EXHIBIT 10.1
WHEELSET SUPPLY AND SERVICES AGREEMENT
This WHEELSET SUPPLY AND SERVICES AGREEMENT ("Agreement") is made
as of November 9, 1999, between UNION PACIFIC RAILROAD COMPANY, a
Delaware corporation, having its principal office at 0000 Xxxxx
Xxxxxx, Xxxxx, Xxxxxxxx 00000 ("UNION PACIFIC"), and ABC-NACO Inc., a
Delaware corporation, having its principal office at 0000 Xxxxxxxxxxx
Xxxx, Xxxxx 000, Xxxxxxx Xxxxx, Xxxxxxxx ("SUPPLIER").
RECITALS:
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A. In reliance on the performance by SUPPLIER of SUPPLIER's
obligations under this Agreement, UNION PACIFIC intends to close UNION
PACIFIC's (or its affiliate's) railroad wheel shops at Pocatello,
Idaho and North Little Rock, Arkansas (the "UP Wheel Shops") on or
before November 9, 1999 (the "Effective Date").
B. SUPPLIER, or Xxxxxxxxx Rail Services, Inc. ("GRS"), owns
and operates railroad wheel mounting, maintenance and repair
facilities at Chicago Heights, Illinois; Kansas City, Kansas; San
Bernardino, California; Corsicana, Texas; Pine Bluff, Arkansas;
Portland, Oregon; and Tacoma, Washington (the "SUPPLIER Wheel Shops").
SUPPLIER also owns and operates a steel foundry at Calera, Alabama
capable of producing railroad wheel blanks.
C. UNION PACIFIC desires that SUPPLIER supply and provide to
UNION PACIFIC, on the terms and conditions of this Agreement, all of
UNION PACIFIC's requirements for railroad freight car wheelsets and
components comprising wheel blanks, axles, bearings, plates and
related parts ("Wheelsets"), railroad freight car wheel services
comprising wheel turning and mounting ("Wheelset Services"), and
related services including transportation to and from UNION PACIFIC
locations designated by UNION PACIFIC, certain loading and unloading,
and inventory control and resupply (the "Related Services"). The
supplying of the Wheelsets, and providing the Wheelset Services and
the Related Services, are sometimes referred to collectively in this
Agreement as the "Wheelset Supply/Services."
D. UNION PACIFIC desires to sell to SUPPLIER, on the terms and
conditions of this Agreement, the UNION PACIFIC inventory (the "UP
Inventory") of (1) railroad freight car new and reconditioned
Wheelsets and Wheelset components, and related maintenance, repair and
operations supplies, materials, tools and equipment (collectively, the
"UP Consumables"), and (2) wheel cars, and the major nonconsumable
equipment item types and in the approximate quantities listed on
EXHIBIT A attached and by reference incorporated into this Agreement
(collectively, the "UP Equipment"), located at the UP Wheel Shops and
other UNION PACIFIC locations.
E. SUPPLIER is agreeable to providing the Wheelset
Supply/Services and purchasing the UP Inventory on the terms and
conditions of this Agreement.
AGREEMENT:
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NOW, THEREFORE, in consideration of the mutual covenants and
undertakings in this Agreement, the parties agree as follows:
1.0 DEFINITIONS. As used in this Agreement, the terms listed below
have the following meanings:
1.1 AAR means the Association of American Railroads.
1.2 ALTERNATE SUPPLIER means a supplier of Wheelsets or Wheelset
Services other than SUPPLIER.
1.3 BASE PRICE means the price of the Wheelsets and Wheelset
Services listed on EXHIBIT B attached and by reference incorporated
into this Agreement.
1.4 CONTRACT YEAR means November 9 through November 8 of each
year.
1.5 EFFECTIVE DATE means November 9, 1999.
1.6 MINIMUM DELIVERY REQUIREMENTS. Until March, 2000, ninety-
eight percent (98%) of the Delivery Requirements (as defined in
Section 2.6, and as may be extended pursuant to Section 2.6(d)), and
thereafter ninety-nine percent (99%) of the Delivery Requirements, as
determined for each UNION PACIFIC location on a calendar month basis
throughout the entire UNION PACIFIC system, except that the Minimum
Delivery Requirement for each Program Shop (as defined in Section 1.7)
is one hundred percent (100%).
1.7 PROGRAM SHOP means a UNION PACIFIC shop or UNION PACIFIC-
affiliated shop (currently at DeSoto, Missouri; Palestine, Texas; and
the Union Pacific Fruit Express facility at Pocatello, Idaho) at which
Wheelsets are consumed as a part of planned freight car program
rebuild work.
1.8 Wheelset Gardens means the locations designated by UNION
PACIFIC from time to time for the on-site storage of Wheelset inventory.
The current Wheelset Garden locations are set forth on EXHIBIT C attached
and by reference made a part of this Agreement.
2.0 WHEELSET SUPPLY/SERVICES.
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2.1 PURCHASE OF UNION PACIFIC REQUIREMENTS; COST REIMBURSEMENT.
(a) During the Term (as defined in Section 7.1), UNION PACIFIC will
purchase from SUPPLIER one hundred percent (100%) of UNION PACIFIC's
requirements for Wheelset Supply/Services, except as otherwise
provided in this Agreement. UNION PACIFIC's requirements for Wheelset
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Supply/Services will be determined at UNION PACIFIC's sole and
absolute discretion. UNION PACIFIC has no obligation to purchase any
minimum amount of Wheelset Supply/Services.
(b) SUPPLIER acknowledges that the award of this contract
by UNION PACIFIC has and will result in UNION PACIFIC (or its
affiliates) incurring costs to shut down operations at the UP Wheel
Shops, that such closure costs will be incurred regardless of if and
when operations are ever resumed at any of the UP Wheel Shops, and
that such closure costs are estimated to exceed the amount (the
"Closure Amount") shown on SCHEDULE 2.1(b) attached and by reference
made a part of this Agreement. In order to mitigate the closure costs
and other risks and liabilities assumed by UNION PACIFIC in closing
the UP Wheel Shops, and in consideration for UNION PACIFIC granting to
SUPPLIER the right to supply UNION PACIFIC's Wheelset Supply/Services
for the life of and under the terms and conditions of this Agreement,
SUPPLIER agrees to pay the Closure Amount to UNION PACIFIC on the
Effective Date. Such payment will be wire transferred (in immediately
available United States funds) to UNION PACIFIC as directed by UNION
PACIFIC, and will not be adjusted regardless of the actual amount of
closure costs incurred by UNION PACIFIC.
2.2 SUPPLY OF UNION PACIFIC REQUIREMENTS; GRS. (a) During the
Term, SUPPLIER will supply all of UNION PACIFIC's requirements for
Wheelset Supply/Services, except as otherwise provided in this
Agreement. SUPPLIER, at its sole cost and expense, will furnish all
labor, services, transportation, materials, tools, equipment and other
things necessary to accomplish the Wheelset Supply/Services that
SUPPLIER is required to furnish under this Agreement. New and
reconditioned/repaired/reassembled Wheelsets will be delivered by
SUPPLIER to each Wheelset Garden in the quantities necessary to
maintain on a consignment basis the Wheelset inventory level for each
UNION PACIFIC location and to satisfy the program requirements for
each Program Shop. The current Wheelset inventory levels ("Base
Inventory Levels") for UNION PACIFIC locations are listed on EXHIBIT D
attached and by reference made a part of this Agreement. The Base
Inventory Levels initially will be maintained by SUPPLIER. Based on
actual delivery performance and consumption levels, the required
inventory levels will be equitably adjusted on a quarterly basis by
UNION PACIFIC and SUPPLIER beginning with the fourth (4th) month of
the Term. The current consumption levels ("Base Consumption Levels")
for UNION PACIFIC locations are listed on EXHIBIT E attached and by
reference made a part of this Agreement. The Program Shop
requirements for 1999 are listed on EXHIBIT F attached and by
reference made a part of this Agreement.
(b) SUPPLIER represents and warrants to UNION PACIFIC that
SUPPLIER has entered into a binding agreement with GRS (the "GRS
Arrangement") under which GRS will provide through SUPPLIER to UNION
PACIFIC all of the Wheelset Supply/Services from GRS's Pine Bluff,
Portland and Tacoma Wheel Shops required to be provided under this
Agreement by SUPPLIER to UNION PACIFIC, under terms and conditions
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which are consistent with the terms and conditions of this Agreement,
and that provide that all guarantees, warranties, and other
obligations of GRS under the GRS Arrangement will run directly to
UNION PACIFIC, that UNION PACIFIC will be named as an additional
insured in all insurance policies required to be procured and
maintained by GRS, and that upon termination or forfeiture of this
Agreement, GRS will continue to perform under the GRS Arrangement in
the event UNION PACIFIC requests that such performance be continued
and takes an assignment of the GRS Arrangement from SUPPLIER.
SUPPLIER agrees to maintain the GRS Arrangement in full force and
effect during the life of this Agreement, it being understood and
agreed that SUPPLIER's failure to do so will constitute a material
default under this Agreement. SUPPLIER is fully responsible to UNION
PACIFIC for the acts and omissions of GRS and any persons directly or
indirectly employed by GRS, and such acts and omissions will be
considered the acts and omissions of SUPPLIER.
2.3 OPERATION AND PRODUCTION FROM SUPPLIER WHEEL SHOPS.
SUPPLIER must continue to operate at each of the SUPPLIER Wheel Shop
location (either directly, or with respect to the SUPPLIER Wheel Shops
at Pine Bluff, Portland and Tacoma, through GRS), and to furnish
Wheelsets from each SUPPLIER Wheel Shop "source" to the applicable
UNION PACIFIC location "destination" in accordance with the
source/destination pairs listed on EXHIBIT D, unless the closure of an
existing SUPPLIER Wheel Shop location or the addition of a new
location is approved in advance by UNION PACIFIC (which approval will
not be withheld unreasonably). There will be no increases in prices
due to the closure or addition of a SUPPLIER Wheel Shop. If SUPPLIER
is unable to meet the Delivery Requirements (as defined in Section
2.6) for, and/or to maintain the required inventory level of, a
particular UNION PACIFIC location "destination" from the applicable
SUPPLIER Wheel Shop "source," SUPPLIER will bear all costs and
expenses of using production from other SUPPLIER Wheel Shop "sources"
or from third-party sources. The sole exception (in addition to any
applicable extensions of the Delivery Requirements under Section
2.6(d)) is that if consumption at a particular UNION PACIFIC location
substantially increases and SUPPLIER is unable to maintain the
required inventory level at such UNION PACIFIC location from the
applicable SUPPLIER Wheel Shop "source" after having used SUPPLIER's
best efforts to do so, then UNION PACIFIC will bear any additional
transportation costs attributable to shipping production from other
SUPPLIER Wheel Shop sources necessary to meet the increased
consumption. SUPPLIER will maintain AAR production certification for
each SUPPLIER Wheel Shop, and in accordance with the requirements of
Section 3.4. No Wheelsets may be supplied by SUPPLIER from wheel
shops that are not AAR-certified.
2.4 WHEELSET MANUFACTURE; SPECIFICATIONS AND STANDARDS.
(a) SUPPLIER will manufacture itself, or will purchase
Wheelsets or related parts or services from third-party
suppliers/manufacturers approved in advance by AAR and UNION PACIFIC.
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SUPPLIER further agrees that UNION PACIFIC may require SUPPLIER to
purchase certain Wheelset components in the quantities and from the
suppliers/manufacturers designated from time to time by UNION PACIFIC
(except to the extent SUPPLIER is contractually obligated to other
suppliers/manufacturers); provided, however, that SUPPLIER is not
required to purchase from any UNION PACIFIC-designated
supplier/manufacturer if to do so would cause SUPPLIER to fail to meet
the Delivery Requirements or the Product Quality Requirements (as
defined in Section 3.1), as reasonably determined by SUPPLIER; and
provided further, that the applicable Base Price (as defined in
Section 4.1) will be equitably adjusted by UNION PACIFIC to reflect
any differences in the price charged by the UNION PACIFIC designated
supplier/manufacturer and the SUPPLIER cost.
(b) The Wheelsets and related parts supplied by SUPPLIER to
UNION PACIFIC under this Agreement will be manufactured, and Wheelset
Services will be provided, in accordance with (i) the then-applicable
specifications and standards of AAR (including, without limitation,
the Field and Office Manuals of AAR Interchange Rules, and Sections G
and H of the AAR Manual of Standards and Recommended Practices, as may
be revised) and of any governmental agency with jurisdiction
(collectively, "AAR/Government Specifications"); and (ii) the
specifications and standards of UNION PACIFIC identified as Union
Pacific Railroad Freight Car Specifications (as may be reasonably
changed by UNION PACIFIC from time to time as provided in Section
2.5(a)), to the extent more restrictive than AAR/Government
Specifications. SUPPLIER is responsible for contacting UNION
PACIFIC's Manager of Purchasing for direction if there is any question
on whether AAR/ Government Specifications or UNION PACIFIC
specifications and standards will control.
2.5 CHANGES IN AAR/GOVERNMENT SPECIFICATIONS OR UNION PACIFIC
STANDARDS AND SPECIFICATIONS.
(a) SUPPLIER is required to promptly implement any and all
changes ("AAR/Government Change") in AAR/Government Specifications,
without the necessity of notice from UNION PACIFIC. UNION PACIFIC may
require reasonable changes ("UP Change") in the UNION PACIFIC
specifications and standards with respect to any Wheelset or component
or Wheelset Service, by giving notice ("a UP Change Notice") to
SUPPLIER. Within fifteen (15) days after a UP Change Notice is given,
SUPPLIER will notify UNION PACIFIC as to whether SUPPLIER will be able
to make the UP Change, it being agreed that SUPPLIER will use its best
efforts to make the UP Change unless the UP Change is commercially
impracticable. If SUPPLIER is able to make the UP Change, then the
SUPPLIER notice will include a detailed estimate of the effect of the
UP Change, if any, on SUPPLIER's out-of-pocket cost of providing the
affected Wheelset Supply/Service. If SUPPLIER is unable to make the UP
Change for any reason other than commercial impracticability, then
UNION PACIFIC, at its election, may withdraw the UP Change Notice, or
temporarily or permanently eliminate the affected Wheelset
Supply/Services item from this Agreement, or terminate this Agreement
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upon not less than sixty (60) days notice to SUPPLIER. The UP Change
will be instituted by SUPPLIER as soon as reasonably possible or on
such later date as UNION PACIFIC specifies in the Change Notice.
(b) If the AAR/Government Change or UP Change results in a
reduction or increase in SUPPLIER's cost, as equitably determined by
UNION PACIFIC and SUPPLIER, then the applicable Base Price will be
adjusted by an amount equal to the reduction or increase in cost. The
adjustment in Base Price (if any) will be documented by amendment to
this Agreement, but no such amendment is necessary to make the
AAR/Government or UP Change or the adjustment in Base Price effective.
2.6 INVENTORY AND DATA CONTROL; DELIVERY REQUIREMENTS.
(a) SUPPLIER will establish and maintain a confidential
Internet website for (i) receipt of Wheelset inventory information
(including quantities received from SUPPLIER, quantities consumed by
UNION PACIFIC and bad orders for return to SUPPLIER) and Excess Demand
(as defined in subparagraph (b) below) requests from UNION PACIFIC,
(ii) confirmation by SUPPLIER of inventory information and requests
from UNION PACIFIC, (iii) consumption summaries by UNION PACIFIC
location and totals for all locations, on a rolling 18-month minimum
basis, (iv) then-current inventory levels at each UNION PACIFIC
location, (v) inventory levels and production data (including scrap
and fallout rates) for each SUPPLIER Wheel Shop and the SUPPLIER
foundry, and (vi) posting by SUPPLIER of weekly, quarterly and annual
reports of the above data. UNION PACIFIC and SUPPLIER agree to work
cooperatively to assure an accurate and efficient inventory control
and supply system to timely meet all of UNION PACIFIC's supply
requirements.
(b) Based on the consumption and inventory data referred to
in subparagraph (a) above, the Base Consumption Levels and Base
Inventory Levels as equitably adjusted by UNION PACIFIC and SUPPLIER
on a quarterly basis using the actual consumption and inventory data,
and the annual Wheelset program requirements to be provided by UNION
PACIFIC to SUPPLIER for each Program Location, SUPPLIER agrees to
supply Wheelsets on a consignment basis in sufficient time to each
UNION PACIFIC location to meet the anticipated needs of UNION PACIFIC
without supply shortfalls as to any UNION PACIFIC location or Wheelset
size/type, and to achieve zero cars held for wheelsets over the entire
UNION PACIFIC system as identified in the UNION PACIFIC Transportation
Control System. If unanticipated demand by UNION PACIFIC depletes an
inventory, or if UNION PACIFIC requests additional inventory supply in
advance to meet unusual demand levels (collectively, "Excess Demand"),
SUPPLIER will replenish the inventory or provide the additional
inventory as soon as possible but in all events within forty-eight
(48) hours after receipt of UNION PACIFIC's request (via the SUPPLIER
website) except that the time period for 6 1/2" x 12" x 33" Wheelsets is
seventy-two (72) hours (the "Excess Demand Delivery Requirements").
All of the requirements for delivery of Wheelset inventory items under
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this Section 2.6(b) sometimes are referred to collectively in this
Agreement as the "Delivery Requirements."
(c) If a freight car is held for Wheelsets (as confirmed by
the UNION PACIFIC Transportation Control System daily report of cars
held for materials), and the inventory shortfall is not made up by
SUPPLIER within twenty-four (24) hours (except that the time period
for 6 1/2" x 12" x 33" Wheelsets is seventy-two (72) hours) after UNION
PACIFIC notifies SUPPLIER (via the SUPPLIER website) of the applicable
shortfall, then SUPPLIER will be assessed a late restocking charge of
Five Hundred Dollars ($500.00) per day until the shortfall is made up.
If any shortfall is due to failure of SUPPLIER to satisfy the Delivery
Requirement, SUPPLIER will bear all costs associated with delivering
Wheelset(s) to make up the shortfall (for example, the excess cost of
truck versus rail shipment).
(d) Each applicable Delivery Requirement and the restocking
time periods under subparagraph (c) above will be extended by the
period of unavoidable delay caused by the following:
(i) Failure of UNION PACIFIC to meet the transit times
(excluding UNION PACIFIC holidays) on EXHIBIT G attached and by
reference made a part of this Agreement;
(ii) Failure of UNION PACIFIC to report Wheelset
consumption to the SUPPLIER website within two (2) days of consumption
(excluding UNION PACIFIC holidays);
(iii) Failure of UNION PACIFIC to return empty
wheel cars or bad order Wheelsets to SUPPLIER within the turnaround
times specified in EXHIBIT G, excluding UNION PACIFIC holidays and
non-UNION PACIFIC rail line switching;
(iv) Failure of UNION PACIFIC to load/unload wheel cars
and trailers within the time periods specified on EXHIBIT G; or
(v) A force majeure event, as provided in Section 11.
The Excess Demand Delivery Requirement will be extended for
a UNION PACIFIC location for an equitable time period as agreed
between UNION PACIFIC and SUPPLIER if Excess Demand for the UNION
PACIFIC location remains for two (2) or more consecutive days during a
calendar month at a level so far in excess of the applicable Base
Consumption Level (as adjusted as provided in Section 2.6(b)) that it
would be inequitable (as agreed between SUPPLIER and UNION PACIFIC) to
require SUPPLIER to meet the Excess Demand Delivery Requirement under
such circumstances.
2.7 MINIMUM DELIVERY REQUIREMENT.
(a) SUPPLIER will in all events be required to meet the
Delivery Requirements. In addition to, and not in limitation of,
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UNION PACIFIC's remedies under this Agreement for default of SUPPLIER
in failing to meet the Delivery Requirements, the procedures and
remedies in this Section 2.7 will apply to SUPPLIER's failure to meet
the Minimum Delivery Requirement.
(b) If SUPPLIER fails to meet the Minimum Delivery
Requirement, UNION PACIFIC may notify SUPPLIER accordingly ("Non-
Compliance Notice"). If SUPPLIER fails to supply to the applicable
UNION PACIFIC location the necessary inventory to make up the
shortfall within five (5) business days after the date of the Non-
Compliance Notice, then UNION PACIFIC will be entitled to purchase the
necessary inventory from Alternate Suppliers to make up the shortfall
and to charge SUPPLIER for the difference in the prices paid to
Alternate Suppliers and the then-current Base Prices. If UNION
PACIFIC issues more than two Non-Compliance Notices in any twelve-
month period, SUPPLIER will, within ten (10) days (the "Compliance
Period") after receipt of the second Non-Compliance Notice, provide
UNION PACIFIC with a compliance plan reasonably acceptable to UNION
PACIFIC for remedying SUPPLIER's non-compliance with the Minimum
Delivery Requirement. If SUPPLIER fails to provide an acceptable
compliance plan within the Compliance Period, or fails to institute
the compliance plan, or if, within six (6) months after the end of the
Compliance Period, UNION PACIFIC issues more than two Non-Compliance
Notices for delivery deficiencies with the same or similar causes as
those for any delivery deficiencies which were the subject of a
previous Non-Compliance Notice, then, in any of such events and at
UNION PACIFIC's election, UNION PACIFIC may purchase any or all
Wheelset Supply/Services from Alternate Suppliers and charge SUPPLIER
for the difference in the prices paid to Alternate Suppliers and the
then-current Base Prices, and/or conclusively declare SUPPLIER in
material default under this Agreement.
2.8 LOGISTICS AND TRANSPORTATION. All used Wheelsets for scrap
or repair/reconditioning will be returned to SUPPLIER, and will be
loaded by UNION PACIFIC at the UNION PACIFIC-designated "pickup" spot
for used Wheelsets at each UNION PACIFIC location. SUPPLIER is
responsible for transporting (including coordinating transportation on
UNION PACIFIC lines) used Wheelsets to the applicable SUPPLIER Wheel
Shop, and for determining if the used Wheelsets are suitable for
repair/reconditioning. SUPPLIER is also responsible for transporting
new or repaired/reconditioned Wheelsets from the applicable SUPPLIER
Wheel Shop "source" to the applicable UNION PACIFIC location
"destination," and placement in the Wheel Garden at each UNION PACIFIC
location. Shipment on UNION PACIFIC lines will be on UNION PACIFIC
terms and conditions applicable to third party, arms-length customers,
except that the rates charged SUPPLIER will be UNION PACIFIC's then-
current "internal move" rates. All loading and unloading will be the
responsibility of SUPPLIER, except that loading and unloading on UNION
PACIFIC property will be coordinated by SUPPLIER but performed by
UNION PACIFIC forces. UNION PACIFIC agrees to indemnify and hold
harmless SUPPLIER from and against any and all claims made against
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SUPPLIER for injuries suffered by any UNION PACIFIC employee during
such loading and unloading on UNION PACIFIC property.
1.9 INSPECTION. After receipt of any shipment of
Wheelsets, UNION PACIFIC has the right (but not the obligation)
to inspect the shipment. No inspection by UNION PACIFIC or
failure of UNION PACIFIC to inspect any particular shipment will
prevent UNION PACIFIC from exercising its rights and remedies
under this Agreement or be deemed a waiver of any of UNION
PACIFIC's rights with respect to the shipment in question or any
other shipments. If a shipment contains units with defects
(including, without limitation, failure to manufacture or provide
the Wheelsets or Wheelset Services in accordance with the
specifications and standards referred to in Section 2.4), UNION
PACIFIC may reject and refuse to take delivery of such Wheelsets
or Wheelset Services and notify SUPPLIER of the rejection via the
SUPPLIER website, in which event the provisions of Section 3.2
will apply.
3.0 SPECIFIC QUALITY REQUIREMENTS.
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3.1 Warranty.
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(a) SUPPLIER covenants and warrants to UNION PACIFIC that
the Wheelsets and Wheel Services will be manufactured and/or provided
in accordance with the specifications and standards referred to in
Section 2.4. SUPPLIER additionally warrants to UNION PACIFIC that
each of the Wheelsets and Wheelset Services supplied and/or provided
will be free from defects in materials and workmanship, and that upon
consumption by UNION PACIFIC, SUPPLIER will have conveyed good title
to the Wheelsets to UNION PACIFIC, free and clear of all liens and
encumbrances. The foregoing warranty of SUPPLIER does not apply to
the condition of the Xxxxxxx wheel xxxxxx included in the UP
Inventory, as such condition exists on the date of sale to SUPPLIER,
other than patent defects in such Xxxxxxx wheel blanks, it being
understood and agreed that SUPPLIER will be responsible for any such
patent defects in such Xxxxxxx wheel xxxxxx. The requirements in this
Section 3.1 are hereafter collectively called the "Product Quality
Requirements." The covenants and warranties in this Section 3 will
survive the termination or expiration of this Agreement.
(b) SUPPLIER warrants that any product (or part thereof)
furnished by SUPPLIER under this Agreement will be free of any claim
of any third party for infringement of any United States patent or
copyright. If UNION PACIFIC notifies SUPPLIER of the receipt of any
claim that such product infringes a United States patent, SUPPLIER
will, at its own expense: (i) settle or defend such claim or any suit
or proceeding arising therefrom and pay all damages and costs awarded
therein against UP, and (ii) procure for UP the right to continue
using such product, or modify the product so that it becomes non-
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infringing, or replace the product with an equivalent non-infringing
product.
(c) SUPPLIER will not be liable for any of UNION PACIFIC's
lost revenue, lost profits, or consequential damages arising out of
SUPPLIER's breach of the above warranty.
3.2 DISPOSITION OF BAD ORDER WHEELSETS. In the event of any
breach of covenant or warranty with respect to any of the Wheelsets or
Wheelset Services (whether or not discovered during inspection),
SUPPLIER may, at its option after notification of the bad order by
UNION PACIFIC via the SUPPLIER website, inspect such Wheelsets at
UNION PACIFIC's designated facility or have the Wheelsets returned to
SUPPLIER at SUPPLIER's expense. Thereafter, SUPPLIER will, at
SUPPLIER's sole cost, and as designated by UNION PACIFIC, either (a)
promptly repair the bad order Wheelsets and return the Wheelsets to
UNION PACIFIC at UNION PACIFIC's designated location; or (b) promptly
send replacement Wheelsets to UNION PACIFIC at UNION PACIFIC's
designated location. For purposes of the Delivery Requirements, bad
order Wheelsets are deemed not to have been delivered until replaced
or repaired.
3.3 MINIMUM PRODUCT QUALITY REQUIREMENTS. SUPPLIER will in all
events be required to meet the Product Quality Requirements. In
addition to, and not in limitation of, UNION PACIFIC's remedies under
this Agreement for default of SUPPLIER in failing to meet the Product
Quality Requirements, the procedures and remedies in this Section 3.3
will apply to SUPPLIER's failure to meet the Product Quality
Requirements. If SUPPLIER fails to meet a Product Quality
Requirement, UNION PACIFIC may notify SUPPLIER accordingly ("Non-
Compliance Notice"). If SUPPLIER fails to eliminate the cause of the
quality deficiency to the satisfaction of UNION PACIFIC within ten
(10) days after the date of the Non-Compliance Notice, then UNION
PACIFIC will be entitled to purchase the affected Wheelset
Supply/Services from Alternate Suppliers and charge SUPPLIER for the
difference in prices paid to Alternate Suppliers and the then-current
Base Prices. If UNION PACIFIC issues more than two Non-Compliance
Notices in any twelve-month period, SUPPLIER will, within ten (10)
days after receipt of the second Non-Compliance Notice, provide UNION
PACIFIC with a compliance plan reasonably acceptable to UNION PACIFIC
for remedying SUPPLIER's non-compliance with the Product Quality
Requirement. If SUPPLIER fails to timely provide an acceptable
compliance plan, or fails to institute the compliance plan, or if
UNION PACIFIC thereafter issues more than two Non-Compliance Notices
in any six-month period, then, at UNION PACIFIC's election, UNION
PACIFIC may purchase any or all Wheelset Supply/Services from
Alternate Suppliers and charge SUPPLIER for the difference in the
prices paid to Alternate Suppliers and the then-current Base Price,
and/or conclusively declare SUPPLIER in material default under this
Agreement.
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3.4 GENERAL QUALITY AND CONTINUOUS IMPROVEMENT REQUIREMENTS.
(a) SUPPLIER agrees to comply with ISO 9002 or AAR M-1003
Quality Standards, and to endeavor to improve continuously the
quality, timeliness and cost effectiveness of the Wheelset
Supply/Services. Measures of the overall quality of SUPPLIER's
performance under this Agreement include delivery performance, backlog
level measurements, supply variability, customer satisfaction, billing
accuracy, product repair/quality/defect rates, AAR and/or Union
Pacific audit reports (reports must be favorable and with no more than
three identified concerns relating to Wheelset Supply/Services), and
development, testing and certification of new Wheelset products.
Cost savings will be shared by SUPPLIER with UNION PACIFIC on an
equitable basis.
(b) Not less than one percent (1%) of the gross revenues
received by SUPPLIER under this Agreement will be invested in research
and development of railroad freight car wheel blanks consistent with
UNION PACIFIC's usage of wheel blanks. SUPPLIER agrees to make
available to UNION PACIFIC, without any fee or charge of any kind, any
and all information pertaining to inventions, improvements or
modifications of the Wheelsets and Wheelset Services as may be
developed by SUPPLIER under this Agreement, provided, however, that
such inventions, improvements and modifications will remain the sole
and exclusive property of SUPPLIER.
(c) SUPPLIER will provide team members from relevant
functional areas to serve on a Supplier Improvement Team with UNION
PACIFIC representatives, meeting on a regular monthly basis to review
(including review of audit reports) and improve SUPPLIER's quality and
performance. The Supplier Improvement Team will also meet as needed
to address, and assist SUPPLIER in resolving, specific performance
and/or quality issues. The actions, inactions, or recommendations of
the Supplier Improvement Team will not relieve SUPPLIER of its
responsibility to determine the necessary means and methods to meet
SUPPLIER's performance and quality obligations under this Agreement.
4.0 PRICING; PAYMENT.
----------------
4.1 BASE PRICES. The Base Prices for Wheelset
Supply/Services are listed on EXHIBIT B. The Base Prices are
calculated using the Base Consumption Levels, labor and freight
charges, and scrap prices for credit to UNION PACIFIC for scrapped
used Wheelsets and Wheelset components. The Base Prices will be
adjusted upward or downward quarterly based only (except as otherwise
may be specifically provided in this Agreement) on the following
adjustment events: (a) equitable adjustments to reflect any
consumption decrease or increase of more than one/half percent (1/2%)
from the Base Consumption Level for a Wheelset type or component type
at a UNION PACIFIC location; (b) after the first twenty-four (24)
months of the Term of this Agreement, all increases or decreases in
11
scrap commodity prices as established by the Chicago Board of Trade
Metal Market except that no adjustment will be made until the scrap
price as reflected by the Chicago Board of Trade Metal Market varies
from the EXHIBIT B scrap price by at least ten percent (10%); (c)
after the first twenty-four (24) months of the Term of this Agreement,
all decreases in labor costs, and increases in labor costs not to
exceed in any twelve-month period the lesser of (i) three percent (3%)
per annum, or (ii) sixty percent (60%) of the average of the per annum
increases for all SUPPLIER Wheel Shops (for example, if the average of
the per annum increases for all SUPPLIER Wheel Shops for a twelve-
month period is 4%, then the labor component of the Base Prices will
be increased by 2.4%, but if the average of the per annum increases
for all SUPPLIER Wheel Shops for a twelve-month period is 7%, then the
labor component of the Base Prices will be increased by 3%); and (d)
after the first twenty-four (24) months of the Term of this Agreement,
increases and decreases in the out-of-pocket cost to SUPPLIER for
obtaining plating services and wheel blanks, bearings and axles,
provided, however, that no such cost increase will result in an
increase in Base Prices unless SUPPLIER first (i) has made
commercially reasonable efforts to obtain the best price possible,
(ii) has advised UNION PACIFIC of the cost increase in advance of
SUPPLIER committing contractually to the cost increase with SUPPLIER's
manufacturer/supplier, and (iii) has worked cooperatively with UNION
PACIFIC to further negotiate the price with such
manufacturer/supplier, or if such further negotiations are
unsuccessful, with other manufacturers/suppliers. Base Price
adjustments will be made reasonably and in accordance with this
Agreement by SUPPLIER (except as otherwise provided in this Agreement)
by giving UNION PACIFIC written notice within ten (10) days after the
end of each quarter. Base Price adjustments will be calculated using
data for the quarter just ended, and will apply to the then-current
quarter and each following quarter until readjusted as provided in
this Section 4.1; provided, however, that an additional Base Price
adjustment will be made for the then-current quarter only, in an
amount necessary to amortize over such quarter the total amount of
overpayment or shortfall in payment of Base Prices for the quarter
just ended based on calculating the increase or decrease in Base
Prices from the date of the adjustment event occurs through the end of
the quarter just ended. Each notice of Base Price adjustment given by
SUPPLIER to UP will include documentation evidencing the bases for the
adjustment. If UNION PACIFIC reasonably objects to any Base Price
increase by giving SUPPLIER written notice of objection within fifteen
(15) days after receipt of an SUPPLIER price adjustment notice, then
the increase will not become effective until agreed to in writing by
UNION PACIFIC or upheld by arbitration under Section 14.0. Upon such
written agreement or decision in arbitration, the price increase will
become effective retroactively to the applicable quarters, and UNION
PACIFIC will pay any shortfall in payment within thirty (30) days.
4.2 PAYMENT. UNION PACIFIC will provide to SUPPLIER on a daily
basis, via SUPPLIER's website, UNION PACIFIC's system-wide Wheelset
inventory. Each Monday, such inventory report will be in the form of
12
a UNION PACIFIC Purchase Order, which will be used only as a means to
trigger the issuance of SUPPLIER's invoice and will not be considered
an order for replenishment of inventory. Based on such Purchase Order
and the then-current Base Prices, SUPPLIER will calculate the payment
earned for the reporting period and transmit an itemized invoice to
UNION PACIFIC. The invoice must include a valid purchase order
number, the UNION PACIFIC item number, and the quantities of such
items covered by the invoice. Payment will be due from UNION PACIFIC
within ten (10) days after UNION PACIFIC's receipt of accurate invoice
in proper form. With respect to Wheelset Supply/Services furnished to
UNION PACIFIC locations in the State of California, SUPPLIER agrees to
provide separate invoice categories for labor and materials and
otherwise to provide documentation to qualify such Wheelset
Supply/Services to the extent possible as provided pursuant to an
optional maintenance contract under California Sales Tax Regulation
Section 1546. The parties agree that this Agreement will control over
any terms and conditions in Purchase Orders or invoices which are
contrary to or inconsistent with this Agreement
4.3 BOOKS AND RECORDS. (a) During the Term and for a period of
three (3) years thereafter, SUPPLIER will keep an accurate record of
the costs and quantities of all material usage, labor, and all other
things furnished by SUPPLIER in connection with the performance of
SUPPLIER's obligations under this Agreement. For purposes of
confirming the prices to be paid by UNION PACIFIC, including any price
adjustment pursuant to Section 4.1, and otherwise performing audits,
UNION PACIFIC will, at all reasonable times during the Term and for a
period of three (3) years thereafter, have free and full access to the
accounts, books and records of SUPPLIER relating to SUPPLIER's
operations under this Agreement. SUPPLIER will immediately repay to
UNION PACIFIC all amounts billed to and paid by UNION PACIFIC under
this Agreement that are not supported by accurate and valid records of
SUPPLIER.
(b) For a period of three (3) years, UNION PACIFIC will
keep an accurate record of consumption of Wheelsets furnished by
SUPPLIER under this Agreement and of cars held for Wheelsets. For
purposes of confirming UNION PACIFIC's Wheelset consumption and UNION
PACIFIC's determination of whether SUPPLIER has failed to meet the
Delivery Requirements, SUPPLIER will, at all reasonable times during
the Term and for a period of three (3) years thereafter, have full and
free access to such records. UNION PACIFIC will immediately pay
SUPPLIER for any Wheelset consumption disclosed by SUPPLIER's audit
which was not reported to SUPPLIER by UNION PACIFIC in the inventory
reports referred to in Section 4.2.
4.4 CONSUMPTION OF INVENTORY. Inventory consigned to UNION
PACIFIC locations by SUPPLIER will remain the property of SUPPLIER
until installed by UNION PACIFIC on a railroad freight car. Title to
consigned inventory items will automatically pass to UNION PACIFIC
upon such installation, at which time the inventory item is considered
"consumed" by UNION PACIFIC and the risk of loss of the inventory item
13
passes to UNION PACIFIC. Until the transfer of title to UNION
PACIFIC, SUPPLIER has the risk of loss, and hereby releases UNION
PACIFIC from any and all claims for loss of or damage to consigned
inventory prior to consumption, except where the loss or damage is
caused solely and directly by the gross negligence or willful
misconduct of UNION PACIFIC. If SUPPLIER desires the installation of
any improvements (such as fencing) to protect the consigned inventory
or to prevent commingling with UNION PACIFIC personal property, the
desired improvement will be subject to UNION PACIFIC's reasonable
advance approval, will be constructed and maintained at the expense of
SUPPLIER, and will be removed at the expense of SUPPLIER upon the
expiration or termination of this Agreement.
5.0 PURCHASE AND SALE OF UP INVENTORY.
---------------------------------
5.1 SALE AND PURCHASE; LIST OF UP CONSUMABLES. Except as
provided in Section 5.3(b), UNION PACIFIC agrees to sell and SUPPLIER
agrees to purchase one hundred percent (100%) of the UP Inventory on
hand as of 12:00 A.M., CST, on the Effective Date. Within fifteen
(15) days after the Effective Date, SUPPLIER will give UNION PACIFIC
notice of any variances from the UP Consumables list furnished by
UNION PACIFIC, as determined by SUPPLIER's audit of such list, and the
parties will then work cooperatively to establish the final list of UP
Consumables within fifteen (15) days after UNION PACIFIC's receipt of
SUPPLIER's notice of variances. If no notice of variances is timely
given by SUPPLIER, then the UP Consumables list furnished by UNION
PACIFIC will be the final list.
5.2 UP INVENTORY PURCHASE PRICE; SALES AND USE TAX. The
purchase price ("Purchase Price") to be paid by SUPPLIER for the UP
Inventory is (a) for the UP Equipment, the amount listed on SCHEDULE
5.2 attached and by reference incorporated into this Agreement, PLUS
(b) for the UP Consumables, an amount calculated using the average
UNION PACIFIC Materials Management System price for each item on the
final list of UP Consumables. SUPPLIER will be responsible for the
timely payment of any and all sales and use taxes on the sale of the
UP Inventory by UNION PACIFIC to SUPPLIER, and, without limitation of
the foregoing, for providing UNION PACIFIC with a sale for resale
certificate covering the UP Consumables.
5.3 CLOSING OF SALE AND PURCHASE. (a) UNION PACIFIC will
transfer to SUPPLIER all of UNION PACIFIC's right, title and interest,
free and clear of all liens and encumbrances, in the UP Equipment as
of 12:00 A.M., CST, on the Effective Date, and in the UP Consumables
within fifteen (15) days after the final list of UP Consumables is
established, provided that SUPPLIER has paid UNION PACIFIC the
applicable portion of the Purchase Price by wire transfer of
immediately available United States funds on or before the applicable
transfer date. The UP Inventory will be transferred to and accepted by
SUPPLIER by duly executed Bills of Sale in the form of EXHIBIT H
attached and by reference incorporated into this Agreement. The sale
14
of the UP Inventory is on an "as is, where-is" basis, with no
representations as to fitness for a particular purpose,
merchantability or otherwise. The UP Inventory will be removed by
SUPPLIER from UNION PACIFIC property within sixty (60) days after the
delivery of the applicable Xxxx of Sale, except that usable Wheelsets
will remain in or be placed in the Wheelset Gardens. If SUPPLIER does
not timely remove any UP Inventory that SUPPLIER is required to
remove, UNION PACIFIC may do so at the expense of SUPPLIER. Wheelsets
and Wheelset components included in the UP Consumables which are not
scrapped by SUPPLIER will be returned to UNION PACIFIC after any
necessary repair/reconditioning as a part of the Wheelset
Supply/Services (for which UNION PACIFIC will pay the applicable Base
Prices).
(b) Notwithstanding the foregoing, UNION PACIFIC may elect
to delay the closing of the sale and purchase of those items of UP
Equipment located at the North Little Rock UP Wheel Shop for a period
of up to one (1) year after the Effective Date, or, if SUPPLIER is in
material default under this Agreement, to delete such items from the
sale and purchase of the UP Inventory entirely. If the closing on
such items is delayed, the Purchase Price attributable to the UP
Equipment to be paid on the Effective Date will be reduced by the
amount shown on SCHEDULE 5.3(b) attached and by reference made a part
of this Agreement, the closing on such items of UP Equipment at the
North Little Rock Wheel Shop will take place within thirty (30) days
after notice is given by UNION PACIFIC to SUPPLIER, and the Purchase
Price to be paid for such items at the delayed closing will be
calculated using the item prices on EXHIBIT A less depreciation as
determined in accordance with generally accepted accounting
principles.
5.4 REPURCHASE OPTION. If this Agreement is terminated for
cause, UNION PACIFIC will have the option to repurchase all or any
portion of the UP Inventory (except for any items which have been
scrapped or consumed). Union Pacific's repurchase option will include
the right to acquire Wheelsets in quantities no less than the
quantities required by the Base Inventory Level (as adjusted pursuant
to Section 2.6(b)). The repurchase will be on the same terms and
conditions as the sale of the UP Inventory to SUPPLIER under this
Agreement, except that SUPPLIER will be responsible at SUPPLIER's
expense for transporting Wheelsets located at SUPPLIER Wheel Shops to
UNION PACIFIC locations designated by UNION PACIFIC.
6.0 CONFIDENTIALITY.
---------------
Both parties will treat as secret, confidential and proprietary
to the other party, the terms and conditions of this Agreement, and,
as to SUPPLIER, all information provided by UNION PACIFIC to SUPPLIER
relating to this Agreement or the Wheelset Supply/Services, including,
without limitation, the UNION PACIFIC specifications and standards
referred to in Section 2.4, and, as to UNION PACIFIC, all information
15
provided by SUPPLIER to UNION PACIFIC relating to this Agreement or
the Wheelset Supply/Services (collectively, the "Confidential
Information"). Neither party will publish, disclose or authorize any
person or entity to publish or disclose to any other person, firm or
entity any of the Confidential Information during the Term or
thereafter, without the prior written consent of the other party,
except to the extent that such information is in the public domain
either at the time of its disclosure or thereafter comes into the
public domain through no act of the disclosing party, or as required
by law or court order (and then only after giving the other party such
reasonable advance notice of disclosure pursuant to legal requirement
or court order as is possible under the circumstances.) Each party
will take all necessary precautions to ensure that its employees,
agents and contractors adhere to this undertaking of confidentiality.
Neither party will use the Confidential Information other than in
connection with performing its obligations under this Agreement. Upon
termination or expiration of this Agreement, each party will promptly
return to the other party all of the Confidential Information which is
in or has been reduced to tangible form, and will not retain any
copies, extracts or other reproductions in whole or in part of same.
Each party acknowledges and agrees that, in the event of its breach of
this undertaking of confidentiality, the other party would be
irreparably and immediately harmed and could not be made whole by
monetary damages. Accordingly, it is agreed that, in addition to any
other remedy to which the other party may be entitled at law or in
equity, the other party will be entitled to an injunction or
injunctions (without the posting of any bond and without proof of
actual damages) to prevent breaches or threatened breaches of this
Section 6.0 and/or to compel specific performance of this Section 6.0,
and that the breaching party will not oppose the granting of such
relief. The provisions of this Section 6.0 will survive the
termination or expiration of this Agreement.
7.0 Term; Termination.
-----------------
7.1 TERM. The term (the "Term") of this Agreement will commence
on the Effective Date and remain in effect until November 8, 2009,
unless earlier terminated as provided in this Agreement. The Term
will be automatically extended for successive one-year extension terms
unless either party gives notice to the other party that it does not
intend to extend this Agreement at least ten (10) months prior to the
expiration of the initial Term or the then-current extended Term, as
applicable.
7.2 MUTUAL CAUSES FOR TERMINATION. This Agreement may be
terminated by a party prior to expiration of the Term upon sixty (60)
days notice of termination to the other party, if any of the events
listed below occurs and is not cured within sixty (60) days from the
date of the termination notice:
16
(a) if a party files any petition or action for relief
under any reorganization, insolvency or moratorium law, or any other
law or laws for the relief of, or relating to, debtors; or
(b) if there is filed against a party an involuntary
petition under any bankruptcy statute, or a custodian, receiver,
trustee, assignee for the benefit of creditors or similar official is
appointed to take possession, custody or control of the property of
the other party.
7.3 SPECIFIC CAUSES FOR TERMINATION. This Agreement may also be
terminated, by the party indicated, upon the occurrence of any of the
following events:
(a) by UNION PACIFIC, upon sixty (60) days notice of
termination to SUPPLIER, if SUPPLIER is in material default under in
Section 2.7 or 3.3; or
(b) by UNION PACIFIC, upon sixty (60) days notice of
termination to SUPPLIER, if (i) SUPPLIER's Tangible Net Worth remains
at less than Fifty Million Dollars ($50,000,000) for any consecutive
thirty (30)-day period, and (ii) SUPPLIER's Total Stockholder's Equity
as reported in SUPPLIER's publicly-issued financial reports is less
than Fifty Million Dollars ($50,000,000). "Tangible Net Worth" means
the net book value (after deducting related depreciation, amortization
and other valuation reserves) at which the "Tangible Assets" of
SUPPLIER would be shown on a balance sheet, minus the amount at which
its liabilities would be shown on such balance sheet as determined in
accordance with generally accepted accounting principles. "Tangible
Assets" means all assets which would, in accordance with generally
accepted accounting principles, be classified as a tangible asset,
except deferred assets (other than prepaid insurance and prepaid
taxes), patents, copyrights, trademarks, trade names, franchises, good
will and other similar assets; or
(c) by UNION PACIFIC, upon ten (10) days notice of
termination to SUPPLIER, if UNION PACIFIC is enjoined from closing a
UP Wheel Shop, or if a significant labor action is threatened or
undertaken against UNION PACIFIC in connection with closing a UP Wheel
Shop; or
(d) by SUPPLIER, upon thirty (30) days notice of
termination to UNION PACIFIC, if UNION PACIFIC fails to make any
uncontested portion of a payment when due under Section 4.1 within
thirty (30) days after receipt by UNION PACIFIC of notice of non-
payment from SUPPLIER.
7.4 TERMINATION AFTER ARBITRATION. If either party materially
breaches any of its representations or warranties in this Agreement or
materially defaults in the performance of any of its obligations under
this Agreement, other than (a) the meeting of financial obligations
when such obligations are due or, (b) failure to meet Minimum Delivery
17
Requirements or the Product Quality Requirements as provided in
Sections 2.7 and 3.3, the other party may give the breaching party
notice specifying the claimed particulars of such breach or default.
If the breaching party does not remedy the breach or default within
thirty (30) days after such notice is given, or if the breaching party
fails within such thirty (30) day period to commence to remedy such
breach or default and to remedy the same within a reasonable time
thereafter, the non-breaching party may at any time thereafter submit
the issue to arbitration as provided in Section 14.0. Upon a
determination in arbitration of the validity of the non-breaching
party's allegations and the materiality of the breach, the non-
breaching party will have the right to terminate this Agreement by
giving the breaching party thirty (30) days notice of termination.
7.5 POST-TERMINATION OBLIGATIONS. (a) Upon expiration or
termination of this Agreement howsoever, SUPPLIER will diligently and
in a timely manner, and otherwise in accordance with the requirements
of this Agreement, provide all of the Wheelset Supply/Services to
UNION PACIFIC necessary to fill the inventory requirements of UNION
PACIFIC as of the date of the expiration or termination, unless
otherwise directed by UNION PACIFIC. SUPPLIER, at SUPPLIER's expense,
will also deliver any bad order Wheelsets or components (whether
located en route or at an SUPPLIER Wheel Shop) to UNION PACIFIC at the
destination designated by UNION PACIFIC.
(b) SUPPLIER acknowledges the limited number of Alternate
Suppliers, and the lengthy start-up time required if it becomes
necessary for UNION PACIFIC to use Alternate Suppliers and/or to
perform its own wheelset services. SUPPLIER agrees that
notwithstanding the expiration or termination of this Agreement
howsoever, SUPPLIER will continue to provide the Wheelset
Supply/Services under the terms of this Agreement for a period of up
to four (4) calendar months as and to the extent requested by UNION
PACIFIC to fill inventory requirements due to lack of or inadequacy of
Alternate Suppliers and/or to accommodate the necessary start-up times
for UNION PACIFIC to open its own wheel shops. If the Agreement was
terminated by SUPPLIER due to default of UNION PACIFIC in making
payments, then SUPPLIER will not be required to provide such post-
termination Wheelset Supply/Services unless adequate measures (such as
escrowing funds) are taken to insure timely payment to SUPPLIER.
8.0 INDEMNITY; INSURANCE; COMPLIANCE WITH LAWS.
-------------------------------------------
8.1 INSURANCE. Prior to the Effective Date, SUPPLIER will
obtain and thereafter maintain general public liability insurance and
policies of insurance against other risks for which insurance is
customarily obtained in operations similar to those of SUPPLIER, with
initial annual coverage of not less than Ten Million Dollars
($10,000,000) for any one occurrence for personal injury, and/or
property damage liability. The insurance will provide Broad Form
Contractual Liability Coverage, severability of interests, name UNION
18
PACIFIC and UNION PACIFIC's affiliates as additional insureds, and
will be on an occurrence basis. The insurer(s) will be reputable
insurance companies acceptable to UNION PACIFIC or with a current
Best's Insurance Guide Rating of B and Class VII or better. UNION
PACIFIC has the right to adjust the amount of such insurance coverage
on the basis of amounts customarily maintained in the industry for
such operations, but no more frequently than once every two (2) years.
SUPPLIER will furnish to UNION PACIFIC evidence that such insurance
is being maintained, in the form of a duplicate copy of the insurance
policy or a certificate of insurance, with endorsements providing (a)
evidence by carrier of continuation of coverage at least ten (10) days
prior to expiration of the policy, and (b) that UNION PACIFIC will be
given thirty (30) day written notice of any modification or
cancellation of the policy.
8.2 Indemnity.
---------
(a) In addition to any insurance required by this
Agreement, SUPPLIER covenants and agrees to release, indemnify, defend
and save harmless UNION PACIFIC, its affiliates, and its and their
officers, agents, employees, successors and assigns ("UP Indemnified
Parties"), from and against any and all claims, losses, damages,
liabilities, actions, causes of action, costs and expenses (including,
without limitation, attorneys' and experts' fees and court costs)
fines and penalties (collectively, "Losses") incurred by any person
(including, without limitation, any UP Indemnified Party, SUPPLIER, or
any employee of SUPPLIER), to the extent (based on the proportion of
causation arising from or relating to the matters described in (i),
(ii), (iii) and (iv) next following, relative to other causes of the
Loss) to the Loss arises from or relates to (i) SUPPLIER's use or
occupancy of UNION PACIFIC's real property, (ii) SUPPLIER's operations
under this Agreement, (iii) SUPPLIER's breach of this Agreement, or
(iv) UNION PACIFIC's use of any Wheelsets supplied by SUPPLIER or as
to which SUPPLIER has provided Wheelset Services.
(b) The right to indemnity under this Section 8.2 will
apply regardless of any negligence or strict liability of any UP
Indemnified Party, except for the sole negligence of a UNION PACIFIC
Indemnified Party, as established by the final judgment of a court of
competent jurisdiction. SUPPLIER expressly and specifically assumes
liability under this Section 8.2 for claims or actions brought by
SUPPLIER's own employees or the employees of any subcontractor.
SUPPLIER waives any immunity it may have under workers' compensation
or industrial insurance acts to indemnify UP under this Section 8.2.
SUPPLIER acknowledges that this waiver was mutually negotiated by the
parties. No court or jury findings in any employee's suit pursuant to
any workers' compensation act or the Federal Employers' Liability Act
against a party to this Agreement may be relied upon or used by
SUPPLIER in any attempt to assert liability against UNION PACIFIC.
19
8.3 COMPLIANCE WITH LAWS.
SUPPLIER will comply with all applicable laws, rules,
regulations, statutes and orders relating to the Wheelset
Supply/Services.
9.0 ASSIGNMENT.
----------
Neither party may assign, transfer or sell its rights, or
delegate its obligations under this Agreement, in whole or in part, to
any person who is not a successor to the entire business conducted by
either UNION PACIFIC or SUPPLIER, without the prior written consent of
the other party. Subject to these restrictions, the provisions of
this Agreement are binding upon and will inure to the benefit of the
parties, their successors in interest or permitted assigns.
10.0 NO WAIVER.
---------
Either party's failure to enforce at any time any of the
provisions of this Agreement will not be construed to be a waiver of
such provision or of the right of the party thereafter to enforce any
such provision. The waiver by either party of any of its rights or
any events of non-compliance by the other party with the terms of this
Agreement in a particular instance will not be construed as a waiver
of the same or different rights or non-compliance in subsequent
instances.
11.0 FORCE MAJEURE.
-------------
11.1 Neither party will be liable for any failure to perform any
obligation under this Agreement resulting from acts of God, fire,
flood, tornado, explosion or other casualty (unless caused by the
party seeking to be excused from performance), strikes or other labor
problems, interruptions or shortage of transport facilities, inability
to obtain raw materials or component parts, war, riot, embargo, year
2000 noncompliance by third parties, national emergency, legal
restrictions enacted after the Effective Date, or any other causes
beyond its control, but due diligence will be used in attempting to
mitigate the effects of such cause(s) and to eliminate such causes(s).
Upon elimination of the force majeure cause, the affected party will
immediately resume performance in accordance with the terms of this
Agreement. If the effect of the force majeure cause on SUPPLIER's
performance continues for more than ninety (90) days, UNION PACIFIC
may terminate this Agreement by giving notice of termination.
11.2 If the force majeure cause affects only a portion of
SUPPLIER's capacity to manufacture, provide and ship Wheelsets and
Wheelset Services, SUPPLIER will perform under the Agreement to the
extent possible unless otherwise directed in writing by UNION PACIFIC.
20
SUPPLIER agrees that if SUPPLIER's performance is affected by a force
majeure cause, then SUPPLIER it will use its best efforts to assist
UNION PACIFIC in obtaining a source of supply for any Wheelsets and
Wheelsets Services required and that UNION PACIFIC may purchase any or
all Wheelsets and Wheelsets Services from Alternate Suppliers
notwithstanding the requirements obligation of this Agreement.
11.3 Promptly upon the occurrence of a force majeure cause (but
in no event more than ten (10) business days after the occurrence),
the affected party will give the other party notice describing the
force majeure cause, together with a reasonable estimate of the
duration and affect of the force majeure cause on the affected party's
performance. Neither party may be excused from non-performance due to
a force majeure cause if it fails to timely give such notice.
12.0 RELATIONSHIP OF THE PARTIES.
---------------------------
The relationship between SUPPLIER and UNION PACIFIC is that of
vendor and vendee. SUPPLIER is an independent contractor, and has no
express or implied right or authority to assume or create any
obligation on behalf of UNION PACIFIC. In no event will the employees
of SUPPLIER be deemed employees of UNION PACIFIC.
13.0 SUBCONTRACTS
------------
No subcontractor may be retained by SUPPLIER until consented to
in writing by UNION PACIFIC. SUPPLIER is fully responsible to UNION
PACIFIC for the acts and omissions of all subcontractors and any
persons either directly or indirectly employed by subcontractors, just
as SUPPLIER is fully responsible for the acts and omissions of persons
employed by SUPPLIER. If at any time during the Term, UNION PACIFIC
determines that any subcontractor is incompetent, or creates an
objectionable condition detrimental to UNION PACIFIC's interests,
UNION PACIFIC may notify SUPPLIER in writing and SUPPLIER will take
immediately steps to correct the condition. Such steps may include
termination of the subcontract and substitution of another
subcontractor or performance of the affected work or services by
SUPPLIER. All subcontracts and contracts for material entered into by
SUPPLIER will provide that all guarantees, warranties, and other
obligations will run directly to UNION PACIFIC, that UNION PACIFIC
will be named as an additional insured in all insurance policies
required to be procured and maintained by any subcontractors, and that
upon termination or forfeiture of this Agreement, subcontractors will
continue to perform under their subcontracts in the event UNION
PACIFIC requests that such performance be continued and takes an
assignment of such subcontract.
21
14.0 ARBITRATION
-----------
Any and all disputes of whatsoever nature arising out of this
Agreement which UNION PACIFIC and SUPPLIER cannot resolve within a
commercially reasonable time period may be referred by either party to
arbitration under the rules of the American Arbitration Association.
If the parties cannot agree on a single arbitrator within thirty (30)
days after written demand for arbitration, the arbitrator will be
selected pursuant to the rules and regulations of the American
Arbitration Association governing commercial transactions. The
arbitration proceeding will be conducted within ninety (90) days of
any demand for arbitration. If reasonable to do so, as determined by
the arbitrator, it will be conducted on a single day with each party
being allowed an equal amount of time to present its case. No
discovery will be allowed except that each party will submit to the
other and to the arbitrator, no later than thirty (30) days prior to
the proceeding, copies of all documents to be presented, the names and
occupations of all proposed witnesses, and a written summary of the
substance of their proposed testimony. The arbitrator will exclude
any evidence not presented to the other party and the arbitrator as
required by this Section 14.0 within such time period. The parties
will submit such legal briefing or other statements of position as the
arbitrator may request. The parties will share equally the costs of
any such arbitrator(s). Any arbitration decision or aware will be
final and not be subject to appeal to any court of law, except in the
case of a manifest error in the application of law.
15.0 NOTICES.
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All notices, approvals and demands of any kind (other than those
to be electronically transmitted as provided in this Agreement) which
either party may be required or desire to serve upon the other under
this Agreement must be in writing and will be deemed given only upon
(i) personal delivery, (ii) the sending of a telecopy or facsimile
transmission if confirmed within two (2) business days in the manner
described in (iii) below, or (iii) delivery by a reputable overnight
air courier service. In each case, notices must be addressed or
transmitted as set forth below or at such other addresses or facsimile
number as may be designated by a party by notice to the other party.
If to SUPPLIER: ABC-NACO, Rail Service Group
Attention: President
000 Xxxxx Xxxxx Xxxxxxxxx Xxxxxx, Xxxxx 000
Xxxxxxxxxx XX 00000
Facsimile #: (000) 000-0000
With copies to: ABC-NACO Inc.
Attention: Vice President and General Counsel
0000 Xxxxxxxxxxx Xxxx, Xxxxx 000
Xxxxxxx Xxxxx, XX 00000
Facsimile #: (000) 000-0000
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Xxxxxxxxx Rail Services
Attention: President
Xxx Xxxxxxxxxxxx Xxxxx, Xxxxx 000
Xxxx Xxxxxx, XX 00000
Facsimile #: (000) 000-0000
If to UNION PACIFIC: UNION PACIFIC RAILROAD COMPANY
Attention: General Director - Purchasing
0000 Xxxxx Xxxxxx, Xxxx 000
Xxxxx, XX 00000-0000
Facsimile #: (000) 000-0000
16.0 MISCELLANEOUS.
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16.1 PARAGRAPH HEADINGS AND LANGUAGE INTERPRETATION. The
paragraph headings in this Agreement are for reference only and are
not substantive provisions of this Agreement. The use of a singular
or plural form includes the other form, and the use of masculine,
feminine or neuter gender includes the other genders.
16.2 ENTIRE AGREEMENT; COUNTERPARTS. This Agreement constitutes
all of the agreements of the parties with respect to the subject
matter of this Agreement. Any and all other written or oral
agreements existing before the Effective Date between the parties
pertaining in any manner to the subject matter of this Agreement are
expressly cancelled and superseded by this Agreement. Any
modifications or amendments to this Agreement must be in writing and
signed by both parties.
16.3 GOVERNING AGREEMENT. Unless otherwise specifically agreed
to in writing, all transactions between UNION PACIFIC and SUPPLIER
relating in any manner to the Wheelsets Supply/Services or this
Agreement will be governed entirely by the terms and conditions set
forth in this Agreement. Without limitation of the previous sentence,
any additional or different terms or conditions in UNION PACIFIC
purchase orders or SUPPLIER order acknowledgments or other business
forms will be deemed objected to by UNION PACIFIC or SUPPLIER, as
applicable, and will be of no force or effect whatsoever,
notwithstanding any failure by either party to communicate objections.
16.4 GOVERNING LAW. This Agreement will be governed by, and
construed in accordance with, the laws of the State of Illinois
applicable to contracts executed in and performed entirely within the
State, without regard to conflicts of law principles.
16.5 TIME OF ESSENCE. Time is of the essence of this Agreement.
16.6 SEVERABILITY. If any of the provisions of this Agreement,
or the application of any such provisions to either of the parties
with respect to their obligations under this Agreement, are held by a
court or other tribunal of competent jurisdiction to be unlawful or
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unenforceable, the remaining provisions of this Agreement will remain
in full force and effect, except that if a party consequently is
deprived of a substantial benefit of its bargain under this Agreement,
then such party may elect to terminate this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement as
of the date first written above.
UNION PACIFIC RAILROAD COMPANY ABC-NACO INC.
By: Xxxxxxx X. Xxxxxx By: Xxxxxx X. Xxxxxx
------------------------ -------------------------------
Title: Vice President Supply Title: President and Chief
Operating Officer
Date: November 10, 1999 Date: November 10, 1999
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