SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
Current Report Pursuant
to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report: September 10, 1996
Date of Earliest Event Reported: September 10, 1996
MK RAIL CORPORATION
-------------------
(Exact name of registrant as specified in its charter)
Delaware
--------
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
- ------------------------------------- -----
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
On September 10, 1996, the Company repurchased for $34.6 million all of
the debt of the Company owed to Morrison Knudsen Corporation, an Ohio
corporation ("Morrison Knudsen"). The amount of the debt outstanding as of the
date of repurchase, including accrued interest, was $57.3 million. This
repurchase was effected pursuant to a Note Cancellation and Restructuring
Agreement dated June 20, 1996 by and among the Company and Morrison Knudsen, as
amended as of July 25, 1996 (the "Note Cancellation Agreement").
The Company's obligation to complete the debt repurchase under the Note
Cancellation Agreement was conditioned on its ability to sell its Mexican
subsidiary, M.K. Gain S.A. de C.V. ("MK Gain"). The Company waived this
condition and does not anticipate selling MK Gain at this time. The Company
financed the repurchase of this debt through borrowings of $8 million under the
term loan portion and the balance $26.6 million under the revolving credit
portion of its bank credit facility as described below under "Amendment of Loan
Agreement." The Company had previously applied the $3.7 million of net proceeds
from the sale of the operating assets of its Alert Mfg. & Supply Co. subsidiary
("Alert") in July 1996 to partially repay then outstanding amounts under this
credit facility.
Stockholders Agreement
On June 25, 1996, Morrison Knudsen Corporation, a Delaware corporation
("MKC"), filed with the United States Bankruptcy Court for the District of
Delaware a voluntary petition for relief pursuant to Chapter 11 of the United
States Bankruptcy Code (the "Bankruptcy Code"). MKC owns all of the stock of
Morrison Knudsen. Morrison Knudsen holds 11,149,000 shares of the outstanding
Common Stock of the Company (representing approximately 63.5% of the Company's
outstanding Common Stock). On August 26, 1996, the Bankruptcy Court approved the
Plan of Reorganization submitted as a part of MKC's bankruptcy filing (the "MKC
Plan of Reorganization"). On September 11, 1996, the MKC Plan of Reorganization
is anticipated to become effective, and, as contemplated therein, MKC is to be
merged into Washington Construction Inc. Under the MKC Plan of Reorganization,
Morrison Knudsen will distribute all 11,149,000 shares of the outstanding Common
Stock of the Company held by it to certain of its creditors and, in certain
circumstances, to those of its existing stockholders who purchase a portion of
the rights of its creditors. This distribution of the Company's Common Stock is
expected to occur in October 1996.
In anticipation of the bankruptcy filing, on June 20, 1996, the Company
and Morrison Knudsen entered into a Stockholders Agreement. Under the
Stockholders Agreement, which was amended by an amendment dated as of July 25,
1996, the Company agreed to provide registration rights to persons receiving
stock of the Company as a part of the Plan of Reorganization of MKC and under
which Morrison Knudsen agreed that the stock would be subject to certain
standstill and voting provisions for a specified period. The standstill
provisions 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 generally require
that the stock will be voted in favor of the Company's nominees to its Board
(which is to consist of at least seven members, of which a majority are to be
outside directors). Under the Stockholders Agreement, "outside directors" are
directors who (i) are not and have not been employed by Morrison Knudsen or the
Company or their respective subsidiaries in an executive capacity
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within the immediately prior five years; (ii) are not (and are not affiliated
with a company or a firm that is) a significant advisor or consultant to the
Company or its subsidiaries; (iii) are not affiliated with a significant
customer or supplier of the Company or its subsidiaries; (iv) do not have
significant personal services contract(s) with the Company or its subsidiaries;
(v) are not affiliated with a tax-exempt entity that receives significant
contributions from the Company or its subsidiaries; and (vi) are not spouses,
parents, siblings, or children of any person described by items (i) through (v).
In general, the period during which the standstill and voting
provisions are in effect will end on the earlier of the date two years after the
date (the "Distribution Date") Morrison Knudsen distributes the stock in
accordance with the MKC Plan of Reorganization, or the date on which Registrable
Securities represent less than 15% of the Company's outstanding shares of common
stock; provided, that if a Stockholders Meeting is required to be held (as
described below), the time period during which the voting provisions are in
effect will expire on the date of the meeting, if earlier than the second
anniversary of the Distribution Date, and the time period during which the
standstill provisions are in effect will expire 90 days before the meeting. The
term "Registrable Securities" is generally defined to mean the stock of the
Company held by Morrison Knudsen or its transferees, other than transferees
receiving the stock in a registered public offering or in "ordinary trading
transactions" within the meaning of Section 1145(b)(1) of the Bankruptcy Code.
Stock of the Company that is distributed as part of the MKC Plan of
Reorganization will be subject to transfer restrictions under which transferees
must agree to be bound by the provisions of the Stockholders Agreement, other
than transferees receiving the stock in registered public offerings or in
"ordinary trading transactions" within the meaning of Section 1145(b)(1) of the
U.S. Bankruptcy Code, in each case so long as the transferor does not know the
specific identity of the transferee prior to the transfer and the transferee is
not assigned any rights under the Stockholders Agreement. The Company has agreed
to file a registration statement to register for resale the shares distributed
to the persons receiving stock of the Company as a part of the MKC Plan of
Reorganization. The Company expects to file this registration statement with the
Securities and Exchange Commission (the "Commission") in September 1996 and to
diligently seek to have the Commission declare the registration statement
effective. However, the Company cannot offer any assurances as to when, or if,
the Commission will declare the registration statement effective. Purchasers of
the Company's shares from persons who sell such shares pursuant to an effective
registration statement or in ordinary trading transactions will not be subject
to the standstill provisions (so long as the seller of the shares does not know
the specific identity of the purchaser prior to the sale and the transferee is
not assigned any rights under the Stockholders Agreement).
Resignation of Robert S. Miller, Jr. as a Director of the Company
On September 11, 1996, the anticipated effective date of both the MKC
Plan of Reorganization and the merger of MKC into Washington Construction Inc.,
Robert S. Miller, Jr. will resign as a Vice Chairman and director of the
Company. Mr. Miller has served as the Chairman of Morrison Knudsen and MKC since
April 1995 and, following its reorganization and merger into Washington
Construction Inc., is expected to serve as its Vice Chairman.
Under the MKC Plan of Reorganization, Morrison Knudsen will distribute
all 11,149,000 shares of the outstanding Common Stock of the Company held by it
to certain of its creditors and, in certain circumstances, to those of its
existing stockholders who purchase a portion of the rights of its creditors. In
order to satisfy the requirements of the Stockholders Agreement, the vacancy on
the Board created by
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Mr. Miller's resignation will be filled by the Company's Board of Directors with
an outside director when a suitable candidate has been identified. See
"Stockholders Agreement," above.
Amendment of Loan Agreement
On September 10, 1996, the Company and its domestic subsidiaries
entered into an Amended and Restated Loan and Security Agreement with
BankAmerica Business Credit, Inc. as lender and agent for other financial
institutions ("BABC"), which amended and restated the $75 million Loan Agreement
entered into among the parties on August 31, 1995, as previously amended on
November 7, 1995, January 22, 1996, February 15, 1996, March 22, 1996 and April
24, 1996 (as amended and restated, the "Loan Agreement" or "Facility").
Under the Loan Agreement, the Company may borrow up to $75 million, $8
million as term loans ("Term Loans"), which amount was fully advanced at
closing, and up to $67 million as revolving loans ("Revolving Loans") to the
extent of eligible accounts receivable, inventory and certain other assets.
Borrowings under the Facility are secured by substantially all of the domestic
inventory, accounts receivable, property, plant and equipment of the Company and
its domestic subsidiaries.
Unless the Company is eligible and elects to borrow under the Facility
based on LIBOR rates, described below ("LIBOR Rate Loans"), Term Loans and
Revolving Loans bear interest at a per annum rate equal to the "Base Rate" plus
a specified percentage or margin based on the Company's debt-to-equity ratio
(the "Applicable Margin"). The Base Rate is a fluctuating rate equal to the
higher of BABC's announced reference rate for prime credits or 0.5% in excess of
the Federal Funds Rate. The Applicable Margin ranges from 0.75% to 1.50% for
Term Loans and from 1.00% to 1.50% for Revolving Loans. The initial Applicable
Margin is 1.50% based on the Company's current debt-to-equity ratio of greater
than 1.50 to 1.00. Commencing on the later of October 31, 1996 or the date the
Company establishes a debt-to-equity ratio of less than 1.50 to 1.00, the
Company may elect to convert its borrowings to LIBOR Rate Loans. LIBOR Rate
Loans bear interest at a per annum rate equal to the LIBOR rate for a specified
loan period plus a specified percentage or margin based on the Company's
debt-to-equity ratio (the "Applicable LIBOR Margin"). The Applicable LIBOR
Margin ranges from 2.50% to 3.00% for Term Loans and from 2.75% to 3.25% for
Revolving Loans.
Additionally, the Company pays a monthly fee of .25% per annum on the
unused portion of the loan amount. The Loan Agreement also provides for a
maximum of $10 million of letters of credit, of which approximately $4.5 million
were outstanding at September 10, 1996. The Company pays a monthly fee of 1.5%
per annum on the undrawn amount of outstanding letters of credit. The Loan
Agreement provides certain restrictive covenants, including attaining a minimum
consolidated tangible net worth, fixed charge coverage, limitations on capital
expenditures, restrictions on the payment of dividends and other financial
covenants.
On September 10, 1996, the Company borrowed the full $8 million
available under the Term Loan portion of the Facility and $28.7 million under
the Revolving Loan portion of the Facility, principally to repurchase the
Morrison Knudsen debt described above under "Note Cancellation Agreement." As of
this date, approximately $18.8 million remained available for Revolving Loans
based on the Company's currently eligible accounts receivable, inventory and
other assets included in its borrowing base under the Facility.
Record Date for Annual Meeting of Stockholders
The Executive Committee of the Board of Directors of the Company
changed the record date for the Annual Meeting of Stockholders scheduled to be
held on October 30, 1996 from September 13, 1996 to September 10, 1996.
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ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial statements of businesses acquired. None
(b) Pro forma financial information. None
(c) Exhibits.
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 (filed as an exhibit to the Company's Amendment No. 2 on
Form 8-K dated July 3, 1996 and incorporated herein by reference).
10.2 Amendment dated as of July 25, 1996 to Note Cancellation and
Restructuring Agreement by and among MK Rail Corporation, Morrison
Knudsen Corporation, a Delaware corporation, and Morrison Knudsen
Corporation, an Ohio corporation.
10.3 Stockholders Agreement dated as of June 20, 1996 between MK Rail
Corporation and Morrison Knudsen Corporation (filed as an exhibit to
the Company's Amendment No. 2 on Form 8-K dated July 3, 1996 and
incorporated herein by reference).
10.4 Amendment dated as of July 25, 1996 to Stockholders Agreement between
MK Rail Corporation and Morrison Knudsen Corporation.
10.5 Amended and Restated Loan and Security Agreement dated September 11,
1996, among the financial institutions named as lenders and BankAmerica
Business Credit, Inc., as agent, and the Company, Motor Coils
Manufacturing Co., MK Engine Systems Co., Inc., Clark Industries, Inc.,
Power Parts, Inc., Touchstone, Inc., Power Parts Sign Co. and Alert
Mfg. & Supply Co.
99.1 Press release of the Company issued September 10, 1996.
99.2 Information sheet of the Company issued September 10, 1996.
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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: September 10, 1996 By: /s/ William D. Grab
----------------------
William D. Grab
Vice President, Controller and
Principal Accounting Officer
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EXHIBIT 10.2
AMENDMENT TO NOTE CANCELLATION AND
RESTRUCTURING AGREEMENT
THIS AMENDMENT TO NOTE CANCELLATION AND RESTRUCTURING
AGREEMENT (this "Amendment") made and entered into as of the ___ day of July,
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, MK Rail, MKO and MKC entered into a Note Cancellation and
Restructuring Agreement (the "Note Cancellation Agreement") dated as of June 20,
1996, under which, subject to the satisfaction of certain conditions set forth
therein, MKO and MKC (collectively, "MK") agreed to cancel a note issued by MK
Rail to MKO dated June 26, 1995 in the original principal amount of $52,200,000
in return for certain payments from MK Rail to MKO; and
WHEREAS, the Note Cancellation Agreement contemplated that MK would
file a joint petition and plan of reorganization in the United States Bankruptcy
Court for the District of Delaware (the "Bankruptcy Court"); and
WHEREAS, MKC has filed a petition and plan of reorganization with the
Bankruptcy Court but MKO has not joined in such a petition or plan of
reorganization; and
WHEREAS, certain changes are required to be made to the Note
Cancellation Agreement to account for the fact that MKO has not joined in the
petition and the plan of reorganization filed by MKC with the Bankruptcy Court,
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. Any capitalized terms set forth herein that are not otherwise
defined herein shall have the meanings given to such terms in the
Note Cancellation Agreement.
2. For purposes of the Note Cancellation Agreement, the term "Plan"
shall mean the Plan of Reorganization filed by MKC with the
Bankruptcy Court as it may be from time to time amended.
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3. Section 3 of the Note Cancellation Agreement is hereby amended in
its entirety to read as follows:
3. Motion to Bankruptcy Court. MKC may, at its option, 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, approving the assumption of
this Agreement and approving the transactions contemplated hereby and
by the Stockholders Agreement (the "Bankruptcy Court Approval"). Among
other things, the Bankruptcy Court Approval, if requested, shall
approve an escrow arrangement in form and substance satisfactory to MKC
and MK Rail as contemplated by Section 5.2 hereof.
4. Section 5.3 (a) of the Note Cancellation Agreement is hereby
amended in its entirety to read as follows:
(a) The "Distribution Condition" shall be satisfied on 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.
5. References to MKO in Section 13.3 of the Note Cancellation
Agreement are hereby changed to references to MKC.
6. The last paragraph of Exhibit D to the Note Cancellation
Agreement, which states that additional changes to the Plan of
Reorganization of MK will be required to implement the intent and
effect of the Mandatory Plan Provisions if MKO does not become a
debtor, is hereby deleted.
7. Except as expressly modified and amended hereby, the Note
Cancellation Agreement shall continue to be in full force and
effect.
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IN WITNESS WHEREOF, the undersigned have hereunto set their hands as of
the day and year first set forth above.
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:_________________________
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EXHIBIT 10.4
AMENDMENT TO STOCKHOLDERS AGREEMENT
This Amendment to Stockholders Agreement (the "Amendment"), dated as of
July ___, 1996, between MK Rail Corporation, a Delaware corporation ("MK Rail"),
and Morrison Knudsen Corporation, an Ohio corporation ("MKO").
WHEREAS, in connection with the reorganization of Morrison Knudsen
Corporation, a Delaware corporation ("MK"), in a case filed under Title 11 of
the United States Bankruptcy Code, as amended (the "Bankruptcy Code"), MK Rail
and MKO executed and delivered a Stockholders Agreement (the "Agreement") dated
as June 20, 1996; and
WHEREAS, the Agreement contains certain agreements regarding the
registration and voting of restricted shares of common stock of MK Rail held by
MKO which stock it was contemplated would be distributed to certain creditors of
MK and MKO; and
WHEREAS, as a result of negotiations between MK and equity holders of
MK, it is contemplated that MK's plan of reorganization will be amended so that
it provides for rights or options to be granted to equity holders of MK which
will permit them, subject to satisfaction of certain conditions, to receive a
portion of the restricted shares of common stock of MK Rail held by MKO; and
WHEREAS, MK has made a motion (an "1145 Motion") requesting that the
Bankruptcy Court having jurisdiction over MK's bankruptcy proceeding issue an
order (an "1145 Order") providing that the offering, issuance, sale and
distribution by MKO of the common stock of MK Rail qualifies for the exemption
(the "1145 Exemption"), available under Section 1145(a) of the Bankruptcy Code,
from the registration requirements of the Securities Act of 1933, as amended;
and
WHEREAS, the Securities and Exchange Commission has stated that it will
not object to the 1145 Motion; and
WHEREAS, the parties wish to amend the Agreement as set forth herein to
make certain changes thereto necessitated by the possibility that equity holders
of MK may acquire some restricted shares of Common Stock and that the 1145
Motion has been made;
NOW THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1. The term "Rights Plan Amendment" is hereby amended and restated in
its entirety so it means the Second Amendment to Rights Agreement dated as of
June 20, 1996 and the Third Amendment to Rights Agreement of even date herewith
between MK Rail and Chase Mellon Shareholder Services, L.L.C., formerly known as
Chemical Mellon Shareholder Services, L.L.C.
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2. The following language is added at the end of the last sentence of
the definition of "Registrable Securities" in Section 1.1 of the Agreement:
or in "ordinary trading transactions" within the meaning of Section
1145(b)(1) of the United States Bankruptcy Code, as amended (the
"Bankruptcy Code").
3. The reference to "creditors of MK" in the definition of "Shares" in
Section 1.1 of the Agreement is hereby changed to a reference to "persons."
4. The first sentence of Section 8 of the Agreement is hereby amended
in its entirety to read as follows:
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 Person has executed an agreement (in the form of Exhibit
A hereto) to be bound, or has otherwise been effectively bound pursuant
to the Plan, by the provisions of this Agreement.
5. The last sentence of Section 8 of the Agreement is hereby amended,
restated and replaced in its entirety by the following sentences:
MKO may distribute shares of Common Stock to equity holders of MK
provided that (a) the 1145 Order has been issued and is in full force
and effect and is not the subject of a pending appeal at the time the
Common Stock is distributed and (b) each equity holder receiving such
Common Stock has executed an agreement (in the form of Exhibit A
hereto) to be bound, or has otherwise been effectively bound pursuant
to the Plan, by the provisions of this Agreement. No distribution of
Common Stock to equity holders or any other party in a distribution
that qualifies for the 1145 Exemption shall excuse any party from or be
deemed to constitute a release of the transfer restrictions and
legending requirements set forth in this Section 8, except as set forth
in the penultimate sentence of this paragraph, and all Common Stock so
distributed shall after such distribution be subject to said transfer
restrictions and legend requirements as well as all other terms and
conditions hereof. 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, or in "ordinary trading transactions" within the meaning of
Section 1145(b)(1) of the Bankruptcy Code, 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 and so long as the Transferees
are not assigned and do not receive any rights under this Agreement.
The Company may also put the following legend on certificates of stock
held by Transferees of MKO and their Transferees that are bound to the
terms of this Agreement:
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THE SHARES OF STOCK REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "ACT"), OR ANY STATE SECURITIES LAWS. SUCH SHARES OF
STOCK MAY NOT BE TRANSFERRED EXCEPT (1) PURSUANT TO A
REGISTRATION STATEMENT EFFECTIVE UNDER THE ACT AND ANY
APPLICABLE STATE SECURITIES LAWS, (2) PURSUANT TO AN EXEMPTION
FROM THE REGISTRATION REQUIREMENTS OF THE ACT AND ANY
APPLICABLE STATE SECURITIES LAW, OR (3) IF THE STOCK HAS BEEN
RECEIVED BY THE HOLDER HEREOF IN A DISTRIBUTION THAT QUALIFIES
FOR THE EXEMPTION, AVAILABLE UNDER SECTION 1145(a) OF THE
UNITED STATES BANKRUPTCY CODE, AS AMENDED (THE "BANKRUPTCY
CODE"), TO THE REGISTRATION REQUIREMENTS OF THE ACT, IN
ORDINARY TRADING TRANSACTIONS WITHIN THE MEANING OF SECTION
1145(b)(1) OF THE BANKRUPTCY CODE.
6. All terms and provisions of the Agreement, as amended hereby, shall
continue to be in full force and effect.
IN WITNESS WHEREOF, the undersigned have hereunto set their hands as of
the day and year first set forth above.
MK RAIL CORPORATION
By:_______________________________
Title:____________________________
MORRISON KNUDSEN CORPORATION
By:_______________________________
Title:____________________________
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LOAN AND SECURITY AGREEMENT
Dated as of September __, 1996
Among
THE FINANCIAL INSTITUTIONS NAMED HEREIN
as the Lenders
and
BANKAMERICA BUSINESS CREDIT, INC.
as the Agent
and
MK RAIL CORPORATION
MOTOR COILS MANUFACTURING CO.,
MK ENGINE SYSTEMS COMPANY, INC.,
CLARK INDUSTRIES, INC.,
POWER PARTS COMPANY,
TOUCHSTONE, INC. and
POWER PARTS SIGN CO.
as the Borrowers
<PAGE>
TABLE OF CONTENTS
-----------------
Section Page
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ARTICLE 1
INTERPRETATION OF THIS AGREEMENT
1.1 Definitions...............................................2
1.2 Accounting Terms.........................................33
1.3 Interpretive Provisions..................................34
1.4 Amendment and Restatement................................35
ARTICLE 2
LOANS AND LETTERS OF CREDIT
2.1 Revolving Loans..........................................36
2.2 Term Loans...............................................43
2.3 Letters of Credit........................................45
ARTICLE 3
INTEREST AND FEES
3.1 Interest.................................................51
3.2 Conversion and Continuation Elections....................54
3.3 Maximum Interest Rate....................................55
3.4 Fees.....................................................56
3.5 Unused Line Fee..........................................56
3.6 Letter of Credit Fee.....................................57
3.7 Audit Fees...............................................57
ARTICLE 4
PAYMENTS AND PREPAYMENTS
4.1 Loans....................................................57
4.2 Termination of Facility; Prepayments.....................58
4.3 Payments by the Borrowers................................59
4.4 Payments as Revolving Loans..............................60
4.5 Apportionment, Application and Reversal of Payments
........................................................60
4.6 Indemnity for Returned Payments..........................61
4.7 Agent's and Lenders' Books and Records; Monthly
Statements...............................................61
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Section Page
4.8 Repayment of the Term Loans..............................62
4.9 Voluntary Prepayments of the Term Loans..................62
4.10 Mandatory Prepayments of the Term Loans..................62
ARTICLE 5
TAXES, YIELD PROTECTION AND ILLEGALITY
5.1 Taxes....................................................63
5.2 Illegality...............................................64
5.3 Increased Costs and Reduction of Return..................64
5.4 Funding Losses...........................................65
5.5 Inability to Determine Rates.............................65
5.6 Certificates of Lenders..................................66
5.7 Survival.................................................66
ARTICLE 6
COLLATERAL
6.1 Grant of Security Interest...............................66
6.2 Perfection and Protection of Security Interest...........67
6.3 Location of Collateral...................................69
6.4 Title to, Liens on, and Sale and Use of Collateral
........................................................69
6.5 Appraisals...............................................69
6.6 Access and Examination; Confidentiality..................70
6.7 Collateral Reporting.....................................71
6.8 Accounts.................................................73
6.9 Collection of Accounts; Payments.........................74
6.10 Inventory; Perpetual Inventory...........................75
6.11 Equipment................................................76
6.12 Assigned Contracts.......................................77
6.13 Documents, Instruments, and Chattel Paper................78
6.14 Right to Cure............................................78
6.15 Power of Attorney........................................78
6.16 The Agent's and Lenders' Rights, Duties and Liabilities .79
ARTICLE 7
BOOKS AND RECORDS; FINANCIAL INFORMATION; NOTICES
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Section Page
7.1 Books and Records........................................80
7.2 Financial Information....................................80
7.3 Notices to the Lenders...................................83
ARTICLE 8
GENERAL WARRANTIES AND REPRESENTATIONS
8.1 Authorization, Validity, and Enforceability of this
Agreement and the Loan Documents.........................85
8.2 Validity and Priority of Security Interest...............86
8.3 Organization and Qualification...........................86
8.4 Corporate Name; Prior Transactions.......................87
8.5 Subsidiaries and Affiliates; FEIN Numbers................87
8.6 Financial Statements, Pro Forma and Projections..........87
8.7 Capitalization...........................................88
8.8 Solvency.................................................88
8.10 Distributions............................................88
8.11 Title to Property........................................88
8.12 Real Estate; Leases; Minnesota...........................89
8.13 Proprietary Rights Collateral............................89
8.14 Trade Names and Terms of Sale............................89
8.15 Litigation...............................................89
8.16 Restrictive Agreements...................................89
8.17 Labor Disputes...........................................90
8.18 Environmental Laws.......................................90
8.19 No Violation of Law......................................91
8.20 No Default...............................................91
8.21 ERISA Compliance.........................................91
8.22 Taxes....................................................92
8.23 Regulated Entities.......................................92
8.24 Use of Proceeds; Margin Regulations......................93
8.25 Copyrights, Patents, Trademarks and Licenses, etc
........................................................93
8.26 No Material Adverse Change...............................93
8.27 Full Disclosure..........................................93
8.28 Material Agreements; Identity of Locomotives.............93
8.29 Bank Accounts............................................94
8.30 Governmental Authorization...............................94
8.31 Insurance................................................94
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Section Page
ARTICLE 9
AFFIRMATIVE AND NEGATIVE COVENANTS
9.1 Taxes and Other Obligations..............................94
9.2 Corporate Existence and Good Standing....................95
9.3 Compliance with Law and Agreements; Maintenance of
Licenses.................................................95
9.4 Maintenance of Property; Use of Locomotives..............95
9.5 Insurance................................................95
9.6 Condemnation.............................................97
9.7 Environmental Laws.......................................98
9.8 Compliance with ERISA....................................98
9.9 Mergers, Consolidations or Sales.........................99
9.10 Distributions; Capital Change; Restricted Investments
........................................................99
9.11 Transactions Affecting Collateral or Obligations
.......................................................101
9.12 Guaranties..............................................101
9.13 Debt; Changes to Preferred Stock........................101
9.14 Prepayment..............................................101
9.15 Transactions with Affiliates............................101
9.16 Investment Banking and Finder's Fees....................102
9.17 Management Compensation.................................102
9.18 Business Conducted......................................102
9.19 Liens...................................................102
9.20 Sale and Leaseback Transactions.........................104
9.21 New Subsidiaries; Motive Power..........................104
9.22 Fiscal Year.............................................105
9.23 Capital Expenditures....................................105
9.24 Operating Lease Obligations.............................105
9.25 Debt Ratio..............................................105
9.26 Current Ratio...........................................106
9.27 Adjusted Tangible Net Worth.............................106
9.28 Fixed Charges Coverage Ratio............................106
9.29 Use of Proceeds.........................................107
9.30 Further Assurances; Acceptance of Citibank L/C..........107
9.31 Restructure Costs.......................................107
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Section Page
ARTICLE 10
CONDITIONS OF LENDING
10.1 Conditions Precedent to Making of Loans on the Initial
Closing Date............................................108
10.2 Conditions Precedent to Each Loan.......................111
10.3 Conditions to this Agreement............................112
ARTICLE 11
DEFAULT; REMEDIES
11.1 Events of Default.......................................115
11.2 Remedies................................................119
ARTICLE 12
TERM AND TERMINATION
12.1 Term and Termination....................................121
ARTICLE 13
AMENDMENTS; WAIVER; PARTICIPATIONS; ASSIGNMENTS; SUCCESSORS
13.1 No Waivers; Cumulative Remedies.........................121
13.2 Amendments and Waivers..................................122
13.3 Assignments; Participations.............................122
ARTICLE 14
THE AGENT
14.1 Appointment and Authorization...........................125
14.2 Delegation of Duties....................................126
14.3 Liability of Agent......................................126
14.4 Reliance by Agent.......................................126
14.5 Notice of Default.......................................127
14.6 Credit Decision.........................................127
14.7 Indemnification.........................................128
14.8 Agent in Individual Capacity............................128
14.9 Successor Agent.........................................128
14.10 Withholding Tax.............................................129
14.11 Intentionally Omitted...................................130
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Section Page
14.12 Collateral Matters......................................130
14.13 Restrictions on Actions by Lenders; Sharing of Payments
.......................................................132
14.14 Agency for Perfection...................................133
14.15 Payments by Agent to Lenders............................133
14.16 Concerning the Collateral and the Related Loan
Documents...............................................133
14.17 Field Audit and Examination Reports; Disclaimer by
Lenders.................................................133
ARTICLE 15
MISCELLANEOUS
15.1 Cumulative Remedies; No Prior Recourse to Collateral
.......................................................134
15.2 Severability............................................135
15.3 Governing Law; Choice of Forum; Service of Process;
Jury Trial Waiver.......................................135
15.4 Waiver of Jury Trial....................................137
15.5 Survival of Representations and Warranties..............137
15.6 Other Security and Guaranties...........................137
15.7 Fees and Expenses.......................................137
15.8 Notices.................................................138
15.9 Waiver of Notices.......................................139
15.10 Binding Effect..........................................140
15.11 Indemnity of the Agent and the Lenders by the Borrowers
140
15.12 Final Agreement.........................................140
15.13 Counterparts............................................141
15.14 Captions................................................141
15.15 Right of Setoff.........................................141
ARTICLE 16
CROSS-GUARANTY
16.1 Cross-Guaranty..........................................141
16.2 Contribution with Respect to Guaranty Obligations
.......................................................142
16.3 Obligations Absolute....................................143
16.4 WAIVER..................................................143
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Section Page
16.5 Recovery................................................144
16.6 Liability Cumulative ...................................144
vii
<PAGE>
INDEX TO SCHEDULES AND EXHIBITS
Schedules
Schedule 1.1A Assigned Contracts
Schedule 1.1B Advance Rates for MKR Locomotive
Inventory
Schedule 1.1C List of Eligible Argentine Notes
Schedule 6.3 Collateral Locations
Schedule 8.3 Jurisdictions of Qualification
Schedule 8.4 Past Names and Transactions
Schedule 8.5 Subsidiaries and Affiliates; FEIN
Numbers
Schedule 8.6 (A) December 31, 1995 Audited
Financials
(B) July 26, 1996 Unaudited
Financials
(C) Pro Forma
(D) Projections
Schedule 8.7 Capitalization
Schedule 8.9 Permitted Debt
Schedule 8.10 Distributions
Schedule 8.12 Premises
Schedule 8.13 Proprietary Rights
Schedule 8.14 Trade Names
Schedule 8.15 Litigation
Schedule 8.17 Labor
Schedule 8.18 Environmental
Schedule 8.21 ERISA
Schedule 8.28 Material Agreements; Locomotive
Identification and Leases
Schedule 8.29 Bank Accounts
Schedule 8.31 Insurance
Schedule 9.15 Affiliate Transactions
Schedule 9.19 Liens
Exhibits
Exhibit A (Section 2.1(b)) Form of Notice of Borrowing
Exhibit B (Section 3.2(b)) Form of Notice of Conversion/
Continuation
Exhibit C (Section 6.7) Form of Borrowing Base Certificate
Exhibit D (Section 10.1) Additional Closing Documents
Exhibit E (Section 13.3) Form of Assignment and Acceptance
Exhibit F (Section 14.15) Lender Wire Transfer Information
Exhibit G (Section 15.8) Lender Notice Addresses
Exhibit H (Section 2.2) Form of Term Loan Promissory Note
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AMENDED AND RESTATED
LOAN AND SECURITY AGREEMENT
This Amended and Restated Loan and Security Agreement, dated as of
September [__], 1996, among the financial institutions listed on the signature
pages hereof (such financial institutions, together with their respective
successors and assigns, are referred to hereinafter each individually as a
"Lender" and collectively as the "Lenders"), BankAmerica Business Credit, Inc.,
a Delaware corporation, as agent for the Lenders (in its capacity as agent, the
"Agent"), and MK Rail Corporation, a Delaware corporation ("MKR"), with it chief
executive office at 1200 Reedsdale Street, Pittsburgh, Pennsylvania 15233; Motor
Coils Manufacturing Co., a Pennsylvania corporation ("Motor Coils"); MK Engine
Systems Company, Inc., a New York corporation ("MKES"); Clark Industries, Inc.,
an Illinois corporation ("Clark"); Power Parts Company, a Nevada corporation
("Power Parts"); Touchstone, Inc., a Tennessee corporation ("Touchstone"); Power
Parts Sign Co., an Illinois corporation ("Sign") (each of MKR and the Component
Subsidiaries a "Borrower" and collectively the "Borrowers").
W I T N E S S E T H
WHEREAS, pursuant to the Existing Loan Agreement (as hereinafter
defined) the Lenders made available to the Borrowers a revolving line of credit
for loans and letters of credit in an amount not to exceed $75,000,000, which
extensions of credit the Borrowers used to refinance certain Indebtedness and
for their working capital needs and general business purposes;
WHEREAS, the Lenders and the Borrowers have agreed to amend and restate
the Existing Loan Agreement to make available to the Borrowers a new $8,000,000
term loan and to continue a revolving credit facility which is reduced to
$67,000,000, all upon the terms and conditions set forth in this Agreement;
WHEREAS, each Borrower guaranteed the obligations and liabilities of
the other Borrowers under the Existing Loan Agreement, and is willing to
continue to guaranty the obligations and liabilities of each other Borrower in
accordance with and to the extent specified herein, and the Borrowers further
acknowledge and agree that Lenders would not be willing to enter into this
Agreement or extend the credit facilities hereunder if they did not receive such
guarantees.
NOW, THEREFORE, in consideration of the mutual conditions and
agreements set forth in this Agreement, and for good and valuable consideration,
the receipt of which is hereby acknowledged, the Lenders, the Agent, and the
Borrowers hereby agree as follows.
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<PAGE>
ARTICLE 1
INTERPRETATION OF THIS AGREEMENT
1.1 Definitions. As used herein:
"Accounts" means all of each Borrower's now owned or hereafter
acquired or arising accounts, and any other rights to payment for the sale or
lease of goods or rendition of services, whether or not they have been earned by
performance.
"Account Debtor" means each Person obligated in any way on or
in connection with an Account.
"Adjusted Net Earnings from Operations" means, with respect to
any fiscal period of the Borrowers, the net income of the Borrowers on a
consolidated basis or MKR, individually, or any Components Subsidiary,
individually (as applicable), after provision for income taxes for such fiscal
period, as determined in accordance with GAAP and reported on the Financial
Statements for such period, excluding any and all of the following otherwise
included in such net income: (a) gain or loss arising from the sale of any
capital assets; (b) gain arising from any write-up in the book value of any
asset; (c) earnings of any corporation, substantially all the assets of which
have been acquired by any Borrower in any manner, to the extent realized by such
other corporation prior to the date of acquisition; (d) earnings of any business
entity (other than a Borrower) in which any Borrower has an ownership interest
unless (and only to the extent) such earnings shall actually have been received
by such Borrower in the form of cash distributions; (e) earnings of any Person
to which assets of any Borrower shall have been sold, transferred or disposed
of, or into which such Borrower shall have been merged, or which has been a
party with such Borrower to any consolidation or other form of reorganization,
prior to the date of such transaction; (f) gain arising from the acquisition of
debt or equity securities of any Borrower or from cancellation or forgiveness of
Debt; (g) gain arising from extraordinary items, as determined in accordance
with GAAP, or from any other non-recurring transaction;(h) any gains or losses
associated with foreign currency or exchange transactions; and (i) any losses
associated with the 1995 Restructure.
"Adjusted Tangible Assets" means all of the Borrowers' assets
on a consolidated basis, except: (a) deferred assets, other than prepaid
insurance and prepaid taxes; (b) patents, copyrights, trademarks, trade names,
franchises, goodwill, and other similar intangibles; (c) Restricted Investments;
(d) unamortized debt discount and expense; (e) assets of any Borrower
constituting Intercompany Accounts; (f) fixed assets to the extent of any
writeup in the book value thereof resulting from a revaluation effective
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<PAGE>
after the Closing Date; and (g) and other assets of any Borrower which Agent
reasonably determines to be intangible assets.
"Adjusted Tangible Net Worth" means, at any date: (a) the book
value (after deducting related depreciation, obsolescence, amortization,
valuation, and other proper reserves as determined in accordance with GAAP) at
which the Adjusted Tangible Assets would be shown on a consolidated balance
sheet of the Borrowers at such date prepared in accordance with GAAP; less (b)
the amount at which the Borrowers' liabilities would be shown on such balance
sheet, including as liabilities all reserves for contingencies and other
potential liabilities which would be shown on such balance sheet or disclosed in
the notes thereto; provided, however, that Borrowers shall not make the foreign
currency translation adjustment or include the foreign currency losses that
would be required by GAAP with respect to MKR's investment in MK Gain, S.A. de
C.V., but rather shall value such investment consistently with its calculation
for the June 30, 1995 financial statements.
"Affiliate" means, as to any Person, any other Person which,
directly or indirectly, is in control of, is controlled by, or is under common
control with, such Person, excluding in any event BABC and Bank of America. A
Person shall be deemed to control another Person if the controlling Person
possesses, directly or indirectly, the power to direct or cause the direction of
the management and policies of the other Person, whether through the ownership
of voting securities, by contract, or otherwise.
"Agent" means BankAmerica Business Credit, Inc., solely in its
capacity as agent for the Lenders, and shall include any successor agent.
"Agent Advances" has the meaning specified in Section 2.1(i).
"Agent's Liens" means the Liens granted to the Agent, for the
ratable benefit of the Lenders and Agent pursuant to this Agreement and the
other Loan Documents.
"Agent-Related Persons" means the Agent and any successor
agent, together with their respective Affiliates, and the officers, directors,
employees, agents and attorneys-in-fact of such Persons and Affiliates.
"Aggregate Borrowing Base" shall have the meaning ascribed
thereto within the definition of the term "Availability" below.
"Agreement" means this Amended and Restated Loan and Security
Agreement, as amended.
3
<PAGE>
"Anniversary Date" means each anniversary of the Initial
Closing Date.
"Applicable Margin" means, as the case may be, the Applicable
Revolver Base Rate Margin, the Applicable Revolver LIBOR Margin, the Applicable
Term Base Rate Margin or the Applicable Term LIBOR Margin.
"Applicable Revolver Base Rate Margin" shall mean the
percentage margin as determined by reference to Section 3.1(b).
"Applicable Revolver LIBOR Margin" shall mean the percentage
margin as determined by reference to Section 3.1(b).
"Applicable Term Base Rate Margin" shall mean the percentage
margin as determined by reference to Section 3.1(b).
"Applicable Term LIBOR Margin" shall mean the percentage
margin as determined by reference to Section 3.1(b).
"Assigned Contracts" means, collectively, all of the
Borrowers' rights and remedies under, and all moneys and claims for money due or
to become due to any Borrower under those contracts set forth on Schedule 1.1A,
and any other contracts, including, without limitation, all lease agreements
entered into by any Borrower providing for the lease of any locomotive held by
any Borrower for use in any manner; and with respect to each and every item
above, any and all amendments, supplements, extensions, and renewals thereof
including, without limitation, all rights and claims of such Borrower now or
hereafter existing: (i) under any insurance, indemnities, warranties, and
guarantees provided for or arising out of or in connection with any of the
foregoing agreements; (ii) for any damages arising out of or for breach or
default under or in connection with any of the foregoing contracts; (iii) to all
other amounts from time to time paid or payable under or in connection with any
of the foregoing agreements; or (iv) to exercise or enforce any and all
covenants, remedies, powers and privileges thereunder.
"Assignee" has the meaning specified in Section 13.3(a).
"Assignment and Acceptance" has the meaning specified in
Section 13.3(a).
"Attorney Costs" means and includes all fees, expenses and
disbursements of any law firm or other external counsel engaged by the Agent,
the allocated cost of internal legal services of the Agent and all expenses and
disbursements of internal counsel of the Agent.
4
<PAGE>
"Availability" means, at any time, (a) the lesser of (i) the
Maximum Revolver Amount or (ii) the sum of (A) eighty-five percent (85%) of the
Net Amount of Eligible Accounts; plus (B) sixty percent (60%) of the book value
of the aggregate amount of all Components Subsidiaries' Eligible Inventory
consisting of raw materials and finished goods, plus (C) thirty percent (30%) of
the book value of the aggregate amount of all Components Subsidiaries' Eligible
Inventory consisting of work-in-process, plus (D) sixty percent (60%) of the
book value of MKR's Eligible Inventory consisting of raw materials and finished
goods, plus (E) the MKR Locomotive Advance Rate from time to time in effect as
set forth on Schedule 1.1B hereto multiplied by the lesser of the cost or net
book value of MKR's Eligible Locomotive Inventory (except, that each MK 5000
Locomotive will be valued at the lesser of $1,000,000, cost or net book value),
plus (F) sixty-five percent (65%) multiplied by the aggregate outstanding
principal amount of all Eligible-Argentine Notes (provided that the 65% advance
rate specified above shall be increased to 85% at such time as Agent shall be
provided with evidence acceptable to Agent in its sole discretion that the
letter of credit securing the Eligible Argentine Notes on the Initial Closing
Date has been accepted by or confirmed by Citibank N.A. in New York pursuant to
an acceptance agreement in form and substance acceptable to Agent), plus (G)
fifty percent (50%) of the book value of Eligible Consigned Inventory consisting
of finished goods (the sum of clauses (A), (B), (C), (D), (E), (F), and (G)
being herein referred to as the "Aggregate Borrowing Base"); minus (b) the sum
of (i) the unpaid balance of Revolving Loans at such time, (ii) the aggregate
amount of Pending Revolving Loans at such time, (iii) the aggregate undrawn
amount of all outstanding Letters of Credit, (iv) the aggregate amount of any
unpaid reimbursement obligations in respect of the Letters of Credit, (v)
reserves for accrued interest on the Obligations, (vi) the Environmental
Compliance Reserve, and (vii) a reserve in an amount equal to the maximum
aggregate value which may be outstanding from time to time as "Common Materials"
under the PTRA Intercreditor and the HBTC Intercreditor, and (viii) all other
reserves which the Agent deems necessary in the exercise of its reasonable
credit judgment to maintain with respect to the Borrowers' Accounts and/or
Inventory, including, without limitation, reserves for any amounts which the
Agent or any Lender may be obligated to pay in the future for the account of any
Borrower; provided, that at no time shall the sum of the outstanding Revolving
Loans advanced against the value (X) of Eligible Inventory plus Eligible
Consigned Inventory exceed $45,000,000, (Y) of MKR's Eligible Locomotive
Inventory exceed $3,000,000 or (Z) of Eligible Consigned Inventory exceed
$2,500,000.
"BABC" means BankAmerica Business Credit, Inc.
5
<PAGE>
"BABC Loan" and "BABC Loans" have the meanings specified in
Section 2.2(h).
"Bank of America" means Bank of America National Trust and
Savings Association, a national banking association, or any successor entity
thereto.
"Bankruptcy Code" means Title 11 of the United States Code (11
U.S.C. ss. 101 et seq.).
"Base Rate" means, for any day, the higher of: (a) The rate of
interest in effect for such day as publicly announced from time to time by Bank
of America in San Francisco, California, as its "reference rate" (the "reference
rate" being a rate set by Bank of America based upon various factors including
Bank of America's costs and desired return, general economic conditions and
other factors, and is used as a reference point for pricing some loans, which
may be priced at, above, or below such announced rate), or (b) one-half percent
(0.50%) per annum above the latest Federal Funds Rate. Any change in the
reference rate announced by Bank of America shall take effect at the opening of
business on the day specified in the public announcement of such change. Each
Interest Rate based upon the Base Rate shall be adjusted simultaneously with any
change in the Base Rate.
"Base Rate Loans" means, collectively, the Base Rate Revolving
Loans and the Base Rate Term Loans.
"Base Rate Revolving Loan" means a Revolving Loan during any
period in which it bears interest at the Base Rate.
"Base Rate Term Loan" means any portion of a Term Loan during
any period in which such portion bears interest at the Base Rate.
"Borrowing" means a borrowing hereunder consisting of
Revolving Loans or Term Loans made on the same day by the Lenders to any
Borrower (or by BABC in the case of a Borrowing funded by BABC Loans) or by the
Agent in the case of a Borrowing consisting of an Agent Advance.
"Business Day" means (a) any day that is not a Saturday,
Sunday, or a day on which banks in San Francisco, California, are required or
permitted to be closed, and (b) with respect to all notices, determinations,
fundings and payments in connection with the LIBOR Rate or LIBOR Rate Loans, any
day that is a Business Day pursuant to clause (a) above and that is also a day
on which trading is carried on by and between banks in the London interbank
market.
6
<PAGE>
"Capital Adequacy Regulation" means any guideline, request or
directive of any central bank or other Governmental Authority, or any other law,
rule or regulation, whether or not having the force of law, in each case,
regarding capital adequacy of any bank or of any corporation controlling a bank.
"Capital Expenditures" means, all payments due (whether or not
paid) during a Fiscal Year in respect of the cost of any fixed asset or
improvement, or replacement, substitution, or addition thereto, which has a
useful life of more than one year, including, without limitation, those costs
arising in connection with the direct or indirect acquisition of such asset by
way of increased product or service charges or offset items or in connection
with a Capital Lease.
"Capital Lease" means any lease of property by any Borrower
which, in accordance with GAAP, is or should be capitalized on such Borrower's
balance sheet or for which the amount of the asset and liability thereunder, as
if so capitalized, should be disclosed in a footnote to such balance sheet.
"Change of Control" means (a) prior to the confirmation and
implementation of the MKC Bankruptcy Plan, that MorrisonKnudsen Corporation
shall cease to own at least 60% of the outstanding common stock of MKR or MKR
shall cease to own, directly or indirectly, all of the outstanding capital stock
of each Component Subsidiary and (b) after the confirmation and implementation
of the MKC Bankruptcy Plan as it relates to the distribution of MKR's common
stock, that (i) any Person or group of Persons (within the meaning of the
Exchange Act) shall have acquired beneficial ownership (within the meaning of
Rule 13d-3 promulgated by the Securities Exchange Commission under the Exchange
Act) of 20% or more of the issued and outstanding shares of MKR's capital stock
having the right to vote for the election of directors of MKR under ordinary
circumstances; or (ii) during any period of twelve (12) consecutive calendar
months, individuals who at the beginning of such period constituted MKR's board
of directors (together with any new directors whose election by MKR's board of
directors or whose nomination for election by MKR's stockholders was approved by
a vote of at least two-thirds of the directors then still in office who either
were directors at the beginning of such period or whose elections or nomination
for election was previously so approved) cease for any reason other than death
or disability to constitute a majority of the directors then in office or MKR
shall cease to own, directly or indirectly, all of the outstanding capital stock
of each Component Subsidiary.
"Closing Date" means the date of this Agreement.
"Closing Fee" has the meaning specified in Section 3.4.
7
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"Code" means the Internal Revenue Code of 1986, as amended
from time to time, and any successor statute, and regulations promulgated
thereunder.
"Collateral" has the meaning specified in Section 6.1.
"Commitment" means, at any time with respect to a Lender, the
principal amount set forth beside such Lender's name under the heading
"Commitment" on the signature pages of this Agreement or on the signature page
of the Assignment and Acceptance pursuant to which such Lender became a Lender
hereunder in accordance with the provisions of Section 13.3, as such Commitment
may be adjusted from time to time in accordance with the provisions of Section
13.3, and "Commitments" means, collectively, the aggregate amount of the
commitments of all of the Lenders.
"Components Subsidiary" means any one of the Borrowers other
than MKR.
"Components Subsidiary's Availability" means at any time as to
any particular Components Subsidiary:
(a) the lesser of
(i) $50,000,000 minus the sum of (A) the aggregate unpaid
balance of Revolving Loans at such time advanced to the
other Components Subsidiaries; plus (B) the aggregate amount
of Pending Revolving Loans to be advanced to the other
Components Subsidiaries; plus (C) the aggregate undrawn
amount of all Letters of Credit issued for the benefit of
the other Components Subsidiaries; plus (D) the aggregate
amount of any unpaid reimbursement obligations in respect of
Letters of Credit issued for the benefit of the other
Components Subsidiaries; or
(ii) the sum of (A) eighty-five percent (85%) of the Net Amount
of Eligible Accounts owing to that Components Subsidiary;
plus (B) sixty percent (60%) of the book value of Eligible
Inventory consisting of raw materials and finished goods of
that Components Subsidiary; plus (C) thirty percent (30%) of
the book value of Eligible Inventory consisting of
work-in-process of that Components Subsidiary plus (D) fifty
percent (50%) of the book value of Eligible Consigned
Inventory consisting of finished goods of that Components
Subsidiary (the sum of clauses (A), (B) (C), and (D) being
herein referred to as a "Components Subsidiary's Borrowing
Base");
minus
8
<PAGE>
(b) the sum of (i) the unpaid balance of Revolving Loans at such time advanced
to that Components Subsidiary; plus (ii) the aggregate amount of Pending
Revolving Loans to be advanced to that Components Subsidiary; plus (iii)
the aggregate undrawn amount of all Letters of Credit issued for the
benefit of that Components Subsidiary; plus (iv) the aggregate amount of
any unpaid reimbursement obligations in respect of Letters of Credit issued
for the benefit of that Components Subsidiary; plus (v) reserves for
accrued interest on the Obligations for which that Components Subsidiary is
primarily liable; plus (vi)any Environmental Compliance Reserve related to
property owned, leased or operated by that Components Subsidiary; plus
(vii) all other reserves which the Agent deems necessary in the exercise of
its reasonable credit judgment to maintain with respect to that Components
Subsidiary's accounts and/or inventory.
For purposes of calculating the Components Subsidiary's Availability of Power
Parts and Sign, the Eligible Accounts and Eligible Inventory of Power Parts and
Sign shall be considered on a consolidated basis as if owned only by Power
Parts.
"Components Subsidiary's Borrowing Base" shall have the
meaning ascribed thereto within the definition of the term "Component's
Subsidiary's Availability."
"Contaminant" means any waste, pollutant, hazardous substance,
toxic substance, hazardous waste, special waste, petroleum or petroleum-derived
substance or waste, asbestos in any form or condition, polychlorinated biphenyls
("PCBs"), or any constituent of any such substance or waste.
"Current Assets" means at any date the amount at which the
current assets of the Borrowers, on a consolidated basis (other than assets
constituting Intercompany Accounts) would be shown on a consolidated balance
sheet of the Borrowers, prepared in accordance with GAAP.
"Current Liabilities" means at any date the amount at which
the current liabilities of the Borrowers, on a consolidated basis would be shown
on a consolidated balance sheet of the Borrowers, prepared in accordance with
GAAP, except that the outstanding principal balance of the Revolving Loans shall
be included in Current Liabilities.
"Debt" means all liabilities, obligations and indebtedness of
any Borrower to any Person, of any kind or nature, now or hereafter owing,
arising, due or payable, howsoever evidenced, created, incurred, acquired or
owing, whether primary, secondary, direct, contingent, fixed or otherwise, and
including, without in any way limiting the generality of the foregoing: (i)
9
<PAGE>
each Borrower's liabilities and obligations to trade creditors; (ii) all
Obligations; (iii) all obligations and liabilities of any Person secured by any
Lien on any Borrower's property, even though such Borrower shall not have
assumed or become liable for the payment thereof; provided, however, that all
such obligations and liabilities which are limited in recourse to such property
shall be included in Debt only to the extent of the book value of such property
as would be shown on a balance sheet of such Borrower prepared in accordance
with GAAP; (iv) all obligations or liabilities created or arising under any
Capital Lease or conditional sale or other title retention agreement with
respect to property used or acquired by any Borrower, even if the rights and
remedies of the lessor, seller or lender thereunder are limited to repossession
of such property; provided, however, that all such obligations and liabilities
which are limited in recourse to such property shall be included in Debt only to
the extent of the book value of such property as would be shown on a
consolidated balance sheet of the Borrowers prepared in accordance with GAAP;
(v) all accrued pension fund and other employee benefit plan obligations and
liabilities; (vi) all obligations and liabilities under Guaranties; and (vii)
deferred taxes.
"Debt Ratio" shall have the meaning specified in Section 9.25.
"Default" means any event or circumstance which, with the
giving of notice, the lapse of time, or both, would (if not cured or otherwise
remedied during such time) constitute an Event of Default.
"Default Rate" means a fluctuating per annum interest rate at
all times equal to the sum of (a) the Interest Rate for each Loan or Obligation
which would be derived by applying the otherwise Applicable Margin in accordance
with Section 3.1(b) hereof (or as required by Section 3.1(a)(iii) hereof with
respect to LIBOR Rate Loans), as the case may be, plus (b) two percent (2.0%).
Each Default Rate shall be adjusted simultaneously with any change in the
applicable Interest Rate. In addition, with respect to Letters of Credit, the
Default Rate shall mean an increase in the Letter of Credit Fee by two percent
(2.0%) per annum.
"Distribution" means, in respect of any corporation: (a) the
payment or making of any dividend or other distribution of property in respect
of capital stock (or any options or warrants for such stock) of such
corporation, other than distributions in capital stock (or any options or
warrants for such stock) of the same class; or (b) the redemption or other
acquisition of any capital stock (or any options or warrants for such stock) of
such corporation.
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"DOL" means the United States Department of Labor or any
successor department or agency.
"Dollar" and "$" means dollars in the lawful currency of the
United States.
"Eligible Accounts" means all Accounts of the Borrowers which
the Agent in the exercise of its reasonable commercial discretion determines to
be Eligible Accounts. Without limiting the discretion of the Agent to establish
other criteria of ineligibility, Eligible Accounts shall not include any
Account:
(a) with respect to which more than 90 days have
elapsed since the date of the original invoice therefor or which is more than 60
days past due;
(b) with respect to which any of the representations,
warranties, covenants, and agreements contained in Section 6.8 are not or have
ceased to be complete and correct or have been breached;
(c) with respect to which, in whole or in part, a
check, promissory note, draft, trade acceptance or other instrument for the
payment of money has been received, presented for payment and returned
uncollected for any reason;
(d) which represents a progress billing (as
hereinafter defined), arises under a contract backed by a performance bond, or
as to which the applicable Borrower has extended the time for payment without
the consent of the Agent; for the purposes hereof, "progress billing" means any
invoice for goods sold or leased or services rendered under a contract or
agreement pursuant to which the Account Debtor's obligation to pay such invoice
is conditioned upon such Borrower's completion of any further performance under
the contract or agreement;
(e) as to which any one or more of the following
events has occurred with respect to the Account Debtor on such Account: death or
judicial declaration of incompetency of an Account Debtor who is an individual;
the filing by or against the Account Debtor of a request or petition for
liquidation, reorganization, arrangement, adjustment of debts, adjudication as a
bankrupt, winding-up, or other relief under the bankruptcy, insolvency, or
similar laws of the United States, any state or territory thereof, or any
foreign jurisdiction, now or hereafter in effect; the making of any general
assignment by the Account Debtor for the benefit of creditors; the appointment
of a receiver or trustee for the Account Debtor or for any of the assets of the
Account Debtor, including, without limitation, the appointment of or taking
possession by a "custodian", as defined in the Federal Bankruptcy Code; the
institution by or against the Account Debtor
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of any other type of insolvency proceeding (under the bankruptcy laws of the
United States or otherwise) or of any formal or informal proceeding for the
dissolution or liquidation of, settlement of claims against, or winding up of
affairs of, the Account Debtor; the nonpayment generally by the Account Debtor
of its debts as they become due; or the cessation of the business of the Account
Debtor as a going concern;
(f) if fifty percent (50%) or more of the aggregate
dollar amount of outstanding Accounts (excluding, however, any so-called
retainages which are not then due and owing) owed at such time by the Account
Debtor is classified as ineligible under the other criteria set forth herein or
otherwise established by the Agent;
(g) owed by an Account Debtor which: (i) does not
maintain its chief executive office in the United States; or (ii) is not
organized under the laws of the United States or any state thereof; or (iii) is
the government of any foreign country or sovereign state, or of any state,
province, municipality, or other political subdivision thereof, or of any
department, agency, public corporation, or other instrumentality thereof; except
to the extent that such Account is secured or payable by a letter of credit or
foreign credit insurance satisfactory to the Agent in its reasonable discretion;
(h) owed by an Account Debtor which is an Affiliate
or employee of any Borrower;
(i) except as provided in clause (k) below, as to
which either the perfection, enforceability, or validity of the Agent's Lien in
such Account, or the Agent's right or ability to obtain direct payment to the
Agent of the proceeds of such Account, is governed by any federal, state, or
local statutory requirements other than those of the UCC;
(j) which is owed by an Account Debtor to which such
Borrower is indebted in any way, or which is subject to any right of setoff or
recoupment by the Account Debtor, unless the Account Debtor has entered into an
agreement acceptable to the Agent to waive setoff rights; or if the Account
Debtor thereon has disputed liability or made any claim with respect to any
other Account due from such Account Debtor; but in each such case only to the
extent of such indebtedness, setoff, recoupment, dispute, or claim;
(k) which is owed by the government of the United
States of America, or any department, agency, public corporation, or other
instrumentality thereof, unless the Federal Assignment of Claims Act of 1940, as
amended (31 U.S.C. ss. 3727 et seq.), and any other steps necessary to perfect
the Agent's Lien therein, have
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been complied with to the Agent's satisfaction with respect to such Account;
(l) which is owed by any state, municipality, or
other political subdivision of the United States of America, or any department,
agency, public corporation, or other instrumentality thereof and as to which the
Agent determines that its Lien therein is not or cannot be perfected;
(m) which represents a sale on a bill-and-hold,
guaranteed sale, sale and return, sale on approval, consignment, or other
repurchase or return basis;
(n) which is evidenced by a promissory note or other
instrument or by chattel paper;
(o) if Agent believes, in the exercise of its
reasonable judgment, that the prospect of collection of such Account is impaired
or that the Account may not be paid by reason of the Account Debtor's financial
inability to pay;
(p) with respect to which the Account Debtor is
located in the states of New Jersey, Minnesota, West Virginia, or any other
state requiring the filing of a Business Activity Report or similar document in
order to bring suit or otherwise enforce its remedies against such Account
Debtor in the courts or through any judicial process of such state, unless the
applicable Borrower has qualified to do business in New Jersey, Minnesota, West
Virginia, or such other states, or has filed a Notice of Business Activities
Report with the applicable division of taxation, the department of revenue, or
with such other state offices, as appropriate, for the then-current year, or is
exempt from such filing requirement;
(q) arises out of a sale not made in the ordinary
course of such Borrower's business;
(r) the goods giving rise to such Account have not
been shipped and delivered to and accepted by the Account Debtor or the services
giving rise to such Account have not been performed by the applicable Borrower,
and, if applicable, accepted by the Account Debtor, or the Account Debtor
revokes its acceptance of such goods or services;
(s) arising under a contract providing for financial
penalties for default that may be set-off against such Account;
(t) which is not subject to a first priority and
perfected security interest in favor of the Agent for the benefit of the
Lenders; or
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(u) of Touchstone with respect to which the Account
Debtor is located in Minnesota.
If any Account at any time ceases to be an Eligible Account by reason
of any of the foregoing exclusions or any failure to meet any other eligibility
criteria established by the Agent in the exercise of its reasonable discretion
then such Account shall promptly be excluded from the calculation of Eligible
Accounts.
"Eligible Argentine Notes" means those certain 42 promissory
notes dated May 19, 1995 by Benito Roggio E. Hijos S.A. and Metrovais S.A. as
more fully described on Schedule 1.1C hereto and any notes issued in
substitution therefor pursuant to the terms of that Amendatory Agreement dated
August 28, 1995 between MKR and Benito Roggio E. Hijos S.A., provided that such
notes have not been paid and are secured by a letter of credit issued by
Citicorp, N.A. Buenos Aires, Argentina (in form and substance acceptable to
Agent) and that the Agent has a first priority security interest in the notes
and the letter of credit.
"Eligible Consigned Inventory" means finished goods Inventory
of any Borrower with a value of at least $100,000 at each location which would
be Eligible Inventory except that it is held on consignment or otherwise stored
on premises which are owned by a railroad (and a portion of such premises are
leased to a Borrower) with the intent that such Inventory be periodically used
by such Borrower in connection with its contract or repair work for such
railroad performed at such leased location, and provided that (A) the premises
where such Inventory is located is (i) leased by MKR from The Atchison, Topeka
and Santa Fe Railway Company and located at Argentine Operations, 2201 Argentine
Boulevard, Kansas City, KS 66106, and H and Main Street, S.F. Main Terminal,
Barstow, CA 92311 or (ii) leased by MKR from the Utah Railway Company and
located at 340 Hordscrabble Road, Helper, UT 84526, or (iii) owned by any other
customer of a Borrower acceptable to Agent at which Inventory of any Borrower is
maintained (with no more than five (5) additional locations being identified to
Agent) and (B) such Inventory is covered by a landlord waiver agreement and
other written documents and duly filed UCC financing statements from The
Atchison, Topeka and Santa Fe Railway Company, the Utah Railway Company or any
other railroad owning any such premises, as applicable, acknowledging Agent's
lien on and security interest in the consigned inventory and otherwise in form
and substance acceptable to Agent to perfect Agent's security interest (on
behalf of Lenders) as evidenced by Agent's written consent.
"Eligible Inventory" means Inventory, valued at the lower of
cost or market on a first-in, first out ("FIFO") basis, that constitutes raw
materials, work-in-process, and first quality finished goods and that: (a) is
not, in the Agent's reasonable opinion, obsolete, slow-moving or unmerchantable;
(b) is located at
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premises owned by the Borrowers or on premises otherwise reasonably acceptable
to the Agent, provided, however, that Inventory located on premises leased to a
Borrower shall not be Eligible Inventory unless such Borrower shall have
delivered to the Agent a written waiver or subordination agreement, duly
executed on behalf of the appropriate landlord and in form and substance
acceptable to the Agent, of all Liens which the landlord for such premises may
be entitled to assert against such Inventory; (c) is not in-transit or held on
consignment or at a third party's premises; (d) upon which the Agent for the
benefit of the Lenders has a first priority perfected security interest; (e) is
not spare parts (for manufacturing equipment or not otherwise held for sale in
the ordinary course), packaging and shipping materials, supplies, billand-hold
Inventory, returned or defective Inventory, or Inventory delivered to a Borrower
on consignment; (f) is not raw materials, work-in-process or finished goods
identified to a specific contract as to which progress payments have been
received; (g) has excluded from the value thereof freight-in and other
transportation charges and warehouse overhead; (h) does not consist of MKR's
Eligible Locomotive Inventory or Eligible Consigned Inventory; (i) that is not
either (I) "Locomotive Inventory" (as such term is defined in the PTRA Contract)
and any locomotives which are identified in the PTRA Contract or otherwise being
reconstructed for PTRA or (II) "Locomotive Inventory" (as such term is defined
in the HBTC Contract) and any locomotives which are identified in the HBTC
Contract or otherwise being reconstructed for HBTC, and (j) the Agent, in the
exercise of its reasonable commercial discretion, deems eligible as the basis
for Revolving Loans based on such collateral and credit criteria as the Agent
may from time to time establish. If any Inventory at any time ceases to be
Eligible Inventory, such Inventory shall promptly be excluded from the
calculation of Eligible Inventory.
"Environmental Claims" means all claims, however asserted, by
any Governmental Authority or other Person alleging potential liability or
responsibility for violation of any Environmental Law, or for release or injury
to the environment.
"Environmental Compliance Reserve" means any reserves which
the Agent, after the Closing Date, establishes from time to time for amounts
that are reasonably likely to be expended by the applicable Borrower in order
for such Borrower and its operations and property (a) to comply with any notice
from a Governmental Authority asserting material non-compliance with
Environmental Laws, or (b) to correct any such material non-compliance
identified in a report delivered to the Agent and the Lenders pursuant to
Section 9.7; provided, however, that such reserve shall be limited to an amount
reasonably likely to be expended by such Borrower prior to the Stated
Termination Date, all as reasonably determined by Agent.
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"Environmental Laws" means all federal, state or local laws,
statutes, common law duties, rules, regulations, ordinances and codes, together
with all administrative orders, directed duties, requests, licenses,
authorizations and permits of, and agreements with, any Governmental Authority,
in each case relating to environmental, health, safety and land use matters.
"Environmental Lien" means a Lien in favor of any Governmental
Authority for (1) any liability under any Environmental Laws, or (2) damages
arising from, or costs incurred by such Governmental Authority in response to, a
Release or threatened Release of a Contaminant into the environment.
"Environmental Property Transfer Act" means any applicable
requirement of law that conditions, restricts, prohibits or requires any
notification or disclosure triggered by the closure of any property or the
transfer, sale or lease of any property or deed or title for any property for
environmental reasons, including, but not limited to, any so-called
"Environmental Cleanup Responsibility Acts" or "Responsible Property Transfer
Acts".
"Equipment" means all of each Borrower's now owned and
hereafter acquired machinery, equipment, furniture, furnishings, fixtures, and
other tangible personal property (except Inventory), including motor vehicles
with respect to which a certificate of title has been issued, aircraft, dies,
tools, jigs, and office equipment, as well as all of such types of personal
property leased by each Borrower and all of each Borrower's rights and interests
with respect thereto under such leases (including, without limitation, options
to purchase); together with all present and future additions and accessions
thereto, replacements therefor, component and auxiliary parts and supplies used
or to be used in connection therewith, and all substitutes for any of the
foregoing, and all manuals, drawings, instructions, warranties and rights with
respect thereto; wherever any of the foregoing is located.
"ERISA" means the Employee Retirement Income Security Act of
1974, and regulations promulgated thereunder.
"ERISA Affiliate" means any trade or business (whether or not
incorporated) under common control with a Borrower within the meaning of Section
414(b) or (c) of the Code (and Sections 414(m) and (o) of the Code for purposes
of provisions relating to Section 412 of the Code).
"ERISA Event" means (a) a Reportable Event with respect to a
Pension Plan; (b) a withdrawal by any Borrower or any ERISA Affiliate from a
Pension Plan subject to Section 4063 of ERISA during a plan year in which it was
a substantial employer (as defined in Section 4001(a)(2) of ERISA) or a
cessation of operations which is treated as such a withdrawal under Section
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4062(e) of ERISA; (c) a complete or partial withdrawal by any Borrower or any
ERISA Affiliate from a Multi-employer Plan or notification that a Multi-employer
Plan is in reorganization; (d) the filing of a notice of intent to terminate,
the treatment of a Plan amendment as a termination under Section 4041 or 4041A
of ERISA, or the commencement of proceedings by the PBGC to terminate a Pension
Plan or Multi-employer Plan; (e) an event or condition which might reasonably be
expected to constitute grounds under Section 4042 of ERISA for the termination
of, or the appointment of a trustee to administer, any Pension Plan or
Multi-employer Plan; or (f) the imposition of any liability under Title IV of
ERISA, other than PBGC premiums due but not delinquent under Section 4007 of
ERISA, upon any Borrower or any ERISA Affiliate.
"Event of Default" has the meaning specified in Section
11.1.
"Excess Cash Flow" shall mean for each Fiscal Year or
specified period of the Borrower, net income on a consolidated basis plus (a)
all other non-cash charges against net income, less (1) the unfinanced portion
of Capital Expenditures and (2) scheduled payments of the principal portion of
Indebtedness (excluding payments of the principal portion of the Revolving Loan
and mandatory prepayments from Excess Cash Flow in accordance with Section 4.10
hereof).
"Exchange Act" means the Securities and Exchange Act of 1934,
and regulations promulgated thereunder.
"Existing Loan Agreement" means that certain Loan and Security
Agreement dated as of August 31, 1995, as amended immediately prior to the
consummation of this Agreement, among the Agent, the Lenders and the Borrowers.
"FDIC" means the Federal Deposit Insurance Corporation, and
any Governmental Authority succeeding to any of its principal functions.
"Federal Funds Rate" means, for any day, the rate set forth in
the weekly statistical release designated as H.15(519), or any successor
publication, published by the Federal Reserve Bank of New York (including any
such successor, "H.15(519)") on the preceding Business Day opposite the caption
"Federal Funds (Effective)"; or, if for any relevant day such rate is not so
published on any such preceding Business Day, the rate for such day will be the
arithmetic mean as determined by the Agent of the rates for the last transaction
in overnight Federal funds arranged prior to 9:00 a.m. (New York City time) on
that day by each of three leading brokers of Federal funds transactions in New
York City selected by the Agent.
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"Federal Reserve Board" means the Board of Governors of the
Federal Reserve System or any successor thereto.
"Financial Statements" means, according to the context in
which it is used, the financial statements attached hereto, or any financial
statements required to be given to the Lenders pursuant to this Agreement.
"Fiscal Quarter" means the Borrowers' fiscal quarter for
accounting purposes, which shall be the Fiscal Month corresponding to the
calendar months of March, June, September and December of each year.
"Fiscal Month" means the Borrowers' fiscal month for
accounting purposes, which shall be the four or five week period ending on the
last Friday of each calendar month.
"Fiscal Year" means the Borrowers' fiscal year for financial
accounting purposes. The current Fiscal Year of the Borrowers will end on
December 31, 1996.
"Fixed Assets" means Equipment and Real Estate of the
Borrowers.
"Fixed Charges" means for any period, as to the Borrowers on a
consolidated basis or MKR or each Components Subsidiary on an individual basis,
as applicable, the sum of (A) the aggregate amount of the principal payments
which the Borrowers or MKR or each Components Subsidiary (as applicable) was
obligated to pay with respect to Debt for borrowed money, excluding the
repayment of the Subordinated Debt on the Closing Date and any prepayments
thereafter, plus (B) dividends paid or due and owing on any preferred stock of
MKR, plus (C) Capital Expenditures of the Borrowers on a consolidated basis or
MKR or each Components Subsidiary, as applicable, excluding up to $8,900,000
expended by MKR during the third and fourth Fiscal Quarters of Fiscal Year 1995
in connection with Capital Expenditures related to the production or overhaul of
its locomotive lease fleet; less (D) up to $900,000 of the moving costs and
expenses associated with Power Parts relocating its facility during the 1995
Fiscal Year.
"Fixed Charges Coverage Ratio" means for any period, as to the
Borrowers on a consolidated basis or MKR or each Components Subsidiary on an
individual basis, as applicable, the ratio of (1) the sum of (a) Adjusted Net
Earnings from Operations, plus (b) depreciation expenses, plus (c) amortization
expenses, plus (d) all other non-cash expenses deducted in computing such
Adjusted Net Earnings from Operations, less (e) all non-cash income included in
computing such Adjusted Net Earnings from Operations, less (f) all cash
expenditures relating to the 1995 Restructure which were
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actually paid during such period to (2) Fixed Charges for such period.
"Funding Date" means the date on which a Borrowing occurs.
"GAAP" means generally accepted accounting principles set
forth from time to time in the opinions and pronouncements of the Accounting
Principles Board and the American Institute of Certified Public Accountants and
statements and pronouncements of the Financial Accounting Standards Board (or
agencies with similar functions of comparable stature and authority within the
U.S. accounting profession), which are applicable to the circumstances as of the
Closing Date and consistently applied.
"General Intangibles" means all of each Borrower's now owned
or hereafter acquired general intangibles, choses in action and causes of action
and all other intangible personal property of such Borrower of every kind and
nature (other than Accounts), including, without limitation, all contract
rights, Proprietary Rights, corporate or other business records, inventions,
designs, blueprints, plans, specifications, patents, patent applications,
trademarks, service marks, trade names, trade secrets, goodwill, copyrights,
computer software, customer lists, registrations, licenses, franchises, tax
refund claims, any funds which may become due to such Borrower in connection
with the termination of any Plan or other employee benefit plan or any rights
thereto and any other amounts payable to such Borrower from any Plan or other
employee benefit plan, rights and claims against carriers and shippers, rights
to indemnification, business interruption insurance and proceeds thereof,
property, casualty or any similar type of insurance and any proceeds thereof,
proceeds of insurance covering the lives of key employees on which such Borrower
is beneficiary, and any letter of credit, guarantee, claim, security interest or
other security held by or granted to such Borrower to secure payment by an
Account Debtor of any of the Accounts.
"Governmental Authority" means any nation or government, any
state or other political subdivision thereof, any central bank (or similar
monetary or regulatory authority) thereof, any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government, and any corporation or other entity owned or controlled, through
stock or capital ownership or otherwise, by any of the foregoing.
"Guaranty" means, with respect to any Person, all obligations
of such Person which in any manner directly or indirectly guarantee or assure,
or in effect guarantee or assure, the payment or performance of any
indebtedness, dividend or other obligation of any other Person (the "guaranteed
obligations"), or assure or in effect assure the holder of the guaranteed
obligations
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against loss in respect thereof, including, without limitation, any such
obligations incurred through an agreement, contingent or otherwise: (a) to
purchase the guaranteed obligations or any property constituting security
therefor; (b) to advance or supply funds for the purchase or payment of the
guaranteed obligations or to maintain a working capital or other balance sheet
condition; or (c) to lease property or to purchase any debt or equity securities
or other property or services.
"HBTC" means the Houston Belt & Terminal Railway Company, a
corporation.
"HBTC Contract" means that certain Locomotive Manufacturing
Agreement between MKR and HBTC providing for the purchase and sale of eight (8)
MK1500D diesel locomotives.
"HBTC Indebtedness" means all Debt and indebtedness of any
kind in favor of HBTC.
"HBTC Intercreditor" has the meaning set forth in Section 9.19
hereof.
"HBTC Inventory Report" has the meaning set forth in Section
6.7 hereof.
"Initial Closing Date" means the date of the closing of the
Existing Loan Agreement, or August 31, 1995.
"Intercompany Accounts" means all assets and liabilities,
however arising, which are due to any Borrower from, which are due from any
Borrower to, or which otherwise arise from any transaction by any Borrower with,
any other Borrower or Affiliate.
"Interest Period" means, as to any LIBOR Rate Loan, the period
commencing on the Funding Date of such Loan or on the Conversion/Continuation
Date on which the Loan is converted into or continued as a LIBOR Rate Loan, and
ending on the date one, two, three or six months thereafter as selected by MKR
in its Notice of Borrowing or Notice of Conversion/Continuation; provided that:
(i) if any Interest Period would otherwise end on a
day that is not a Business Day, that Interest Period shall be extended to the
following Business Day unless the result of such extension would be to carry
such Interest Period into another calendar month, in which event such Interest
Period shall end on the preceding Business Day;
(ii) any Interest Period pertaining to a LIBOR Rate
Loan that begins on the last Business Day of a calendar month (or on a day for
which there is no numerically corresponding day in the calendar month at the end
of such Interest Period) shall end on the
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last Business Day of the calendar month at the end of such Interest Period;
(iii) no Interest Period for any Loan shall extend
beyond the Stated Termination Date; and
(iv) there may not be more than five (5) different
Interest Periods in effect at any time.
"Interest Rate" means each or any of the interest rates,
including the Default Rate, set forth in Section 3.1.
"Inventory" means all of each Borrower's now owned and
hereafter acquired inventory, goods, merchandise, and other personal property,
wherever located, to be furnished under any contract of service or held for sale
or lease, including locomotives and rolling stock under lease or held for lease,
all returned goods, raw materials, other materials and supplies of any kind,
nature or description which are or might be consumed in such Borrower's business
or used in connection with the packing, shipping, advertising, selling or
finishing of such goods, merchandise and such other personal property, and all
documents of title or other documents representing them.
"IRS" means the Internal Revenue Service and any Governmental
Authority succeeding to any of its principal functions under the Code.
"Latest Projections" means: (a) on the Closing Date and
thereafter until the Lenders receive new projections pursuant to Section 7.2(e),
the projections with respect to the Borrowers' consolidated balance sheets,
income statements and statements of cash flow, dated July 1, 1996 for the period
commencing on January 1, 1996 and ending on December 31, 1998 (quarterly for the
period being covered in such projections) and delivered to the Lenders prior to
the Closing Date; and (b) thereafter, the projections most recently received by
the Lenders pursuant to Section 7.2(e).
"Lender" and "Lenders" have the meanings specified in the
introductory paragraph hereof.
"Letter of Credit" has the meaning specified in Section
2.4(a).
"Letter of Credit Fee" has the meaning specified in Section
3.6.
"LIBOR Interest Payment Date" means, with respect to a LIBOR
Rate Loan, the last day of each Interest Period applicable to such Loan.
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"LIBOR Interest Rate Determination Date" means each date of
calculating the LIBOR Rate for purposes of determining the interest rate with
respect to an Interest Period. The LIBOR Interest Rate Determination Date for
any LIBOR Rate Loan shall be the second Business Day prior to the first day of
the related Interest Period for such LIBOR Rate Loan.
"LIBOR Rate" means, for any Interest Period, with respect to
LIBOR Rate Loans comprising part of the same Borrowing, the rate of interest per
annum (rounded upward to the next 1/16th of 1.0%) determined by the Agent as
follows:
LIBOR Rate = LIBOR
1.00 - Eurodollar Reserve Percentage
Where,
"Eurodollar Reserve Percentage" means for any day for
any Interest Period the maximum reserve percentage (expressed
as a decimal, rounded upward to the next 1/100th of 1.0%) in
effect on such day (whether or not applicable to any Lender)
under regulations issued from time to time by the Federal
Reserve Board for determining the maximum reserve requirement
(including any emergency, supplemental or other marginal
reserve requirement) with respect to Eurocurrency funding
(currently referred to as "Eurocurrency liabilities"); and
"LIBOR" means the rate of interest per annum (rounded
upward to the next 1/16 of 1%) notified to the Agent by Bank
of America as the rate of interest at which dollar deposits in
the approximate amount of the Loan to be made or continued as,
or converted into, a LIBOR Rate Loan and having a maturity
comparable to such Interest Period would be offered by Bank of
America's applicable lending office to major banks in the
London Eurodollar market at approximately 11:00 a.m. (London
time) two Business Days prior to the commencement of such
Interest Period.
"LIBOR Rate Loans" means, collectively, the LIBOR Revolving
Loans and the LIBOR Term Loans.
"LIBOR Revolving Loan" means a Revolving Loan during any
period in which it bears interest at the LIBOR Rate.
"LIBOR Term Loan" means any portion of a Term Loan during any
period in which such portion bears interest at the LIBOR Rate.
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"Lien" means: (a) any interest in property securing an
obligation owed to, or a claim by, a Person other than the owner of the
property, whether such interest is based on the common law, statute, or
contract, and including without limitation, a security interest, charge, claim,
or lien arising from a mortgage, deed of trust, encumbrance, pledge,
hypothecation, assignment, deposit arrangement, agreement, security agreement,
conditional sale or trust receipt or a lease, consignment or bailment for
security purposes; and (b) to the extent not included under clause (a), any
reservation, exception, encroachment, easement, right-of-way, covenant,
condition, restriction, lease or other title exception or encumbrance affecting
property.
"Loan Account" means the loan account of each Borrower, which
account shall be maintained by the Agent.
"Loan Documents" means this Agreement, the Term Loan Notes,
the Patent and Trademark Agreement, the Mortgages, and any other pledge
agreement, locomotive assignments, collateral assignment of leases or other
agreements, instruments, and documents heretofore, now or hereafter evidencing,
securing, guaranteeing or otherwise relating to the Obligations, the Collateral,
or any other aspect of the transactions contemplated by this Agreement.
"Loans" means, collectively, all loans and advances provided
for in Article 2.
"Majority Lenders" means, at any time, Lenders whose Pro Rata
shares aggregate more than sixty-six and 2/3 percent (662/3%) of the
Commitments.
"Margin Stock" means "margin stock" as such term is defined in
Regulation G, T, U or X of the Federal Reserve Board.
"Material Adverse Effect" means (a) a material adverse change
in, or a material adverse effect upon, the operations, business, properties,
condition (financial or otherwise) or prospects of any Borrower or the
Collateral; (b) a material impairment of the ability of any Borrower to perform
under any Loan Document and to avoid any Event of Default; or (c) a material
adverse effect upon the legality, validity, binding effect or enforceability
against any Borrower of any Loan Document.
"Maximum Revolver Amount" means the aggregate amount of the
Revolving Loan Commitments or Sixty-Seven Million Dollars ($67,000,000.)
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"Memoranda of Understanding" means the following three (3)
agreements setting forth the terms of settlement of the Stockholder Litigation:
(1) Memorandum of Understanding executed on or about August
30, 1995 between Plaintiffs and the Individual
Defendants regarding the class actions pending in the
U.S. District Court for the District of Idaho entitled
Newman, et al. v. MK Rail Corporation, et al., Case No.
94-478; and Susser, et. al. v. MK Rail Corporation, et.
al. Case No. 94-477;
(2) Memorandum of Understanding executed on or about August
30, 1995 among Plaintiffs, the Underwriter Defendants,
MKR, and Morrison Knudsen Corporation regarding the
class actions pending in the U.S. District Court for
the District of Idaho entitled Newman, et al. v. MK
Rail Corporation, et al., Case No. 94-478; and Susser,
et. al. v. MK Rail Corporation, et. al. Case No.
94-477; and
(3) Morrison Knudsen Corporation And MK Rail Derivative
Litigation Memorandum of Understanding executed on or
about August 30, 1995 regarding the derivative action
pending in the United States District Court for the
District of Idaho entitled Wohlgelernter v. Agee, et
al. CV-OC-95000656D.
"MKC Bankruptcy Plan" means the Findings of Fact, Conclusions
of Law and Order Confirming The First Amended Plan of Reorganization of Morrison
Knudsen Corporation, dated August 26, 1996 with respect to the case titled, In
re: Morrison Knudsen Corporation, Case No. 96-1006 (PJW) Chapter 11.
"MKR's Availability" means at any time (a) the lesser of (i)
$30,000,000 or (ii) the sum of (A) eighty-five percent (85%) of the Net Amount
of Eligible Accounts owing to MKR; plus (B) sixty percent (60%) of the book
value of MKR's Eligible Inventory consisting of raw materials and finished
goods, plus (C) the MKR Locomotive Advance Rate from time to time in effect as
set forth on Schedule 1.1B hereto multiplied by the lesser of the cost or net
book value of MKR's Eligible Locomotive Inventory (except, that each MK 5000
Locomotive will be valued at the lesser of $1,000,000, cost or net book value),
plus (D) sixty-five percent (65%) multiplied by the aggregate outstanding
principal amount of all Eligible Argentine Notes (provided that the 65% advance
rate specified above shall be increased to 85% at such time as Agent shall be
provided with evidence acceptable to Agent in its sole discretion that the
letter of credit from Citibank N.A., Buenos Aires Argentina securing the
Eligible Argentine Notes on the
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Initial Closing Date has been accepted by or confirmed by Citibank N.A. in New
York pursuant to an acceptance agreement in form and substance acceptable to
Agent), plus (E) fifty percent (50%) of the book value of MKR's Eligible
Consigned Inventory consisting of finished goods (the sum of clauses (A), (B),
(C), (D) and (E) being herein referred to as "MKR's Borrowing Base"), minus (b)
the sum of (i) the unpaid balance of Revolving Loans at such time advanced to
MKR; (ii) the aggregate amount of Pending Revolving Loans to be advanced to MKR
at such time, (iii) the aggregate undrawn amount of all outstanding Letters of
Credit issued for the benefit of MKR, (iv) the aggregate amount of any unpaid
reimbursement obligations in respect of Letters of Credit issued for the benefit
of MKR; (v) reserves for accrued interest on the Obligations for which MKR is
primarily liable; (vi) any Environmental Compliance Reserve related to
properties owned, leased or operated by MKR; (vii) a reserve in an amount equal
to the maximum aggregate value which may be outstanding from time to time as
"Common Materials" under the PTRA Intercreditor and the HBTC Intercreditor; and
(viii) all other reserves which the Agent deems necessary in the exercise of its
reasonable credit judgment to maintain with respect to MKR's Accounts and/or
Inventory.
"MKR's Borrowing Base" shall have the meaning ascribed thereto
within the definition of the term "MKR's Availability."
"MKR's Eligible Locomotive Inventory" means not more than one
hundred three (103) railroad locomotives owned by MKR (i) that are in service
and operating only in the United States or Canada, (ii) that are in good
operating condition and repair, (iii) that are fully insured, (iv) that are
leased to railroads under valid and enforceable leases in which the Agent has a
first and prior perfected security interest and (v) in which the Agent has a
first and prior perfected security interest by means of ICC filings in the
United States or PPSA and other filings in Canada.
"Modified Fixed Charges Coverage Ratio" means, with respect to
intercompany loans permitted in accordance with Section 9.10, the Fixed Charges
Coverage Ratio for the Borrower making such intercompany loan, calculated for
the twelve Fiscal Months ending as of the last day of the Fiscal Month ended
prior to the date such intercompany loan is made; provided that in calculating
the applicable Borrower's Fixed Charges Coverage Ratio, the intercompany loan
shall be deemed to have been made on the last day of the applicable twelve-month
period and the principal amount of that intercompany loan shall be deducted from
Adjusted Net Earnings from Operations as if such intercompany loan and all other
intercompany loans made by that Borrower during that twelve-month period during
that period were an expense of the Borrower making such intercompany loans.
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"Mortgages" means: (a) each Mortgage, Security Agreement, and
Assignments of Leases and Rents dated the date hereof between the Borrowers and
the Agent and delivered to the Agent; and (b) all other real property mortgages,
leasehold mortgages, assignments of leases, mortgage deeds, deeds of trust,
deeds to secure debt, security agreements, and other similar instruments
hereafter entered into which provide the Lender a lien on or other interest in
any portion of the Premises or the Real Estate or which relate to any such Lien
or interest.
"Multi-employer Plan" means a "multi-employer plan" as defined
in Section 4001(a)(3) of ERISA which is or was at any time during the current
year or the immediately preceding six (6) years contributed to by any Borrower
or any ERISA Affiliate.
"Net Amount of Eligible Accounts" means, at any time, the
gross amount of Eligible Accounts less sales, excise or similar taxes, and less
returns, discounts, claims, credits and allowances of any nature at any time
issued, owing, granted, outstanding, available or claimed.
"1995 Restructure" means all of the Borrowers' costs and
charges relating to the restructuring of the Borrowers in December 1995,
including, without limitation, the costs and charges associated with the
write-down of assets, severance of employees and acceleration of future expenses
as determined in accordance with GAAP.
"Note Cancellation and Restructuring Agreement" means that
certain Note Cancellation and Restructuring Agreement dated as of June 20, 1996
among MKR, Morrison Knudsen Corporation, a Delaware corporation and Morrison
Knudson Corporation, an Ohio corporation, as amended by that certain Amended To
Note Cancellation and Restructuring Agreement dated as of July 25, 1996.
"Notice of Borrowing" has the meaning specified in Section
2.1(b).
"Notice of Conversion/Continuation" has the meaning specified
in Section 3.2(b).
"Obligations" means all present and future loans, advances,
liabilities, obligations, covenants, duties, and debts owing by any Borrower to
the Agent and/or any Lender, arising under or pursuant to this Agreement or any
of the other Loan Documents, whether or not evidenced by any note, or other
instrument or document, whether arising from an extension of credit, opening of
a letter of credit, acceptance, loan, guaranty, indemnification or otherwise,
whether direct or indirect (including, without limitation, those acquired by
assignment from others, and any participation by the Agent and/or any Lender in
the Borrowers'
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<PAGE>
debts owing to others), absolute or contingent, due or to become due, primary or
secondary, as principal or guarantor, and including, without limitation, all
principal, interest, charges, expenses, fees, attorneys' fees, filing fees and
any other sums chargeable to any Borrower hereunder or under any of the other
Loan Documents. "Obligations" includes, without limitation, all debts,
liabilities, and obligations now or hereafter owing from the Borrowers to the
Agent and/or any Lender under or in connection with the Letters of Credit.
"Other Taxes" means any present or future stamp or documentary
taxes or any other excise or property taxes, charges or similar levies which
arise from any payment made hereunder or from the execution, delivery or
registration of, or otherwise with respect to, this Agreement or any other Loan
Documents.
"Participating Lender" means any Person who shall have been
granted the right by any Lender to participate in the financing provided by such
Lender under this Agreement, and who shall have entered into a participation
agreement in form and substance satisfactory to such Lender.
"Patent and Trademark Agreement" means the Intellectual
Property Agreement, dated as of the date hereof, executed and delivered by each
Borrower to the Agent to evidence and perfect the Agent's security interest in
such Borrower's present and future patents, trademarks, and related licenses and
rights, for the benefit of the Lenders.
"Payment Account" means each blocked bank account established
pursuant to Section 6.9, to which the funds of any Borrower (including, without
limitation, proceeds of Accounts and other Collateral) are deposited or
credited, and which is maintained in the name of the Agent or a Borrower, as the
Agent may determine, on terms acceptable to the Agent.
"PBGC" means the Pension Benefit Guaranty Corporation or any
Governmental Authority succeeding to the functions thereof.
"Pending Revolving Loans" means, at any time, the aggregate
principal amount of all Revolving Loans requested in any Notice(s) of Borrowing
received by the Agent which have not yet been advanced.
"Pension Plan" means a pension plan (as defined in Section
3(2) of ERISA) subject to Title IV of ERISA which any Borrower sponsors,
maintains, or to which it makes, is making, or is obligated to make
contributions, or in the case of a Multipleemployer Plan has made contributions
at any time during the immediately preceding five (5) plan years.
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<PAGE>
"Permitted Liens" means:
(a) Liens for taxes not delinquent or for taxes being
contested in good faith by appropriate proceedings and as to which adequate
financial reserves have been established on the applicable Borrower's books and
records and a stay of enforcement of any such Lien is in effect;
(b) the Agent's Liens;
(c) deposits under worker's compensation, unemployment
insurance, social security and other similar laws, or to secure the performance
of bids, tenders or contracts (other than for the repayment of borrowed money)
or to secure indemnity, performance or other similar bonds for the performance
of bids, tenders or contracts (other than for the repayment of borrowed money)
or to secure statutory obligations (other than liens arising under ERISA or
Environmental Liens) or surety or appeal bonds, or to secure indemnity,
performance or other similar bonds in the ordinary course of business;
(d) Liens securing the claims or demands of materialmen,
mechanics, carriers, warehousemen, landlords and other like Persons, provided
that the payment thereof is not at the time required by Section 9.1;
(e) Reservations, exceptions, encroachments, easements, rights
of way, covenants running with the land, and other similar title exceptions or
encumbrances affecting any Real Estate; provided that they do not in the
aggregate materially detract from the value of the Real Estate or materially
interfere with its use in the ordinary conduct of the Borrowers' business; and
(f) Judgment and other similar Liens arising in connection
with court proceedings, provided that (A) the existence of such Liens is being
contested in good faith and by proper proceedings diligently pursued, (B)
reserves or other appropriate provision, if any, as are required by GAAP have
been made therefor, (C) a stay of enforcement of any such Liens is in effect,
(D) the priority of any such Liens is subordinate to that of the Agent's Liens,
and (E) the existence of any judgment or court proceedings upon which such Liens
are based does not otherwise constitute an Event of Default under this
Agreement.
"Permitted Rentals" has the meaning specified in Section 9.24.
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<PAGE>
"Person" means any individual, sole proprietorship,
partnership, joint venture, trust, unincorporated organization, association,
corporation, Governmental Authority, or any other entity.
"Plan" means an employee benefit plan (as defined in Section
3(3) of ERISA) which any Borrower sponsors or maintains or to which any Borrower
makes, is making, or is obligated to make contributions and includes any Pension
Plan.
"Preferred Stock" shall mean up to 10,000 shares of Class B
Preferred Stock of MKR initially issued in favor of the Fidelity and Casualty
Company of New York in connection with the final settlement of the Stockholder
Litigation and upon substantially the terms and conditions set forth in the
Certificate of Designations of Class B Preferred Stock of MKR included as part
of its Certificate of Incorporation as in effect on the Closing Date.
"Premises" means the land identified by addresses on Schedule
8.12, together with all buildings, improvements, and fixtures thereon and all
tenements, hereditaments, and appurtenances belonging or in any way appertaining
thereto, and which constitutes all of the real property in which any Borrower
has any interest on the Closing Date.
"Pro Rata Share" means, with respect to a Lender, a fraction
(expressed as a percentage), the numerator of which is the amount of such
Lender's Commitment and the denominator of which is the sum of the amounts of
all of the Lenders' Commitments.
"Proprietary Rights" means all of each Borrower's now owned
and hereafter arising or acquired: licenses, franchises, permits, patents,
patent rights, copyrights, works which are the subject matter of copyrights,
trademarks, service marks, trade names, trade styles, patent, trademark and
service mark applications, and all licenses and rights related to any of the
foregoing, including, without limitation, those patents, trademarks, service
marks and copyrights set forth on Schedule 8.13 hereto, and all other rights
under any of the foregoing, all extensions, renewals, reissues, divisions,
continuations, and continuations-in-part of any of the foregoing, and all rights
to sue for past, present and future infringement of any of the foregoing.
"PTRA" means the Port Terminal Railroad Association, a Texas
association.
"PTRA Contract" means that certain Locomotive Manufacturing
Agreement between MKR and PTRA providing for the purchase and sale of
twenty-four (24) MK1500D diesel locomotives.
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<PAGE>
"PTRA Indebtedness" means all Debt and indebtedness of any
kind in favor of PTRA.
"PTRA Intercreditor" has the meaning set forth in Section 9.19
hereof.
"PTRA Inventory Report" has the meaning set forth in Section
6.7 hereof."
"Real Estate" means all of the present and future interests of
each Borrower, as owner, lessee, or otherwise, in the Premises, including,
without limitation, any interest arising from an option to purchase or lease the
Premises or any portion thereof.
"Release" means a release, spill, emission, leaking, pumping,
injection, deposit, disposal, discharge, dispersal, leaching or migration of a
Contaminant into the indoor or outdoor environment or into or out of any Real
Estate or other property, including the movement of Contaminants through or in
the air, soil, surface water, groundwater or Real Estate or other property.
"Rentals" has the meaning specified in Section 9.24.
"Reportable Event" means, any of the events set forth in
Section 4043(b) of ERISA or the regulations thereunder, other than any such
event for which the 30-day notice requirement under ERISA has been waived in
regulations issued by the PBGC.
"Required Lenders" means, at any time Lenders whose Pro Rata
Shares aggregate more than thirty-five percent (35%) of the Commitments.
"Requirement of Law" means, as to any Person, any law
(statutory or common), treaty, rule or regulation or determination of an
arbitrator or of a Governmental Authority, in each case applicable to or binding
upon the Person or any of its property or to which the Person or any of its
property is subject.
"Responsible Officer" means the chief executive officer or the
president of each Borrower, or any other officer having substantially the same
authority and responsibility; or, with respect to compliance with financial
covenants, the chief financial officer or the treasurer of each Borrower, or any
other officer having substantially the same authority and responsibility.
"Restricted Investment" means any acquisition of property by
the Borrowers in exchange for cash or other property, whether in the form of an
acquisition of stock, debt, or other indebtedness or obligation, or the purchase
or acquisition of any other property, or a loan, advance, capital contribution,
investment, deposit of funds or subscription, except the following: (a)
acquisitions of
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<PAGE>
equipment to be used in the business of each Borrower so long as the acquisition
costs thereof constitute Capital Expenditures permitted hereunder; (b)
acquisitions of goods held for sale or lease or to be used by each Borrower in
the ordinary course of business; (c) acquisitions of current assets arising from
the sale or lease of goods or the rendition of services in the ordinary course
of business of each Borrower; (d) direct obligations of the United States of
America, or any agency thereof, or obligations guaranteed by the United States
of America, provided that such obligations mature within one year from the date
of acquisition thereof; (e) certificates of deposit maturing within one year
from the date of acquisition, bankers' acceptances, Eurodollar bank deposits, or
overnight bank deposits, in each case issued by, created by, or with a bank or
trust company organized under the laws of the United States or any state thereof
having capital and surplus aggregating at least $100,000,000; (f) commercial
paper given a rating of "A2" or better by Standard & Poor's Corporation or "P2"
or better by Moody's Investors Service, Inc. and maturing not more than 90 days
from the date of creation thereof and (g) loans by any Borrower to any other
Borrower, subject of any such Borrower to the terms hereof, but expressly
excluding any Subsidiaries located outside of the United States;
"Revolving Loans" has the meaning specified in Section
2.1.
"Revolving Loan Commitment" means, at any time with respect to
a Lender, the principal amount set forth beside such Lender's name under the
heading "Revolving Loan Commitment" on the signature pages of this Agreement or
on the signature page of the Assignment and Acceptance pursuant to which such
Lender became a Lender hereunder in accordance with the provisions of Section
13.3, as such Revolving Loan Commitment may be adjusted from time to time in
accordance with the provisions of Section 13.3, and "Revolving Loan Commitments"
means, collectively, the aggregate amount of the Revolving Loan Commitments of
all of the Lenders.
"Solvent" means when used with respect to any Person that (a)
the fair value of all its assets is in excess of the total amount of its debts
(including contingent liabilities); (b) it is able to pay its debts as they
mature; (c) it does not have unreasonably small capital for the business in
which it is engaged or for any business or transaction in which it is about to
engage; and (d) it is not "insolvent" as such term is defined in Section 101(32)
of the Bankruptcy Code.
"Stated Termination Date" means August 31, 1999.
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<PAGE>
"Stockholder Litigation" means:
(i) Newman v. Agee, et al., 94-CV-478-EJL, pending in the
United States District Court for the District of Idaho,
(ii) Susser, et al. v. Agee, et al., 94-CV-477-S-LMB,
pending in the United States District Court for the
District of Idaho, and
(iii)Wohlgelernter v. Agee, et al., CV-DC-95000656D,
pending in Ada County, Idaho.
"Subsidiary" means any corporation of which more than fifty
percent (50.0%) of the outstanding securities of any class or classes, the
holders of which are ordinarily, in the absence of contingencies, entitled to
elect a majority of the corporate directors (or Persons performing similar
functions), is at the time, directly or indirectly through one or more
intermediaries, owned by any Borrower and/or one or more of its Subsidiaries.
"Subordinated Debt" means subordinated debt in the principal
amount of $52,200,000 plus approximately $5,200,000 of accrued interest as of
August 30, 1996 owing by MKR to MorrisonKnudsen Corporation pursuant to that
certain Note dated June 26, 1995 from MKR to Morrison Knudsen Corporation, an
Ohio corporation.
"Subordination Agreement" means the Subordination Agreement
dated as of the Initial Closing Date, among Morrison Knudsen Corporation, the
Agent and MKR, as hereafter amended or modified from time to time.
"Taxes" means any and all present or future taxes, levies,
imposts, deductions, charges or withholdings, and all liabilities with respect
thereto, excluding, in the case of each Lender and the Agent, such taxes
(including income taxes or franchise taxes) as are imposed on or measured by
each Lender's net income by the jurisdiction (or any political subdivision
thereof) under the laws of which such Lender or the Agent, as the case may be,
is organized or maintains a Lending Office.
"Term Loan" and "Term Loans" have the meanings specified in
Section 2.2(a).
"Term Loan Commitment" means, at any time with respect to a
Lender, the principal amount set forth beside such Lender's name under the
heading "Term Loan Commitment" on the signature pages of this Agreement or on
the signature page of the Assignment and Acceptance pursuant to which such
Lender became a Lender hereunder in accordance with the provisions of Section
13.3, as such Term Loan Commitment may be adjusted from time to time in
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accordance with the provisions of Section 13.3, and "Term Loan Commitments"
means, collectively, the aggregate amount of the Term Loan Commitments of all of
the Lenders.
"Term Loan Note" and "Term Loan Notes" have the meanings
specified in Section 2.2(c).
"Termination Date" means the earliest to occur of (i) the
Stated Termination Date, (ii) the date the Revolver Facility is terminated
either by the Borrowers pursuant to Section 4.2 or by the Majority Lenders
pursuant to Section 11.2, and (iii) the date this Agreement is otherwise
terminated for any reason whatsoever.
"Total Facility" has the meaning specified in Section 2.1.
"UCC" means the Uniform Commercial Code as the same may, from
time to time, be in effect in the State of Illinois; provided, however, in the
event that, by reason of mandatory provisions of law, any or all of the
attachment, perfection or priority of the security interest of Agent (or any
party for which Agent is agent) in any collateral is governed by the Uniform
Commercial Code as in effect in a jurisdiction other than the State of Illinois,
the term "UCC" shall mean the Uniform Commercial Code as in effect in such other
jurisdiction solely for purposes of the provisions hereof relating to such
attachment, perfection or priority and for purposes of definitions related to
such provisions.
"Unused Letter of Credit Subfacility" means an amount equal to
$10,000,000 minus the sum of (a) the aggregate undrawn amount of all outstanding
Letters of Credit plus (b) the aggregate unpaid reimbursement obligations with
respect to all Letters of Credit plus (c) the stated amount of any letter of
credit which is permitted to be issued under Section 9.19 in favor of the issuer
of any performance bonds required by MKR whether or not such letter of credit
constitutes a Letter of Credit under this Agreement.
"Unfunded Pension Liability" means the excess of a Plan's
benefit liabilities under Section 4001(a)(16) of ERISA, over the current value
of that Plan's assets, determined in accordance with the assumptions used for
funding the Pension Plan pursuant to Section 412 of the Code for the applicable
plan year.
1.2 Accounting Terms. Any accounting term used in this Agreement shall
have, unless otherwise specifically provided herein, the meaning customarily
given in accordance with GAAP, and all financial computations hereunder shall be
computed, unless otherwise specifically provided herein, in accordance with GAAP
as consistently applied and using the same method for inventory valuation as
used in the preparation of the Financial Statements.
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<PAGE>
1.3 Interpretive Provisions. (a) The meanings of defined terms
are equally applicable to the singular and plural forms of the defined terms.
(b) The words "hereof," "herein," "hereunder" and similar
words refer to this Agreement as a whole and not to any particular provision of
this Agreement; and Subsection, Section, Schedule and Exhibit references are to
this Agreement unless otherwise specified.
(c) (i) The term "documents" includes any and all instruments,
documents, agreements, certificates, indentures, notices and other writings,
however evidenced.
(ii) The term "including" is not limiting and means "including
without limitation."
(iii) In the computation of periods of time from a specified
date to a later specified date, the word "from" means "from and including," the
words "to" and "until" each mean "to but excluding" and the word "through" means
"to and including."
(d) Unless otherwise expressly provided herein, (i) references
to agreements (including this Agreement) and other contractual instruments shall
be deemed to include all subsequent amendments and other modifications thereto,
but only to the extent such amendments and other modifications are not
prohibited by the terms of any Loan Document, and (ii) references to any statute
or regulation are to be construed as including all statutory and regulatory
provisions consolidating, amending, replacing, supplementing or interpreting the
statute or regulation.
(e) The captions and headings of this Agreement are for
convenience of reference only and shall not affect the interpretation of this
Agreement.
(f) This Agreement and other Loan Documents may use several
different limitations, tests or measurements to regulate the same or similar
matters. All such limitations, tests and measurements are cumulative and shall
each be performed in accordance with their terms.
(g) This Agreement and the other Loan Documents are the result
of negotiations among and have been reviewed by counsel to the Agent, the
Borrowers and the other parties, and are the products of all parties.
Accordingly, they shall not be construed against the Lenders or the Agent merely
because of the Agent's or Lender's involvement in their preparation.
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<PAGE>
1.4 Amendment and Restatement.
(a) This Agreement amends and restates in its entirety the
Existing Loan Agreement and, upon effectiveness of this Agreement, the terms and
provisions of the Existing Loan Agreement shall, subject to Section 1.4(b) and
(c), be superseded hereby.
(b) Notwithstanding the amendment and restatement of the
Existing Loan Agreement by this Agreement, the Borrowers shall continue to be
liable to the Agent and the Lenders with respect to agreements on the part of
the Borrowers under the Existing Loan Agreement to indemnify and hold the Agent
and the Lenders harmless from and against all claims, demands, liabilities,
damages, losses, costs, charges and expenses to which the Agent or any Lender
may be subject arising in connection with any action taken, failure to take
action or transaction contemplated in or under the Existing Loan Agreement
during the period that such agreement was in effect.
(c) Notwithstanding the amendment and restatement of the
Existing Loan Agreement by this Agreement, the indebtedness, liabilities and
obligations owing to the Agent and the Lenders by the Borrowers under the
Existing Loan Agreement remain outstanding as of the date hereof, constitute
continuing Obligations hereunder and shall continue to be secured by the
Collateral.
This Agreement is given in partial substitution for the
Existing Loan Agreement, and does not evidence a repayment and reborrowing of
the obligations of Borrowers under such agreement, and is in no way intended to
constitute a novation of the Existing Loan Agreement, and the Liens granted with
respect thereto shall be continuing.
(d) Upon the effectiveness of this Agreement, each reference
to the Existing Loan Agreement in each Loan Document and any other document,
instrument or agreement executed and/or delivered in connection therewith shall
mean and be a reference to this Agreement.
(e) The parties hereto acknowledge and agree that any waivers,
express or implied by course of conduct or otherwise, amendments or other
actions (or failures to act) under the Existing Loan Agreement and the other
Loan Documents shall be of no force or effect, and of no use in interpreting the
rights and duties of the parties under this Agreement.
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<PAGE>
ARTICLE 2
LOANS AND LETTERS OF CREDIT
Subject to all of the terms and conditions of this Agreement, the
Lenders severally agree to make available a total credit facility of up to
Seventy Five Million Dollars ($75,000,000) (the "Total Facility") for the
Borrowers' use from time to time during the term of this Agreement. The Total
Facility shall be comprised of: (a) a revolving line of credit consisting of
revolving loans and letters of credit up to the Maximum Revolver Amount, as
described in Sections 2.1 and 2.3; and (b) the Term Loans up to the Term Loan
Commitment described in Section 2.2.
2.1 Revolving Loans. (a) Amounts. Subject to the satisfaction of the
conditions precedent set forth in Article 10, each Lender severally agrees, upon
MKR's request from time to time on any Business Day during the period from the
Closing Date to the Termination Date, to make revolving loans (the "Revolving
Loans") (1) to the Borrowers, in amounts not to exceed (except with respect to
BABC Loans) such Lender's Pro Rata Share of the Borrowers' Availability;
provided that as separate sublimits, the Revolving Loans outstanding at any time
to MKR shall not exceed MKR's Availability and the Revolving Loans outstanding
at any time to each Component Subsidiary shall not exceed that Component
Subsidiary's Availability. The Lenders, however, in their discretion, may elect
to make Revolving Loans or participate (as provided for in Section 2.3(f)) in
the credit support or enhancement provided through the Agent to the issuers of
Letters of Credit in excess of the Availability, MKR's Availability or a
Component Subsidiary's Availability on one or more occasions, but if they do so,
neither the Agent nor the Lenders shall be deemed thereby to have changed the
limits of the Maximum Revolver Amount, the Availability, MKR's Availability or
any Component Subsidiary's Availability or to be obligated to exceed such limits
on any other occasion. If the sum of outstanding Revolving Loans, the aggregate
amount of Pending Revolving Loans, the undrawn amount of outstanding Letters of
Credit and any unpaid reimbursement obligations in respect of Letters of Credit
exceeds the Availability, the Lenders may refuse to make or otherwise restrict
the making of Revolving Loans as the Lenders determine until such excess has
been eliminated. If the sum of outstanding Revolving Loans, the aggregate amount
of Pending Revolving Loans, the undrawn amount of outstanding Letters of Credit
and any unpaid reimbursement obligations in respect of Letters of Credit to MKR
or to any Component Subsidiary exceeds MKR's Availability or that Component
Subsidiary's Availability, respectively, the Lenders may refuse to make or
otherwise restrict the making of Revolving Loans to MKR or that Component
Subsidiary, as applicable, as the Lenders determine until that excess has been
eliminated.
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(b) Procedure for Borrowing. (1) Each Borrowing shall be made
upon MKR's irrevocable written notice in the form of Exhibit A hereto (a "Notice
of Borrowing") delivered to the Agent (which notice must be received by the
Agent prior to 11 a.m. (Chicago time) (i) three Business Days prior to the
requested Funding Date, in the case of LIBOR Rate Loans and (ii) no later than
11:00 a.m. (Chicago time) on the requested Funding Date, in the case of Base
Rate Revolving Loans, specifying:
(A) the amount of the Borrowing, which, in the case of LIBOR
Rate Loans shall be in a minimum amount of $5,000,000 and $1,000,000 increments
in excess of $5,000,000;
(B) the requested Funding Date, which shall be a Business Day;
(C) the Borrower that is to receive such Borrowing;
(D) whether the Revolving Loans requested are to be Base Rate
Revolving Loans or LIBOR Rate Loans; and
(E) the duration of the Interest Period if the requested
Revolving Loans are to be LIBOR Rate Loans. If the Notice of Borrowing fails to
specify the duration of the Interest Period for any Borrowing comprised of LIBOR
Rate Loans, such Interest Period shall be three months;
provided, however, that with respect to the Borrowing to be made on the Closing
Date, such Borrowings will consist of Base Rate Revolving Loans and a Base Rate
Term Loan only.
(2) After giving effect to any Borrowing, there may not be
more than five (5) different Interest Periods in effect.
(3) With respect to any request for Base Rate Revolving Loans,
in lieu of delivering the above-described Notice of Borrowing MKR may give the
Agent telephonic notice of such request, specifying the information contained in
clauses (A)-(D) of paragraph (1) above, by the required time, with such
telephonic notice to be confirmed in writing within 24 hours of the giving of
such notice and Agent shall be entitled to rely on the telephonic notice in
making such Revolving Loans.
(c) Reliance upon Authority. On or prior to the Closing Date
and thereafter prior to any change with respect to any of the information
contained in the following clauses (i) and (ii), MKR shall deliver to the Agent
a writing setting forth (i) the account of each Borrower to which the Agent is
authorized to transfer the proceeds of the Revolving Loans requested pursuant to
this Section 2.1, and (ii) the names of the officers of MKR authorized to
request Revolving Loans on behalf of each Borrower, and shall
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provide the Agent with a specimen signature of each such officer. The Agent
shall be entitled to rely conclusively on such officer's authority to request
Revolving Loans on behalf of each Borrower, the proceeds of which are to be
transferred to any of the accounts specified by MKR pursuant to the immediately
preceding sentence, until the Agent receives written notice to the contrary. The
Agent shall have no duty to verify the identity of any individual representing
himself or herself as one of the officers authorized by MKR to make such
requests on behalf of each Borrower. Each Borrower hereby appoints MKR to act as
its agent in requesting Borrowings, specifying the amounts thereof, determining
the applicable interest rate and Interest Period and otherwise acting as its
agent hereunder for purposes of delivering and receiving notices provided for
herein.
(d) No Liability. The Agent shall not incur any liability to
any Borrower as a result of acting upon any notice referred to in Sections
2.1(b) and (c), which notice the Agent believes in good faith to have been given
by an officer duly authorized by MKR to request Revolving Loans on its behalf or
for otherwise acting in good faith under this Section 2.1, and the crediting of
Revolving Loans to that Borrower's deposit account, or transmittal to such
Person as MKR shall direct, shall conclusively establish the obligation of such
Borrower to repay such Revolving Loans as provided herein.
(e) Notice Irrevocable. Any Notice of Borrowing (or telephonic
notice in lieu thereof) made pursuant to Section 2.1(b) shall be irrevocable and
the designated Borrower shall be bound to borrow the funds requested therein in
accordance therewith.
(f) Agent's Election. Promptly after receipt of a Notice of
Borrowing (or telephonic notice in lieu thereof) pursuant to Section 2.1(b), the
Agent shall elect, in its discretion, (i) to have the terms of Section 2.1(g)
apply to such requested Borrowing, or (ii) to request BABC to make a BABC Loan
pursuant to the terms of Section 2.1(h) in the amount of the requested
Borrowing; provided, however, that if BABC declines in its sole discretion to
make a BABC Loan pursuant to Section 2.1(h), the Agent shall elect to have the
terms of Section 2.1(g) apply to such requested Borrowing.
(g) Making of Revolving Loans. (i) In the event that the Agent
shall elect to have the terms of this Section 2.1(g) apply to a requested
Borrowing as described in Section 2.1(f), then promptly after receipt of a
Notice of Borrowing or telephonic notice pursuant to Section 2.1(b), the Agent
shall notify the Lenders by telecopy, telephone or other similar form of
transmission, of the requested Borrowing. Each Lender shall make the amount of
such Lender's Pro Rata Share of the requested Borrowing available to the Agent
in same day funds, to such account
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of the Agent as the Agent may designate, not later than noon, (Chicago time) on
the Funding Date applicable thereto. After the Agent's receipt of the proceeds
of such Revolving Loans, upon satisfaction of the applicable conditions
precedent set forth in Article 10, the Agent shall make the proceeds of such
Revolving Loans available to the designated Borrower on the applicable Funding
Date by transferring same day funds equal to the proceeds of such Revolving
Loans received by the Agent to the account of the Borrower designated in writing
by MKR; provided, however, that the amount of Revolving Loans so made on any
date shall in no event exceed the Availability of the applicable Borrower on
such date.
(ii) Unless the Agent receives notice from a Lender on or
prior to the Closing Date or, with respect to any Borrowing after the Closing
Date, at least one Business Day prior to the date of such Borrowing, that such
Lender will not make available as and when required hereunder to the Agent for
the account of each Borrower the amount of that Lender's Pro Rata Share of the
Borrowing, the Agent may assume that each Lender has made such amount available
to the Agent in immediately available funds on the Funding Date and the Agent
may (but shall not be so required), in reliance upon such assumption, make
available to the designated Borrower on such date a corresponding amount. If and
to the extent any Lender shall not have made its full amount available to the
Agent in immediately available funds and the Agent in such circumstances has
made available to a Borrower such amount, that Lender shall on the Business Day
following such Funding Date make such amount available to the Agent, together
with interest at the Federal Funds Rate for each day during such period. A
notice of the Agent submitted to any Lender with respect to amounts owing under
this subsection shall be conclusive, absent manifest error. If such amount is so
made available, such payment to the Agent shall constitute such Lender's Loan on
the date of Borrowing for all purposes of this Agreement. If such amount is not
made available to the Agent on the Business Day following the Funding Date, the
Agent will notify MKR of such failure to fund and, upon demand by the Agent, the
Borrower that received such Borrowing shall pay such amount to the Agent for the
Agent's account, together with interest thereon for each day elapsed since the
date of such Borrowing, at a rate per annum equal to the interest rate
applicable at the time to the Loans comprising such Borrowing. The failure of
any Lender to make any Loan on any Funding Date shall not relieve any other
Lender of any obligation hereunder to make a Loan on such Funding Date, but no
Lender shall be responsible for the failure of any other Lender to make the Loan
to be made by such other Lender on any Funding Date.
(h) Making of BABC Loans. (i) In the event the Agent shall
elect, with the consent of BABC, to have the terms of this Section 2.1(h) apply
to a requested Borrowing as described in Section 2.1(f), BABC shall make a
Revolving Loan in the amount of
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such Borrowing (any such Revolving Loan made solely by BABC pursuant to this
Section 2.1(h) being referred to as a "BABC Loan" and such Revolving Loans being
referred to collectively as "BABC Loans") available to the applicable Borrower
on the Funding Date applicable thereto by transferring same day funds to an
account of the applicable Borrower, designated in writing by MKR. Each BABC Loan
is a Revolving Loan hereunder and shall be subject to all the terms and
conditions applicable to other Revolving Loans except that all payments thereon
shall be payable to BABC solely for its own account (and for the account of the
holder of any participation interest with respect to such Revolving Loan). The
Agent shall not request BABC to make any BABC Loan if (i) the Agent shall have
received written notice from any Lender, or otherwise has actual knowledge, that
one or more of the applicable conditions precedent set forth in Article 10 will
not be satisfied on the requested Funding Date for the applicable Borrowing, or
(ii) the requested Borrowing would exceed the Availability of the applicable
Borrower on such Funding Date. BABC shall not otherwise be required to determine
whether the applicable conditions precedent set forth in Article 10 have been
satisfied or the requested Borrowing would exceed the Availability, Components
Subsidiary's Availability or MKR's Availability, as the case may be, of the
applicable Borrower on the Funding Date applicable thereto prior to making, in
its sole discretion, any BABC Loan.
(ii) The BABC Loans shall be repayable on demand and secured
by the Collateral, shall constitute Revolving Loans and Obligations hereunder,
and shall bear interest at the rate applicable to the particular Borrowing for
which such BABC Loans are funded.
(i) Agent Advances. (i) Subject to the limitations set forth
in the provisos contained in this Section 2.1(i), the Agent is hereby authorized
by each Borrower and the Lenders, from time to time in the Agent's sole
discretion, (1) after the occurrence of a Default or an Event of Default, or (2)
at any time that any of the other applicable conditions precedent set forth in
Article 10 have not been satisfied, to make Revolving Loans to the Borrowers on
behalf of the Lenders which the Agent, in its reasonable business judgment,
deems necessary or desirable (A) to preserve or protect the Collateral, or any
portion thereof, (B) to enhance the likelihood of, or maximize the amount of,
repayment of the Loans and other Obligations, or (C) to pay any other amount
chargeable to a Borrower pursuant to the terms of this Agreement, including,
without limitation, interest, costs, fees and expenses as described in Section
15.7 (any of the advances described in this Section 2.1(i) being herein referred
to as "Agent Advances"); provided, that the Agent shall not make any Agent
Advance to MKR or any Component Subsidiary if the amount thereof would exceed
MKR's Availability or any such Component Subsidiary's Availability,
respectively, on the Funding Date applicable thereto; and provided,
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further, that the Required Lenders may at any time revoke the Agent's
authorization contained in this Section 2.1(i) to make Agent Advances, any such
revocation to be in writing and to become effective upon the Agent's receipt
thereof.
(ii) The Agent Advances shall be repayable on demand and
secured by the Collateral, shall constitute Revolving Loans and Obligations
hereunder, and shall bear interest at the rate applicable to Base Rate Revolving
Loans from time to time. The Agent shall notify each Lender in writing of each
such Agent Advance.
(j) Settlement. It is agreed that each Lender's funded portion
of the Revolving Loans is intended by the Lenders to be equal at all times to
such Lender's Pro Rata Share of the outstanding Revolving Loans. Notwithstanding
such agreement, the Agent, BABC, and the other Lenders agree (which agreement
shall not be for the benefit of or enforceable by the Borrowers) that in order
to facilitate the administration of this Agreement and the other Loan Documents,
settlement among them as to the Revolving Loans, the BABC Loans and the Agent
Advances shall take place on a periodic basis in accordance with the following
provisions:
(i) The Agent shall request settlement ("Settlement") with the
Lenders on a weekly basis, or on a more frequent basis if so determined by the
Agent, (1) on behalf of BABC, with respect to each outstanding BABC Loan, (2)
for itself, with respect to each Agent Advance, and (3) with respect to
collections received, by notifying the Lenders by telecopy, telephone or other
similar form of transmission, of such requested Settlement, no later than 11:00
a.m. (Chicago time) on the date of such requested Settlement (the "Settlement
Date"). Each Lender (other than BABC, in the case of BABC Loans) shall make the
amount of such Lender's Pro Rata Share of the outstanding principal amount of
the BABC Loans and Agent Advances with respect to which Settlement is requested
available to the Agent, for itself or for the account of BABC, in same day
funds, to such account of the Agent as the Agent may designate, not later than
3:00 p.m. (Chicago time), on the Settlement Date applicable thereto, regardless
of whether the applicable conditions precedent set forth in Article 10 have then
been satisfied. Such amounts made available to the Agent shall be applied
against the amounts of the applicable BABC Loan or Agent Advance and, together
with the portion of such BABC Loan or Agent Advance representing BABC's Pro Rata
Share thereof, shall constitute Revolving Loans of such Lenders. If any such
amount is not made available to the Agent by any Lender on the Settlement Date
applicable thereto, the Agent shall be entitled to recover such amount on demand
from such Lender together with interest thereon at the Federal Funds Rate for
the first three (3) days from and after the Settlement Date and thereafter at
the Interest Rate then applicable to Base Rate Revolving Loans.
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(ii) Notwithstanding the foregoing, not more than one (1)
Business Day after demand is made by the Agent (whether before or after the
occurrence of a Default or an Event of Default and regardless of whether the
Agent has requested a Settlement with respect to a BABC Loan or Agent Advance),
each other Lender shall irrevocably and unconditionally purchase and receive
from BABC or the Agent, as applicable, without recourse or warranty, an
undivided interest and participation in such BABC Loan or Agent Advance to the
extent of such Lender's Pro Rata Share thereof by paying to the Agent, in same
day funds, an amount equal to such Lender's Pro Rata Share of such BABC Loan or
Agent Advance. If such amount is not in fact made available to the Agent by any
Lender, the Agent shall be entitled to recover such amount on demand from such
Lender together with interest thereon at the Federal Funds Rate for the first
three (3) days from and after such demand and thereafter at the Interest Rate
then applicable to Base Rate Revolving Loans.
(iii) From and after the date, if any, on which any Lender
purchases an undivided interest and participation in any BABC Loan or Agent
Advance pursuant to subsection (ii) above, the Agent shall promptly distribute
to such Lender at such address as such Lender may request in writing, such
Lender's Pro Rata Share of all payments of principal and interest and all
proceeds of Collateral received by the Agent in respect of such BABC Loan or
Agent Advance.
(iv) Between Settlement Dates, the Agent, to the extent no
Agent Advances or BABC Loans are outstanding, may pay over to BABC any payments
received by the Agent, which in accordance with the terms of the Agreement would
be applied to the reduction of the Revolving Loans, for application to BABC's
Pro Rata Share of the Revolving Loans. If, as of any Settlement Date,
collections received since the then immediately preceding Settlement Date have
been applied to BABC's Pro Rata Share of the Revolving Loans other than to BABC
Loans or Agent Advances, as provided for in the previous sentence, BABC shall
pay to the Agent for the accounts of the Lenders, to be applied to the
outstanding Revolving Loans of such Lenders, an amount such that each Lender
shall, upon receipt of such amount, have, as of such Settlement Date, its Pro
Rata Share of the Revolving Loans. During the period between Settlement Dates,
BABC with respect to BABC Loans, the Agent with respect to Agent Advances, and
each Lender with respect to the Revolving Loans other than BABC Loans and Agent
Advances, shall be entitled to interest at the applicable rate or rates payable
under the Agreement on the actual average daily amount of funds employed by
BABC, the Agent and the other Lenders.
(k) Notation. The Agent shall record on its books the
principal amount of the Revolving Loans owing to each Lender, including the BABC
Loans owing to BABC, and the Agent Advances
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owing to the Agent, from time to time. In addition, each Lender is authorized,
at such Lender's option, to note the date and amount of each payment or
prepayment of principal of such Lender's Revolving Loans in its books and
records, including computer records, such books and records constituting
rebuttably presumptive evidence, absent manifest error, of the accuracy of the
information contained therein.
(l) Lenders' Failure to Perform. All Loans (other than BABC
Loans and Agent Advances) shall be made by the Lenders simultaneously and in
accordance with their Pro Rata Shares. It is understood that (i) no Lender shall
be responsible for any failure by any other Lender to perform its obligation to
make any Loans hereunder, nor shall any Commitment of any Lender be increased or
decreased as a result of any failure by any other Lender to perform its
obligation to make any Loans hereunder, and (ii) no failure by any Lender to
perform its obligation to make any Loans hereunder shall excuse any other Lender
from its obligation to make any Loans hereunder.
(m) Revolving Loan Obligations; Waiver of Presentment, etc..
The Borrowers hereby agree to repay to each Lender the principal amount of, and
pay to each Lender interest on, the Loans made by such Lender hereunder. The
Borrowers shall pay interest on the principal balance of the Loans from time to
time outstanding as provided in this Agreement. Subject to the earlier
acceleration or prepayment of the Loans as permitted or required by this
Agreement, each Loan shall mature on the Stated Termination Date, and all Loans
outstanding on the Termination Date shall be repaid in full on the Termination
Date. The Borrowers hereby waive presentment, demand, protest or notice of
dishonor in connection with the payment of the Obligations hereunder.
2.2 Term Loans.
(a) Amount of Term Loan. Each Lender severally agrees to make
a term loan (any such term loan being referred to as a "Term Loan" and such term
loans being referred to collectively as the "Term Loans") to the Borrower on the
Closing Date, upon the satisfaction of the conditions precedent set forth in
Article 10, in an amount equal to such Lender's Pro Rata Share of the Term Loan
Commitments or Eight Million Dollars ($8,000,000). The Term Loans shall
initially be Base Rate Term Loans. The pro rata portion of the outstanding Term
Loan allocated to the Borrowers as of the Closing Date as follows: Two Million
Eight Hundred Forty Thousand Dollars ($2,840,000) to MKR; Two Million Five
Hundred Fifty Thousand Dollars ($2,550,000) to Motor Coils; Two Million Ten
Thousand Dollars ($2,010,000) to Touchstone; and Six Hundred Thousand Dollars
($600,000) to MKES.
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(b) Making of Term Loans. Each Lender shall make the amount of
such Lender's Term Loan available to the Agent in same day funds, to such
account of the Agent as the Agent may designate, not later than 10:00 a.m.
(Chicago time) on the Closing Date. After the Agent's receipt of the proceeds of
such Term Loans, and upon satisfaction of the conditions precedent set forth in
Article 10, the Agent shall make the proceeds of such Term Loans available to
the Borrowers on the Closing Date by transferring same day funds equal to the
proceeds of such Term Loans received by the Agent to an account of the Borrowers
designated in writing by the Borrowers or as the Borrowers shall otherwise
instruct in writing.
(c) Term Loan. Each Borrower receiving part of the Term Loan
shall execute and deliver to the Agent, on behalf of the Lenders, on the Closing
Date, a promissory note, substantially in the form of Exhibit H attached hereto
and made a part hereof (such promissory notes, together with any new notes
issued pursuant to Section 14.9 upon the assignment of the Agent's duties
hereunder, being hereinafter referred to collectively as the "Term Loan Notes"
and each of such promissory notes being hereinafter referred to individually as
a "Term Loan Note"), to evidence Lenders' Term Loans, in the original principal
amount equal to the Eight Million Dollar ($8,000,000) Term Loan Commitment of
the Lenders being loaned to such Borrowers and with other appropriate
insertions. The principal amount of the Term Loan Notes delivered to the Agent
(on behalf of the Lenders) shall be dated the Closing Date and the Term Loan
shall mature in thirty-six (36) monthly installments. Each of the first
thirty-five (35) installments of principal shall be payable in an amount equal
to $133,334 (and paid ratably by the Borrowers receiving Term Loans) and shall
be payable on the first day of each month, commencing on October 1, 1996 and
ending on August 1, 1999, and the final installment of principal on the Term
Loan shall be payable in an amount equal to $3,333,310 or, if different, the
then remaining principal balance of the Term Loan, and shall be payable on the
Stated Termination Date. Each such installment shall be payable by each Borrower
receiving part of the Term Loan in an amount proportionate to the percentage of
the entire Term Loan received by all The Borrowers on the Closing Date to the
Agent for the account of the Lenders.
(d) Notation and Endorsement. The Agent shall record on its
books the principal amount of the Term Loans owing to each Lender from time to
time. In addition, each Lender is authorized, at such Lender's option, to note
the date and amount of each payment or prepayment of principal of such Lender's
Term Loans in its books and records, such books and records constituting
rebuttably presumptive evidence, absent manifest error, of the accuracy of the
information contained therein. Prior to the transfer of a Term Loan, the
applicable Lender shall evidence the outstanding principal balance of the Term
Loan evidenced thereby to the new Lender assuming such Term Loan. Failure by
such Lender to
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make such notation shall not affect the obligations of the Borrowers under the
Term Loan Notes or any of the other Loan Documents.
2.3 Letters of Credit.
(a) Agreement to Cause Issuance. Subject to the terms and
conditions of this Agreement, and in reliance upon the representations and
warranties of the Borrowers herein set forth, the Agent agrees to take
reasonable steps to cause to be issued for the account of each Borrower and to
provide credit support or other enhancement in connection with one or more
stand-by or documentary letters of credit (each such letter of credit, a "Letter
of Credit" and such letters of credit, collectively, the "Letters of Credit") in
accordance with this Section 2.3 from time to time during the term of this
Agreement.
(b) Amounts; Outside Expiration Date. The Agent shall not have
any obligation to take steps to cause to be issued any Letter of Credit at any
time: (1) if the maximum undrawn amount of the requested Letter of Credit is
greater than the Unused Letter of Credit Subfacility at such time; (2) if the
maximum undrawn amount of the requested Letter of Credit and all commissions,
fees, and charges due from the applicable Borrower in connection with the
opening thereof exceed the Availability of that Borrower at such time; or (3)
which has an expiration date later than the Stated Termination Date.
(c) Other Conditions. In addition to being subject to the
satisfaction of the applicable conditions precedent contained in Article 10, the
obligation of the Agent to take reasonable steps to cause to be issued any
Letter of Credit is subject to the following conditions precedent having been
satisfied in a manner satisfactory to the Agent:
(1) The applicable Borrower shall have delivered to the
proposed issuer of such Letter of Credit, at such times and in such manner as
such proposed issuer may prescribe, an application in form and substance
satisfactory to such proposed issuer for the issuance of the Letter of Credit
and such other documents as may be required pursuant to the terms thereof, the
form and terms of the proposed Letter of Credit shall be satisfactory to the
Agent and such proposed issuer; and
(2) as of the date of issuance, no order of any court,
arbitrator or Governmental Authority shall purport by its terms to enjoin or
restrain money center banks generally from issuing letters of credit of the type
and in the amount of the proposed Letter of Credit, and no law, rule or
regulation applicable to money center banks generally and no request or
directive (whether or not having the force of law) from any Governmental
Authority
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with jurisdiction over money center banks generally shall prohibit, or request
that the proposed issuer of such Letter of Credit refrain from, the issuance of
letters of credit generally or the issuance of such Letters of Credit.
(d) Issuance of Letters of Credit.
(1) Request for Issuance. MKR shall give the Agent three (3)
Business Days' prior written notice, containing the original signature of an
authorized officer of the applicable Borrower of such Borrower's request for the
issuance of a Letter of Credit. Such notice shall be irrevocable and shall
specify the original face amount of the Letter of Credit requested, the
effective date (which date shall be a Business Day) of issuance of such
requested Letter of Credit, whether such Letter of Credit may be drawn in a
single or in partial draws, the date on which such requested Letter of Credit is
to expire (which date shall be a Business Day), the purpose for which such
Letter of Credit is to be issued (such Letter of Credit shall not be issued for
the purpose of backing the issuance of performance bonds or be issued in lieu of
performance bonds), and the beneficiary of the requested Letter of Credit. MKR
shall attach to such notice the proposed form of the Letter of Credit that the
Agent is requested to cause to be issued.
(2) Responsibilities of the Agent; Issuance. The Agent shall
determine, as of the Business Day immediately preceding the requested effective
date of issuance of the Letter of Credit set forth in the notice from MKR
pursuant to Section 2.3(d)(1), (i) the amount of the applicable Unused Letter of
Credit Subfacility and (ii) the Availability of the designated Borrower as of
such date. If (i) the undrawn amount of the requested Letter of Credit is not
greater than the applicable Unused Letter of Credit Subfacility and (ii) the
issuance of such requested Letter of Credit and all commissions, fees, and
charges due from the designated Borrower in connection with the opening thereof
would not exceed the Availability of that Borrower, the Agent shall take
reasonable steps to cause such issuer to issue the requested Letter of Credit on
such requested effective date of issuance.
(3) Notice of Issuance. Promptly after the issuance of any
Letter of Credit, the Agent shall give notice to each Lender of the issuance of
such Letter of Credit.
(4) No Extensions or Amendment. The Agent shall not be
obligated to cause any Letter of Credit to be extended or amended unless the
requirements of this Section 2.3(d) are met as though a new Letter of Credit
were being requested and issued. With respect to any Letter of Credit which
contains any "evergreen" or automatic renewal provision, each Lender shall be
deemed to have consented to any such extension or renewal unless any such Lender
shall have
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provided to the Agent, not less than 30 days prior to the last date on which the
applicable issuer can in accordance with the terms of the applicable Letter of
Credit decline to extend or renew such Letter of Credit, written notice that it
declines to consent to any such extension or renewal, provided, that if all of
the requirements of this Section 2.3 are met and no Event or Event of Default
exists, no Lender shall decline to consent to any such extension or renewal.
(e) Payments Pursuant to Letters of Credit.
(1) Payment of Letter of Credit Obligations. Each Borrower
agrees to reimburse the issuer for any draw under any Letter of Credit issued
for its benefit immediately upon demand, and to pay the issuer of the Letter of
Credit the amount of all other obligations and other amounts payable to such
issuer under or in connection with any Letter of Credit immediately when due,
irrespective of any claim, setoff, defense or other right which any Borrower may
have at any time against such issuer or any other Person.
(2) Revolving Loans to Satisfy Reimbursement Obligations. In
the event that the issuer of any Letter of Credit honors a draw under such
Letter of Credit and the Borrowers shall not have repaid such amount to the
issuer of such Letter of Credit pursuant to Section 2.3(e)(1), the Agent shall,
upon receiving notice of such failure, notify each Lender of such failure, and
each Lender shall unconditionally pay to the Agent, for the account of such
issuer, as and when provided hereinbelow, an amount equal to such Lender's Pro
Rata Share of the amount of such payment in Dollars and in same day funds. If
the Agent so notifies the Lenders prior to noon (Chicago time) on any Business
Day, each Lender shall make available to the Agent the amount of such payment,
as provided in the immediately preceding sentence, on such Business Day. Such
amounts paid by the Lenders to the Agent shall constitute Revolving Loans which
shall be deemed to have been requested by MKR pursuant to Section 2.1 as set
forth in Section 4.4.
(f) Participations.
(1) Purchase of Participations. Immediately upon issuance of
any Letter of Credit in accordance with Section 2.3(d), each Lender shall be
deemed to have irrevocably and unconditionally purchased and received without
recourse or warranty, an undivided interest and participation in the credit
support or enhancement provided through the Agent to such issuer in connection
with the issuance of such Letter of Credit, equal to such Lender's Pro Rata
Share of the face amount of such Letter of Credit (including, without
limitation, all obligations of the applicable Borrower with
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respect thereto, and any security therefor or guaranty pertaining thereto).
(2) Sharing of Reimbursement Obligation Payments. Whenever the
Agent receives a payment from any Borrower on account of reimbursement
obligations in respect of a Letter of Credit as to which the Agent has
previously received for the account of the issuer thereof payment from a Lender
pursuant to Section 2.3(e)(2), the Agent shall promptly pay to such Lender such
Lender's Pro Rata Share of such payment from such Borrower in Dollars. Each such
payment shall be made by the Agent on the Business Day on which the Agent
receives immediately available funds paid to such Person pursuant to the
immediately preceding sentence, if received prior to noon (Chicago time) on such
Business Day and otherwise on the next succeeding Business Day.
(3) Documentation. Upon the request of any Lender, the Agent
shall furnish to such Lender copies of any Letter of Credit, reimbursement
agreements executed in connection therewith, application for any Letter of
Credit and credit support or enhancement provided through the Agent in
connection with the issuance of any Letter of Credit, and such other
documentation as may reasonably be requested by such Lender.
(4) Obligations Irrevocable. The obligations of each Lender to
make payments to the Agent with respect to any Letter of Credit or with respect
to any credit support or enhancement provided through the Agent with respect to
a Letter of Credit, and the obligations of each Borrower to make payments to the
Agent, for the account of the Lenders, shall be irrevocable, not subject to any
qualification or exception whatsoever, including, without limitation, any of the
following circumstances:
(i) any lack of validity or enforceability of this
Agreement or any of the other Loan Documents;
(ii) the existence of any claim, setoff, defense or
other right which any Borrower may have at any time against a beneficiary named
in a Letter of Credit or any transferee of any Letter of Credit (or any Person
for whom any such transferee may be acting), any Lender, the Agent, the issuer
of such Letter of Credit, or any other Person, whether in connection with this
Agreement, any Letter of Credit, the transactions contemplated herein or any
unrelated transactions (including any underlying transactions between such
Borrower or any other Person and the beneficiary named in any Letter of Credit);
(iii) any draft, certificate or any other document
presented under the Letter of Credit proving to be forged, fraudulent, invalid
or insufficient in any respect or any statement therein being untrue or
inaccurate in any respect;
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(iv) the surrender or impairment of any security for
the performance or observance of any of the terms of any of the Loan Documents;
or
(v) the occurrence of any Default or Event of
Default.
(g) Recovery or Avoidance of Payments. In the event any
payment by or on behalf of any Borrower received by the Agent with respect to
any Letter of Credit (or any guaranty by such Borrower or reimbursement
obligation of such Borrower relating thereto) and distributed by the Agent to
the Lenders on account of their respective participations therein is thereafter
set aside, avoided or recovered from the Agent in connection with any
receivership, liquidation or bankruptcy proceeding, the Lenders shall, upon
demand by the Agent, pay to the Agent their respective Pro Rata Shares of such
amount set aside, avoided or recovered, together with interest at the rate
required to be paid by the Agent upon the amount required to be repaid by it.
(h) Compensation for Letters of Credit.
(1) Letter of Credit Fee. Each Borrower agrees to pay to the
Agent with respect to each Letter of Credit issued for the benefit of such
Borrower, for the account of the Lenders, the Letter of Credit Fee specified in,
and in accordance with the terms of, Section 3.6.
(2) Issuer Fees and Charges. Each Borrower shall pay to the
issuer of any Letter of Credit issued for the benefit of such Borrower, or to
the Agent, for the account of the issuer of any such Letter of Credit, solely
for such issuer's account, such fees and other charges as are charged by such
issuer for letters of credit issued by it, including, without limitation, its
standard fees for issuing, administering, amending, renewing, paying and
canceling letters of credit and all other fees associated with issuing or
servicing letters of credit, as and when assessed.
(i) Indemnification; Exoneration.
(1) Indemnification. In addition to amounts payable as
elsewhere provided in this Section 2.3, each Borrower hereby agrees to protect,
indemnify, pay and save the Lenders and the Agent harmless from and against any
and all claims, demands, liabilities, damages, losses, costs, charges and
expenses (including reasonable attorneys' fees) which any Lender or the Agent
may incur or be subject to as a consequence, direct or indirect, of the issuance
of any Letter of Credit or the provision of any credit support or enhancement in
connection therewith.
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(2) Assumption of Risk by the Borrowers. As among the
Borrowers, the Lenders, and the Agent, the Borrowers assume all risks of the
acts and omissions of, or misuse of any of the Letters of Credit by, the
respective beneficiaries of such Letters of Credit. In furtherance and not in
limitation of the foregoing, subject to the provisions of the applications for
the issuance of Letters of Credit, the Lenders and the Agent shall not be
responsible for: (A) the form, validity, sufficiency, accuracy, genuineness or
legal effect of any document submitted by any Person in connection with the
application for and issuance of and presentation of drafts with respect to any
of the Letters of Credit, even if it should prove to be in any or all respects
invalid, insufficient, inaccurate, fraudulent or forged; (B) the validity or
sufficiency of any instrument transferring or assigning or purporting to
transfer or assign any Letter of Credit or the rights or benefits thereunder or
proceeds thereof, in whole or in part, which may prove to be invalid or
ineffective for any reason; (C) the failure of the beneficiary of any Letter of
Credit to comply duly with conditions required in order to draw upon such Letter
of Credit; (D) errors, omissions, interruptions, or delays in transmission or
delivery of any messages, by mail, cable, telegraph, telex or otherwise, whether
or not they be in cipher; (E) errors in interpretation of technical terms; (F)
any loss or delay in the transmission or otherwise of any document required in
order make a drawing under any Letter of Credit or of the proceeds thereof; (G)
the misapplication by the beneficiary of any Letter of Credit of the proceeds of
any drawing under such Letter of Credit; or (H) any consequences arising from
causes beyond the control of the Lenders or the Agent, including, without
limitation, any act or omission, whether rightful or wrongful, of any present or
future de jure or de facto Governmental Authority. None of the foregoing shall
affect, impair or prevent the vesting of any rights or powers of the Agent or
any Lender under this Section 2.3(i).
(3) Exoneration. In furtherance and extension, and not in
limitation, of the specific provisions set forth above, any action taken or
omitted by the Agent or any Lender under or in connection with any of the
Letters of Credit or any related certificates, if taken or omitted in the
absence of gross negligence or willful misconduct, shall not put the Agent or
any Lender under any resulting liability to any Borrower or relieve any Borrower
of any of its obligations hereunder to any such Person.
(j) Supporting Letter of Credit; Cash Collateral. If,
notwithstanding the provisions of Section 2.3(b) any Letter of credit is
outstanding upon the termination of this Agreement, then upon such termination
the Borrower for whose benefit such Letter of Credit was issued shall deposit
with the Agent, for the ratable benefit of the Lenders, with respect to each
Letter of Credit then outstanding, as the Majority Lenders, in their discretion
shall specify, either (A) a standby letter of credit (a "Supporting
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Letter of Credit") in form and substance satisfactory to the Agent, issued by an
issuer satisfactory to the Agent in an amount equal to the greatest amount for
which such Letter of Credit may be drawn, under which Supporting Letter of
Credit the Agent is entitled to draw amounts necessary to reimburse the Agent
and the Lenders for payments made by the Agent and the Lenders under such Letter
of Credit or under any credit support or enhancement provided through the Agent
with respect thereto, or (B) cash in amounts necessary to reimburse the Agent
and the Lenders for payments made by the Agent or the Lenders under such Letter
of Credit or under any credit support or enhancement provided through the Agent
with respect thereto. Such Supporting Letter of Credit or deposit of cash shall
be held by the Agent, for the ratable benefit of the Lenders, as security for,
and to provide for the payment of, the aggregate undrawn amount of such Letters
of Credit remaining outstanding.
ARTICLE 3
INTEREST AND FEES
3.1 Interest.
(a) Interest Rates. All outstanding Obligations shall bear
interest on the unpaid principal amount thereof (including, to the extent
permitted by law, on interest thereon not paid when due) from the date made
until paid in full in cash at a rate determined by reference to the Base Rate or
the LIBOR Rate and Sections 3.1(a)(i) or (ii), as applicable, but not to exceed
the Maximum Rate described in Section 3.3. Subject to the provisions of Section
3.2, any of the Loans may be converted into, or continued as, Base Rate Loans or
LIBOR Rate Loans in the manner provided in Section 3.2. If at any time Loans are
outstanding with respect to which notice has not been delivered to the Agent in
accordance with the terms of this Agreement specifying the basis for determining
the interest rate applicable thereto, then those Loans shall be Base Rate Loans
and shall bear interest at a rate determined by reference to the Base Rate until
notice to the contrary has been given to the Agent and such notice has become
effective. Except as otherwise provided herein, the outstanding Obligations
shall bear interest as follows:
(i) For all Term Loans which are not LIBOR Term
Loans, then at a fluctuating per annum rate equal to the Base Rate plus the
Applicable Term Base Rate Margin, and for all Revolving Loans and other
Obligations (other than Term Loans), which are not LIBOR Revolving Loans, then
at a fluctuating per annum rate equal to the Base Rate plus the Applicable
Revolver Base Rate Margin;
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(ii) For all Term Loans which are LIBOR Term Loans,
then at a per annum rate equal to the LIBOR Rate plus the Applicable Term LIBOR
Margin, and for all Revolving Loans which are LIBOR Revolving Loans, then at a
per annum rate equal to the LIBOR Rate plus the Applicable Revolver LIBOR
Margin; and
(iii) Without limiting any other restrictions herein
on the availability of LIBOR Rate Loans, the Borrowers shall not have the option
to elect, designate or convert any Loans into LIBOR Rate Loans on the Closing
Date (through October 31, 1996) or at any time when the Borrowers have not
established a Debt Ratio as of any Fiscal Quarter end thereafter in accordance
with Section 3.1(b) hereof of less than 1.50 to 1.0. If subsequent to electing
to convert to or continue any Loans as LIBOR Rate Loans, the terms of Section
3.1(b) would specify that the LIBOR Rate Loan option is not available, then
thereafter any Loans then bearing interest as LIBOR Rate Loans would be deemed
to have an applicable Revolver LIBOR Margin of 3.25% and an Applicable Term
LIBOR Margin of 3.50% (subject to further increases or decreases in accordance
with Section 3.1(b) hereof), and could not thereafter be continued as LIBOR Rate
Loans unless LIBOR Rate Loans would again be permitted in accordance with
Section 3.1(b) hereof at the time such LIBOR Rate Loans are to be continued.
Each change in the Base Rate shall be reflected in the interest rate described
in clause (i) above as of the effective date of such change. All interest
charges shall be computed on the basis of a year of 360 days and actual days
elapsed (which results in more interest being paid than if computed on the basis
of a 365-day year). Interest accrued on all Base Rate Loans and LIBOR Rate Loans
will be payable in arrears on the first day of each month hereafter and in
addition on the last day of each Interest Period with respect to LIBOR Rate
Loans.
(b) Reduction of Applicable Margin. The Applicable Revolver
Base Rate Margin, Applicable Revolver LIBOR Margin, Applicable Term LIBOR
Margin, and Applicable Term Base Rate Margin will be adjusted (up or down)
quarterly based on Borrowers' Debt Ratio (as calculated pursuant to Section 9.25
hereof) for the trailing twelve month period as calculated on its quarterly
consolidated financial statements in accordance with the following grids:
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Applicable Applicable
Revolver Revolver
Debt Ratio Base Rate LIBOR
- ---------- Margin Margin
------ ------
Greater than or 1.50% LIBOR Rate
equal to 1.50 to Loans are
1.0 not available
Less than 1.25% 3.00%
1.50 to 1.0 but
greater
than 1.0 to 1.0
Less than or 1.00% 2.75%
equal to
1.0 to 1.0 but
greater than
than 0.75 to 1.0
Less than or 0.75% 2.50%
equal to 0.75 to
1.0
Applicable Term Applicable Term
Debt Ratio Base Rate Margin LIBOR Margin
- ---------- ---------------- ------------
Greater than or equal to 1.50% LIBOR Rate
1.50 to 1.0 Loans are
not available
Less than 1.50 to 1.0 but 1.50% 3.25%
greater than 1.0 to 1.0
Less than or equal to 1.0 1.25% 3.00%
to 1.0 but greater than
0.75 to 1.0
Less than or equal to 1.00% 2.75%
0.75 to 1.0
As of the date hereof, the Applicable Revolver Base Rate Margin, and Applicable
Term Base Rate Margin shall be 1.50% and the option to request LIBOR Rate Loans
shall not be available. The Applicable Revolver Base Rate Margin, Applicable
Revolver LIBOR Margin, Applicable Term Base Rate Margin, and Applicable Term
LIBOR Margin, will first be subject to adjustment on the first Business Day of
the first calendar month following delivery of the financial statements for any
Fiscal Quarter End as required by Section 7.2(b) hereof for the Fiscal Quarter
ending September 30, 1996, and any such adjustment shall be effective as of the
first Business Day of
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the first calender month following the delivery of financial statements for each
Fiscal Quarter thereafter. If Borrower's annual audited financial statements (as
required by Section 7.2(a) hereof) for any Fiscal Year as subsequently delivered
demonstrate that the Debt Ratio calculated at the end of the final Fiscal
Quarter in such Fiscal Year was higher than was reported in the final quarterly
financial statement delivered during any such Fiscal Year, then the Borrowers
shall pay to the Agent for the ratable benefit of Lenders a make-up payment
within five (5) days after delivery of Borrowers' annual audited financial
statements. The make-up payment shall be equal to the interest that should have
been paid during such Fiscal Year and those actually paid. Notwithstanding the
foregoing, at any time during which the Borrowers have failed to deliver the
financial statements for any Fiscal Quarter End as required by Section 7.2(b)
hereof or the annual audited financial statements required by Section 7.2(a)
hereof, the Debt Coverage Ratio shall be deemed to be greater than or equal to
1.50 to 1.0 for purposes of this Section 3.1(b).
(c) Default Rate. If any Default or Event of Default occurs
and is continuing and the Majority Lenders in their discretion so elect, then,
while any such Default or Event of Default is outstanding, all of the
Obligations shall bear interest at the Default Rate applicable thereto.
3.2 Conversion and Continuation Elections. (a) The Borrowers
may, upon irrevocable written notice to the Agent in accordance with Subsection
3.2(b):
(i) elect, as of any Business Day, in the case of
Base Rate Loans to convert any such Loans (or any part thereof in an amount not
less than $5,000,000, or that is in an integral multiple of $1,000,000 in excess
thereof) into LIBOR Rate Loans; or
(ii) elect, as of the last day of the applicable
Interest Period, to continue any LIBOR Rate Loans having Interest Periods
expiring on such day (or any part thereof in an amount not less than $5,000,000,
or that is in an integral multiple of $1,000,000 in excess thereof);
provided, that if at any time the aggregate amount of LIBOR Rate Loans in
respect of any Borrowing is reduced, by payment, prepayment, or conversion of
part thereof to be less than $1,000,000, such LIBOR Rate Loans shall
automatically convert into Base Rate Loans, and on and after such date the right
of the Borrowers to continue such Loans as, and convert such Loans into, LIBOR
Rate Loans, as the case may be, shall terminate.
(b) MKR is hereby appointed as agent on behalf of the
Borrowers to accept all notices from the Agent and to give all Borrowing
notices, Notices of Conversion/Continuation and other
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notices as required under this Agreement. MKR shall deliver a Notice of
Conversion/Continuation in the form of Exhibit B hereto to be received by the
Agent not later than 11:00 a.m. (Chicago time) at least three (3) Business Days
in advance of the Conversion/Continuation Date, if the Loans are to be converted
into or continued as LIBOR Rate Loans and specifying:
(i) the proposed Conversion/Continuation Date;
(ii) the aggregate amount of Loans to be converted or renewed;
(iii) the type of Loans resulting from the proposed conversion
or continuation; and
(iv) the duration of the requested Interest Period; provided,
however, that the Borrowers may not select an Interest Period with respect to
any portion of the Term Loans which extends beyond an installment payment date
for the Term Loans unless, after giving effect to such election, the portion of
the Term Loans not subject to Interest Periods ending after such installment
payment date is equal to or greater than the principal due on such installment
payment date.
(c) If upon the expiration of any Interest Period applicable
to LIBOR Rate Loans, MKR has failed to select timely a new Interest Period to be
applicable to LIBOR Rate Loans or if any Default or Event of Default then exists
or LIBOR Rate Loans are not then available in accordance with Section 3.1(b)
hereof, then the applicable Borrower shall be deemed to have elected to convert
such LIBOR Rate Loans into Base Rate Loans effective as of the expiration date
of such Interest Period.
(d) The Agent will promptly notify each Lender of its receipt
of a Notice of Conversion/Continuation. All conversions and continuations shall
be made ratably according to the respective outstanding principal amounts of the
Loans with respect to which the notice was given held by each Lender.
(e) During the existence of a Default or Event of Default, or
if the calculation of Debt Coverage as of the Fiscal Quarter most recently ended
showed a ratio equal to or greater than 1.5 to 1.0, then in any such case the
Borrowers may not elect to have a Loan converted into or continued as a LIBOR
Rate Loan.
3.3 Maximum Interest Rate. In no event shall any interest rate provided
for hereunder exceed the maximum rate permissible for corporate borrowers under
applicable law for loans of the type provided for hereunder (the "Maximum
Rate"). If, in any month, any interest rate, absent such limitation, would have
exceeded the Maximum Rate, then the interest rate for that month shall be the
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Maximum Rate, and, if in future months, that interest rate would otherwise be
less than the Maximum Rate, then that interest rate shall remain at the Maximum
Rate until such time as the amount of interest paid hereunder equals the amount
of interest which would have been paid if the same had not been limited by the
Maximum Rate. In the event that, upon payment in full of the Obligations under
this Agreement, the total amount of interest paid or accrued under the terms of
this Agreement is less than the total amount of interest which would, but for
this Section 3.3, have been paid or accrued if the interest rates otherwise set
forth in this Agreement had at all times been in effect, then the Borrowers
shall, to the extent permitted by applicable law, pay the Agent, for the account
of the Lenders, an amount equal to the difference between (a) the lesser of (i)
the amount of interest which would have been charged if the Maximum Rate had, at
all times, been in effect or (ii) the amount of interest which would have
accrued had the interest rates otherwise set forth in this Agreement, at all
times, been in effect and (b) the amount of interest actually paid or accrued
under this Agreement. In the event that a court determines that the Agent and/or
any Lender has received interest and other charges hereunder in excess of the
Maximum Rate, such excess shall be deemed received on account of, and shall
automatically be applied to reduce, the Obligations other than interest, in the
inverse order of maturity, and if there are no Obligations outstanding, the
Agent and/or such Lender shall refund to the Borrowers such excess.
3.4 Fees. (a) The Borrowers, jointly and severally, hereby reconfirm
their agreement to pay any remaining fees to Agent and BABC in such amounts and
at such times as are set forth in the fee letter dated August 31, 1995 among the
Agent, individually, and BABC, individually, and the Borrowers.
(b) The Borrowers, jointly and severally, agree to pay to
Agent, on behalf of the Lenders, on the date hereof a closing fee (the "Closing
Fee") in immediately available funds in connection with the execution of this
Agreement of Five Hundred and Fifty Thousand Dollars ($550,000) for the ratable
benefit of the Lenders in accordance with their Pro Rata Shares; provided,
however, that if Borrowers present evidence to the reasonable satisfaction of
the Agent that they have at least $10,000,000 of Availability on the Closing
Date after giving effect to the Term Loan and Revolving Loans being made on the
Closing Date (and the payment of the Closing Fee) and the repurchase of the
Subordinated Debt and the other transactions contemplated hereby on the Closing
Date (including an assumption that all of the Borrowers' obligations including
trade payables are current and paid in full), then such Closing Fee shall only
be $500,000.
3.5 Unused Line Fee. The Borrowers, jointly and severally, agree to
pay, on the first day of each month and on the date all Obligations are paid in
full, to the Agent, for the ratable account
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of the Lenders, an unused line fee equal to one-quarter of one percent (.25%)
per annum on the average daily amount by which the Maximum Revolver Amount
exceeded the sum of the average daily outstanding amount of Revolving Loans and
the undrawn amount of all outstanding Letters of Credit, during the immediately
preceding month or shorter period if calculated on the date all Obligations are
paid in full. The unused line fee shall be computed on the basis of a 360-day
year for the actual number of days elapsed. All payments received by the Agent
on account of Accounts or as proceeds of other Collateral shall be deemed to be
credited to each Borrower's Loan Account one day following receipt for purposes
of calculating the unused line fee pursuant to this Section 3.5.
3.6 Letter of Credit Fee. Each Borrower agrees to pay to the Agent, for
the ratable account of the Lenders, for each Letter of Credit, a fee (the
"Letter of Credit Fee") equal to one and one-half percent (1.5%) per annum of
the undrawn amount of each Letter of Credit issued for such Borrower's account
at MKR's request, plus all out-of-pocket costs, fees and expenses incurred by
the Agent in connection with the application for, issuance of, or amendment to
any Letter of Credit, which costs, fees and expenses could include a "fronting
fee" required to be paid by the Agent to such issuer for the assumption of the
settlement risk in connection with the issuance of such Letter of Credit. The
Letter of Credit Fee shall be payable in arrears on the first day of each month
during which each such Letter of Credit remains outstanding. The Letter of
Credit Fee shall be computed on the basis of a 360-day year for the actual
number of days elapsed.
3.7 Audit Fees. Each Borrower agrees to pay to the Agent, solely for
its own account, all costs and fees reasonably incurred by the Agent's internal
auditors in connection with audits of that Borrower performed by such auditors
during the term of this Agreement; provided, that prior to the occurrence of an
Event of Default, the Agent shall not be entitled to reimbursement for any such
costs and fees incurred in connection with audits in excess of four (4) per
year. Each auditor of the Agent shall be billed at a rate of $300 per day plus
out-of-pocket expenses (including travel expenses) prior to the occurrence of a
Default or Event of Default, and thereafter at $500 per day plus out-of-pocket
expenses (including travel expenses).
ARTICLE 4
PAYMENTS AND PREPAYMENTS
4.1 Loans. Each Borrower shall repay the outstanding principal balance
of all the Loans received by it, plus all accrued but unpaid interest thereon,
on the Termination Date. The Borrowers may prepay Revolving Loans at any time,
and reborrow
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subject to the terms of this Agreement; provided, however, that with respect to
any LIBOR Rate Loans prepaid by any Borrower prior to the expiration date of the
Interest Period applicable thereto, such Borrower agrees to pay to the Lenders
the amounts described in Section 5.4. In addition, and without limiting the
generality of the foregoing, upon demand MKR and each Component Subsidiary shall
pay to the Agent, for the account of the Lenders, the amount, without
duplication, by which the sum of outstanding Revolving Loans, the aggregate
amount of Pending Revolving Loans, the aggregate undrawn amounts of all
outstanding Letters of Credit and the amount of all unpaid reimbursement
obligations with respect to the Letters of Credit exceeds MKR's Availability or
such Component Subsidiary's Availability, as applicable.
4.2 Termination of Facility; Prepayments. The Borrowers may terminate
this Agreement upon at least ten (10) Business Days' prior written notice from
MKR to the Agent and the Lenders, upon (a) the payment in full in cash of all
outstanding Loans, together with accrued interest thereon, and the cancellation
of all outstanding Letters of Credit, (b) the payment of the early termination
fee set forth below, (c) the payment in full in cash of all other Obligations
together with accrued interest thereon, and (d) with respect to any LIBOR Rate
Loans prepaid in connection with such termination prior to the expiration date
of the Interest Period applicable thereto, the payment of the amounts described
in Section 5.4. If this Agreement is terminated at any time prior to the Stated
Termination Date or any prepayments (excluding ordinary course repayments of the
Revolving Loan) are made for any reason other than pursuant to Section 4.10
hereof, whether pursuant to this Section or pursuant to Section 11.2, the
Borrowers shall pay to the Agent, for the account of the Lenders, an early
termination fee determined in accordance with the following table:
Period during which Early
early termination Termination
occurs Fee
------ ---
Prior to August 31, 2.0% of the Commitments
1997 being terminated or paid.
After August 31, 1997 1.0% of the Commitments
but on or prior to the being terminated or
Stated Termination Date paid.
Notwithstanding the foregoing, (i) such early termination fee shall be limited
to $500,000 if the Obligations are prepaid in full with the proceeds of a Sale
during the period commencing one hundred eighty-one (181) days following the
Closing Date, and (ii) no early termination fee shall be due and payable if the
Obligations are
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prepaid in full with proceeds of a Sale during the period commencing one hundred
eighty-one (181) days following the Closing Date and BABC or another Affiliate
of Bank of America Corporation provides financing of at least $25,000,000 to the
purchaser to effectuate such Sale. "Sale" shall mean the merger or consolidation
of MKR with another Person, or the sale of all or substantially all the assets
of MKR, in each instance in an arm's length transaction with a Person that is
not an Affiliate of MKR. In addition, BABC's ratable portion of any early
termination fee payable pursuant to this Section 4.2 shall not be required to be
paid in the event that all the Obligations hereunder are prepaid in full by the
Borrowers pursuant to a refinancing of the Obligations in which the Agent or
Bank of America or another affiliate of Bank of America shall (1) act as sole
agent for the new lenders and (2) receive individually, in connection with such
refinancing and on or prior to the closing thereof, closing fees in an aggregate
amount at least equal to BABC's ratable portion of such early termination fee
hereunder.
4.3 Payments by the Borrowers. (a) All payments to be made by any
Borrower shall be made without set-off, recoupment or counterclaim. Except as
otherwise expressly provided herein, all payments by the Borrowers shall be made
to the Agent for the account of the Lenders at the Agent's address set forth in
Section 15.8, and shall be made in Dollars and in immediately available funds,
no later than noon (Chicago time) on the dates specified herein. All proceeds of
Accounts and other Collateral received in any Payment Account shall be deemed to
have been received one Business Day after receipt of good funds by the Agent
with respect thereto, and any payment received by the Agent later than 12:30
p.m. (Chicago time) shall be deemed to have been received on the following
Business Day and any applicable interest or fee shall continue to accrue.
(b) Subject to the provisions set forth in the definition of
"Interest Period" herein, whenever any payment is due on a day other than a
Business Day, such payment shall be made on the following Business Day, and such
extension of time shall in such case be included in the computation of interest
or fees, as the case may be.
(c) Unless the Agent receives notice from MKR prior to the
date on which any payment is due to the Lenders that the applicable Borrower
will not make such payment in full as and when required, the Agent may assume
that such Borrower has made such payment in full to the Agent on such date in
immediately available funds and the Agent may (but shall not be so required), in
reliance upon such assumption, distribute to each Lender on such due date an
amount equal to the amount then due such Lender. If and to the extent the
applicable Borrower has not made such payment in full to the Agent, each Lender
shall repay to the Agent on demand such amount distributed to such Lender,
together with interest thereon
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at the Federal Funds Rate for each day from the date such amount is distributed
to such Lender until the date repaid.
4.4 Payments as Revolving Loans. All payments of interest,
reimbursement obligations in connection with Term Loans, Letters of Credit,
fees, premiums and other sums payable hereunder, including all reimbursement for
expenses pursuant to Section 15.7, may, at the option of the Agent, in its sole
discretion, subject only to the terms of this Section 4.4, be paid from the
proceeds of Revolving Loans made hereunder, whether made following a request by
MKR pursuant to Section 2.1 or a deemed request as provided in this Section 4.4.
Each Borrower hereby irrevocably authorizes the Agent to charge its Loan Account
for the purpose of paying interest, reimbursement obligations in connection with
Letters of Credit, fees, premiums and other sums payable hereunder, including
reimbursing expenses pursuant to Section 15.7, and agrees that all such amounts
charged shall constitute Revolving Loans (including BABC Loans and Agent
Advances) and that all such Revolving Loans so made shall be deemed to have been
requested by Borrower pursuant to Section 2.1.
4.5 Apportionment, Application and Reversal of Payments. Aggregate
principal and interest payments shall be apportioned ratably among the Lenders
(according to the unpaid principal balance of the Loans to which such payments
relate held by each Lender) and payments of the fees shall, as applicable, be
apportioned ratably among the Lenders. All payments shall be remitted to the
Agent and all such payments not relating to principal or interest of specific
Loans, or not constituting payment of specific fees, and all proceeds of
Accounts or other Collateral received by the Agent, shall be applied, ratably,
subject to the provisions of this Agreement, first, to pay any fees, or expense
reimbursements then due to the Agent from any Borrower; second, to pay any fees
or expense reimbursements then due to the Lenders from the Borrowers; third, to
pay interest due in respect of all Loans, including BABC Loans and Agent
Advances; fourth, to pay or prepay principal of the BABC Loans and Agent
Advances; fifth, to pay or prepay principal of the Term Loans in inverse order
of maturity; sixth, to pay or prepay principal of the Revolving Loans (other
than BABC Loans and Agent Advances) and unpaid reimbursement obligations in
respect of Letters of Credit, and seventh; to the payment of any other
Obligation due to the Agent or any Lender by any Borrower. Notwithstanding
anything to the contrary contained in this Agreement, unless so directed by the
MKR, or unless an Event of Default is outstanding, neither the Agent nor any
Lender shall apply any payments which it receives to any LIBOR Rate Loan, except
(a) on the expiration date of the Interest Period applicable to any such LIBOR
Rate Loan, or (b) in the event, and only to the extent, that there are no
outstanding Base Rate Revolving Loans or Base Rate Term Loans. The Agent shall
promptly distribute to each Lender, pursuant to the applicable wire
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transfer instructions received from each Lender in writing, such funds as it may
be entitled to receive, subject to a Settlement delay as provided for in Section
2.1(j). The Agent and the Lenders shall have the continuing and exclusive right
to apply and reverse and reapply any and all such proceeds and payments to any
portion of the Obligations.
4.6 Indemnity for Returned Payments. If, after receipt of any payment
of, or proceeds applied to the payment of, all or any part of the Obligations,
the Agent or any Lender is for any reason compelled to surrender such payment or
proceeds to any Person, because such payment or application of proceeds is
invalidated, declared fraudulent, set aside, determined to be void or voidable
as a preference, impermissible setoff, or a diversion of trust funds, or for any
other reason, then the Obligations or part thereof intended to be satisfied
shall be revived and continue and this Agreement shall continue in full force as
if such payment or proceeds had not been received by the Agent or such Lender,
and the Borrowers shall be liable to pay to the Agent, and hereby do indemnify
the Agent and the Lenders and hold the Agent and the Lenders harmless for, the
amount of such payment or proceeds surrendered. The provisions of this Section
4.6 shall be and remain effective notwithstanding any contrary action which may
have been taken by the Agent or any Lender in reliance upon such payment or
application of proceeds, and any such contrary action so taken shall be without
prejudice to the Agent's and the Lenders' rights under this Agreement and shall
be deemed to have been conditioned upon such payment or application of proceeds
having become final and irrevocable. The provisions of this Section 4.6 shall
survive the termination of this Agreement.
4.7 Agent's and Lenders' Books and Records; Monthly Statements. Each
Borrower agrees that the Agent's and each Lender's books and records showing the
Obligations and the transactions pursuant to this Agreement and the other Loan
Documents shall be admissible in any action or proceeding arising therefrom, and
shall constitute rebuttably presumptive proof thereof, irrespective of whether
any Obligation is also evidenced by a promissory note or other instrument. The
Agent will provide to MKR a monthly statement of Loans, payments, and other
transactions pursuant to this Agreement. Such statement shall be deemed correct,
accurate, and binding on the Borrowers and an account stated (except for
reversals and reapplications of payments made as provided in Section 4.5 and
corrections of errors discovered by the Agent), unless MKR notifies the Agent in
writing to the contrary within thirty (30) days after such statement is
rendered. In the event a timely written notice of objections is given MKR, only
the items to which exception is expressly made will be considered to be disputed
by the Borrowers.
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4.8 Repayment of the Term Loans. The Borrowers agree to repay the
principal of the Term Loans to the Agent, for the account of the Lenders, in
accordance with the terms of Section 2.2(c) hereof.
4.9 Voluntary Prepayments of the Term Loans. The Borrowers with
outstanding Term Loans may prepay the principal of the Term Loans in whole but
not in part, at any time upon (a) at least five (5) Business Days' prior written
notice to the Agent and the Lenders, and (b) payment of, with respect to any
LIBOR Term Loans to be prepaid prior to the expiration date of the Interest
Period applicable thereto, the amounts described in Section 5.4 hereof, and (c)
payment of the termination fee under Section 4.2 hereof. All voluntary
prepayments of the principal of the Term Loans shall be accompanied by the
payment of all accrued but unpaid interest on the Term Loans to the date of
prepayment.
4.10 Mandatory Prepayments of the Term Loans. (a) The Borrowers with
outstanding Term Loans shall prepay the entire unpaid principal balance of the
Term Loans, and all accrued but unpaid interest thereon, upon the termination of
this Agreement for any reason.
(b) Any prepayment under this Section 4.10(b) of less than all
of the outstanding principal amount of the Term Loans shall be applied, based
upon the Pro Rata Shares of the Lenders, to the installments of principal of the
Term Loans in the inverse order of maturity. In connection with any such
prepayment, if any LIBOR Term Loans are prepaid prior to the expiration date of
the Interest Period applicable thereto, the Borrower shall pay to the Lenders
the amounts described in Section 5.4. The Borrowers with outstanding Term Loans
hereby agree to prepay the Term Loans in the amounts as follows:
(i) Fifty percent (50%) of the Borrowers' Excess Cash
Flow during the immediately preceding Fiscal Year ending on the last
day of December, 1996 and the last day of each Fiscal Year thereafter,
determined based upon the annual audited financial statements delivered
in accordance with Section 7.2(a) hereof and in any event payable no
later than March 31st each year for the immediately preceding Fiscal
Year; and
(ii) The proceeds of the sale or other disposition by
any Borrower of any Equipment (which proceeds are not used to finance
the purchase by such Borrower of replacement Equipment pursuant to
Sections 9.9 and 6.11 hereof) less the reasonable expenses of such
sale.
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ARTICLE 5
TAXES, YIELD PROTECTION AND ILLEGALITY
5.1 Taxes. (a) Any and all payments by any Borrower to each Lender or
the Agent under this Agreement and any other Loan Document shall be made free
and clear of, and without deduction or withholding for any Taxes. In addition,
each Borrower shall pay all Other Taxes.
(b) Each Borrower agrees to indemnify and hold harmless each
Lender and the Agent for the full amount of Taxes or Other Taxes (including any
Taxes or Other Taxes imposed by any jurisdiction on amounts payable under this
Section) paid by the Lender or the Agent and any liability (including penalties,
interest, additions to tax and expenses) arising therefrom or with respect
thereto, whether or not such Taxes or Other Taxes were correctly or legally
asserted. Payment under this indemnification shall be made within 30 days after
the date the Lender or the Agent makes written demand therefor; provided,
however, that should such Lender or Agent ever conclude that it has received in
cash any refund solely and indisputably attributable to such tax paid with
monies received from any Borrower, then such Lender or Agent, to the extent it
is actually aware of such refund and the existence of this provision, shall turn
over such refund (net of expenses with respect thereto) to MK Rail.
(c) If any Borrower shall be required by law to deduct or
withhold any Taxes or Other Taxes from or in respect of any sum payable
hereunder to any Lender or the Agent, then:
(i) the sum payable shall be increased as necessary
so that after making all required deductions and withholdings (including
deductions and withholdings applicable to additional sums payable under this
Section) such Lender or the Agent, as the case may be, receives an amount equal
to the sum it would have received had no such deductions or withholdings been
made;
(ii) each Borrower shall make such deductions and
withholdings;
(iii) each Borrower shall pay the full amount
deducted or withheld to the relevant taxing authority or other authority in
accordance with applicable law; and
(iv) each Borrower shall also pay to each Lender or
the Agent for the account of each Lender, at the time interest is paid, all
additional amounts which the respective Lender specifies as necessary to
preserve the after-tax yield such Lender would have received if such Taxes or
Other Taxes had not been imposed.
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(d) Within 30 days after the date of any payment by each
Borrower of Taxes or Other Taxes, such Borrower shall furnish the Agent the
original or a certified copy of a receipt evidencing payment thereof, or other
evidence of payment satisfactory to the Agent.
(e) If any Borrower is required to pay additional amounts to
any Lender or the Agent pursuant to subsection (c) of this Section, then such
Lender shall use reasonable efforts (consistent with legal and regulatory
restrictions) to change the jurisdiction of its Lending Office so as to
eliminate any such additional payment by any Borrower which may thereafter
accrue, if such change in the judgment of such Lender is not otherwise
disadvantageous to such Lender.
5.2 Illegality. (a) If any Lender determines that the application of
any Requirement of Law, or any change in any Requirement of Law, or in the
interpretation or administration of any Requirement of Law, has made it
unlawful, or that any central bank or other Governmental Authority has asserted
that it is unlawful, for any Lender or its applicable Lending Office to make
LIBOR Rate Loans, then, on notice thereof by such Lender to the Borrowers
through the Agent, any obligation of that Lender to make LIBOR Rate Loans shall
be suspended until the Lender notifies the Agent and the Borrowers that the
circumstances giving rise to such determination no longer exist.
(b) If a Lender determines that it is unlawful to maintain any
LIBOR Rate Loan, the Borrowers shall, upon its receipt of notice of such fact
and demand from such Lender (with a copy to the Agent), prepay in full such
LIBOR Rate Loans of that Lender then outstanding, together with interest accrued
thereon and amounts required under Section 5.4, either on the last day of the
Interest Period thereof, if the Lender may lawfully continue to maintain such
LIBOR Rate Loans to such day, or immediately, if the Lender may not lawfully
continue to maintain such LIBOR Rate Loan. If the Borrowers are required to so
prepay any LIBOR Rate Loan, then concurrently with such prepayment, the
Borrowers shall borrow from the affected Lender, in the amount of such
repayment, a Base Rate Revolving Loan.
5.3 Increased Costs and Reduction of Return. (a) If any Lender
determines that, due to either (i) the application of or any change in the
interpretation of any Requirement of Law or (ii) the compliance by that Lender
with any guideline or request from any central bank or other Governmental
Authority (whether or not having the force of law), there shall be any increase
in the cost to such Lender of agreeing to make or making, funding or maintaining
any LIBOR Rate Loans, then the Borrowers shall be liable for, and shall from
time to time, upon demand (with a copy of such demand to be sent to the Agent),
pay to the Agent for the account of such
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Lender, additional amounts as are sufficient to compensate such Lender for such
increased costs.
(b) If any Lender shall have determined that (i) the
application of any Capital Adequacy Regulation, (ii) any change in any Capital
Adequacy Regulation, (iii) any change in the interpretation or administration of
any Capital Adequacy Regulation by any central bank or other Governmental
Authority charged with the interpretation or administration thereof, or (iv)
compliance by the Lender or any corporation controlling the Lender with any
Capital Adequacy Regulation, affects or would affect the amount of capital
required or expected to be maintained by the Lender or any corporation
controlling the Lender and (taking into consideration such Lender's or such
corporation's policies with respect to capital adequacy and such Lender's
desired return on capital) determines that the amount of such capital is
increased as a consequence of its Commitment, loans, credits or obligations
under this Agreement, then, upon demand of such Lender to the Borrowers through
the Agent, the Borrowers shall pay to that Lender, from time to time as
specified by such Lender, additional amounts sufficient to compensate such
Lender for such increase.
5.4 Funding Losses. The Borrowers shall reimburse each Lender and hold
each Lender harmless from any loss or expense which any Lender may sustain or
incur as a consequence of:
(a) the failure of any Borrower to make on a timely basis any
payment of principal of any LIBOR Rate Loan;
(b) the failure of any Borrower to borrow, continue or convert
a Loan after MKR has given (or is deemed to have given) a Notice of Borrowing or
a Notice of Conversion/ Continuation;
(c) the prepayment or other payment (including after
acceleration thereof) of an LIBOR Rate Loan on a day that is not the last day of
the relevant Interest Period;
including any such loss or expense arising from the liquidation or reemployment
of funds obtained by it to maintain its LIBOR Rate Loans or from fees payable to
terminate the deposits from which such funds were obtained.
5.5 Inability to Determine Rates. If the Agent determines that for any
reason adequate and reasonable means do not exist for determining the LIBOR Rate
for any requested Interest Period with respect to a proposed LIBOR Rate Loan, or
that the LIBOR Rate for any requested Interest Period with respect to a proposed
LIBOR Rate Loan does not adequately and fairly reflect the cost to the Lenders
of funding such Loan, the Agent will promptly so notify the Borrowers and each
Lender. Thereafter, the obligation of the Lenders to make or maintain LIBOR Rate
Loans hereunder shall be
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suspended until the Agent revokes such notice in writing. Upon receipt of such
notice, MKR may revoke any Notice of Borrowing or Notice of
Conversion/Continuation then submitted by it. If MKR does not revoke such
Notice, the Lenders shall make, convert or continue the Loans, as proposed by
MKR, in the amount specified in the applicable notice submitted by MKR, but such
Loans shall be made, converted or continued as Base Rate Loans instead of LIBOR
Rate Loans.
5.6 Certificates of Lenders. Any Lender claiming reimbursement or
compensation under this Article 5 shall deliver to MKR (with a copy to the
Agent) a certificate setting forth in reasonable detail the amount payable to
the Lender hereunder and such certificate shall be conclusive and binding on the
Borrowers in the absence of manifest error.
5.7 Survival. The agreements and obligations of the Borrowers in this
Article 5 shall survive the payment of all other Obligations.
ARTICLE 6
COLLATERAL
6.1 Grant of Security Interest. (a) As security for all present and
future Obligations, each Borrower hereby grants to the Agent, for itself and for
the ratable benefit of the Lenders, a continuing security interest in, lien on,
and right of set-off against, all of the following property of such Borrower,
whether now owned or existing or hereafter acquired or arising, regardless of
where located:
(i) all "accounts" as such term is defined in the
UCC, now or hereafter acquired by any Borrower, and in any event including,
without limitation, all Accounts;
(ii) all "inventory" as such term is defined in the
UCC, now or hereafter acquired by any Borrower, and in any event including,
without limitation, all Inventory;
(iii) all contract rights, letters of credit, chattel
paper, instruments, notes, documents, and documents of title as such terms are
defined in the UCC and all Assigned Contracts;
(iv) all "general intangibles" as such term is
defined in the UCC, now or hereafter acquired by any Borrower, and in any event
including, without limitation, all General Intangibles;
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(v) all "equipment" as such term is defined in the
UCC, now or hereafter acquired by any Borrower, and in any event including,
without limitation, all Equipment;
(vi) all money, securities and other property of any
kind of each Borrower in the possession or under the control of the Agent or any
Lender, any assignee of or participant in the Obligations, or a bailee of any
such party or such party's affiliates;
(vii) all deposit accounts, credits and balances with
and other claims against the Agent or any Lender or any of its affiliates or any
other financial institution in which such Borrower maintains deposits;
(viii) all books, records and other property related
to or referring to any of the foregoing, including, without limitation, books,
records, account ledgers, data processing records, computer software and other
property and General Intangibles at any time evidencing or relating to any of
the foregoing; and
(ix) all accessions to, substitutions for and
replacements, products and proceeds of any of the foregoing, including, but not
limited to, proceeds of any insurance policies, claims against third parties,
and condemnation or requisition payments with respect to all or any of the
foregoing.
All of the foregoing, together with the Real Estate covered by the Mortgage(s),
and all other property of each Borrower in which the Agent or any Lender may at
any time be granted a Lien, is herein collectively referred to as the
"Collateral."
(b) As security for all Obligations, each Borrower shall
simultaneously herewith execute and deliver to the Agent the Mortgage(s) to
grant to the Agent, for the ratable benefit of the Lenders, a continuing
mortgage lien on such Borrower's Real Estate.
(c) All of the Obligations shall be secured by all of the
Collateral. The Agent may, subject to the provisions of Articles 13 and 14, in
its sole discretion, (i) exchange, waive, or release any of the Collateral, (ii)
apply Collateral and direct the order or manner of sale thereof as the Agent may
determine, and (iii) settle, compromise, collect, or otherwise liquidate any
Collateral in any manner, all without affecting the Obligations or the Agent's
or any Lender's right to take any other action with respect to any other
Collateral.
6.2 Perfection and Protection of Security Interest. (a) Each Borrower
shall, at its expense, perform all steps requested by the Agent at any time to
perfect, maintain, protect, and enforce
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the Agent's Liens, including, without limitation: (i) executing, delivering
and/or filing and recording of the Mortgage(s), the Patent and Trademark
Agreements and executing and filing financing or continuation statements, and
amendments thereof, in form and substance satisfactory to the Agent; (ii)
delivering to the Agent the originals of all instruments, documents, and chattel
paper, and all other Collateral of which the Agent determines it should have
physical possession in order to perfect and protect the Agent's security
interest therein, duly pledged, endorsed or assigned to the Agent without
restriction; (iii) delivering to the Agent warehouse receipts covering any
portion of the Collateral located in warehouses and for which warehouse receipts
are issued; (iv) when an Event of Default exists, transferring Inventory to
warehouses designated by the Agent; (v) placing notations on such Borrower's
books of account to disclose the Agent's security interest; (vii) delivering to
the Agent all letters of credit on which such Borrower is named beneficiary; and
(viii) taking such other steps as are deemed necessary or desirable by the Agent
to maintain and protect the Agent's Liens. To the extent permitted by applicable
law, the Agent may file, without any Borrower's signature, one or more financing
statements disclosing the Agent's Liens. Each Borrower agrees that a carbon,
photographic, photostatic, or other reproduction of this Agreement or of a
financing statement is sufficient as a financing statement.
(b) If any Collateral is at any time in the possession or
control of any warehouseman, bailee or any Borrower's agents or processors, then
such Borrower shall notify the Agent thereof and shall notify such Person of the
Agent's security interest in such Collateral and, upon the Agent's request,
instruct such Person to hold all such Collateral for the Agent's account subject
to the Agent's instructions. If at any time any Collateral is located on any
operating facility of a Borrower which is not owned by that Borrower, then such
Borrower shall, at the request of the Agent, obtain written waivers, in form and
substance satisfactory to the Agent, of all present and future Liens to which
the owner or lessor of such premises may be entitled to assert against the
Collateral.
(c) From time to time, each Borrower shall, upon the Agent's
request, execute and deliver confirmatory written instruments pledging to the
Agent, for the ratable benefit of the Lenders, the Collateral of that Borrower,
but such Borrower's failure to do so shall not affect or limit the Agent's
security interest or the Agent's other rights in and to the Collateral with
respect to that Borrower. So long as this Agreement is in effect and until all
Obligations have been fully satisfied, the Agent's Liens shall continue in full
force and effect in all Collateral (whether or not deemed eligible for the
purpose of calculating the Availability or as the basis for any advance, loan,
extension of credit, or other financial accommodation).
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6.3 Location of Collateral. Each Borrower represents and warrants to
the Agent and the Lenders that: (a) Schedule 6.3 is a correct and complete list
of such Borrower's chief executive office, the location of its books and
records, the locations of the Collateral with respect to that Borrower, and the
locations of all of its other places of business; and (b) Schedule 6.3 correctly
identifies any of such facilities and locations that are not owned by a Borrower
and sets forth the names of the owners and lessors or sublessors of and, to the
best of each Borrower's knowledge, the holders of any mortgages on, such
facilities and locations. Each Borrower covenants and agrees that it will not
(i) maintain any Collateral of that Borrower at any location other than those
locations listed for that Borrower on Schedule 6.3, (ii) otherwise change or add
to any of such locations, or (iii) change the location of its chief executive
office from the location identified in Schedule 6.3, unless it gives the Agent
at least thirty (30) days' prior written notice thereof and executes any and all
financing statements and other documents that the Agent requests in connection
therewith. Without limiting the foregoing, each Borrower represents that all of
its Inventory is, and covenants that all of its Inventory will be, located
either (a) on premises owned by that Borrower, (b) on premises leased by that
Borrower, provided that the Agent has received an executed landlord waiver from
the landlord of such premises in form and substance satisfactory to the Agent,
or (c) in a public warehouse, provided that the Agent has received an executed
bailee letter from the applicable public warehouseman in form and substance
satisfactory to the Agent.
6.4 Title to, Liens on, and Sale and Use of Collateral. Each Borrower
represents and warrants to the Agent and the Lenders and agrees with the Agent
and the Lenders that: (a) all of the Collateral with respect to that Borrower is
and will continue to be owned by that Borrower free and clear of all Liens
whatsoever, except for Permitted Liens; (b) the Agent's Liens in the Collateral
with respect to that Borrower will not be subject to any prior Lien; (c) such
Borrower will use, store, and maintain the Collateral with all reasonable care
and will use such Collateral for lawful purposes only; and (d) such Borrower
will not, without the Agent's prior written approval, sell, or dispose of or
permit the sale or disposition of any of the Collateral except for sales of
Inventory in the ordinary course of business and sales of Equipment as permitted
by Section 6.11. The inclusion of proceeds in the Collateral shall not be deemed
to constitute the Agent's or any Lender's consent to any sale or other
disposition of the Collateral except as expressly permitted herein.
6.5 Appraisals. Whenever a Default or Event of Default exists, and at
such other times not more frequently than once a year as the Agent requests,
each Borrower shall, at its expense and upon the Agent's request, provide the
Agent with appraisals or
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updates thereof of any or all of the Collateral from an appraiser, and prepared
on a basis, satisfactory to the Agent, such appraisals and updates to include,
without limitation, information required by applicable law and regulation and by
the internal policies of the Lenders.
6.6 Access and Examination; Confidentiality. (a) The Agent, accompanied
by any Lender which so elects, may at all reasonable times (and at any time when
a Default or Event of Default exists) have access to, examine, audit, make
extracts from or copies of and inspect any or all of each Borrower's records,
files, and books of account and the Collateral, and discuss each Borrower's
affairs with such Borrower's officers and management. Each Borrower will deliver
to the Agent any instrument necessary for the Agent to obtain records from any
service bureau maintaining records for any Borrower. The Agent may, and at the
direction of the Majority Lenders shall, at any time when a Default or Event of
Default exists, and at the Borrowers' expense, make copies of all of the
Borrowers' books and records, or require each Borrower to deliver such copies to
the Agent. The Agent may, without expense to the Agent, use each Borrower's
respective personnel, supplies, and premises to the extent reasonably necessary
for maintaining or enforcing the Agent's Liens. The Agent shall have the right,
at any time, in the Agent's name or in the name of a nominee of the Agent, to
verify the validity, amount or any other matter relating to the Accounts,
Inventory, or other Collateral, by mail, telephone, or otherwise.
(b) Each Borrower agrees that, subject to each Borrower's
prior consent for uses other than in a traditional tombstone, which consent
shall not be unreasonably withheld or delayed, the Agent and each Lender may use
the Borrowers' names in advertising and promotional material and in conjunction
therewith disclose the general terms of this Agreement. The Agent and each
Lender agree to take normal and reasonable precautions and exercise due care to
maintain the confidentiality of all information identified as "confidential" or
"secret" by any Borrower and provided to the Agent or such Lender by or on
behalf of such Borrower, under this Agreement or any other Loan Document, and
neither the Agent, nor such Lender nor any of their respective Affiliates shall
use any such information other than in connection with or in enforcement of this
Agreement and the other Loan Documents, except to the extent that such
information (i) was or becomes generally available to the public other than as a
result of disclosure by the Agent or such Lender, or (ii) was or becomes
available on a nonconfidential basis from a source other than a Borrower,
provided that such source is not bound by a confidentiality agreement with such
Borrower known to the Agent or such Lender; provided, however, that the Agent
and any Lender may disclose such information (1) at the request or pursuant to
any requirement of any Governmental Authority to which the Agent or
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such Lender is subject or in connection with an examination of the Agent or such
Lender by any such Governmental Authority; (2) pursuant to subpoena or other
court process; (3) when required to do so in accordance with the provisions of
any applicable requirement of law; (4) to the extent reasonably required in
connection with any litigation or proceeding (including, but not limited to, any
bankruptcy proceeding) to which the Agent, any Lender or their respective
Affiliates may be party; (5) to the extent reasonably required in connection
with the exercise of any remedy hereunder or under any other Loan Document; (6)
to the Agent's or such Lender's independent auditors, accountants, attorneys and
other professional advisors; (7) to any Affiliate of the Agent or such Lender,
or to any Participating Lender or assignee under any Assignment and Acceptance,
actual or potential, provided that such affiliate, Participating Lender or
assignee agrees to keep such information confidential to the same extent
required of the Agent and the Lenders hereunder; and (8) as expressly permitted
under the terms of any other document or agreement regarding confidentiality to
which the Borrowers are parties or are deemed parties with the Agent or such
Lender.
6.7 Collateral Reporting. Each Borrower shall provide the Agent with
the following documents at the following times in form satisfactory to the
Agent: (a) on a weekly basis, or more frequently if requested by the Agent or by
the Borrowers, (i) a schedule of such Borrower's Accounts created, credit memos
issued and payments received since the last such schedule and (ii) a Borrowing
Base Certificate for each Borrower in the form of Exhibit C attached hereto
which shall also include a deduction of the value of all "Locomotive Inventory"
(as defined in the PTRA Intercreditor and the HBTC Intercreditor); (b) on a
monthly basis, within fifteen (15) days after the last day of each Fiscal Month,
an aging of each Borrower's Accounts, together with a reconciliation to the
previous month's aging of each Borrower's Accounts and to each Borrower's
general ledger; (c) on a monthly basis, within fifteen (15) days after the last
day of each Fiscal Month, an aging of each Borrower's accounts payable; (d) on a
monthly basis within fifteen (15) days after the last day of each Fiscal Month
(or more frequently if requested by the Agent), Inventory reports by category,
with additional detail showing additions to and deletions from the Inventory and
the value of all "Locomotive Inventory" (as defined in the PTRA Intercreditor
and the HBTC Intercreditor); (e) upon request, copies of invoices in connection
with each Borrower's Accounts, customer statements, credit memos, remittance
advices and reports, deposit slips, shipping and delivery documents in
connection with the Borrowers' Accounts and for Inventory and Equipment acquired
by such Borrower, purchase orders and invoices; (f) on a monthly basis, within
fifteen (15) days after the last day of each Fiscal Month a statement of the
balance of each of the intercompany loans in accordance with Section 9.10 as of
the last day of the immediately preceding Fiscal Month; (g) daily collection
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reports and weekly cash reports for each Borrower; (h) on a monthly basis,
within fifteen (15) days after the last day of each Fiscal Month, a summary of
all Inventory identified to, or incorporated in work-in-process for, contracts
subject to performance or surety bonds or on which progress payments are
received or subject to financial penalties for noncompletion; (i) with respect
to MKR's Eligible Locomotive Inventory, monthly reports within twenty-five (25)
days after the last day of each Fiscal Month summarizing usage, rental payments,
down-time and lease status; (j) not less frequently than weekly (unless such
frequency is modified by the prior written consent of PTRA and the Agent) a
written certification (the "PTRA Inventory Report") from the manager of the
Boise Facility (as such term is defined in the PTRA Contract) and duly
acknowledged by the Chief Financial Officer (or if none exists, the Treasurer or
Controller) of MKR, which report shall include (i) a detailed description of the
Locomotive Inventory (as such term is defined in the PTRA Contract) and its
specific location at the Boise Facility, (ii) the book value of the Locomotive
Inventory (as such term is defined in the PTRA Contract), (iii) the principal
amount of outstanding indebtedness or Net Construction Advances (as such term is
defined in the PTRA Contract) advanced to MKR by PTRA under the PTRA Contract,
(iv) the number and aggregate sales price of locomotives delivered to PTRA under
the PTRA Contract, and (v) the aggregate amount of all Construction Advances (as
such term is defined in the PTRA Contract) made by PTRA to MKR under the PTRA
Contract, (k) not less frequently than weekly (unless such frequency is modified
by the prior written consent of HBTC and the Agent) a written certification (the
"HBTC Inventory Report") from the manager of the Boise Facility (as such term is
defined in the HBTC Contract) and duly acknowledged by the Chief Financial
Officer (or if none exists, the Treasurer or Controller) of MKR, which report
shall include (i) a detailed description of the Locomotive Inventory (as such
term is defined in the HBTC Contract) and its specific location at the Boise
Facility, (ii) the book value of the Locomotive Inventory (as such term is
defined in the HBTC Contract), (iii) the principal amount of outstanding
indebtedness or Net Construction Advances (as such term is defined in the HBTC
Contract) advanced to MKR by HBTC under the HBTC Contract, (iv) the number and
aggregate sales price of locomotives delivered to HBTC under the HBTC Contract,
and (v) the aggregate amount of all Construction Advances (as such term is
defined in the HBTC Contract) made by HBTC to MKR under the HBTC Contract; (l)
such other reports as to the Collateral of each Borrower as the Agent shall
reasonably request from time to time; and (m) with the delivery of each of the
foregoing, a certificate of an officer of each Borrower certifying as to the
accuracy and completeness of the foregoing. If any Borrower's records or reports
of the Collateral are prepared by an accounting service or other agent, such
Borrower hereby authorizes such service or agent to deliver such records,
reports, and related documents to the Agent, for distribution to
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the Lenders; provided, however, that the required time for all deliveries
referred in this Section 6.7 shall be extended (to the extent an earlier date
would otherwise be required) with respect to such reports due on the last Fiscal
Month in each Fiscal Year to the date which is twenty-five (25) days after the
last day of only such Fiscal Month.
6.8 Accounts. (a) Each Borrower hereby represents and warrants to the
Agent and the Lenders, with respect to such Borrower's Accounts, that: (i) each
existing Account represents, and each future Account will represent, a bona fide
sale or lease and delivery of goods by such Borrower, or rendition of services
by such Borrower, in the ordinary course of such Borrower's business; (ii) each
existing Account is, and each future Account will be, for a liquidated amount
payable by the Account Debtor thereon on the terms set forth in the invoice
therefor or in the schedule thereof delivered to the Agent, without any offset,
deduction, defense, or counterclaim except those known to such Borrower and
disclosed to the Agent and the Lenders pursuant to this Agreement; (iii) no
payment will be received with respect to any Account, and no credit, discount,
or extension, or agreement therefor will be granted on any Account, except as
reported to the Agent and the Lenders in accordance with this Agreement; (iv)
each copy of an invoice delivered to the Agent by such Borrower will be a
genuine copy of the original invoice sent to the Account Debtor named therein;
and (v) all goods described in each invoice will have been delivered to the
Account Debtor (except for contracts providing for progress payments) and all
services of such Borrower described in each invoice will have been performed.
(b) No Borrower shall re-date any invoice or sale or make
sales on extended dating beyond that customary in the such Borrower's business
or extend or modify any Account. If any Borrower becomes aware of any matter
adversely affecting the collectability of any Account or any Account Debtor
owing an Account or Accounts to that Borrower involving an amount greater than
$100,000, including information regarding the Account Debtor's creditworthiness,
such Borrower will promptly so advise the Agent.
(c) No Borrower shall accept any note or other instrument
(except a check or other instrument for the immediate payment of money) with
respect to any Account without the Agent's written consent. If the Agent
consents to the acceptance of any such instrument, it shall be considered as
evidence of the Account and not payment thereof and the applicable Borrower will
promptly deliver such instrument to the Agent, endorsed by such Borrower to the
Agent in a manner satisfactory in form and substance to the Agent. Regardless of
the form of presentment, demand, notice of protest with respect thereto, the
applicable Borrower shall remain liable thereon until such instrument is paid in
full.
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(d) Each Borrower shall notify the Agent promptly of all
disputes and claims in excess of $100,000 individually, or $500,000 in the
aggregate with any Account Debtor, and agrees to settle, contest, or adjust such
dispute or claim at no expense to the Agent or any Lender. No discount, credit
or allowance shall be granted to any such Account Debtor without the Agent's
prior written consent, except for discounts, credits and allowances made or
given in the ordinary course of a Borrower's business when no Event of Default
exists hereunder. Each Borrower shall send the Agent a copy of each credit
memorandum in excess of $25,000 as soon as issued. The Agent may, and at the
direction of the Majority Lenders shall, at all times when an Event of Default
exists hereunder, settle or adjust disputes and claims directly with Account
Debtors for amounts and upon terms which the Agent or the Majority Lenders, as
applicable, shall consider advisable and, in all cases, the Agent will credit
the applicable Borrower's Loan Account with only the net amounts received by the
Agent in payment of any Accounts.
(e) If an Account Debtor returns any Inventory to a Borrower
when no Event of Default exists, then such Borrower shall promptly determine the
reason for such return and shall issue a credit memorandum to the Account Debtor
in the appropriate amount. Such Borrower shall immediately report to the Agent
any return involving an amount in excess of $50,000. Each such report shall
indicate the reasons for the returns and the locations and condition of the
returned Inventory. In the event any Account Debtor returns Inventory to a
Borrower when an Event of Default exists, such Borrower, upon request of the
Agent, shall: (i) hold the returned Inventory in trust for the Agent; (ii)
segregate all returned Inventory from all of its other property; (iii) dispose
of the returned Inventory solely according to the Agent's written instructions;
and (iv) not issue any credits or allowances with respect thereto without the
Agent's prior written consent. All returned Inventory shall be subject to the
Agent's Liens thereon. Whenever any Inventory is returned, the related Account
shall be deemed ineligible to the extent of the amount owing by the Account
Debtor with respect to such returned Inventory
6.9 Collection of Accounts; Payments. (a) Each Borrower shall establish
as of the Closing Date a lock-box service for collections of Accounts at a bank
acceptable to the Agent and pursuant to documentation satisfactory to the Agent.
Each Borrower shall instruct all Account Debtors to make all payments directly
to the address established for such service. If, notwithstanding such
instructions, any Borrower receives any proceeds of Accounts, it shall receive
such payments as the Agent's trustee, and shall immediately deliver such
payments to the Agent in their original form duly endorsed in blank or deposit
them into a Payment Account, as the Agent may direct. All collections received
in any such lock-box or Payment Account or directly by any Borrower or the
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Agent, and all funds in any Payment Account or other account to which such
collections are deposited shall be subject to the Agent's sole control. If a
Default or an Event of Default shall have occurred and be continuing, the Agent
or the Agent's designee may, at any time, notify Account Debtors that the
Accounts have been assigned to the Agent and of the Agent's security interest
therein, and may collect them directly and charge the collection costs and
expenses to the applicable Borrower's Loan Account as a Revolving Loan. When an
Event of Default exists, each Borrower, at the Agent's request, shall execute
and deliver to the Agent such documents as the Agent shall require to grant the
Agent access to any post office box in which such Borrower's collections of
Accounts are received.
(b) If sales of Inventory are made for cash by any Borrower,
such Borrower shall immediately deliver to the Agent or deposit into a Payment
Account the identical checks, cash, or other forms of payment which that
Borrower receives.
(c) All payments, including immediately available funds
received by the Agent at a bank designated by it, received by the Agent on
account of Accounts or as proceeds of other Collateral will be the Agent's sole
property for the benefit of the Lenders and will be credited to the applicable
Borrower's Loan Account (conditional upon final collection) one (1) Business Day
after receipt of good funds in respect thereof; provided, however, that such
payments shall be deemed to be credited to such Borrower's Loan Account
immediately upon receipt for purposes of (i) determining Availability, and (ii)
calculating the amount of interest accrued thereon solely for purposes of
determining the amount of interest to be distributed by the Agent to the
Lenders.
(d) In the event the Borrowers repay all of the Obligations
with good funds upon the termination of this Agreement or upon acceleration of
the Obligations, other than through the Agent's receipt of payments on account
of the Accounts or proceeds of the other Collateral, such payment will be
credited (conditional upon final collection) to the Borrowers' Loan Accounts one
(1) Business Day after the Agent's receipt of such funds.
6.10 Inventory; Perpetual Inventory. Each Borrower represents and
warrants to the Agent and the Lenders and agrees with the Agent and the Lenders
that all of the Inventory owned by the Borrowers is and will be held for sale or
lease, or to be furnished in connection with the rendition of services, in the
ordinary course of such Borrower's business, and is and will be fit for such
purposes. Each Borrower will keep its Inventory in good and marketable
condition, at its own expense. No Borrower will, without the prior written
consent of the Agent, acquire or accept any Inventory on consignment or
approval. Each Borrower agrees that all Inventory produced in the United States
will be produced
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in accordance with the Federal Fair Labor Standards Act of 1938, as amended, and
all rules, regulations, and orders thereunder. Each Borrower will conduct a
physical count of the Inventory at least once per Fiscal Year, and after and
during the continuation of an Event of Default, at such other times as the Agent
reasonably requests. Each Borrower will maintain a perpetual inventory reporting
system at all times. No Borrower will, without the Agent's written consent, sell
any Inventory on a bill-and-hold, guaranteed sale, sale and return, sale on
approval, consignment, or other repurchase or return basis.
6.11 Equipment. (a) Each Borrower represents and warrants to the Agent
and the Lenders and agrees with the Agent and the Lenders that all of the
Equipment owned by such Borrower is and will be used or held for use in such
Borrower's business, and is and will be fit for such purposes. Each Borrower
shall keep and maintain its Equipment in good operating condition and repair
(ordinary wear and tear excepted) and shall make all necessary replacements
thereof.
(b) Each Borrower shall promptly inform the Agent of any
material additions to or deletions from the Equipment. No Borrower shall permit
any Equipment to become a fixture with respect to real property or to become an
accession with respect to other personal property with respect to which real or
personal property the Agent does not have a Lien. No Borrower will, without the
Agent's prior written consent, alter or remove any identifying symbol or number
on any of such Borrower's Equipment consisting of Collateral.
(c) No Borrower shall, without the Agent's prior written
consent, sell, lease as a lessor, or otherwise dispose of any of such Borrower's
Equipment; provided, however, that the Borrowers, collectively, may dispose of
obsolete or unusable Equipment having an orderly liquidation value no greater
than $200,000 aggregate in any Fiscal Year, or $600,000 term of this Agreement,
without the Agent's consent, subject to the conditions set forth in the next
sentence. In the event any of such Equipment is sold, transferred or otherwise
disposed of pursuant to the proviso contained in the immediately preceding
sentence, (1) if such sale, transfer or disposition is effected without
replacement of such Equipment (which shall require that such replacement
Equipment be purchased within 90 days before or after the sale of the Equipment
being replaced), or such Equipment is replaced by Equipment leased by the
applicable Borrower or by Equipment purchased by such Borrower subject to a
Lien, then such Borrower shall deliver all of the cash proceeds of any such
sale, transfer or disposition to the Agent, which proceeds shall be applied to
the reduction of the Term Loans, or (2) if such sale, transfer or disposition is
made in connection with the purchase by the applicable Borrower of replacement
Equipment, then such Borrower shall use the proceeds of such sale, transfer or
disposition to purchase such replacement Equipment and
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shall deliver to the Agent written evidence of the use of the proceeds for such
purchase. All replacement Equipment purchased by each Borrower shall be free and
clear of all Liens except the Agent's Lien, except as otherwise permitted
hereby.
6.12 Assigned Contracts. Each Borrower shall fully perform all of its
obligations under each of such Borrower's Assigned Contracts, and shall enforce
all of its rights and remedies thereunder as it deems appropriate in its
business judgment; provided, however, that no Borrower shall take any action or
fail to take any action with respect to its Assigned Contracts which would
result in a waiver or other loss of any material right or remedy of such
Borrower thereunder. Without limiting the generality of the foregoing, each
Borrower shall take all action necessary or appropriate to permit, and shall not
take any action which would have any materially adverse effect upon, the full
enforcement of all indemnification rights under its Assigned Contracts. No
Borrower shall, without the Agent's and the Majority Lenders' prior written
consent, modify, amend, supplement, compromise, satisfy, release, or discharge
any of its Assigned Contracts, any collateral securing the same, any Person
liable directly or indirectly with respect thereto, or any agreement relating to
any of its Assigned Contracts or the collateral therefor. Each Borrower shall
notify the Agent and the Lenders in writing, promptly after such Borrower
becomes aware thereof, of any event or fact which could give rise to a claim by
it for indemnification under any of its Assigned Contracts, and shall diligently
pursue such right and report to the Agent on all further developments with
respect thereto. Each Borrower shall remit directly to the Agent for application
to the Obligations in such order as the Majority Lenders shall determine, all
amounts received by such Borrower as indemnification or otherwise pursuant to
its Assigned Contracts. If any Borrower shall fail after the Agent's demand to
pursue diligently any right under its Assigned Contracts, or if an Event of
Default then exists, the Agent may, and at the direction of the Majority Lenders
shall, directly enforce such right in its own or such Borrower's name and may
enter into such settlements or other agreements with respect thereto as the
Agent or the Majority Lenders, as applicable, shall determine. In any suit,
proceeding or action brought by the Agent for the benefit of the Lenders under
any Assigned Contract for any sum owing thereunder or to enforce any provision
thereof, the applicable Borrower shall indemnify and hold the Agent and Lenders
harmless from and against all expense, loss or damage suffered by reason of any
defense, setoff, counterclaims, recoupment, or reduction of liability whatsoever
of the obligor thereunder arising out of a breach by such Borrower of any
obligation thereunder or arising out of any other agreement, indebtedness or
liability at any time owing from such Borrower to or in favor of such obligor or
its successors. All such obligations of each Borrower shall be and remain
enforceable only against such Borrower and shall not be
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enforceable against the Agent. Notwithstanding any provision hereof to the
contrary, each Borrower shall at all times remain liable to observe and perform
all of its duties and obligations under its Assigned Contracts, and the Agent's
or any Lender's exercise of any of their respective rights with respect to the
Collateral shall not release such Borrower from any of such duties and
obligations. Neither the Agent nor any Lender shall be obligated to perform or
fulfill any Borrower's duties or obligations under its Assigned Contracts or to
make any payment thereunder, or to make any inquiry as to the nature or
sufficiency of any payment or property received by it thereunder or the
sufficiency of performance by any party thereunder, or to present or file any
claim, or to take any action to collect or enforce any performance, any payment
of any amounts, or any delivery of any property.
6.13 Documents, Instruments, and Chattel Paper. Each Borrower
represents and warrants to the Agent and the Lenders that (a) all documents,
instruments, and chattel paper describing, evidencing, or constituting
Collateral, and all signatures and endorsements thereon, are and will be
complete, valid, and genuine, (b) all goods evidenced by such documents,
instruments, and chattel paper are and will be owned by such Borrower, free and
clear of all Liens other than Permitted Liens, and (c) MK Rail has no creditors
in Argentina who may assert claims against instruments held for the benefit of
the Agent in Argentina.
6.14 Right to Cure. The Agent may, in its discretion, and shall, at the
direction of the Majority Lenders, pay any amount or do any act required of the
Borrowers hereunder or under any other Loan Document in order to preserve,
protect, maintain or enforce the Obligations, the Collateral or the Agent's
Liens therein, and which any Borrower fails to pay or do, including, without
limitation, payment of any judgment against such Borrower, any insurance
premium, any warehouse charge, any finishing or processing charge, any
landlord's claim, and any other Lien upon or with respect to the Collateral. All
payments that the Agent makes under this Section 6.14 and all out-of-pocket
costs and expenses that the Agent pays or incurs in connection with any action
taken by it hereunder shall be charged to such Borrower's Loan Account as a
Revolving Loan. Any payment made or other action taken by the Agent under this
Section 6.14 shall be without prejudice to any right to assert an Event of
Default hereunder and to proceed thereafter as herein provided.
6.15 Power of Attorney. Each Borrower hereby appoints the Agent and the
Agent's designee as such Borrower's attorney, with power: (a) to endorse such
Borrower's name on any checks, notes, acceptances, money orders, or other forms
of payment or security that come into the Agent's or any Lender's possession
including, without limitation, to draw against any letter of credit supporting
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or securing the promissory notes which are listed on Schedule 1.1C hereto, and
any replacement thereof; (b) to sign such Borrower's name on any invoice, bill
of lading, warehouse receipt or other document of title relating to any
Collateral, on drafts against customers, on assignments of Accounts, on notices
of assignment, financing statements and other public records; (c) to notify the
post office authorities, when an Event of Default exists, to change the address
for delivery of such Borrower's mail to an address designated by the Agent and
to receive, open and dispose of all mail addressed to such Borrower; (d) to send
requests for verification of Accounts to customers or Account Debtors; (e) to
clear Inventory, the purchase of which was financed with Letters of Credit,
through customs in such Borrower's name, the Agent's name or the name of the
Agent's designee, and to sign and deliver to customs officials powers of
attorney in such Borrower's name for such purpose; (f) continue any insurance of
any Borrower and pay any premiums or costs therefor; and (g) to do all things
necessary to carry out this Agreement. Each Borrower ratifies and approves all
acts of such attorney. None of the Lenders or the Agent nor their attorneys will
be liable for any acts or omissions or for any error of judgment or mistake of
fact or law. This power, being coupled with an interest, is irrevocable until
this Agreement has been terminated and the Obligations have been fully
satisfied.
6.16 The Agent's and Lenders' Rights, Duties and Liabilities. Each
Borrower assumes all responsibility and liability arising from or relating to
the use, sale or other disposition of the Collateral. Neither the Agent, nor any
Lender, nor any of their respective officers, directors, employees or agents
shall be liable or responsible in any way for the safekeeping of any of the
Collateral, or for any loss or damage thereto, or for any diminution in the
value thereof, or for any act of default of any warehouseman, carrier,
forwarding agency or other person whomsoever, all of which shall be at each
Borrower's sole risk, except in the case of the Agent's gross negligence or
willful misconduct. The Obligations shall not be affected by any failure of the
Agent or any Lender to take any steps to perfect the Agent's Liens or to collect
or realize upon the Collateral, nor shall loss of or damage to the Collateral
release any Borrower from any of the Obligations. The Agent may (but shall not
be required to), and at the direction of the Majority Lenders shall, without
notice to or consent from any Borrower, sue upon or otherwise collect, extend
the time for payment of, modify or amend the terms of, compromise or settle for
cash, credit, or otherwise upon any terms, grant other indulgences, extensions,
renewals, compositions, or releases, and take or omit to take any other action
with respect to the Collateral, any security therefor, any agreement relating
thereto, any insurance applicable thereto, or any Person liable directly or
indirectly in connection with any of the foregoing, without discharging or
otherwise affecting the liability of any Borrower for the Obligations or under
this Agreement or any other agreement
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now or hereafter existing between the Agent and/or any Lender and any Borrower.
ARTICLE 7
BOOKS AND RECORDS; FINANCIAL INFORMATION; NOTICES
7.1 Books and Records. Each Borrower shall maintain, at all times,
correct and complete books, records and accounts in which complete, correct and
timely entries are made of its transactions in accordance with GAAP applied
consistently with the audited Financial Statements required to be delivered
pursuant to Section 7.2(a). Each Borrower shall, by means of appropriate
entries, reflect in such accounts and in all Financial Statements proper
liabilities and reserves for all taxes and proper provision for depreciation and
amortization of property and bad debts, all in accordance with GAAP. Each
Borrower shall maintain at all times books and records pertaining to the
Collateral in such detail, form and scope as the Agent or any Lender shall
reasonably require, including, but not limited to, records of (a) all payments
received and all credits and extensions granted with respect to the Accounts;
(b) the return, rejections, repossession, stoppage in transit, loss, damage, or
destruction of any Inventory; and (c) all other dealings affecting the
Collateral.
7.2 Financial Information. Each Borrower shall promptly furnish to the
Agent, in sufficient copies for distribution by the Agent to each Lender, all
such financial information as the Agent or any Lender shall reasonably request,
and notify its auditors and accountants that the Agent, on behalf of the
Lenders, is authorized to obtain such information directly from them. Without
limiting the foregoing, each Borrower will furnish to the Agent, in sufficient
copies for distribution by the Agent to each Lender, in such detail as the Agent
or the Lenders shall request, the following:
(a) As soon as available, but in any event not later than
ninety (90) days after the close of each Fiscal Year, audited consolidated and
unaudited consolidating balance sheets, and statements of income and expense,
cash flow and of stockholders' equity for the Borrowers and their Subsidiaries
for such Fiscal Year, on a consolidated and consolidating basis (together with
separate financial statements prepared on a consolidated basis but excluding MK
Gain, S.A. de C.V.) and the accompanying notes thereto, setting forth in each
case in comparative form figures for the previous Fiscal Year, all in reasonable
detail, fairly presenting the financial position and the results of operations
of each Borrower and its consolidated Subsidiaries as at the date thereof and
for the Fiscal Year then ended, and prepared in accordance with GAAP. Such
statements shall be examined in
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accordance with generally accepted auditing standards by and, in the case of
such statements performed on a consolidated basis, accompanied by a report
thereon unqualified as to scope of independent certified public accountants
selected by MKR and satisfactory to the Agent and shall include written
confirmation from such accountants that in preparing the audited consolidated
financial statements of MKR that they relied on and used the unaudited
consolidating financial statements of MKR and its Subsidiaries which were
delivered to Agent and Lenders.
(b) As soon as available, but in any event not later than
thirty (30) days after the end of each Fiscal Month, consolidated and
consolidating unaudited balance sheets of the Borrowers and their consolidated
Subsidiaries as at the end of such Fiscal Month, and consolidated and
consolidating unaudited statements of income and expense and cash flow for each
Borrower and its consolidated Subsidiaries for such Fiscal Month and for the
period from the beginning of the Fiscal Year to the end of such Fiscal Month,
all in reasonable detail, fairly presenting the financial position and results
of operations of each Borrower and its consolidated Subsidiaries as at the date
thereof and for such periods, and prepared in accordance with GAAP applied
consistently with the audited Financial Statements required to be delivered
pursuant to Section 7.2(a) (other than the cash flow statements which may
deviate from GAAP as expressly stated therein). MKR shall certify by a
certificate signed by its the chief financial officer or treasurer that all such
statements (other than the cash flow statements which may deviate from GAAP as
expressly stated therein) have been prepared in accordance with GAAP and present
fairly, subject to normal year-end adjustments, the Borrowers' financial
position as at the dates thereof and their results of operations for the periods
then ended.
(c) Intentionally Omitted.
(d) With each of the audited Financial Statements delivered
pursuant to Section 7.2(a), a certificate of the independent certified public
accountants that examined such statement to the effect that they have reviewed
and are familiar with this Agreement and that, in examining such Financial
Statements, they did not become aware of any fact or condition which then
constituted a Default or Event of Default, except for those, if any, described
in reasonable detail in such certificate.
(e) With each of the annual audited Financial Statements
delivered pursuant to Section 7.2(a), and within forty-five (45) days after the
end of each fiscal quarter, a certificate of the chief financial officer or
treasurer of MKR (i) setting forth in reasonable detail the calculations
required to establish that the Borrowers were in compliance with the covenants
set forth in Sections 9.23 through 9.29 during the period covered in such
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Financial Statements and as at the end thereof, and (ii) stating that, except as
explained in reasonable detail in such certificate, (A) all of the
representations and warranties of each Borrower contained in this Agreement and
the other Loan Documents are correct and complete in all material respects as at
the date of such certificate as if made at such time, (B) each Borrower is, at
the date of such certificate, in compliance in all material respects with all of
its respective covenants and agreements in this Agreement and the other Loan
Documents, (C) no Default or Event of Default then exists or existed during the
period covered by such Financial Statements, (D) describing and analyzing in
reasonable detail all material trends, changes, and developments in each and all
Financial Statements; and (E) explaining the variances of the figures in the
corresponding budgets and prior Fiscal Year financial statements. If such
certificate discloses that a representation or warranty is not correct or
complete, or that a covenant has not been complied with, or that a Default or
Event of Default existed or exists, such certificate shall set forth what action
the Borrowers have taken or propose to take with respect thereto.
(f) No sooner than 60 days and not less than 30 days prior to
the beginning of each Fiscal Year, annual forecasts (to include forecasted
consolidated and consolidating balance sheets, statements of income and expenses
and statements of cash flow) for the Borrowers and their Subsidiaries as at the
end of and for each fiscal quarter of such Fiscal Year.
(g) Promptly after filing with the PBGC and the IRS, a copy of
each annual report or other filing filed with respect to each Plan of each
Borrower.
(h) Promptly upon the filing thereof, copies of all reports,
if any, to or other documents filed by any Borrower or any of its Subsidiaries
with the Securities and Exchange Commission under the Exchange Act, and all
reports, notices, or statements sent or received by any Borrower or any of its
Subsidiaries to or from the holders of any equity interests of such Borrower
(other than routine non-material correspondence sent by shareholders of such
Borrower to such Borrower) or any such Subsidiary or of any Debt for borrowed
money of such Borrower or any of its Subsidiaries registered under the
Securities Act of 1933 or to or from the trustee under any indenture under which
the same is issued.
(i) As soon as available, but in any event not later than 15
days after any Borrower's receipt thereof, a copy of all management reports and
management letters prepared for such Borrower by Deloitte & Touche, L.L.P. or
any other independent certified public accountants of such Borrower satisfactory
to Agent.
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(j) Promptly after their preparation, copies of any and all
proxy statements, financial statements, and reports which any Borrower makes
available to its stockholders.
(k) Promptly after filing with the IRS, a copy of each tax
return filed by any Borrower or by any of its Subsidiaries.
(l) Such additional information as the Agent and/or any Lender
may from time to time reasonably request regarding the financial and business
affairs of each Borrower or any Subsidiary.
7.3 Notices to the Lenders. Each Borrower shall notify the Agent, in
writing of the following matters at the following times:
(a) Immediately after becoming aware of any Default or Event
of Default.
(b) Immediately after becoming aware of the assertion by the
holder of any capital stock of any Borrower or Subsidiary thereof or of any Debt
in an outstanding principal amount in excess of $100,000 that a default exists
with respect thereto or that such Borrower is not in compliance with the terms
thereof, or the threat or commencement by such holder of any enforcement action
because of such asserted default or non-compliance.
(c) Immediately after becoming aware of any material adverse
change in any Borrower's or any Subsidiary's property, business, operations, or
condition (financial or otherwise).
(d) Immediately after becoming aware of any pending or
threatened action, suit, proceeding, or counterclaim by any Person, or any
pending or threatened investigation by a Governmental Authority, which action,
suit, proceeding, counterclaim or investigation seeks damages in excess of
$250,000 (which amount shall not be fully covered by insurance), or which may
otherwise materially and adversely affect the Collateral, the repayment of the
Obligations, the Agent's or any Lender's rights under the Loan Documents, or any
Borrower's or any Subsidiary's property, business, operations, or condition
(financial or otherwise).
(e) Immediately after becoming aware of any pending or
threatened strike, work stoppage, unfair labor practice claim, or other labor
dispute affecting any Borrower or any of its Subsidiaries in a manner which
could reasonably be expected to have a Material Adverse Effect.
(f) Immediately after becoming aware of any violation of any
law, statute, regulation, or ordinance of a Governmental Authority affecting any
Borrower which could reasonably be expected to have a Material Adverse Effect.
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(g) Immediately after receipt of any notice of any violation
by any Borrower or any of its Subsidiaries of any Environmental Law which could
reasonably be expected to have a Material Adverse Effect or that any
Governmental Authority has asserted that any Borrower or any Subsidiary thereof
is not in compliance with any Environmental Law or is investigating such
Borrower's or such Subsidiary's compliance therewith.
(h) Immediately after receipt of any written notice that any
Borrower or any of its Subsidiaries is or may be liable to any Person as a
result of the Release or threatened Release of any Contaminant or that such
Borrower or any Subsidiary of such Borrower is subject to investigation by any
Governmental Authority evaluating whether any remedial action is needed to
respond to the Release or threatened Release of any Contaminant which, in either
case, is reasonably likely to give rise to liability in excess of $250,000.
(i) Immediately after receipt of any written notice of the
imposition of any Environmental Lien against any property of any Borrower or any
of its Subsidiaries.
(j) Any change in any Borrower's name, state of incorporation,
or form of organization, trade names or styles under which such Borrower will
sell Inventory or create Accounts, or to which instruments in payment of
Accounts may be made payable, in each case at least thirty (30) days prior
thereto.
(k) Within ten (10) Business Days after any Borrower or any
ERISA Affiliate knows or has reason to know, that an ERISA Event or a prohibited
transaction (as defined in Sections 406 of ERISA and 4975 of the Code) has
occurred, and, when known, any action taken or threatened by the IRS, the DOL or
the PBGC with respect thereto.
(l) Upon request, or, in the event that such filing reflects a
significant change with respect to the matters covered thereby, within three (3)
Business Days after the filing thereof with the PBGC, the DOL or the IRS, as
applicable, copies of the following: (i) each annual report (form 5500 series),
including Schedule B thereto, filed with the PBGC, the DOL or the IRS with
respect to each Plan, (ii) a copy of each funding waiver request filed with the
PBGC, the DOL or the IRS with respect to any Plan and all communications
received by any Borrower or any ERISA Affiliate from the PBGC, the DOL or the
IRS with respect to such request, and (iii) a copy of each other filing or
notice filed with the PBGC, the DOL or the IRS, with respect to each Plan of any
Borrower or any ERISA Affiliate.
(m) Upon request, copies of each actuarial report for any Plan
or Multi-employer Plan and annual report for any Multiemployer Plan; and within
three (3) Business Days after receipt thereof by any Borrower or any ERISA
Affiliate, copies of the following: (i) any notices of the PBGC's intention to
terminate a Plan or to have a trustee appointed to administer such Plan; (ii)
any favorable or unfavorable determination letter from the IRS regarding the
qualification of a Plan under Section 401(a) of the Code; or (iii) any notice
from a Multi-employer Plan regarding the imposition of withdrawal liability.
(n) Within three (3) Business Days upon the occurrence
thereof: (i) any changes in the benefits of any existing Plan which increase any
Borrower's annual costs with respect thereto by an amount in excess of $250,000,
or the establishment of any new Plan or the commencement of contributions to any
Plan to which any Borrower or any ERISA Affiliate was not previously
contributing; or (ii) any failure by any Borrower or any ERISA Affiliate to make
a required installment or any other required payment under Section 412 of the
Code on or before the due date for such installment or payment.
(o) Within three (3) Business Days after any Borrower or any
ERISA Affiliate knows or has reason to know that any of the following events has
or will occur: (i) a Multi-employer Plan has been or will be terminated; (ii)
the administrator or plan sponsor of a Multi-employer Plan intends to terminate
a Multi-employer Plan; or (iii) the PBGC has instituted or will institute
proceedings under Section 4042 of ERISA to terminate a Multiemployer Plan.
Each notice given under this Section shall describe the
subject matter thereof in reasonable detail, and shall set forth the action that
the applicable Borrower, its Subsidiary, or any ERISA Affiliate, as applicable,
has taken or proposes to take with respect thereto.
ARTICLE 8
GENERAL WARRANTIES AND REPRESENTATIONS
Each Borrower warrants and represents to the Agent and the Lenders that
except as hereafter disclosed to and accepted by the Agent and the Majority
Lenders in writing:
8.1 Authorization, Validity, and Enforceability of this Agreement and
the Loan Documents. Each Borrower has the corporate power and authority to
execute, deliver and perform this Agreement and the other Loan Documents, to
incur the Obligations, and to grant to the Agent Liens upon and security
interests in the Collateral. Each Borrower has taken all necessary corporate
action (including without limitation, obtaining approval of its
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stockholders if necessary) to authorize the execution, delivery, and performance
of this Agreement and the other Loan Documents and the transactions contemplated
hereby by it (including, without limitation, making the dividends referred to in
Sections 8.10 and 8.24). No consent, approval, or authorization of, or
declaration or filing with, any Governmental Authority, and no consent of any
other Person, is required in connection with any Borrower's execution, delivery
and performance of this Agreement and the other Loan Documents, except for those
already duly obtained. This Agreement and the other Loan Documents have been
duly executed and delivered by each Borrower, and constitute the legal, valid
and binding obligation of each Borrower, enforceable against it in accordance
with its terms without defense, setoff or counterclaim. Each Borrower's
execution, delivery, and performance of this Agreement and the other Loan
Documents (and the transactions contemplated hereby, including, without
limitation, the repurchase of the Subordinated Debt and the distribution of the
Common Stock of MKR currently held by Morrison Knudsen Corporation pursuant to
the terms of the MKC Bankruptcy Plan and the making of the dividends referred to
in Sections 8.10 and 8.24) do not and will not require the redemption or
repurchase of the Preferred Stock or conflict with, or constitute a violation or
breach of, or constitute a default under, or result in the creation or
imposition of any Lien upon the property of such Borrower or any of its
Subsidiaries by reason of the terms of (a) any mortgage, Lien, lease, indenture,
or any other material contract, agreement or instrument to which such Borrower
is a party or which is binding upon it, (b) any Requirement of Law applicable to
such Borrower or any of its Subsidiaries, or (c) the certificate or articles of
incorporation or by-laws of such Borrower or any of its Subsidiaries.
8.2 Validity and Priority of Security Interest. The provisions of this
Agreement, the Mortgage(s), and the other Loan Documents create legal and valid
Liens on all the Collateral in favor of the Agent, for the ratable benefit of
the Lenders, and such Liens constitute perfected and continuing Liens on all the
Collateral, having priority over all other Liens on the Collateral, securing all
the Obligations, and enforceable against each Borrower and all third parties.
8.3 Organization and Qualification. Each Borrower (a) is duly
incorporated and organized and validly existing in good standing under the laws
of the state of its incorporation, (b) is qualified to do business as a foreign
corporation and is in good standing in the jurisdictions set forth on Schedule
8.3. Each Borrower is qualified in each jurisdiction in which qualification is
necessary in order for it to own or lease its property and conduct its business,
except where the failure to be so qualified would not have a Material Adverse
Effect, and (c) has all requisite
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power and authority to conduct its business and to own its property.
8.4 Corporate Name; Prior Transactions. Except as set forth on Schedule
8.4, no Borrower has, during the past five (5) years, been known by or used any
other corporate or fictitious name, or been a party to any merger or
consolidation, or acquired all or substantially all of the assets of any Person,
or acquired any of its property outside of the ordinary course of business.
8.5 Subsidiaries and Affiliates; FEIN Numbers. Schedule 8.5 is a
correct and complete list of the name and relationship to each Borrower of all
of that Borrower's Subsidiaries, joint ventures and other Affiliates (including
a listing of all capital stock of any kind owned directly or indirectly by each
Borrower) together with the Federal Employer Identification Number of each
Borrower. Each Subsidiary is (a) duly incorporated and organized and validly
existing in good standing under the laws of its state of incorporation set forth
on Schedule 8.5, and (b) qualified to do business as a foreign corporation and
in good standing in each jurisdiction in which the failure to so qualify or be
in good standing could reasonably be expected to have a material adverse effect
on any such Subsidiary's business, operations, prospects, property, or condition
(financial or otherwise) and (c) has all requisite power and authority to
conduct its business and own its property.
8.6 Financial Statements, Pro Forma and Projections. (a) MKR has
delivered to the Agent and the Lenders the audited balance sheet and related
statements of income, retained earnings, changes in financial position, and
changes in stockholders equity for the Borrowers and their consolidated
Subsidiaries as of December 31, 1995, and for the Fiscal Year then ended,
accompanied by the report thereon of the Borrowers' independent certified public
accountants, Deloitte & Touche, L.L.P., and such financial statements are
attached hereto as Schedule 8.6(A). MKR has also delivered to the Agent and the
Lenders the unaudited balance sheet and related statements of income and changes
in financial position for each Borrower and its consolidated Subsidiaries as of
July 26, 1996, and a consolidating balance sheet and income statement of MKR and
its subsidiaries as of July 26, 1996, and all such financial statements are
attached hereto as Schedule 8.6(B). All such financial statements have been
prepared in accordance with GAAP and present accurately and fairly the financial
position of the Borrowers and their consolidated Subsidiaries as at the dates
thereof and their results of operations for the periods then ended.
(b) The pro forma delivered on the date hereof and attached
hereto as Schedule 8.6(C) is the unaudited consolidated and consolidating
balance sheet of the Borrowers, and was prepared by Borrowers assuming the
consummation of the transactions
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contemplated by this Agreement as of the Closing Date (including, without
limitation, the repurchase of the Subordinated Debt by MKR and the dividends
referred to in Sections 8.10 and 8.24) and based on the unaudited balance sheet
of Borrowers dated July 26, 1996 and was prepared in accordance with GAAP
(subject to the exceptions set forth on Schedule 8.6(C) hereof), with only such
adjustments thereto as would be required in accordance with GAAP.
(c) The Latest Projections (with such projections as are
delivered on the Closing Date being attached hereto as Schedule 8.6(D))
represent and will represent the Borrowers' best estimate of the future
financial performance of the Borrowers and their consolidated Subsidiaries for
the periods set forth therein. The Latest Projections have been prepared on the
basis of the assumptions set forth therein, which the Borrowers believe are fair
and reasonable in light of current and reasonably foreseeable business
conditions at the time submitted to the Lender.
8.7 Capitalization. The amount of each Borrower's authorized and issued
capital stock and the ownership of every block representing 5% or more thereof
is as set forth on Schedule 8.7 including, without limitation, after
implementation of the MKC Bankruptcy Plan.
8.8 Solvency. Each Borrower is Solvent prior to and after giving effect
to the making of the Term Loans and the Revolving Loans to be made on the
Closing Date and the issuance of the Letters of Credit to be issued on the
Closing Date, and shall remain Solvent during the term of this Agreement.
8.9 Debt. After giving effect to the making of the Term Loans and the
Revolving Loans to be made on the Closing Date, each Borrower and its
Subsidiaries have no Debt, except (a) the Obligations, (b) Debt described on
Schedule 8.9, and (c) trade payables and other contractual obligations arising
in the ordinary course of business.
8.10 Distributions. Except as set forth on Schedule 8.10, since
December 31, 1994, no Distribution has been declared, paid, or made upon or in
respect of any capital stock or other securities of any Borrower or any of their
Subsidiaries.
8.11 Title to Property. Each Borrower has good and marketable title in
fee simple to its real property listed in Schedule 8.12 hereto, and each
Borrower has good, indefeasible, and merchantable title to all of its other
property (including, without limitation, the assets reflected on the December
31, 1995 Financial Statements delivered to the Agent and the Lenders, except as
disposed of in the ordinary course of business since the date thereof), free of
all Liens except Permitted Liens.
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8.12 Real Estate; Leases; Minnesota. Schedule 8.12 sets forth a correct
and complete list of all Real Estate owned by each Borrower or any of its
Subsidiaries, all leases and subleases of real or personal property by each
Borrower or its Subsidiaries as lessee or sublessee (other than leases of
personal property as to which any Borrower is lessee or sublessee for which the
value of such personal property is less than $50,000 individually or $150,000 in
the aggregate), and all leases and subleases of real or personal property by
each Borrower or its Subsidiaries as lessor, lessee, sublessor or sublessee.
Each of such leases and subleases is valid and enforceable in accordance with
its terms and is in full force and effect, and no default by any party to any
such lease or sublease exists. The Borrowers represent and warrant that
Touchstone has no operations or facilities in the state of Minnesota.
8.13 Proprietary Rights Collateral. Schedule 8.13 sets forth a correct
and complete list of all of the Proprietary Rights Collateral. None of the
Proprietary Rights Collateral is subject to any licensing agreement or similar
arrangement except as set forth on Schedule 8.13. To the best of each Borrower's
knowledge, none of the Proprietary Rights Collateral infringes on or conflicts
with any other Person's property, and no other Person's property infringes on or
conflicts with the Proprietary Rights Collateral. The Proprietary Rights
Collateral described on Schedule 8.13 constitute all of the property of such
type necessary to the current and anticipated future conduct of the Borrowers'
business.
8.14 Trade Names and Terms of Sale. All trade names or styles under
which each Borrower or any of its Subsidiaries will sell Inventory or create
Accounts, or to which instruments in payment of Accounts may be made payable,
are listed on Schedule 8.14.
8.15 Litigation. Except as set forth on Schedule 8.15, there is no
pending or (to the best of any Borrower's knowledge) threatened, action, suit,
proceeding, or counterclaim by any Person, or investigation by any Governmental
Authority, or any basis for any of the foregoing, which could reasonably be
expected to cause a Material Adverse Effect.
8.16 Restrictive Agreements. No Borrower and none of their Subsidiaries
is a party to any contract or agreement, or subject to any charter or other
corporate restriction, which affects its ability to execute, deliver, and
perform the Loan Documents and repay the Obligations or which materially and
adversely affects or, insofar as any Borrower can reasonably foresee, could
materially and adversely affect, the property, business, operations, or
condition (financial or otherwise) of such Borrower or such Subsidiary, or would
in any respect cause a Material Adverse Effect.
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8.17 Labor Disputes. Except as set forth on Schedule 8.17, (a) there is
no collective bargaining agreement or other labor contract covering employees of
any Borrower or any of its Subsidiaries, (b) no such collective bargaining
agreement or other labor contract is scheduled to expire during the term of this
Agreement, (c) no union or other labor organization is seeking to organize, or
to be recognized as, a collective bargaining unit of employees of any Borrower
or any of its Subsidiaries or for any similar purpose, and (d) there is no
pending or (to the best of any Borrower's knowledge) threatened, strike, work
stoppage, material unfair labor practice claim, or other material labor dispute
against or affecting any Borrower or its Subsidiaries or their employees.
8.18 Environmental Laws. Except as otherwise disclosed on Schedule
8.18:
(a) Each Borrower and its Subsidiaries have complied in all
material respects with all Environmental Laws applicable to its Premises and
business, and none of the Borrowers nor any of their Subsidiaries nor any of
their present Premises or operations, nor their past property or operations, is
subject to any enforcement order from or liability agreement with any
Governmental Authority or private Person respecting (i) compliance with any
Environmental Law or (ii) any potential liabilities and costs or remedial action
arising from the Release or threatened Release of a Contaminant.
(b) Each Borrower and its Subsidiaries have obtained all
permits necessary for their current operations under Environmental Laws, and all
such permits are in good standing and each Borrower and its Subsidiaries are in
compliance with all terms and conditions of such permits.
(c) No Borrower and none of their Subsidiaries, nor, to the
best of each Borrower's knowledge, any of their predecessors in interest, has
stored, treated or disposed of any hazardous waste on any Premises, as defined
pursuant to 40 CFR Part 261 or any equivalent Environmental Law.
(d) No Borrower and none of their Subsidiaries has received
any summons, complaint, order or similar written notice that it is not currently
in compliance with, or that any Governmental Authority is investigating its
compliance with, any Environmental Laws or that it is or may be liable to any
other Person as a result of a Release or threatened Release of a Contaminant.
(e) None of the present or past operations of any Borrower or
its Subsidiaries is the subject of any investigation by any Governmental
Authority evaluating whether any remedial action
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is needed to respond to a Release or threatened Release of a Contaminant.
(f) There is not now, nor to the best of any Borrower's
knowledge has there ever been on or in the Premises:
(1) any underground storage tanks or surface impoundments,
(2) any asbestos containing material, or
(3) any polychlorinated biphenyls (PCB's) used in hydraulic
oils, electrical transformers or other equipment.
(g) No Borrower and none of their Subsidiaries has filed any
notice under any requirement of Environmental Law reporting a spill or
accidental and unpermitted release or discharge of a Contaminant into the
environment.
(h) No Borrower and none of their Subsidiaries has entered
into any negotiations or settlement agreements with any Person (including,
without limitation, the prior owner of any of its property) imposing material
obligations or liabilities on such Borrower or any of its Subsidiaries with
respect to any remedial action in response to the Release of a Contaminant or
environmentally related claim.
(i) None of the products manufactured, distributed or sold by
any Borrower or any of its Subsidiaries contain asbestos containing material.
(j) No Environmental Lien has attached to any Premises of any
Borrower or any of its Subsidiaries.
8.19 No Violation of Law. No Borrower and none of their Subsidiaries is
in violation of any law, statute, regulation, ordinance, judgment, order, or
decree applicable to it which violation could reasonably be expected to have a
Material Adverse Effect.
8.20 No Default. No Borrower and none of their Subsidiaries is in
default with respect to any note, indenture, loan agreement, mortgage, lease,
deed, or other agreement to which such Borrower or such Subsidiary is a party or
by which it is bound, which default could reasonably be expected to have a
Material Adverse Effect.
8.21 ERISA Compliance. Except as specifically disclosed in Schedule
8.21:
(a) Each Plan is in compliance in all material respects with
the applicable provisions of ERISA, the Code and other federal
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or state law. Each Plan which is intended to qualify under Section 401(a) of the
Code has received a favorable determination letter from the IRS and to the best
knowledge of the applicable Borrower, nothing has occurred which would cause the
loss of such qualification. Each Borrower and each ERISA Affiliate has made all
required contributions to any Plan subject to Section 412 of the Code, and no
application for a funding waiver or an extension of any amortization period
pursuant to Section 412 of the Code has been made with respect to any Plan.
(b) There are no pending or, to the best knowledge of any
Borrower, threatened claims, actions or lawsuits, or action by any Governmental
Authority, with respect to any Plan which has resulted or could reasonably be
expected to result in a Material Adverse Effect. There has been no prohibited
transaction or violation of the fiduciary responsibility rules with respect to
any Plan which has resulted or could reasonably be expected to result in a
Material Adverse Effect.
(c) (i) No ERISA Event has occurred or is reasonably expected
to occur; (ii) no Pension Plan has any Unfunded Pension Liability; (iii) no
Borrower and no ERISA Affiliate has incurred, or reasonably expects to incur,
any liability under Title IV of ERISA with respect to any Pension Plan (other
than premiums due and not delinquent under Section 4007 of ERISA); (iv) no
Borrower and no ERISA Affiliate has incurred, or reasonably expects to incur,
any liability (and no event has occurred which, with the giving of notice under
Section 4219 of ERISA, would result in such liability) under Section 4201 or
4243 of ERISA with respect to a Multiemployer Plan; and (v) no Borrower and no
ERISA Affiliate has engaged in a transaction that could be subject to Section
4069 or 4212(c) of ERISA.
8.22 Taxes. (a) Each Borrower and its Subsidiaries have filed all
Federal and other tax returns and reports required to be filed, and have paid
all Federal and other taxes, assessments, fees and other governmental charges
levied or imposed upon them or their properties, income or assets otherwise due
and payable.
(b) The repayment of the Subordinated Debt pursuant to the
terms and conditions in the Note Cancellation and Restructuring Agreement will
not result in any cancellation of indebtedness income or tax liability to the
Borrowers for Federal or any State Income tax purposes, except to the extent
that such tax liability is completely offset by net operating loss deductions
(including carry forwards) then available to the Borrowers.
8.23 Regulated Entities. No Borrower, no Person controlling any
Borrower, and no Subsidiary of any Borrower, is an "Investment Company" within
the meaning of the Investment Company Act of 1940. No Borrower is subject to
regulation under the Public Utility
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Holding Company Act of 1935, the Federal Power Act, the Interstate Commerce Act,
any state public utilities code, or any other Federal or state statute or
regulation limiting its ability to incur Indebtedness.
8.24 Use of Proceeds; Margin Regulations. The proceeds of the Loans are
to be used solely for working capital purposes, except that on the Closing Date
approximately $21,317,000 will be dividended up to MKR by the other Borrowers as
shown on Schedule 8.10, and thereafter approximately $34,650,000 will be used by
MKR to repurchase the entire amount of the Subordinated Debt in accordance with
the Note Cancellation and Restructuring Agreement. No Borrower and no Subsidiary
of any Borrower is engaged in the business of purchasing or selling Margin Stock
or extending credit for the purpose of purchasing or carrying Margin Stock.
8.25 Copyrights, Patents, Trademarks and Licenses, etc. Each Borrower
owns or is licensed or otherwise has the right to use all of the patents,
trademarks, service marks, trade names, copyrights, contractual franchises,
authorizations and other rights that are reasonably necessary for the operation
of its businesses, without conflict with the rights of any other Person. To the
best knowledge of each Borrower, no slogan or other advertising device, product,
process, method, substance, part or other material now employed, or now
contemplated to be employed, by such Borrower or any Subsidiary thereof
infringes upon any rights held by any other Person. No claim or litigation
regarding any of the foregoing is pending or threatened, and no patent,
invention, device, application, principle or any statute, law, rule, regulation,
standard or code is pending or, to the knowledge of any Borrower, proposed,
which, in either case, could reasonably be expected to have a Material Adverse
Effect.
8.26 No Material Adverse Change. No Material Adverse Effect has
occurred since August 31, 1995.
8.27 Full Disclosure. None of the representations or warranties made by
any Borrower in the Loan Documents as of the date such representations and
warranties are made or deemed made, and none of the statements contained in any
exhibit, report, statement or certificate furnished by or on behalf of any
Borrower or any Subsidiary in connection with the Loan Documents (including the
offering and disclosure materials delivered by or on behalf of the Borrowers to
the Lenders prior to the Closing Date), contains any untrue statement of a
material fact or omits any material fact required to be stated therein or
necessary to make the statements made therein, in light of the circumstances
under which they are made, not misleading as of the time when made or delivered.
8.28 Material Agreements; Identity of Locomotives. Schedule 8.28 hereto
sets forth all material agreements and contracts to
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which any Borrower or any of its Subsidiaries is a party or is bound as of the
date hereof. No Borrower other than MKR owns or leases any locomotives and all
of the locomotives that are owned by or leased to MKR on the Closing Date are
specifically identified on Schedule 8.28. Schedule 8.28 also sets forth with
respect to each locomotive owned by or leased to MKR, (i) the model or type of
each such locomotive, (ii) the markings including any AAR designation or serial
number of each such locomotive, (iii) if such locomotive is leased to MKR, the
information necessary to identify the lease (including the name of the lessor
and the date and term of the lease), (iv) if such locomotive is leased by MKR,
the information necessary to identify the lease (including the name of the
lessee and the date and term of the lease) and (v) the countries where each such
locomotive is being used.
8.29 Bank Accounts. Schedule 8.29 contains a complete and accurate list
of all bank accounts and lock boxes maintained by each Borrower with any bank or
other financial institution.
8.30 Governmental Authorization. No approval, consent, exemption,
authorization, or other action by, or notice to, or filing with, any
Governmental Authority is necessary or required in connection with the
execution, delivery or performance by, or enforcement against, any Borrower or
any of its Subsidiaries of the Agreement or any other Loan Document.
8.31 Insurance. Schedule 8.31 contains a complete and accurate list of
all insurance of any kind maintained by each Borrower listing the names of the
insurance carriers and the policy numbers and summarizing the types of insurance
and the policy limits with respect thereto.
ARTICLE 9
AFFIRMATIVE AND NEGATIVE COVENANTS
Each Borrower covenants to the Agent and each Lender that, so
long as any of the Obligations remain outstanding or this Agreement is in
effect:
9.1 Taxes and Other Obligations. Each Borrower shall, and shall cause
each of its Subsidiaries to, (a) file when due all tax returns and other reports
which it is required to file; (b) pay, or provide for the payment, when due, of
all taxes, fees, assessments and other governmental charges against it or upon
its property, income and franchises, make all required withholding and other tax
deposits, and establish adequate reserves for the payment of all such items, and
provide to the Agent and the Lenders, upon request, satisfactory evidence of its
timely compliance with the foregoing; and (c) pay when due all Debt owed by it
and all claims of
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materialmen, mechanics, carriers, warehousemen, landlords and other like
Persons, and all other indebtedness owed by it and perform and discharge in a
timely manner all other obligations undertaken by it; provided, however, so long
as the applicable Borrower has notified Agent in writing, such Borrower or its
Subsidiaries need pay any tax, fee, assessment, or governmental charge, that (i)
it is contesting in good faith by appropriate proceedings diligently pursued,
(ii) such Borrower or its Subsidiary, as the case may be, has established proper
reserves for as provided in GAAP, and (iii) no Lien (other than a Permitted
Lien) results from such non-payment.
9.2 Corporate Existence and Good Standing. Each Borrower shall, and
shall cause each of its Subsidiaries to, maintain its corporate existence and
its qualification and good standing in all jurisdictions in which the failure to
maintain such qualification or good standing could reasonably be expected to
have a material adverse effect on such Borrower's or such Subsidiary's property,
business, operations, prospects, or condition (financial or otherwise).
9.3 Compliance with Law and Agreements; Maintenance of Licenses. Each
Borrower shall comply, and shall cause each of its Subsidiaries to comply, in
all material respects with all Requirements of Law of any Governmental Authority
having jurisdiction over it or its business (including the Federal Fair Labor
Standards Act). Each Borrower shall, and shall cause each of its Subsidiaries
to, obtain and maintain all licenses, permits, franchises, and governmental
authorizations necessary to own its property and to conduct its business as
conducted on the Closing Date.
9.4 Maintenance of Property; Use of Locomotives. Each Borrower shall,
and shall cause each of its Subsidiaries to, maintain all of its property
necessary and useful in the conduct of its business, in good operating condition
and repair, ordinary wear and tear excepted. All Locomotives which are owned or
leased by MKR are currently and during the term of this Agreement shall only be
located and used within the 48 contiguous states of the U.S., except for
eighteen (18) locomotives (as clearly indicated on Schedule 8.28) which are
leased for use in Mexico and are permanently located in Mexico.
9.5 Insurance. (a) Each Borrower shall maintain, and shall cause each
of its Subsidiaries to maintain, with financially sound and reputable insurers
having a rating of at least (A-) VII or better by Best Rating Guide, insurance
against loss or damage by fire with extended coverage; theft, burglary,
pilferage and loss in transit; public liability and third party property damage;
larceny, embezzlement or other criminal liability; business interruption; public
liability and third party property damage; and such other
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hazards or of such other types as is customary for Persons engaged in the same
or similar business, as the Agent, in its discretion, or acting at the direction
of the Majority Lenders, shall specify, in amounts, and under policies
acceptable to the Agent and the Majority Lenders. Without limiting the
foregoing, the Borrowers shall also maintain, and shall cause each of their
Subsidiaries to maintain, flood insurance, in the event of a designation of the
area in which any Real Estate is located as "flood prone" or a "flood risk
area," as defined by the Flood Disaster Protection Act of 1973, in an amount to
be reasonably determined by the Agent, and shall comply with the additional
requirements of the National Flood Insurance Program as set forth in said Act.
(b) Each Borrower shall cause the Agent, for the ratable
benefit of the Lenders, to be named in each such policy as secured party or
mortgagee and loss payee or additional insured, in a manner acceptable to the
Agent. Each policy of insurance shall contain a clause or endorsement requiring
the insurer to give not less than thirty (30) days' prior written notice to the
Agent in the event of cancellation of the policy for any reason whatsoever and a
clause or endorsement stating that the interest of the Agent shall not be
impaired or invalidated by any act or neglect of any Borrower or any of its
Subsidiaries or the owner of any premises for purposes more hazardous than are
permitted by such policy. All premiums for such insurance shall be paid by the
applicable Borrower when due, and certificates of insurance and, if requested by
the Agent or any Lender, photocopies of the policies, shall be delivered to the
Agent, in each case in sufficient quantity for distribution by the Agent to each
of the Lenders. If any Borrower fails to procure such insurance or to pay the
premiums therefor when due, the Agent may, and at the direction of the Majority
Lenders shall, do so from the proceeds of Revolving Loans.
(c) Each Borrower shall promptly notify the Agent and the
Lenders of any loss, damage, or destruction to the Collateral arising from its
use, whether or not covered by insurance. The Agent is hereby authorized to
collect all insurance proceeds directly, and to apply or remit them as follows:
(d) (i) With respect to insurance proceeds relating to
Collateral other than Fixed Assets, after deducting from such proceeds the
reasonable expenses, if any, incurred by the Agent in the collection or handling
thereof, the Agent shall apply such proceeds, ratably, to the reduction of the
Obligations in the order provided for in Section 4.5.
(ii) With respect to insurance proceeds relating to
Collateral consisting of Fixed Assets, after deducting from such proceeds the
reasonable expenses, if any, incurred by the Agent in the collection or handling
thereof, the Agent shall apply such proceeds, ratably, to the reduction of the
Obligations in the order
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provided for in Section 4.5, or at the option of the Majority Lenders, may
permit or require the applicable Borrower to use such money, or any part
thereof, to replace, repair, restore or rebuild the relevant Fixed Assets in a
diligent and expeditious manner with materials and workmanship of substantially
the same quality as existed before the loss, damage or destruction; provided,
however, that so long as there does not then exist any Default or Event of
Default, the applicable Borrower shall be permitted to use insurance proceeds
relating to Collateral consisting of Fixed Assets in an aggregate amount not to
exceed $1,000,000 with respect to any occurrence, to replace, repair, restore or
rebuild the relevant Fixed Assets, in the manner set forth in this sentence; and
provided, further, that the applicable Borrower first (i) provides the Agent and
the Majority Lenders with plans and specifications for any such repair or
restoration which shall be reasonably satisfactory to the Agent and the Majority
Lenders and (ii) demonstrates to the reasonable satisfaction of the Agent and
the Majority Lenders that the funds available to it will be sufficient to
complete such project in the manner provided therein.
9.6 Condemnation. (a) Each Borrower shall, immediately upon learning of
the institution of any proceeding for the condemnation or other taking of any of
its property, notify the Agent of the pendency of such proceeding, and agrees
that the Agent may participate in any such proceeding, and such Borrower from
time to time will deliver to the Agent all instruments reasonably requested by
the Agent to permit such participation.
(b) The Agent is hereby authorized to collect the proceeds of
any condemnation claim or award directly, and to apply or remit them as follows:
(c) With respect to condemnation proceeds relating to
Collateral other than Fixed Assets, after deducting from such proceeds the
reasonable expenses, if any, incurred by the Agent in the collection or handling
thereof, the Agent shall apply such proceeds, ratably, to the reduction of the
Obligations in the order provided for in Section 4.5.
(i) With respect to condemnation proceeds relating to
Collateral consisting of Fixed Assets, after deducting from such proceeds the
reasonable expenses, if any, incurred by the Agent in the collection or handling
thereof, the Agent shall apply such proceeds, ratably, to the reduction of the
Obligations in the order provided for in Section 4.5, or at the option of the
Majority Lenders, may permit or require the applicable Borrower to use such
money, or any part thereof, to replace, repair, restore or rebuild the relevant
Fixed Assets in a diligent and expeditious manner with materials and workmanship
of substantially the same quality as existed before the condemnation; provided,
however, that so long as there does not then exist any Default or Event of
Default, the
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applicable Borrower shall be permitted to use proceeds relating to Collateral
consisting of Fixed Assets in an aggregate amount not to exceed $1,000,000 with
respect to any occurrence, to replace, repair, restore or rebuild the relevant
Fixed Assets, in the manner set forth in this sentence; and provided, further,
that plans and specifications for any such repair or restoration shall be
reasonably satisfactory to the Agent and the Majority Lenders and shall be
subject to the reasonable approval of the Agent and the Majority Lenders.
9.7 Environmental Laws. (a) Each Borrower shall, and shall cause each
of its Subsidiaries to, conduct its business in compliance with all
Environmental Laws applicable to it, including, without limitation, those
relating to the generation, handling, use, storage, and disposal of any
Contaminant. Each Borrower shall, and shall cause each of its Subsidiaries to,
take prompt and appropriate action to respond to any non-compliance with
Environmental Laws and shall regularly report to the Agent on such response.
(b) Without limiting the generality of the foregoing, each
Borrower shall submit to the Agent and the Lenders annually, commencing on the
first Anniversary Date, and on each Anniversary Date thereafter, an update of
the status of each environmental compliance or liability issue. The Agent or any
Lender may request copies of technical reports prepared by the applicable
Borrower and its communications with any Governmental Authority to determine
whether any Borrower or any of its Subsidiaries is proceeding reasonably to
correct, cure or contest in good faith any alleged non-compliance or
environmental liability. Each Borrower shall, at the Agent's or the Majority
Lenders' request and at such Borrower's expense, (a) retain an independent
environmental engineer acceptable to the Agent to evaluate the site, including
tests if appropriate, where the non-compliance or alleged non-compliance with
Environmental Laws has occurred and prepare and deliver to the Agent, in
sufficient quantity for distribution by the Agent to the Lenders, a report
setting forth the results of such evaluation, a proposed plan for responding to
any environmental problems described therein, and an estimate of the costs
thereof, and (b) provide to the Agent and the Lenders a supplemental report of
such engineer whenever the scope of the environmental problems, or the response
thereto or the estimated costs thereof, shall change in any material respect.
9.8 Compliance with ERISA. Each Borrower shall, and shall cause each of
its ERISA Affiliates to: (a) maintain each Plan in compliance in all material
respects with the applicable provisions of ERISA, the Code and other federal or
state law; (b) cause each Plan which is qualified under Section 401(a) of the
Code to maintain such qualification; (c) make all required contributions to any
Plan subject to Section 412 of the Code; (d) not engage in a
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prohibited transaction or violation of the fiduciary responsibility rules with
respect to any Plan; and (e) not engage in a transaction that could be subject
to Section 4069 or 4212(c) of ERISA.
9.9 Mergers, Consolidations or Sales. No Borrower and none of their
Subsidiaries shall enter into any transaction of merger, reorganization, or
consolidation, or transfer, sell, assign, lease, or otherwise dispose of all or
any part of its property, or wind up, liquidate or dissolve, or agree to do any
of the foregoing, except (a) for sales of Inventory in the ordinary course of
its business and (b) for sales or other dispositions of Equipment in the
ordinary course of business that are obsolete or no longer useable by such
Borrower in its business as permitted by Section 6.11; provided, however, that
MKR shall be permitted to enter into a merger agreement upon terms and
conditions acceptable to the Agent in its sole discretion with a wholly-owned
and newly formed subsidiary of MKR which has no business or operations of any
kind and was set up merely to facilitate a name change by MKR, so long as (i)
MKR is the surviving corporation in such merger, (ii) the Agent and Lenders
receive a legal opinion in form and substance reasonably acceptable to Agent as
to the legality, validity and effectiveness of the merger, (iii) the Borrowers
otherwise comply with the terms and conditions otherwise set forth in this
Agreement and the other Loan Documents with respect to any name change and
merger transaction by MKR (including, without limitation, filing UCC-3
amendments and mortgage modifications to reflect such name change), and (iv)
take such other steps and actions, and execute and deliver such documents as may
be reasonably required by the Agent prior to consummating such merger.
9.10 Distributions; Capital Change; Restricted Investments. No Borrower
and none of their Subsidiaries shall (a) directly or indirectly declare or make,
or incur any liability to make, any Distribution, except Distributions to a
Borrower by its Subsidiaries and Distributions by MKR with respect to its
Preferred Stock in an aggregate amount not to exceed $40,000 per year, (b) make
any change in its capital structure which could have a Material Adverse Effect,
(c) make any Restricted Investment except:
(1) intercompany loans by one Borrower to any other Borrower; provided that
such intercompany loans shall be subject to the following terms and conditions:
(i) such loans shall be unsecured and payable on demand, and
the Borrowers hereby agree that all such Indebtedness shall
be subordinated in right of payment to the final payment in
full in cash of the Obligations;
(ii) no Default or Event of Default shall then exist and be
continuing or would result after giving effect thereto, and
after giving effect to each such
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intercompany loan, both the Borrower making such loan and
the recipient thereof shall be Solvent;
(iii) each recipient of such a loan shall use the proceeds
thereof solely for its own working capital requirements and
other general corporate purposes arising in the ordinary
course of its business or as permitted by Section 8.24
hereof;
(iv) after giving effect to each intercompany loan, the
Borrower making such loan shall have Availability
(consisting of MKR's Availability or the applicable
Components Subsidiary's Availability as the case may be)
equal to at least 10% of MKR's Borrowing Base or that
Components Subsidiary's Borrowing Base, as applicable;
(v) after giving effect to such intercompany loan, the
Borrower making such intercompany loan shall have a Modified
Fixed Charge Coverage Ratio of at least 1.25 to 1.0 for the
twelve calendar months most recently ended prior to the date
such intercompany loan is made, and the Borrower making such
intercompany loan shall have delivered to the Agent a
compliance certificate demonstrating its compliance with the
terms of this clause (v) and clause (iv) above; and
(vi) Borrowers shall have delivered to the Agent a current
list of intercompany accounts outstanding; and
(vii) in no event shall the aggregate amount of all such
intercompany loans owing by MKR to the Components
Subsidiaries exceed six million dollars ($6,000,000) in the
aggregate at any time; and
(2) reimbursement of expenses incurred by MKR on behalf of any Components
Subsidiary, provided that,
(i) such reimbursement shall be limited to actual out-
of-pocket expenditures made by MKR for the benefit of the
particular Components Subsidiary;
(ii) such reimbursement shall be for expenses incurred for
the direct benefit of the particular Components Subsidiary
consisting of legal, accounting, treasury, audit, insurance,
pension or personnel services;
(iii) such reimbursement shall be allocated among the
Components Subsidiaries to the extent determinable, based on
the benefit received or expense incurred with respect to
each Components Subsidiary and if not determinable,
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pro rata based on the relative sales volume of each
Components Subsidiary; and
(iv) the aggregate amount of expenses incurred by MKR and
reimbursed by the Components Subsidiaries during each Fiscal
Year shall not exceed six million two hundred and fifty
thousand dollars ($6,250,000).
9.11 Transactions Affecting Collateral or Obligations. No Borrower and
none of their Subsidiaries shall enter into any transaction which could have a
Material Adverse Effect.
9.12 Guaranties. No Borrower and none of their Subsidiaries shall make,
issue, or become liable on any Guaranty, except Guaranties in favor of the
Agent.
9.13 Debt; Changes to Preferred Stock. (a) No Borrower nor any of their
Subsidiaries shall incur or maintain any Debt, other than: (i) the Obligations;
(ii) trade payables and contractual obligations to suppliers and customers
incurred in the ordinary course of business; (iii) other Debt existing on the
Closing Date and reflected on Schedule 8.9; and (iv) Debt secured by Liens
permitted under Section 9.19.
3(b) MKR shall not, in any event, change or amend the terms of
the Preferred Stock (or any certificate of designations with respect thereto).
9.14 Prepayment. No Borrower and none of their Subsidiaries shall (a)
voluntarily prepay any Debt, except the Obligations in accordance with the terms
of this Agreement or (b) exercise any right of optional redemption with respect
to the Preferred Stock.
9.15 Transactions with Affiliates. (a) No Borrower and none of their
Subsidiaries shall, sell, transfer, distribute, or pay any money or property,
including, but not limited to, any fees or expenses of any nature (including,
but not limited to, any fees or expenses for management services), to any
Affiliate, or lend or advance money or property to any Affiliate, or invest in
(by capital contribution or otherwise) or purchase or repurchase any stock or
indebtedness, or any property, of any Affiliate, or become liable on any
Guaranty of the indebtedness, dividends, or other obligations of any Affiliate,
except that (a) the Borrowers may make travel advances or other loans to their
employees in connection with relocations provided that all such loans and
advances are less than $75,000 in the aggregate and (b) the Components
Subsidiaries may make payments to MKR (i) to satisfy MKR's Federal, state and
local income tax obligations to the extent such obligations are the result of
the net consolidated income of the Components Subsidiaries and their
Subsidiaries being attributed to MKR for tax purposes, (ii) as permitted under
Section 9.10
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hereof or (iii) to pay such other amounts as are described on Schedule 9.15.
Notwithstanding the foregoing, each Borrower and its Subsidiaries may engage in
transactions with Affiliates in the ordinary course of business, in amounts and
upon terms fully disclosed to the Agent in writing and the Lenders, and no less
favorable to the Borrowers or such Subsidiary than would be obtained in a
comparable arm's-length transaction with a third party who is not an Affiliate,
and each Borrower shall guaranty the Obligations of each other Borrower
hereunder.
(b) Without limiting the restrictions set forth in paragraph
(a) above, in addition, the Borrowers hereby agree that if at any time for any
reason the Borrowers' Availability should fall below $4,000,000, then the
Borrowers will immediately take any and all steps necessary to cause the
aggregate amount of trade payables, accrued expenses and other obligations of
any kind owed by MK Gain, S.A. de C.V. to the Borrowers (other than the Debt of
MK Gain, S.A. de C.V. owed to the Borrowers and set forth on the Pro Forma) to
be paid down to below $4,000,000 (U.S. Dollars) and in no instance will the
amount of such accrued expenses, payables and obligations owed by MK Gain, S.A.
de C.V. to the Borrowers ever be permitted to exceed $6,000,000 (U.S. Dollars).
9.16 Investment Banking and Finder's Fees. No Borrower and none of
their Subsidiaries shall pay or agree to pay, or reimburse any other party with
respect to, any investment banking or similar or related fee, underwriter's fee,
finder's fee, or broker's fee to any Person in connection with this Agreement.
Each Borrower shall defend and indemnify the Agent and the Lenders against and
hold them harmless from all claims of any Person for any such fees, and all
costs and expenses (including without limitation, attorneys' fees) incurred by
the Agent and/or any Lender in connection therewith.
9.17 Management Compensation. Intentionally omitted.
9.18 Business Conducted. No Borrower shall or shall permit any of its
Subsidiaries to, engage directly or indirectly, in any line of business other
than the businesses in which such Borrower or such subsidiary is engaged on the
Closing Date.
9.19 Liens. Except as set forth on Schedule 9.19 hereto, no Borrower
and none of their Subsidiaries shall create, incur, assume, or permit to exist
any Lien on any property now owned or hereafter acquired by any of them, except
(a) Permitted Liens, (b) Liens created after the date hereof by conditional sale
or other title retention agreements (including, without limitation, Capital
Leases) or in connection with purchase money indebtedness with respect to
properties acquired by any Borrower or any of their Subsidiaries in the ordinary
course of business, involving the incurrence of an aggregate amount of purchase
money indebtedness
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and obligations (whether or not then due or paid) in connection with such
Capital Leases of not more than Three Million Dollars ($3,000,000) outstanding
at any one time for all such Liens (provided that such Liens attach only to the
assets subject to such purchase money debt or Capital Lease and such Debt is
incurred within twenty (20) days following such purchase of such assets and does
not exceed 100% of the purchase price of the subject assets, (c) Liens created
on certain of MKR's cash after the Closing Date to the extent such cash has been
deposited as cash collateral in favor of a third party bank or financial
institution other than BABC or a Lender (the "Other L/C Issuer") to secure the
reimbursement obligations of MKR to such Other L/C Issuer in connection with its
issuance of a letter of credit for the account of MKR, provided that (i) such
letter of credit is in favor of the issuer of a performance bond on behalf of
MKR, (ii) the maximum stated amount of all such letters of credit does not
exceed $7,500,000, (iii) the obligations and liabilities of MKR with respect to
all such letters of credit are non recourse to MKR except to the extent of the
cash collateral securing the obligations to such Other L/C Issuer and (iv) Agent
has reviewed all documentation in connection with such letters of credit of any
Other L/C Issuer and acknowledged in writing that such documentation is in form
and substance reasonably acceptable to Agent, (d) Liens created on certain of
MKR's inventory at its Boise, Idaho facility in favor of PTRA that is providing
inventory financing to MKR in connection with the PTRA Contract provided that
(i) the Agent (on behalf of the Lenders), MKR and PTRA shall have entered into
an intercreditor agreement in form and substance acceptable to the Agent (the
"PTRA Intercreditor") which, among other things, shall define the limited nature
of PTRA's Lien on MKR's inventory and identify all documentation and agreements
related to the PTRA Contract and PTRA Indebtedness, (ii) the maximum principal
amount of PTRA Indebtedness shall not at any time exceed $20,000,000 and the
interest rate, fees and other terms and conditions of the PTRA Indebtedness
shall be acceptable to the Agent, (iii) the Lien in favor of PTRA shall only
apply to specific locomotives which are being reconstructed under the PTRA
Contract and certain other raw materials, spare parts and work in process
inventory that is not attached to and made a part of the locomotives under
reconstruction, but is necessary to the reconstruction of such locomotives and
is identified in the PTRA Intercreditor and (iv) all locomotives and locomotive
cores being pledged to PTRA shall first be identified to the Agent by written
notice listing the model, road number and serial number, and (e) Liens created
on certain of MKR's inventory at its Boise, Idaho facility in favor of HBTC that
is providing inventory financing to MKR in connection with the HBTC Contract
provided that (i) the Agent (on behalf of the Lenders), MKR and HBTC shall have
entered into an intercreditor agreement in form and substance acceptable to the
Agent (the "HBTC Intercreditor") which, among other things, shall define the
limited nature of HBTC's Lien on MKR's inventory
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and identify all documentation and agreements related to the HBTC Contract and
HBTC Indebtedness, (ii) the maximum principal amount of HBTC Indebtedness shall
not at any time exceed $7,000,000 and the interest rate, fees and other terms
and conditions of the HBTC Indebtedness shall be acceptable to the Agent, (iii)
the Lien in favor of HBTC shall only apply to specific locomotives which are
being reconstructed under the HBTC Contract and certain other raw materials,
spare parts and work in process inventory that is not attached to and made a
part of the locomotives under reconstruction, but is necessary to the
reconstruction of such locomotives and is identified in the HBTC Intercreditor
and (iv) all locomotives and locomotive cores being pledged to HBTC shall first
be identified to the Agent by written notice listing the model, road number and
serial number.
9.20 Sale and Leaseback Transactions. No Borrower and none of their
Subsidiaries shall, directly or indirectly, enter into any arrangement with any
Person providing for such Borrower or such Subsidiary to lease or rent property
that such Borrower or such Subsidiary has sold or will sell or otherwise
transfer to such Person, except sale-leasebacks of locomotives in the ordinary
course of MKR's business which are otherwise in compliance with Section 9.24.
9.21 New Subsidiaries; Motive Power. No Borrower shall, directly or
indirectly, organize, create, acquire or permit to exist any Subsidiary other
than those listed on Schedule 8.5. MCM Transportation Co., a Pennsylvania
corporation, is a wholly-owned Subsidiary of Motor Coils and (i) is not
currently conducting business or business operations, (ii) shall not restart
operations without the written consent of Agent, and (iii) has no assets or
liabilities of any kind; provided, however, that MKR shall be permitted to form
a new wholly-owned Subsidiary (which Subsidiary will not be a Borrower under
this Agreement) to be called Motive Power International, Inc., a Delaware
corporation ("Motive"), solely to act as a foreign distribution agent on behalf
of MKR on the condition that (i) Motive shall guaranty the Obligations pursuant
to a guaranty agreement in form and substance acceptable to the Agent, (ii) all
of the capital stock and assets of Motive shall be pledged in favor of the
Agent, on behalf of the Lenders, pursuant to security agreements, stock pledge
agreements, documents, UCC financing statements and other filings in form and
substance acceptable to the Agent and granting the Agent (on behalf of the
Lenders) a first and prior perfected security interest in such assets and stock,
(iii) MKR has provided the Agent with a certificate from its chief financial
officer or treasurer containing a description of Motive's proposed business and
operations including, without limitation, information on Motive's employees,
assets and any receivables or inventory it will have as well as where it
proposes to conduct business and the costs and charges of such services to MKR,
which costs and charges must be
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reasonable and not be greater than those that would otherwise be charged by an
independent entity that entered into such transaction with MKR on an arms length
basis. The Borrowers hereby agree that (A) no Borrower shall be permitted to
make any intercompany loans, contributions, advances or payments of any kind to
Motive (other than payments to Motive to cover Motive's actual out of pocket
costs for services rendered by Motive which payments are made strictly in
accordance with the description of Motive's business provided to the Agent under
clause (iii) above) and (B) prior to the time Motive begins operations or
business of any kind, MKR will receive the written consent of the Agent
acknowledging that the requirements of this Section 9.21 and any other
requirements reasonably requested by Agent have been completed to Agent's
satisfaction.
9.22 Fiscal Year. No Borrower shall change its Fiscal Year.
9.23 Capital Expenditures. No Borrower and none of their Subsidiaries
shall make or incur any Capital Expenditure if, after giving effect thereto, the
aggregate amount of all Capital Expenditures by the Borrowers and their
Subsidiaries on a consolidated basis would exceed: $7,500,000 during Fiscal Year
1996; $11,000,000 during Fiscal Year 1997; and $12,000,000 during Fiscal Year
1998 and each Fiscal Year thereafter.
9.24 Operating Lease Obligations. No Borrower and none of their
Subsidiaries shall enter into, or suffer to exist, any lease of real or personal
property as lessee or sublessee (other than a Capital Lease), if, after giving
effect thereto, the aggregate amount of Rentals (as hereinafter defined) payable
by the Borrowers and their Subsidiaries on a consolidated basis in any Fiscal
Year in respect of such lease and all other such leases would exceed the sum of
(a) Seven Million Five Hundred Thousand Dollars ($7,500,000) plus (b) the annual
Rentals on any lease ("Master Lease") by MKR of any locomotives for which MKR
has also entered into a sublease where MKR is the lessor of such locomotive and
such sublease has an effective and valid lease term which runs until after the
Stated Termination Date or runs coterminous with the term of the Master Lease
(such amount being referred to herein as "Permitted Rentals"). The term
"Rentals" means all payments due from the lessee or sublessee under a lease,
including, without limitation, basic rent, percentage rent, property taxes,
utility or maintenance costs, and insurance premiums.
9.25 Debt Ratio. The Borrowers will not permit the ratio of Debt to
Adjusted Tangible Net Worth ("Debt Ratio") to exceed 2.0 to 1.0, measured as of
the last day of each Fiscal Quarter through the Fiscal Quarter Ending in June
1997, and (b) 1.5 to 1.0 measured as of the last day of each Fiscal Quarter
thereafter.
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9.26 Current Ratio. The Borrowers will not permit the ratio of Current
Assets to Current Liabilities to be less than 1.2 to 1.0, measured as of the
last day of each Fiscal Quarter.
9.27 Adjusted Tangible Net Worth. The Borrowers will maintain an
Adjusted Tangible Net Worth of at least the following amounts, determined as of
the last day of the respective Fiscal Quarters set forth below:
Adjusted Tangible Net Worth Fiscal Quarter Ending
- --------------------------- ---------------------------
$ 52,500,000 September, 1996
$ 57,000,000 December, 1996
$ 61,000,000 March, 1997
$ 64,500,000 June, 1997
$ 67,500,000 September, 1997
$ 71,000,000 December, 1997
$ 76,000,000 March, 1998
$ 81,500,000 June, 1998
$ 86,500,000 September, 1998
$ 92,000,000 December, 1998
$ 97,000,000 March, 1999
$ 102,500,000 June, 1999
$ 107,500,000 September 1999
and thereafter
; provided, however, that each of the Adjusted Tangible Net Worth numbers above
shall be increased by an amount equal to Ninety percent (90%) of (a) the gain
attributable to any asset sale (other than sales of Inventory in the ordinary
course) approved by the Agent in writing (b) any gain attributable to the
repurchase of the Subordinated Debt on the Closing Date, all such gain to be
determined according to GAAP.
9.28 Fixed Charges Coverage Ratio. (a) The Borrowers, on a consolidated
basis, will maintain a Fixed Charges Coverage Ratio, of at least the following
respective amounts, measured as of the last day of the respective Fiscal
Quarters set forth below:
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Fixed Charges Measurement Period Ended on
Coverage Ratio the Last Day of Fiscal Quarter
- -------------- ------------------------------
1.25:1.00 September and December, 1996
1.35:1.00 Last day of each Fiscal
Quarter thereafter
(b) Each of Touchstone, Motor Coils, MKES, and Power Parts, on
an individual basis, will maintain a Fixed Charges Coverage Ratio of at least
1.25 to 1.0, measured as of the last day of each Fiscal Quarter.
Measurements as of the last day of each Fiscal Quarter shall
be for the four Fiscal Quarters ended on the last day of each of the respective
Fiscal Quarters.
9.29 Use of Proceeds. No Borrower shall, or shall suffer or permit any
of its Subsidiaries to, use any portion of the Loan proceeds, directly or
indirectly, (i) to purchase or carry Margin Stock, (ii) to repay or otherwise
refinance indebtedness of any Borrower or others incurred to purchase or carry
Margin Stock, (iii) to extend credit for the purpose of purchasing or carrying
any Margin Stock, or (iv) to acquire any security in any transaction that is
subject to Section 13 or 14 of the Exchange Act.
9.30 Further Assurances; Acceptance of Citibank L/C. Each Borrower
shall execute and deliver, or cause to be executed and delivered, to the Agent
and/or the Lenders such documents and agreements, and shall take or cause to be
taken such actions, as the Agent or any Lender may, from time to time, request
to carry out the terms and conditions of this Agreement and the other Loan
Documents. MKR further agrees that promptly after the Closing Date it shall use
commercially reasonable efforts to have the letter of credit issued by Citibank
N.A., Buenos Aires Argentina, to secure the payment of the Eligible Argentine
Notes accepted by Citibank N.A. in New York pursuant to an acceptance agreement
in form and substance acceptable to the Agent.
9.31 Restructure Costs. The Borrowers will not permit the 1995
Restructure to exceed in the aggregate $42,000,000.
ARTICLE 10
CONDITIONS OF LENDING
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10.1 Conditions Precedent to Making of Loans on the Initial Closing
Date. Borrowers hereby acknowledge that the obligation of BABC, as lender under
the Existing Loan Agreement, to make the initial Revolving Loan pursuant to the
Existing Loan Agreement was, in addition to the conditions precedent specified
in Section 10.2 below, subject to satisfaction of the conditions set forth
below, prior to or concurrent with the initial funding thereof (except as such
conditions were waived by the Agent on the Initial Closing Date or the time for
performance or delivery was extended or modified pursuant to the terms of that
certain Post-Closing Agreement entered into on such date):
(a) The Existing Loan Agreement and the other Loan Documents
had been executed by each party thereto and each Borrower performed and complied
with all covenants, agreements and conditions contained therein and in the other
Loan Documents which were required to be performed or complied with by such
Borrower before or on such Initial Closing Date.
(b) After making the Revolving Loans on the Initial Closing
Date (including such Revolving Loans made to finance the closing fee due on such
date as reimbursement for fees, costs and expenses then payable under the
Existing Loan Agreement) and with all their obligations current, MKR's
Availability was equal to 10% or more of MKR's Borrowing Base immediately prior
to the making of such Revolving Loans and each Components Subsidiary's
Availability equaled or exceeded 10% or more of that Components Subsidiary's
Borrowing Base immediately prior to the making of such Revolving Loans.
(c) All representations and warranties made in the Loan
Documents were true and correct as of the Initial Closing Date as if made on
such date.
(d) No Default or Event of Default existed on the Initial
Closing Date after giving effect to the Loans to be made on such date.
(e) The Agent and the Lenders received such opinions of
counsel for each Borrower and its Subsidiaries (including ICC counsel)as the
Agent or any Lender requested, each such opinion was in form, scope, and
substance satisfactory to the Agent, the Lenders, and their respective counsel.
(f) The Agent and the Lenders received title policies, in form
and substance acceptable to Agent, with respect to the Mortgages.
(g) The Agent received:
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(I) acknowledgment copies of proper financing
statements, duly filed on or before the Initial Closing Date under the UCC of
all jurisdictions that the Agent deemed necessary or desirable in order to
perfect the Agent's Lien; and
(II) duly executed UCC-3 Termination Statements and
other instruments, in form and substance satisfactory to the Agent, as were
necessary to terminate and satisfy all Liens on the Property of each Borrower
and its Subsidiaries except Permitted Liens.
(h) Each Borrower had paid all fees and expenses of the Agent
and the Attorney costs incurred in connection with any of the Loan Documents and
the transactions contemplated thereby.
(i) The Agent received evidence, in form, scope, and
substance, reasonably satisfactory to the Agent, of all insurance coverage as
required by the Existing Loan Agreement.
(j) The Agent and the Lenders had an opportunity to examine
the books of account and other records and files of the Borrowers and to make
copies thereof, and to conduct a pre-closing audit which included, without
limitation, verification of Inventory, Accounts, and Availability, MKR's
Availability and each Component Subsidiary's Availability and the results of
such examination and audit were satisfactory to the Agent and the Lenders in all
respects.
(k) All proceedings taken in connection with the execution of
the Existing Loan Agreement, all other Loan Documents and all documents and
papers relating thereto was satisfactory in form, scope, and substance to the
Agent and the Lenders.
(l) The Agent received a separate security agreement regarding
all locomotives owned by MKR and all leases of such locomotives and such
security agreement was filed with and accepted by the Interstate Commerce
Commission in the USA and with the Registrar General of Canada pursuant to the
Railway Act of Canada (R.S.C. 1985).
(m) MKR delivered to the Agent true copies of all agreements
to which it is a party providing for progress payments, surety or performance
bonds and financial penalties for failure to complete.
(n) Each Memorandum of Understanding was executed and
delivered by all parties thereto in the form delivered to the Agent prior to the
date hereof; the preferred stock issued or to be issued by MKR pursuant to the
Memoranda of Understanding had the rights and preferences set forth in Schedule
10.1(n); and MK Rail certified that it knew of no facts that would be reasonably
likely
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to cause the Stockholders Litigation to which MK Rail is a party not to be
settled in accordance with the terms set forth in the Memoranda of Litigation.
(o) All intercompany indebtedness of MKR owing to Morrison
Knudsen Corporation, an Ohio corporation was evidenced by unsecured promissory
notes in an amount not to exceed $52,200,000, payable over not less than five
years in maximum aggregate payments no greater than $10,440,000 per year,
bearing interest and otherwise having terms acceptable to the Lenders.
(p) The Subordinated Debt was subordinated in right of payment
to the Obligations pursuant to a Subordination Agreement on terms satisfactory
to the Lenders, which in any event does not require annual payments of principal
and interest except in accordance with Section 9.13.
(q) Inventory Appraisal, including locomotive appraisal.
(r) No Material Adverse Effect had occurred since March 31,
1995 and the Borrowers' financial performance met or exceeded results of
operations contained in the Projections dated May 30, 1995 delivered to the
Agent.
(s) The Agent received landlord, mortgagee, warehousemen or
consignee waivers as to all Inventory located at any site not owned by a
Borrower.
(t) No action suit investigation or proceeding was pending or
threatened before any court, Governmental Authority or arbitrator that could in
the Agent's judgment have had a Material Adverse Effect or challenged, seeked to
enjoin or seeked to impose restrictions upon the transactions contemplated
hereby.
(u) The Agent received a pro forma consolidated and
consolidating balance sheet of the Borrowers dated as of the Initial Closing
Date which reflects no material changes from the most recent pro forma balance
sheet delivered to the Agent prior to the Initial Closing Date.
(v) MKR delivered to the Agent a stock pledge agreement,
together with share certificates representing all of the outstanding capital
stock of each Components Subsidiary and stock powers endorsed in blank.
(w) The Borrowers delivered to the Agent all of the additional
closing documents listed on Exhibit D to the Existing Loan Agreement.
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(x) The Borrowers had an Adjusted Tangible Net Worth as of the
last day of the most recent Fiscal Month preceding the Initial Closing Date of
at least $88,529,000.
The acceptance by any Borrower of any Loans made on the Initial Closing
Date was deemed to be a representation and warranty made by all Borrowers to the
effect that all of the conditions precedent to the making of such Loans have
been satisfied, with the same effect as delivery to the Agent and the Lenders of
a certificate signed by the a Responsible Officer of each Borrower, dated the
Initial Closing Date, to such effect.
Execution and delivery to the Agent by a Lender of a counterpart to the
Existing Loan Agreement was deemed confirmation by such Lender that (i) all
conditions precedent in this Section 10.1 had been fulfilled to the satisfaction
of such Lender and (ii) the decision of such Lender to execute and deliver to
the Agent an executed counterpart to the Existing Loan Agreement was made by
such Lender independently and without reliance on the Agent or any other Lender
as to the satisfaction of any condition precedent set forth in Section 10.1 of
the Existing Loan Agreement.
10.2 Conditions Precedent to Each Loan. The obligation of the Lenders
to make each Loan, including the initial Revolving Loans and Term Loan on the
Closing Date, and the obligation of the Agent to take reasonable steps to cause
to be issued any Letter of Credit and the obligation of the Lenders to
participate in Letters of Credit, shall be subject to the further conditions
precedent that on and as of the date of any such extension of credit:
(a) the following statements shall be true, and the acceptance
by any Borrower of any extension of credit shall be deemed to be a statement to
the effect set forth in clauses (i) and (ii), with the same effect as the
delivery to the Agent and the Lenders of a certificate signed by a Responsible
Officer, dated the date of such extension of credit, stating that:
(b) The representations and warranties contained in this
Agreement and the other Loan Documents are correct in all material respects on
and as of the date of such extension of credit as though made on and as of such
date, except to the extent the Agent and the Lenders have been notified by MKR
that any representation or warranty is not correct and the Majority Lenders have
explicitly waived in writing compliance with such representation or warranty;
and
(i) No event has occurred and is continuing, or would result
from such extension of credit, which constitutes a Default or an Event of
Default; and
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(c) without limiting Section 10.3 (e), the amount of the
Availability, MKR's Availability and each Components Subsidiary's Availability,
shall be sufficient to permit the making of such Revolving Loan, provided,
however, that the foregoing conditions precedent are not conditions to each
Lender participating in or reimbursing BABC or the Agent for such Lenders' Pro
Rata Share of any BABC Loan or Agent Advance as provided in Sections 2.1(h), (i)
and (j).
10.3 Conditions to this Agreement.
The obligations of the Agent and each Lender to enter into this
Agreement are subject to prior or concurrent satisfaction of the conditions
precedent set forth below.
(a) No Default or Event of Default. No event shall have occurred and be
continuing that constitutes an Event of Default or a Default under the Existing
Loan Agreement or under this Agreement.
(b) Performance of Agreements. Each Borrower shall have performed in
all material respects all agreements and satisfied all conditions which any Loan
Document provides shall be performed by it on or before the Closing Date.
(c) Borrower Documents. On or before the Closing Date, Borrower shall
(unless delivery thereof is waived by the Agent in its sole discretion) deliver
or cause to be delivered to Agent the documents listed below, each, unless
otherwise noted, dated the date hereof, duly executed, in form and substance
reasonably satisfactory to Agent and in quantities designated by Agent (except
for the Term Loan Notes, of which only the originals shall be signed):
(1) Agreement; Notes. This Agreement, the Term Loan Notes and
the amendment and restatement of any other Loan Documents as the Agent may
reasonably request.
(2) Disclosure Schedules. The schedules to this Agreement
shall have been revised in form and substance acceptable to the Agent.
(3) Officer's Certificate. A certificate executed by the chief
executive officer, chief financial officer or treasurer of each Borrower,
stating that, on the date hereof, (a) prior to giving effect to this Agreement,
no Default or Event of Default has occurred and is continuing under the Existing
Loan Agreement and, after giving effect to this Agreement, no Default or Event
of Default has occurred and is continuing hereunder; (b) no material adverse
change in the Collateral, financial condition or operations of the business of
any Borrower or any of their Subsidiaries has
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occurred since August 31, 1995; (c) prior to giving effect to this Agreement,
the representations and warranties set forth in Section 8 of the Existing Loan
Agreement are true and correct in all material respects as though made on and as
of the date hereof and, after giving effect to this Agreement, the
representations and warranties set forth in Section 8 of this Agreement are true
and correct in all material respects; and (d) each Borrower is in compliance
with all the terms and provisions set forth in the Existing Loan Agreement and
in this Agreement on its part to be observed and performed.
(4) Modifications of Mortgages, Title Insurance. Modifications
of Mortgages executed under the Existing Loan Agreement together with: (a) date
down endorsements to the title insurance policies delivered in connection with
the Mortgages; and (b) evidence that counterparts of the mortgages have been
recorded in all places to the extent necessary or desirable, in the judgment of
Agent, to create a valid and enforceable first priority lien (subject to
Permitted Encumbrances) on each mortgaged property in favor of Agent for the
benefit of Lenders (or in favor of such other trustee as may be required or
desired under local law).
(5) Insurance Policies and Endorsements. Copies of policies of
insurance required to be maintained under this Agreement together with
endorsements satisfactory to Agent naming Agent as loss payee or additional
insured (as required by Subsection 9.5) under such policies.
(6) Resolutions. Resolutions of the Board of Directors of each
Borrower approving and authorizing, as applicable, the execution, delivery and
performance of the Loan Documents to which such Borrower is to be a party. All
of the above will be certified as of the date hereof by each Borrower's
corporate secretary or an assistant secretary as being in full force and effect
without modification or amendment.
(7) Incumbency Certificates. Signature and incumbency
certificates of the officers of each Borrower executing the Loan Documents
together with a representation that the copies of the Certificates or Articles
of Incorporation and By-Laws of such Person as delivered in connection with the
closing of the Existing Loan Agreement remain in full force and effect and have
not been amended.
(8) Subsidiary Guaranty. Alert Mfg. & Supply Co. and any other
Subsidiaries of any Borrower (other than MK Gain and MCM Transportation Co.)
shall have executed a Guaranty in form and substance acceptable to the Agent, in
favor of the Agent, on behalf of the Lenders.
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(9) Borrowers' Counsel opinion. The favorable written opinion,
in form and substance reasonably satisfactory to Agent and its counsel, dated as
of the Closing Date, of Doepken Keevican & Weiss, counsel to the Borrowers, in
form and substance acceptable to the Agent, including an opinion that the
transactions contemplated hereby do not violate the terms of or require a
redemption of the Preferred Stock, together with such local counsel opinions as
the Agent shall reasonably require.
(10) Tax Opinion from Accountants. A written opinion from
Deloitte & Touche (or another accounting or legal firm acceptable to the Agent)
in favor of MKR and the Agent (on behalf of the Lenders) and in form and
substance reasonably acceptable to the Agent, which shall include customary and
reasonable assumptions and qualifications, indicating that the repayment of the
Subordinated Debt pursuant to the terms and conditions in the Note Cancellation
and Restructuring Agreement will not result in any cancellation of indebtedness
income or tax liability to the Borrowers for Federal Income tax purposes, except
to the extent that such tax liability is completely offset by net operating loss
deductions (including carry forwards) then available to the Borrowers.
(11) Stockholder Litigation. Evidence satisfactory to the
Agent that (i) the Stockholder Litigation has been settled and such settlement
has been confirmed by orders of the applicable trial court on the terms set
forth in the Memoranda of Understanding, and (ii) that holders of no more than
10% of any class of securities affected thereby have elected to "opt out" of the
settlement as confirmed.
(12) Subordinated Debt. A certified copy of an escrow
agreement or other arrangement acceptable to the Agent related to the
Subordinated Debt among all parties as deemed necessary by the Agent obligating
the escrow agent or other party thereunder to mark the note evidencing the
Subordinated Debt cancelled upon payment into the escrow account thereunder or
to such other Person as is acceptable to the Agent of $34,500,000 (plus interest
on $6,900,000 of principal beginning as of June 20, 1996) in immediately
available funds in accordance with the Note Cancellation and Restructuring
Agreement.
(13) Additional Documents. The Borrowers shall have delivered
to the Agent (unless waived by the Agent in its sole discretion) in form
acceptable to the Agent all of the additional closing documents listed on
Exhibit D hereto.
(d) Other Documents. Borrowers shall have delivered such other
documents as the Agent may reasonably request.
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(e) Availability. After making the Revolving Loans and the Term Loan on
the Closing Date (including such Revolving Loans made to finance the Closing Fee
due on such date) and assuming that the Subordinated Debt has been repaid in
full and all the Borrowers' obligations including trade payables are current and
paid in full as of the Closing Date, the Borrowers' Availability shall be at
least $7,000,000.
The acceptance by any Borrower of any Loans made on the Closing Date
shall be deemed to be a representation and warranty made by all Borrowers to the
effect that all of the conditions precedent to the making of such Loans have
been satisfied, with the same effect as delivery to the Agent and the Lenders of
a certificate signed by the a Responsible Officer of each Borrower, dated the
Closing Date, to such effect.
Execution and delivery to the Agent by a Lender of a counterpart to
this Agreement shall be deemed confirmation by such Lender that (i) all
conditions precedent in this Section 10.1 have been fulfilled to the
satisfaction of such Lender and (ii) the decision of such Lender to execute and
deliver to the Agent an executed counterpart to this Agreement was made by such
Lender independently and without reliance on the Agent or any other Lender as to
the satisfaction of any condition precedent set forth in this Section 10.1.
ARTICLE 11
DEFAULT; REMEDIES
11.1 Events of Default. It shall constitute an event of default ("Event
of Default") if any one or more of the following shall occur for any reason:
(a) any failure to pay the principal of or premium on any of
the Obligations when due or to pay any interest within three (3) days of the
date when due, in any case whether upon demand or otherwise;
(b) any representation or warranty made by any Borrower in
this Agreement or by such Borrower or any of its Subsidiaries in any of the
other Loan Documents, any Financial Statement, or any certificate furnished by
any Borrower or any of its Subsidiaries at any time to the Agent or any Lender
shall prove to be untrue in any material respect as of the date on which made or
furnished;
(c) (i) any default shall occur in the observance or
performance of any of the covenants or agreements contained in any of Sections
6.6, 9.2, 9.5, 9.31 or 9.9 through 9.29 of this Agreement; (ii) any default
shall occur in the observance or performance of any other covenants or
agreements contained in this
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Agreement, any other Loan Documents, or any other agreement entered into at any
time to which any Borrower or any Subsidiary thereof and the Agent or any Lender
are party and shall continue for twenty (20) days or more following notice
thereof from the Agent to MKR; or (iii) if any such agreement or document shall
terminate (other than in accordance with its terms or the terms hereof or with
the written consent of the Agent and the Majority Lenders) or become void or
unenforceable, without the written consent of the Agent and the Majority
Lenders;
(d) default shall occur with respect to any Debt for borrowed
money (other than the Obligations) in an outstanding principal amount which
exceeds, in the aggregate for all such Debt with respect to which default shall
have occurred, $500,000, or under any agreement or instrument under or pursuant
to which any such Debt or indebtedness may have been issued, created, assumed,
or guaranteed by any Borrower or any of its Subsidiaries, and such default shall
continue for more than the period of grace, if any, therein specified, if the
effect thereof (with or without the giving of notice or further lapse of time or
both) is to accelerate, or to permit the holders of any such Debt or
indebtedness to accelerate, the maturity of any such Debt; or any such Debt or
indebtedness shall be declared due and payable or be required to be prepaid
(other than by a regularly scheduled required prepayment) prior to the stated
maturity thereof;
(e) any Borrower or any of its Subsidiaries shall (i) file a
voluntary petition in bankruptcy or file a voluntary petition or an answer or
otherwise commence any action or proceeding seeking reorganization, arrangement
or readjustment of its debts or for any other relief under the federal
Bankruptcy Code, as amended, or under any other bankruptcy or insolvency act or
law, state or federal, now or hereafter existing, or consent to, approve of, or
acquiesce in, any such petition, action or proceeding; (ii) apply for or
acquiesce in the appointment of a receiver, assignee, liquidator, sequestrator,
custodian, trustee or similar officer for it or for all or any part of its
property; (iii) make an assignment for the benefit of creditors; or (iv) be
unable generally to pay its debts as they become due;
(f) an involuntary petition shall be filed or an action or
proceeding otherwise commenced seeking reorganization, arrangement or
readjustment of the debts of any Borrower or any of its Subsidiaries or for any
other relief under the federal Bankruptcy Code, as amended, or under any other
bankruptcy or insolvency act or law, state or federal, now or hereafter existing
and either (i) such petition, action or proceeding shall not have been dismissed
within a period of sixty (60) days after its commencement or (ii) an order for
relief against any Borrower or such Subsidiary shall have been entered in such
proceeding;
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(g) a receiver, assignee, liquidator, sequestrator, custodian,
trustee or similar officer for any Borrower or any of its Subsidiaries or for
all or any part of its property shall be appointed or a warrant of attachment,
execution or similar process shall be issued against any part of the property of
such Borrower or any of its Subsidiaries;
(h) any Borrower or any of its Subsidiaries shall file a
certificate of dissolution under applicable state law or shall be liquidated,
dissolved or wound-up or shall commence or have commenced against it any action
or proceeding for dissolution, winding-up or liquidation, or shall take any
corporate action in furtherance thereof;
(i) all or any material part of the property of any Borrower
or any of its Subsidiaries shall be nationalized, expropriated or condemned,
seized or otherwise appropriated, or custody or control of such property or of
such Borrower or such Subsidiary shall be assumed by any Governmental Authority
or any court of competent jurisdiction at the instance of any Governmental
Authority, except where contested in good faith by proper proceedings diligently
pursued where a stay of enforcement is in effect;
(j) any guaranty of the Obligations shall be terminated,
revoked or declared void or invalid;
(k) one or more final, non-appealable judgments or orders for
the payment of money aggregating in excess of $250,000, which amount shall not
be fully covered by insurance, shall be rendered against any Borrower or any of
its Subsidiaries;
(l) any loss, theft, damage or destruction of any item or
items of Collateral or other property of any Borrower or any Subsidiary occurs
which (i) materially and adversely affects the property, business, operation,
prospects, or condition of any Borrower or any of its Subsidiaries; or (ii) is
material in amount and is not adequately covered by insurance;
(m) there occurs a Material Adverse Effect;
(n) there is filed against any Borrower or any of its
Subsidiaries any civil or criminal action, suit or proceeding under any federal
or state racketeering statute (including, without limitation, the Racketeer
Influenced and Corrupt Organization Act of 1970), which action, suit or
proceeding (1) is not dismissed within one hundred twenty (120) days, and (2)
could result in the confiscation or forfeiture of any material portion of the
Collateral;
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(o) for any reason other than the failure of the Agent to take
any action available to it to maintain perfection of the Agent's Liens, pursuant
to the Loan Documents, any Loan Document ceases to be in full force and effect
or any Lien with respect to any material portion of the Collateral intended to
be secured thereby ceases to be, or is not, valid, perfected and prior to all
other Liens (other than Permitted Liens) or is terminated, revoked or declared
void;
(p) an ERISA Event shall occur with respect to a Pension Plan
or Multi-employer Plan which has resulted or could reasonably be expected to
result in liability of any Borrower under Title IV of ERISA to the Pension Plan,
Multi-employer Plan or the PBGC in an aggregate amount in excess of $250,000;
(ii) the aggregate amount of Unfunded Pension Liability among all Pension Plans
at any time exceeds $250,000; or (iii) any Borrower or any ERISA Affiliate shall
fail to pay when due, after the expiration of any applicable grace period, any
installment payment with respect to its withdrawal liability under Section 4201
of ERISA under a Multiemployer Plan in an aggregate amount in excess of
$250,000;
(q) there occurs a Change of Control;
(r) any default, violation or breach shall occur in any
covenants or agreements contained in any lease documents pursuant to which MKR
leases locomotives from any other Person, and such locomotive lease shall be
terminated, or such default, violation or breach shall continue, for more than
the applicable grace period (and shall not have been waived in writing), and
shall give the lessor thereunder the right to terminate such locomotive lease or
otherwise bring suit of any kind against MKR for injunctive relief, damages or
other penalties or costs of any kind;
(s) (i) the Stockholder Litigation to which MKR is a party is
or was settled on terms other than those set forth in the Memoranda of
Understanding, or
(ii) the applicable trial court holds confirmation hearings
regarding the Stockholder Litigation to which MKR is a party and does
or did not enter an order or orders confirming the settlement of such
Stockholder Litigation on the terms set forth in the Memoranda of
Understanding, or
(iii) settlements of the Stockholder Litigation to which MKR is a
party are or were not confirmed by orders of the applicable trial court
on the terms set forth in the Memoranda of Understanding on or before
June 30, 1996 for any reason, or
(iv) settlements of the Stockholder Litigation to which MKR is a
party are or were confirmed by orders of the applicable trial court on
or before June 30, 1996 but holders
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of more than 10% of any class of securities affected thereby
elect or elected to "opt out" of the settlements so confirmed,
or
(v) any of the Memoranda of Understanding are terminated
by any party thereto for any reason, or
(vi) If the funding requirements (meaning the requirements of the
parties to deposit cash and securities) of MKR, Morrison Knudsen
Corporation or The Fidelity and Casualty Company of New York to fund
the various escrow accounts or joint accounts as set forth in the
Memoranda of Understanding have not been satisfied in full to the
satisfaction of Agent on or before October 30, 1995; or
(t) any violation, breach or default of any kind shall occur
under the PTRA Contract or any other documents executed in connection therewith
or the obligation of PTRA to make "Construction Advances" (as defined in the
PTRA Contract) shall be suspended for any reason; or (u) any violation, breach
or default of any kind shall occur under the HBTC Contract or any other
documents executed in connection therewith or the obligation of HBTC to make
"Construction Advances" (as defined in the HBTC Contract) shall be suspended for
any reason.
11.2 Remedies. (a) If a Default or an Event of Default exists, the
Agent may, in its discretion, and shall, at the direction of the Majority
Lenders, do one or more of the following at any time or times and in any order,
without notice to or demand on the Borrowers: (i) reduce the Maximum Revolver
Amount, or the advance rates against Eligible Accounts, Eligible Inventory
and/or other eligible Collateral used in computing Availability, MKR's
Availability or any Component Subsidiary's Availability or reduce one or more of
the other elements used in computing Availability, MKR's Availability or any
Components Subsidiary's Availability; (ii) restrict the amount of or refuse to
make Revolving Loans; and (iii) restrict or refuse to arrange for Letters of
Credit. If an Event of Default exists, the Agent shall, at the direction of the
Majority Lenders, do one or more of the following, in addition to the actions
described in the preceding sentence, at any time or times and in any order,
without notice to or demand on any Borrower: (a) terminate the Commitments and
this Agreement; (b) declare any or all Obligations to be immediately due and
payable; provided, however, that upon the occurrence of any Event of Default
described in Sections 11.1(e), 11.1(g), or 11.1(h), the Commitments shall
automatically and immediately expire and all Obligations shall automatically
become immediately due and payable without notice or demand of any kind; and (c)
pursue its other rights and remedies under the Loan Documents and applicable
law.
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(b) If an Event of Default exists: (i) the Agent shall have
for the benefit of the Lenders, in addition to all other rights of the Agent and
the Lenders, the rights and remedies of a secured party under the UCC; (ii) the
Agent may, at any time, take possession of the Collateral and keep it on the
applicable Borrower's premises, at no cost to the Agent or any Lender, or remove
any part of it to such other place or places as the Agent may desire, or the
Borrowers shall, upon the Agent's demand, at the Borrowers' cost, assemble the
Collateral and make it available to the Agent at a place reasonably convenient
to the Agent; and (iii) the Agent may sell and deliver any Collateral at public
or private sales, for cash, upon credit or otherwise, at such prices and upon
such terms as the Agent deems advisable, in its sole discretion, and may, if the
Agent deems it reasonable, postpone or adjourn any sale of the Collateral by an
announcement at the time and place of sale or of such postponed or adjourned
sale without giving a new notice of sale. Without in any way requiring notice to
be given in the following manner, the Borrowers agree that any notice by the
Agent of sale, disposition or other intended action hereunder or in connection
herewith, whether required by the UCC or otherwise, shall constitute reasonable
notice to the Borrowers if such notice is mailed by registered or certified
mail, return receipt requested, postage prepaid, or is delivered personally
against receipt, at least five (5) Business Days prior to such action to the
MKR's address specified in or pursuant to Section 15.8. If any Collateral is
sold on terms other than payment in full at the time of sale, no credit shall be
given against the Obligations until the Agent or the Lenders receive payment,
and if the buyer defaults in payment, the Agent may resell the Collateral
without further notice to any Borrower. In the event the Agent seeks to take
possession of all or any portion of the Collateral by judicial process, each
Borrower irrevocably waives: (a) the posting of any bond, surety or security
with respect thereto which might otherwise be required; (b) any demand for
possession prior to the commencement of any suit or action to recover the
Collateral; and (c) any requirement that the Agent retain possession and not
dispose of any Collateral until after trial or final judgment. Each Borrower
agrees that the Agent has no obligation to preserve rights to the Collateral or
marshal any Collateral for the benefit of any Person. The Agent is hereby
granted a license or other right to use, without charge, each Borrower's labels,
patents, copyrights, name, trade secrets, trade names, trademarks, and
advertising matter, or any similar property, in completing production of,
advertising or selling any Collateral, and each Borrower's rights under all
licenses and all franchise agreements shall inure to the Agent's benefit. The
proceeds of sale shall be applied in accordance with Section 4.5 and each
Borrower shall remain liable for any deficiency.
(c) If an Event of Default occurs, each Borrower hereby waives
all rights to notice and hearing prior to the exercise by the Agent of the
Agent's rights to repossess the Collateral without
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judicial process or to replevy, attach or levy upon the Collateral without
notice or hearing.
(d) If the Agent, at the direction of the Majority Lenders
terminates this Agreement upon an Event of Default, the Borrowers shall pay the
Agent, for the account of the Lenders, immediately upon termination, an early
termination penalty equal to the early termination fee that would have been
payable under Article 4 if this Agreement had been terminated on that date
pursuant to the Borrowers' election and subject to the terms of Article 4.
ARTICLE 12
TERM AND TERMINATION
12.1 Term and Termination. The term of this Agreement shall end on the
Stated Termination Date. The Agent upon direction from the Majority Lenders may
terminate this Agreement without notice upon the occurrence of an Event of
Default. Upon the effective date of termination of this Agreement for any reason
whatsoever, all Obligations (including, without limitation, all unpaid principal
of, accrued interest on and prepayment penalties, if any, with respect to the
Loans) shall become immediately due and payable. Notwithstanding the termination
of this Agreement, until all Obligations are indefeasibly paid and performed in
full in cash, the Borrowers shall remain bound by the terms of this Agreement
and shall not be relieved of any of their Obligations hereunder, and the Agent
and the Lenders shall retain all their rights and remedies hereunder (including,
without limitation, the Agent's Liens in and all rights and remedies with
respect to all then existing and after-arising Collateral).
ARTICLE 13
AMENDMENTS; WAIVER; PARTICIPATIONS; ASSIGNMENTS; SUCCESSORS
13.1 No Waivers; Cumulative Remedies. No failure by the Agent or any
Lender to exercise any right, remedy, or option under this Agreement or any
present or future supplement thereto, or in any other agreement between or among
the Borrowers and the Agent and/or any Lender, or delay by the Agent or any
Lender in exercising the same, will not operate as a waiver thereof. No waiver
by the Agent or any Lender will be effective unless it is in writing, and then
only to the extent specifically stated. No waiver by the Agent or the Lenders on
any occasion shall affect or diminish the Agent's and each Lender's rights
thereafter to require strict performance by the Borrowers of any provision of
this Agreement. The Agent's and each Lender's rights under this Agreement will
be cumulative
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and not exclusive of any other right or remedy which the Agent or any Lender may
have.
13.2 Amendments and Waivers. No amendment or waiver of any provision of
this Agreement or any other Loan Document, and no consent with respect to any
departure by any Borrower therefrom, shall be effective unless the same shall be
in writing and signed by the Majority Lenders (or by the Agent at the written
request of the Majority Lenders) and each Borrower and then any such waiver or
consent shall be effective only in the specific instance and for the specific
purpose for which given; provided, however, that no such waiver, amendment, or
consent shall, unless in writing and signed by all the Lenders and the Borrowers
and acknowledged by the Agent, do any of the following:
(a) increase or extend the Commitment of any Lender;
(b) postpone or delay any date fixed by this Agreement or any
other Loan Document for any payment of principal, interest, fees or other
amounts due to the Lenders (or any of them) hereunder or under any other Loan
Document;
(c) reduce the principal of, or the rate of interest specified
herein on any Loan, or any fees or other amounts payable hereunder or under any
other Loan Document;
(d) change the percentage of the Commitments or of the
aggregate unpaid principal amount of the Loans which is required for the Lender
or any of them to take any action hereunder;
(e) increase the advance rates with respect to Revolving
Loans;
(f) amend this Section or any provision of the Agreement
providing for consent or other action by all Lenders;
(g) release Collateral other than as permitted by Section
14.12;
(h) change the definitions of "Majority Lenders";
and, provided further, that no amendment, waiver or consent shall, unless in
writing and signed by the Agent, affect the rights or duties of the Agent under
this Agreement or any other Loan Document.
13.3 Assignments; Participations.
(a) Any Lender may, with the written consent of the Agent,
assign and delegate to one or more assignees (provided that no written consent
of the Agent shall be required in connection
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with any assignment and delegation by a Lender to an Affiliate of such Lender)
(each an "Assignee") all, or any ratable part of all, of the Loans, the
Commitments and the other rights and obligations of such Lender hereunder, in a
minimum amount of $5,000,000; provided, however, that (i) any such assignment
must consist of a ratable assignment of proportionate amounts of the Term Loan
and Revolving Loan, (ii) the Borrowers and the Agent may continue to deal solely
and directly with such Lender in connection with the interest so assigned to an
Assignee until (iii) written notice of such assignment, together with payment
instructions, addresses and related information with respect to the Assignee,
shall have been given to MKR and the Agent by such Lender and the Assignee; (iv)
such Lender and its Assignee shall have delivered to the Agent an Assignment and
Acceptance in the form of Exhibit E ("Assignment and Acceptance") and (v) the
assignor Lender or Assignee has paid to the Agent a processing fee in the amount
of $3,500.
(b) From and after the date that the Agent notifies the
assignor Lender that it has received an executed Assignment and Acceptance and
payment of the above-referenced processing fee, (i) the Assignee thereunder
shall be a party hereto and, to the extent that rights and obligations,
including, but not limited to, the obligation to participate in credit support
or other enhancement for Letters of Credit hereunder have been assigned to it
pursuant to such Assignment and Acceptance, shall have the rights and
obligations of a Lender under the Loan Documents, and (ii) the assignor Lender
shall, to the extent that rights and obligations hereunder and under the other
Loan Documents have been assigned by it pursuant to such Assignment and
Acceptance, relinquish its rights and be released from its obligations under
this Agreement (and in the case of an Assignment and Acceptance covering all or
the remaining portion of an assigning Lender's rights and obligations under this
Agreement, such Lender shall cease to be a party hereto).
(c) By executing and delivering an Assignment and Acceptance,
the assigning Lender thereunder and the Assignee thereunder confirm to and agree
with each other and the other parties hereto as follows: (1) other than as
provided in such Assignment and Acceptance, such assigning Lender makes no
representation or warranty and assumes no responsibility with respect to any
statements, warranties or representations made in or in connection with this
Agreement or the execution, legality, validity, enforceability, genuineness,
sufficiency or value of this Agreement or any other Loan Document furnished
pursuant hereto; (2) such assigning Lender makes no representation or warranty
and assumes no responsibility with respect to the financial condition of the
Borrowers or the performance or observance by the Borrowers of any of their
obligations under this Agreement or any other Loan Document furnished pursuant
hereto; (3) such Assignee confirms that it has received a copy of this
Agreement, together with such other
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documents and information as it has deemed appropriate to make its own credit
analysis and decision to enter into such Assignment and Acceptance; (4) such
Assignee will, independently and without reliance upon the Agent, such assigning
Lender or any other Lender, and based on such documents and information as it
shall deem appropriate at the time, continue to make its own credit decisions in
taking or not taking action under this Agreement; (5) such Assignee appoints and
authorizes the Agent to take such action as agent on its behalf and to exercise
such powers under this Agreement as are delegated to the Agent by the terms
hereof, together with such powers as are reasonably incidental thereto; and (6)
such Assignee agrees that it will perform in accordance with their terms all of
the obligations which by the terms of this Agreement are required to be
performed by it as a Lender.
(d) Within five Business Days after its receipt of notice by
the Agent that it has received an executed Assignment and Acceptance and payment
of the processing fee, each Borrower shall execute and deliver to the Agent, an
acknowledgment evidencing such Assignee's assigned Loans and Commitment.
Immediately upon each Assignee's making its processing fee payment under the
Assignment and Acceptance, this Agreement shall be deemed to be amended to the
extent, but only to the extent, necessary to reflect the addition of the
Assignee and the resulting adjustment of the Commitments arising therefrom. The
Commitment allocated to each Assignee shall reduce such Commitments of the
assigning Lender pro tanto.
(e) Any Lender may at any time sell to one or more commercial
banks, financial institutions, or other Persons not Affiliates of any Borrower
(a "Participant") participating interests in any Loans, the Commitment of that
Lender and the other interests of that Lender (the "originating Lender")
hereunder and under the other Loan Documents; provided, however, that (i) the
originating Lender's obligations under this Agreement shall remain unchanged,
(ii) the originating Lender shall remain solely responsible for the performance
of such obligations, (iii) the Borrowers and the Agent shall continue to deal
solely and directly with the originating Lender in connection with the
originating Lender's rights and obligations under this Agreement and the other
Loan Documents, and (iv) no Lender shall transfer or grant any participating
interest under which the Participant has rights to approve any amendment to, or
any consent or waiver with respect to, this Agreement or any other Loan
Document, and all amounts payable by the Borrowers hereunder shall be determined
as if such Lender had not sold such participation; except that, if amounts
outstanding under this Agreement are due and unpaid, or shall have been declared
or shall have become due and payable upon the occurrence of an Event of Default,
each Participant shall be deemed to have the right of set-off in respect of its
participating interest in amounts owing under this Agreement to the same extent
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as if the amount of its participating interest were owing directly to it as a
Lender under this Agreement.
(f) Notwithstanding any other provision in this Agreement, any
Lender may at any time create a security interest in, or pledge, all or any
portion of its rights under and interest in this Agreement in favor of any
Federal Reserve Bank in accordance with Regulation A of the FRB or U.S. Treasury
Regulation 31 CFR ss.203.14, and such Federal Reserve Bank may enforce such
pledge or security interest in any manner permitted under applicable law.
ARTICLE 14
THE AGENT
14.1 Appointment and Authorization. Each Lender hereby designates and
appoints BankAmerica Business Credit, Inc. as its Agent under this Agreement and
the other Loan Documents and each Lender hereby irrevocably authorizes the Agent
to take such action on its behalf under the provisions of this Agreement and
each other Loan Document and to exercise such powers and perform such duties as
are expressly delegated to it by the terms of this Agreement or any other Loan
Document, together with such powers as are reasonably incidental thereto. The
Agent agrees to act as such on the express conditions contained in this Article
14. The provisions of this Article 14 are solely for the benefit of the Agent
and the Lenders and the Borrowers shall have no rights as a third party
beneficiary of any of the provisions contained herein. Notwithstanding any
provision to the contrary contained elsewhere in this Agreement or in any other
Loan Document, the Agent shall not have any duties or responsibilities, except
those expressly set forth herein, nor shall the Agent have or be deemed to have
any fiduciary relationship with any Lender, and no implied covenants, functions,
responsibilities, duties, obligations or liabilities shall be read into this
Agreement or any other Loan Document or otherwise exist against the Agent.
Except as expressly otherwise provided in this Agreement, the Agent shall have
and may use its sole discretion with respect to exercising or refraining from
exercising any discretionary rights or taking or refraining from taking any
actions which the Agent is expressly entitled to take or assert under this
Agreement and the other Loan Documents, including, without limitation, (a) the
determination of the applicability of ineligibility criteria with respect to the
calculation of the Availability, (b) the making of Agent Advances pursuant to
Section 2.2(i), and (c) the exercise of remedies pursuant to Section 11.2, and
any action so taken or not taken shall be deemed consented to by the Lenders.
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14.2 Delegation of Duties. The Agent may execute any of its duties
under this Agreement or any other Loan Document by or through agents, employees
or attorneys-in-fact and shall be entitled to advice of counsel concerning all
matters pertaining to such duties. The Agent shall not be responsible for the
negligence or misconduct of any agent or attorney-in-fact that it selects as
long as such selection was made without gross negligence or willful misconduct.
14.3 Liability of Agent. None of the Agent-Related Persons shall (i) be
liable for any action taken or omitted to be taken by any of them under or in
connection with this Agreement or any other Loan Document or the transactions
contemplated hereby (except for its own gross negligence or willful misconduct),
or (ii) be responsible in any manner to any of the Lenders for any recital,
statement, representation or warranty made by any Borrower or any Subsidiary or
Affiliate of any Borrower, or any officer thereof, contained in this Agreement
or in any other Loan Document, or in any certificate, report, statement or other
document referred to or provided for in, or received by the Agent under or in
connection with, this Agreement or any other Loan Document, or the validity,
effectiveness, genuineness, enforceability or sufficiency of this Agreement or
any other Loan Document, or for any failure of any Borrower or any other party
to any Loan Document to perform its obligations hereunder or thereunder. No
Agent-Related Person shall be under any obligation to any Lender to ascertain or
to inquire as to the observance or performance of any of the agreements
contained in, or conditions of, this Agreement or any other Loan Document, or to
inspect the properties, books or records of any Borrower or any Borrower's
Subsidiaries or Affiliates.
14.4 Reliance by Agent. (a) The Agent shall be entitled to rely, and
shall be fully protected in relying, upon any writing, resolution, notice,
consent, certificate, affidavit, letter, telegram, facsimile, telex or telephone
message, statement or other document or conversation believed by it to be
genuine and correct and to have been signed, sent or made by the proper Person
or Persons, and upon advice and statements of legal counsel (including counsel
to any Borrower), independent accountants and other experts selected by the
Agent. The Agent shall be fully justified in failing or refusing to take any
action under this Agreement or any other Loan Document unless it shall first
receive such advice or concurrence of the Majority Lenders as it deems
appropriate and, if it so requests, it shall first be indemnified to its
satisfaction by the Lenders against any and all liability and expense which may
be incurred by it by reason of taking or continuing to take any such action. The
Agent shall in all cases be fully protected in acting, or in refraining from
acting, under this Agreement or any other Loan Document in accordance with a
request or consent of the Majority Lenders and such request and any action taken
or failure to act pursuant thereto shall be binding upon all of the Lenders.
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(b) For purposes of determining compliance with the conditions
specified in Section 10.1, each Lender that has executed this Agreement shall be
deemed to have consented to, approved or accepted or to be satisfied with, each
document or other matter either sent by the Agent to such Lender for consent,
approval, acceptance or satisfaction, or required thereunder to be consented to
or approved by or acceptable or satisfactory to the Lender.
14.5 Notice of Default. The Agent shall not be deemed to have knowledge
or notice of the occurrence of any Default or Event of Default, except with
respect to defaults in the payment of principal, interest and fees required to
be paid to the Agent for the account of the Lenders, unless the Agent shall have
received written notice from a Lender or MKR referring to this Agreement,
describing such Default or Event of Default and stating that such notice is a
"notice of default." The Agent will notify the Lenders of its receipt of any
such notice. The Agent shall take such action with respect to such Default or
Event of Default as may be requested by the Majority Lenders in accordance with
Section 11; provided, however, that unless and until the Agent has received any
such request, the Agent may (but shall not be obligated to) take such action, or
refrain from taking such action, with respect to such Default or Event of
Default as it shall deem advisable.
14.6 Credit Decision. Each Lender acknowledges that none of the
Agent-Related Persons has made any representation or warranty to it, and that no
act by the Agent hereinafter taken, including any review of the affairs of any
Borrower and its Subsidiaries, shall be deemed to constitute any representation
or warranty by any Agent-Related Person to any Lender. Each Lender represents to
the Agent that it has, independently and without reliance upon any Agent-Related
Person and based on such documents and information as it has deemed appropriate,
made its own appraisal of and investigation into the business, prospects,
operations, property, financial and other condition and creditworthiness of the
Borrowers and their Subsidiaries, and all applicable bank regulatory laws
relating to the transactions contemplated hereby, and made its own decision to
enter into this Agreement and to extend credit to the Borrowers. Each Lender
also represents that it will, independently and without reliance upon any
Agent-Related Person and based on such documents and information as it shall
deem appropriate at the time, continue to make its own credit analysis,
appraisals and decisions in taking or not taking action under this Agreement and
the other Loan Documents, and to make such investigations as it deems necessary
to inform itself as to the business, prospects, operations, property, financial
and other condition and creditworthiness of the Borrowers. Except for notices,
reports and other documents expressly herein required to be furnished to the
Lenders by the Agent, the Agent shall not have any duty or responsibility to
provide any Lender with any credit or other information concerning the business,
prospects, operations,
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property, financial and other condition or creditworthiness of the Borrowers
which may come into the possession of any of the Agent-Related Persons.
14.7 Indemnification. Whether or not the transactions contemplated
hereby are consummated, the Lenders shall indemnify upon demand the
Agent-Related Persons (to the extent not reimbursed by or on behalf of the
Borrowers and without limiting the obligation of the Borrowers to do so), pro
rata, from and against any and all Indemnified Liabilities; provided, however,
that no Lender shall be liable for the payment to the Agent-Related Persons of
any portion of such Indemnified Liabilities resulting solely from such Person's
gross negligence or willful misconduct. Without limitation of the foregoing,
each Lender shall reimburse the Agent upon demand for its ratable share of any
costs or out-of-pocket expenses (including Attorney Costs) incurred by the Agent
in connection with the preparation, execution, delivery, administration,
modification, amendment or enforcement (whether through negotiations, legal
proceedings or otherwise) of, or legal advice in respect of rights or
responsibilities under, this Agreement, any other Loan Document, or any document
contemplated by or referred to herein, to the extent that the Agent is not
reimbursed for such expenses by or on behalf of the Borrowers. The undertaking
in this Section shall survive the payment of all Obligations hereunder and the
resignation or replacement of the Agent.
14.8 Agent in Individual Capacity. BABC and its Affiliates may make
loans to, issue letters of credit for the account of, accept deposits from,
acquire equity interests in and generally engage in any kind of banking, trust,
financial advisory, underwriting or other business with any Borrower and its
Subsidiaries and Affiliates as though BABC were not the Agent hereunder and
without notice to or consent of the Lenders including, without limitation,
owning directly or indirectly an equity interest in MKR. The Lenders acknowledge
that, pursuant to such activities, BABC or its Affiliates may receive
information regarding a Borrower or its Affiliates (including information that
may be subject to confidentiality obligations in favor of such Borrower or such
Subsidiary) and acknowledge that the Agent shall be under no obligation to
provide such information to them. With respect to its Loans, BABC shall have the
same rights and powers under this Agreement as any other Lender and may exercise
the same as though it were not the Agent, and the terms "Lender" and "Lenders"
include BABC in its individual capacity.
14.9 Successor Agent. The Agent may resign as Agent upon 30 days'
notice to the Lenders. If the Agent resigns under this Agreement, the Majority
Lenders shall appoint from among the Lenders a successor agent for the Lenders.
If no successor agent is appointed prior to the effective date of the
resignation of the
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Agent, the Agent may appoint, after consulting with the Lenders and the
Borrowers, a successor agent from among the Lenders. Upon the acceptance of its
appointment as successor agent hereunder, such successor agent shall succeed to
all the rights, powers and duties of the retiring Agent and the term "Agent"
shall mean such successor agent and the retiring Agent's appointment, powers and
duties as Agent shall be terminated and the Term Loans Notes shall be reissued
to such successor agent. After any retiring Agent's resignation hereunder as
Agent, the provisions of this Section 14 shall inure to its benefit as to any
actions taken or omitted to be taken by it while it was Agent under this
Agreement. If no successor agent has accepted appointment as Agent by the date
which is 30 days following a retiring Agent's notice of resignation, the
retiring Agent's resignation shall nevertheless thereupon become effective and
the Lenders shall perform all of the duties of the Agent hereunder until such
time, if any, as the Majority Lenders appoint a successor agent as provided for
above.
14.10 Withholding Tax. (a) If any Lender is a "foreign corporation,
partnership or trust" within the meaning of the Code and such Lender claims
exemption from, or a reduction of, U.S. withholding tax under Sections 1441 or
1442 of the Code, such Lender agrees with and in favor of the Agent, to deliver
to the Agent:
(i) if such Lender claims an exemption from, or a reduction
of, withholding tax under a United States tax treaty, properly completed IRS
Forms 1001 and W-8 before the payment of any interest in the first calendar year
and before the payment of any interest in each third succeeding calendar year
during which interest may be paid under this Agreement;
(ii) if such Lender claims that interest paid under this
Agreement is exempt from United States withholding tax because it is effectively
connected with a United States trade or business of such Lender, two properly
completed and executed copies of IRS Form 4224 before the payment of any
interest is due in the first taxable year of such Lender and in each succeeding
taxable year of such Lender during which interest may be paid under this
Agreement, and IRS Form W-9; and
(iii) such other form or forms as may be required under the
Code or other laws of the United States as a condition to exemption from, or
reduction of, United States withholding tax.
Such Lender agrees to promptly notify the Agent of any change in circumstances
which would modify or render invalid any claimed exemption or reduction.
(b) If any Lender claims exemption from, or reduction of,
withholding tax under a United States tax treaty by providing
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IRS Form 1001 and such Lender sells, assigns, grants a participation in, or
otherwise transfers all or part of the Obligations of the Borrowers to such
Lender, such Lender agrees to notify the Agent of the percentage amount in which
it is no longer the beneficial owner of Obligations of the Borrowers to such
Lender. To the extent of such percentage amount, the Agent will treat such
Lender's IRS Form 1001 as no longer valid.
(c) If any Lender claiming exemption from United States
withholding tax by filing IRS Form 4224 with the Agent sells, assigns, grants a
participation in, or otherwise transfers all or part of the Obligations of the
Borrowers to such Lender, such Lender agrees to undertake sole responsibility
for complying with the withholding tax requirements imposed by Sections 1441 and
1442 of the Code.
(d) If any Lender is entitled to a reduction in the applicable
withholding tax, the Agent may withhold from any interest payment to such Lender
an amount equivalent to the applicable withholding tax after taking into account
such reduction. If the forms or other documentation required by subsection (a)
of this Section are not delivered to the Agent, then the Agent may withhold from
any interest payment to such Lender not providing such forms or other
documentation an amount equivalent to the applicable withholding tax.
(e) If the IRS or any other Governmental Authority of the
United States or other jurisdiction asserts a claim that the Agent did not
properly withhold tax from amounts paid to or for the account of any Lender
(because the appropriate form was not delivered, was not properly executed, or
because such Lender failed to notify the Agent of a change in circumstances
which rendered the exemption from, or reduction of, withholding tax ineffective,
or for any other reason) such Lender shall indemnify the Agent fully for all
amounts paid, directly or indirectly, by the Agent as tax or otherwise,
including penalties and interest, and including any taxes imposed by any
jurisdiction on the amounts payable to the Agent under this Section, together
with all costs and expenses (including Attorney Costs). The obligation of the
Lenders under this subsection shall survive the payment of all Obligations and
the resignation or replacement of the Agent.
14.11 Intentionally Omitted.
14.12 Collateral Matters.
(a) The Lenders hereby irrevocably authorize the Agent, at its
option and in its sole discretion, to release any Agent's Lien upon any
Collateral (i) upon the termination of the Commitments and payment and
satisfaction in full by Borrowers of all Loans and reimbursement obligations in
respect of Letters of
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Credit, and the termination of all outstanding Letters of Credit (whether or not
any of such obligations are due) and all other Obligations; (ii) constituting
property being sold or disposed of if MKR certifies to the Agent that the sale
or disposition is made in compliance with Section 9.9 (and the Agent may rely
conclusively on any such certificate, without further inquiry); (iii)
constituting property in which no Borrower owned any interest at the time the
Lien was granted or at any time thereafter; (iv) constituting property leased to
any Borrower under a lease which has expired or been terminated in a transaction
permitted under this Agreement or (v) provided that no Default or Event of
Default then exists and is continuing, collateral which has a value of up to
$1,000,000 each year in addition to the other amounts specified in clauses (i)
to (iv) above (and any such release by the Agent shall constitute a waiver by
the Lenders of the restrictions in Section 9.9 hereof without need for further
approval from the Lenders). Except as provided above, the Agent will not release
any of the Agent's Liens without the prior written authorization of the Majority
Lenders; provided that the Agent may not release the Agent's Liens on Collateral
valued in the aggregate in excess of $5,000,000 without the prior written
authorization of all of the Lenders. Upon request by the Agent or MKR at any
time, the Lenders will confirm in writing the Agent's authority to release any
Agent's Liens upon particular types or items of Collateral pursuant to this
Section 14.12.
(b) Upon receipt by the Agent of any authorization required
pursuant to Section 14.12(a) from the Majority Lenders or Lenders, as
applicable, of the Agent's authority to release any Agent's Liens upon
particular types or items of Collateral, and upon at least five (5) Business
Days' prior written request by MKR, the Agent shall (and is hereby irrevocably
authorized by the Lenders to) execute such documents as may be necessary to
evidence the release of the Agent's Liens upon such Collateral; provided,
however, that (i) the Agent shall not be required to execute any such document
on terms which, in the Agent's opinion, would expose the Agent to liability or
create any obligation or entail any consequence other than the release of such
Liens without recourse or warranty, and (ii) such release shall not in any
manner discharge, affect or impair the Obligations or any Liens (other than
those expressly being released) upon (or obligations of any Borrower in respect
of) all interests retained by such Borrower, including (without limitation) the
proceeds of any sale, all of which shall continue to constitute part of the
Collateral.
(c) The Agent shall have no obligation whatsoever to any of
the Lenders to assure that the Collateral exists or is owned by the Borrowers or
is cared for, protected or insured or has been encumbered, or that the Agent's
Liens have been properly or sufficiently or lawfully created, perfected,
protected or enforced or are entitled to any particular priority, or to exercise
at all
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or in any particular manner or under any duty of care, disclosure or fidelity,
or to continue exercising, any of the rights, authorities and powers granted or
available to the Agent pursuant to any of the Loan Documents, it being
understood and agreed that in respect of the Collateral, or any act, omission or
event related thereto, the Agent may act in any manner it may deem appropriate,
in its sole discretion given the Agent's own interest in the Collateral in its
capacity as one of the Lenders and that the Agent shall have no other duty or
liability whatsoever to any Lender as to any of the foregoing.
14.13 Restrictions on Actions by Lenders; Sharing of Payments (a) Each
of the Lenders agrees that it shall not, without the express consent of the
Agent, and that it shall, to the extent it is lawfully entitled to do so, upon
the request of the Agent, set off against the Obligations, any amounts owing by
such Lender to any Borrower or any accounts of any Borrower now or hereafter
maintained with such Lender. Each of the Lenders further agrees that it shall
not, unless specifically requested to do so by the Agent, take or cause to be
taken any action, including, without limitation, the commencement of any legal
or equitable proceedings, to foreclose any Lien on, or otherwise enforce any
security interest in, any of the Collateral, the purpose of which is, or could
be, to give such Lender any preference or priority against the other Lenders
with respect to the Collateral.
(b) Subject to Section 4.5, if, at any time or times any
Lender shall receive (i) by payment, foreclosure, setoff or otherwise, any
proceeds of Collateral or any payments with respect to the Obligations of any
Borrower to such Lender arising under, or relating to, this Agreement or the
other Loan Documents, except for any such proceeds or payments received by such
Lender from the Agent pursuant to the terms of this Agreement, or (ii) payments
from the Agent in excess of such Lender's ratable portion of all such
distributions by the Agent, such Lender shall promptly (1) turn the same over to
the Agent, in kind, and with such endorsements as may be required to negotiate
the same to the Agent, or in same day funds, as applicable, for the account of
all of the Lenders and for application to the Obligations in accordance with the
applicable provisions of this Agreement, or (2) purchase, without recourse or
warranty, an undivided interest and participation in the Obligations owed to the
other Lenders so that such excess payment received shall be applied ratably as
among the Lenders in accordance with their Pro Rata Shares; provided, however,
that if all or part of such excess payment received by the purchasing party is
thereafter recovered from it, those purchases of participations shall be
rescinded in whole or in part, as applicable, and the applicable portion of the
purchase price paid therefor shall be returned to such purchasing party, but
without interest except to the extent that such purchasing party is
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required to pay interest in connection with the recovery of the excess payment.
14.14 Agency for Perfection. Each Lender hereby appoints each other
Lender as agent for the purpose of perfecting the Lenders' security interest in
assets which, in accordance with Article 9 of the UCC can be perfected only by
possession. Should any Lender (other than the Agent) obtain possession of any
such Collateral, such Lender shall notify the Agent thereof, and, promptly upon
the Agent's request therefor shall deliver such Collateral to the Agent or in
accordance with the Agent's instructions.
14.15 Payments by Agent to Lenders. All payments to be made by the
Agent to the Lenders shall be made by bank wire transfer or internal transfer of
immediately available funds to the account of the particular Lender as set forth
on Exhibit F hereto or pursuant to such other wire transfer instructions as each
party may designate for itself by written notice to the Agent. Concurrently with
each such payment, the Agent shall identify whether such payment (or any portion
thereof) represents principal, premium or interest on the Revolving Loans, Term
Loans or otherwise.
14.16 Concerning the Collateral and the Related Loan Documents. Each
Lender authorizes and directs the Agent to enter into this Agreement and the
other Loan Documents relating to the Collateral, for the ratable benefit of the
Lenders. Each Lender agrees that any action taken by the Agent or Majority
Lenders in accordance with the terms of this Agreement or the other Loan
Documents relating to the Collateral, and the exercise by the Agent or the
Majority Lenders of their respective powers set forth therein or herein,
together with such other powers that are reasonably incidental thereto, shall be
binding upon all of the Lenders.
14.17 Field Audit and Examination Reports; Disclaimer by Lenders. By
signing this Agreement, each Lender:
(a) is deemed to have requested that the Agent furnish such
Lender, promptly after it becomes available, a copy of each field audit or
examination report (each a "Report" and collectively, "Reports") prepared by the
Agent;
(b) expressly agrees and acknowledges that neither BABC nor
the Agent (i) makes any representation or warranty as to the accuracy of any
Report, or (ii) shall be liable for any information contained in any Report;
(c) expressly agrees and acknowledges that the Reports are not
comprehensive audits or examinations, that the Agent or
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other party performing any audit or examination will inspect only specific
information regarding the applicable Borrower and will rely significantly upon
such Borrower's books and records, as well as on representations of such
Borrower's personnel;
(d) agrees to keep all Reports confidential and strictly for
its internal use, and not to distribute or use any Report in any other manner;
and
(e) without limiting the generality of any other
indemnification provision contained in this Agreement, agrees: (i) to hold the
Agent and any such other Lender preparing a Report harmless from any action the
indemnifying Lender may take or conclusion the indemnifying Lender may reach or
draw from any Report in connection with any loans or other credit accommodations
that the indemnifying Lender has made or may make to any Borrower, or the
indemnifying Lender's participation in, or the indemnifying Lender's purchase
of, a loan or loans of any Borrower; and (ii) to pay and protect, and indemnify,
defend and hold the Agent and any such other Lender preparing a Report harmless
from and against, the claims, actions, proceedings, damages, costs, expenses and
other amounts (including, without limitation attorney costs) incurred by the
Agent and any such other Lender preparing a Report as the direct or indirect
result of any third parties who might obtain all or part of any Report through
the indemnifying Lender.
ARTICLE 15
MISCELLANEOUS
15.1 Cumulative Remedies; No Prior Recourse to Collateral. The
enumeration herein of the Agent's and each Lender's rights and remedies is not
intended to be exclusive, and such rights and remedies are in addition to and
not by way of limitation of any other rights or remedies that the Agent and the
Lenders may have under the UCC or other applicable law. The Agent and the
Lenders shall have the right, in their sole discretion, to determine which
rights and remedies are to be exercised and in which order. The exercise of one
right or remedy shall not preclude the exercise of any others, all of which
shall be cumulative. The Agent and the Lenders may, without limitation, proceed
directly against any Borrower to collect the Obligations without any prior
recourse to the Collateral. No failure to exercise and no delay in exercising,
on the part of the Agent or any Lender, any right, remedy, power or privilege
hereunder, shall operate as a waiver thereof; nor shall any single or partial
exercise of any right, remedy, power or privilege hereunder preclude any other
or further exercise thereof or the exercise of any other right, remedy, power or
privilege.
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15.2 Severability. The illegality or unenforceability of any provision
of this Agreement or any instrument or agreement required hereunder shall not in
any way affect or impair the legality or enforceability of the remaining
provisions of this Agreement or any instrument or agreement required hereunder.
15.3 Governing Law; Choice of Forum; Service of Process; Jury Trial
Waiver. (a) THIS AGREEMENT SHALL BE INTERPRETED AND THE RIGHTS AND LIABILITIES
OF THE PARTIES HERETO DETERMINED IN ACCORDANCE WITH THE INTERNAL LAWS (AS
OPPOSED TO THE CONFLICT OF LAWS PROVISIONS PROVIDED THAT PERFECTION ISSUES WITH
RESPECT TO ARTICLE 9 OF THE UCC MAY GIVE EFFECT TO APPLICABLE CHOICE OR CONFLICT
OF LAW RULES SET FORTH IN ARTICLE 9 OF THE UCC) OF THE STATE OF ILLINOIS;
PROVIDED THAT THE AGENT AND THE LENDERS SHALL RETAIN ALL RIGHTS ARISING UNDER
FEDERAL LAW.
(b) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS
AGREEMENT OR ANY OTHER LOAN DOCUMENT MAY BE BROUGHT IN THE COURTS OF THE STATE
OF ILLINOIS, OR OF THE UNITED STATES FOR THE NORTHERN DISTRICT OF ILLINOIS, AND
BY EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH BORROWER, THE AGENT AND THE
LENDERS CONSENT, FOR ITSELF AND IN RESPECT OF ITS PROPERTY, TO THE NON-EXCLUSIVE
JURISDICTION OF THOSE COURTS. EACH OF THE BORROWERS, THE AGENT AND THE LENDERS
IRREVOCABLY WAIVES ANY OBJECTION, INCLUDING ANY OBJECTION TO THE LAYING OF VENUE
OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS, WHICH IT MAY NOW OR HEREAFTER
HAVE TO THE BRINGING OF ANY ACTION OR PROCEEDING IN SUCH JURISDICTION IN RESPECT
OF THIS AGREEMENT OR ANY DOCUMENT RELATED HERETO. NOTWITHSTANDING THE FOREGOING:
(1) THE AGENT AND THE LENDERS SHALL HAVE THE RIGHT TO BRING ANY ACTION OR
PROCEEDING AGAINST ANY BORROWER OR ITS PROPERTY IN THE COURTS OF ANY OTHER
JURISDICTION THE AGENT OR THE LENDERS DEEM NECESSARY OR APPROPRIATE IN ORDER TO
REALIZE ON THE COLLATERAL OR OTHER SECURITY FOR THE OBLIGATIONS AND (2) EACH OF
THE PARTIES HERETO ACKNOWLEDGES THAT ANY APPEALS FROM THE COURTS DESCRIBED IN
THE IMMEDIATELY PRECEDING SENTENCE MAY HAVE TO BE HEARD BY A COURT LOCATED
OUTSIDE THOSE JURISDICTIONS.
(c) EACH BORROWER HEREBY WAIVES PERSONAL SERVICE OF ANY AND
ALL PROCESS UPON IT AND CONSENTS THAT ALL SUCH SERVICE OF PROCESS MAY BE MADE BY
REGISTERED MAIL (RETURN RECEIPT REQUESTED) DIRECTED TO SUCH BORROWER AT ITS
ADDRESS SET FORTH IN SECTION 15.8 AND SERVICE SO MADE SHALL BE DEEMED TO BE
COMPLETED FIVE (5) DAYS AFTER THE SAME SHALL HAVE BEEN SO DEPOSITED IN THE U.S.
MAILS. NOTHING CONTAINED HEREIN SHALL AFFECT THE RIGHT OF AGENT OR THE LENDERS
TO SERVE LEGAL PROCESS BY ANY OTHER MANNER PERMITTED BY LAW.
(d) NOTWITHSTANDING ANY OTHER PROVISION OF THIS AGREEMENT TO
THE CONTRARY, ANY CONTROVERSY OR CLAIM BETWEEN OR AMONG THE PARTIES, INCLUDING
BUT NOT LIMITED TO THOSE ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY
OTHER LOAN DOCUMENT AND ANY
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CLAIM BASED ON OR ARISING FROM AN ALLEGED TORT, SHALL AT THE REQUEST OR ANY
PARTY HERETO BE DETERMINED BY ARBITRATION. The arbitration shall be conducted in
accordance with the United States Arbitration Act (Title 9, U.S. Code),
notwithstanding any choice of law provision in this Agreement, and under the
Commercial Rules of the American Arbitration Association ("AAA"). The
arbitrator(s) shall give effect to statutes of limitation in determining any
claim. Any controversy concerning whether an issue is arbitrable shall be
determined by the arbitrator(s). Judgment upon the arbitration award may be
entered in any court having jurisdiction. The institution and maintenance of an
action for judicial relief or pursuant to a provisional or ancillary remedy
shall not constitute a waiver of the right of either party, including the
plaintiff, to submit the controversy or claim to arbitration if any other party
contests such action for judicial relief.
(e) Notwithstanding the provisions of (d) above, no
controversy or claim shall be submitted to arbitration without the consent of
all parties if, at the time of the proposed submission, such controversy or
claim arises from or related to an obligation to the Lender which is secured by
real estate property collateral (exclusive of real estate space lease
assignments). If all the parties do not consent to submission of such a
controversy or claim to arbitration, the controversy or claim shall be
determined as provided in this Section 15.3(e).
(f) At the request of either party a controversy or claim
which is not submitted to arbitration as provided and limited in Section 15.3(d)
and (e) shall be determined by judicial reference. If such an election is made,
the parties shall designate to the court a referee or referees selected under
the auspices of the AAA in the same manner as arbitrators are selected in
AAA-sponsored proceedings. The presiding referee of the panel, or the referee if
there is a single referee, shall be an active attorney or retired judge.
Judgment upon the award rendered by such referee or referees shall be entered in
the court in which such proceeding was commenced.
(g) No provision of Paragraphs (d) through (g) shall limit the
right of the Agent or the Lenders to exercise self-help remedies such as setoff,
foreclosure against or sale of any real or personal property collateral or
security, or obtaining provisional or ancillary remedies from a court of
competent jurisdiction before, after, or during the pendency of any arbitration
or other proceeding. The exercise of a remedy does not waive the right of either
party to resort to arbitration or reference. At the Agent's option, foreclosure
under a deed of trust or mortgage may be accomplished either by exercise of
power of sale under the deed of trust or mortgage or by judicial foreclosure.
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15.4 Waiver of Jury Trial. (a) SUBJECT TO THE PROVISIONS OF SECTION
15.3(d), EACH BORROWER, THE LENDERS AND THE AGENT EACH WAIVE THEIR RESPECTIVE
RIGHTS TO A TRIAL BY JURY OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING
OUT OF OR RELATED TO THIS AGREEMENT, THE OTHER LOAN DOCUMENTS, OR THE
TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY, IN ANY ACTION, PROCEEDING OR OTHER
LITIGATION OF ANY TYPE BROUGHT BY ANY OF THE PARTIES AGAINST ANY OTHER PARTY OR
ANY AGENT-RELATED PERSON, PARTICIPANT OR ASSIGNEE, WHETHER WITH RESPECT TO
CONTRACT CLAIMS, TORT CLAIMS, OR OTHERWISE. THE BORROWERS, THE LENDERS AND THE
AGENT EACH AGREE THAT ANY SUCH CLAIM OR CAUSE OF ACTION SHALL BE TRIED BY A
COURT TRIAL WITHOUT A JURY. WITHOUT LIMITING THE FOREGOING, THE PARTIES FURTHER
AGREE THAT THEIR RESPECTIVE RIGHT TO A TRIAL BY JURY IS WAIVED BY OPERATION OF
THIS SECTION AS TO ANY ACTION, COUNTERCLAIM OR OTHER PROCEEDING WHICH SEEKS, IN
WHOLE OR IN PART, TO CHALLENGE THE VALIDITY OR ENFORCEABILITY OF THIS AGREEMENT
OR THE OTHER LOAN DOCUMENTS OR ANY PROVISION HEREOF OR THEREOF. THIS WAIVER
SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS
TO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS.
(b) EACH BORROWER AGREES THAT IT WILL NOT ASSERT AGAINST AGENT
OR ANY LENDER ANY CLAIM FOR CONSEQUENTIAL, INCIDENTAL, SPECIAL OR PUNITIVE
DAMAGES IN CONNECTION WITH THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS OR
THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.
15.5 Survival of Representations and Warranties. All of each Borrower's
representations and warranties contained in this Agreement shall survive the
execution, delivery, and acceptance thereof by the parties, notwithstanding any
investigation by the Agent or the Lenders or their respective agents.
15.6 Other Security and Guaranties. The Agent, may, without notice or
demand and without affecting any Borrower's obligations hereunder, from time to
time: (a) take from any Person and hold collateral (other than the Collateral)
for the payment of all or any part of the Obligations and exchange, enforce or
release such collateral or any part thereof; and (b) accept and hold any
endorsement or guaranty of payment of all or any part of the Obligations and
release or substitute any such endorser or guarantor, or any Person who has
given any Lien in any other collateral as security for the payment of all or any
part of the Obligations, or any other Person in any way obligated to pay all or
any part of the Obligations.
15.7 Fees and Expenses. Each Borrower agrees to pay to the Agent, for
its benefit, on demand, all costs and expenses that Agent pays or incurs in
connection with the negotiation, preparation, consummation, administration,
enforcement, and termination of this Agreement and the Existing Loan Agreement,
including, without limitation: (a) Attorney Costs; (b) costs and
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expenses (including attorneys' and paralegals' fees and disbursements which
shall include the allocated costs of Agent's in-house counsel fees and
disbursements) for any amendment, supplement, waiver, consent, or subsequent
closing in connection with the Loan Documents and the transactions contemplated
thereby; (c) costs and expenses of lien and title searches and title insurance;
(d) taxes, fees and other charges for recording the Mortgages (and modifications
thereto), filing financing statements and continuations, and other actions to
perfect, protect, and continue the Agent's Liens (including costs and expenses
paid or incurred by the Agent in connection with the consummation of Agreement);
(e) sums paid or incurred to pay any amount or take any action required of any
Borrower under the Loan Documents that such Borrower fails to pay or take; (f)
costs of appraisals, inspections, and verifications of the Collateral,
including, without limitation, travel, lodging, and meals for inspections of the
Collateral and the Borrowers' operations by the Agent's and each of the Lenders'
agents plus the Agent's then customary charge for field examinations and audits
and the preparation of reports thereof (such charge is currently $300 per day
(or portion thereof) for each agent or employee of the Agent with respect to
each field examination or audit prior to the occurrence of a Default or Event of
Default, and thereafter $500 per day (or portion thereof)); (g) costs and
expenses of forwarding loan proceeds, collecting checks and other items of
payment, and establishing and maintaining Payment Accounts and lock boxes; (h)
costs and expenses of preserving and protecting the Collateral; and (i) costs
and expenses (including attorneys' and paralegals' fees and disbursements which
shall include the allocated cost of Agent's in-house counsel fees and
disbursements) paid or incurred to obtain payment of the Obligations, enforce
the Agent's Liens, sell or otherwise realize upon the Collateral, and otherwise
enforce the provisions of the Loan Documents, or to defend any claims made or
threatened against the Agent or any Lender arising out of the transactions
contemplated hereby (including without limitation, preparations for and
consultations concerning any such matters). The foregoing shall not be construed
to limit any other provisions of the Loan Documents regarding costs and expenses
to be paid by the Borrowers. All of the foregoing costs and expenses shall be
charged to the Borrowers' Loan Accounts as Revolving Loans as described in
Section 4.4.
15.8 Notices. Except as otherwise provided herein, all notices, demands
and requests that any party is required or elects to give to any other shall be
in writing, or by a telecommunications device capable of creating a written
record, and any such notice shall become effective (a) upon personal delivery
thereof, including, but not limited to, delivery by overnight mail and courier
service, (b) four (4) days after it shall have been mailed by United States
mail, first class, certified or registered, with postage prepaid, or (c) in the
case of notice by such a
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telecommunications device, when properly transmitted, in each case addressed to
the party to be notified as follows:
If to the Agent or to BABC:
BankAmerica Business Credit, Inc.
231 South LaSalle Street
16th Floor
Chicago, Illinois 60697
Attention: Portfolio Administrator
Telecopy No.: (312) 974-8760
with copies to:
Bank of America NT & SA
10124 Old Grove Road
San Diego, California 92131
Attention: Legal Department
Telecopy No. (619) 549-7518
If to any Borrower:
MK Rail Corporation
200 Reedsdale Street
Pittsburgh, PA 15233
Attention: Executive Vice President
Telecopy No.: (412) 231-2698
Doepken Keevican & Weiss
Professional Corporation
37th Floor, USX Tower
600 Grant Street
Pittsburgh, PA 15219
Attention: James F. Bauerle
Telecopy No.: (412) 355-2609
If to any other Lender, then at the respective addresses set forth on Exhibit G
hereto or to such other address as each party may designate for itself by like
notice. Failure or delay in delivering copies of any notice, demand, request,
consent, approval, declaration or other communication to the persons designated
above to receive copies shall not adversely affect the effectiveness of such
notice, demand, request, consent, approval, declaration or other communication.
15.9 Waiver of Notices. Unless otherwise expressly provided herein,
each Borrower waives presentment, protest and notice of demand or dishonor and
protest as to any instrument, notice of intent to accelerate the Obligations and
notice of acceleration of the Obligations, as well as any and all other notices
to which it
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might otherwise be entitled. No notice to or demand on any Borrower which the
Agent or any Lender may elect to give shall entitle any Borrower to any or
further notice or demand in the same, similar or other circumstances.
15.10 Binding Effect. The provisions of this Agreement shall be binding
upon and inure to the benefit of the respective representatives, successors, and
assigns of the parties hereto; provided, however, that no interest herein may be
assigned by any Borrower without prior written consent of the Agent and each
Lender. The rights and benefits of the Agent and the Lenders hereunder shall, if
such Persons so agree, inure to any party acquiring any interest in the
Obligations or any part thereof.
15.11 Indemnity of the Agent and the Lenders by the Borrowers. Each
Borrower, jointly and severally, agrees to defend, indemnify and hold the
Agent-Related Persons, and each Lender and each of its respective officers,
directors, employees, counsel, agents and attorneys-in-fact (each, an
"Indemnified Person") harmless from and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
charges, expenses and disbursements (including Attorney costs) of any kind or
nature whatsoever which may at any time (including at any time following
repayment of the Loans and the termination, resignation or replacement of the
Agent or replacement of any Lender) be imposed on, incurred by or asserted
against any such Person in any way relating to or arising out of this Agreement
or any document contemplated by or referred to herein, or the transactions
contemplated hereby, or any action taken or omitted by any such Person under or
in connection with any of the foregoing, including with respect to any
investigation, litigation or proceeding (including any Insolvency Proceeding or
appellate proceeding) related to or arising out of this Agreement or the Loans
or the use of the proceeds thereof, whether or not any Indemnified Person is a
party thereto (all the foregoing, collectively, the "Indemnified Liabilities");
provided, that no Borrower shall have any obligation hereunder to any
Indemnified Person with respect to Indemnified Liabilities resulting solely from
the gross negligence or willful misconduct of such Indemnified Person. The
agreements in this Section shall survive payment of all other Obligations.
15.12 Final Agreement. This Agreement and the other Loan Documents are
intended by the Borrowers, the Agent and the Lenders to be the final, complete,
and exclusive expression of the agreement between them. This Agreement
supersedes any and all prior oral or written agreements relating to the subject
matter hereof except as set forth in Section 1.4 hereof or with respect to that
certain Letter of Credit Financing Agreement between MKR and BABC dated August
25, 1995 which shall survive until terminated in a separate writing from BABC,
but in any event the Letter of Credit issued thereunder shall be deemed to be a
Letter of Credit issued
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hereunder, and even after the termination of such Letter of Credit Financing
Agreement any fees earned under such Letter of Credit Financing Agreement and
any indemnification in favor of BABC therein shall expressly survive and remain
in full force and effect. No modification, rescission, waiver, release, or
amendment of any provision of this Agreement or any other Loan Document shall be
made, except by a written agreement signed by each Borrower and a duly
authorized officer of each of the Agent and the Majority Lenders.
15.13 Counterparts. This Agreement may be executed in any number of
counterparts, and by the Agent, each Lender and each Borrower in separate
counterparts, each of which shall be an original, but all of which shall
together constitute one and the same agreement.
15.14 Captions. The captions contained in this Agreement are for
convenience of reference only, are without substantive meaning and should not be
construed to modify, enlarge, or restrict any provision.
15.15 Right of Setoff. In addition to any rights and remedies of the
Lenders provided by law, if an Event of Default exists or the Loans have been
accelerated, each Lender is authorized at any time and from time to time,
without prior notice to any Borrower, any such notice being waived by each
Borrower to the fullest extent permitted by law, to set off and apply any and
all deposits (general or special, time or demand, provisional or final) at any
time held by, and other indebtedness at any time owing by, such Lender to or for
the credit or the account of any Borrower against any and all Obligations owing
to such Lender, now or hereafter existing, irrespective of whether or not the
Agent or such Lender shall have made demand under this Agreement or any Loan
Document and although such Obligations may be contingent or unmatured. Each
Lender agrees promptly to notify the affected Borrower and the Agent after any
such set-off and application made by such Lender; provided, however, that the
failure to give such notice shall not affect the validity of such set-off and
application.
ARTICLE 16
CROSS-GUARANTY
16.1 Cross-Guaranty. Each Borrower hereby acknowledges and agrees that
such Borrower is jointly and severally liable for, and hereby absolutely and
unconditionally guarantees to each other Borrower, Agent and Lenders the full
and prompt payment of, all Obligations owed or hereafter owing to Agent and/or
Lenders by each other Borrower. Notwithstanding any provision herein contained
to
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the contrary, each Borrower's liability under this Article 16 (which liability
is in any event in addition to amounts for which such Borrower is primarily
liable under Article 2 hereof) shall be limited to an amount not to exceed as of
any date of determination the greater of:
(i) the net amount of all Loans advanced to any other
Borrower under this Agreement and then re-loaned or otherwise transferred to
such Borrower; or
(ii) the amount which could be claimed by the Agent
and Lenders from such Borrower under this Article 16 without rendering such
claim voidable or avoidable under Section 548 of Chapter 11 of the Bankruptcy
Code or under any applicable state Uniform Fraudulent Transfer Act, Uniform
Fraudulent Conveyance Act or similar statute or common law after taking into
account, among other things, such Borrower's right of contribution and
indemnification from the other Borrowers under Section 16.2 hereof.
16.2 Contribution with Respect to Guaranty Obligations.
(a) To the extent that any Borrower shall make a payment under
this Article 16 of all or any of the Obligations (other than Revolving Loans
made to that Borrower for which it is primarily liable) (a "Guarantor Payment")
which, taking into account all other Guarantor Payments then previously or
concurrently made by the other Borrowers, exceeds the amount which such Borrower
would otherwise have paid if each Borrower had paid the aggregate Obligations
satisfied by such Guarantor Payment in the same proportion that such Borrower's
"Allocable Amount" (as defined below) (as determined immediately prior to such
Guarantor Payment) bore to the aggregate Allocable Amounts of all of Borrowers
as determined immediately prior to the making of such Guarantor Payment, then
such Borrower shall be entitled to receive contribution and indemnification
payments from, and be reimbursed by, each of the other Borrowers for the amount
of such excess, pro rata based upon their respective Allocable Amounts in effect
immediately prior to such Guarantor Payment.
(b) As of any date of determination, the "Allocable Amount" of
any Borrower shall be equal to the maximum amount of the claim which could then
be recovered from such Borrower under this Article 16 without rendering such
claim voidable or avoidable under Section 548 of Chapter 11 of the Bankruptcy
Code or under any applicable state Uniform Fraudulent Transfer Act, Uniform
Fraudulent Conveyance Act or similar statute or common law.
(c) This Article 16 is intended only to define the relative
rights of Borrowers and nothing set forth in this Section 16.2 is intended to or
shall impair the obligations of Borrowers, jointly and severally, to pay any
amounts as and when the same
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shall become due and payable in accordance with the terms of this Agreement,
including, without limitation, Section 16.1 hereof. Nothing contained in this
Section 16.2 shall limit the liability of any Borrower to pay the Revolving
Loans made to that Borrower and accrued interest, fees and expenses with respect
thereto for which such Borrower shall be primarily liable.
(d) The parties hereto acknowledge that the rights of
contribution and indemnification hereunder shall constitute assets of any
Borrower to which such contribution and indemnification is owing.
16.3 Obligations Absolute. The liability of each Borrower to Agent and
Lenders hereunder shall not be affected or impaired by any of the following acts
by Agent or any Lender: (i) any acceptance of collateral security, guarantors,
accommodation parties or sureties for any or all Obligations; (ii) one or more
extensions or renewals of Obligations (whether or not for longer than the
original period) or any modification of the interest rates, fees, maturities or
principal amount of, or other contractual terms applicable to any Obligations;
(iii) any waiver or indulgence granted to a Borrower, any delay or lack of
diligence in the enforcement of Obligations, or any failure to institute
proceedings, file a claim, give any required notices or otherwise protect any
Obligations; (iv) any full or partial release of, compromise or settlement with,
or agreement not to sue a Borrower or any guarantor or other person liable in
respect of any Obligations; (v) any release, surrender, cancellation or other
discharge of any evidence of Obligations or the acceptance of any instrument in
renewal or substitution therefore; (vi) any failure to obtain collateral
security (including rights of setoff) for Obligations, or to obtain or maintain
the proper or sufficient creation and perfection thereof, or to establish the
priority thereof, or to preserve, protect, insure, care for, exercise or enforce
any collateral security; or any modification, alteration, substitution,
exchange, surrender, cancellation, termination, release or other change,
impairment, limitation, loss or discharge of any collateral security; (vii) any
collection, sale, lease or disposition of, or any other foreclosure or
enforcement of or realization on, any collateral security; (viii) any
assignment, pledge or other transfer of any Obligations or any evidence thereof;
or (ix) any manner, order or method of application of any payments or credits
upon Obligations. Each Borrower hereby waives any and all defenses and
discharges available to a surety, guarantor, or accommodation co-obligor.
16.4 WAIVER. EACH BORROWER HEREBY WAIVES PRESENTMENT, DEMAND FOR
PAYMENT, NOTICE OF DISHONOR OR NONPAYMENT, AND PROTEST OF ANY INSTRUMENT
EVIDENCING OBLIGATIONS.
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16.5 Recovery. If any payment is applied by Agent or any Lender to the
Obligations and is thereafter set aside, recovered, rescinded or required to be
returned for any reason (including, without limitation, the bankruptcy,
insolvency or reorganization of a Borrower or any other obligor), the
Obligations to which such payment was applied shall for the purposes of this
Article 16 be deemed to have continued in existence, notwithstanding such
payment and application and this cross guaranty shall be enforceable as to such
Obligations as fully as if such payment and application had never been made.
16.6 Liability Cumulative. The liability of Borrowers under this
Article 16 is in addition to and shall be cumulative with all liabilities of
each Borrower to Agent and Lenders under this Agreement and the other Loan
Documents to which such Borrower is a party or in respect of any Obligations or
obligation of the other Borrower, without any limitation as to amount, unless
the instrument or agreement evidencing or creating such other liability
specifically provides to the contrary.
143
<PAGE>
IN WITNESS WHEREOF, the parties have entered into this Agreement on the
date first above written.
"BORROWERS"
MK Rail Corporation
By:
Title:
Motor Coils Manufacturing Co.
By:
Title:
MK Engine Systems Company, Inc.
By:
Title:
Clark Industries, Inc.
By:
Title:
Power Parts Company
By:
Title:
Touchstone, Inc.
By:
Title:
Power Parts Sign Co.
By:
Title:
<PAGE>
"AGENT"
BANKAMERICA BUSINESS CREDIT, INC.,
as the Agent
By:
Title:
"LENDERS"
Commitment: $25,000,000 BANKAMERICA BUSINESS CREDIT, INC.,
Revolving Loan as the Agent
Commitment:
$22,333,333.33 By:
Term Loan Commitment: Title:
$2,666,666.67
Pro Rata Share: 33.334%
Commitment: $19,000,000 GREEN TREE FINANCIAL SERVICING
Revolving Loan Commitment: CORPORATION
$16,973,333.33
Term Loan Commitment: By:
$2,026,666.67 Title:
Pro Rata Share: 25.333%
Commitment: $19,000,000
Revolving Loan Commitment: HELLER FINANCIAL, INC.
$16,973,333.33
Term Loan Commitment: By:
$2,026,666.67 Title:
Pro Rata Share: 25.333%
Commitment: $12,000,000 STAR BANK, N.A.
Revolving Loan Commitment:
$10,720,000.00 By:
Term Loan Commitment: Title:
$1,280,000.00
Pro Rata Share: 16.000%
<PAGE>
EXHIBIT A
NOTICE OF BORROWING
Date: , 199
To: BankAmerica Business Credit, Inc. as Agent for the Lenders who
are parties to the Amended and Restated Loan and Security
Agreement dated as of ________________, 1996 (as extended,
renewed, amended or restated from time to time, the "Loan and
Security Agreement") among MK Rail Corporation, the other
Borrowers named therein, certain financial institutions which
are signatories thereto as Lenders and BankAmerica Business
Credit, Inc., as Agent
Ladies and Gentlemen:
The undersigned, MK Rail Corporation, refers to the Loan and Security
Agreement, the terms defined therein being used herein as therein defined, and
hereby gives you notice irrevocably of the Borrowing specified below:
1. The Business Day of the proposed Borrowing is
_________________________, 19 .
2. The aggregate amount of the proposed Borrowing is $________
.
3. The Borrowing is to be comprised of $______________ of Base
Rate Revolving Loans and $_______________of LIBOR Rate Loans.
4. The duration of the Interest Period for the LIBOR Rate
Loans, if any, included in the Borrowing shall be _____
months.
5. Such Loan shall be made to [specify Borrower(s)].
The undersigned hereby certifies that the following statements are true
on the date hereof, and will be true on the date of the proposed Borrowing,
before and after giving effect thereto and to the application of the proceeds
therefrom:
(a) The representations and warranties of the Borrowers contained in
the Loan and Security Agreement are true and correct as though made on and as of
such date;
<PAGE>
(b) No Default or Event of Default has occurred and is continuing, or
would result from such proposed Borrowing; and
(c) without limiting Section 10.3(e) of the Loan and Security
Agreement, the amount of the Availability, MKR's Availability and each
Components Subsidiary's Availability, shall be sufficient to permit the making
of such Revolving Loan, provided, however, that the foregoing conditions
precedent are not conditions to each Lender participating in or reimbursing BABC
or the Agent for such Lenders' Pro Rata Share of any BABC Loan or Agent Advance
as provided in Sections 2.1(h), (i) and (j) of the Loan and Security Agreement.
MK Rail Corporation
By:
Title:
<PAGE>
EXHIBIT B
NOTICE OF CONVERSION/CONTINUATION
Date: , 199
To: BankAmerica Business Credit, Inc. Agent for the Lenders parties to the
Amended and Restated Loan and Security Agreement dated as of
____________________, 1996 (as extended, renewed, amended or restated
from time to time, the "Loan and Security Agreement") among MK Rail
Corporation, the other Borrowers named therein, certain Lenders which
are signatories thereto and BankAmerica Business Credit, Inc., as Agent
Ladies and Gentlemen:
The undersigned, MK Rail Corporation, refers to the Loan and Security
Agreement, the terms defined therein being used herein as therein defined, and
hereby gives you notice irrevocably of the [conversion] [continuation] of the
Loans specified herein, that:
1. The Conversion/Continuation Date is___________, 19__.
2. The aggregate amount of the Loans to be [converted]
[continued] is $___________________.
3. The Loans are to be [converted into] [continued as] [LIBOR
Rate] [Base Rate] Loans.
4. The duration of the Interest Period for the Loans included in
the [conversion] [continuation] shall be______months.
5. ___________ is/are the Borrowers with respect to such Loans.
The undersigned hereby certifies that the following statements are true
on the date hereof, and will be true on the proposed Conversion/Continuation
Date, before and after giving effect thereto and to the application of the
proceeds therefrom:
(a) The representations and warranties of the Borrowers contained in
the Loan and Security Agreement are true and correct as though made on and as of
such date;
(b) No Default or Event of Default has occurred and is continuing, or
would result from such proposed [conversion] [continuation]; and
(c) without limiting Section 10.3(e) of the Loan and Security
Agreement, the amount of the Availability, MKR's Availability and each
Components Subsidiary's Availability, shall be sufficient to permit the making
of such conversion/continuation,
<PAGE>
provided, however, that the foregoing conditions precedent are not conditions to
each Lender participating in or reimbursing BABC or the Agent for such Lenders'
Pro Rata Share of any BABC Loan or Agent Advance as provided in Sections 2.1(h),
(i) and (j) of the Loan and Security Agreement.
MK Rail Corporation
By:
Title:
<PAGE>
EXHIBIT E
[FORM OF] ASSIGNMENT AND ACCEPTANCE AGREEMENT
This ASSIGNMENT AND ACCEPTANCE AGREEMENT (this "Assignment and
Acceptance") dated as of __________, 199__ is made between
______________________________ (the "Assignor") and
__________________________ (the "Assignee").
RECITALS
WHEREAS, the Assignor is party to that certain Amended and
Restated Loan and Security Agreement dated as of __________________, 1996 (as
amended, amended and restated, modified, supplemented or renewed, the "Credit
Agreement") among MK Rail Corporation and the other Borrowers party thereto (the
"Borrowers"), the several financial institutions from time to time party thereto
(including the Assignor, the "Lenders"), and BankAmerica Business Credit, Inc.,
as agent for the Lenders (the "Agent"). Any terms defined in the Credit
Agreement and not defined in this Assignment and Acceptance are used herein as
defined in the Credit Agreement;
WHEREAS, as provided under the Credit Agreement, the Assignor
has committed to making Loans (the "Committed Loans") to the Borrowers in an
aggregate amount not to exceed $__________ (the "Commitment");
WHEREAS, the Assignor has made Committed Loans in the
aggregate principal amount of $__________ for Term Loans and $__________ for
Revolving Loans to the Borrowers;
WHEREAS, [the Assignor has acquired a participation in the
issuing bank's liability under Letters of Credit in an aggregate principal
amount of $____________ (the "L/C Obligations")] [no Letters of Credit are
outstanding under the Credit Agreement]; and
WHEREAS, the Assignor wishes to assign to the Assignee [part
of the] [all] rights and obligations of the Assignor under the Credit Agreement
in respect of its Commitment, together with a corresponding portion of each of
its outstanding Committed Loans and L/C Obligations, in an amount equal to
$__________ (the "Assigned Amount") on the terms and subject to the conditions
set forth herein and the Assignee wishes to accept assignment of such rights and
to assume such obligations from the Assignor on such terms and subject to such
conditions;
<PAGE>
NOW, THEREFORE, in consideration of the foregoing and the
mutual agreements contained herein, the parties hereto agree as follows:
1. Assignment and Acceptance.
(a) Subject to the terms and conditions of this Assignment and
Acceptance, (i) the Assignor hereby sells, transfers and assigns to the
Assignee, and (ii) the Assignee hereby purchases, assumes and undertakes from
the Assignor, without recourse and without representation or warranty (except as
provided in this Assignment and Acceptance) __% (the "Assignee's Percentage
Share") of (A) the Commitment, each Committed Loans and the L/C Obligations of
the Assignor and (B) all related rights, benefits, obligations, liabilities and
indemnities of the Assignor under and in connection with the Credit Agreement
and the Loan Documents.
(b) With effect on and after the Effective Date (as defined in
Section 5 hereof), the Assignee shall be a party to the Credit Agreement and
succeed to all of the rights and be obligated to perform all of the obligations
of a Lender under the Credit Agreement, including the requirements concerning
confidentiality and the payment of indemnification, with a Commitment in an
amount equal to the Assigned Amount. The Assignee agrees that it will perform in
accordance with their terms all of the obligations which by the terms of the
Credit Agreement are required to be performed by it as a Lender. It is the
intent of the parties hereto that the Commitment of the Assignor shall, as of
the Effective Date, be reduced by an amount equal to the Assigned Amount and the
Assignor shall relinquish its rights and be released from its obligations under
the Credit Agreement to the extent such obligations have been assumed by the
Assignee; provided, however, the Assignor shall not relinquish its rights under
Sections __ and __ of the Credit Agreement to the extent such rights relate to
the time prior to the Effective Date.
(c) After giving effect to the assignment and assumption
set forth herein, on the Effective Date the Assignee's Commitment
will be $__________.
(d) After giving effect to the assignment and assumption
set forth herein, on the Effective Date the Assignor's Commitment
will be $__________.
2. Payments.
(a) As consideration for the sale, assignment and transfer
contemplated in Section 1 hereof, the Assignee shall pay to the Assignor on the
Effective Date in immediately available funds an amount equal to $__________,
representing the Assignee's Pro Rata Share of the principal amount of all
Committed Loans.
<PAGE>
(b) The Assignee further agrees to pay to the Agent a
processing fee in the amount specified in Section 13.3 of the
Credit Agreement.
3. Reallocation of Payments.
Any interest, fees and other payments accrued to the Effective Date
with respect to the Commitment, and Committed Loans and L/C Obligations shall be
for the account of the Assignor. Any interest, fees and other payments accrued
on and after the Effective Date with respect to the Assigned Amount shall be for
the account of the Assignee. Each of the Assignor and the Assignee agrees that
it will hold in trust for the other party any interest, fees and other amounts
which it may receive to which the other party is entitled pursuant to the
preceding sentence and pay to the other party any such amounts which it may
receive promptly upon receipt.
4. Independent Credit Decision.
The Assignee (a) acknowledges that it has received a copy of the Credit
Agreement and the Schedules and Exhibits thereto, together with copies of the
most recent financial statements of the Borrowers, and such other documents and
information as it has deemed appropriate to make its own credit and legal
analysis and decision to enter into this Assignment and Acceptance; and (b)
agrees that it will, independently and without reliance upon the Assignor, the
Agent or any other Lender and based on such documents and information as it
shall deem appropriate at the time, continue to make its own credit and legal
decisions in taking or not taking action under the Credit Agreement.
5. Effective Date; Notices.
(a) As between the Assignor and the Assignee, the effective
date for this Assignment and Acceptance shall be __________, 199__ (the
"Effective Date"); provided that the following conditions precedent have been
satisfied on or before the Effective Date:
(i) this Assignment and Acceptance shall be executed
and delivered by the Assignor and the Assignee;
[(ii) the consent of the Agent required for an
effective assignment of the Assigned Amount by the Assignor to the Assignee
shall have been duly obtained and shall be in full force and effect as of the
Effective Date;]
(iii) the Assignee shall pay to the Assignor all
amounts due to the Assignor under this Assignment and Acceptance;
[ iv) the Assignee shall have complied with Section
(____) of the Credit Agreement (if applicable);]
<PAGE>
(v) the processing fee referred to in Section 2(b)
hereof and in Section 13.3 of the Credit Agreement shall have been paid to the
Agent; and
(b) Promptly following the execution of this Assignment and
Acceptance, the Assignor shall deliver to the Agent for acknowledgment by the
Agent, a Notice of Assignment in the form attached hereto as Schedule 1.
[6. Agent. [INCLUDE ONLY IF ASSIGNOR IS AGENT]
(a) The Assignee hereby appoints and authorizes the Assignor
to take such action as agent on its behalf and to exercise such powers under the
Credit Agreement as are delegated to the Agent by the Lenders pursuant to the
terms of the Credit Agreement.
(b) The Assignee shall assume no duties or obligations
held by the Assignor in its capacity as Agent under the Credit
Agreement.]
7. Withholding Tax.
The Assignee (a) represents and warrants to the Lender, the Agent and
the Borrowers that under applicable law and treaties no tax will be required to
be withheld by the Lender with respect to any payments to be made to the
Assignee hereunder, (b) agrees to furnish (if it is organized under the laws of
any jurisdiction other than the United States or any State thereof) to the Agent
and the Borrowers prior to the time that the Agent or any Borrower is required
to make any payment of principal, interest or fees hereunder, duplicate executed
originals of either U.S. Internal Revenue Service Form 4224 or U.S. Internal
Revenue Service Form 1001 (wherein the Assignee claims entitlement to the
benefits of a tax treaty that provides for a complete exemption from U.S.
federal income withholding tax on all payments hereunder) and agrees to provide
new Forms 4224 or 1001 upon the expiration of any previously delivered form or
comparable statements in accordance with applicable U.S. law and regulations and
amendments thereto, duly executed and completed by the Assignee, and (c) agrees
to comply with all applicable U.S. laws and regulations with regard to such
withholding tax exemption.
8. Representations and Warranties.
(a) The Assignor represents and warrants that (i) it is the
legal and beneficial owner of the interest being assigned by it hereunder and
that such interest is free and clear of any Lien or other adverse claim; (ii) it
is duly organized and existing and it has the full power and authority to take,
and has taken, all action necessary to execute and deliver this Assignment and
Acceptance and any other documents required or permitted to be executed or
delivered by it in connection with this Assignment and Acceptance and to fulfill
its obligations hereunder; (iii) no notices to, or consents, authorizations or
approvals of, any Person are required
<PAGE>
(other than any already given or obtained) for its due execution, delivery and
performance of this Assignment and Acceptance, and apart from any agreements or
undertakings or filings required by the Credit Agreement, no further action by,
or notice to, or filing with, any Person is required of it for such execution,
delivery or performance; and (iv) this Assignment and Acceptance has been duly
executed and delivered by it and constitutes the legal, valid and binding
obligation of the Assignor, enforceable against the Assignor in accordance with
the terms hereof, subject, as to enforcement, to bankruptcy, insolvency,
moratorium, reorganization and other laws of general application relating to or
affecting creditors' rights and to general equitable principles.
(b) The Assignor makes no representation or warranty and
assumes no responsibility with respect to any statements, warranties or
representations made in or in connection with the Credit Agreement or the
execution, legality, validity, enforceability, genuineness, sufficiency or value
of the Credit Agreement or any other instrument or document furnished pursuant
thereto. The Assignor makes no representation or warranty in connection with,
and assumes no responsibility with respect to, the solvency, financial condition
or statements of the Borrowers, or the performance or observance by the
Borrowers, of any of its respective obligations under the Credit Agreement or
any other instrument or document furnished in connection therewith.
(c) The Assignee represents and warrants that (i) it is duly
organized and existing and it has full power and authority to take, and has
taken, all action necessary to execute and deliver this Assignment and
Acceptance and any other documents required or permitted to be executed or
delivered by it in connection with this Assignment and Acceptance, and to
fulfill its obligations hereunder; (ii) no notices to, or consents,
authorizations or approvals of, any Person are required (other than any already
given or obtained) for its due execution, delivery and performance of this
Assignment and Acceptance; and apart from any agreements or undertakings or
filings required by the Credit Agreement, no further action by, or notice to, or
filing with, any Person is required of it for such execution, delivery or
performance; and (iii) this Assignment and Acceptance has been duly executed and
delivered by it and constitutes the legal, valid and binding obligation of the
Assignee, enforceable against the Assignee in accordance with the terms hereof,
subject, as to enforcement, to bankruptcy, insolvency, moratorium,
reorganization and other laws of general application relating to or affecting
creditors' rights and to general equitable principles.
9. Further Assurances.
The Assignor and the Assignee each hereby agree to execute and deliver
such other instruments, and take such other action, as either party may
reasonably request in connection with the transactions contemplated by this
Assignment and Acceptance, including the delivery of any notices or other
documents or
<PAGE>
instruments to the Borrowers or the Agent, which may be required in connection
with the assignment and assumption contemplated hereby.
10. Miscellaneous.
(a) Any amendment or waiver of any provision of this
Assignment and Acceptance shall be in writing and signed by the parties hereto.
No failure or delay by either party hereto in exercising any right, power or
privilege hereunder shall operate as a waiver thereof and any waiver of any
breach of the provisions of this Assignment and Acceptance shall be without
prejudice to any rights with respect to any other or further breach thereof.
(b) All payments made hereunder shall be made without
any set-off or counterclaim.
(c) The Assignor and the Assignee shall each pay its own costs
and expenses incurred in connection with the negotiation, preparation, execution
and performance of this Assignment and Acceptance.
(d) This Assignment and Acceptance may be executed in any
number of counterparts and all of such counterparts taken together shall be
deemed to constitute one and the same instrument.
(e) THIS ASSIGNMENT AND ACCEPTANCE SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF
[Note: confirm choice of law]. The Assignor and the Assignee each
irrevocably submits to the non-exclusive jurisdiction of any State or Federal
court sitting in [ ] over any suit, action or proceeding arising out of or
relating to this Assignment and Acceptance and irrevocably agrees that all
claims in respect of such action or proceeding may be heard and determined in
such [_________________] State or Federal court. Each party to this Assignment
and Acceptance hereby irrevocably waives, to the fullest extent it may
effectively do so, the defense of an inconvenient forum to the maintenance of
such action or proceeding.
(f) THE ASSIGNOR AND THE ASSIGNEE EACH HEREBY KNOWINGLY,
VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHTS THEY MAY HAVE TO A TRIAL BY JURY
IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN
CONNECTION WITH THIS ASSIGNMENT AND ACCEPTANCE, THE CREDIT AGREEMENT, ANY
RELATED DOCUMENTS AND AGREEMENTS OR ANY COURSE OF CONDUCT, COURSE OF DEALING, OR
STATEMENTS (WHETHER ORAL OR WRITTEN).
<PAGE>
IN WITNESS WHEREOF, the Assignor and the Assignee have caused this
Assignment and Acceptance to be executed and delivered by their duly authorized
officers as of the date first above written.
[ASSIGNOR]
By:
Title:
By:
Title:
Address:
[ASSIGNEE]
By:
Title:
By:
Title:
Address:
<PAGE>
SCHEDULE 1 TO
NOTICE OF ASSIGNMENT AND ACCEPTANCE
_______________, 19__
BankAmerica Business Credit, Inc.
Attn:
Re: [Name and Address of Borrower]
Ladies and Gentlemen:
We refer to the Amended and Restated Loan and Security Agreement dated
as of _________________, 1996 (as amended, amended and restated, modified,
supplemented or renewed from time to time the "Credit Agreement") among MK Rail
Corporation, the other Borrowers named therein (the "Borrowers"), the Lenders
referred to therein and BankAmerica Business Credit, Inc., as agent for the
Lenders (the "Agent"). Terms defined in the Credit Agreement are used herein as
therein defined.
1. We hereby give you notice of, and request your consent to, the
assignment by __________________ (the "Assignor") to _______________ (the
"Assignee") of _____% of the right, title and interest of the Assignor in and to
the Credit Agreement (including, without limitation, the right, title and
interest of the Assignor in and to the Commitments of the Assignor, all
outstanding Loans made by the Assignor and the Assignor's participation in the
Letters of Credit pursuant to the Assignment and Acceptance Agreement attached
hereto (the "Assignment and Acceptance"). We understand and agree that the
Assignor's Commitment, as of , 19 , is $ ___________, the aggregate amount of
its outstanding Loans is $_____________, and its participation in L/C
Obligations is $_____________.
2. The Assignee agrees that, upon receiving the consent of the Agent to
such assignment, the Assignee will be bound by the terms of the Credit Agreement
as fully and to the same extent as if the Assignee were the Lender originally
holding such interest in the Credit Agreement.
3. The following administrative details apply to the Assignee:
<PAGE>
(A) Notice Address:
Assignee name: __________________________
Address: _______________________________
_______________________________
Attention: _____________________________
Telephone: (___) _______________________
Telecopier: (___) ______________________
Telex (Answerback): ____________________
(B) Payment Instructions:
Account No.: ___________________________
At: ___________________________
___________________________
Reference: ___________________________
Attention: ___________________________
4. You are entitled to rely upon the representations,
warranties and covenants of each of the Assignor and Assignee
contained in the Assignment and Acceptance.
IN WITNESS WHEREOF, the Assignor and the Assignee have caused this
Notice of Assignment and Acceptance to be executed by their respective duly
authorized officials, officers or agents as of the date first above mentioned.
Very truly yours,
[NAME OF ASSIGNOR]
By:
Title:
By:
Title:
[NAME OF ASSIGNEE]
By:
Title:
<PAGE>
By:
Title:
ACKNOWLEDGED AND ASSIGNMENT
CONSENTED TO:
BankAmerica Business Credit, Inc,
as Agent
By: __________________________
Its: _________________________
<PAGE>
EXHIBIT F
WIRE TRANSFER INFORMATION
Lender Name: BANKAMERICA BUSINESS CREDIT, INC.
Bank Name: Bank of America Illinois
Address: 231 South LaSalle Street
Chicago, Illinois 60697
Beneficiary: MK Rail Corporation Participation
Account No.: 71-09539
ABA Number: 071000039
Memo: MK Rail
Lender Name: STAR BANK, N.A.
Bank Name: Star Bank, N.A.
Address: 425 Walnut Street
Cincinnati, OH 45202
Beneficiary: Structured Capital
Account No.: 9909-3014
ABA Number: 042-000-013
Memo: MK Rail CL
Lender Name: HELLER FINANCIAL, INC.
Bank Name: The First National Bank of Chicago
Address: One First National Plaza
Chicago, Illinois 60670
Beneficiary: Heller Financial Credit
Account No.: 55-35158
ABA Number: 071000013
Memo: MK Rail Corporation
Lender Name: GREEN TREE FINANCIAL SERVICING CORPORATION
Bank Name: First Bank
Address: First Bank Place
601 2nd Avenue South
Minneapolis, MN 55402
Beneficiary: Green Tree Financial Corporation
Account No.: 160232402265
ABA Number: 091000022
Memo: MK Rail CL
<PAGE>
EXHIBIT G
LENDER NOTICE ADDRESS
GREEN TREE FINANCIAL SERVICING CORPORATION
100 North Point Center East, Suite 200
Alpharetta, GA 30202
Attn: Russell Baqir,
Division Credit Manager
Telephone: (800) 459-9696
Telecopy: (800) 873-1863
STAR BANK, N.A.
425 Walnut Street, Location 9220
Cincinnati, OH 45202
Attn: Steven C. Keiffner
Senior Vice President
Telephone: (513) 632-3159
Telecopy: (513) 632-2040
HELLER FINANCIAL, INC.
500 West Monroe Street
Chicago, Illinois 60661
Attn: Elizabeth Schmidt, Vice President
Senior Account Executive
Telephone: (312) 441-7040
Telecopy: (312) 441-7652
<PAGE>
EXHIBIT H
FORM OF TERM LOAN PROMISSORY NOTE
$ _____________, 199___
FOR VALUE RECEIVED, the undersigned, ________________, a[n]
_______________ corporation (the "Borrower"), hereby promises to pay to the
order of BankAmerica Business Credit, Inc., a Delaware corporation, as agent
(the "Agent") on behalf of the Lenders, the principal sum of Dollars ($ ) or, if
less, the aggregate unpaid principal amount of all Term Loans made by the
Lenders to the Borrower pursuant to the Amended and Restated Loan and Security
Agreement, dated as of ______________, 199_ (such Amended and Restated Loan and
Security Agreement, as it may be amended, restated, supplemented or otherwise
modified from time to time, being hereinafter called the "Credit Agreement"),
among the Borrower, the Agent, the other lenders from time to time (the
"Lenders") and borrowers parties thereto, on the dates and in the amounts
provided in the Credit Agreement. The Borrower further promises to pay interest
on the unpaid principal amount of the Term Loans evidenced hereby from time to
time at the rates, on the dates, and otherwise as provided in the Credit
Agreement. All payments made hereunder to the Agent are made for the ratable
benefit of the Lenders in accordance with the Credit Agreement.
The Agent is authorized to endorse the amount and the date on which the
Term Loan is made, the maturity date therefor and each payment of principal with
respect thereto on schedules which may be annexed hereto and made a part hereof,
or on continuations thereof which shall be attached hereto and made a part
hereof; provided, that any failure to endorse such information or create such
schedule or continuation thereof shall not in any manner affect any obligation
of the Borrower under the Credit Agreement and this Term Loan Promissory Note
(this "Note").
This Note is one of the Term Loan Notes referred to in, and is entitled
to the benefits of, the Credit Agreement, which Credit Agreement, among other
things, contains provisions for acceleration of the maturity hereof upon the
happening of certain stated events and also for prepayments on account of
principal hereof prior to the maturity hereof upon the terms and conditions
therein specified.
Terms defined in the Credit Agreement are used herein with their defined
meanings therein unless otherwise defined herein. This Note shall be governed
by, and construed and interpreted in accordance with, the laws of the State of
Illinois applicable to contracts made and to be performed entirely within such
State. Demand, presentment, protest and notice of non-payment and protest are
hereby waived by Borrower.
[BORROWER]
By:
Title:
<PAGE>
Tim Wesley (412) 237-2250 x161
MK RAIL COMPLETES DEBT-REDUCTION TRANSACTION
BY REPAYING MORRISON KNUDSEN NOTE AT DISCOUNT
PITTSBURGH, September 10, 1996 -- MK Rail Corporation (Nasdaq: MKRL)
today completed a debt-reduction transaction by repaying a note owed to Morrison
Knudsen Corporation (NYSE: MRN) at a discount to face value. In the transaction,
MK Rail repaid $57.3 million of debt, including accrued interest, for $34.6
million.
As a result of this debt repayment, non-core asset sales and MK Rail's
improved cash flow from operations in 1996, the company will have reduced total
debt from about $120 million at the beginning of the year to about $65 million
by the end of the third quarter. During the same period, stockholders' equity
will have increased from $94.5 million to about $115 million and book value per
share of common stock will have increased from $5.38 to about $6.55. In
addition, through the note repayment the company expects to reduce annual
interest expense by about $1 million.
"This debt-reduction transaction represents the final step in the
turnaround plan that we articulated at the beginning of this year," said John C.
(Jack) Pope, the company's chairman. "MK Rail is now profitable and has a very
strong balance sheet which should enable us to invest in the future growth of
our businesses."
In conjunction with the Morrison Knudsen note repayment, Morrison
Knudsen expects to emerge from bankruptcy and merge with Washington Construction
Inc. (NYSE: WAS). As part of its bankruptcy plan, Morrison Knudsen plans to
distribute its 63 percent ownership of MK Rail stock, about 11.1 million shares,
to its creditors and, in certain circumstances, its current stockholders.
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MK RAIL COMPLETES DEBT-REDUCTION TRANSACTION...
The stock distribution is expected to occur during the first week of
October 1996, at which time Morrison Knudsen will no longer be an MK Rail
stockholder.
Also, Robert S. Miller Jr. will resign from the MK Rail Board of
Directors, effective Sept. 11. Miller had been the chairman of Morrison Knudsen
and will be the vice chairman of Morrison Knudsen following its merger with
Washington Construction.
MK Rail is a leader in the manufacturing and distribution of engineered
locomotive components; provides locomotive fleet maintenance and overhauls; and
manufactures switcher locomotives.
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MK Rail Stock Distribution
Information Sheet*
As part of its bankruptcy plan, Morrison Knudsen plans to distribute
its 63 percent ownership of MK Rail stock to its creditors and, in certain
circumstances, to its current stockholders. The distribution is expected to
occur during the first week of October 1996, at which time Morrison Knudsen will
no longer be an MK Rail stockholder.
The shares that are being distributed are unregistered and subject to
the provisions of a Stockholders Agreement between MK Rail and Morrison Knudsen.
The Agreement includes standstill and voting provisions, which, among other
things, require that for a specified period the stock must be voted in favor of
MK Rail's nominees to its board. Also in the Agreement and subject to certain
conditions, MK Rail has granted registration rights for this stock so that the
shares can be registered and sold in secondary offerings.
Following are answers to questions frequently asked about this stock
distribution:
When and how will the stock distribution occur?
Under Morrison Knudsen's plan of reorganization, the stock cannot be
distributed until Sept. 27, which is a Friday, so the actual
distribution will probably occur the following week or shortly
thereafter. To distribute the stock, Morrison Knudsen will send its
stock certificate to MK Rail's transfer agent with a list of recipients
and how much stock they will own. The transfer agent will then issue
new certificates to the new holders.
Can these shares be sold immediately?
Yes, there are a variety of ways the shares could be sold, but there
are probably three logical ways. First, the shares could be sold in
"ordinary trading transactions" through the Nasdaq stock exchange. If
the stock is sold through this exchange, the provisions contained in
the Stockholders Agreement would no longer apply and the shares would
be freely tradeable. Second, under certain conditions, the shares could
be sold in private transactions not using Nasdaq. In this case, the
registration rights and provisions contained in the Stockholders
Agreement would transfer to the purchaser. Finally, the shares could be
sold under a shelf registration statement that MK Rail has agreed to
file later this month. The company cannot, however, offer any
assurances as to when, or if, the SEC will declare the registration
statement effective. If the shares are sold in this manner and the
transaction is anonymous (the sellers and buyers do not know each
other), then the provisions in the Stockholders Agreement would not
transfer to the new buyer and the shares would be freely tradeable.
*This Information Sheet presents a brief discussion in question-and-answer
format of information reported by MK Rail Corporation in its various SEC
filings, including its Annual Report on Form 10-K for the year ended December
31, 1995, its Quarterly Reports on Form 10-Q for the quarters ended March 31,
1996 and June 30, 1996, and its Current Reports on Form 8-K filed July 3, 1996
and September 10, 1996. These reports, in turn, include or incorporate by
reference as exhibits various documents summarized therein or herein. This
summary Information Sheet is qualified in its entirety by the more detailed
discussions in the SEC filings and by the text of the documents included or
incorporated therein as exhibits.
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What are "ordinary trading transactions"?
In general,"ordinary trading transactions" are sales made through a
stock exchange or in the over-the-counter market by persons who are
not affiliates of MK Rail or Morrison Knudsen, and who are not acting
alone or in concert with others as a dealer or underwriter. Whether
any given transaction is considered "ordinary," or whether a person is
an affiliate, underwriter or dealer will depend on the specific facts
and circumstances in each instance.
What incentive do the new shareholders have to hold onto their stock?
If they believe in the company's new management team and believe that
the stock is currently undervalued they may want to hold their stock.
Also, subject to certain conditions, we have given the new
stockholders the right to register their shares in underwritten
secondary offerings once a year for five years, beginning after the
company has filed its 1996 10-K. These rights should give the new
stockholders ample opportunity to sell their shares when they think
market conditions are favorable. It's important to note that the
registration rights apply to the original recipients of the Morrison
Knudsen stock. The rights will not transfer to future buyers unless
they also agree to be bound by the provisions of the Stockholders
Agreement.
What impact, if any, does Rule 144 have on the sale of creditors' stock?
Rule 144 imposes limitations on the sale of "restricted securities" or
stock held by affiliates of an issuer. Generally, these restrictions
should not affect non-affiliate holders who plan to hold their shares
for the long term or who plan to sell the shares in "ordinary trading
transactions" or under an effective registration statement, as long
as, in either case, the transactions are anonymous.
Could the new Morrison Knudsen change its mind and decide to keep the stock?
No, the stock distribution is part of Morrison Knudsen's bankruptcy
plan, so it cannot be revoked.
What impact does this stock distribution have on existing MK Rail shareholders?
Existing shareholders don't need to do anything. They will continue to
own the same percentage of MK Rail stock as they did prior to the
distribution. The company cannot predict what impact, if any, the
distribution of new shares into the public float may have. Any impact
could depend on when the new stockholders choose to sell their shares
and how many shares they choose to sell. In any event, you should
remember that the stock distribution will have no impact whatsoever on
MK Rail's fundamental business operations. In the longer term,
therefore, we view the Morrison Knudsen stock distribution as a
positive step that will diversify our shareholder base and increase
liquidity in the market, and we welcome new investors into the fold.
What is MK Rail doing to protect the stock price?
We are very focused on continuing to improve and grow our businesses.
In the long term, that's the best way to protect and increase
shareholder value. We do, however, conduct an active investor
relations program through which we meet with stockholders to discuss
the company's operations and answer any questions.
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Are you considering a stock buyback to support the price?
That would be up to the Board of Directors. But currently the Board
believes that investing excess cash in future operations is a better
long-term strategy than a stock buyback.
Who will receive the stock? And how much will each new stockholder receive?
We won't know for sure who will receive the stock and how much they
will receive until the distribution date because the Morrison Knudsen
debt continues to trade in the secondary market. Also, Morrison
Knudsen's current equity holders have an option to purchase some of
the Morrison Knudsen debt, which would entitle them to receive some of
the MK Rail stock. We do believe, however, that no one will end up
with more than 15 percent of MK Rail stock, or about 2.6 million
shares, because that would trigger our shareholders rights plan.
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