all necessary corporate action by MK
Rail. This Agreement and the Stockholders Agreement have been duly executed by
MK Rail and are the valid, legally binding and enforceable obligations of MK
Rail except as they may be limited or otherwise affected by applicable
bankruptcy, reorganization, insolvency, moratorium, fraudulent transfer and
other similar laws of general application from time to time in effect relating
to or affecting creditors' rights. Copies of the Certificate of Incorporation,
By-Laws and Resolutions of the Board of Directors of MK Rail approving this
Agreement, the Rights Plan Amendment, the Stockholders Agreement and the
transactions contemplated hereby and thereby, certified by the Secretary or
Assistant Secretary of MK Rail, together with a Good Standing Certificate issued
by the Secretary of State of Delaware with respect to MK Rail within thirty (30)
days of the date hereof and a certificate of the Secretary or Assistant
Secretary of MK Rail setting forth the names, signatures and offices of the
officers duly authorized to execute this Agreement and the Stockholders
Agreement, have been delivered to MKO.
15.3 Effect of Agreement. The execution, delivery and
performance of this Agreement and the Stockholders Agreement by MK Rail and the
consummation of the transactions contemplated hereby and thereby will not (i)
require the consent, approval, authorization, license, order, or permit of any
person, corporation, partnership, joint venture or other business association or
public authority other than the BABC Consent; (ii) violate, with or without the
giving of notice or the passage of time, or both, any provisions of law or any
statute or any rule, regulation, order, award, judgment or decree of any court
or governmental authority now applicable to MK Rail; or (iii) conflict with or
result in a breach or termination of any provision of, or constitute a default
under, or result in the creation of any lien, charge or encumbrance upon any of
the properties or assets of MK Rail, pursuant to any corporate charter, bylaw,
indenture,
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mortgage, deed of trust, lease, contract, agreement or other instrument, or any
order, judgment, award, decree, statute, ordinance, regulation or any other
restriction of any kind or character, to
which MK Rail is a party, or by which MK Rail is bound.
15.4 Rights Plan Amendments. The Board of Directors of MK Rail
has adopted and approved the Rights Plan Amendment and such amendment is in full
force and effect, subject to its terms.
16. Termination. This Agreement may be terminated only as
follows:
16.1 Termination by Mutual Consent. By the mutual written
agreement of the parties entered into at any time prior to the Second Closing
Date, in which case all of the obligations of the parties not performed prior to
the date of termination shall be of no further force or effect.
16.2 Termination by MK Rail. By MK Rail, by written notice to
MKO, if the Second Closing has not occurred on or before December 31, 1996, and
such failure to close has not been caused by the default by MK Rail of any of
its material representations, warranties,
agreements or covenants under this Agreement.
16.3 Termination by MKO. By MKO, by written notice to MK Rail,
if either of the following occurs:
(a) If the Second Closing has not occurred on or before the
latest of (i) August 30, 1996, (ii) the date sixty (60) days after the filing by
MK of a petition under Title 11 of the United States Bankruptcy Code and of a
Conforming Plan which has received the consents of the creditors described in
clause (a) of the definition of MK Requisite Creditors or (iii) the date the
Distribution Condition and the condition set forth in Section 11.5 hereof have
been satisfied or waived by MK Rail, and such failure to close has not been
caused by the default by MKO or MKC of any of their respective material
representations, warranties, agreements or covenants under this Agreement.
(b) Effective on any date after December 31, 1996, if both (i)
the Second Closing has not occurred on or before the termination date and such
failure to close by said date has not been caused by a breach by MKO or MKC of
any of their respective material representations, warranties, agreement or
covenants under this Agreement and (ii) MKO has given MK Rail at least thirty
(30) days advance written notice of its intention to terminate under this
subsection (b), which notice sets forth the proposed termination date, and MK
Rail (A) has not prior to the proposed termination date given MKO written notice
that it waives any MK Rail Second Closing Conditions that have not been
satisfied and (B) has not tendered for payment to MKO the full amount of the
Final Installment (and, to the extent not previously paid, the Reduction
Payment) within five (5) business days after giving such written notice to MKO.
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16.4 Effect of Termination. (a) Upon a termination under
Section 16.2 or 16.3, any party who is not in default of its material
representations, warranties, agreements and covenants under this Agreement shall
have no further obligations hereunder. A failure to obtain a consent or approval
or to consummate a transaction that is a condition to a closing shall not
constitute such a default by a party provided, in the case of consents or
approvals, that the party has complied with any obligation expressly set forth
hereunder with respect to attempting to obtain such consent or approval. A
termination under Section 16.2 or 16.3 hereof shall not excuse any party that is
in default of any of its material representations, warranties, agreements or
covenants under this Agreement from any liability the party may have to any
other party as a result of such default.
(b) A termination hereunder shall have no effect on the Rights
Plan Amendment, which shall be governed by its terms, or on the Debt Reduction,
if the Reduction Payment has been delivered to MKC.
17. Transfer of Note. MKO shall not convey, negotiate,
endorse, assign or otherwise transfer its right, title or interest in the Note
to any party prior to the termination of this Agreement unless such party has
agreed by a written agreement in form and substance satisfactory to MK Rail in
its reasonable discretion to assume and be bound by all of the obligations of
MKO under this Agreement. Notwithstanding the foregoing, it is understood that
MKO has pledged and will continue to pledge the Note to secure its obligations
to certain of its lenders that have expressly consented in writing to this
Agreement and to the transactions contemplated hereby and the conditions and
restrictions set forth herein, a copy of which consent has been provided to MK
Rail as described in Section 1 hereof.
18. Further Assurances. MKO, MKC and MK Rail hereby agree to
execute and deliver such other instruments, and take such other action, as
either party may reasonably request of the other party hereto in connection with
the transactions contemplated by this Agreement and the Stockholders Agreement.
19. Status of Note and Note Agreement. Unless and until the
Second Closing occurs, and notwithstanding termination of this Agreement in
accordance with its terms, the Note (reduced as provided herein if the Reduction
Payment has been delivered to MKO) and the Note Agreement shall continue to be
in full force and effect.
20. Restriction on Ownership Changes of MK Rail and MK. MK
shall not, until after the Second Closing Date or the termination of this
Agreement in accordance with its terms, transfer any Common Stock of MK Rail or
permit any party to take, or to permit any other party to take, any other action
or enter, or permit any other party to enter, into any agreement that could
cause there to be an ownership change of MK Rail or MK for purposes of Section
382 of the Internal Revenue Code of 1986, as amended. Nothing herein that states
that MK shall not permit a third party to act in a certain manner shall be
deemed to require MK to take any action with respect to a third party over which
it does not have control unless by contract or otherwise the
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<PAGE>
action in question cannot be taken by the third party without the consent or
approval or other action of either MK or a party which is controlled by MK.
21. No Effect on Other Rights and Obligations Among the
Parties. Except as expressly provided herein, in the Stockholders Agreement or
the Rights Amendment, neither this Agreement nor the Stockholders Agreement, nor
the consummation of the transactions contemplated hereby or thereby, nor the
Plan, shall in any way affect or impair or constitute a waiver or release of any
rights or obligations of the parties hereto.
22. Governing Law. This Agreement shall be deemed to be a
contractual obligation under, and shall be governed by and construed in
accordance with, the laws of the State of Delaware without regard to conflicts
of laws principles.
23. Notices. All notices, requests, demands and other
communications which are required or may be given under this Agreement shall be
in writing and shall be deemed to have been duly given if delivered personally
or by registered or certified mail or recognized overnight delivery service,
return receipt requested, charges prepaid, or by confirmed facsimile
transmission:
(a) If to MK Rail, to:
MK Rail Corporation
1200 Reedsdale Street
Pittsburgh, Pennsylvania 15233
Attention: Chairman
FAX: (412) 321-0111
Confirm: (412) 237-2250
With a copy to:
Michael A. Weiss, Esq.
Doepken Keevican & Weiss
37th Floor, USX Tower
600 Grant Street
Pittsburgh, Pennsylvania 15219
FAX: (412) 355-2609
Confirm: (412) 355-2614
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(b) If to MKO or MKC, to:
Morrison Knudsen Corporation
720 Park Boulevard
Boise, Idaho 83712
Attention: President
FAX: [(208) 386-7186]
Confirm: [(208) 386-5000]
With a copy to:
Robert Dean Avery, Esq.
Jones, Day, Reavis & Pogue
Suite 4600
555 West Fifth Street
Los Angeles, California 90013-1025
FAX: (213) 243-2539
Confirm: (213) 489-3939
and
Mellon Bank, N.A.
One Mellon Bank Center
Pittsburgh, PA 15219-1886
Attention: Alan Kopolow
FAX: (412) 234-0286
Confirm: (412) 236-1013
24. Interpretation. The headings of the various sections
hereof are for convenience of reference only and shall not affect the meaning or
construction of any provision hereof. Unless the context of this Agreement
otherwise clearly requires, references to the plural include the singular, the
singular the plural and the part the whole and "or" has the inclusive meaning
represented by the phrase "and/or". The words "hereof", "herein", "hereunder"
and similar terms in this Agreement refer to this Agreement as a whole and not
to any particular provision of this Agreement.
25. Entire Agreement; Amendment; Waiver. This Agreement and
the Stockholders Agreement and the exhibits hereto constitute the entire
agreement between the parties regarding the subject matter hereof. Subject to
Section 16.4(b) hereof and Section 12.8 of the Stockholders Agreement, it is
acknowledged and agreed that said documents evidence and effect one and the same
integrated transaction and that the consideration for any and all agreements,
releases, promises, or obligations of one party to the other under said
documents consists of all of the agreements, releases, covenants, promises and
obligations of the other party contained in all of
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<PAGE>
said documents. This Agreement may not be amended or altered in any manner
unless such amendment or alteration is in writing and signed by each of MKO, MKC
and MK Rail. No covenant or condition or any other part of this Agreement may be
waived except by written instrument signed and made a part hereof by MKO, MKC
and MK Rail. The failure of any party hereto to enforce any of the provisions of
this Agreement or the waiver thereof in any instance will not be construed as a
general waiver or relinquishment on its part of any such provisions, but the
same will be and remain in full force and effect. Notwithstanding the foregoing,
it is understood and agreed that the Note and the transactions relating thereto
are also governed by the Note Purchase Agreement and the Global Settlement
Agreement.
26. Successors and Assigns. This Agreement shall be binding
upon MKO, MKC and MK Rail and their respective successors and assigns, and shall
inure to the benefit of MKO, MKC and MK Rail and their respective successors and
assigns. No party hereto shall have any right to assign its rights or delegate
its duties under this Agreement without the other parties' prior written
consent.
27. Counterparts. This Agreement may be executed in any number
of counterparts and by different parties hereto on separate counterparts, each
of which, when so executed and delivered, shall be an original, but all such
counterparts shall together constitute one and the same instrument.
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<PAGE>
IN WITNESS WHEREOF, the undersigned, intending to be legally
bound hereby, have duly executed and delivered this Agreement as of the date
first above written.
MK RAIL CORPORATION
By:_________________________
John C. Pope, Chairman
MORRISON KNUDSEN CORPORATION
an Ohio corporation
By:_________________________
Name:
Title:
MORRISON KNUDSEN CORPORATION
a Delaware corporation
By:_________________________
Name:
Title:
<PAGE>
STOCKHOLDERS AGREEMENT
dated as of June 20, 1996
between
MK RAIL CORPORATION
and
MORRISON KNUDSEN CORPORATION
<PAGE>
STOCKHOLDERS AGREEMENT
Stockholders Agreement (this "Agreement") dated as of June 20, 1996
between MK Rail Corporation, a Delaware corporation (the "Company"), and
Morrison Knudsen Corporation, an Ohio corporation ("MKO").
RECITALS
WHEREAS, in connection with the reorganization of Morrison Knudsen
Corporation, a Delaware corporation ("MK"), certain creditors of MK and MKO will
acquire restricted shares of Common Stock held by MKO, and the Company has
agreed to provide certain rights to such future holders to cause the shares so
acquired to be registered pursuant to the Securities Act; and
WHEREAS, the Company, at the request of MK and MKO, has, by execution
of a Second Amendment to Rights Agreement (the "Rights Plan Amendments") of even
date herewith, made certain amendments to the Rights Agreement between MK Rail
and Chemical Mellon Shareholder Services, L.L.C. dated as of January 19, 1996,
as amended (the "Rights Plan"), in order to facilitate the obtaining by MK and
MKO of the acceptances required to confirm a plan of reorganization that MK
contemplates filing with the Bankruptcy Court pursuant to which, among other
things, the restricted shares of Common Stock are to be transferred to creditors
of MK; and
WHEREAS, the parties hereto desire to set forth the rights of such
future holders and the Company's obligations to cause the registration of the
Registrable Securities pursuant to the Securities Act; and
WHEREAS, the Company, MKO and such future holders have agreed upon
certain matters relating to the governance of the Company and to the Rights Plan
Amendment.
NOW, THEREFORE, in consideration of good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
Section 1. Definitions and Usage. As used in this Agreement:
1.1. Definitions.
Affiliate. "Affiliate" means Affiliate as defined in Rule 12b-2
promulgated by the Commission under the Exchange Act.
Agent. "Agent" means the principal placement agent on an agented
placement of Registrable Securities.
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Bankruptcy Court. "Bankruptcy Court" shall mean the United States
Bankruptcy Court for the District of Delaware, in which court the Plan has
been filed.
Certificate Amendment. "Certificate Amendment" shall have the meaning
set forth in Section 9.5.
Commission. "Commission" shall mean the United States Securities and
Exchange Commission.
Common Stock. "Common Stock" shall mean (i) the common stock, par
value $.01 per share, of the Company, and (ii) shares of capital stock of
the Company issued by the Company in respect of or in exchange for shares
of such common stock in connection with any stock dividend or distribution,
stock split-up, recapitalization, recombination or exchange by the Company
generally of shares of such common stock.
Continuously Effective. "Continuously Effective," with respect to a
specified registration statement, shall mean that it shall not cease to be
effective and available for Transfers of Registrable Securities thereunder
for longer than either (i) any ten consecutive business days, or (ii) an
aggregate of fifteen business days during the period specified in the
relevant provision of this Agreement.
Demand Registration Request. "Demand Registration Request" shall have
the meaning set forth in Section 2.1(i).
Demand Registration Statement. "Demand Registration Statement" shall
have the meaning set forth in Section 2.1(i).
Demanding Holders. "Demanding Holders" shall have the meaning set
forth in Section 2.1(i).
Distribution Date. "Distribution Date" shall mean the date MK Rail
Common Stock owned by MKO on the date hereof has been distributed to
creditors of MKO in any case under Title 11 of the United States Bankruptcy
Code or through a foreclosure against MKO. Election Request. "Election
Request" shall have the meaning set forth in Section 9.6.
Exchange Act. "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended, and the rules and regulations promulgated thereunder.
Holder. "Holders" shall mean MKO and the Transferees of the Common
Stock held by MKO or their Transferees in accordance with Section 8.
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<PAGE>
Majority Selling Holders. "Majority Selling Holders" means those
Selling Holders whose Registrable Securities included in a registration
represent a majority of the Registrable Securities of all Selling Holders
included therein.
Market Value. "Market Value" of Registrable Securities as of a given
date shall mean the average closing price for such securities over the ten
(10) business days immediately preceding said date as quoted on the NASDAQ
National Market System or such other securities exchange on which said
securities are listed.
Note Cancellation Agreement. "Note Cancellation Agreement" shall refer
to the Note Cancellation and Restructuring Agreement of even date herewith
by and among the Company, MKO and MK.
Outside Director. "Outside Director" shall mean a director of the
Company who (i) is not and has not been employed by MK, MKC or the Company
or their respective subsidiaries in an executive capacity within the five
years immediately prior to the annual meeting at which the nominees of the
board of directors will be voted upon; (ii) is not (and is not affiliated
with a company or a firm that is) a significant advisor or consultant to
the Company or its subsidiaries; (iii) is not affiliated with a significant
customer or supplier of the Company or its subsidiaries; (iv) does not have
significant personal services contract(s) with the Company or its
subsidiaries; (v) is not affiliated with a tax-exempt entity that receives
significant contributions from the Company or its subsidiaries; and (vi) is
not a spouse, parent, sibling or child or any person described by (i)
through (v) of this definition.
Person. "Person" shall mean any individual, corporation, partnership,
joint venture, association, joint-stock company, limited liability company,
trust, unincorporated organization or government or other agency or
political subdivision thereof.
Piggyback Registration Statement. "Piggyback Registration Statement"
shall have the meaning set forth in Section 3.
Plan. "Plan" shall mean the plan of reorganization with respect to MK,
which plan of reorganization shall contain substantially the terms set
forth in Exhibit C to the Note Cancellation Agreement and which plan of
reorganization shall not contain any terms or provisions that are
inconsistent with the Note Cancellation Agreement, this Agreement or the
terms set forth in such Exhibit C.
Register, Registered and Registration. "Register", "registered", and
"registration" shall refer to a registration effected by preparing and
filing a registration statement or similar document in compliance with the
Securities Act, and the declaration or ordering by the Commission of
effectiveness of such registration statement or document.
Registrable Securities. "Registrable Securities" shall mean, subject
to Section 8: (i) the Shares owned by the Holders on any date of
determination, (ii) any shares of Common
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<PAGE>
Stock or other securities issued as (or issuable upon the conversion or
exercise of any warrant, right or other security which is issued as) a
dividend or other distribution with respect to, or in exchange by the
Company generally for, or in replacement by the Company generally of, such
Shares; and (iii) any securities issued in exchange for Shares in any
merger or reorganization of the Company; provided, however, that
Registrable Securities shall not include any securities which have
theretofore been registered and sold to the public in a bona fide public
offering pursuant to the Securities Act or which have been sold to the
public pursuant to Rule 144 or any similar rule promulgated by the
Commission pursuant to the Securities Act.
Registrable Securities then outstanding. "Registrable Securities then
outstanding" shall mean, with respect to a specified determination date,
the Registrable Securities owned by all Holders on such date.
Registration Expenses. "Registration Expenses" shall have the meaning
set forth in Section 6.1.
Securities Act. "Securities Act" shall mean the Securities Act of
1933, as amended, and the rules and regulations promulgated thereunder.
Selling Holders. "Selling Holders" shall mean, with respect to a
specified registration pursuant to this Agreement, Holders whose
Registrable Securities are included in such registration.
Shares. "Shares" shall mean the shares of Common Stock acquired by
certain creditors of MK in connection with the reorganization of MK.
Shelf Registration Statement. "Shelf Registration Statement" shall
have the meaning set forth in Section 2.2.
Standstill Termination Date. "Standstill Termination Date" shall have
the meaning set forth in Section 9.2.
Stockholders Meeting. "Stockholders Meeting" shall have the meaning
set forth in Section 9.7.
Substantial Stockholder. "Substantial Stockholder" shall mean any
Person beneficially owning 5% of more of the outstanding Common Stock.
Transfer. "Transfer" shall mean and include the act of selling,
giving, transferring, creating a trust (voting or otherwise), assigning or
otherwise disposing of (other than pledging, hypothecating or otherwise
transferring as security) (and correlative words shall have correlative
meanings); provided however, that any transfer or other disposition upon
foreclosure or other exercise of remedies of a secured creditor after an
event of default under or with respect to a
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<PAGE>
pledge, hypothecation or other transfer as security shall constitute a
"Transfer." "Transferee" shall mean any Person who acquires Common Stock
pursuant to a Transfer.
Underwriters' Representative. "Underwriters' Representative" shall
mean the managing underwriter, or, in the case of a co-managed
underwriting, the lead manager.
Violation. "Violation" shall have the meaning set forth in Section
7.1.
1.2. Usage.
(i) References to a Person are also references to its assigns and
successors in interest (by any means whatever, including merger,
consolidation or sale of all or substantially all the assets of such
Person or otherwise, as the case may be).
(ii) References to Registrable Securities "owned" by a Holder shall include
Registrable Securities beneficially owned by such Person but which are
held of record in the name of a nominee, trustee, custodian, or other
agent, but shall exclude shares of Common Stock held by a Holder
(other than the liquidating trust contemplated by the Plan) in a
fiduciary capacity for customers of such Person.
(iii)References to a document are to it as amended, waived and otherwise
modified from time to time and references to a statute or other
governmental rule are to it as amended and otherwise modified from
time to time (and references to any provision thereof shall include
references to any successor provision).
(iv) References to Sections or to Schedules or Exhibits are to sections
hereof or schedules or exhibits hereto, unless the context otherwise
requires.
(v) The definitions set forth herein are equally applicable both to the
singular and plural forms and the feminine, masculine and neuter forms
of the terms defined.
(vi) The term "including" and correlative terms shall be deemed to be
followed by "without limitation" whether or not followed by such words
or words of like import.
(vii)The term "hereof" and similar terms refer to this Agreement as a
whole.
(viii) The "date of" any notice or request given pursuant to this Agreement
shall be determined in accordance with Section 12.2.
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<PAGE>
Section 2. Demand and Shelf Registration Statements.
2.1. (i) At any time during the period commencing on the date of the first
filing by the Company of its Annual Report on Form 10-K that follows the
effective date of the Plan and ending on the fifth anniversary thereof, one or
more Holders of Registrable Securities may at their option make a written
request (a "Demand Registration Request") to the Company (the "Demanding
Holders") requesting that the Company file with the Commission a registration
statement on an appropriate form under the Securities Act (a "Demand
Registration Statement") to register (subject to Section 2.6) all or such number
of such Demanding Holder's Registrable Securities as the Demanding Holder shall
request in writing; provided, however, that no request may be made pursuant to
this Section 2.1 if (A) within twelve months prior to the date of such request a
Demand Registration Statement pursuant to this Section 2.1 shall have been
declared effective by the Commission or (B) the Registrable Securities that the
Demanding Holders request be included in the Demand Registration Statement do
not have a Market Value as of the date the request is given to the Company of at
least $5,000,000. Notwithstanding the foregoing, in no event shall a Demand
Registration Request be effective unless and until the Registrable Securities
that the Demanding Holders request be included in the Demand Registration and
that other Holders request be included in the Demand Registration pursuant to
Section 2.1(iii) hereof have an aggregate Market Value determined as of the day
the last such request is received of at least $20,000,000. After an effective
Demand Registration Request is made, the Company shall file with the Commission
the Demand Registration Statement. Any Demand Registration Statement shall
relate to an underwritten offering (whether on a "firm," "best efforts" or "all
reasonable efforts" basis or otherwise) or an agented offering. Any Demand
Registration Request made pursuant to this Section 2.1 shall be addressed to the
attention of the Secretary of the Company and shall specify the number of
Registrable Securities to be registered, the intended methods of disposition
thereof and that the request is for a Demand Registration Statement pursuant to
this Section 2.1.
(ii) The Company shall be entitled to postpone for up to 120 days the
filing of any Demand Registration Statement otherwise required to be prepared
and filed pursuant to this Section 2.1 if (A) the Board of Directors of the
Company determines, in its good faith reasonable judgment, that such
registration and the Transfer of Registrable Securities contemplated thereby
would materially interfere with, or require the premature disclosure of, any
financing, acquisition or reorganization involving the Company or any of its
subsidiaries or would otherwise require the premature disclosure of any other
material nonpublic information as to which the Company has a bona fide business
purpose for maintaining its confidentiality and (B) the Company promptly gives
the Demanding Holders notice of such determination (which notice need not
disclose the fact, event or information); provided, however, that the Company
shall not have, within the twelve months prior to the date of the postponement,
postponed pursuant to this Section 2.1(ii) the filing of any other Demand
Registration Statement that was subsequently abandoned because the Demand
Registration Request relating thereto was withdrawn.
(iii) Whenever the Company receives a demand pursuant to Section 2.1(i) to
effect the registration of any Registrable Securities, the Company shall
promptly give written notice of
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such proposed registration to all Holders. Any such Holder may, within thirty
days after receipt of such notice, request in writing that all of such Holder's
Registrable Securities, or any portion thereof designated by such Holder, be
included in the registration.
2.2. As soon as practicable after the later of (i) the entry by the
Bankruptcy Court of the order approving the assumption of this Agreement and the
transactions contemplated hereby and (ii) July 1, 1996, the Company shall file
with the Commission a registration statement on Form S-3 in accordance with the
Securities Act for an offering on a delayed or continuous basis pursuant to Rule
415 under the Securities Act (the "Shelf Registration Statement"). The Company
shall use its reasonable best efforts to have the Shelf Registration Statement
declared effective on the effective date of the Plan. Subject to compliance with
the provisions of Section 5, the Holders shall be entitled to have all or a
portion of such Holders' Registrable Securities included in the Shelf
Registration Statement.
2.3. The Company shall be obligated to effect no more than four Demand
Registration Statements pursuant to this Agreement. For purposes of the
preceding sentence, a Demand Registration Statement shall not be deemed to have
been effected (i) unless a registration statement with respect thereto has
become effective, (ii) if after such registration statement has become
effective, such registration or the related offer, sale or distribution of
Registrable Securities thereunder is interfered with by any stop order,
injunction or other order or requirement of the Commission or other governmental
agency or court for any reason not attributable to any of the Selling Holders
and such interference is not thereafter eliminated, or (iii) if the conditions
to closing specified in any underwriting agreement containing usual and
customary terms entered into in connection with such registration are not
satisfied or waived, other than by reason of a failure on the part of any of the
Selling Holders. The Company's obligation to effect a given Demand Registration
pursuant to Section 2.1 shall be deemed to have been satisfied upon the earlier
of (x) the date as of which all of the Registrable Securities included therein
shall have been disposed of pursuant to the Demand Registration Statement, and
(y) the date as of which such Demand Registration Statement shall have been
Continuously Effective for a period of 90 days.
2.4. Whenever the Company receives a request for a Demand Registration
Statement pursuant to Section 2.1, the Company shall have the right to register
in any such Demand Registration Statement and to include in any related offering
shares of authorized but unissued Common Stock. The Company may exercise the
foregoing option to include additional shares by written notice delivered to
each of the Selling Holders within 30 days following the Company's receipt of
the request for a Demand Registration Statement pursuant to Section 2.1(i).
2.5. In any Demand Registration Statement, the managing or lead underwriter
or underwriters (for an underwritten offering) or the lead agent (for an agented
offering) shall be a nationally recognized firm selected by the Majority Selling
Holders with the approval of the Company, which approval shall not be
unreasonably withheld.
2.6 Whenever the Company effects a Demand Registration Statement pursuant
to Section 2.1, if the Underwriters' Representative or Agent advises the Company
and each Selling
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Holder in writing that, in its opinion, the amount of securities requested to be
included in such offering (whether by the Company or the Selling Holders)
exceeds the amount which can be sold in such offering within a price range
acceptable to the Majority Selling Holders, the securities to be included in
such offering and the related registration shall be reduced in the following
order to an amount which can be sold within such price range: first, the amount
of securities, if any, that the Company has requested be included in the
offering and registration shall be reduced until no such securities are included
therein; and second, the amount of Registrable Securities that the Selling
Holders have requested be included in the offering and registration shall be
reduced on a pro rata basis among all Selling Holders based on the relative
number of securities each has requested be included in such offering.
2.7. Notwithstanding anything in this Agreement to the contrary, neither MK
nor MKO shall have the right to dispose of any Registrable Securities pursuant
to any registration statement effected pursuant to Sections 2 or 3.
Section 3. Piggyback Registration Statements.
3.1. If at any time the Company proposes to register (including for this
purpose a registration effected by the Company for stockholders of the Company
other than the Holders) equity securities or securities convertible or
exchangeable into equity securities under the Securities Act in connection with
a public offering solely for cash (other than by a registration on Form S-4 or
S-8 or any successor or similar forms or filed in connection with an exchange
offer or any offering of securities solely to the Company's existing
stockholders or otherwise pursuant to a dividend reinvestment plan or a dividend
reinvestment and stock purchase plan, and other than pursuant to Section 2), the
Company shall promptly give each Holder of Registrable Securities written notice
of such registration (a "Piggyback Registration Statement"). Upon the written
request of each Holder given within fifteen days following the date of such
notice, the Company shall cause to be included in such registration statement
and use its reasonable best efforts to be registered under the Securities Act
all the Registrable Securities that each such Holder shall have requested to be
registered; provided, however, that such right of inclusion shall not apply to
any registration statement covering an underwritten offering of convertible or
exchangeable securities or equity securities other than Common Stock if the
Underwriters' Representative or Agent shall advise the Company in writing (with
a copy to each Selling Holder) that in its opinion, the kind of Registrable
Securities requested to be included in the Piggyback Registration Statement
would adversely affect the offering of the convertible or exchangeable
securities or equity securities or the timing thereof. The Company shall have
the absolute right at any time to withdraw or cease to prepare or file any
registration statement for any offering referred to in this Section 3 without
any obligation or liability to any Holder.
3.2 If the Underwriters' Representative or Agent shall advise the Company
in writing (with a copy to each Selling Holder) that, in its opinion, the amount
of securities requested to be included in such offering (whether by the Company,
the Selling Holders or other selling stockholders) exceeds the amount which can
be sold in such offering within a price range
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acceptable to the Company, the securities to be included in such offering and
the related registration shall be reduced in the following order to an amount
which can be sold within such price range: first the amount of securities to be
included in the offering and registration by any selling stockholder other than
the Selling Holders shall be reduced until no such securities are included
therein; second, the amount of Registrable Securities that the Selling Holders
have requested be included in the offering and registration shall be reduced on
a pro rata basis among all Selling Holders based on the relative number of
securities each has requested be included in such offering; and third, the
amount of securities to be included in the offering and registration by the
Company shall be reduced.
3.3 During the term of this Agreement, each Holder shall be entitled to
have its Registrable Securities included in an unlimited number of Piggyback
Registration Statements pursuant to this Section 3.
3.4 If the Company has previously filed a registration statement with
respect to Registerable Securities pursuant to Section 2.1 or pursuant to this
Section 3, and if such previous registration statement has not been withdrawn or
abandoned, the Company will not file or cause to be effected any other
registration of any of its equity securities or securities convertible or
exchangeable into or exercisable for its equity securities under the Securities
Act (except on Form S-8 or any successor form), whether on its own behalf or at
the request of any holder or holders of such securities, until a period of 180
days has elapsed from the effective date of such a previous registration
statement.
Section 4. Registration Procedures. Whenever required under Section 2 or Section
3 to effect the registration of any Registrable Securities, the Company shall,
as expeditiously as practicable:
4.1. Prepare and file with the Commission a registration statement with
respect to such Registrable Securities, subject to Section 2.2, and use the
Company's reasonable best efforts to cause such registration statement to become
effective, in each instance giving due regard to the need to prepare current
financial statements, conduct due diligence and complete other actions that are
reasonably necessary to effect a registered public offering; provided, however,
that before filing a registration statement or prospectus or any amendments or
supplements thereto, including documents incorporated by reference after the
initial filing of the registration statement and prior to effectiveness thereof,
the Company shall use its reasonable efforts to furnish to one firm of legal
counsel for the Selling Holders (selected by the Majority Selling Holders)
copies of all such documents in the form substantially as proposed to be filed
with the Commission at least five business days prior to filing for review and
comment by such counsel.
4.2. (i) Use the Company's reasonable best efforts to keep the relevant
registration statement Continuously Effective (x) if a Demand Registration
Statement, for up to 90 days or until such earlier date as of which all the
Registrable Securities under the Demand Registration Statement shall have been
disposed of in the manner described in the Demand Registration Statement, and
(y) if a Shelf Registration Statement, subject to the immediately following
sentence,
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for three years. As soon as reasonably practicable after the occurrence of any
fact or event that makes untrue any statement of a material fact made in the
Shelf Registration Statement or that requires the making of any additions to or
changes in the Shelf Registration Statement in order to make the statements
therein, in light of the circumstances in which they were made, not misleading,
the Company shall prepare and file a supplement or amendment to the Shelf
Registration Statement or related prospectus, or a document incorporated therein
by reference, so that such Shelf Registration Statement and related prospectus
shall not contain any such untrue statement of a material fact or any such
omission of a material fact; provided, however, that if the Board of Directors
of the Company determines, in its good faith reasonable judgment, that the
Transfer of Registrable Securities pursuant to the Shelf Registration Statement
would materially interfere with, or require the premature disclosure of, any
financing, acquisition or reorganization involving the Company or any of its
subsidiaries or otherwise would require premature disclosure of any other
material nonpublic information as to which the Company has a bona fide business
purpose for maintaining its confidentiality, then for so long as such
circumstances or such business purpose continues to exist (provided that the
number of days of any such suspension may not exceed an aggregate of 120 days in
any calendar year), the Company shall not be required to prepare or file any
such supplement, amendment or document.
(ii) Each Holder agrees by acquisition of a Registrable Security that, upon
receipt of any notice from the Company of the existence of any fact or event of
the kind described in Section 2.1(ii) or 4.2(i) (which notice need not disclose
the fact, event or information), such Holder will forthwith discontinue the
disposition of any Registrable Securities pursuant to the Shelf Registration
Statement until such Holder's receipt of the copies of a supplemented or amended
prospectus as contemplated by Section 4.2(i), or until it is advised in writing
by the Company that the use of the prospectus related to the Shelf Registration
Statement may be resumed, and, has received copies of any additional or
supplemental filings that are incorporated by reference in such prospectus. If
so directed by the Company, each Holder will deliver to the Company all copies,
other than permanent file copies then in such Holder's possession, of the
prospectus covering such Registrable Securities that was current at the time of
receipt of such notice.
(iii) Notwithstanding the foregoing, if, in the case of a Demand
Registration Statement, the filing of a registration statement is postponed as
permitted by Section 2.1(ii), or, in the case of a Shelf Registration Statement,
the preparation and filing of a supplement, amendment or incorporated document
is postponed as permitted by Section 4.2(i) or Section 4.2(ii), the five-year
period for filing a Demand Registration Statement or the three-year period of
effectiveness of the Shelf Registration Statement, as the case may be, shall be
extended by the aggregate number of days of such postponement.
4.3. Subject to Section 4.2(i), prepare and file with the Commission such
amendments, supplements or incorporated documents to such registration statement
and the prospectus used in connection with such registration statement as may be
necessary to comply with the provisions of the Securities Act with respect to
the disposition of all securities covered by such registration statement. If the
registration statement is for an underwritten offering, the Company shall amend
the registration statement or supplement the prospectus whenever required by the
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terms of the underwriting agreement entered into pursuant to Section 4.6. In the
event that any Registrable Securities included in a registration statement
subject to, or required by, this Agreement remain unsold at the end of the
period during which the Company is obligated to use its reasonable best efforts
to maintain the effectiveness of such registration statement, the Company may
file a post-effective amendment to the registration statement for the purpose of
removing such securities from registered status.
4.4. Furnish to each Selling Holder of Registrable Securities copies of the
registration statement, any pre-effective or post-effective amendment thereto,
the prospectus, including each preliminary prospectus and any amendments or
supplements thereto, in each case in conformity with the requirements of the
Securities Act.
4.5. Use the Company's reasonable best efforts (i) to register and qualify
the securities covered by such registration statement under the securities or
Blue Sky laws of such states or jurisdictions as shall be reasonably requested
by the Underwriters' Representative or Agent (as applicable, or if inapplicable,
the Majority Selling Holders), and (ii) to obtain the withdrawal of any order
suspending the effectiveness of a registration statement, or the lifting of any
suspension of the qualification (or exemption from qualification) of the offer
and transfer of any of the Registrable Securities in any jurisdiction, at the
earliest practicable moment; provided, however, that the Company shall not be
required in connection therewith or as a condition thereto to qualify to do
business, subject itself to taxation or to file a general consent to service of
process in any states or jurisdictions where it is not now so subject.
4.6. In the event of Demand Registration Statement, enter into and perform
the Company's obligations under an underwriting or agency agreement (including
indemnification and contribution obligations of underwriters or agents), in
usual and customary form, with the managing underwriter or underwriters of or
agents for such offering. The Company shall also cooperate with the Majority
Selling Holders and the Underwriters' Representative or Agent for such offering
in the marketing of the Registrable Securities, including making reasonably
available the Company's officers, accountants, counsel, premises, books and
records for such purpose.
4.7. Promptly notify each Selling Holder of any stop order issued or
threatened to be issued by the Commission in connection therewith (and take all
reasonable actions required to prevent the entry of such stop order or to remove
it if entered).
4.8. Make generally available to the Company's security holders an earnings
statement satisfying the provisions of Section 11(a) of the Securities Act no
later than 90 days following the end of the 12-month period beginning with the
first month of the Company's first fiscal quarter commencing after the effective
date of each registration statement filed pursuant to this Agreement.
4.9. Make reasonably available for inspection by any Selling Holder, any
underwriter participating in such offering and the representatives of such
Selling Holder and Underwriter (but not more than one firm of legal counsel to
such Selling Holders), all financial
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and other information as shall be reasonably requested by them, and provide the
Selling Holder, any underwriter participating in such offering and the
representatives of such Selling Holder and Underwriter the opportunity to
discuss the business affairs of the Company with its principal executives and
independent public accountants who have certified the audited financial
statements included in such registration statement, in each case to the extent
necessary to enable them to exercise their due diligence responsibility under
the Securities Act; provided, however, that information that the Company
determines, in good faith, to be confidential and which the Company advises such
Person in writing, is confidential shall not be disclosed unless such Person
signs a confidentiality agreement reasonably satisfactory to the Company.
4.10. In the event of a Demand Registration Statement, use the Company's
reasonable best efforts to obtain a "comfort letter" from its independent public
accountants and legal opinions of counsel to the Company addressed to the
Selling Holders, in customary form and covering such matters of the type
customarily covered by such letters and in a form that shall be reasonably
satisfactory to the Majority Selling Holders. The Company shall furnish to each
Selling Holder a signed counterpart of any such comfort letter or legal opinion.
Delivery of any comfort letter shall be subject to the recipient furnishing such
written representations or acknowledgments as are customarily provided by
selling stockholders who receive such comfort letters under SAS No. 72. Nothing
in the immediately preceding sentence shall be deemed to require a Selling
Holder to make representations and warranties if the Selling Holder is willing
to receive a letter in the form to be provided to selling stockholders not
making representations and warranties under SAS No. 76.
4.11. Provide and cause to be maintained a transfer agent and registrar for
all Registrable Securities covered by such registration statement from and after
a date not later than the effective date of such registration statement.
4.12. Use all reasonable efforts to cause the Registrable Securities
covered by such registration statement, if the Common Stock is then listed on a
securities exchange or included for quotation in a recognized trading market, to
continue to be so listed or included for a reasonable period of time after the
offering.
Section 5. Holders' Obligations.
5.1. It shall be a condition precedent to the obligations of the Company to
take any action pursuant to this Agreement with respect to the Registrable
Securities of any Selling Holder of Registrable Securities that such Selling
Holder shall:
(i) furnish to the Company such information regarding such Selling Holder
and its affiliates, the number of Registrable Securities owned and
proposed to be sold by it, the intended method of disposition of such
securities and any other information as shall be required to effect
the registration of such Selling Holder's Registrable Securities, and
cooperate with the Company in preparing such registration statement
and in complying with the requirements of the Securities Act;
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(ii) agree to sell their Registrable Securities to the underwriters at the
same price and on substantially the same terms and conditions as the
Company or the other Persons on whose behalf the registration
statement was being filed have agreed to sell their securities, and
execute the underwriting agreement agreed to by the Company and the
Majority Selling Holders and customary custody arrangements, lock-up
letters, indemnities, questionnaires and other documents reasonably
required by the underwriters or agents and agreed to by the Majority
Selling Holders.
5.2. In the event that a Demand Registration Statement or a Piggyback
Registration Statement becomes effective, if and to the extent requested by the
managing underwriter or lead agent for the offering relating thereto, no Holder
shall offer, sell or agree to sell or otherwise dispose of or transfer any
Registrable Securities or securities convertible into or exchangeable or
exercisable for any Registrable Securities (other than, in the case of the
Selling Holders under the Demand Registration Statement or Piggyback
Registration Statement, pursuant to such Demand Registration Statement or
Piggyback Registration Statement, as the case may be), or exercise any right to
register any such securities, during the period commencing ten days prior to the
anticipated effective date of such registration statement and ending 120 days
from the effective date of such registration statement. In order to enforce the
foregoing agreement, the Company shall be entitled to impose stop-transfer
instructions with respect to the Registrable Securities of each Holder until the
end of such period.
Section 6. Expenses of Registration. Expenses in connection with registrations
pursuant to this Agreement shall be allocated and paid as follows:
6.1 With respect to the Shelf Registration Statement, MKO shall bear and
pay or shall reimburse the Company for, and with respect to each Demand
Registration Statement, the Company shall bear and pay, all of the expenses
incurred in connection with the registration and offering of Registrable
Securities with respect to such Shelf Registration Statement or Demand
Registration Statement, as the case may be, including, but not limited to, all
registration, filing and National Association of Securities Dealers, Inc. fees,
all fees and expenses of complying with securities or blue sky laws, all word
processing and duplicating expenses, messenger and delivery expenses, the fees
and disbursements of counsel for the Company, the fees and disbursements of the
Company's independent public accountants, including the expenses of "cold
comfort" letters required by or incident to such performance and compliance, and
all printing expenses (including the printing of certificates evidencing the
Registrable Securities and the printing of the registration statement and any
related prospectus, or any amendment or supplement thereto) (collectively, the
"Registration Expenses"); provided, however, that, the Selling Holders shall pay
(i) underwriting discounts and commissions relating to the Registrable
Securities sold by them pursuant to any such registration statement and (ii) all
fees and disbursements of counsel and any other advisors to the Selling Holders.
Notwithstanding the foregoing, in no event shall the obligations of MKO under
this Section 6.1 exceed $75,000 in the aggregate. In no event shall MKO be
responsible for the expenses of a Demand Registration Statement. To the extent
MKO is not required by this Section to pay or reimburse the Company for expenses
incurred in connection with a Shelf Registration
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Statement, those expenses shall be borne and paid by the Company, except as
expressly otherwise provided in the first sentence of this Section.
6.2 The Company shall bear and pay all Registration Expenses incurred in
connection with any Piggyback Registration Statements pursuant to Section 3,
other than (i) underwriting discounts and commissions relating to Registrable
Securities, (ii) the portion of any filing fees allocable to the Registrable
Securities included in such registration by the Holders and (iii) the fees and
disbursements of any counsel and other advisors to the Selling Holders (each of
which expenses in clauses (i) and (ii) shall be paid on a pro rata basis by the
Selling Holders of Registrable Securities included in such Piggyback
Registration Statement and which expenses in clause (iii) shall be paid on a pro
rata basis by the Selling Holders for which the expenses are incurred).
Section 7. Indemnification; Contribution. If any Registrable Securities are
included in a registration statement under this Agreement:
7.1. To the extent permitted by applicable law, the Company shall indemnify
and hold harmless each Selling Holder, its directors, officers, shareholders,
employees, investment advisors, agents and Affiliates, either direct or indirect
(and each such Affiliate's directors, officers, shareholders, employees,
investment advisors and agents) and each other Person, if any, who controls such
Selling Holder within the meaning of the Securities Act against any and all
losses, claims, damages, liabilities and expenses, including attorneys' fees and
disbursements and expenses of investigation, incurred by such party pursuant to
any actual or threatened action, suit, proceeding or investigation, to which any
of the foregoing Persons may become subject under the Securities Act, the
Exchange Act or other federal or state laws, insofar as such losses, claims,
damages, liabilities and expenses arise out of or are based upon any untrue
statement or alleged untrue statement of a material fact contained in such
registration statement, including any preliminary prospectus or final prospectus
contained therein, or any amendments or supplements thereto, or the omission or
alleged omission to state therein a material fact required to be stated therein,
or necessary to make the statements therein not misleading (collectively, a
"Violation"); provided, however, that the indemnification required by this
Section 7.1 shall not apply to amounts paid in settlement of any such loss,
claim, damage, liability or expense if such settlement is effected without the
consent of the Company (which consent shall not be unreasonably withheld), nor
shall the Company be liable in any such case for any such loss, claim, damage,
liability or expense to the extent that it arises out of or is based upon a
Violation which occurs in reliance upon and in conformity with written
information furnished to the Company by the indemnified party expressly for use
in connection with such registration.
7.2. To the extent permitted by applicable law, each Selling Holder shall
indemnify and hold harmless the Company, its directors, officers, shareholders,
employees, investment advisors, agents and Affiliates, either direct or indirect
(and each such Affiliate's directors, officers, shareholders, employees,
investment advisors and agents) and each other Person, if any, who controls the
Company within the meaning of the Securities Act, any other Selling Holder and
any controlling Person of any such other Selling Holder against any and all
losses, claims,
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damages, liabilities and expenses, including attorneys' fees and disbursements
and expenses of investigation, incurred by such party pursuant to any actual or
threatened action, suit, proceeding or investigation, to which any of the
foregoing Persons may otherwise become subject under the Securities Act, the
Exchange Act or other federal or state laws, insofar as such losses, claims,
damages, liabilities and expenses arise out of or are based upon any Violation,
in each case to the extent (and only to the extent) that such Violation occurs
in reliance upon and in conformity with written information furnished by such
Selling Holder expressly for use in connection with such registration statement;
provided, however, that (x) the indemnification required by this Section 7.2
shall not apply to amounts paid in settlement of any such loss, claim, damage,
liability or expense if settlement is effected without the consent of the
relevant Selling Holder of Registrable Securities, which consent shall not be
unreasonably withheld, (y) in no event shall the amount of any indemnity under
this Section 7.2 and of the contribution obligation of a Selling Holder under
Section 7.4 exceed the net proceeds from the applicable offering received by
such Selling Holder, and (z) the obligation to provide indemnification hereunder
shall be several, and not joint and several, among the indemnifying parties.
7.3. Promptly after receipt by an indemnified party under this Section 7 of
notice of the commencement of any action, suit, proceeding, investigation or
threat thereof made in writing for which such indemnified party may make a claim
under this Section 7, such indemnified party shall deliver to the indemnifying
party a written notice of the commencement thereof. The failure to deliver
written notice to the indemnifying party within a reasonable time following the
commencement of any such action, if and to the extent materially prejudicial to
its ability to defend such action, shall relieve such indemnifying party of any
liability to the indemnified party under this Section 7 but shall not relieve
the indemnifying party of any liability that it may have to any indemnified
party otherwise than pursuant to this Section 7. Any fees and expenses incurred
by the indemnified party (including any fees and expenses incurred in connection
with investigating or preparing to defend such action or proceeding) shall be
paid to the indemnified party, as incurred, within thirty days of written notice
thereof to the indemnifying party (regardless of whether it is ultimately
determined that an indemnified party is not entitled to indemnification
hereunder). Any such indemnified party shall have the right to employ separate
counsel in any such action, claim or proceeding and to participate in the
defense thereof, but the fees and expenses of such counsel shall be the expenses
of such indemnified party unless (i) the indemnifying party shall have failed to
promptly assume the defense of such action, claim or proceeding or (ii) the
named parties to any such action, claim or proceeding (including any impleaded
parties) include both such indemnified party and the indemnifying party, and
such indemnified party shall have been advised by its counsel that there may be
one or more legal defenses available to it which are different from or in
addition to those available to the indemnifying party and that the assertion of
such defenses would create a conflict of interest such that counsel employed by
the indemnifying party could not represent the indemnified party (in which case,
if such indemnified party notifies the indemnifying party in writing that it
elects to employ separate counsel at the expense of the indemnifying party, the
indemnifying party shall not have the right to assume the defense of such
action, claim or proceeding on behalf of such indemnified party; it being
understood, however, that the indemnifying party shall not, in connection with
any one such action, claim or proceeding or separate but substantially similar
or
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related actions, claims or proceedings in the same jurisdiction arising out of
the same general allegations or circumstances, be liable for the reasonable fees
and expenses of more than one separate firm of attorneys (together with
appropriate local counsel) at any time for all such indemnified parties, unless
the indemnified party shall have been advised by its counsel that a conflict of
interest may exist between such indemnified party and any other of such
indemnified parties with respect to such action, claim or proceeding such that
the counsel could not represent the indemnified party and any other of such
indemnified parties, in which event the indemnifying party shall be obligated to
pay the fees and expenses of such additional counsel or counsels). No
indemnifying party shall be liable to an indemnified party for any settlement of
any action, proceeding or claim without the written consent of the indemnifying
party, which consent shall not be unreasonably withheld.
7.4. If the indemnification required by this Section 7 from the
indemnifying party is unavailable to an indemnified party hereunder in respect
of any losses, claims, damages, liabilities or expenses referred to in this
Section 7:
(i) The indemnifying party, in lieu of indemnifying such indemnified
party, shall contribute to the amount paid or payable by such
indemnified party as a result of such losses, claims, damages,
liabilities or expenses in such proportion as is appropriate to
reflect the relative fault of the indemnifying party and
indemnified parties in connection with the actions which resulted
in such losses, claims, damages, liabilities or expenses, as well
as any other relevant equitable considerations. The relative
fault of such indemnifying party and indemnified parties shall be
determined by reference to, among other things, whether any
Violation has been committed by, or relates to information
supplied by, such indemnifying party or indemnified parties, and
the parties' relative intent, knowledge, access to information
and opportunity to correct or prevent such Violation. The amount
paid or payable by a party as a result of the losses, claims,
damages, liabilities and expenses referred to above shall be
deemed to include, subject to the limitations set forth in
Section 7.1 and Section 7.2, any legal or other fees or expenses
reasonably incurred by such party in connection with any
investigation or proceeding.
(ii) The parties hereto agree that it would not be just and equitable
if contribution pursuant to this Section 7.4 were determined by
pro rata allocation or by any other method of allocation which
does not take into account the equitable considerations referred
to in Section 7.4(i). No Person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any Person
who was not guilty of such fraudulent misrepresentation.
7.5. The obligations of the Company and the Selling Holders of Registrable
Securities under this Section 7 shall survive the completion of any offering of
Registrable Securities pursuant to a registration statement under this
Agreement.
Section 8. Transfer of Common Stock. Notwithstanding anything in this Agreement
to the contrary, no Holder may Transfer any shares of Common Stock to any
Person, except as set forth in the last paragraph of this Section 8, unless
prior to any such Transfer such
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Person has executed an agreement (in the form of Exhibit A hereto) to be bound
by the provisions of this Agreement. The Company shall place the following
legend on any certificate representing
shares of Common Stock held by a Holder:
"This security is subject to certain restrictions on transfer
contained in a Stockholders Agreement dated as of June 20,
1996 between MK Rail Corporation and Morrison Knudsen
Corporation to which the holder of this certificate is bound,
a copy of which agreement is on file with the Secretary of MK
Rail Corporation."
In order to enforce the foregoing transfer restriction, without limiting
any other rights or remedies available to the Company, the Company shall be
entitled to impose stop-transfer instructions with respect to the Registrable
Securities of each Holder. The foregoing transfer restrictions and legend shall
be removed in connection with any sale of Common Stock to the public pursuant to
an effective registration statement or pursuant to Rule 144 or any similar rule
promulgated by the Commission under the Securities Act, in each case so long as
the specific identities of the Transferees are not known to the Holders selling
such shares prior to such sale.
Section 9. Corporate Governance Agreement.
9.1. Until either the second anniversary of the Distribution Date (or, if
an effective Election Request, as defined in Section 9.6 hereof, is made and the
Stockholders Meeting, as defined in Section 9.7 hereof, is held prior thereto,
the date of the Stockholders Meeting), each Holder (i) shall vote all of its
shares of Registrable Securities and any other voting securities of the Company
over which such Holder exercises voting power (or execute written consents in
lieu of meetings) in favor of the election of the Company's nominees for
director and against the removal of any of the Company's directors (other than a
removal for cause) at any meeting of stockholders or in any action by written
consent and (ii) shall take all other necessary or desirable actions within such
Holder's control (including, but not limited to, attendance at annual or special
stockholder meetings of the Company in person or by proxy for purposes of
obtaining a quorum) to elect such nominees and to vote against such removal of
any of the Company's directors; provided, however, that the total number of
directors on the Company's Board of Directors shall not be fewer than seven and
a majority of such directors shall at all times consist of Outside Directors.
Notwithstanding the foregoing, a Holder shall not be required to vote any voting
securities of the Company over which such Holder exercises voting power that are
not Registrable Securities (or execute written consents in lieu of meetings with
respect to such voting securities) as otherwise required by this Section to the
extent the voting securities are held or controlled by the Holder as an agent,
custodian, trustee or executor, in all cases for or on behalf of parties that
are not Holders of Registrable Securities or their Affiliates or associates (as
defined in the rules promulgated under the Exchange Act), or are controlled by
the Holder as an investment advisor for an investment company registered under
the Investment Company Act of 1940, as amended, or as an investment advisor for
any other person or group; provided, that in all cases, the arrangement whereby
the Holder owns or controls the voting securities has not been entered into for
the purpose of circumventing this Section; and further provided, in the case of
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<PAGE>
securities controlled by the Holder as an investment advisor for a person or
group that is not an investment company registered under the Investment Company
Act, that no Holder or Holders has a direct economic beneficial interest in the
person or group for which the Holder so acts as an investment advisor.
9.2. Without the prior written consent of the Company, until either (i)
ninety (90) days prior to the scheduled date of the Stockholders Meeting (if an
effective Election Request is made pursuant to Section 9.6 hereof) or (ii) the
second anniversary of the Distribution Date (if no effective Election Request is
made) (in either case, the "Standstill Termination Date"), no Holder may (i)
solicit proxies (as such terms are defined in Rule 14a-1 under the Exchange
Act), whether or not such solicitation is exempt under 14a-2 under the Exchange
Act, with respect to any matter from holders of any shares of common or
preferred stock of the Company, or any securities convertible into or
exchangeable for or exercisable (whether currently or upon the occurrence of any
contingency) for the purchase of any such capital stock, or make any
communication exempted from the definition of solicitation by Rule
14a-1(l)(2)(iv) under the Exchange Act, or (ii) initiate, or induce or attempt
to induce any other Person or group (as defined in Section 13(d)(3) of the
Exchange Act) to initiate, any stockholder proposal or tender offer for
securities of the Company or any subsidiary thereof, any change of control of
the Company or any subsidiary thereof or the convening of a stockholders'
meeting of the Company or any subsidiary thereof; or (iii) otherwise seek or
propose (or request permission to propose) to influence or control the
management or policies of the Company or any subsidiary thereof. Nothing herein
shall be deemed to apply to a Holder to the extent the Holder is acting solely
in its capacity as an agent, custodian, trustee or executor holding securities
that are not Registrable Securities for persons that are not Holders or
Affiliates of Holders, provided that the Holder's actions are (a) at the
direction of a person or persons that are not Holders that are the beneficial
owners of the securities so held by the Holder or (b) arise from the fiduciary
duties of the Holder acting in such capacity ascertained in good faith after
consulting with and based on advice of counsel as described in reasonable detail
in a written notice given the Company at least thirty (30) days prior to taking
such action; and further provided that in all cases the arrangement whereby the
Holder holds the securities has not been entered into, and the action by the
Holder has not been taken, for the purpose of circumventing this Section.
9.3 Notwithstanding anything herein to the contrary, the provisions of
Sections 9.1 and 9.2 hereof shall terminate at such time prior to the second
anniversary of the Distribution Date, if ever, that all of the Registrable
Securities held by all Holders constitutes less than 15% of the outstanding
Common Stock.
9.4 For so long as the provisions of Section 9.1 hereof are in force and
effect, the Company shall not amend the Rights Plan (i) to change the percentage
used in the definition of "Acquiring Person" therein so that it is less than
fifteen percent (15%) or (ii) in any other manner that would deprive the Holders
of the Registrable Securities of the intended benefits of the Rights Plan
Amendment.
9.5 At the first annual meeting of the stockholders of the Company
scheduled to occur at least seventy-five (75) days after the effective date of
this Agreement, the
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Board of Directors of the Company shall propose to the stockholders of the
Company, shall recommend approval of, and shall solicit proxies voting to
approve an amendment (the "Certificate Amendment") to the Amended and Restated
Certificate of Incorporation of the Company, as amended, that, if adopted and
approved by the requisite vote of the stockholders of the Company, would amend
the first sentence of Section 3 of the Seventh Article thereof in its entirety
so it states as follows:
Subject to the rights, if any, of the holders of any series of
Preferred Stock to elect additional directors under circumstances
specified in a Preferred Stock Designation, newly created directorships
resulting from any increase in the number of Directors and any
vacancies on the Board resulting from death, resignation,
disqualification, removal or other cause, will be filled solely by the
affirmative vote of the majority of the remaining Directors then in
office, even though less than a quorum of the Board, or by a sole
remaining Director; provided, however, that at the sole option of the
Board, effected by resolution of the Board of Directors, one or more
such vacancies or newly created directorships may be filled by the
stockholders at a meeting of the stockholders called by the Board of
Directors.
If the Certificate Amendment is effectively adopted and approved by the
stockholders of the Company, the Board of Directors shall make a conforming
amendment to the first sentence of By- Law 11 of the By-Laws of the Company.
9.6 The Holders shall have the right at their option to request that the
Company hold a meeting of the stockholders as provided herein by delivery of a
written request (the "Election Request") to the Secretary of the Company at its
principal executive offices not more than one hundred twenty (120) nor less than
ninety (90) days prior to the second anniversary of the Distribution Date, which
Election Request shall identify each of the Holders making the Election Request
and shall include the information they would be required to give under By-Law 13
of the By-Laws of the Company as in effect on the date hereof as if they were
making nominations for positions as directors at an annual meeting of the
stockholders of the Company. An Election Request shall be ineffective if it has
not been executed by Holders owning Registrable Securities constituting at least
fifteen percent (15%) of the outstanding Common Stock of the Company as of the
ninetieth (90th) day prior to the second anniversary of the Distribution Date
and shall cease to be effective if prior to the second anniversary of the
Distribution Date the Holders executing the Election Request cease to own
Registrable Securities constituting at least fifteen percent (15%) of the
outstanding Common Stock of the Company. If no effective Election Request is
delivered to the Secretary of the Company at the Company's principal executive
offices not more than one hundred twenty (120) nor less than ninety (90) days
prior to said second anniversary of the Distribution Date or if, prior to the
second anniversary of the Distribution Date, the Election Request ceases to be
effective, the Holders shall have no further rights under this Section.
9.7 Provided the Certificate Amendment has been adopted and approved, upon
receipt of an effective Election Request, unless and until it becomes
ineffective, the Board
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of Directors of the Company shall call a meeting of the stockholders of the
Company to be held as closely as practicable to the second anniversary of the
Distribution Date (which meeting may be the annual meeting of stockholders) (the
"Stockholders Meeting"), at which meeting the stockholders of the Company shall
be entitled to vote to fill vacancies and/or newly-created positions on the
Board of Directors of the Company, which vacancies and/or newly-created
positions, when filled, will constitute a majority of the Company's Board of
Directors.
9.8 Nothing in Sections 9.6 or 9.7 hereof shall be deemed to amend, modify
or waive any provisions of the By-Laws of the Company, including, without
limitation, those regarding the manner in which stockholders of the Company may
make proposals or nominations at meetings of such stockholders, all of which
shall continue to be in full force and effect with respect to the Stockholders
Meeting, if it is held. The provisions of By-Law 13 of the Company's By-Laws
shall be in full force and effect with respect to all nominations to fill
vacancies at the Stockholders Meeting, if it is held.
Section 10. Amendment, Modification and Waivers; Further Assurances.
10.1. This Agreement may be amended with the consent of the Company, and
the Company may take any action herein prohibited, or omit to perform any act
herein required to be performed by it, only if the Company shall have obtained
the written consent of Holders owning Registrable Securities possessing a
majority in number of the Registrable Securities then outstanding to such
amendment, action or omission to act.
10.2. No waiver of any terms or conditions of this Agreement shall operate
as a waiver of any other breach of such terms and conditions or any other term
or condition, nor shall any failure to enforce any provision hereof operate as a
waiver of such provision or of any other provision hereof. No written waiver
hereunder, unless it by its own terms explicitly provides to the contrary, shall
be construed to effect a continuing waiver of the provisions being waived and no
such waiver in any instance shall constitute a waiver in any other instance or
for any other purpose or impair the right of the party against whom such waiver
is claimed in all other instances or for all other purposes to require full
compliance with such provision.
10.3. Each of the parties hereto shall execute all such further instruments
and documents and take all such further action as any other party hereto may
reasonably require in order to effectuate the terms and purposes of this
Agreement.
Section 11. Assignment; Benefit. This Agreement and all of the provisions hereof
shall be binding upon and shall inure to the benefit of the parties hereto and
their respective heirs, permitted assigns, executors, administrators or
successors; provided, however, that except as specifically provided herein with
respect to certain matters, neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned or delegated by the Company
without the prior written consent of Holders owning Registrable Securities
possessing a majority in number of the Registrable Securities then outstanding
on the date as of which such delegation or
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<PAGE>
assignment is to become effective. A Holder may Transfer its rights hereunder to
a successor in interest to the Registrable Securities owned by such assignor
only as permitted by Section 8.
Section 12. Miscellaneous.
12.1. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE, WITHOUT GIVING REGARD TO THE
CONFLICT OF LAWS PRINCIPLES THEREOF.
12.2. Notices. All notices and requests given pursuant to this Agreement
shall be in writing and shall be made by hand-delivery, first-class mail
(registered or certified, return receipt requested), confirmed facsimile or
overnight air courier guaranteeing next business day:
(a) If to MK Rail, to:
MK Rail Corporation
1200 Reedsdale Street
Pittsburgh, PA 15233
Attention: Chairman
With a copy to:
Michael A. Weiss, Esquire
Doepken Keevican & Weiss
37th Floor, USX Tower
600 Grant Street
Pittsburgh, PA 15219
(b) If to MKO or MKC, to:
Morrison Knudsen Corporation
720 Park Boulevard
Boise, Idaho
Attention: President
With a copy to:
Robert Dean Avery, Esq.
Jones, Day, Reavis & Pogue
Suite 4600
555 West Fifth Street
Los Angeles, CA 90013-1025
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(c) and if to any other Holder, to:
the address set forth in the relevant
agreement in the form of Exhibit A whereby
such party became bound by the provisions of
this Agreement.
Except as otherwise provided in this Agreement, the date of each such notice and
request shall be deemed to be, and the date on which each such notice and
request shall be deemed given shall be: at the time delivered, if personally
delivered or mailed; when receipt is acknowledged, if sent by facsimile; and the
next business day after timely delivery to the courier, if sent by overnight air
courier guaranteeing next business day delivery.
12.3. Entire Agreement; Integration. This Agreement supersedes all prior
agreements between or among any of the parties hereto with respect to the
subject matter contained herein, and this agreement embodies the entire
understanding among the parties relating to such subject matter.
12.4. Injunctive Relief. Each of the parties hereto acknowledges that in
the event of a breach by any of them of any material provision of this
Agreement, the aggrieved party may be without an adequate remedy at law. Each of
the parties therefore agrees that in the event of such a breach hereof the
aggrieved party may elect to institute and prosecute proceedings in any court of
competent jurisdiction to enforce specific performance or to enjoin the
continuing breach hereof. By seeking or obtaining any such relief, the aggrieved
party shall not be precluded from seeking or obtaining any other relief to which
it may be entitled.
12.5. Section Headings. Section headings are for convenience of reference
only and shall not affect the meaning of any provision of this Agreement.
12.6. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be an original, and all of which shall
together constitute one and the same instrument. All signatures need not be on
the same counterpart.
12.7. Filing. A copy of this Agreement and of all amendments thereto shall
be filed at the principal executive office of the Company with the Secretary of
the Company.
12.8 Termination. This Agreement may be terminated at any time by a written
instrument signed by the parties hereto. Unless sooner terminated in accordance
with the immediately preceding sentence, the parties' obligations under this
Agreement (other than Section 7 hereof) shall terminate in their entirety on the
fifth anniversary of the Distribution Date.
12.9 Attorneys' Fees. In any action or proceeding brought to enforce any
provision of this Agreement, the successful party shall be entitled to recover
reasonable attorneys'
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<PAGE>
fees (including any fees incurred in any appeal) in addition to its costs and
expenses and any other available remedy.
12.10 No Third Party Beneficiaries. Nothing herein expressed or implied is
intended to confer upon any person, other than the parties hereto or their
respective permitted assigns, successors, heirs and legal representatives and
other than parties entitled to indemnification uinder Section 7 hereof, any
rights, remedies, obligations or liabilities under or by reason of this
Agreement.
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<PAGE>
IN WITNESS WHEREOF, this Agreement has been duly executed by the parties
hereto as of the date first written above.
MK RAIL CORPORATION
By:_____________________
John C. Pope, Chairman
MORRISON KNUDSEN CORPORATION
By:______________________
Name:
Title:
<PAGE>
EXHIBIT A
AGREEMENT TO BE BOUND
BY THE STOCKHOLDERS AGREEMENT
The undersigned, being the proposed transferee of ______
shares of the common stock, $.01 par value per share (the "Common Stock"), of MK
Rail Corporation, a Delaware corporation (the "Company"), as a condition to the
receipt of such Common Stock, acknowledges that matters pertaining to the
registration, voting and transfer of such Common Stock is governed by the
Stockholders Agreement dated as of __________, 1996 (the "Agreement") initially
among the Company and Morrison Knudsen Corporation, an Ohio corporation, and the
undersigned hereby (1) acknowledges receipt of a copy of the Agreement, and (2)
agrees to be bound as a Holder by the terms of the Agreement, as the same has
been or may be amended from time to time.
Agreed to this __ day of ______________, ____________.
- ---------------------------------
_________________________________*
_________________________________*
*Include address for notices.
<PAGE>
AGREEMENT FOR THE PURCHASE AND SALE OF ASSETS
THIS AGREEMENT is made and entered into this 27th day of June, 1996, by
and among MK Rail Corporation, a Delaware corporation having its principal
office at 1200 Reedsdale Street, Pittsburgh, Pennsylvania 15233 (the "Parent"),
Alert Manufacturing & Supply Co., an Illinois corporation having its principal
office at 1325 Pratt Boulevard, Elk Grove Village, Illinois 60007 (the
"Seller"), and All-State Industrial Rubber Co., Inc., an Iowa corporation,
having its principal office at 520 South 18th Street, West Des Moines, Iowa
50265 (the "Buyer"),
W I T N E S S E T H:
WHEREAS, the Seller desires to sell, and the Buyer desires to acquire,
substantially all of the assets, properties and business of the Seller as a
going concern, such assets, properties and business so to be acquired being
herein sometimes referred to as the "Business," in accordance with
the terms and conditions herein set forth; and
WHEREAS, in conjunction with the transactions contemplated hereby the
Buyer will acquire all such assets, properties and business;
NOW, THEREFORE, in consideration of the promises, covenants and
agreements hereinafter set forth, and intending to be legally bound hereby, the
parties hereto hereby agree as follows:
I. SALE OF ASSETS AND RELATED TRANSACTIONS
1.1 Purchase and Sale of Assets. Subject to the satisfaction or waiver
of the terms and conditions of this Agreement, on the Closing Date (as that term
is defined in Section III hereof), the Seller shall sell, convey, assign,
transfer and deliver to the Buyer, and the Buyer shall purchase and acquire from
the Seller, free and clear of all liens, claims, pledges, options, charges,
security interests and other encumbrances or restrictions of any kind
whatsoever, for the consideration set forth in Section 2.1 hereof, all real,
personal and mixed assets, both tangible and intangible (including the Business
of the Seller as a going concern), owned by or used or useful to the Seller in
connection with the Seller's Business and operations other than Excluded Assets
(as defined in Section 1.2 below) which shall be retained by the Seller, all of
which are hereinafter collectively called the "Purchased Assets." Subject to the
provisions of Section VI hereof, the Purchased Assets shall include all of such
assets existing on the date of this Agreement and all such assets acquired
between the date hereof and the Closing Date, and replacements and substitutions
therefor and shall include, without limitation:
1.
<PAGE>
(a) Inventories. All inventories of raw materials, goods in process,
parts, finished goods, partly finished goods, goods in transit
and supplies used in connection with the Seller's Business
(collectively referred to herein as the "Inventories").
(b) Accounts Receivable. All accounts receivable of, and other
amounts due to, the Seller arising out of bona fide transactions
of the Business and carried on the regular books of account of
the Seller, as maintained in the ordinary course of the Business
and in accordance with generally accepted principles of
accounting consistently applied by the Seller, including, without
limitation, accounts receivable which arise in the ordinary
course of the Business between the date hereof and the Closing
Date, other than Excluded Accounts Receivable which shall be
retained by the Seller, all of which are hereinafter collectively
called the "Net Accounts Receivable." As used in this Section
1.1(b), the term "Excluded Accounts Receivable" shall mean the
aggregate amount of the Seller's (i) any accounts receivable
that, as of the Closing Date, shall have remained unpaid for a
period of one hundred eighty (180) days after billing, if the
Seller shall have not completed a bona fide transaction with the
obligor therefor in the ordinary course of business during the
period of one hundred twenty (120) days immediately preceding the
Closing Date, and, (ii) accounts receivable that, as of the
Closing Date, shall have remained unpaid for a period of seven
hundred thirty (730) days after billing.
(c) Equipment and Other Fixed Assets. All machinery, tools,
equipment, spare parts, motor vehicles, furniture, office
furnishings, office materials and supplies, fixtures, and other
tangible personal property of every kind and description owned or
leased by or used or useful to the Seller in connection with the
Business on the date hereof, and any additions, improvements and
replacements thereto between the date hereof and the Closing Date
(collectively referred to herein as the "Equipment"). All items
of such Equipment, as of the date of this Agreement, are listed
on Disclosure Exhibit 1.1-C hereto.
(d) Contracts. All rights and interest of the Seller in and to all
contracts, leases, insurance contracts, supply agreements,
purchase orders, licenses, agreements and other commitments which
relate to the Business, or which affect any of the Business or
the Purchased Assets or confer any material benefits on the
Business, and any claim or right or any benefit arising
thereunder or resulting therefrom, in effect on the Closing Date.
All such material contracts, leases, insurance contracts, supply
agreements, purchase orders, licenses, agreements and other
commitments which are in effect on the date hereof and which are
included in the "Purchased Assets," are listed on Disclosure
Exhibit 1.1-D hereto (which shall also specify those contracts,
leases, insurance contracts, supply agreements, purchase orders,
licenses, agreement and commitments the assignment of which
requires third-party consent) (collectively referred to herein as
the "Assigned Contracts").
2.
<PAGE>
(e) Deposits, Prepayments and Other Assets. All advances, deposits,
prepaid items, supplies, leaseholds, leasehold improvements and
other assets pertaining to, or arising out of, the Business or
the Purchased Assets (collectively referred to herein as the
"Prepayments").
(f) Books, Records and Intangibles. All of the Seller's goodwill in,
and the going concern value of, the Business; the right to use
the Seller's name and any names, letters, marks, logos, designs,
drawings or other material or symbols associated with the
Seller's name or any trade name of the Seller; all trade marks,
trademark registrations, trademark applications, copyrights,
copyright registrations, copyright applications, patents, patent
applications, inventions, trade secrets, technical know- how,
licenses, processes, formulae, royalties, computer programs,
tapes, disks, computer hardware and software, technical
information, blue prints, drawings, and other technical papers,
manufacturing procedures and processes and the like; all customer
accounts records and customer list and supplier lists and files;
copies of all the books and records of the Seller pertaining to
the Business or any of the foregoing Purchased Assets; and all
right of the Seller under or pursuant to any warranties,
representations and guarantees made by suppliers in connection
with the products or services furnished to the Business or
otherwise pertaining to the Business or affecting the Purchased
Assets (collectively referred to herein as the "Miscellaneous
Assets").
1.2 Excluded Assets. Notwithstanding the provisions of section 1.1
hereof, the following assets pertaining to the Business (collectively referred
to herein as the "Excluded Assets") shall be retained by the Seller, shall not
be sold and transferred to the Buyer on the Closing Date and shall not create
any obligation or commitment of the Buyer after the Closing:
(a) all right, title and interest of the Seller in and to all cash,
bank balances, money in possession of banks and similar cash
items;
(b) all Excluded Accounts Receivable (as that term is defined in
Section 1.1(b) hereof);
(c) all employment agreements, whether written or verbal;
(d) all Employee Plans (within the meaning of Section 4.21 hereof)
and
(e) all the computer hardware and software and related information
used by or useful to the Seller which has been provided by the
Seller's affiliate, Power Parts Company, prior to the Closing.
1.3 Instruments of Conveyance and Transfer of Purchased Assets. At the
Closing, to effect the transfers, conveyances and assignments from the Seller to
the Buyer as herein provided, the Seller shall deliver to the Buyer the
following bills of sale, certificates, assignments and other instruments of
transfer assigning, transferring and conveying to the Buyer good and marketable
title 3.
<PAGE>
to all of the Purchased Assets to be transferred hereunder, free and clear of
all security interests, mortgages, pledges, claims, liens, taxes, charges and
any other encumbrances or restrictions of any kind whatsoever except as
expressly permitted under this Agreement, all in form and substance
reasonably satisfactory to counsel for the Buyer, and dated the Closing Date:
(a) assignments (and consents thereto) of all leases and leasehold
interests in real and personal property;
(b) bill(s) of sale for all tangible personal property;
(c) assignments of all contracts and other intangible assets to be
transferred pursuant to this Agreement, including, without
limitation, the Assigned Contracts described in Disclosure
Exhibit 1.1-D hereto; and
(d) such other instruments or documents as the Buyer may reasonably
request in connection with the transfer to it of any personal
property to be transferred under this Agreement.
Seller further covenants and agrees to execute and deliver, from time
to time after the Closing and without further consideration, such other
documents and instruments of assignment, transfer or conveyance of any of the
Purchased Assets as the Buyer may reasonably require to evidence or perfect the
Buyer's right, title and interest in and to the Purchased Assets and the
Business.
1.4 Assignment of Contracts and Rights. This Agreement shall not
constitute an agreement to assign any claim, contract, license, lease
commitment, sales or purchase order, or any claim or right or any benefit
arising thereunder or resulting therefrom if an attempted transfer or assignment
thereof, without the consent of a third party thereto, would constitute a breach
thereof or in any way affect the respective rights the Buyer or the Seller have
thereunder. If such third party consent is not obtained, or if an attempted
transfer or assignment thereof would be ineffective or would affect the rights
of the Seller thereunder so that the Buyer would not in fact receive all such
rights, the Seller shall use reasonable, good faith efforts to cooperate with
the Buyer in any arrangement designed to provide for the Buyer those benefits to
which the Seller would be due. Such arrangements may include, but are not
limited to, obtaining such consent promptly and the enforcement for the benefit
of the Buyer of any and all rights of the Seller against a third party thereto
arising out of the breach or cancellation by such third party or otherwise. All
transfers or assignments to the Buyer of any claim, contract, license, lease,
agreement, commitment or sales or purchase order which shall require the consent
or approval of any third party shall be made subject to such consent or approval
being obtained. In the event the Seller is unable to obtain any necessary
consent, and the Buyer and the Seller are unable to make the arrangements
designed to provide the Buyer with the benefits under the applicable agreement
and the third party to such contract refuses performance by the Buyer in
writing, the Seller and Parent shall put the Buyer in the same financial
position as the Buyer would have been if such contract was assigned or
performance under such agreement was accepted.
4.
<PAGE>
II. CONSIDERATION AND METHOD OF PAYMENT
2.1 Consideration. For and in full consideration of the sale,
assignments, conveyances and transfers of the Purchased Assets described herein,
and in consideration of the representations, warranties, covenants and
agreements of the Seller provided herein, the Buyer shall:
(a) pay to the Seller the sum of Four Million Five Hundred Thousand
Dollars ($4,500,000.00) (the "Estimated Purchase Price") plus any
increase or less any decrease, as the case may be, by the amount
of any Adjustment (as that term is defined in Section 2.3(c)
hereof) (the "Final Purchase Price"), subject to escrow as set
forth in, and in accordance with, this Agreement and the Escrow
Agreement (as described in Section 2.4 below); and
(b) assume the Assumed Obligations in accordance with Section 2.6
hereof.
The net amount of the adjustments, including prorations, required
pursuant to Section 2.7 below, to the extent determinable on the Closing Date,
shall be separately paid by the Buyer to the Seller or the Seller to the Buyer,
as the case may be, by check at the Closing, with final settlement
within ninety (90) days thereafter.
2.2 Payment of Purchase Price. At the Closing, the Buyer shall pay the
Final Purchase Price in the following manner:
(a) the amount equal to the Final Purchase Price minus the sum of Two
Hundred Thousand Dollars ($200,000.00) shall be paid to or upon
the order of the Seller in immediately available funds; and
(b) the remaining sum of Two Hundred Thousand Dollars ($200,000.00)
shall be deposited, held, invested, and disbursed in accordance
with the terms of Section 2.4 of this Agreement and the Escrow
Agreement (as that term is defined in Section 2.4 hereof).
2.3 Estimated Purchase Price Adjustments.
(a) Representatives of the Seller and the Buyer shall jointly
determine the actual amount of the Net Accounts Receivable as of
the close of business on the day immediately preceding the
Closing Date (the amount thereof being referred to herein as the
"Closing Net Accounts Receivable Amount") which shall reflect the
Net Accounts Receivable (as that term is defined in Section
1.1(b) hereof) carried on the regular books of account of the
Seller, maintained in the ordinary course of business and
prepared in accordance with generally accepted accounting
principles consistently applied by the Seller, on such date.
5.
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(b) On the day immediately preceding the Closing Date (the "Inventory
Valuation Date"), or on such other date(s) before the Closing
Date as the Seller and the Buyer shall mutually agree,
representatives of the Seller and the Buyer shall jointly
determine the fair market value of all items of the Inventories
(the "Closing Inventory Amount"). For this purpose, the "fair
market value" of each item of the Inventories (as that term is
defined in Section 1.1(a) hereof) shall be the lesser of the cost
or the fair market value of that item as of the Inventory
Valuation Date. Notwithstanding the foregoing, for purposes of
the adjustment described herein, the Closing Inventory Amount
shall not exceed One Million Five Hundred Sixty-Five Thousand
Dollars ($1,565,000).
(c) Upon certification of the Closing Net Accounts Receivable Amount
and the Closing Inventory Amount, the Final Purchase Price shall
be computed by adding to the Estimated Purchase Price an amount
(i) which is the sum of (x) the Total Closing Net Accounts
Receivable, plus (y) the lesser of the Inventory Amount or
$1,565,000, minus (z) $3,200,000. The adjustment provided in this
Section 2.3(c) (the "Adjustment") may be positive or negative.
Notwithstanding the foregoing, if any dispute arises over any
item reflected in or omitted from the certified list of the
Closing Inventory Amount, the Total Closing Net Accounts
Receivable plus Closing Inventory Amount net of any disputed
amount of the Closing Inventory Amount shall be the Adjustment
for purposes of the Closing.
(d) If the representatives of the Seller and the Buyer are unable to
agree prior to the Closing with respect to any determination of
the fair market value of any items of the Inventories for the
purpose of determining the Closing Inventory Amount, the Seller
and the Buyer hereby agree that such determination shall be
referred to Price Waterhouse (or, if such accounting firm has
been employed by any party hereto (or an affiliate thereof)
during the five (5) years preceding the date of such referral or
cannot for any reason serve to resolve the dispute, then to an
independent public accounting firm of national stature mutually
approved by the parties hereto) (the "Selected Accountants"),
which shall promptly make such a determination. The determination
of the Selected Accountants shall be conclusive and binding on
both the Seller and the Buyer. One half of the fees of the
Selected Accountants shall be borne by the Seller, and one half
thereof shall be borne by the Buyer. Within five (5) business
days following the determination of the Adjustment by the
Selected Accountants, the amount of any further Adjustment
required by this Section 2.3 to the Estimated Purchase Price
because of the determination by the Selected Accountants, plus
interest from and after the Closing Date to and including the
date of payment of such Adjustment at the rate of 5.0 percent per
annum, shall be paid by the Buyer to the Seller in immediately
available funds, or, alternatively, the Buyer by the Escrow Agent
(as defined hereafter) immediately in the amount of such further
Adjustment payable to the Buyer.
6.
<PAGE>
(e) To the extent that the Selected Accountants have made a
determination of an Adjustment resulting in an obligation by the
Seller to the Buyer pursuant to Section 2.3(d) hereof and Parent
or Seller shall have failed to pay the Buyer such amount, then
Parent and the Seller acknowledge and agree that the Buyer may
withhold payment as a set-off against amounts that shall become
due and payable to Parent under the terms of the Sublease (as
that term is defined in Section 6.4 hereof).
2.4 Escrow.
(a) At Closing, the Seller, the Buyer and West Des Moines State Bank,
West Des Moines, Iowa, as Escrow Agent (the "Escrow Agent") shall
execute and deliver an Escrow Agreement substantially in the form
of Appendix I (the "Escrow Agreement"); and, in accordance with
Section 2.2(b) hereof, the sum of Two Hundred Thousand Dollars
($200,000.00) shall be deposited, held, invested and disbursed in
accordance with the terms of this Section 2.4 and the Escrow
Agreement.
(b) If, on November 1, 1996, any portion of the Closing Net Accounts
Receivable Amount transferred and assigned to the Buyer on the
Closing Date shall remain uncollected, then on November 1, 1996
the Buyer shall "put" any or all of the Uncollected Closing Net
Accounts Receivable to Seller by delivering to the Seller with a
copy to the Escrow Agent (i) written notice of the amount of each
Uncollected Closing Net Account Receivable and the name of the
party responsible for payment of such Uncollected Closing Net
Account Receivable (the "Put Notice") and (ii) such instruments
necessary to effect the lawful assignment and transfer to the
Seller of those Closing Net Accounts Receivable being "put"to the
Seller. In the event that Buyer has given Seller the Put Notice
as provided herein, the Escrow Agent shall immediately without
further notice release from escrow and deliver to the Buyer an
amount of funds equal to the amount of the Uncollected Closing
Net Accounts Receivable "put" to the Seller as described in the
Put Notice and the Escrow Agent shall release to the Seller the
remaining amount, if any, held under the Escrow Agreement. On
November 2, 1996, the Escrow Agent shall pay to the Seller all
amounts in the Escrow Fund if the Buyer has not given Seller the
Put Notice. As used in this Section 2.4, the term "Uncollected
Closing Net Accounts Receivable" shall mean that amount equal to
that portion of the Closing Net Accounts Receivable Amount that
shall remain uncollected by the Buyer as of the close of business
on October 31, 1996.
(c) To the extent the amount of the Uncollected Closing Net Accounts
Receivable or the amount of any Adjustment owed by the Seller to
the Buyer as a result of the Selected Accountant's determination
under Section 2.3(d) hereof shall exceed the funds held under the
Escrow Agreement at any time, Parent hereby agrees to immediately
pay to the Buyer in immediately available funds the amount of
such excess.
7.
<PAGE>
2.5 Obligations. Except as set forth in Section 2.6 below, the Buyer
expressly does not, and shall not, assume or be deemed to have assumed under
this Agreement or by reason of any transactions contemplated hereunder any
debts, liabilities (contingent or otherwise) or obligations of the Seller of any
nature whatsoever, including, without limitation, (a) excise or property taxes,
contracts, agreements, commitments and leases required to be listed but not
listed on any Disclosure Exhibit hereto (as such Disclosure Exhibits are amended
in accordance with this Agreement), (b) all liabilities and obligations,
including, without limitation, any product liability claims, arising out of or
relating to the sale of products of the Business, including, without limitation,
manufactured, purchased or fabricated by the Seller, (c) obligations arising out
of or in connection with any litigation, proceeding or investigation of any
nature arising out of the operation of the Business, (d) liabilities or
obligations (contingent or otherwise) in connection with any current or prior
employment contract with any employee, whether written or verbal, or any current
or prior Employee Plan within the meaning of Section 4.21 and (e) all
liabilities and obligations (contingent or otherwise) for environmental matters
arising under any and all local, state, regional or federal law or jurisdiction,
for conduct, noncompliance, status, releases, events or occurrences prior to the
Closing Date.
2.6 Assumed Obligations. At the Closing the Buyer shall deliver an
undertaking satisfactory in form and substance to the Seller and its counsel
(the "Assumption Agreement") whereby the Buyer shall assume and agree to pay,
perform and discharge when due, subject to Section 2.4 hereof, the following
liabilities and obligations of the Seller to the extent the same are
attributable to the Purchased Assets and unpaid at the Closing Date (the
"Assumed Obligations"):
(a) the Trade Payables (as that term is defined in Section 4.15
hereof) of the Seller as of the Closing Date not to exceed in
the aggregate the sum of Seven Hundred Fifty Thousand Dollars
($750,000.00), to be paid by Buyer in accordance with their
respective terms;
(b) all liabilities and obligations of the Seller for performance,
after the Closing Date, under the Assigned Contracts (other
than any Excluded Asset).
The Buyer and the Seller acknowledge and agree that any provision of
this Agreement to the contrary notwithstanding, all liabilities and obligations
arising out of or relating to the sale of products of the Business, including
product liability claims, shall be the responsibility of the party which
manufactured or fabricated the product in question sold to the third-party
customer.
2.7 Adjustments and Prorations. All ad valorem real estate and other
property taxes, real or personal, shall be adjusted and prorated between the
Seller and the Buyer as of the Closing Date in accordance with generally
accepted accounting principles consistently applied by the
Seller.
Prorations and adjustments under this Section 2.7 shall be determined and paid
as provided in Section 2.2.
8.
<PAGE>
2.8 Allocation of Final Purchase Price. For the purpose of determining
the allocation of the amount of the Final Purchase Price and the Assumed
Obligations among the Purchased Assets, the parties hereto agree that the Buyer
and Seller shall mutually determine an allocation of the amount of the Final
Purchase Price and the Assumed Obligations among the Purchased Assets (the
"Allocation"), and the Seller and the Buyer agree to jointly execute and report
a Form 8594 in a manner consistent with the allocation.
III. THE CLOSING
The closing with respect to the transactions provided for in this
Agreement (the "Closing") shall take place at the offices of Ahlers, Cooney,
Dorweiler, Haynie, Smith & Allbee, P.C., 600 Court Avenue, Des Moines, Iowa
50309, at 10 o'clock a.m. on July 26, 1996 (the "Closing Date") or at such other
place or on such date as the parties hereto may mutually agree.
IV. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE SELLER AND PARENT
A. The Seller hereby represents and warrants to, and covenants and
agrees with, the Buyer as follows:
4.1 Organization; Power; Good Standing. The Seller is a corporation
duly organized, validly existing and in good standing under the laws of the
state of Illinois. The Seller has all requisite corporate power and authority to
own, operate and lease its properties, to carry on its business as now being
conducted and to enter into this Agreement and perform its obligations
hereunder. The Seller has not failed to qualify to do business in any
jurisdiction in which the property owned, leased or operated by it or the nature
of the business conducted by it makes such qualification necessary.
4.2 Affiliates; Officers and Directors.
(a) The Seller is a wholly-owned subsidiary of Power Parts Company, a
Nevada corporation which is a wholly-owned subsidiary of Parent,
a Delaware corporation; and
(b) Disclosure Exhibit 4.2 hereto sets out a true and complete list
of the officers and directors of the Seller.
4.3 Authority Relative to Agreement; Binding Obligation. The execution,
delivery and performance of this Agreement by the Seller have been duly and
effectively authorized by all necessary corporate action by the Seller,
including approval of the entire transaction by the requisite vote of the
Seller's board of directors and shareholders; if required. This Agreement has
been duly executed by the Seller and is a valid, legally binding and enforceable
agreement of the Seller enforceable in accordance with its terms, except as its
enforceability may be limited by bankruptcy,
9.
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insolvency, moratorium or other laws relating to or affecting creditor's rights
generally and the exercise of judicial discretion in accordance with equitable
principles.
4.4 Effect of Agreement. Except as set forth in Disclosure Exhibit 4.4
hereto, the execution, delivery and performance of this Agreement by the Seller
and the consummation of the transactions contemplated hereby will not (i)
require the consent, approval or authorization of any person, corporation,
partnership, joint venture or other business association or public authority
(other than the shareholders of the Seller); (ii) violate, with or without the
giving of notice or the passage of time, or both, any provisions of law or
statute or any rule, regulation, order, award, judgment or decree of any court
or governmental authority or of any license applicable to the Seller or its
assets; or (iii) with or without the giving of notice, the passage of time, or
both conflict with or result in a breach or termination of any provision of,
accelerate the performance or maturity of, constitute a default under, or result
in the creation of any lien, charge or encumbrance upon any of the Purchased
Assets pursuant to any corporate charter, bylaw, indenture, note, bond,
mortgage, deed of trust, lease, contract, permit, agreement or other instrument,
or any order, judgment, award, decree, statute, ordinance, regulation or any
other restriction of any kind or character, to which the Seller is a party, or
by which the Seller or any of the Purchased Assets may be bound.
4.5 Financial Statements. The unaudited balance sheets of the Seller,
at December 31, 1995 and 1994 and related statements of liabilities and
stockholders' equity for each of the two years then ended, and the unaudited
balance sheet of the Seller, at April 26, 1996, and related statement of
liabilities and stockholders' equity for the same period, all as set forth in
Disclosure Exhibit 4.5 hereto, are in accordance with the books and records of
the Seller, are complete and correct in all material respects, fairly present
the financial position and results of operations of the Seller as of the dates
and for the periods indicated and have been prepared in conformity with
generally accepted accounting principles applied on a basis consistent with
prior years. The unaudited balance sheets at December 31, 1995 and 1994 and the
statements of liabilities and stockholders' equity for the same periods and the
unaudited balance sheet at April 26, 1996 and related statement of liabilities
and stockholders' equity for the four months ended April 26, 1996, as described
above, are collectively referred to herein as the "Financial Statements" .
4.6 Undisclosed Liabilities. Except as and to the extent disclosed in
the Financial Statements or as set forth in Disclosure Exhibit 4,5 or 4.6
hereto, the Seller had, at the respective dates of the Financial Statements and
as of the date of this Agreement no material liabilities or obligations of any
kind, whether accrued, absolute, contingent or otherwise, whether or not such
liabilities or obligations would have been required to be disclosed on a balance
sheet prepared in accordance with generally accepted accounting principles.
4.7 Absence of Certain Changes or Events. Since December 31, 1995,
except as otherwise disclosed in Disclosure Exhibit 4.5 or 4.7 hereto, in
conducting its Business and affairs, including but not limited to use and
operation of the Purchased Assets, the Seller has not, and will not have as of
the Closing Date:
10.
<PAGE>
(a) incurred any obligation or liability (contingent or otherwise)
except (i) normal trade or business obligations incurred in the
ordinary course of business, the performance of which will not,
individually or in the aggregate, have a material adverse affect
on the Seller's financial condition or results of operations and
(ii) obligations under contracts, leases, supply agreements,
purchase orders, licenses, agreements, and other commitments
described in Disclosure Exhibit 1.1-D hereto the performance of
which will not, individually or in the aggregate, have a material
adverse affect on the Seller's Business, financial condition or
results of operations;
(b) discharged or satisfied any lien or encumbrance or paid any
obligation or liability (contingent or otherwise), except (i)
current liabilities included in the Financial Statements, (ii)
current liabilities in excess of $25,000 in the aggregate that
have been incurred since the date of the Financial Statements in
the ordinary course of business and (iii) scheduled payments
pursuant to obligations under contracts, leases, supply
agreements, purchase orders, licenses, agreements and other
commitments described in Disclosure Exhibit 1.1-D hereto;
(c) mortgaged, pledged or subjected to any lien, charge, security
interest or to any other encumbrance any of the Purchased Assets
(whether tangible or intangible);
(d) made any material additions to, sold, assigned, transferred,
conveyed, leased or otherwise disposed of, or agreed to sell,
assign, transfer, convey, lease or otherwise dispose of, any of
the Purchased Assets, except for items of Inventories for fair
and adequate consideration in the ordinary course of the
Business;
(e) canceled or compromised any debt or claim, except for adjustments
made in the ordinary course of Business which, in the aggregate,
are not material;
(f) waived or released any material rights, whether or not in the
ordinary course of business;
(g) transferred or granted any rights under any concessions, leases,
licenses, agreements, patents, inventions, trademarks, trade
names, copyrights, or with respect to any know-how;
(h) made or granted any general wage or salary increase or entered
into any employment contract with any officer or employee
involving an annual basic rate of compensation in excess of
$25,000 or a period of employment of more than thirty days;
(i) entered into any transaction, contract or commitment other than
in the ordinary course of business;
(j) made any capital expenditure or entered into any commitment
therefor;
11.
<PAGE>
(k) suffered any material casualty loss or damage, whether or not
such loss or damage shall have been covered by insurance;
(l) suffered any material adverse change in the Seller's Business,
the Purchased Assets or the operations, earnings, liabilities,
properties, business relationships, prospects or condition
(financial or otherwise), or in the results of the Seller's
Business and operations;
(m) lost any supplier or suppliers which loss or losses, individually
or in the aggregate, have or may have a material adverse affect
on the results of the Seller's Business and operations;
(n) lost any customer or customers which loss or losses, individually
or in the aggregate, have or may have a material adverse affect
on the results of operations of the Seller; or
(o) introduced or permitted any material change to occur with respect
to the Seller's Business and operations, including, without
limitation, its method of accounting, whether by act or by lapse
of time or attention.
4.8 Tax Matters. The Seller has duly filed with the appropriate United
States, state and local governmental agencies, and with the appropriate foreign
countries and political subdivisions thereof, all tax returns and reports
required to be filed under the Internal Revenue Code of 1986, as amended (the
"Code"), or the statutes, rules, ordinances, regulations or other laws of any
state, county, city or other political subdivision of a state; such returns and
reports are accurate and complete; and the Seller has paid in full or made
adequate provisions for all taxes, interest, penalties, assessments or
deficiencies shown to be due on such tax returns and reports or claimed to be
due by any taxing authority or otherwise due and owing. The Seller has made all
withholdings of tax required to be made under all applicable United States,
state and local tax regulations, and such withholdings have either been paid to
the appropriate governmental agencies or set aside in accounts for such purpose
or accrued, reserved against and entered upon the books of the Seller. The
provisions for income taxes payable reflected in the Financial Statements are
adequate. The United States income tax liabilities of the Seller have been
examined and reported on by the Internal Revenue Service (or closed by
applicable statutes of limitations) and finally determined and fully paid for
all fiscal years prior to and including the fiscal year ended October 28, 1992.
The Seller has not executed or filed with the Internal Revenue Service or any
other taxing authority, domestic or foreign, any agreement or other document
extending, or having the effect of extending, the period for assessment or
collection of any taxes. The Seller is not a party to any pending action,
proceeding, suit, investigation or audit nor to Seller's knowledge is any
action, proceeding, suit, investigation or audit threatened, by any governmental
authority for assessment or collection of taxes and no claim for assessment or
collection of taxes has been asserted or proposed against the Seller.
12.
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Further, the Seller has not received any notice of, and is not aware of any
information of, any increase or intention to seek increases in the assessed
value of the Purchased Assets.
4.9 Title to Properties; Absence of Liens and Encumbrances; Leases.
(a) The Seller has good and marketable title to all of its properties
and assets, including, without limitation, the Purchased Assets,
tangible and intangible, free and clear of all mortgages,
pledges, claims, liens, changes, security interests and any other
encumbrances hereto, other than (i) as specifically disclosed in
Disclosure Exhibit 4.9 hereto, (ii) any liens for taxes not yet
due and payable or being contested in good faith by appropriate
proceedings and (iii) such imperfections of title, easements,
liens, pledges, charges and encumbrances, if any, as do not
materially detract from the value or interfere with the present
use of any of its properties or otherwise materially impair its
business operations.
(b) All leases and easements pursuant to which the Seller leases or
uses any real or personal property belonging to or used in its
Business and all licensing agreements belonging to or used in its
Business and to which the Seller is a party are in good standing
and are valid and binding in accordance with their terms; and
there is not under any of such leases, easements or licensing
agreements any existing default, event of default or event which
with notice or lapse of time, or both, would constitute a default
(and in respect of which the Seller has not taken adequate steps
to prevent such a default or event of default from occurring).
None of the rights of the Seller under any of such leases,
easements or licensing agreements is subject to termination or
modification as the result of the transactions contemplated
hereby.
4.10 Litigation. There are no claims, actions, suits, proceedings or
investigations pending or to Seller's knowledge threatened against or affecting
the Seller at law or in equity, or before or by any federal, state, municipal or
governmental or nongovernmental department, commission, board, bureau, agency or
instrumentality, United States or foreign.
4.11 Labor Controversies. All employees are employees at will. Except
as set forth on Disclosure Exhibit 4.11 hereto, there are no controversies
pending or to Seller's knowledge threatened between the Seller and any of its
employees and the Seller has not taken or failed to take any action which would
provide a reasonable basis for any such controversy. The Seller has complied
with all material laws relating to the employment of labor, including any
provisions thereof relating to wages, hours, collective bargaining and the
payment of social security and similar taxes, and is not liable for any arrears
of wages or any taxes or penalties for failure to comply with any of the
foregoing. To the best of Seller's knowledge, there are no present employees of
the Seller who will not be available for employment by the Buyer on
substantially the same terms and conditions as they are presently employed by
the Seller. There are no organizational efforts presently being made or
threatened by or on behalf of any labor union with respect to employees of the
Seller.
13.
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4.12 Patents; Trademarks; Intellectual Property Rights. The Seller has
protected by way of trademark, trade name or otherwise to the fullest extent
permitted by the law the names set forth in Disclosure Exhibit 4.12 hereto. No
other patents, trademarks, trade names, copyrights, trade secrets,
registrations, applications, technical information, data, formulae, blueprints,
drawings, computer hardware and software, proprietary know-how, manufacturing
procedures, process and the like ("Intellectual Property Rights") are necessary
for the conduct of the Sellers' business as now conducted. All such Intellectual
Property Rights are in good standing, are valid and enforceable and are free
from any default on the part of the Seller. The Seller is not a licensor or
licensee of any Intellectual Property Rights, nor is the Seller violating the
Intellectual Property Rights of others. No director, officer or employee of the
Seller owns, directly or indirectly, in whole or in part, any of the
Intellectual Property Rights or interests therein which the Seller has used, is
presently using, or the use of which is necessary for the Seller's business as
now conducted.
4.13 Purchased Assets; Inventory.
(a) The Purchased Assets, including, without limitation, each item of
Equipment as identified in Disclosure Exhibit 1.1-C are in
Sellers' possession and good operating condition and repair,
normal wear and tear excepted and are suitable and useable in the
ordinary course of the Business for the uses and purposes for
which they are being used or intended. There are no actions
pending or to Seller's knowledge threatened or consent decrees,
orders or agreements entered by the United States, any state or
local regulatory agency or court with respect to the compliance
of such properties or assets with applicable laws, statutes,
ordinances or regulations, including, without limitation, the
Environmental Laws (as that term is defined in Section 4.19
hereto).
(b) The Inventories reflected in the Financial Statements consist of
raw materials, parts and supplies, work in process, partly
finished goods, finished goods and goods in transit usable for
the intended purpose and salable within periods of time
consistent with the Seller's past experience, in the ordinary
course of business, subject only to adjustment consistent with
the Seller's established accounting practices. All Inventories of
raw materials, parts and supplies satisfy industry standards of
quality for the intended use of such assets and are in good
condition and usable for their intended purpose and use in the
regular and ordinary course of the Business; and all Inventories
of goods in process, partly finished goods, finished goods and
goods in transit satisfy the industry standards of quality,
without any material defect, for such assets and are usable or
salable in the regular and ordinary course of the Business. The
Inventories are not either inadequate or excessive in kind or
amount in light of the Seller's past experience in the ordinary
course of the Business and the Seller's obligations under the
Assigned Contracts.
4.14 Insurance. All of the insurable properties constituting the
Purchased Assets are adequately insured for the Seller's benefit against all
risks usually insured against by persons owning
14.
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or operating similar properties in the localities where such properties are
located, all under valid and enforceable policies insured by insurers of
recognized responsibility. The operations constituting the Business have been
continuously covered, without gaps in such coverage, since the date of the
Seller's acquisition of the Business and will be covered as of the Closing Date
by liability and worker's compensation insurance. The Seller is adequately
insured, for its benefit, against all product liability claims relating to
products manufactured, fabricated, sold, or delivered by it to the same extent
that the risks of such claims are insured against by persons manufacturing,
fabricating, selling or delivering similar products, all under valid and
enforceable policies issued by insurer's of recognized responsibility. The
Seller is not in default with respect to any terms or conditions contained in
any of its insurance policies described herein in any respect that could result
in a cancellation of such policies or a refusal by the insurer to pay under such
policies, nor has it failed to give any notice or represent any claim under any
such insurance policies in due and timely fashion.
Further, if a claim is made for damage occurring during the period prior to
the Closing Date, which is covered by the physical damage, liability or worker's
compensation insurance policy, then the Seller shall properly notify the Buyer
of the pendency and amount of such claim, and the Buyer shall have the right to
consult with the Seller in any negotiations or legal proceedings in respect
thereto. The Seller agrees that if any award for damages is made in respect to
any non-material physical damage to the Purchased Assets occurring prior to the
Closing Date but is awarded after the Closing Date, then the proceeds therefrom
shall be transferred promptly by the Seller to the Buyer unless such physical
damage has been previously corrected by the Seller in a manner satisfactory to
the Buyer.
4.15 Trade Notes and Accounts Payable. The trade notes and accounts
payable of the Seller reflected on the Financial Statements and all trade notes
and accounts payable arising thereafter and prior to the Closing Date arose from
bona fide transactions in the ordinary course of business of the Seller and were
paid or are not yet due and payable (the "Trade Payables").
4.16 Permits and Licenses. There is set forth in Disclosure Exhibit
4.16 a list of all permits, licenses or other authorizations of governmental
authorities in effect on the date hereof applicable to any of the Purchased
Assets or required by any such authority to be in effect, if not presently
effective for the operation or the conduct of the Business as currently
conducted by Seller, and true and correct copies of such permits, licenses or
other authorizations in effect have been delivered to Buyer. Except as set forth
in Disclosure Exhibit 4.16, no consent of any governmental authority is required
for the assignment by the Seller to the Buyer of any of such permits, licenses
or authorizations. The Business is conducted by the Seller in all material
respects in accordance with the requirements of all such permits, licenses or
authorizations, whether in effect or required to be in effect, and in accordance
with the requirements of all governmental authorities having jurisdiction over
the Business. No proceeding is pending or, to the knowledge of the Seller,
threatened, looking toward the revocation or limitation of any of the permits,
licenses or authorizations set forth in Disclosure Exhibit 4.16, nor has the
Seller received any notice of noncompliance thereunder or any notice asserting a
violation in respect of any of such permits, licenses or authorizations which
remains unremedied or unresolved, or the remedy or resolution of which requires
a continuing undertaking by the Seller which requires additional investment by
the Seller in the Business or a
15.
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change in the method of operation of the Business, nor is the Seller aware of
any basis which could give rise to the delivery of such notice. To the knowledge
of the Seller, no federal, state or local governmental authority has threatened
to terminate or not to renew any such license, permit or
authorization.
4.17 Contracts. All the "Assigned Contracts" are listed in Disclosure
Exhibit 1.1-D, are, and on the Closing Date will be, in full force and effect,
except as shown on Disclosure Exhibit 1.1- D. True and complete copies of all
Assigned Contracts described in Disclosure Exhibit 1.1-D shall be delivered to
or made available for the Buyer's review prior to June 28, 1996. At the request
of the Buyer, any third party consent required for the assignment to the Buyer
of any material Assigned Contract will be obtained by Seller prior to the
Closing.
Except as indicated in Disclosure Exhibit 1.1-D, there are no material
contracts, agreements or commitments of any nature relating to the Business, or
which affect any of the Purchased Assets, including without limitation any (i)
assignment or pledge of the Seller's interest in the Business or any of the
Purchased Assets, (ii) supply agreements, (iii) service agreements, (iv)
individual employment agreements or collective bargaining agreements of any
nature, (v) employee welfare, retirement or other benefit plans, policies or
agreements, (vi) purchase orders, (vii) loan or guarantee agreements or (viii)
any other type of lease agreement, commitment or contingency which may become a
liability of the Buyer or the Purchased Assets upon the Buyer's assumption of
the ownership, operations or management of the Business and the Purchased
Assets.
4.18 Contract Observance. Except as disclosed in Disclosure Exhibit
1.1-D to this Agreement, the Seller has complied, and currently is in compliance
with, the material provisions of all Assigned Contracts, and neither the Seller
nor, to the knowledge of the Seller, any other party thereto is in default in
the performance, observance or fulfillment of any material obligation, covenant
or condition contained therein, and no event has occurred which, with or without
the giving of notice or lapse of time, or both, would constitute a default
thereunder by the Seller or by any other party.
4.19 Environmental Matters.
(a) To the best of Seller's knowledge, the Seller has obtained all
permits, licenses and other authorizations which are required to
conduct the Business under all Federal, state, county and local
statutes, laws, regulations, ordinances, rules, judgments,
orders, decrees, concessions, grants, franchises, agreements or
governmental restrictions relating to human health, the
environment or the general treatment, storage, recycling,
transportation, release or disposal of any materials into the
environment (collectively, "Environmental Laws"). Seller is in
compliance (i) with the terms and conditions of all such permits,
licenses and authorizations and (ii) with all other limitations,
restrictions, conditions, standards, prohibitions, requirements,
obligations, schedules and timetables contained in any
Environmental Law applicable to it in connection with the conduct
of the Business or in any regulation, code, plan, 16. <PAGE>
order, decree, judgment, injunction, notice or demand letter
issued, entered, promulgated or approved thereunder. In addition,
no notice, notification, demand, request for information,
citation, summons or order has been received and, to the best of
Seller's knowledge, no complaint has been filed, no penalty has
been assessed and no investigation or review is pending or
threatened by any Federal, regional, state, county or local
government or any executive, legislative, judicial, regulatory or
administrative entity, or other governmental entity with respect
to any alleged failure by the Seller to have any environmental
permit, license or authorization required in connection with the
conduct of the Business or with respect to any generation,
treatment, storage, recycling, transportation, release or
disposal, or any release as defined in 42 U.S.C. Section 9601(22)
("Release") of any hazardous substance, waste or material
regulated under Environmental Laws or other Hazardous Materials
generated by the Seller in the conduct of the Business. For the
purposes of this Agreement, "Hazardous Materials" shall mean
substances defined as "hazardous substances", "toxic substances"
or "hazardous wastes" in the Federal Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended
("CERCLA"), the Federal Hazardous Materials Transportation Act,
as amended, and the Resource Conservation and Recovery Act, as
amended; oil and underground storage tanks; asbestos and material
containing asbestos; and those substances defined as "hazardous
wastes", "hazardous materials" or "hazardous substances" in the
laws of the State of Illinois, and as such substances are defined
in the regulations adopted and publications promulgated pursuant
to said laws.
(b) The Seller has not disposed of any Hazardous Material on the
property leased by the Seller with respect to the Business; and
to the best of the Seller's knowledge:
(i) no PCB is or has been present at the property leased by
the Seller with respect to the Business;
(ii) no asbestos is or has been present at the property
leased by the Seller with respect to the Business;
(iii)there are no underground storage tanks for Hazardous
Materials, active or abandoned, at the property leased
by the Seller with respect to the Business;
(iv) no Hazardous Materials have been released by the
Seller, in a reportable quantity, where such a quantity
has been established by statute, ordinance, rule,
regulation or order, at, on or under the property
leased by the Seller with respect to the Business; and
(v) no Hazardous Materials have been otherwise released by
the Seller at, on or under the property leased by the
Seller with respect to the Business, and no
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Hazardous Materials have ever been released at, on or
under any property adjoining the property leased by
the Seller with respect to the Business.
(c) The Seller has not received any notification and does not
otherwise have any knowledge with respect to any liability at any
location which is listed on the National Priorities List under
CERCLA, listed for possible inclusion on the National Priorities
List under the Comprehensive Environmental Response, Compensation
and Liability and Information System ("CERCLIS") by the
Environmental Protection Agency or on any similar state list or
which is the subject of Federal, state or local enforcement
actions or other investigations which may lead to claims against
the Seller for clean-up costs, remedial work, damages to natural
resources or personal injury claims, including, but not limited
to, claims under CERCLA.
(d) No oral or written notification of a Release of a Hazardous
Material has been filed by or on behalf of the Seller with
respect to the Business and no property now or previously owned
or, to the best of the Seller's knowledge, leased by the Seller
with respect to the Business is listed or, to the best of the
Seller's knowledge, proposed for listing on the National
Priorities List promulgated pursuant to CERCLA, on CERCLIS or on
any similar state list of sites requiring investigation or
clean-up.
(e) There are no encumbrances in favor of any governmental authority
for (i) any liability under Environmental Laws or (ii) damages
arising from or costs incurred by such governmental authority in
response to a Release or threatened Release of Hazardous Waste or
any toxic waste, substance or constituent or other substance into
the environment (collectively, "Environmental Encumbrances")
arising under or pursuant to any Environmental Laws, and, to the
best of the Seller's knowledge, no governmental actions have been
taken or are in process which could reasonably be anticipated to
subject the Business to such Environmental Encumbrances and, to
the best of the Seller's knowledge, the Seller is not required to
place any notice or restriction relating to the presence of
Hazardous Materials at the site of the Business.
4.20 Compliance with Applicable Law. The conduct of the Seller's
Business does not violate or infringe any material domestic or foreign laws,
statutes, ordinances or regulations or any material right or patent, trademark,
trade name, copyright, know-how or other proprietary right of third parties, the
enforcement of which would adversely affect the Seller's Business or the value
of its properties and assets.
4.21 Plans and Agreements Relating to Employees.
(a) Except as set forth on Disclosure Exhibit 4.21 attached hereto,
there are no employee benefit plans, contracts or arrangements of
any type (including, without limitation, (i) any employee benefit
plans described in Section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), and (ii) any
personnel policies,
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deferred compensation plans, incentive plans, bonus plans or
arrangements, stock option plans, stock purchase plans, golden
parachute (or similar) agreements, severance pay plans, dependent
care plans, cafeteria plans, employee assistance programs,
scholarship programs, employment contracts and other similar
plans, agreements and arrangements which are not so described)
which are currently in effect or will be in effect on the Closing
Date for the benefit of employees of the Seller (or beneficiaries
of such employees) who provide or provided services to or in
connection with the Business. Each of such employee benefit
plans, contracts or arrangements is herein referred to as an
"Employee Plan."
(b) The Seller has delivered to the Buyer true, correct and complete
copies with respect to each Employee Plan.
(c) With respect to each funded Employee Plan which is an employee
pension plan within the meaning of Section 3(2) of ERISA, (i) the
plan is a qualified plan under Section 401(a) of the Code, and
its related trust is exempt from federal income taxation under
Section 501(a) of the Code; (ii) the plan is covered by a
favorable determination letter with respect to its qualified
status, and all amendments or other actions required by such
determination letter have been adopted or taken; (iii) there is
no change in the relevant facts or circumstances which would make
the submission on which such determination letter was based
materially inaccurate or which would otherwise adversely affect
the qualified status of the plan; (iv) no prohibited transactions
(as defined in Section 406 of ERISA or Section 4975 of the Code)
have occurred; (v) there has been no accumulated funding
deficiency within the meaning of Section 302(a)(2) of ERISA or
Section 412 of the Code, whether or not waived; (vi) the plan has
been administered in accordance with its terms and the provisions
of applicable law; (vii) no event has occurred and no
circumstance exists or is expected to occur or exist under which
Seller or any other person has incurred or may incur, directly or
indirectly, liability under the provisions of Title IV of ERISA;
(viii) no actions, suits or claims (other than routine claims for
benefits) are pending, threatened or imminent against Seller or
any fiduciary (as defined in Section 3(21) of ERISA) of the plan;
(ix) all disclosures, notices and filings required by applicable
law have been timely made, transmitted or filed as the cases may
be; and (x) all contributions for all periods ending prior to the
Closing (including periods from the first day of the current plan
year to the Closing) will have been made prior to or as soon as
practicable after the Closing by Seller in accordance with the
terms of the plan and applicable law.
(d) Disclosure Exhibit 4.21 sets forth a list of the Seller's
employees, together with their annualized base pay and a
description of the amount and basis of their other compensation.
19.
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(e) The Seller is not a party to any collective bargaining agreement
covering the employment of any employees, or to any employee
welfare benefit plan or employee pension benefit plan which is a
multi employer plan within the meaning of Section 3(37) of ERISA
covering any such employee.
(f) With respect to each Employee Plan which is a group health plan
within the meaning of Section 5000(b)(1) of the Code, the Seller
has complied with the provisions of Section 4980(B) of the Code.
4.22 Purchased Assets' Relationship to Business of the Seller. Except
as set forth in Disclosure Exhibit 4.22, the Purchased Assets, including,
without limitation, the Assigned Contracts and Equipment, constitute, and will
constitute as of the Closing Date, all of the properties and assets (other than
any Excluded Asset) used or useful in or necessary to the conduct of the
Business and operations of the Seller and, as such, constitute, and will
constitute as of the Closing Date, all of the properties and assets necessary in
order for the Buyer to conduct the Business as a going concern subsequent to the
Closing in the same manner in which the Business was conducted by the Seller at
December 31, 1995 as reflected in the Financial Statements.
4.23 Net Accounts Receivable. The Net Accounts Receivable (as that term
is defined in Section 1.1(b) hereof) (i) represent undisputed, bona fide
transactions completed in the ordinary course of the Business and in accordance
with the terms and provisions contained in the invoices therefor, (ii) are not
subject to set-offs, counterclaims or disputes presently extant or asserted with
respect thereto and (iii) are not subject to any agreement with any obligor
therefor for any deduction therefrom.
4.24 Misstatements and Omissions. No representation or warranty made by
Seller in this Agreement, and no statement made in any schedule, certificate or
other document furnished pursuant to this Agreement, contains or will contain
any untrue statement of a material fact or omits or fails to state, or will omit
or fail to state as of the Closing Date, any material fact or information
necessary to make such representation or warranty or any such statement not
materially misleading.
4.25 Books and Records. The books, records and work papers of the
Seller are complete and correct, have been maintained in accordance with
generally accepted accounting principles, as consistently applied in preparing
the Financial Statements and good business practices and accurately reflect the
basis for the financial condition and results of operations of the Seller set
forth in the Financial Statements.
B. The Parent hereby represents and warrants to, and covenants and
agrees with, the Buyer as follows:
4.26 Organization; Power; Good Standing. Parent is a corporation duly
organized, validly existing and in good standing under the laws of the state of
Delaware. Parent has all requisite corporate power and authority to own, operate
and lease its properties, to carry on its business as now
20.
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being conducted and to enter into this Agreement and perform its obligations
hereunder. Parent has not failed to qualify to do business in any jurisdiction
in which the property owned, leased or operated by it or the nature of the
business conducted by it makes such qualification necessary.
4.27 Authority Relative to Agreement; Binding Obligation. The
execution, delivery and performance of this Agreement by Parent have been duly
and effectively authorized by all necessary corporate action by Parent,
including approval of the entire transaction by the requisite vote of Parent's
board of directors and shareholders if required. This Agreement has been duly
executed by Parent and is a valid, legally binding and enforceable agreement of
Parent enforceable in accordance with its terms, except as its enforceability
may be limited by bankruptcy, insolvency, moratorium or other laws relating to
or affecting creditor's rights generally and the exercise of judicial discretion
in accordance with equitable principles.
4.28 Effect of Agreement. The execution, delivery and performance of
this Agreement by Parent and the consummation of the transactions contemplated
hereby will not (i) require the consent, approval or authorization of any
person, corporation, partnership, joint venture or other business association or
public authority (or of the shareholders of Parent); (ii) violate, with or
without the giving of notice or the passage of time, or both, any provisions of
law or statute or any rule, regulation, order, award, judgment or decree of any
court or governmental authority or of any license applicable to Parent or its
assets; or (iii) with or without the giving of notice, the passage of time, or
both conflict with or result in a breach or termination of any provision of,
accelerate the performance or maturity of, constitute a default under, or result
in the creation of any lien, charge or encumbrance upon any of the Purchased
Assets pursuant to any corporate charter, bylaw, indenture, note, bond,
mortgage, deed of trust, lease, contract, permit, agreement or other instrument,
or any order, judgment, award, decree, statute, ordinance, regulation or any
other restriction of any kind or character, to which Parent is a party, or by
which Parent or any of the Purchased Assets may be bound.
V. REPRESENTATIONS AND WARRANTIES OF THE BUYER
The Buyer represents and warrants to the Seller and Parent as follows:
5.1 Organization; Good Standing; Power. The Buyer is a corporation duly
organized, validly existing and in good standing under the laws of the state of
Iowa and will have all requisite corporate power and authority to own, lease and
operate its properties, to carry on its business as now being conducted and to
enter into this Agreement and the Assumption Agreement and perform its
obligations hereunder.
On the Closing Date the Buyer will be duly qualified to do business as
a foreign corporation and will be in good standing in each of the jurisdictions
in which the property owned, leased or operated by it or the nature of the
business conducted by it after the consummation of the transaction
contemplated hereunder makes such qualification necessary.
21.
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5.2 Authority Relative to Agreement. The execution, delivery and
performance of this Agreement and the Assumption Agreement, and the transactions
contemplated hereby and thereby by the Buyer, will have been duly and
effectively authorized and ratified by all necessary corporate action. This
Agreement has been duly executed by the Buyer and is a valid, legally binding
and enforceable agreement of the Buyer. This Agreement and the Assumption
Agreement will be duly executed by the Buyer and are valid, legally binding and
enforceable obligations of the Buyer enforceable in accordance with its terms,
except as their enforceability may be limited by bankruptcy, insolvency,
moratorium or other laws relating to or affecting creditor's rights generally
and the exercise of judicial discretion in accordance with equitable principles.
5.3 Effect of Agreement. The execution, delivery and performance of
this Agreement and the Assumption Agreement, and the consummation of the
transactions contemplated hereby and thereby, will not (i) require the consent,
approval or authorization of any person, corporation, partnership, joint venture
or other business association or other public authority; (ii) violate, with or
without the giving of notice or the passage of time, or both, any provisions of
law applicable to the Buyer; or (iii) conflict with or result in a breach or
termination of any provision of, or constitute a default under, or result in the
creation of any lien, charge or encumbrance upon any of the properties or assets
of the Buyer pursuant to any indenture, corporate charter, bylaw, indenture
mortgage, deed of trust, lease, contract, agreement or other instrument or any
order, judgment, award, decree, statute, ordinance, regulation or any other
restriction of any kind or character, to which the Buyer is a party, or by which
the Buyer or any of its assets or properties may be bound.
VI. TRANSACTIONS PRIOR TO THE CLOSING DATE
6.1 Access to Information. The Seller shall give to the Buyer, its
employees, counsel, accountants, engineers and other consultants and
representatives, full access during normal business hours throughout the period
prior to the Closing Date to the Purchased Assets, books, contracts, commitments
and records of the Seller for such purposes as Buyer deems appropriate,
including but not limited to testing of the Purchased Assets provided the same
does not unreasonably interfere with the Seller's Business, and will furnish to
the Buyer during such period all such information concerning the affairs of the
Seller as the Buyer or its representatives may reasonably request. The Buyer
shall use its best efforts to cause its representatives to hold in strict
confidence all information so obtained from the Seller and, if the transactions
herein provided for are not consummated as contemplated herein, the Buyer will
return all such data as the Seller may reasonably request.
6.2 Conduct of the Seller's Business Pending the Closing Date. The
Seller hereby agrees that, except as described in Disclosure Exhibit 6.2 hereto,
prior to the Closing Date it will:
(a) operate its business only in the usual, regular and ordinary
manner and, to the extent consistent with such operation, use its
best efforts to: preserve and promote its present business
organization and reputation intact; avoid any act which might
have a material adverse affect upon the value of the Business as
a going concern; and keep
22.
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available the services of its present officers and employees and
preserve its present relationships and goodwill with persons
having business dealings with it;
(b) maintain all of its properties, including, without limitation,
the Purchased Assets, in customary repair, order and condition,
reasonable wear and tear excepted, and maintain insurance upon
all of its properties and with respect to the conduct of its
business in such amounts and of such kinds comparable to that in
effect on the date hereof; and, in the event of loss, damage or
destruction of any of the Purchased Assets prior to the Closing
Date, or if any of the Purchased Assets shall cease to be in good
operating condition or repair or shall cease to be adequate for
the uses to which they are being put, the Seller shall promptly
replace (or repair if appropriate) any such property at the
Seller's sole cost and expense, provided that in the event of any
casualty, loss, damage or destruction for which the Seller is
insured, the Seller shall, at the Buyer's option, either repair
or replace such damaged property or transfer the proceeds of such
insurance to the Buyer;
(c) maintain its books, accounts and records in the usual, regular
and ordinary manner, on a basis consistent with prior years; and
perform all of its obligations without default;
(d) use its best efforts to comply duly with all laws applicable to
it and the conduct of the Business;
(e) conduct its operations so as to comply with all Environmental
Laws;
(f) make or grant no general wage or salary increase or increase in
compensation payable or to become payable to any employee,
officer, director or agent; pay or provide for no bonus, stock
option, stock purchase, profit sharing, deferred compensation,
pension, multi-employer pension, retirement or other similar
payment or arrangement except in the ordinary course of
administering existing plans referred to in any Employee Plan ;
pay or provide for no unfunded pensions, not covered by any
pension plan, other than the unfunded pensions, if any, referred
to in any Employee Plan and enter into no employment or
consulting agreement or sales agency with respect to the
performance of personal services which is not terminable without
liability by the Seller on thirty days notice or less.
(g) (i) incur or become subject to, or agree to incur or become
subject to, no obligation or liability (contingent or otherwise),
subject to the exceptions enumerated in Section 4.9(a) hereof;
(ii) discharge or satisfy no lien or encumbrance and pay no
obligation or liability (contingent or otherwise), subject to the
exceptions enumerated in Section 4.9(b) hereof; (iii) mortgage,
pledge or subject to lien, charge, security interest or any other
encumbrance none of the Purchased Assets; (iv) sell, assign,
transfer, convey, lease or otherwise dispose of, or agree to
sell, assign, transfer, convey, lease or
23.
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otherwise dispose of, none of the Purchased Assets, except for
items of Inventories for fair and adequate consideration in the
ordinary course of business; (v) acquire or lease (other than a
renewal of an existing lease in the ordinary course of business),
or agree to acquire or lease (other than a renewal of an existing
lease in the ordinary course of business), no material assets or
property; (vi) cancel or compromise no debt or claim, except for
adjustments or settlements made in the ordinary course of
business; (vii) waive or release no rights; (viii) transfer or
grant no rights under any concessions, leases, licenses,
agreements, patents, inventions, trade names, trademarks,
copyrights, or with respect to any know-how or Intellectual
Property Rights; (ix) modify, change or terminate no existing
license, lease, contract or other document; (x) make no capital
expenditures and enter into no commitments therefor; (xi) enter
into no collective bargaining agreement and, through negotiation
or otherwise, make no commitment or incur any liability to any
labor organization; (xii) enter into no transaction and make or
enter into no contract or commitment which by reason of its size
or otherwise is not in the ordinary course of business;
(h) make no substantial renovation of property involving any
substantial obligation on the part of the Seller;
(i) make no change in its accounting procedures;
(j) agrees that it will enter into no transaction involving any
material obligation or liability of the Seller, nor any agreement
or understanding with respect to such transaction; and
(k) will not intentionally take any action that would result in any
of the Seller's representations, warranties and agreements
contained in Section IV of this Agreement not being true and
correct at and as of the time immediately after the occurrence of
such transaction or event and as of the Closing Date.
6.3 Consents. The Seller agrees that it shall cooperate with the Buyer
to obtain prior to the Closing all such consents, assignments, and approvals as
may be required in order to enable the Seller to perform its obligations
hereunder, including, but not limited to, all consents and approvals required to
permit it to make the transfers to the Buyer contemplated herein so that the
Buyer may enjoy after the Closing all rights and benefits presently enjoyed by
the Seller.
6.4 Sublease. Parent agrees that it shall prior to or at the Closing
enter into a sublease for a term of one (1) year beginning on the Closing Date
for the facility at 1325 Pratt Boulevard, Elk Grove, Illinois, for the same
space presently occupied by the Seller and on the same financial terms
applicable to the Seller, which sublease shall contain two (2) six (6) month
renewal options and shall expressly allow the Buyer the right of set-off agreed
to by the parties under Section 2.3(e) hereof (the "Sublease").
24.
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VII. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE SELLER AND
PARENT
The obligations of the Seller and Parent under this Agreement are
subject to the satisfaction at or prior to the Closing Date of each of the
following conditions:
7.1 Accuracy of Representations and Warranties. The representations and
warranties of the Buyer herein contained shall be true and correct on and as of
the Closing Date, with the same force and effect as though made on and as of
such date, except as affected by the transactions contemplated hereby.
7.2 Performance of Agreements. The Buyer shall have performed all
obligations and agreements and complied with all covenants and conditions
contained in this Agreement to be performed or complied with by it at or prior
to the Closing Date.
7.3 Officers' Certificate. The Buyer shall have furnished the Seller
with a certificate, dated as of the Closing Date, of the Buyer's President and
Secretary to the effect that, to the best knowledge, information and belief of
such officers, the Buyer has fulfilled the conditions specified in Sections 7.1
and 7.2 hereof.
7.4 Sublease. The Buyer shall have entered into the Sublease.
7.5 Opinion of Counsel. The Seller shall have received the written
opinion of Ahlers, Cooney, Dorweiler, Haynie, Smith & Allbee, P.C., counsel for
the Buyer, dated the Closing Date, acceptable to Seller's counsel. In rendering
its opinion, such counsel may rely, to the extent appropriate, as to matters of
fact upon statements and certificates of officers of the Buyer.
7.6 Resolutions of Board of Directors. The Seller shall have received
from the Buyer certified copies of the Resolutions of the Board of Directors of
the Buyer approving this Agreement and authorizing the consummation of the
transactions contemplated hereby.
7.7 Actual or Threatened Actions. There shall not be any actual or, in
the opinion of the Seller, threatened action or proceeding by or before any
court or other governmental body or agency which shall seek to restrain,
prohibit or invalidate the transactions contemplated by this Agreement in
accordance with the terms hereof.
7.8 Employees and Employee Benefit Matters. The Buyer shall make offers
of employment, upon such terms as shall be mutually agreeable to the parties, to
all employees of the Seller. The Seller and the Buyer acknowledge and agree that
the Buyer does not hereby assume, and shall not be deemed to have assumed, any
liability or obligations whatsoever with regard to the Seller's employees
arising out of their employment by Seller prior to the Closing Date.
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VIII. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE BUYER
The obligation of the Buyer under this Agreement to purchase the
Purchased Assets and to assume the Assumed Obligations at Closing is subject to
the satisfaction at or prior to the Closing
of each of the following conditions precedent:
8.1 Accuracy of Representations and Warranties. The representations and
. The representations and warranties of the Seller and Parent herein contained
shall be true and correct as of the date hereof and as of the Closing Date with
the same force and effect as though made on and as of such date.
8.2 Performance of Agreements. The Seller and Parent shall have
performed all obligations and agreements and complied with all covenants and
conditions required by this Agreement to be performed or complied with by the
Seller or Parent, as the case may be, at or prior
to the time of Closing .
8.3 Resolutions of Board of Directors. The Buyer shall have received
from the Seller certified copies of the Resolutions of the Board of Directors of
the Seller approving this Agreement and authorizing the consummation of the
transactions contemplated hereby.
8.4 Actual or Threatened Actions. There shall not be any actual or, in
the opinion of the Buyer, threatened action or proceeding by or before any court
or other governmental body or agency which shall seek to restrain, prohibit or
invalidate the transactions contemplated by this Agreement in accordance with
the terms hereof or which might affect the right of the Buyer to own, operate or
control the Purchased Assets after the Closing Date.
8.5 Officers' Certificate. The Seller shall have delivered to the Buyer
a certificate dated the Closing Date, of the President and Secretary of the
Seller to the effect that the Seller has fulfilled the conditions specified in
Sections 6.2, 6.3, 8.1, 8.2 and 8.4 hereof. Such certificate shall include a
schedule which shall contain an update of the information disclosed in the
Disclosure Exhibits hereto and a complete and correct list and description of
the information specified in Section 4.10 as of a date not more than three (3)
days prior to the Closing Date.
8.6 Determination of Closing Date Net Accounts Receivable Amount. The
representatives of the Seller and the Buyer shall have jointly determined the
amount of the Closing Net Accounts Receivable Amount.
8.7 Loss of Assets. No loss, destruction, impairment or condemnation of
any of the Purchased Assets shall have occurred by reason of theft, loss, fire,
explosion, disaster, flood, accident, strike, riot, insurrection, act of God or
other similar occurrence (unless repaired, replaced or restored pursuant to
Section 6.2(b) hereof prior to the Closing Date) which, individually or in the
aggregate, shall have a material adverse affect on the business, operations,
results of operations or condition (financial or otherwise) of either the
Business or the Purchased Assets.
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8.8 Accuracy of Representations and Warranties. The Buyer shall not
have discovered any material error, misstatement or omission in any of the
representations or warranties made by the Seller herein or in any of the
Financial Statements.
8.9 Material Changes. Prior to the Closing Date, there shall not have
occurred, nor shall there exist as of the Closing Date, any event, series of
events or set of circumstances which constitutes or has resulted in a material
adverse change in the Business, the Purchased Assets or the material business
relationships, condition (financial or otherwise) or results of the Business or
operations of the Seller, since the dates of the Financial Statements.
8.10 Consents. All material consents shall have been received by the
Buyer including, but not limited to, all consents and approvals required to
permit the Buyer to enjoy after the Closing Date all rights and benefits
presently enjoyed by the Seller.
8.11 Noncompetition Agreements. Parent, the Seller and each subsidiary
of Parent shall execute and deliver to Buyer a noncompetition agreement in
substantially the form of Appendix II attached hereto.
8.12 Execution and Delivery of Sublease. Parent shall have executed and
delivered to the Buyer the Sublease.
8.13 Opinion of Counsel. The Buyer shall have received the written
opinion of Doepken, Keevican & Weiss, counsel for the Seller, dated the Closing
Date, in form acceptable to Buyer's counsel. In rendering its opinion, such
counsel may rely, to the extent appropriate, as to matters of
fact upon statements and certificates of officers of the Seller.
IX. NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES;
INDEMNIFICATION
9.1 Events of Default. A breach of any representation or warranty by
the Seller or Parent, or breach as a result of the failure of the Seller or
Parent to perform any of its covenants and obligations under this Agreement,
shall be considered a default hereunder giving rise to the
indemnification set forth in Section 9.3 hereof.
9.2 Survival of Representations, Warranties and Agreements. All
representations, warranties and agreements made by the Seller and the Buyer in
this Agreement or in any exhibit, certificate, document or instrument delivered
pursuant to the provisions hereof or in connection with the transactions
contemplated hereby, and the remedies of the Buyer and the Seller with respect
thereto, shall be deemed to be material and to have been relied upon by the
Buyer or the Seller, as the case may be, shall survive the Closing Date and,
except as otherwise specifically provided in this Agreement, shall remain
operative and in full force and effect for a period of eighteen (18) months
following the Closing Date, except as to any matters with respect to which a
bona fide written claim shall have been made or an action at law or in equity
shall have commenced before such date, in
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which event survival shall continue (but only with respect to, and to the extent
of, such claim) until the final resolution of such claim or action, including
all applicable periods for appeal; provided, however, that the representations,
warranties, covenants and agreements contained in Section 4.9, Sections 9.3(a),
9.3(c), and 9.3(d) to the extent applicable to Section 9.3(a) or Sections
9.3(c), 9.4(a), 9.4(c), and 9.4(d) to the extent applicable to Section 9.4(a) or
9.4(c) and Section 9.7 hereof shall continue without any time limitation, and
the representations, warranties and agreements contained in Sections 4.8, 4.19
and 4.21 shall survive for the periods equal to the applicable statute of
limitations relating thereto. Further, notwithstanding any other provision in
this Agreement to the contrary, the obligation of the Seller and Parent to
indemnify and hold harmless the Buyer under Section 10.4 hereof shall begin on
the Closing Date and end upon the latest of (i) three years from the date of the
last filing of a return or report of Taxes relating to the Business and the
Purchased Assets and covering such Taxes for which indemnification is provided
in Section 10.5 hereof , (ii) the expiration of the applicable statute of
limitations, or (iii) six months following the ultimate disposition of any claim
with respect to any Taxes relating to the Business or the Purchased Assets.
9.3 Indemnification to the Buyer. Parent and the Seller agree, jointly
and severally, to indemnify and hold the Buyer harmless from, against and in
respect of:
(a) all obligations and liabilities of the Seller, whether accrued,
absolute, fixed, contingent or otherwise, not expressly assumed
by the Buyer under this Agreement;
(b) any and all loss, liability or damage suffered or incurred by the
Buyer because of a breach of any obligation or liability of the
Seller under this Agreement, or because of any inaccuracy,
misrepresentation or breach of any representation, warranty,
covenant or agreement of the Seller or Parent (i) under this
Agreement or (ii) any documents furnished to the Buyer in
connection with the Closing as of the date of this Agreement and
as of the Closing Date;
(c) any and all loss, obligations and liabilities of the Seller
(other than the Assumed Obligations as that term is defined in
Section 2.6 hereof), including any and all claims, actions,
suits, proceedings, demands and judgments, and all reasonable
costs and expenses (including accounting and attorney's fees)
incurred in connection therewith, resulting from any causes of
action or claims of any kind asserted by unrelated third parties
arising out of or relating to the Seller's actions or omissions
in the conduct of the Business or ownership or operation of the
Purchased Assets, including, without limitation, any action or
claim arising out of or relating to products manufactured,
fabricated, purchased, sold or delivered by the Seller, prior to
the Closing Date without any time limitations notwithstanding any
provision of Section 9.2 to the contrary; and
(d) all reasonable costs and expenses (including accounting and
attorneys' fees) incurred by the Buyer in connection with any
action, suit, proceeding, demand, assessment or judgment incident
to any of the matters indemnified against it in this Section 9.3.
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This agreement to indemnify the Buyer shall be in addition to any
liability which the Seller may incur to the Buyer and shall not
foreclose any other rights or remedies that the Buyer may have to
enforce the provisions of this Agreement.
9.4 Indemnification to the Seller and Parent. The Buyer agrees to
indemnify and hold the Seller and Parent harmless from, against and in respect
of:
(a) all obligations and liabilities of the Buyer, whether accrued,
absolute, fixed, contingent or otherwise, expressly assumed by
the Buyer under the Assumption Agreement;
(b) any and all loss, liability or damage suffered or incurred by the
Seller or Parent because of a breach of any obligation or
liability of the Buyer under this Agreement, or because of any
inaccuracy, misrepresentation or breach of any representation,
warranty, covenant or agreement of the Buyer (i) under this
Agreement or (ii) any documents furnished to the Seller or Parent
in connection with the Closing as of the date of this Agreement
and as of the Closing Date;
(c) any and all loss, obligations and liabilities of the Buyer,
including any and all claims, actions, suits, proceedings,
demands and judgments, resulting from any causes of action or
claims of any kind asserted by unrelated third parties arising
out of or relating to the Buyer's actions or omissions in the
conduct of the Business or ownership or operation of the
Purchased Assets, including, without limitation, any action or
claim arising out of or relating to products manufactured,
fabricated, purchased, sold or delivered by the Buyer (other than
products manufactured or fabricated by the Seller prior to the
Closing Date), after the Closing Date without any time
limitations notwithstanding any provision of Section 9.2 to the
contrary; and
(d) all reasonable costs and expenses (including accounting and
attorneys' fees) incurred by the Seller or Parent in connection
with any action, suit, proceeding, demand, assessment or judgment
incident to any of the matters indemnified against it in this
Section 9.4.
This agreement to indemnify the Seller or Parent shall be in addition to any
liability which the Buyer may incur to the Seller or Parent and shall not
foreclose any other rights or remedies that the Seller
or Parent may have to enforce the provisions of this Agreement.
9.5 Representation, Cooperation and Settlement.
(a) Buyer.
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(i) The Buyer agrees to give prompt written notice to the Seller
of any claim against the Buyer which might give rise to a
claim by the Buyer against the Seller based on the indemnity
agreement contained in Section 9.3 hereof, stating the
nature and basis of the first-mentioned claim and the amount
thereof.
(ii) The Buyer shall have full responsibility and authority with
respect to the disposition of any action, suit or proceeding
brought against it. In the event any action, suit or
proceeding is brought against the Buyer with respect to
which the Seller may have liability under the indemnity
agreement contained in Section 9.3 hereof, however, the
Seller shall have the right, without prejudice to the
Buyer's rights under this Agreement, at the Seller's sole
expense, to be represented by counsel of its own choosing
and with whom counsel for the Buyer shall confer in
connection with the defense of any such action, suit or
proceeding. The Buyer shall make available to the Seller and
its counsel and accountants, all books and records of the
Buyer relating to such action, suit or proceeding, and the
parties agree to render to each other such assistance as may
reasonably be requested in order to ensure the proper and
adequate defense of any such action, suit or proceeding.
(b) Seller.
(i) The Seller and Parent agree to give prompt written notice to
the Buyer of any claim against the Buyer which might give
rise to a claim by the Seller and Parent against the Buyer
based on the indemnity agreement contained in Section 9.4
hereof, stating the nature and basis of the first-mentioned
claim and the amount thereof.
(ii) The Seller and Parent shall have full responsibility and
authority with respect to the disposition of any action,
suit or proceeding brought against them. In the event any
action, suit or proceeding is brought against the Seller and
Parent with respect to which the Buyer may have liability
under the indemnity agreement contained in Section 9.4
hereof, however, the Buyer shall have the right, without
prejudice to the Seller's and Parent's rights under this
Agreement, at the Buyer's sole expense, to be represented by
counsel of its own choosing and with whom counsel for the
Seller and Parent shall confer in connection with the
defense of any such action, suit or proceeding. The Seller
and Parent shall make available to the Buyer and its counsel
and accountants, all books and records of the Seller and
Parent relating to such action, suit or proceeding, and the
parties agree to render to each other such assistance as may
reasonably be requested in order to ensure the proper and
adequate defense of any such action, suit or proceeding.
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9.6 Limitation of Indemnification.
(a) The Seller and Parent shall be liable, jointly and severally, for
indemnification under this Section IX only in the event the
amount of a single claim or an aggregate amount of several claims
for indemnity under this Agreement by Buyer shall exceed the sum
of Twenty Five Thousand Dollars ($25,000.00) but in such event
for the entire amount of any claim for which indemnity would
otherwise be due and payable to the Buyer hereunder; except that
this limitation on the indemnification obligation of the Seller
and Parent shall not apply: (a) to any amount owed by the Seller
to the Buyer in connection with the computation of the Final
Purchase Price, any Adjustment or the amount of Uncollected
Closing Net Accounts Receivable Amount, as required under Section
II hereof and (b) to any loss, liability or obligation described
in Section 9.3 (c) hereof.
(b) The Buyer shall be liable for indemnification under this Section
IX only in the event the amount of a single claim or an aggregate
amount of several claims for indemnity under this Agreement by
the Seller or Parent shall exceed the sum of Twenty Five Thousand
Dollars ($25,000.00) but in such event for the entire amount of
any claim for which indemnity would otherwise be due and payable
to the Seller or Parent hereunder; except that this limitation on
the indemnification obligation of the Buyer shall not apply: (i)
to any amount owed by the Buyer to the Seller in connection with
the computation of the Final Purchase Price, any Adjustment or
the amount of Uncollected Closing Net Accounts Receivable Amount,
as required under Section II hereof and (ii) to any loss,
liability or obligation described in Section 9.4 (c) hereof and
(iii) failure to pay the Trade Payables assumed by Buyer.
9.7 Bulk Sales Agreement for Indemnification. The Buyer hereby waives
compliance by the Seller with the provisions of bulk sales and similar laws
applicable to this transaction, if any; provided, however, that any loss,
liability, obligation, expense or cost suffered by the Buyer as a result of the
failure by the Seller to comply therewith shall be borne by the Seller and that
the Seller shall indemnify and hold the Buyer harmless therefrom,
notwithstanding any other provision of this Agreement to the contrary.
X. TRANSACTIONS SUBSEQUENT TO THE CLOSING DATE
10.1 Control of Settlements and Disputes. Subject to Section 9.4
hereof, from and after the Closing Date the Buyer shall have complete control
over the payment, settlement or other disposition of, or any dispute involving,
any obligation or liability of the Seller assumed by the Buyer under the
Assumption Agreement, and the Buyer shall have the right to conduct and control
all negotiations and proceedings with respect thereto. The Seller will notify
the Buyer promptly of any claim made with respect to any such obligation or
liability and will not, except with the prior written consent of the Buyer,
voluntarily make any payment of, or settle or offer to settle, or consent to any
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compromise with respect to, any such obligations or liabilities. The Seller
will, at the expense of the Buyer, cooperate with the Buyer in any reasonable
manner requested by the Buyer in connection with any negotiations or proceedings
involving any such obligations or liabilities.
10.2 Further Assurances. From time to time after the Closing Date, upon
the request of the Buyer, the Seller will (a) make available to the Buyer any
records, documents and data retained by the Seller, and (b) execute, deliver and
acknowledge all such further instruments of transfer and conveyance as the Buyer
may reasonably require to more effectively transfer the Purchased Assets to the
Buyer and to put the Buyer in possession of any of the Purchased Assets.
10.3 Certain Employee Benefit Matters.
(a) The account balance of any Transferred Employee in the "MK Rail
Corporation Savings Plan," as amended (the "MK Rail Savings
Plan"), as of the Closing Date, including earnings or losses
thereon through the date of transfer, shall be transferred in
cash (or such other form as may be agreed upon by Buyer and
Seller) to the trustee of the trust maintained under the
All-State Industrial Rubber Co., Inc.401(k) Plan" or any similar
plan established by the Buyer for this purpose (the "Buyer's
401(k) Plan") as soon as practicable after the first valuation
date with respect to the MK Rail Savings Plan following the
Closing Date in a plan-to-plan transfer meeting the requirements
of Section 414(l) of the Code. During the period prior to the
plan-to- plan transfer required by this subsection, the Seller
will cause the fiduciaries of the MK Rail Savings Plan to process
and distribute benefits with respect to the Transferred Employees
whose employment with the Buyer is terminated, and the amount to
be transferred in the plan-to-plan transfer will be reduced
accordingly.
(b) All plan-to-plan transfers of assets and liabilities pursuant to
this Section 10.4 will be effected in accordance with the
provisions of Section 414(l) of the Code and will otherwise be
made in accordance with the applicable plan provisions, as
amended, and the provisions of applicable law. The Buyer and the
Seller shall make or cause to be made any plan amendments and
filings as may be required or requested of the Buyer and the
Seller , respectively, in connection with said plan-to-plan
transfers whether before or after the Closing Date. The Seller
may require, as a condition of making a plan-to-plan transfer
hereunder, evidence reasonably satisfactory to the Seller of the
qualified status of the Buyer's 401(k) Plan including, without
limitation, a copy of a favorable determination letter from the
Internal Revenue Service or, if none, a written opinion of
outside counsel that such a favorable determination letter could
be obtained without substantial changes to the plan. The Buyer
may require, as a condition of receiving a plan-to-plan transfer
hereunder, evidence reasonably satisfactory to the Buyer of the
qualified status of the MK Rail Savings Plan including, without
limitation, a copy of a recent favorable determination from the
Internal Revenue Service or, if none, a written opinion of
outside counsel that such a favorable determination letter could
be obtained without substantial changes to the
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plan. Each of the parties hereto shall pay its own expenses in
connection with the plan-to-plan transfers contemplated by
this Section 10.3. The Buyer and the Seller shall provide each
other with such records and information as they may reasonably
request to carry out their respective obligations under this
Section 10.3.
10.4 Certain Tax Matters.
(a) Tax Returns Through Closing. The Seller shall prepare and file on
a timely basis all reports and returns of any federal, state,
local and foreign income, profits, franchise, unincorporated
business, capital, general corporate, sales, use, occupation,
withholding, social security, property, excise and any and all
other taxes (all such taxes being collectively referred to herein
as "Taxes") relating to the Business and the Purchased Assets
with respect to all periods through and including the Closing
Date and shall pay or cause to be paid when due all Taxes
relating to the Business and the Purchased Assets for such
periods, including any interest, additions to tax or penalties
thereon, together with interest on such additions to tax or
penalties. The Seller shall be entitled to receive any Tax refund
relating to the Business and the Purchased Assets in respect of
any period prior to, through and including the Closing Date.
(b) Subsequent Liability. If, subsequent to the Closing Date, any
liability for Taxes relating to the Business or the Purchased
Assets is imposed on the Buyer with respect to any period ending
on or prior to the Closing Date, then the Seller and Parent,
jointly and severally, shall indemnify and hold the Buyer
harmless from and against, and shall pay, the full amount of such
Tax liability, including any interest, additions to tax and
penalties thereon, together with interest on such additions to
tax or penalties (as well as reasonable attorneys' or other fees
and disbursements of the Buyer incurred in determination thereof
or in connection therewith). The Buyer shall notify the Seller,
upon its receipt of any notice thereof, of the imposition or
threatened imposition of any liability for Taxes relating to the
Business or the Purchased Assets in respect of any period ending
on or prior to the Closing Date, and the Seller shall, at its
sole expense and in its reasonable discretion, either settle any
such Tax claim that may be the subject of indemnification under
this Section 10.4(b) at such time and on such terms as it shall
deem appropriate or assume the entire defense thereof; provided,
however, that the Seller shall in no event take any position in
such settlement or defense that would subject the Buyer to any
civil fraud or any civil or criminal penalty. Notwithstanding the
foregoing, the Seller shall not consent, without the prior
written approval of the Buyer, which prior written approval shall
not be unreasonably withheld, to any change in the treatment of
any item which would, in any manner whatsoever, affect the Tax
liability of the Buyer for a period subsequent to the Closing
Date.
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10.5 Net Accounts Receivable. The Buyer shall use reasonable efforts to collect
the Net Accounts Receivable assigned to the Buyer by the Seller at the Closing;
provided however that Buyer shall not be required to engage a collection agency
or attorneys to collect the Net Accounts Receivable. As Buyer receives payments
from the account debtors of the Net Accounts Receivable assigned to the Buyer,
such payments shall be credited against amounts first invoiced under the Net
Accounts Receivable assigned to the Buyer by Seller hereunder unless otherwise
designated by the account debtor or where the amount of invoices to the account
debtor corresponds to the amount of the payments from the account debtor.
XI. ALTERNATIVE DISPUTE RESOLUTION ("ADR"); ADDITIONAL
PROCEEDINGS
11.1 Agreement to Use Procedure. The parties have entered into this
Agreement in good faith and in the belief that it is mutually advantageous to
them. It is with that same spirit of cooperation that they pledge to attempt to
resolve any dispute amicably without the necessity of litigation. Accordingly,
they agree that if any dispute arises among them relating to this
Agreement,
or any document executed and delivered in connection with the terms and
conditions of, or any transaction contemplated by, this Agreement (the
"Dispute"), they will first utilize the procedures specified in this Section XI
(the "Procedure") before any Additional Proceedings (as that term is defined in
Section 11.11 hereof).
11.2 Initiation of Procedure. The party seeking to initiate the
Procedure (the "Initiating Party") will give written notice to the other
parties. The notice must describe in general terms the nature of the Dispute and
the Initiating Party's claim for relief. Additionally, the notice must identify
one or more individuals with authority to settle the Dispute on the Initiating
Party's behalf. The party receiving the notice (the "Responding Party", whether
one or more) will have five business days within which to designate by written
notice to the Initiating Party, one or more individuals with authority to settle
the Dispute on the Responding Party's behalf. The individuals so designated will
be known as the "Authorized Individuals". The Responding Party may authorize
himself or herself as an Authorized Individual. The Initiating Party and the
Responding Party will collectively be referred to as the "Disputing Parties" or
individually "Disputing Party".
11.3. Direct Negotiations. The Authorized Individuals may investigate
the Dispute as they deem appropriate. But they agree to promptly, and in no
event later than 30 days from the date of the Initiating Party's written notice,
meet to discuss the Dispute's resolution. The Authorized Individuals will meet
at the times and places and with the frequency as they may agree. If the Dispute
has not been resolved within ten (10) days from their initial meeting date, the
Disputing Parties will cease direct negotiations and will submit the Dispute to
mediation in accordance with the following procedure.
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11.4 Mediator Selection. The Authorized Individuals will have five
business days from the date they cease direct negotiations to submit to each
other a written list of acceptable qualified attorney-mediators not affiliated
with any Party. Within five days from the date the list is received, the
Authorized Individuals will rank the mediators in numerical order of preference
and exchange the rankings. If one or more names are on both lists, the highest
ranking person will be designated as the mediator. If no mediator has been
selected under this procedure, the Disputing Parties agree jointly to request a
state or federal district judge of their choosing to supply within ten business
days a list of potential qualified attorney-mediators. Within five business days
from the date the list is received, the Authorized Individuals will again rank
the proposed mediators in numerical order of preference and will simultaneously
exchange the list and will select as the mediator the individual receiving the
highest combined ranking. If the mediator is not available to serve, they will
proceed to contact the mediator who was next highest in ranking until they are
able to select a mediator.
11.5 Mediation Time and Place. In consultation with the mediator
selected, the Authorized Individuals will promptly designate a mutually
convenient time and place for the mediation. Unless circumstances require
otherwise, the time for mediation may not be later than thirty (30) days after
selecting the mediator.
11.6 Information Exchange. If any Disputing Party to this Agreement has
substantial need for information in another Disputing Party's possession in
order to prepare for the mediation, all Disputing Parties will attempt in good
faith to agree to procedures to expeditiously exchange the information, with the
mediator's help if required.
11.7 Summary of Views. At least seven days before the first scheduled
mediation session, each Disputing Party will deliver to the mediator and to the
other Disputing Parties a concise written summary of its views on the matter in
Dispute and the other matters required by the mediator. The mediator may also
request that a confidential issue paper be submitted by each Disputing Party to
him or her.
11.8 Parties to be Represented. In the mediation, each Disputing Party
will be represented by an Authorized Individual and may be represented by
counsel. In addition, each Disputing Party may, with the mediator's permission,
bring the additional persons as needed to respond to questions, contribute
information and participate in the negotiations.
11.9 Conduct of Mediation.
(a) Mediation Format. The mediator will determine the format for the
meetings. The format must be designed to assure that:
(i) both the mediator and the Authorized Individuals have an
opportunity to hear an oral presentation of each Disputing
Party's views on the matter in dispute; and
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(ii) the Disputing Parties attempt to negotiate to resolve the
matter in dispute, with or without the assistance of counsel
or others, but with the mediator's assistance.
(b) Commitment to Participate in Mediation in Good Faith. To this
end, the mediator is authorized to conduct both joint meetings
and separate private caucuses with the Disputing Parties. The
mediation session will be private. The mediator will keep
confidential all information learned in private caucus with any
Disputing Parties unless specifically authorized by the Disputing
Parties to disclose the information to the other Disputing Party.
The Disputing Parties agree to sign a document agreeing that the
mediator will be governed by applicable Iowa law and the other
rules as the mediator will prescribe. The Disputing Parties
commit to participate in the proceedings in good faith with the
intention of resolving the Dispute if at all possible.
11.10 Termination of Procedure.
(a) Procedure to Terminate Mediation. The Disputing Parties agree to
participate in the mediation procedure to its conclusion. The
mediation will be terminated by:
(i) executing a settlement agreement by the Disputing Party;
(ii) declaring to the mediator that the mediation is terminated;
or
(iii)a Disputing Party declaring in writing that the mediation
process is terminated when one full day's mediation session
is concluded.
(b) If Dispute is Not Resolved. Even if the mediation is terminated
without the Dispute's resolution, the Disputing Parties agree not
to terminate negotiations and not to commence any Additional
Proceedings before five days following the mediation expiration.
Any Disputing Party may, however, commence Additional Proceedings
within the five-day period if the Dispute could be barred by an
applicable statute of limitations.
11.11 Arbitration. The parties agree to participate in good faith in
the ADR to its conclusion. If the Disputing Parties are not successful in
resolving the Dispute through the ADR, then the Disputing Parties may mutually
agree to submit the matter to binding arbitration or a private adjudicator, or
either Disputing Party may seek an adjudicated resolution through the
appropriate court ("Additional Proceedings")
11.12 Mediation Fees; Disqualification. The mediator's fees and
expenses will be shared equally by the Disputing Parties. The mediator will be
disqualified as a witness, consultant, expert, or counsel for any Disputing
Party with respect to the Dispute and any related matters.
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11.13 Confidentiality. Mediation is a compromise negotiation for
purposes of federal and state rules of evidence and constitutes privileged
communication under Iowa law. The entire mediation process is confidential, and
no stenographic, visual or audio record will be made. All conduct, statements,
promises, offers, views and opinions, whether oral or written, made in the
mediation's course by any Disputing Party, their agents, employees,
representatives or other invites and by the mediator are confidential and will,
in addition and where appropriate, be deemed privileged. The conduct,
statements, promises, offers, views and opinions will not be discoverable or
admissible for any purpose, including impeachment, in any litigation or other
proceeding involving the parties. It will not be disclosed to anyone not any
Party's agent, employee, expert, witness or representative. Evidence otherwise
discoverable or admissible is not, however, excluded from discovery or admission
as a result of its use in the mediation.
XII. TERMINATION.
12.1 Anything contained herein to the contrary notwithstanding, this
Agreement may be terminated and the transactions contemplated hereby abandoned
at any time prior to the Closing Date, without liability:
(a) by mutual written consent of the Seller and the Buyer;
(b) by the Seller if any of the conditions set forth in Section VII
hereof shall not have been satisfied on or before the Closing
Date, and shall not have been waived in writing by the Seller;
(c) by the Buyer if any of the conditions set forth in Section VIII
hereof shall not have been satisfied on or before the Closing
Date, and shall not have been waived in writing by the Buyer;
(d) by either party hereto, if the Closing Date does not occur on or
prior to July 26, 1996; provided, however, that the party seeking
termination pursuant to clause (b), (c) or (d) shall not be in
breach of any of its representations, warranties, covenants or
agreements contained in this Agreement.
12.2 If this Agreement is terminated and the transactions contemplated
hereby are abandoned as described in Section 12.1 hereof, this Agreement shall
become void and of no further force and effect. Nothing in Section 12.1 shall be
deemed to release either party from any liability for any breach by such party
of the terms and provisions of this Agreement. Nothing in Section 12.1 or
elsewhere in this Agreement shall impair the right of the Buyer, prior to any
termination of this Agreement pursuant to Section 12.1, to compel specific
performance by the Seller of its obligations to the Buyer hereunder.
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XIII. MISCELLANEOUS
13.1 Noncompetition. Parent on behalf of itself and each of its
subsidiaries, and Seller agree not to compete with the Buyer for a period of
five years commencing on the Closing Date as provided in the noncompetition
agreement attached as Appendix II hereto.
13.2 Brokerage. The Seller, represents and warrants to the Buyer that
the Seller has not incurred any obligations or liabilities, contingent or
otherwise, for brokerage or finders' fees or agents' commissions or other like
payments in connection with this Agreement or the transactions contemplated
hereby. The Buyer represents and warrants to the Seller that the Buyer has not
incurred any obligations or liabilities, contingent or otherwise, for brokerage
or finders' fees or agents' commissions or other like payments in connection
with this Agreement or the transactions contemplated hereby. The Seller and the
Buyer each agree to indemnify and hold the other harmless against and in respect
of any such obligations or liabilities based in any way on agreements,
arrangements or understandings claimed to have been made by it or them with any
third party and not disclosed herein.
13.3 Waivers and Amendment.
(a) The Seller or the Buyer may, by written notice to the other, (i)
extend the time for the performance of any of the obligations or
other actions of the other; (ii) waive any inaccuracies in the
representations or warranties of the other contained in this
Agreement; (iii) waive compliance with any of the covenants of
the other contained in this Agreement; and (iv) waive or modify
performance of any of the obligations of the other.
(b) This Agreement may be amended, modified or supplemented only by a
written instrument executed by all the parties hereto. Except as
provided in the preceding sentence, no action taken pursuant to
this Agreement, including, without limitation, any investigation
by or on behalf of any party, shall be deemed to constitute a
waiver by the party taking such action of compliance with any
representations, warranties, covenants or agreements contained
herein. The waiver by any party hereto of a breach of any
provision of this Agreement shall not operate or be construed as
a waiver of any subsequent breach.
13.4 Expenses. Whether or not the transactions contemplated by this
Agreement are consummated, the Buyer shall pay the fees and expenses of its
counsel, accountants, other experts and all other expenses incurred by it
incident to the negotiation, preparation and execution of this Agreement, and
the Seller shall pay any and all such fees and expenses incurred by it incident
to the negotiation, preparation and execution of this Agreement and the
performance by it of its obligations hereunder.
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13.5 Occurrences of Conditions Precedent. Each of the parties hereto
agrees to use its best efforts to cause all conditions precedent to its
obligations under this Agreement to be satisfied.
13.6 Notices. All notices, requests, demands and other communications
which are required or may be given under this Agreement shall be in writing and
shall be deemed to have been duly given if delivered personally or sent by
registered or certified mail, return receipt requested, postage prepaid:
(a) If to Parent, to:
1200 Reedsdale Street
Pittsburgh, PA 15233
Attention: President
With a copy to:
Michael A. Weiss, Esq.
Doepken Keevican & Weiss, Professional Corporation
600 Grant Street
37th Floor, USX Tower
Pittsburgh, PA 15219
(b) If to the Seller, to:
1325 Pratt Boulevard
Elk Grove Village, IL 60007
Attention: President
With a copy to:
Michael A. Weiss, Esq.
Doepken Keevican & Weiss, Professional Corporation
600 Grant Street
37th Floor, USX Tower
Pittsburgh, PA 15219
(c) If to the Buyer, to:
520 South 18th Street
West Des Moines, Iowa 50265
Attention: Robert G. Pulver, President
or to such other address as any party shall have specified by notice in writing
to the other.
13.7 Integration Clause. This Agreement, the Assumption Agreement and
the Exhibits hereto constitute the entire agreement between the Buyer and the
Seller with respect to the subject matter hereof.
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13.8 Binding Effect; Benefits. This Agreement shall inure to the
benefit of and be binding upon the parties hereto and their successors; nothing
in this Agreement, expressed or implied, is intended to confer on any person
other than the parties hereto, or their successors, any rights, remedies,
obligations or liabilities under or by reason of this Agreement.
13.9 Non-assignability. This Agreement and any rights pursuant hereto
shall not be assignable by either party without the prior written consent of the
other.
13.10 Applicable Law. This Agreement shall be deemed a contract made
under the laws of the state of Iowa, and this Agreement and the legal relations
among the parties hereto shall, for all purposes, be governed by, construed,
interpreted and enforced in accordance with the laws of the state of Iowa. Any
suit, action or other legal proceeding arising out this Agreement or any
document executed and delivered in connection with this Agreement shall be
brought in the courts of record of the state of Iowa or the courts of the United
States located in the state of Iowa. Parent and the Seller hereby consent to the
jurisdiction of each such court in any suit, action or proceeding and waives any
objection which they may have to the laying of venue of any suit, action or
proceeding in any such courts.
13.11 Section and Other Headings. The Section and other headings
contained in this Agreement are for reference purposes only and shall not affect
the meaning or interpretation of this Agreement.
13.12 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original and all of which
together shall be deemed to be one and the same instrument.
13.13 Severability. If any term or other provision of this Agreement is
invalid, illegal or incapable of being enforced by any rule of law or public
policy, all other conditions and provisions of this Agreement shall nevertheless
remain in full force and effect so long as the economic or legal substance of
the transactions contemplated hereby is not affected in any manner materially
adverse to any party. Upon such determination that any term or other provision
is invalid, illegal or incapable of being enforced, the parties hereto shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in an acceptable manner to the end
that transactions contemplated hereby are fulfilled to the extent possible.
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IN WITNESS WHEREOF, the undersigned, intending to be legally bound
hereby, have duly executed and delivered this Agreement as of the date first
above written.
MK RAIL CORPORATION
By:_______________________________________
William D. Grab, Vice President
ALERT MANUFACTURING AND SUPPLY CO.
By:_______________________________________
Name: _________________________________
Title:_________________________________
ALL-STATE INDUSTRIAL RUBBER CO.,INC.
By:________________________________________
Robert G. Pulver, President
41.
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