EXHIBIT 10.1
ASSET PURCHASE AGREEMENT
DATED AS OF
OCTOBER 10, 1995
BY AND AMONG
AMERICAN PASSENGER RAIL CAR COMPANY,
L.L.C.,
XXXXXXXX XXXXXXX CORPORATION,
XXXXXXXX XXXXXXX CORPORATION,
AND
THE ENTITIES LISTED ON SCHEDULE 1 HERETO
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ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT dated as of October 10, 1995, is by and
among American Passenger Rail Car Company, L.L.C., a Delaware limited liability
company (the "Buyer"), Xxxxxxxx Xxxxxxx Corporation, an Ohio corporation
(together with its successors and assigns, "MK" or the "Seller"), Xxxxxxxx
Xxxxxxx Corporation, a Delaware corporation ("MK Delaware"), and each of the
entities listed on Schedule 1 hereto (collectively, MK Delaware and the entities
listed on Schedule 1 hereto, the "MK Affiliates").
W I T N E S S E T H:
WHEREAS, MK Delaware is the sole owner, of record and beneficially, of
all of the issued and outstanding capital stock of the Seller and has Affiliates
(as hereinafter defined) including the entities listed in Schedule 1 hereto;
WHEREAS, the Seller, among other things, conducts a public
transportation manufacturing business, which provides engineering services and
manufactures and refurbishes commuter passenger and transit railcars for various
municipalities and other governmental entities pursuant to the Transit Division
Contracts (as hereinafter defined) (the "Business");
WHEREAS, the Seller and its advisors have attempted to find a
purchaser for the Business and anticipated having to pay potential transferees
of the Purchased Assets (as defined below) to accept them, but, due to potential
liabilities and other concerns, have been unsuccessful in concluding any such
transaction;
WHEREAS, at the request of the Seller, Fidelity and Deposit Company of
Maryland, on its own behalf and on behalf of its co-sureties and reinsurers
(collectively, the "Sureties"), executed and delivered that certain guarantee
(the "$25,000,000 Guarantee") dated as of July 31, 1995, guaranteeing certain
obligations of the Seller, up to a maximum principal amount of Twenty-five
Million Dollars ($25,000,000.00), under that certain credit agreement (the
"Previous Credit Agreement") described in Schedule R1, conditioned on certain
principal terms and conditions set forth in the T-Co Term Sheet (as hereinafter
defined), executed contemporaneously with the $25,000,000 Guarantee, which
principal terms and conditions provided, among other things, that the Seller
would transfer and assign to the Buyer the assets used to conduct the Business
in accordance with the terms of this Agreement;
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WHEREAS, certain financial institutions that are lenders to the Seller
(the "Banks") extended to the Seller financing (the "New Financing"), subject to
and conditioned on certain principal terms and conditions set forth in the T-Co
Term Sheet, executed contemporaneously with the extending of such financing,
which principal terms and conditions provided, among other things, that the
Seller would transfer and assign to the Buyer the assets used to conduct the
Business in accordance with the terms of this Agreement.
WHEREAS, if the transactions contemplated by this Agreement did not
occur, such failure to consummate the transactions contemplated by this
Agreement would constitute an event of default with respect to the New Financing
and all original financing provided by the Banks to or for the benefit of the
Seller, entitling the Banks to accelerate such financing and to enforce certain
rights and remedies against the Seller, including the right to enforce the
Banks' security interests in certain assets and property of the Seller;
WHEREAS, the Sureties have agreed, at the request of the Seller and
the Buyer, to enter into an agreement (the "New Bonds Agreement"), at Closing,
to issue the bond or bonds described in the New Bonds Agreement (the "New
Bonds"), on the terms and conditions set forth in the New Bonds Agreement,
subject to, and conditioned upon, the Buyer agreeing to assume the Buyer
Obligations, certain banks and financial institutions extending new credit and
the Seller transferring and assigning the Purchased Assets to the Buyer
contemporaneously with the entering into of the New Bonds Agreement, on the
terms and conditions herein set forth;
WHEREAS, pursuant to Section 2.05 of this Agreement, the Buyer will
pay the amount set forth on Exhibit 2.05(a) to the Seller as partial
consideration for the Purchased Assets;
WHEREAS, a financial advisor has provided an opinion as to the
fairness of the transaction contemplated by this Agreement;
WHEREAS, since the Seller believes that the New Financing and the New
Bonds are necessary for the continued operation and viability of the Seller's
remaining business and that the value of such New Financing and New Bonds,
together with the cash payment to be made by the Buyer pursuant to Section 2.05
is at least equivalent to the value of the Purchased Assets, and, further, to
avoid the acceleration of the Seller's existing financing and the exercise of
the Banks' rights and remedies against the Seller and its assets and properties
as aforesaid, the Seller desires to sell the Purchased Assets to the Buyer, upon
the terms and subject to the conditions of this Agreement; and
WHEREAS, the Buyer desires to purchase the Purchased Assets and has
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agreed to assume the Buyer Obligations, upon the terms and subject to the
conditions of this Agreement;
NOW, THEREFORE, in consideration of the premises, and the mutual
representations, warranties, covenants and agreements hereinafter set forth, and
for other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, and intending to be legally bound, the parties hereto
agree as follows:
ARTICLE I
DEFINITIONS
1.01. DEFINITIONS. (a) Unless the context shall otherwise require,
the following terms used in this Agreement shall have the respective meanings
assigned to such terms in this Section 1.01 for all purposes of this Agreement.
All agreements or instruments defined in this Section 1.01 or elsewhere in this
Agreement shall mean such agreements or instruments as the same may from time to
time be supplemented or amended or the terms thereof waived or modified to the
extent permitted by, and in accordance with, the terms hereof and thereof.
"Affiliate" has the meaning ascribed to such term in Rule 405 of the
Securities Act of 1933, as amended.
"Amtrak" means National Railroad Passenger Corporation.
"Applicable Law" means, with respect to any Person, any domestic or
foreign, federal, state or local statute, law, code, ordinance, rule,
administrative interpretation, regulation, order, writ, injunction, directive,
judgment, decree or other requirement of any Governmental Authority (including
any Environmental Law) applicable to such Person or any of its Affiliates or any
of their respective properties, assets, officers, directors or employees (in
connection with such officer's, director's or employee's activities on behalf of
such Person or any of its Affiliates).
"Assignment Agreement" means the Assignment Agreement to be dated as
of the Closing Date between the Seller and the Buyer in the form of Exhibit
1.01(a) attached hereto.
"Attributable to the Business" means (i) with respect to assets
physically located in any of the Seller's locations in Chicago, Illinois,
Pittsburg, California or Hornell,
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New York, and, with respect to contracts, subcontracts, agreements,
arrangements, options, leases, licenses, commitments and other instruments of
any kind, used or held in connection with the conduct of the Business as the
Business is being conducted on the date hereof, and (ii) with respect to assets
physically located in any of the Seller's locations other than Chicago,
Illinois, Pittsburg, California and Hornell, New York, either (A) necessary to
conduct the Business as the Business is being conducted on the date hereof,
excluding assets that are used or held only in connection with an Excluded
Obligation, or (B) used or held in connection with the conduct of the Business,
but not primarily used or held in connection with the conduct of any business of
the Seller other than the Business.
"Banks" has the meaning set forth in the recitals of this Agreement.
"BART" means San Francisco Bay Area Rapid Transit District.
"Bid" means any quotation, bid or proposal made by the Seller or its
Affiliates that, if accepted or awarded, would become a contract, subcontract,
agreement, arrangement, joint venture, order, option, lease, license, commitment
or other instrument of any kind with any Governmental Authority or any other
Person for the design, manufacture, engineering, rehabilitation, lease and/or
sale of, or any other action with respect to, any products or the provision of
any services by the Business.
"Bond Documents" means that certain Indemnification and Reimbursement
Agreement dated as of the date hereof by and between the Buyer and the Bonding
Company and that certain Agreement of Indemnity dated as of the date hereof by
and between the Buyer and the Bonding Company.
"Bonding Company" means Fidelity & Deposit Company of Maryland.
"Business" has the meaning set forth in the recitals of this
Agreement.
"Business Day" means a day other than a Saturday, Sunday or other day
on which commercial banks in Chicago, Illinois, New York, New York or Los
Angeles, California are authorized or required by law to close.
"Buyer Obligations" has the meaning set forth in Section 2.03 hereof.
"Caltrans" means State of California Department of Transportation.
"Closing Net Assets To Be Sold" means the net assets of the Business
to be sold by the Seller to the Buyer, as shown on the Closing Statement of Net
Assets To Be Sold.
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"Closing Statement of Net Assets To Be Sold" means the statement of
the Closing Net Assets To Be Sold as at the close of business on the Closing
Date, together with the notes thereto and accompanied by a report thereon from
Deloitte & Touche.
"Contracts" means any and all written contracts, subcontracts,
agreements, arrangements, options, leases, licenses, commitments and other
instruments of any kind to which the Seller is a party on the Closing Date,
which are Attributable to the Business or which relate to any of the Purchased
Assets.
"Conveyance Documents" means the xxxx of sale, the assignments of
intellectual property rights, the TDC Assignments, the Lease Assignments, the
Assignment Agreement, the Instrument of Assumption, the Pledge and Security
Agreement (Equipment Assets) and the Bulk Sales Pledge and Security Agreement
(Equipment Assets).
"Customer Concessions" means the concessions described in Exhibit
1.01(b).
"Damages" means all demands, claims, actions or causes of action,
assessments, losses, damages (excluding consequential damages, other then
consequential damages included in any judgment, award or settlement paid to a
third party), costs, expenses, liabilities (excluding contingent liabilities),
judgments, awards, fines, sanctions, penalties, charges and amounts paid in
settlement, including (x) interest on cash disbursements in respect of any of
the foregoing at the Reference Rate in effect from time to time, compounded
quarterly, from the date each such cash disbursement is made until the Person
incurring the same shall have been indemnified in respect thereof and (y)
reasonable costs, fees and expenses of attorneys, experts, accountants,
appraisers, consultants, witnesses, investigators and any other agents of such
Person.
"Delaware LLC Act" means the Delaware Limited Liability Company Act, 6
Del. C. Ch. 18.
"Disclosure Schedule" means that certain schedule identified as such
and delivered or to be delivered by the Seller to the Buyer pursuant hereto.
"Environmental Laws" means all Applicable Laws relating to the control
of any pollutant or the protection of human health, safety or the environment
including (i) all requirements pertaining to reporting, licensing, permitting,
controlling, investigating or remediating emissions, discharges, releases or
threatened releases of Hazardous Substances, chemical substances, pollutants,
contaminants or toxic substances, materials or wastes, whether solid, liquid or
gaseous in nature, into the air, surface water, groundwater or land, or relating
to the manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of Hazardous Substances, chemical substances, pollutants,
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contaminants or toxic substances, materials or wastes, whether solid, liquid or
gaseous in nature; and (ii) all requirements pertaining to the protection of the
health and safety of employees or the public. Without limiting the generality
of the foregoing, "Environmental Laws" include: (a) the Resource Conservation
and Recovery Act, as amended, 42 U.S.C. Sections 6901 ET SEQ.; (b) the
Comprehensive Environmental Response, Compensation and Liability Act of 1980, 26
U.S.C. Sections 4611 and 42 U.S.C. Sections 9601 ET SEQ.; (c) the Superfund
Amendment and Reauthorization Act of 1984; (d) the Clean Air Act, 42 U.S.C.
Sections 7401 ET SEQ.; (e) the Clean Water Act, 33 U.S.C. Sections 1251 ET SEQ.;
(f) the Safe Drinking Water Act, 42 U.S.C. Sections 300f ET SEQ.; (g) the Toxic
Substances Control Act, 15 U.S.C. Sections 2601 ET SEQ.; (h) the Federal Water
Pollution Control Act, as amended, 33 U.S.C. Section 1251 ET SEQ.; (i) the
Hazardous Materials Transportation Act, as amended, 49 U.S.C. Sections 1801 ET
SEQ., (j) the Atomic Energy Act, as amended, 42 U.S.C. Sections 2011 ET SEQ.;
(k) the Federal Insecticide, Fungicide and Rodenticide Act, as amended, 7 U.S.C.
Sections 136 ET SEQ.; (l) the Federal Food, Drug and Cosmetic Act, as amended,
21 U.S.C. Sections 301 ET SEQ.; and (m) OSHA.
"Environmental Liabilities" means all Liabilities of a Person (whether
such Liabilities are owed by such Person to Governmental Authorities, third
parties or otherwise) whether presently in existence or arising hereafter which
arise under or relate to any Environmental Law.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations promulgated thereunder.
"Excluded Assets" means (i) any and all Bids which have not been
accepted or awarded as of the date of this Agreement, the Teaming Agreement
between the Seller and Fiat Ferroviara and the Teaming Agreement between the
Seller and AEG (ii) subject to Section 2.04(d) hereof, the Restricted Contracts,
where the consent of the Person that is required for the Buyer to assume such
Restricted Contract is not obtained (but only until so obtained, if ever), and
(iii) the assets set forth in Section 1A of the Disclosure Schedule.
"Excluded Obligations" means Liabilities of the Seller specifically
not being assumed by the Buyer hereunder, including (i) Liabilities related to
"401(k) and SERP expenses", "Legal and audit Services", "Professional and
Consulting Services" and "Other Outside Services" as those terms are used in the
1995 Proposed Overhead Budget attached as an exhibit to the Indemnification and
Reimbursement Agreement, (ii) any existing bank debt, (iii) Environmental
Liabilities associated with any conditions existing prior to Closing, (iv)
employee severance Liabilities, (v) Liabilities associated with any existing
employee benefit plans, (vi) Liabilities associated with any existing health
care plans, (vii) retiree benefits of any kind, (viii) product liability arising
in tort relating to defects in work performed by the Seller or any of the MK
Affiliates prior to Closing, (ix) Tax Liabilities, including any state sales
taxes arising in connection with the transaction consummated
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pursuant to this Agreement, (x) subject to Section 2.04(d), Liabilities
associated with any Excluded Asset, and (xi) Liabilities associated with any
litigation pending on the Closing Date or any claims, charges or complaints
pending on the Closing Date with any Governmental Authority arising out of
employment related disputes.
"GAAP" means generally accepted accounting principles applied on a
consistent basis.
"Governmental Authority" means any foreign, domestic, federal,
territorial, state or local governmental authority, quasi-governmental
authority, parastatal, instrumentality, court, government or self-regulatory
organization, commission, tribunal or organization or any regulatory,
administrative or other agency, or any political or other subdivision,
department or branch of any of the foregoing.
"Government Contract" means any Contract with (i) any Governmental
Authority, (ii) any prime contractor of any Governmental Authority, or (iii) any
subcontractor of any Governmental Authority or any prime contractor of any
Governmental Authority.
"Guaranty Agreement" means that certain Guaranty Agreement, dated as
of the date of this Agreement, from the Bonding Company in favor of Credit
Suisse.
"Hazardous Substance" means any chemical substance, object, condition,
material or waste that is or may be hazardous to human health, safety or the
environment, including any chemicals, substances, materials and wastes: (i) the
presence of which requires investigation or remediation under any Applicable
Law; (ii) which is defined as "hazardous wastes," "hazardous substances,"
"hazardous materials," "toxic substances," "air pollutants," toxic pollutants,"
"extremely hazardous waste" or "restricted hazardous waste" under any Applicable
Law; (iii) which is toxic, explosive, corrosive, flammable, infectious,
radioactive, carcinogenic, dangerous or mutagenic or otherwise hazardous and is
regulated by any Governmental Authority having or asserting jurisdiction over
the Business, the Purchased Assets or the Seller; (iv) the presence of which
causes a nuisance to adjacent properties or poses a hazard to the health or
safety of Persons; (v) the presence of which on adjacent properties constitutes
a trespass by the Seller; or (vi) which contains radioactive materials,
pesticides, pollutants, contaminants, chemicals, lead, ureaformaldehyde,
flammable explosives, radon, gasoline, diesel fuel or other petroleum
hydrocarbons, polychlorinated biphenols (PCBs) or asbestos.
"I.A.M." means the International Association of Machinists and
Aerospace Workers.
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"Indemnification and Reimbursement Agreement" means that certain
Indemnification and Reimbursement Agreement dated as of July 31, 1995 among the
Seller, MK Delaware, the Bonding Company and Colonial American Casualty and
Surety Company.
"Initial Net Assets To Be Sold" means the net assets of the Business
that would have been sold by the Seller to the Buyer if the Closing Date had
been August 27, 1995, as shown on the Initial Statement of Net Assets To Be
Sold.
"Initial Statement of Net Assets To Be Sold" means the statement of
the Initial net assets to be sold, as at the close of business on August 27,
1995, a copy of which is attached as Exhibit 1.01(c) hereto.
"Instrument of Assumption" means the instrument of assumption to be
dated as of the Closing Date between the Seller and the Buyer in the form of
Exhibit 1.01(d) attached hereto.
"Knowledge" or "knowledge" means, with respect to the Seller, the
collective actual knowledge (after due inquiry) of the officers, directors and
Management Employees of the Seller and MK Delaware, and Xxx Xxxxxxx, Xxxxx X.
X'Xxxxx III and Xxx Xxxxxx, and with respect to the Buyer, the collective actual
knowledge (after due inquiry) of the officers, managers and Management Employees
of the Buyer.
"Lease Assignments" means the assignment agreements with respect to
the Real Property Leases in substantially the form of Exhibit 1.01(e).
"Liability" means, with respect to any Person, any liability or
obligation of such Person of any kind, character or description, whether
disclosed or undisclosed, known or unknown, absolute or contingent, accrued or
unaccrued, liquidated or unliquidated, secured or unsecured, joint or several,
due or to become due, vested or unvested, executory, determined, determinable or
otherwise and whether or not the same is required to be accrued on the financial
statements of such Person.
"Lien" means, with respect to any asset, any mortgage, title defect or
objection, lien, pledge, charge, security interest, hypothecation, restriction
applicable to such asset's use in the Business, encumbrance, adverse right or
charge of any kind in respect of such asset.
"Management Employee" means, with respect to any Person, any employee
of such Person who has an annual base salary in 1995 of One Hundred Thousand
Dollars ($100,000) or more.
"Material Adverse Effect" means a change or effect that is reasonably
likely
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to be materially adverse to the Purchased Assets taken as a whole or the
operations, properties, prospects, condition, results of operations, assets or
Liabilities of the Business taken as a whole.
"Metra" means Commuter Rail Division of the Regional Transit Authority
D/B/A Metra/Metropolitan Rail.
"Metra Contract" means that certain Proposal/Contract (Rev. 1/24/92),
between Metra and the Seller, and all exhibits, schedules, amendments and
supplements thereto, awarded March 9, 1992.
"Net Asset Statements" means the Initial Statement of Net Assets To Be
Sold and the Closing Statement of Net Assets To Be Sold.
"New Metra Banks Revolving Credit Agreement" means that certain
Revolving Credit Agreement dated as of the date hereof among the Buyer, the
several financial institutions parties thereto and the Bank of America National
Trust and Savings Association, as agent for such financial institutions.
"OSHA" means the Occupational Safety and Health Act of 1970, 29
U.S.C.A. Section 651, and all rules and regulations promulgated thereunder.
"Owners" means Amtrak, BART, Caltrans, Metra, Metro North Commuter
Railroad, New York City Transit Authority, Massachusetts Bay Transportation
Authority, San Francisco Municipal Railway, Chicago Transit Authority,
Turbomecca Engine Corporation and VIA Rail.
"PBGC" means the Pension Benefit Guaranty Corporation.
"Permitted Liens" means (i) Liens for Taxes or governmental
assessments, charges or claims the payment of which is not yet due or, with
respect to California, is due but not past due; (ii) purchase money Liens on
equipment set forth in Section 1B(ii) of the Disclosure Schedule; PROVIDED, such
Liens do not apply to any other Purchased Assets, and, PROVIDED, FURTHER, that
such Liens do not, individually or in the aggregate, interfere with or impair
the present use of the equipment they affect; (iii) Encumbrances and Liens on
the Real Property Leases which are disclosed in any of the Title Commitments (as
defined in Section 5.07), other than the Liens granted by the Seller in favor of
Mellon Bank, or in Section lB(iii) of the Disclosure Schedule; (iv) the lien
granted under that certain Security Agreement and Waiver No. 4 with Xxxxxx
Guaranty Trust Company of New York dated as of July 31, 1995 and described in
Section 1B(iv) of the Disclosure Schedule; (v) inchoate mechanic's Liens and
materialman's Liens that will attach if the Buyer fails to satisfy the
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Buyer Obligations giving rise to such Liens; (vi) other Liens set forth in
Section lB(iv) of the Disclosure Schedule.
"Person" means an individual, corporation, partnership, association,
trust, estate, Governmental Authority or other entity or organization.
"Previous Metra Banks Revolving Credit Agreement" means that certain
Revolving Credit Agreement dated as of July 31, 1995, as amended, among the
Seller, the several financial institutions parties thereto and the Bank of
America National Trust and Savings Association, as agent for such financial
institutions.
"Purchased Assets" has the meaning set forth in Section 2.01.
"Reference Rate" means the "prime rate" of interest per annum
published from time to time in the "Money Rates" column of The Wall Street
Journal. Any change in the Reference Rate shall take effect at the opening of
business on the day on which such change is published.
"Required Consents" has the meaning set forth in Section 3.15.
"Restricted Contracts" means all those Contracts for which consent of
a third party is required to the assignment or transfer of such Contract to the
Buyer or the assignment of the rents, claims and benefits thereunder to the
Buyer.
"Subsidiary" means (i) any corporation that conducts any part of the
Business or that owns any Purchased Assets or owes or is otherwise liable for
any of the Buyer Obligations, as to which more than 50% of the outstanding stock
having ordinary voting rights or power (and excluding stock having voting rights
only upon the occurrence of a contingency unless and until such contingency
occurs and such rights may be exercised) is owned or controlled, directly or
indirectly, by the Seller and (ii) any partnership, joint venture or other
similar relationship between the Seller and any other Person (whether pursuant
to a written agreement or otherwise) which relates to the Business, or pursuant
to which any part of the Business is conducted.
"Sureties" has the meaning set forth in the Recitals of this
Agreement.
"T-Co Term Sheet" means that certain T-Co Transaction Revised Term
Sheet, executed on behalf of the Seller, the Banks and the Sureties, a copy of
which is attached as Exhibit 1.01(f).
"TDC Assignments" means the assignment agreements with respect to the
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Transit Division Contracts.
"Transit Division Contracts" means the Contracts with the Owners
described in Schedule R3.
"Union Benefit Plans" means, (i) the I.A.M. National Pension Fund, the
Group Health and Dental Plan and the Group Life Insurance covering union
employees in Hornell New York; (ii) the Group Health Plan, the Group Dental
Plan, the Group Life Insurance and the Short-term Sickness and Accident
Insurance covering union employees in Chicago, Illinois; and (iii) the Group
Health and Dental Plan and the Short-term Sickness and Accident Insurance
covering union employees in Pittsburg, California.
Certain terms used principally in other sections of this Agreement are
defined in such sections.
ARTICLE II
PURCHASE AND SALE
2.01. PURCHASE AND SALE. Upon the terms and subject to the
conditions of this Agreement and in reliance upon the representations,
warranties and agreements herein set forth, the Buyer agrees to purchase from
the Seller and the Seller agrees to sell, transfer, assign and deliver, or cause
to be sold, transferred, assigned and delivered, to the Buyer at the Closing,
free and clear of all Liens, other than Permitted Liens, all the assets,
properties, rights, licenses (other than licenses granted by a Governmental
Authority that are not transferable), transferable permits, causes of action and
claims (excluding counterclaims and cross-claims for all litigation that is not
assumed by the Buyer), operations and businesses of such Seller of every kind
and description that are Attributable to the Business (other than the Excluded
Assets), wherever located, whether tangible or intangible, real, personal or
mixed, which are owned by, leased by or in the possession of such Seller,
whether or not reflected on the books and records of such Seller, including all
assets shown on the Initial Statement of Net Assets To Be Sold and not disposed
of in the ordinary course of business or as permitted by this Agreement prior to
the Closing Date (the collective assets, properties, rights, licenses, permits,
causes of action, claims, operations and businesses to be transferred to the
Buyer by the Seller pursuant hereto are referred to collectively herein as the
"Purchased Assets") and including, except as otherwise specified herein, all
right, title and interest of the Seller in, to and under:
(i) all the Real Property Leases (as defined in Section 3.09(d))
and
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other leases, whether capitalized or operating, of, and other interests in, real
property that are Attributable to the Business, including the items listed in
Section 3.09(d) of the Disclosure Schedule, in each case together with all
buildings, fixtures and improvements erected thereon and appurtenances thereto;
(ii) all machinery, equipment, furniture, office equipment,
communications equipment, vehicles, storage tanks, spare and replacement parts,
fuel and other tangible property (and interests in any of the foregoing) of the
Seller that are Attributable to the Business, including the items listed in
Section 2.01(ii) of the Disclosure Schedule ("Equipment");
(iii) all items of inventory notwithstanding how classified in
the financial records of the Seller that are Attributable to the Business,
including all raw materials, work-in-process, finished goods, supplies, spare
parts, samples and stores that are Attributable to the Business ("Inventory");
(iv) the Contracts, which included those contracts listed on
Schedule 2.03(a) as of the date of such Schedule 2.03(a), including the
Restricted Contracts, upon receipt of the consent of all Persons that are
required to consent to the assignment of such Restricted Contracts;
(v) all accounts, accounts receivable and notes receivable of the
Seller, together with any unpaid interest or fees accrued thereon or other
amounts due with respect thereto, arising out of the Business, and any security
or collateral therefor, including recoverable advances and deposits, that are
Attributable to the Business;
(vi) all amounts held or retained by any of the Owners on account
of amounts payable under any of the Contracts;
(vii) all prepaid charges and expenses of the Seller that are
Attributable to the Business, including any such charges and expenses with
respect to ad valorem taxes, leases, rentals and utilities;
(viii) all cash and xxxxx cash of the Seller located at operating
facilities that are Attributable to the Business ("Xxxxx Cash") and all cash
accounts, including the Stuben Trust Account in Hornell, New York, the Mellon
Bank Loan Proceeds Account (Account Number 0000000), the Bank of America Loan
Proceeds Account (Account Number 1233320736), the Key Bank Concentration Account
(Account Number 000000000000), the Bank of America California Payroll Account
(Account Number 1233920795), and the Key Bank Disbursement Account (Account
Number 1920084077);
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(ix) all of the Seller's rights, claims, credits, causes of
action or rights of set-off against third parties relating to the Business or
the Purchased Assets, whether liquidated or unliquidated, fixed or contingent
(including claims under Government Contracts, but excluding counterclaims and
cross-claims for all litigation that is not assumed by the Buyer), and all
rights of the Seller under or pursuant to all warranties, representations and
guarantees made by suppliers, manufacturers, contractors and other third parties
in connection with products or services purchased by or furnished to the Seller
that are Attributable to the Business or affect any of the Purchased Assets;
(x) all of the Seller's patents, copyrights, trademarks, trade
names, service marks, service names, mask work, designs, technology, know-how,
processes, trade secrets, inventions, proprietary data, formulae, chip designs,
research and development data and results, computer software and documentation
(including computer modeling programs, design and operational software and
computer source and object codes), manufacturing, engineering quality control,
testing, operational, logistical, maintenance and other technical information,
and other intangible property (excluding the name "Xxxxxxxx Xxxxxxx," "MK" and
any derivatives thereof) and any registrations and applications for the same and
any rights of the Seller as licensee or otherwise with respect to any of the
foregoing, that are Attributable to the Business, including the items listed in
Sections 3.19(a) and (b) of the Disclosure Schedule;
(xi) all transferable franchises, licenses, permits or other
authorizations issued or granted by any Governmental Authority that are owned
by, granted to or held or used by the Seller and Attributable to the Business,
including the items listed in Section 3.15(a) of the Disclosure Schedule;
(xii) all books, records, files and papers of the Seller, whether
in hard copy or computer format, including bank account records, books of
account, invoices, engineering information, sales and promotional literature,
manuals and data, sales and purchase correspondence, lists of present and former
suppliers, lists of present and former customers, personnel and employment
records of present and former employees, and documentation developed or used for
accounting, marketing, engineering, manufacturing or any other purpose that are
Attributable to the Business;
(xiii) all goodwill associated with the Business or the Purchased
Assets; and
(xiv) the Beechcraft King Air A100.
2.02. EXCLUDED ASSETS. The parties expressly acknowledge and agree
that the Purchased Assets shall exclude the Excluded Assets.
14
2.03. BUYER OBLIGATIONS.
Upon the terms and subject to the conditions of this Agreement
and in reliance upon the representations, warranties and agreements herein set
forth, the Buyer agrees, from and effective as of the time of Closing, to (i)
assume the Liabilities of the Seller with respect to the Transit Division
Contracts pursuant to the terms and conditions of the TDC Assignments; (ii)
assume the Liabilities of the Seller with respect to the Real Property Leases
set forth in Section 3.09(d) of the Disclosure Schedule pursuant to the terms
and conditions of the Lease Assignments; (iii) assume the Liabilities of the
Seller with respect to the Contracts (other than Transit Division Contracts and
the Real Property Leases), including the letters of credit/reimbursement
agreements listed in item 4 of Schedule 2.03(a) and the Loan Agreement with the
City of Pittsburg, California listed in item 5 of Schedule 2.03(a), pursuant to
the Instrument of Assumption; (iv) assume the Liabilities of the Seller included
on the Initial Statement of Net Assets To Be Sold that were necessarily incurred
in performance of the Transit Division Contracts; (v) assume the Liabilities of
the Seller that were necessarily incurred in performance of the Transit Division
Contracts, in the ordinary course of the Seller's business, between August 27,
1995 and the Closing Date with respect to any of the foregoing; (vi) assume the
Liabilities of the Seller with respect to item 7 of Schedule 2.03(a); and (vii)
assume the Union Benefit Plans; PROVIDED, HOWEVER, that, notwithstanding
anything herein to the contrary, the Buyer shall not assume (x) the Liabilities
of the Seller with respect to any Restricted Contract unless and until all third
party consents required for the assignment or transfer of such Restricted
Contract have been obtained, (y) Liabilities arising out of any breach by the
Seller of, or the failure of the Seller to perform, any provision of any
Contract (other than the Transit Division Contracts), and (z) any Excluded
Obligation, whether or not listed on Schedule 2.03(a). The obligations referred
to in clauses (i) through (vii) above, as limited by the proviso above, other
than the Excluded Obligations are hereafter referred to as the "Buyer
Obligations." Anything in this Agreement to the contrary notwithstanding, the
Buyer is not assuming and shall not assume any Liabilities of the Seller, or any
of its Affiliates, whether presently in existence or arising hereafter, except
the Buyer Obligations. The parties agree that the Buyer is not assuming any
Benefit Plan other than the Union Benefit Plans, and that all Benefit Plans
other than the Union Benefit Plans shall remain a Liability of the Seller.
2.04. ASSIGNMENT OF CONTRACTS.
(a) Anything in this Agreement to the contrary notwithstanding, this
Agreement shall not constitute an agreement to assign any Restricted Contracts
or any claim or right or any benefit arising thereunder or resulting therefrom
if an attempted assignment thereof, without the consent of a third party
thereto, would constitute a breach or other contravention thereof, be
ineffective with respect to any party thereto or in any way
15
adversely affect the rights of the Buyer or the Seller thereunder.
(b) With respect to each Transit Division Contract indicated with an
asterisk on Schedule R3, prior to Closing the Seller shall have obtained the
execution of a TDC Assignment between the Buyer and the Seller, consented to by
the applicable Owner.
(c) With respect to each Real Property Lease indicated with an
asterisk on Section 3.09(d) of the Disclosure Schedule, prior to Closing the
Seller shall have obtained the execution by the applicable other parties thereto
of a Lease Assignment among the Buyer, the Seller and such other parties.
(d) If the Seller is unable to obtain the execution of a consent to
assignment from each of the other parties to any Restricted Contract prior to
Closing, the Seller and the Buyer will cooperate in an arrangement reasonably
satisfactory to the Buyer and the Seller under which the Buyer would obtain, to
the extent practicable, the claims, rights and benefits, and perform the
corresponding obligations thereunder, in accordance with this Agreement,
including subcontracting, sub-licensing or subleasing to the Buyer, or under
which the Seller would enforce for the benefit of the Buyer, with the Buyer
performing the Seller's corresponding obligations thereunder, any and all
claims, rights and benefits of the Seller against each other party thereto. The
Seller will promptly pay to the Buyer when received all monies received by the
Seller under or with respect to any Restricted Contract or any claim, right or
benefit arising thereunder not transferred pursuant to this Section 2.04(d). To
the extent that the Buyer receives rights and benefits from any Restricted
Contract not transferred pursuant to this Section 2.04(d), the Buyer shall pay
to the other contracting party to such contract all amounts owing to such other
contracting party under such Restricted Contract. The parties agree that, with
respect to the agreement between the Seller and Sumitomo/Nippon Sharyo, the
arrangement described in that certain Resale Agreement dated as of October 10,
1995 between the Seller and the Buyer, secured by that certain Security
Agreement dated as of October 10, 1995 by the Seller in favor of the Buyer, is a
satisfactory arrangement for purposes of this Section 2.04(d). The Seller shall
continue to use its best efforts after Closing to obtain the execution of a
consent to assignment from each of the other parties to any Restricted Contract
for which such consent was not obtained prior to Closing. Upon receipt of the
consent of all Persons that are required to consent to the assignment of a
Restricted Contract, the Seller shall transfer, assign and deliver such
Restricted Contract to the Buyer, free and clear of all Liens, other than
Permitted Liens.
SECTION 2.05. CONSIDERATION.
(a) The consideration for the Purchased Assets (the "Consideration")
(subject to adjustment pursuant to Section 2.08) is described below:
16
(i) the payment by the Buyer to the Seller the amount set
forth on Exhibit 2.05(a);
(ii) the Seller acknowledges and agrees that the following
constitutes value and consideration for the Purchased Assets: (w) pending the
negotiation, execution and delivery of this Agreement, and contemporaneous with
the T-Co Term Sheet, the Seller received value for the transactions contemplated
in this Agreement in the form of the issuance by the Sureties, at the Seller's
request, of the $25,000,000 Guarantee; (x) pending the negotiation, execution
and delivery of this Agreement, and contemporaneous with the T-Co Term Sheet,
the Banks extended the New Financing to the Seller; (y) at the request of the
Buyer and the Seller, the Sureties have agreed to issue the New Bonds for the
benefit of the Seller, based on, among other things, the consummation of the
transactions herein contemplated, and the assurance that the aggregate value of
the New Financing and the New Bonds Agreement is at least equivalent to the
value of the Purchased Assets; and (z) had this Agreement not been entered into,
an event of default with respect to the New Financing and all original financing
provided by the Banks to or for the benefit of the Seller would have occurred,
thus entitling the Banks (I) discontinue the New Financing, (II) accelerate
certain existing financing or credit facilities to the Seller, or (III) enforce
their rights as a secured party with respect to security interests in certain of
the Seller's assets; and
(iii) the Buyer's assumption of the Buyer Obligations from and
effective as of the Closing pursuant to this Agreement.
(b) The Buyer and the Seller shall prepare or obtain a reasonable
valuation of the Purchased Assets. The Buyer and the Seller agree to allocate
the Consideration among the Purchased Assets in accordance with the rules of
Section 1060 of the Internal Revenue Code and the regulations thereunder and in
a manner entirely consistent with such valuation. The Buyer and the Seller
further agree to act in accordance with such allocation in the filing of all tax
returns (including filing Form 8594 with its Federal income tax return for the
taxable year that includes the date of the Closing) and in the course of any tax
audit, tax review or tax litigation relating thereto.
(c) Not later than ten (10) Business Days prior to the filing of their
respective Form 8594 relating to this transaction, each party hereto shall
deliver to the other party a copy of its Form 8594.
2.06. CLOSING. The closing (the "Closing") of the purchase and sale
of the Purchased Assets hereunder shall take place at the offices of Steptoe &
Xxxxxxx in Washington, D.C. on the date hereof or such other date as the Buyer
and the Seller shall mutually agree (the "Closing Date"). At the Closing:
17
(i) The Seller shall deliver to the Buyer such bills of sale,
certificates of title, endorsements, consents, assignments and other good and
sufficient instruments of conveyance and assignment, which in the case of
Intellectual Property Rights, shall be documents immediately recordable in the
respective countries of origin of such rights, as the Buyer shall deem
reasonably necessary or appropriate to vest in the Buyer all of the Seller's
right, title and interest in, to and under the Purchased Assets. Such
instruments shall include:
(A) a xxxx of sale in the form of Exhibit 2.06(a)(i)(A)
with respect to all of the Purchased Assets;
(B) assignments in the form of Exhibit 2.06(a)(i)(B) of all
Intellectual Property Rights;
(C) an opinion of counsel, dated as of the Closing Date;
(D) the fairness opinion of a financial advisor;
(E) a xxxx of sale for the Beechcraft King Air A100 (which
shall be executed at the Closing and delivered by the Seller to
the Buyer in New York), accompanied by all other documentation
necessary to record the sale of such airplane; and
(F) all other previously undelivered documents that this
Agreement or the Closing List prepared in connection with the
consummation of this Agreement requires the Seller to deliver to
the Buyer at Closing.
(ii) The Buyer shall deliver on behalf of the Seller the amount set
forth on Exhibit 2.06(ii) by wire transfer in immediately available funds to
such account(s) as the Agent under the Previous Credit Agreement shall specify
in writing.
(iii) The Buyer shall deliver on behalf of the Seller the amount set
forth on Exhibit 2.06(iii) to Bank of America National Trust and Savings
Association, as agent under the Previous Metra Banks Revolving Credit Agreement.
(iv) The Seller and the Buyer shall enter into the Pledge and Security
Agreement (Equipment Assets), in the form attached as Exhibit 2.06(iv), and the
Bulk Sales Pledge and Security Agreement (Equipment Assets).
(v) The Seller and the Buyer shall enter into the TDC Assignments, the
Lease
18
Assignments and the Assignment Agreement.
(vi) The Seller shall deliver to the Buyer (x) evidence
satisfactory to the Buyer of the release of each Lien (other than Permitted
Liens) relating to any of the Purchased Assets, and (y) evidence satisfactory to
the Buyer that all borrowings and obligations under each of the Previous Credit
Agreement and the Previous Metra Banks Revolving Credit Agreement have been paid
and satisfied in full.
(vii) The Buyer shall deliver to the Seller the Instrument of
Assumption and the Assignment Agreement.
(viii)The Buyer shall deliver to the Seller an opinion of counsel,
dated as of the Closing Date.
(ix) The Buyer shall deliver to the Seller all other previously
undelivered documents that this Agreement or the Closing List prepared in
connection with the consummation of this Agreement requires the Buyer to deliver
to the Seller at Closing.
2.07. CLOSING STATEMENT OF NET ASSETS TO BE SOLD.
(a) As promptly as practicable after the Closing Date, the Seller
shall cause the preparation of the Closing Statement of Net Assets To Be Sold
and shall engage Deloitte & Touche to audit it in accordance with generally
accepted auditing standards, for the purpose of rendering an opinion thereon
(the "Closing Deloitte & Touche Report"). The Closing Statement of Net Assets
To Be Sold shall be prepared in accordance with GAAP; however, the following
shall be excluded from such statement: reserves for losses on completion of
transit car contracts, inventory valuation allowances, reserves for future
warranty costs and liabilities for purchase contract penalties (GAAP, together
with such exclusions is hereinafter referred to as the "Basis of Accounting").
The Closing Deloitte & Touche Report shall express Deloitte & Touche's opinion
that the Closing Statement of Net Assets To Be Sold presents fairly, in all
material respects, the Closing Net Assets To Be Sold in conformity with the
Basis of Accounting at the Closing Date.
In addition to rendering the Deloitte & Touche Closing Report,
Deloitte & Touche will also examine disbursements during the period from July 1,
1995 to the Closing Date and Liabilities at the Closing Date, using certain
agreed upon procedures as set forth in Exhibit 2.07 (the "Agreed Upon
Procedures") for the purpose of rendering a report (the "Agreed Upon Procedures
Report"). The Agreed Upon Procedures Report shall state the procedures
performed and the results of performing such procedures.
As promptly as practicable, but in any case not later than sixty (60)
days (or
19
such longer period as the Buyer and the Seller shall agree in writing) after the
Closing Date (the "Report Delivery Date"), the Seller shall cause the proposed
form of Closing Statement of Net Assets To Be Sold and a draft of the Closing
Deloitte & Touche Report and the Agreed Upon Procedures Report to be delivered
to the Buyer. For a period of fifteen (l5) Business Days after the Report
Delivery Date, the Buyer and the Seller shall be entitled to review the proposed
Closing Statement of Net Assets To Be Sold and the draft of the Closing Deloitte
& Touche Report and the Agreed Upon Procedures Report (and any employees of the
Seller and officers of the Buyer of the level of controller or above shall be
entitled to access to Deloitte & Touche's work papers prepared in connection
with its draft reports) and to submit in writing any suggestions for changes
thereto to Deloitte & Touche. Any suggestions submitted to Deloitte & Touche
shall concurrently be submitted to the Buyer or the Seller, as applicable. For
a period of fifteen (15) Business Days after the expiration of such fifteen (l5)
Business Day period, the Buyer and the Seller shall consult with each other and
with Deloitte & Touche to determine if any such suggested changes may be
resolved to the mutual satisfaction in writing of the Buyer and the Seller.
Within fifteen (15) Business Days after the Report Delivery Date, the
Buyer shall deliver to the Seller a statement identifying (i) any disbursements
made from July 1, 1995 to the Closing Date by or on behalf of the transit
division of the Seller that the Buyer contends were not Necessary for the
Business (each, a "Buyer Reimbursable Disbursement") and (ii) any overhead
allocated by the Seller to its transit division from July 1, 1995 to the Closing
Date that the Buyer contends constitutes Excluded Overhead that have not been
previously reimbursed to the Buyer or the transit division of the Seller and
either applied as described in Section 3.24 of this Agreement or acquired by the
Buyer at the Closing (a "Buyer Reimbursable Overhead Payment"). The Seller has
determined that there were checks aggregating $4,232,069.94 that had been
written prior to July 1, 1995 but did not clear until on or after July 1, 1995.
Based on such determination, for purposes of this Section 2.07, the parties
agree that $3,239,967.63 of that amount is to be considered a post-July 1, 1995
disbursement and that $992,102.31 of that amount is to be considered a pre-July
1, 1995 disbursement.
Within fifteen (15) Business Days after the Report Delivery Date, the
Seller shall deliver to the Buyer a statement identifying (i) any disbursements
made from July 1, 1995 to the Closing Date by or on behalf of the Seller
(excluding its transit division) or any MK Affiliate that the Seller contends
were Necessary for the Business and that have not been previously reimbursed to
the Seller (excluding its transit division) or any MK Affiliate (a "Seller
Reimbursable Disbursement") and (ii) any overhead items on the 1995 Proposed
Overhead Budget allocable to the Seller's transit division from July 1, 1995 to
the Closing Date that does not constitute Excluded Overhead that has not been
previously reimbursed to the Seller (excluding its transit division) or any MK
Affiliate (a "Seller Reimbursable Overhead Payment"). The Buyer and Seller
shall have fifteen (15) Business Days from the
20
date of delivery of the foregoing statements to reach agreement as to the amount
required to be paid by either party to the other party in accordance with the
foregoing statements. To the extent the Buyer and the Seller agree on the
amounts required to be paid by either to the other, the party owing such amount
shall pay such amount to the other within five (5) Business Days after reaching
such agreement.
If the Buyer and Seller are unable to reach agreement with respect to
any suggested changes to the Closing Statement of Net Assets To Be Sold (the
"Unresolved Changes") and/or amounts required to be paid by either party to the
other by the end of the applicable periods specified above, then the matter(s)
shall be submitted to arbitration in accordance with section 9.04 and 10.04
hereof. At the completion of the arbitration process, the resolution of the
Unresolved Changes shall be reflected in the Closing Statement of Net Assets To
Be Sold, which statement, and the executed Closing Deloitte & Touche Report and
the executed Agreed Upon Procedures Report, shall be final and binding upon the
parties hereto. In addition, the decision of the arbitrator as to the amount of
any Buyer Reimbursable Disbursement, Buyer Reimbursable Overhead Payment, Seller
Reimbursable Disbursement or Seller Reimbursable Overhead Payment shall be final
and binding upon the parties hereto.
All fees, costs, and expenses (including attorneys' fees and expenses)
incurred by the party that prevails in any such arbitration may be assessed
against the party that does not prevail in such arbitration. This provision for
arbitration shall be specifically enforceable by the parties. No statement made
in the footnotes to either Net Assets Statement shall expand or reduce the
Liabilities that come within the definition of Buyer Obligations as set forth in
this Agreement.
Notwithstanding any other provision of this Section 2.07, neither the
Buyer nor the Seller shall be obligated to pay any amount to the other pursuant
to Section 2.07 or Section 2.08 based on the audit of the Closing Statement of
Net Assets To Be Sold or the Agreed Upon Procedures Report, except for Buyer
Reimbursable Disbursements, Buyer Reimbursable Overhead Payments, Seller
Reimbursable Disbursements, and Seller Reimbursable Overhead Payments.
For purposes of this Section 2.07, (i) "Necessary for the Business"
means necessarily incurred in performance of the Transit Division Contracts in
the ordinary course of the Business, and (ii) "Excluded Overhead" means "401(k)
and SERP Expenses", "Legal and Audit Services", "Professional and Consulting
Services", and "other Outside Services" as those terms are used in the 1995
Proposed Overhead Budget attached as an exhibit to the Indemnification and
Reimbursement Agreement.
(b) The Buyer shall provide all reasonable assistance and cooperation
of its
21
employees and representatives to assist in the preparation of the Closing
Statement of Net Assets To Be Sold, and the Seller shall require Deloitte &
Touche to allow the Buyer and its auditors to examine all of the auditors' work
papers (including observation of inventories, review of open contracts and all
memoranda prepared in connection with the completion of the Closing Statement of
Net Assets To Be Sold and the preparation of the Closing Deloitte & Touche
Report and the Agreed Upon Procedures Report), schedules and other documents
prepared in connection with the preparation of the Closing Statement of Net
Assets To Be Sold. The right to examine work papers, schedules and documents
shall continue after completion of the examination.
2.08. REIMBURSEMENTS.
(a) To the extent that the arbitrator determines that there is any
Buyer Reimbursable Disbursement, Buyer Reimbursable Overhead Payment, Seller
Reimbursable Disbursement, or Seller Reimbursable Overhead Payment, the Seller
shall pay the amount of any Buyer Reimbursable Disbursement and Buyer
Reimbursable Overhead Payment to the Buyer, and the Buyer shall pay the amount
of any Seller Reimbursable Disbursement and Seller Reimbursable Overhead Payment
to the Seller, within fifteen (15) days of the completion of the arbitration.
(b) Any payments pursuant to this Section 2.08 shall be made in
immediately available funds by wire transfer to an account designated by the
recipient at least two (2) Business Days prior to the payment date. The amount
of any payment to be made pursuant to this Section 2.08 shall bear interest from
and including the Closing Date (but excluding the date of payment) through the
date of payment in full, at a rate per annum equal to the Reference Rate. Such
interest shall be payable at the same time as the payment to which it relates
and shall be calculated daily on the basis of a year of 365 days.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE SELLERS
The Seller hereby represents and warrants to the Buyer as follows:
3.01. CORPORATE EXISTENCE AND POWER. The Seller is a corporation
duly incorporated, validly existing and in good standing under the laws of the
state of its incorporation, and has all corporate power and all governmental
licenses, authorizations, consents and approvals required to carry on the
Business as now conducted. The Seller is
22
duly qualified to do business as a foreign corporation in each jurisdiction
where the character of the property owned or leased by it or the nature of its
activities makes such qualification necessary to carry on the Business as now
conducted. Section 3.01 to the Disclosure Schedule sets forth those
jurisdictions in which the Seller is qualified to do business. Section 3.01 of
the Disclosure Schedule includes true and complete copies of the certificates of
incorporation, bylaws and other charter documents of the Seller as currently in
effect.
3.02. CORPORATE AUTHORIZATION. The execution, delivery and
performance by the Seller of this Agreement and the consummation by the Seller
of the transactions contemplated hereby are within the Seller's corporate powers
and have been duly authorized by all necessary corporate action on the part of
the Seller, the Seller's Affiliates and the Seller's shareholders. This
Agreement constitutes the legal, valid and binding agreement of the Seller
enforceable against the Seller in accordance with its terms (i) except as
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
other similar laws now or hereafter in effect relating to or affecting
creditors' rights generally, and (ii) subject to the limitations imposed by
general equitable principles (regardless whether such enforceability is
considered in a proceeding at law or in equity).
3.03. SUBSIDIARIES. The Seller has no Subsidiaries.
3.04. GOVERNMENTAL AUTHORIZATION.
The execution, delivery and performance by the Seller of this
Agreement require no action by, consent or approval of, or filing with, any
Governmental Authority (other than the Owners) other than:
(i) compliance with any applicable requirements of the Exchange Act;
(ii) any actions, consents, approvals or filings otherwise expressly
referred to in this Agreement or described in Section 3.15(b) of the Disclosure
Schedule; and
(iii) any actions, consents, approvals or filings which if not
obtained would not have a Material Adverse Effect.
3.05. NON-CONTRAVENTION. The execution, delivery and performance by
the Seller of this Agreement do not and will not: (a) (i) contravene or conflict
with the certificate of incorporation, bylaws or other charter documents of the
Seller; (ii) assuming compliance with the matters referred to in Section 3.04
and receipt of the Required Consents, contravene or conflict with or constitute
a violation of any provision of any Applicable Law binding upon or applicable to
the Business or any of the Purchased Assets; and (iii) assuming compliance with
the matters referred to in Section 3.04 and receipt of the Required Consents,
constitute a default under or give rise to any right of termination,
23
cancellation or acceleration of, or to a loss of any benefit to which the Seller
is entitled under any Contract or any license, franchise, permit or similar
authorization relating to the Business or included in any of the Purchased
Assets or by which the Business or the Purchased Assets may be bound, except,
for any of the foregoing described in clause (iii) hereof, as would not have a
Material Adverse Effect or are described in Section 3.05 of the Disclosure
Schedule, or (b) result in the creation or imposition of any Lien on any
Purchased Asset, other than Permitted Liens.
3.06. FINANCIAL STATEMENTS AND REPORTS. (a) The Seller has delivered
to the Buyer the financial statements described in Section 3.06(a) of the
Disclosure Schedule. Except as set forth in Section 3.06(a) of the Disclosure
Schedule, such financial statements have been prepared based on the books and
records of the Seller and have been prepared in accordance with GAAP, consistent
with past practice. All management letters and all other letters, reports and
other documents delivered to the Seller or any of its Affiliates by Deloitte &
Touche (or any previous auditors of the Seller, its Affiliates, or any of them)
relating to the results of operations, financial statements or internal controls
of the Seller insofar as the same may pertain to the Business or any of the
Purchased Assets or the Buyer Obligations during any period from and after
January l, 1993 are included as part of Section 3.06(a) of the Disclosure
Schedule.
(b) No report filed since January l, 1992 by the Seller or any
predecessor thereof (and not withdrawn) with the Securities and Exchange
Commission under the Exchange Act contained on the date of filing any untrue
statement of a material fact required to be stated therein, or necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading, except for untrue statements or omissions which were
corrected in or superseded by a subsequent filing under the Exchange Act,
without regard to any such filings by MK Rail Corporation or MK Gold Company.
(c) Since January l, 1992 there has been no material disagreement
(within the meaning of Item 304(a)(1)(iv) of Regulation S-K under the Securities
Act of 1933, as amended) between the Seller and its independent auditing firm(s)
concerning any aspect of the manner in which the Seller maintained or maintains
its books and records insofar as the same relate to the Business or any of the
Purchased Assets or Buyer Obligations, or the manner in which any of the
foregoing has reported upon the financial condition and results of operations of
the Business or any of the Purchased Assets or Buyer Obligations since such
date, that has not been resolved to the satisfaction of the relevant independent
auditing firm.
3.07. INITIAL STATEMENT OF NET ASSETS TO BE SOLD. The Initial
Statement of Net Assets To Be Sold and the Financial Statements of the MK
Transit Group as of August 27, 1995 (upon which the Initial Statement of Net
Assets To Be Sold was based) each was prepared based on the books and records of
the Seller, is true and complete, and accurately
24
and fairly presents the net assets of the Business to be transferred pursuant to
this Agreement in conformity with the basis of presentation as described
therein, except for any reduction in the value of the assets listed therein
resulting from the Customer Concessions. The assets and liabilities included on
the face of the Initial Statement of Net Assets To Be Sold have been prepared in
accordance with GAAP in effect on August 27, 1995 and include all of the assets
and Liabilities of the Business as of August 27, 1995, except for those
specifically excluded from the Statement by the provisions of this Agreement.
3.08. ABSENCE OF CERTAIN CHANGES. Except as set forth in Section
3.08 of the Disclosure Schedule, since July 1, 1995, the Business has been
conducted in the ordinary course, and there has not been:
(a) any event, occurrence, development or state of circumstances or
facts or change in the Purchased Assets or the Business (including any damage,
destruction or other casualty loss, but excluding any event, occurrence,
development or state of circumstances or facts or change resulting from changes
in general economic conditions) affecting the Business or any Purchased Asset
which has had or which may be reasonably expected to have, either alone or
together with all such events, occurrences, developments, states of
circumstances or facts or changes, a Material Adverse Effect;
(b) (i) any incurrence, assumption or guarantee of any indebtedness
for borrowed money by the Seller in connection with the Business or any of the
Purchased Assets, (ii) any incurrence of any Liability relating to a documentary
or standby letter of credit by the Seller in connection with the Business or any
of the Purchased Assets, (iii) any incurrence of any other Liability by the
Seller in connection with the Business or any of the Purchased Assets, other
than in each such case referred to in this clause (iii) in the ordinary course
of business, or (iv) any change in any Buyer Obligations other than in the
ordinary course of business;
(c) any creation, assumption or sufferance of the existence of any
Lien on any Purchased Asset (other than Permitted Liens);
(d) any transaction or commitment made, or any Contract entered into,
by the Seller relating to the Business or any Purchased Assets (including the
acquisition or disposition of any Purchased Assets), or any waiver, amendment,
termination or cancellation of any Contract by the Seller, or any relinquishment
of any rights thereunder by the Seller or of any other right or debt owed to the
Seller relating to the Business or the Purchased Assets, other than in each such
case actions (i) taken in the ordinary course of business or (ii) otherwise
permitted or contemplated by this Agreement;
(e) other than severance pay, retention bonuses and similar
compensation that
25
arise under agreements, plans or arrangements in existence as of July 1, 1995
and that are solely the responsibility of Seller or its Affiliates, any (i)
grant of any severance, continuation or termination pay to any officer or
employee of the Seller who is employed in connection with the Business, (ii)
entering into of any employment, deferred compensation or other similar
agreement (or any amendment to any such existing agreement) with any officer or
employee of the Seller who is employed in connection with the Business, (iii)
increase in benefits payable or potentially payable under any severance,
continuation or termination pay policies or employment agreements with any
officer or employee of the Seller who is employed in connection with the
Business (other than increases resulting from termination of employment), (iv)
increase in compensation, bonus or other benefits payable or potentially payable
to officers or employees of the Seller who is employed in connection with the
Business other than in the ordinary course of business, (v) change in the terms
of any bonus, pension, insurance, health or other employee benefit plan or
arrangement of the Seller with respect to any officer or employee of the Seller
who is employed in connection with the Business, or (vi) prior to the Closing
Date, any transfer of an employee of the Seller or any Affiliate thereof to the
Business;
(f) any loan to or guarantee or assumption of any loan or obligation
by the Seller on behalf of any director, officer or employee of the Seller
involved in the Business, except travel advances occurring in the ordinary
course of business;
(g) any change by the Seller related to the Business or any of the
Purchased Assets in the Seller's accounting principles, methods or practices or
in the manner it keeps its books and records;
(h) any labor dispute or any activity or proceeding by a labor union
or representative thereof to organize any employees of the Seller involved in
the Business, who were not subject to a collective bargaining agreement on July
1, 1995, or any lockouts, strikes, slowdowns, work stoppages or threats thereof
by or with respect to any such employees;
(i) with respect to the Business or any of the Purchased Assets, any
writing down the value of the Inventories for any reason, or writing off as
uncollectible any notes or accounts receivable except writedowns and writeoffs,
in the ordinary course of business and consistent with past practices, that,
individually and in the aggregate, are immaterial in amount; or
(j) with respect to the Business or any of the Purchased Assets, any
canceling of debts payable of substantial value to the Seller or waiving of
claims or rights of substantial value.
26
3.09. PROPERTIES; LEASES; TANGIBLE ASSETS.
(a) Except as disclosed in Section 3.09(a) of the Disclosure Schedule,
the Seller owns and has good, valid and marketable title to or, in the case of
leased properties, a good, valid and marketable leasehold interest in, all of
the Purchased Assets, including all such assets (real, personal or mixed,
tangible or intangible (including the Intellectual Property Rights, as defined
in Section 3.19)) reflected in the Initial Statement of Net Assets To Be Sold,
except those assets disposed of in the ordinary course of business after August
27, 1995. The Seller holds title to each such property and asset free and clear
of all Liens, except Permitted Liens, and, to the knowledge of the Seller, free
and clear of all adverse claims, easements, rights of way, servitudes, zoning or
building restrictions, or any other rights of others or other adverse interests
of any kind, including leases, chattel mortgages, conditional sales contracts,
collateral security arrangements and other title or interest retention
arrangements (collectively, "Encumbrances"), except Permitted Liens. Except as
disclosed in Section 3.09(a) of the Disclosure Schedule, to the Seller's
knowledge, there are no governmental assessments, charges or claims (other than
Taxes) the payment of which is not yet due, which would create a Lien on any of
the Purchased Assets, except Permitted Liens.
(b) Except as disclosed in Section 3.09(b) of the Disclosure Schedule,
to the knowledge of the Seller, all material tangible properties and assets
included in the Purchased Assets (other than inventory) and the Real Property
are adequate for the uses to which they are currently put in the conduct of the
Business, and are in all material respects structurally sound and are in good
operating condition and repair and no properties or assets Attributable to the
Business are in need of replacement, maintenance or repair except for routine
replacement, maintenance and repair which are not material in nature or cost.
(c) the Seller does not own any real property that is Attributable to
the Business.
(d) Section 3.09(d) of the Disclosure Schedule sets forth all personal
property leases requiring annual lease payments in excess of $25,000 to which
the Seller is a party or by which it is bound and that are Attributable to the
Business and all real property leases (such section of the Disclosure Schedule
describing separately those leases relating to real property the "Real Property
Leases" and those leases relating to personal property and indicating where
appropriate those leases which have been recorded for tax, protection of title
of interest, or other purposes) entered into in connection with the Business
(the "Leases"). With respect to the Real Property Leases and the Leases, there
exist no defaults or violations by the Seller or, to the Seller's knowledge, any
default or violation or threatened default or violation by any third party
thereunder that has affected or could reasonably be expected to affect the
rights and privileges thereunder of the Seller. The
27
Buyer expressly agrees and acknowledges that it shall not be a breach of the
representations set forth in this Section 3.09(d) if the Seller fails to include
in the list of Leases set forth in Section 3.09(d) of the Disclosure Schedule
any Lease that requires an annual payment of less than $25,000; provided, that
the aggregate annual payments due under all such omitted Leases does not exceed
$250,000.
(e) Except as disclosed in Section 3.09(e) of the Disclosure Schedule,
with respect to any property subject to any of the Real Property Leases (the
"Real Property"), to the knowledge of the Seller, there exists no applicable
restrictive covenant, zoning ordinance, building code, use or occupancy
restriction, or any violation of any such ordinance, code or restriction, or any
condemnation action or proceeding with respect thereto, that will interfere with
the assignment thereof to the Buyer pursuant hereto or will materially interfere
with the enjoyment thereof by the Buyer following the Closing in the conduct of
the Business.
(f) Except as disclosed in Section 3.09(f) of the Disclosure Schedule,
to the knowledge of the Seller, none of the buildings and structures located on
any Real Property nor any appurtenances thereto or equipment thereon, nor the
operation or maintenance thereof, violates any restrictive covenants or
encroaches on any property owned by others, except for such violations or
encroachments, if any, that do not have a Material Adverse Effect. To the
knowledge of the Seller, no condemnation proceeding is pending or threatened
which would preclude or impair the use of any Real Property for the uses
permitted under the Real Property Leases. No expropriation proceeding is
pending, or to the Seller's knowledge threatened, with respect to the Business
or any of the Purchased Assets.
3.10. SUFFICIENCY OF PURCHASED ASSETS. The Purchased Assets
(together with sufficient working capital and except for nontransferable Permits
listed in Section 3.15(b) of the Disclosure Schedule, appropriate arrangements
with employees, qualifications to do business and any Restricted Contracts with
respect to which a consent to assignment has not been obtained) include all
rights, properties, and other assets necessary to permit the Seller to conduct
the Business in all material respects in the same manner as the Business has
been conducted prior to the Closing Date. Upon consummation of the assignment,
transfer and conveyance by the Seller to the Buyer of all of the Purchased
Assets, the Buyer will own or otherwise be vested with all rights, interests,
assets and properties necessary (together with sufficient working capital and
appropriate arrangements with employees) to permit the Buyer to conduct the
Business immediately after the Closing in all materials respects in the same
manner as the Business has been conducted prior to the Closing Date, excluding
Restricted Contracts with respect to which a consent to assignment has not been
obtained, nontransferable Permits listed in Section 3.15(b) of the Disclosure
Schedule and qualifications to do business. The Purchased Assets include all of
the material assets that
28
are currently being used in the conduct of the Business by the Seller, except as
set forth in Section 3.10 of the Disclosure Schedule.
3.11. AFFILIATES. Section 3.11 of the Disclosure Schedule sets forth
a correct and complete list of all Affiliates of the Seller other than natural
Persons.
3.12. LOCATION OF PURCHASED ASSETS. Except for Purchased Assets in
transit and on the premises of vendors in Pennsylvania, Alabama, Minnesota,
South Carolina and Japan, none of the Purchased Assets physically reside in any
state other than California, Illinois, New York or Ohio.
3.13. LITIGATION.
(a) Except as disclosed in Section 3.13(a) of the Disclosure Schedule:
(i) there are no actions, suits, hearings, inquiries, arbitrations, proceedings
(public or private) or governmental investigations that have been brought by or
against any Governmental Authority or any other Person (collectively,
"Proceedings") pending or threatened, against or affecting the Business or any
of the Purchased Assets; and (ii) there are no existing orders, judgments or
decrees of any Governmental Authority affecting any of the Purchased Assets or
the Business. Without limiting the generality of the foregoing, Section 3.13(a)
of the Disclosure Schedule sets forth a correct and complete listing of the
Seller's product liability claims experience, Bureau of Labor Statistics Log and
Summary of Occupational Injuries and Illnesses (which accurately and completely
describes all recordable injuries and illnesses) and workers' compensation
experience losses and claims, including potential liabilities for violation of
federal and state safety rules (including OSHA), relating to the Business during
the five years immediately preceding the date hereof.
(b) Except as set forth in Section 3.13(b) of the Disclosure Schedule,
there are no Proceedings pending or threatened, against the Seller, the Business
or the Purchased Assets which seek to enjoin or rescind the transactions
contemplated by this Agreement or otherwise prevent the Seller from complying
with the terms and provisions of this Agreement.
3.14. CONTRACTS AND BIDS.
(a) Section 3.14(a) of the Disclosure Schedule sets forth an accurate
and complete list of all Contracts in effect as of the date of this Agreement.
Without limiting the generality of the foregoing and without regard to whether
any of the following are necessary for the conduct of the Business, Section
3.14(a) of the Disclosure Schedule identifies by date and the parties thereto
the following):
29
(i) each Contract between the Seller Attributable to the Business or
relating to any of the Purchased Assets and (y) any supplier of the Business, or
(z) any customer (including Governmental Authorities) of the Business;
(ii) each agreement or arrangement of the Seller Attributable to the
Business that requires the payment or incurrence of Liabilities by the Seller
subsequent to August 27, 1995;
(iii) all contracts relating to, and evidences of, indebtedness for
borrowed money or the deferred purchase price of property (whether incurred,
assumed, guaranteed or secured by any asset), Attributable to the Business or
relating to any Purchased Asset or otherwise constituting a Buyer Obligation;
(iv) all license, sale, distribution, commission, marketing, agent,
franchise, technical assistance or similar agreements relating to or providing
for the marketing and/or sale of the products or services of the Business other
than any such agreement terminable without penalty to the Seller or the Buyer
upon thirty (30) days' or less notice to the other party thereto;
(v) all teaming or similar agreements or arrangements to which the
Seller is a party that are Attributable to the Business or relate to any of the
Purchased Assets;
(vi) all Government Contracts under which the Seller is the prime
contractor ("Prime Government Contracts") and all other Government Contracts to
which the Seller is a party that, in either case, are Attributable to the
Business or relate to any Purchased Asset;
(vii) all Restricted Contracts to which the Seller is a party that are
Attributable to the Business or relate to any Purchased Asset; and
(viii) all partnership, joint venture or other similar contracts,
arrangements or agreements that are Attributable to the Business as a result of
which the Seller owns, directly or indirectly, an equity interest (whether as a
limited or general partner, as a shareholder or otherwise) and each agreement,
obligation or commitment to which the Seller is subject to make any investment
in or loan or advance to any joint venture, partnership, corporation or other
business enterprise described in this clause (viii) of this Section 3.14(a).
The Buyer expressly agrees and acknowledges that it shall not be a
breach of the representations set forth in this Section 3.14(a) if the Seller
fails to include in the list of Contracts set forth in Section 3.14(a) of the
Disclosure Schedule any Contract that requires an annual payment of less than
$25,000; provided, that the aggregate annual payments due under all such omitted
Contracts does not exceed $250,000.
(b) Except as disclosed in Section 3.l4(b) of the Disclosure Schedule
and other than with respect to accounts receivable, each Contract is a legal,
valid and binding obligation of the Seller and each other party thereto,
enforceable against the Seller and each such other party in accordance with its
terms (except as limited by applicable bankruptcy, insolvency, reorganization,
moratorium or other similar laws now or hereafter in effect
30
relating to or affecting creditors' rights generally, and subject to the
limitations imposed by general equitable principles regardless of whether such
enforceability is considered in a proceeding at law or in equity), and neither
Seller nor any other party thereto is in material default or has failed to
perform any material obligation thereunder.
(c) Except as disclosed in Section 3.14(c) of the Disclosure Schedule,
the Seller has not submitted any Bid that is Attributable to the Business which
is currently outstanding.
3.15. PERMITS; REQUIRED CONSENTS.
(a) Section 3.15(a) of the Disclosure Schedule sets forth all
approvals, authorizations, certificates, consents, licenses, orders and permits
or other similar authorizations of all Governmental Authorities and other
Persons (other than qualifications to do business) that are necessary for the
operation of the Purchased Assets in substantially the same manner as currently
operated by the Seller or are Attributable to the Business (the "Permits"),
including all such permits and approvals relating to the discharge of by-
products and waste material into a public waste discharge system.
(b) Section 3.15(b) of the Disclosure Schedule lists (i) except for
qualifications to do business, each governmental or other registration, filing,
application, notice, transfer, consent, approval, order, qualification and
waiver (each, a "Required Governmental Approval") that is required under
Applicable Law to be obtained by the Seller by virtue of the execution and
delivery of this Agreement or the consummation of the transactions contemplated
hereby to avoid the loss of any Permit and (ii) each Contract with respect to
which, pursuant to the terms thereof, the consent of the other party or parties
thereto must be obtained by the Seller by virtue of the execution and delivery
of this Agreement or the consummation of the transactions contemplated hereby,
to avoid a breach or default thereunder (each, a "Required Contractual Consent"
and collectively with the Required Governmental Approvals, the "Required
Consents"). Except as set forth in Section 3.15(b) of the Disclosure Schedule,
each Permit is valid and in full force and effect and, assuming the related
Required Consents have been obtained prior to the Closing Date, are, or will be,
transferable by the Seller and none of the Permits will, assuming the related
Required Consents have been obtained prior to the Closing Date, be terminated or
become terminable or impaired as a result of the transactions contemplated
hereby.
3.16. COMPLIANCE WITH LAWS. Except as set forth in Section 3.16 of
the Disclosure Schedule, (a) the operation of the Business and condition of the
Purchased Assets do not violate or infringe any Applicable Law, or any order,
writ, injunction or decree of any Governmental Authority, and (b) the Seller has
not received any notification of any asserted present or past infringement or
violation of any Applicable Law that is continuing.
31
3.17. EMPLOYMENT MATTERS.
(a) Section 3.17(a) of the Disclosure Schedule contains a complete
and accurate list of each collective bargaining agreement or other labor or
consulting agreement (including, in each case, all supplements, amendments,
modifications and side agreements relating thereto, whether in writing or oral)
that is Attributable to the Business and (i) to which the Seller or any of its
Affiliates is a party or by which it or they are bound, (ii) which covers
employees of the Business and (iii) which may affect in any way the Purchased
Assets or Buyer Obligations.
(b) Except as set forth in Section 3.17(b) of the Disclosure
Schedule, and with respect to the Business:
(i) the Seller and its Affiliates are in compliance with all Applicable
Laws of all Governmental Authorities having jurisdiction over the Seller or any
of its Affiliates respecting employment and employment practices, terms and
conditions of employment, and wages and hours, and are not engaged in any unfair
labor practice;
(ii) there is no unfair labor practice complaint pending or threatened
against the Seller or any of its Affiliates before the National Labor Relations
Board;
(iii) there is no labor strike, or slowdown or stoppage pending or
threatened against or affecting the Seller or any of its Affiliates, and neither
the Seller nor any of its Affiliates has experienced any such event since
January 1, 1992;
(iv) since January 1, 1992, no representation petition under Section 9 of
the National Labor Relations Act has been filed at the National Labor Relations
Board;
(v) no grievance or arbitration proceeding arising out of or under
collective bargaining agreements of the Seller or any of its Affiliates is
pending or threatened;
(vi) there is no unfair labor practice charge or complaint pending or
threatened with respect to a Seller or any of its Affiliates arising out of this
transaction;
(vii) there are no pending or threatened charges, claims or complaints
relating to the Business before the Office of Federal Contract Compliance
Programs, the Equal Employment Opportunity Commission, any similar state or
local agency, or any court of competent jurisdiction under E.O. 11246 (as
amended), the Civil Rights Act, the Age Discrimination in Employment Act, the
Equal Pay Act, the Americans with Disabilities Act, the Family and Medical Leave
Act, or any similar federal, state or local statute prohibiting discrimination
in employment; and
(viii) neither the Seller nor any of its Affiliates is liable, on account
of this transaction, for any severance pay or other payments arising from the
termination of employment of any employee or former employee of the Seller or
any of its Affiliates that will become an employee of the Buyer.
(c) Section 3.17(c) of the Disclosure Schedule sets forth the name of
each highly compensated employee (as defined in Section 414(p) of the Code)
employed in the Business as of December 31, 1994, and his or her total wages,
commissions and bonuses as
32
reported on Form W-2 for the year ending on such date. None of such persons,
except as set forth in Section 3.17(c) of the Disclosure Schedule, has announced
an intention to his or her immediate supervisor or to any other Person to cancel
or otherwise terminate such person's relationship with the Seller or any of its
Affiliates.
(d) The Seller and its Affiliates, consistent with past practices,
will have paid to all employees of the Business all wages, salaries, commissions
and bonuses for services rendered prior to the Closing Date, except (i) as
accrued on the Initial Statement of Net Assets To Be Sold, (ii) as set forth on
Section 3.17(d) of the Disclosure Schedule or (iii) relating to vacation pay for
non-union employees of the Business. This representation is not intended to
require the Seller and its Affiliates to disclose severance pay, retention
bonuses and similar compensation which the Seller or its Affiliates are solely
responsible to pay arising from the Seller's or its Affiliates termination of
employment of any employee or former employee of the Seller or any of the
Seller's Affiliates on account of this transaction.
(e) Except as set forth on Section 3.17(e) of the Disclosure
Schedule, since January 1, 1995, neither the Seller nor any of its Affiliates
has incurred any Liability under the Worker Adjustment and Retraining
Notification Act ("WARN"), as amended from time to time, or any similar state or
federal law with respect to employees of the Business.
(f) Section 3.17(f) of the Disclosure Schedule sets forth a true and
complete list of the wage rates for non-salaried and salaried employees of the
Business by classification.
3.18. COMPLIANCE WITH ERISA.
(a) Neither the Seller nor any of its Affiliates within the meaning
of Section 414(b) or (c) of the Code (as defined in Section 7.01) (and, for
purposes of Section 412(n) of the Code, Sections 414(n) and (o) of the Code)
(hereinafter "ERISA Affiliates"), maintains or contributes to any employee
pension benefit plan, any multiemployer plan or any employee welfare benefit
plan (as those terms are defined in Section 3 of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA")) that covers employees of the
Business, other than those listed on Section 3.18(a) of the Disclosure Schedule
("Benefit Plans"). Neither the Seller nor any of its ERISA Affiliates maintains
any stock option, stock bonus, restricted stock, phantom stock or similar plan
that covers employees of the Business other than those listed on Section 3.18(a)
of the Disclosure Schedule, and all employees covered by such plans are listed
on Section 3.18(a) of the Disclosure Schedule.
(b) There are no Liens pending against the Seller or any ERISA
Affiliates under Code Section 412(n) and there is no basis for such a Lien. All
premium payments due to the PBGC under Section 4007 of ERISA have been or will
be timely made before
33
the Closing Date. As of the Closing Date, neither the Seller nor any of its
ERISA Affiliates has adopted an amendment which would be subject to the security
requirements of Code Section 401(a)(29).
(c) None of the pension plans subject to Title IV of ERISA maintained
by the Seller or any ERISA Affiliate has been completely or partially
terminated, other than in a "standard termination," within the meaning of
Section 4041(b) of ERISA, with respect to which there is any further outstanding
liability to the plan or the PBGC, nor has been the subject of a "reportable
event" (as that term is defined in Section 4043 of ERISA and regulations
thereunder) as to which either (i) notices would be required to be filed with
the PBGC; or (ii) penalties have not been waived under PBGC Technical Update 95-
3. The PBGC has not instituted proceedings to terminate any such plan pursuant
to Subtitle 1 of Title IV of ERISA, and there is no pending or threatened
action, proceeding or investigation under Title IV of ERISA against or involving
any such plan. There are no liens pending against the Seller or any ERISA
Affiliate under Section 4068 of ERISA and there is no basis for such a lien.
The PBGC has not instituted or threatened to institute any action against the
Seller or its ERISA Affiliates under sections 4063, 4064 or 4062(e) of ERISA.
(d) The Seller has not represented to the employees (or any former
employees) of the Business that the Buyer will provide any form of retiree
medical benefits.
(e) Except for multiemployer Union Benefit Plans not maintained or
sponsored by the Seller but to which the Seller contributes or is obligated to
contribute, each Union Benefit Plan is in compliance in all material respects
with the applicable provisions of ERISA, the Code and other Federal or state
law, including all requirements under the Code or ERISA for filing reports
(which are true and correct in all material respects as of the date filed), and
benefits have been paid in accordance with the provisions of the Union Benefit
Plans.
3.19. INTELLECTUAL PROPERTY.
(a) Section 3.19(a) of the Disclosure Schedule sets forth a complete
and correct list of each patent, patent application and docketed invention of
the Seller, by date and germane case or docket number and country of origin, and
each license or licensing agreement of the Seller, by date, term and the parties
thereto, for each patent and patent application, and a summary description of
each invention or customized (by modification of source code) computer program,
Attributable to the Business (each of the foregoing being hereinafter referred
to as the "Patents and Licenses").
(b) Section 3.19(b) of the Disclosure Schedule sets forth a complete
and correct list of each trademark, trade name, trademark or tradename
registration or
34
application, and copyright registration or application for copyright
registration of the Seller, by date and germane case or docket number and
country of origin, and each license or licensing agreement, by date and the
parties thereto, for each trademark or copyright license or application,
relating to any Purchased Asset or Attributable to the Business (each of the
foregoing being hereafter referred to as the "Trademarks and Copyrights" and
collectively with the Patents and Licenses, the "Intellectual Property Rights").
(c) Except as disclosed in Section 3.19(c) of the Disclosure Schedule,
neither the Seller nor any of its Affiliates has during the three years
preceding the date of this Agreement been a party to any Proceeding as to which
there is a reasonable possibility of a determination adverse to the Seller that
involved or may involve a claim of infringement by any Person (including a
Governmental Authority) of any Intellectual Property Right, nor does the Seller
have any reason to believe that it or any of its Affiliates may become a party
to any Proceeding as to which there is a reasonable possibility of a
determination adverse to the Seller that involved or may involve a claim of
infringement by any Person (including a Governmental Authority) of any
Intellectual Property Right that would be expected to have a Material Adverse
Effect. Except as disclosed in Section 3.19(c) of the Disclosure Schedule, no
Intellectual Property Right (other than the name "Xxxxxxxx Xxxxxxx", "MK" or any
derivative thereof) is subject to any outstanding order, judgment, decree,
stipulation or agreement restricting the use thereof by the Seller or any of its
Affiliates or restricting the licensing thereof by the Seller to any Person, and
there is no valid basis for a claim to restrict the use thereof by the Seller.
The use of the Intellectual Property Rights does not conflict with, infringe
upon or violate any patent, patent license, patent application, trademark,
tradename, trademark or tradename registration, copyright, copyright
registration, service xxxx, brand xxxx or brand name or any pending application
relating thereto, or any trade secret, know-how, programs or processes, or any
similar rights, of any Person.
(d) Except as set forth in Section 3.19(d) of the Disclosure Schedule,
the Seller either owns the entire right, title and interest in, to and under, or
has acquired in connection with the acquisition of Equipment or Inventory all
necessary licenses to use, any and all inventions, processes, computer programs,
know-how, formulae, trade secrets, patents, chip designs, mask works,
trademarks, tradenames, brand names and copyrights Attributable to the Business.
No other inventions, processes, computer programs, know-how, formulae, trade
secrets, patents, chip designs, mask works, trademarks, tradenames, brand names,
copyrights, licenses or applications for any of the foregoing are necessary to
conduct the Business in all material respects in the same manner as the Business
has been conducted prior to the Closing Date.
3.20. ADVISORY AND LEGAL FEES. Except for the legal counsel retained
by the Seller in connection with this Agreement, the financial advisors
providing the fairness
35
opinion, and Bear, Xxxxxxx (if any fees or expenses are owed), whose fees and
expenses will be paid by the Seller, there is no other investment banker,
broker, finder, counsel or other intermediary or advisor which has been retained
by or is authorized to act on behalf of the Seller or any of its Affiliates who
might be entitled to any fee, commission or reimbursement of expenses from the
Buyer or any of its Affiliates upon consummation of the transactions
contemplated by this Agreement.
3.21. ENVIRONMENTAL COMPLIANCE.
(a) Except as set forth in Section 3.21(a) of the Disclosure Schedule,
the Seller has obtained all approvals, authorizations, certificates, consents,
licenses, orders and permits or other similar authorizations of all Governmental
Authorities, or from any other Person, which are required under any
Environmental Law and that are Attributable to the Business or relate to the
Purchased Assets. Section 3.21(a) of the Disclosure Schedule sets forth (i) all
permits, licenses and other authorizations issued under any Environmental Law to
the Seller that are Attributable to the Business or relate to the Purchased
Assets, and (ii) a description and good faith estimate by the Seller of the
costs of all capital expenditures through September 22, 1997 that, to the
knowledge of the Seller, are reasonably expected to be necessary to maintain or
continue to be qualified for each such permit, license or other authorization.
(b) Except as set forth in Section 3.21(b) of the Disclosure Schedule,
the Seller is in full compliance with all terms and conditions of all approvals,
authorizations, certificates, consents, licenses, orders and permits or other
similar authorizations of all Governmental Authorities (and all other Persons)
required under all Environmental Laws and that are Attributable to the Business
or that relate to the Purchased Assets or any, and is also in full compliance
with all other limitations, restrictions, conditions, standards, prohibitions,
requirements, obligations, schedules and timetables required or imposed under
all Environmental Laws.
(c) Except as set forth in Section 3.21(c) of the Disclosure Schedule,
there is no pending or, to the Seller's knowledge, threatened, Proceeding,
citation or notice of violation under any Environmental Law relating to the
Business or any of the Purchased Assets.
(d) Except as set forth in Sections 3.21(a) through (c) of the
Disclosure Schedule, with respect to the Business and the Purchased Assets,
there are no past or present events, conditions, circumstances, activities,
practices, incidents, actions, omissions or plans which may interfere with or
prevent continued compliance with any Environmental Law or with any approvals,
authorizations, certificates, consents, licenses, order, permits or other
similar authorizations, or which may give rise to any Environmental Liability,
or
36
otherwise form the basis of any claim, action, demand, suit, proceeding,
hearing, study or investigation (1) under any Environmental Law, (2) based on or
related to the manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling, or the emission, discharge, release or
threatened release of any Hazardous Substance, or (3) resulting from exposure to
workplace hazards.
(e) Except as set forth in Section 3.21(e) of the Disclosure Schedule,
the Seller is not required to make any capital or other expenditures to comply
with any Environmental Law nor, to the Seller's knowledge, is there any
reasonable basis on which any Governmental Authority could take any action that
would require any such capital expenditures with respect to the Business or the
Purchased Assets.
3.22. GOVERNMENT-FURNISHED PROPERTY OR EQUIPMENT. Section 3.22 of the
Disclosure Schedule identifies by description or inventory number all personal
property, equipment and fixtures loaned, bailed or otherwise furnished to the
Seller by or on behalf of any Governmental Authority that (i) is Attributable to
the Business, and (ii) are or should be in the possession of the Seller
("Government-Furnished Items"). Section 3.22 of the Disclosure Schedule
identifies each Government Contract to which each such item of personal
property, equipment or fixture relates. The Seller has complied with all of its
obligations relating to the Government-Furnished Items, and upon the return
thereof to the applicable Governmental Authority in the condition thereof on the
date hereof, would have no Liability to that Governmental Authority with respect
thereto.
3.23. [INTENTIONALLY OMITTED]
3.24. APPLICATION OF RECEIPTS. The Seller has applied (i) the
proceeds of any borrowings under the Previous Credit Agreement in accordance
with the application of proceeds provision of the Indemnification and
Reimbursement Agreement and has not applied such proceeds to any other cost,
expense or liability of any nature whatsoever, and (ii) the proceeds of any
receivables from the assets constituting Collateral (as defined in the
Indemnification and Reimbursement Agreement) in accordance with the application
of proceeds provision of the Indemnification and Reimbursement Agreement. The
Seller has used the proceeds of each loan made under the Previous Metra Banks
Revolving Credit Agreement solely for the purpose set forth in the schedule
attached to any applicable Notice of Borrowing (as defined in the Metra Banks
Revolving Credit Agreement) and to fund the Seller's performance of its
obligations under the Metra Contract.
3.25. [INTENTIONALLY OMITTED]
3.26. INSURANCE. Section 3.26 of the Disclosure Schedule sets forth
a complete and correct list of all insurance policies of any kind or nature
whatsoever currently in force
37
with the Seller that are Attributable to the Business (the "Insurance
Policies"), including all "occurrence based" liability policies regardless of
the periods to which they relate. For each Insurance Policy, Section 3.26 of
the Disclosure Schedule indicates the type of coverage, the name of the
insureds, the insurer, the premium, the expiration date, the period to which it
relates, the deductibles and loss retention amounts and the amounts of coverage.
Section 3.26 of the Disclosure Schedule sets forth a general description of the
Seller's self-insurance practices relating to the Business or the Purchased
Assets. The policies of insurance described as currently in effect in such
section of the Disclosure Schedule are in full force and effect and are valid,
outstanding and enforceable, and all premiums due thereon have been paid in
full. Except as set forth in Section 3.26 of the Disclosure Schedule, no
"claims made" insurance policies will in any way be affected by or terminate or
lapse by reason of the transactions contemplated by this Agreement. The Seller
has complied in all material respects with the provisions of all such policies.
3.27. REPORTS. Except as set forth in Section 3.27 of the Disclosure
Schedule, to the knowledge of the Seller, with respect to the Business, all
reports, documents and notices required to be filed, maintained or furnished
with or to any Governmental Authority by the Seller have been so filed,
maintained or furnished. All such reports, documents and notices were complete
and correct in all material respects on the date filed (or were corrected in or
superseded by a subsequent filing such that no Liability exists with respect to
the original filing, maintenance or furnishing thereof) and are kept in the
public inspection files of the Business, to the extent required by Applicable
Law to be kept in such files.
3.28. GOVERNMENT CONTRACTS.
There are no Government Contracts other than the Transit Division
Contracts. Except as set forth in Section 3.14(a), 3.14(b) and 3.14(c) of the
Disclosure Schedule, there is no Bid which, if accepted, would result in a
Government Contract.
3.29. PRODUCT WARRANTIES. Section 3.29 of the Disclosure Schedule
sets forth copies of the written product warranties and guaranties extended by
the Seller, and there are no other product warranties or guaranties extended by
the Seller, currently in effect that are Attributable to the Business or relate
to any of the Purchased Assets. Except as set forth in Section 3.29 of the
Disclosure Schedule, there have not been any deviations from such warranties and
guaranties, and salesmen, employees and agents of the Seller are not authorized
to undertake obligations to any customer or other third parties in excess of
such written warranties or guaranties.
3.30. MATERIAL DISCLOSURES. No statement, representation or warranty
made by the Seller in this Agreement, in any exhibit hereto, the Disclosure
Schedule or any other
38
schedule of Seller hereto contains any untrue statement of a material fact, or
fails to state a material fact necessary to make the statements of the Seller
contained herein or therein, in light of the circumstances in which they are
made, not misleading. Notwithstanding any other provision to the contrary in
this Agreement, the Seller makes no representations or warranties as to any
financial projections, estimates to complete contracts, contract loss
projections, reserves on financial statements or similar predictive information
contained in any exhibit hereto, the Disclosure Schedule or other schedule of
the Seller hereto.
3.31. AGREEMENT REGARDING REPRESENTATIONS AND WARRANTIES. Other than
the representations and warranties of the Seller set forth in Sections 3.01,
3.02, 3.03, 3.05, 3.09 (except to the extent specifically provided therein),
3.10, 3.11, 3.12, 3.21 (except to the extent specifically provided therein),
3.22, 3.24, 3.26 and 3.27 (except to the extent specifically provided therein),
the Buyer and the Seller agree that each and every other representation and
warranty set forth in Article III hereof is limited to the knowledge of the
Seller, whether or not specifically provided in such representation and
warranty.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE BUYER
The Buyer hereby represents and warrants to the Seller that:
4.01. ORGANIZATION AND EXISTENCE. The Buyer has been duly formed and
is validly existing and in good standing as a limited liability company under
the Delaware LLC Act and, under the Delaware LLC Act and the Amended and
Restated Limited Liability Company Agreement of the Buyer dated October 10, 1995
by and between AmerailOne Corporation, a Delaware corporation, and AmerailTwo
Corporation, a Delaware corporation (the "LLC Agreement"), has all the requisite
limited liability company power and authority to carry on its business as
proposed to be conducted by it and to own and hold its properties, all as
described in the LLC Agreement. Exhibit 4.01 includes true and complete copies
of the Certificate of Formation and LLC Agreement as currently in effect.
4.02. CORPORATE AUTHORIZATION. The execution, delivery and
performance by the Buyer of this Agreement and the consummation by the Buyer of
the transactions contemplated hereby are within the power and authority
conferred on the Buyer under its Certificate of Formation and LLC Agreement and
Applicable Law. This Agreement constitutes a legal, valid and binding agreement
of the Buyer, enforceable in accordance with its terms (i) except as limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other similar
laws now or hereafter in effect relating to or affecting creditors'
39
rights generally, and (ii) subject to the limitations imposed by general
equitable principles (regardless whether such enforceability is considered in a
proceeding at law or in equity).
4.03. GOVERNMENTAL AUTHORIZATION.
(a) To the knowledge of the Buyer, the execution, delivery and
performance by the Buyer of this Agreement require no action by, consent or
approval of, or filing with, any Governmental Authority other than: (i) any
actions, consents, approvals or filings otherwise expressly referred to in this
Agreement or described in Schedule 4.03; and (ii) any actions, consents,
approvals or filings which if not obtained would not have a material adverse
effect.
(b) Except as set forth in Section 4.03(b) of the Disclosure
Schedule, to the Buyer's knowledge, there are no facts relating to the identity
or circumstances of the Buyer or any of its Affiliates that would prevent or
materially delay obtaining any of the authorizations referred to in Sections
3.04(a)(i), (ii) and (iii) or 4.03(a).
4.04. NON-CONTRAVENTION. The execution, delivery and performance by
the Buyer of this Agreement do not and will not (i) contravene or conflict with
the certificate of formation or limited liability company agreement of the
Buyer, (ii) to the knowledge of the Buyer, assuming compliance with the matters
referred to in Section 4.03, contravene or conflict with or constitute a
violation of any provision of any Applicable Law binding upon or applicable to
the Buyer, (iii) constitute a default under or give rise to any right of
termination, cancellation or acceleration of any right or obligation of the
Buyer or to a loss of any benefit to which the Buyer is entitled under any
provision of any agreement, contract or other instrument binding upon the Buyer
or any license, franchise, permit or other similar authorization held by the
Buyer, except in the case of clauses (ii) and (iii) for any such contravention,
conflict, violation, default, termination, cancellation, acceleration or loss
that would not interfere with the Buyer's ability to consummate the transactions
contemplated hereby.
4.05. ADVISORY AND LEGAL FEES. To the knowledge of the Buyer, except
for legal counsel retained by the Buyer in connection with this Agreement and
the financial advisor providing the fairness opinion, whose fees are being paid
by the Seller, there is no investment banker, broker, finder, counsel or other
intermediary or advisor not affiliated with the Buyer which has been retained by
or is authorized to act on behalf of the Buyer who might be entitled to any fee,
commission or reimbursement of expenses from the Buyer or any of its Affiliates
upon consummation of the transactions contemplated by this Agreement.
4.06. LITIGATION. To the knowledge of the Buyer, there is no action,
suit,
40
investigation or proceeding pending against, or to the knowledge of the Buyer
threatened against or affecting, the Buyer before any court or arbitrator or any
governmental body, agency or official which in any matter challenges or seeks to
prevent, enjoin, alter or materially delay the transactions contemplated hereby.
4.07. OWNERSHIP OF THE BUYER. To the knowledge of the Buyer, (i)
AmerailOne Corporation, a Delaware corporation, and AmerailTwo Corporation, a
Delaware corporation, each own one-half of the Class A limited liability company
interests of the Buyer ("Class A Interests"); (ii) Amerail Holdings Company owns
each issued and outstanding share of AmerailOne Corporation and AmerailTwo
Corporation; (iii) one-third of the issued and outstanding shares of Amerail
Holdings Company are held by each of Broad Street Holdings, Inc., Broad Street
Contract Services, Inc. and Acacia Holding, Inc.; (iv) the only assets of
Amerail Holdings Company are the shares of AmerailOne Corporation and AmerailTwo
Corporation; (v) the only assets of AmerailOne Corporation are one-half of the
Class A Interests; (vi) the only assets of AmerailTwo Corporation are one-half
of the Class A Interests; (vii) Xxxxxxx Xxxxxxxxx, Xxxxxx X. Xxxxxxx and Xxxxxx
X. Xxxxxxxx, Xx., each own one third of the Class B Limited Liability Company
Interests of the Buyer (the "Class B Interests"); (viii) the Class A Interests
and the Class B Interests constitute all of the equity interests in the Buyer;
and (ix) the only assets of the Buyer are Thirty Thousand Dollars ($30,000).
4.08. MATERIAL DISCLOSURES. To the knowledge of the Buyer, no
statement, representation or warranty made by the Buyer in this Agreement or in
any exhibit or schedule of the Buyer hereto contains any untrue statement of
material fact, or fails to state a material fact necessary to make the
statements of the Buyer contained herein or therein, in light of the
circumstances in which they are made, not misleading.
ARTICLE V
COVENANTS OF THE SELLER
The Seller agrees that:
5.01. COMPLIANCE WITH TERMS OF REQUIRED GOVERNMENTAL APPROVALS AND
REQUIRED CONTRACTUAL CONSENTS. On and after the Closing Date, the Seller shall,
and shall cause its Affiliates to, comply at their respective expense with all
conditions and
41
requirements set forth in: (i) all Required Governmental Approvals to the extent
necessary such that all such Required Governmental Approvals will remain in full
force and effect assuming continued compliance with the terms thereof by the
Buyer and its Affiliates; and (ii) all Required Contractual Consents to the
extent necessary such that all such Required Contractual Consents will remain
effective and enforceable against the Persons giving such Required Contractual
Consents assuming continued compliance with the terms thereof by the Buyer and
its Affiliates.
5.02. INSURANCE POLICIES. Seller shall include, to the extent
permitted by Applicable Laws, Buyer as an additional insured on the Insurance
Policies with respect to events occurring or claims relating to periods ending
prior to the Closing Date, and, with respect to any such "claims made" Insurance
Policies, will maintain such policies in effect for a period of three (3) years
from the Closing Date.
5.03. CHANGE OF LOCKBOX ACCOUNTS. Immediately after Closing, the
Seller shall take such steps as the Buyer may reasonably request to cause the
Buyer and/or its designees to be substituted as the sole party having control
over any lockbox or similar bank account to which customers of the Seller
directly make payments related to the Business.
5.04. DELIVERY OF DISCLOSURE SCHEDULE. On or before the execution of
this Agreement, the Seller shall deliver to the Buyer the Disclosure Schedule.
5.05. ACCESS TO BOOKS AND RECORDS. The Seller agrees that on and
after the Closing, during normal business hours or at such other times as the
Buyer may reasonably request, it will permit the Buyer and Buyer's Affiliates
and their auditors, through their authorized representative, to have reasonable
access to and examine and take copies of all books and records of the Seller and
its Affiliates relating to the Business or the Purchased Assets which are not
delivered to the Buyer hereunder (including correspondence, memoranda, books of
account and similar documents) where there is a legitimate purpose and relating
to events or transactions occurring prior to or after the date of this
Agreement.
5.06. TAX RETURNS. The Seller shall prepare and timely file all
material required Federal, state, local and foreign tax returns and amendments.
5.07. REAL PROPERTY LEASES. The Seller shall pay to the applicable
landlords all amounts accruing, arising or occurring under the Real Property
Leases prior to July 1, 1995.
ARTICLE VI
42
OTHER COVENANTS
The parties hereto agree that:
6.01. FURTHER ASSURANCES. Subject to the terms and conditions of
this Agreement, each party shall take, or cause to be taken, all actions and to
do, or cause to be done, all things necessary or desirable under Applicable Law
to consummate the transactions contemplated by this Agreement. The Seller and
the Buyer agree to execute and deliver such other documents, certificates,
agreements and other writings and to take such other actions as may be
reasonably necessary or desirable in order to consummate or implement
expeditiously the transactions contemplated by this Agreement.
6.02. CERTAIN FILINGS. The Seller and the Buyer shall cooperate with
one another in determining whether any action by or in respect of, or filing
with, any Governmental Authority is required or reasonably appropriate, or any
action, consent, approval or waiver from any party to any Contract is required
or reasonably appropriate, in connection with the consummation of the
transactions contemplated by this Agreement. Subject to the terms and
conditions of this Agreement, in taking such actions or making any such filings,
the Seller and the Buyer shall furnish information required in connection
therewith and seek timely to obtain any such actions, consents, approvals or
waivers.
6.03. ADMINISTRATION OF ACCOUNTS. All payments and reimbursements
made in the ordinary course by any third party in the name of or to the Seller
or any Affiliate thereof Attributable to the Business or in connection with or
arising out of the Purchased Assets after the Closing Date shall be held by the
Seller in trust for the benefit of the Buyer and, immediately upon receipt by
the Seller of any such payment or reimbursements, the Seller shall pay over to
the Buyer the amount of such payment or reimbursement without right of set off.
6.04. ACCESS TO BUYER'S BOOKS, RECORDS AND EMPLOYEES. The Buyer
agrees that on and after the Closing, during normal business hours or at such
other times as the Seller may reasonably request, it will permit the Seller and
Seller's Affiliates and their auditors and legal advisors, through their
authorized representatives, to have reasonable access to and examine and take
copies of all books, records and employees of the Buyer and its Affiliates
relating to the Business or the Purchased Assets (including correspondence,
memoranda, books of account and similar documents) where there is a legitimate
purpose (including litigation matters) and relating to events or transactions
occurring prior to or after the date of this Agreement. The Buyer further
agrees to provide the Seller with any and all reporting materials supplied to
Credit Suisse under the Credit Agreement between the Buyer and Credit Suisse
dated as of the date hereof or to the Bank of America National
43
Trust and Savings Association as agent under the New Metra Banks Revolving
Credit Agreement, under such agreement, and to the Bonding Company under the
Bond Documents at or about the same time such reporting materials are provided
to such financial institutions and the Bonding Company.
6.05. GUARANTEE. Each of the MK Affiliates hereby agrees to cause
the Seller to perform its obligations and agreements hereunder. The MK
Affiliates each hereby unconditionally guaranties to the Buyer the full and
timely performance of all obligations and agreements of the Seller hereunder.
These guarantees shall include the guarantee of payment of all Damages as a
result of the nonperformance of any of the obligations or agreements so
guaranteed or as a result of the nonperformance of this guarantee. The Buyer,
at its option, may proceed against any of the MK Affiliates for the performance
of any such obligation or agreement, or for Damages for the default in the
performance thereof, without first proceeding against any other party or against
any of their respective properties. The MK Affiliates each agree that its
guarantee shall be an irrevocable guarantee and shall continue in effect
notwithstanding any extension or modification of any guaranteed obligation, any
assumption of any such guaranteed obligation by any other party, or any other
act or thing which might otherwise operate as a legal or equitable discharge of
a guarantor and the MK Affiliates each waives all special suretyship defenses
and notice requirements.
6.06. ELIMINATION OF LETTER OF CREDIT. From and after the date on
which the Seller obtains the consent of the New York City Transit Authority to
the assignment of the R46 Transit Division Contract and assigns such R46 Transit
Division Contract to the Buyer, the Buyer shall use its best efforts to cause
the New York City Transit Authority to issue as soon as possible any and all
reduction and termination certificates with respect to the letter of credit
issued by Citibank with respect to the R46 Transit Division Contract.
6.07. BULK SALES LAWS. The Buyer (subject to its rights to
indemnification under Section 9.01(e) hereof) and the Seller each waives
compliance with any applicable bulk sales or similar laws (including Tax laws
relating to sales in bulk). The Seller further agrees to execute and deliver at
the Closing the Bulk Sales Pledge and Security Agreement (Equipment Assets)
pursuant to which the Seller shall grant the Buyer a security interest in
certain of its assets for a period of six (6) months to secure its
indemnification obligation under Section 9.01(e). Nothing in this section shall
estop or prevent the Seller or the Buyer from asserting as a bar or defense to
any action or proceeding brought under any such applicable laws that it does not
apply to the transaction being consummated under this Agreement.
6.08. NOTICES TO VENDORS. The Buyer shall cooperate with the Seller
to prepare and deliver notices to creditors of the Seller with respect to the
Business notifying
44
the creditors of the consummation of the transaction contemplated by this
Agreement, identifying the Buyer as the party to which the relevant Contract
and/or Buyer Obligation has been assigned, making arrangements for the Seller to
be released from liability to such creditor for such Buyer Obligations, advising
the creditor that all future transactions will be with the Buyer and that the
Seller shall have no liability therefor. Notwithstanding anything else to the
contrary set forth herein, the Seller shall have no liability to the Buyer for
any Damages arising from any creditor of the Seller refusing to extend credit to
the Buyer, any creditor demanding adequate assurance of future performance from
the Seller with respect to any Contract or otherwise any contracting party to a
Restricted Contract refusing to provide the benefit of the bargain of such
Restricted Contract to the Buyer.
6.09. COVENANT TO REIMBURSE. If, after the Closing, the Buyer makes
any disbursements with respect to any of the Seller's Liabilities, other than
(i) the Buyer Obligations or (ii) Seller Liabilities that the Buyer actually
knew at the time it made such disbursement were not Buyer Obligations, the
Seller shall promptly reimburse the Buyer for the aggregate amount of all such
disbursements.
ARTICLE VII
TAX MATTERS
7.01. TAX DEFINITIONS. The following terms, as used herein, have the
following meanings:
"Code" means the Internal Revenue Code of 1986, as amended.
"Tax" means all taxes imposed of any nature including federal, state,
local or foreign net income tax, alternative or add-on minimum tax, profits or
excess profits tax, franchise tax, gross income, adjusted gross income or gross
receipt tax, employment related tax (including employee withholding or employer
payroll tax, FICA or FUTA), real or personal property tax or ad valorem tax,
sales or use tax, excise tax, stamp tax or duty, any withholding or back up
withholding tax, value added tax, severance tax, prohibited transaction tax,
premiums tax, occupation tax, together with any interest or any penalty,
addition to tax or additional amount imposed with respect to any of the
foregoing by any governmental authority (domestic or foreign) responsible for
the imposition of any such tax.
"Tax Return" shall mean all returns, reports, forms or other
information required to be filed with respect to any Tax.
45
"Seller Group" means, with respect to the Seller, the group of
affiliated entities that are required to file consolidated, combined, unitary,
or other group Tax Returns together with the Seller under the applicable
federal, state, local, foreign or other Tax laws.
7.02. TAX MATTERS. The Seller hereby represents and warrants to the
Buyer that (a) except for accrued and unpaid real and personal property and
employment related Taxes governed by Section 7.04, the Seller or its Affiliates
have timely filed or will timely file all Tax Returns required to be filed by
the Seller Group or any member thereof, and have timely paid or will timely pay
all Taxes owed by members of the Seller Group including all Taxes (i) with
respect to all taxable periods of the Seller Group ending on or before the
Closing Date or (ii) with respect to the assets, operations or business of the
Seller Group during all periods up to and including the Closing Date whether or
not such periods are taxable periods, (b) the reserves for taxes reflected in
the financial statements described in Section 3.06(a) of the Disclosure Schedule
are adequate, (c) there are no tax liens upon any of the Purchased Assets except
liens for current taxes not yet due or, with respect to California, due but not
past due, (d) the federal income tax returns of the Seller have been examined by
the Internal Revenue Service for all periods to and including those set forth in
Section 7.02 of the Disclosure Schedule and, except to the extent shown therein,
all deficiencies asserted as a result of such examinations have been paid or
finally settled and no issue has been raised by the Internal Revenue Service and
brought to the attention of the Seller in any such examination which, by
application of the same or similar principles, reasonably could be expected to
result in a proposed deficiency for any other period not so examined, (e) except
to the extent set forth in Section 7.02 of the Disclosure Schedule, there are no
outstanding agreements or waivers extending the statutory period of limitation
applicable to any federal income tax return of the Seller for any period, and
(f) neither Seller nor any of its Affiliates has transferred, or will transfer,
on or before the Closing Date, to the Buyer or its Affiliates the stock of any
corporation in an amount which would create a qualified stock purchase within
the meaning of Section 338 of the Code, and if such a transfer takes place, or
has taken place, it shall be null and void and such stock and the consideration
paid therefor shall be returned.
7.03. TAX COOPERATION. The Buyer and the Seller agree to retain
until the expiration of any applicable Tax statute of limitations or extension
thereof, and furnish or cause to be furnished to each other, upon request, as
promptly as practicable, such working papers and information relating to the
Purchased Assets and the Business and to provide such assistance as is
reasonably necessary for the preparation and filing of all Tax Returns, the
making of any election related to Taxes, the preparation for any audit by any
taxing authority, and the prosecution or defense of any claim, suit or
proceeding relating to any Tax Return. The Seller and the Buyer shall cooperate
with each other in the conduct of any audit or other proceeding related to Taxes
involving the Business and each shall execute and deliver such powers of
attorney and other documents as are necessary to carry out the intent
46
of this Section 7.03.
7.04. ALLOCATION OF CERTAIN TAXES.
(a) The Closing Statement of Net Assets To Be Sold will reflect all
accrued but unpaid real and personal property Taxes on all Purchased Assets,
through and including the Closing Date, using a ratable daily accrual method.
The Seller has furnished the Buyer an analysis of this amount itemized by
property, tax and taxing jurisdiction, at least three (3) days prior to the date
hereof.
(b) The Buyer agrees to timely pay all real and personal property
Taxes on all Purchased Assets the payment date for which is after the Closing
Date.
(c) Any transfer, documentary, sales, use or other Taxes assessed upon
or with respect to the transfer of the Purchased Assets to the Buyer and any
recording or filing fees with respect thereto shall be borne by the Seller.
(d) The Closing Statement of Net Assets To Be Sold will reflect all
accrued but not yet due or paid employment-related Tax liabilities of the Seller
(including employee withholding and employer portions of such Taxes) through and
including the Closing Date.
(e) The Buyer and the Seller agree that, pursuant to the "Alternative
Procedure" provided in Section 5 of Revenue Procedure 84-77, 1984-2 C.B. 753,
(i) the Seller and the Buyer shall report on a predecessor/successor basis as
set forth therein, (ii) the Seller shall be relieved from filing a form W-2 with
respect to any employee of the Seller who accepts employment with the Buyer, and
(iii) the Buyer shall undertake to file a W-2 for each such employee for the
year that includes the Closing Date (including the portion of such year that
such employee was employed by the Seller). The Seller agrees to provide the
Buyer with all payroll and employment related information with respect to each
employee of the Seller who accepts employment with the Buyer.
(f) The Buyer agrees to prepare for the Seller and, where permitted,
to file on such Seller's behalf, any federal, state or local employment-related
tax reports or information reports (including Internal Revenue Service Forms W-
2, W-3, 940, 941, 1042, l042S, 1096 and 1099) that the Seller may be required to
file following the Closing Date (but that were not due to be filed on or prior
to the Closing Date) with respect to any employment period on or before the
Closing Date.
ARTICLE VIII
47
[INTENTIONALLY OMITTED]
ARTICLE IX
INDEMNIFICATION OF BUYER INDEMNITEES
FOLLOWING THE CLOSING
9.01. AGREEMENT TO INDEMNIFY. If the Closing occurs, the Buyer and
its Affiliates (collectively, the "Buyer Indemnitees") shall be indemnified and
held harmless to the extent set forth in this Article IX by the Seller in
respect of any and all Damages incurred by any Buyer Indemnitee as a result of
each of the following:
(a) any breach of any representation or warranty made by the Seller or any
of its Affiliates in this Agreement or in any certificate, exhibit hereto, the
Disclosure Schedule or other schedule of the Seller hereto;
(b) the breach or failure to perform by the Seller after the Closing Date
of any of the covenants, agreements or obligations of the Seller contained in
this Agreement or the Conveyance Documents, or in any exhibit or schedule,
hereto;
(c) any Liabilities of the Seller, other than the Buyer Obligations;
(d) any Environmental Liability of the Buyer or the Seller that arose out
of or results from either (i) the Business or any of the Purchased Assets on or
prior to the Closing Date, or (ii) the failure of the Seller to have obtained an
approval, authorization, certificate, consent, license, order, permit or other
similar authorization of any Governmental Authority or other Person required by
any Environmental Law;
(e) any claim asserted by any Person (other than claims with respect to
Liabilities expressly assumed by the Buyer under Section 2.03 hereof) against
the Buyer or any of the Purchased Assets arising directly or indirectly out of
any failure or alleged failure of the Seller to pay any amounts due creditors of
the Seller as of the Closing Date under any bulk sales or similar laws
(including Tax laws relating to sales in bulk); and
(f) all actions, suits, proceedings, demands, assessments, judgments, costs
and expenses incident to any of the foregoing.
9.02. SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS. All
representations and warranties made by the Seller in this Agreement or in any
exhibit hereto, the Disclosure Schedule or other schedule hereto, shall survive
the Closing for a period of two years. Notwithstanding any investigation or
audit conducted before or after the Closing Date or the decision of any party to
complete the Closing, each party shall be entitled to rely upon the
representations and warranties set forth herein and therein. Any
48
claim for indemnification pursuant to Section 9.02(a) made prior to the end of
the survival period shall continue to be subject to indemnification in
accordance with this Agreement. All covenants of the Seller contained in this
Agreement or in any exhibit or schedule hereto shall survive the Closing.
9.03. CLAIMS FOR INDEMNIFICATION. If any Buyer Indemnitee shall
believe that such Buyer Indemnitee is entitled to indemnification pursuant to
this Article IX in respect of any Damages, such Buyer Indemnitee shall give the
Seller prompt written notice thereof. Any such notice shall set forth in
reasonable detail and to the extent then known the basis for such claim for
indemnification. The failure of such Buyer Indemnitee to give notice of any
claim for indemnification promptly shall not adversely affect such Buyer
Indemnitee's right to indemnity hereunder except to the extent that such failure
adversely affects the right of the Seller to assert any reasonable defense to
such claim. The Seller shall have twenty (20) Business Days following its
receipt of such notice either (y) to acquiesce in such claim by giving such
Buyer Indemnitee written notice of such acquiescence or (z) to object to the
claim by giving such Buyer Indemnitee written notice of the objection. If the
Seller acquiesces in such claim or the Seller does object thereto within such
twenty (20) Business Day period, such Buyer Indemnitee shall be entitled to be
indemnified for all Damages incurred by such Buyer Indemnitee in respect of such
claim. If the Seller timely objects to such claim and such Buyer Indemnitee and
the Seller is unable to resolve their dispute within ten (10) Business Days
following such objection (or such additional period of time as may be mutually
agreed to by Buyer Indemnitee and the Seller), the claim shall be submitted
immediately to arbitration pursuant to Section 9.04.
9.04. ARBITRATION OF DISPUTES RELATING TO INDEMNIFICATION.
(a) Any dispute between any Buyer Indemnitee and the Seller under this
Article IX shall be resolved by one arbitrator in accordance with the procedures
set forth in this Section 9.04. Within ten (10) Business Days after expiration
of the ten (10) Business Day period referred to in Section 9.03, each of (y) the
Seller and (z) the relevant Buyer Indemnitee(s) shall designate a mutually
acceptable arbitrator who is, in any such case, not affiliated with any party in
interest to such arbitration and who has substantial professional experience
with regard to corporate legal matters. If the Seller and the relevant Buyer
Indemnitee(s) fail to agree upon such arbitrator within such ten (10) Business
Day period, the arbitrator shall be appointed by the American Arbitration
Association as soon as practicable, and shall be, in any such case, a person who
is not affiliated with any party in interest to such arbitration and who has
substantial professional experience with regard to corporate legal matters.
(b) The arbitrator shall consider the dispute at issue at Washington,
D.C. at a mutually agreed upon time and place within thirty (30) (or such longer
period as may be
49
acceptable to such Buyer Indemnitee(s) and the Seller) days of the designation
of the arbitrator. The arbitration proceeding shall be held in accordance with
the Center for Public Resources Rules for Non-Administered Arbitration of
Business Disputes in effect on the date of the initial request by the relevant
Buyer Indemnitee or the Seller, as the case may be, that gave rise to the
dispute to be arbitrated (as such rules are modified by the terms of this
Agreement or may be further modified by mutual agreement of the relevant Buyer
Indemnitee(s) and the Seller) and shall include an opportunity for the parties
to conduct discovery in advance of the proceeding. Notwithstanding the
foregoing, the relevant Buyer Indemnitee(s) and the Seller agree that they will
attempt, and they intend that they and the arbitrator should use their best
efforts in that attempt, to conclude the arbitration proceeding and have a final
decision from the arbitrator within ninety (90) days (or such longer period as
may be mutually acceptable to such Buyer Indemnitee(s) and the Seller) from the
date of selection of the arbitrator; provided, however, that the arbitrator
shall be entitled to extend such 90-day period one or more times to the extent
necessary for such arbitrator to place a dollar value on any claim that may be
unliquidated. The arbitrator shall immediately deliver his or her written
decision with respect to the dispute to each of the parties, who shall promptly
act in accordance therewith. Each Buyer Indemnitee and the Seller agree that
any decision of the arbitrator shall be final, conclusive and binding and that
they will not contest any action by any other party thereto in accordance with a
decision of the arbitrator. It is specifically understood and agreed that any
party may enforce any award rendered pursuant to the arbitration provisions of
this Section 9.04 by bringing suit in any court of competent jurisdiction.
(c) All fees, costs and expenses (including attorneys' fees and
expenses) incurred by the party that prevails in any such arbitration commenced
pursuant to this Section 9.04 or any judicial action or proceeding seeking to
enforce the agreement to arbitrate disputes as set forth in this Section 9.04 or
seeking to enforce any order or award of any arbitration commenced pursuant to
this Section 9.04 may be assessed against the party or parties that do not
prevail in such arbitration in such manner as the arbitrator or the court in
such judicial action, as the case may be, may determine to be appropriate under
the circumstances. All costs and expenses attributable to the arbitrator shall
be allocated among the parties to the arbitration in such manner as the
arbitrator shall determine to be appropriate under the circumstances.
9.05. DEFENSE BY THE SELLER OF CLAIMS. In connection with any claim
which may give rise to indemnity under this Article IX resulting from or arising
out of any claim or Proceeding against a Buyer Indemnitee by a Person that is
not a party hereto, the Seller may (unless such Buyer Indemnitee elects not to
seek indemnity hereunder for such claim), upon written notice to the relevant
Buyer Indemnitee, assume the defense of any such claim or Proceeding if the
Seller acknowledges to the relevant Buyer Indemnitee its right to indemnity
pursuant hereto in respect of the entirety of such claim (as such claim may have
50
been modified through written agreement of the parties or arbitration hereunder)
and provides assurances, reasonably satisfactory to such Buyer Indemnitee, that
the Seller will be financially able to satisfy such claim in full if such claim
or Proceeding is decided adversely. If the Seller assume the defense of any
such claim or Proceeding, the Seller shall select counsel reasonably acceptable
to such Buyer Indemnitee to conduct the defense of such claim or Proceeding,
shall take all steps necessary in the defense or settlement thereof and shall at
all times diligently and promptly pursue the resolution thereof. If the Seller
shall have assumed the defense of any claim or Proceeding in accordance with
this Section 9.05, the Seller shall be authorized to consent to a settlement of,
or the entry of any judgment arising from, any such claim or Proceeding, without
the prior written consent of such Buyer Indemnitee; provided, however, that the
Seller shall pay or cause to be paid all amounts arising out of such settlement
or judgment concurrently with the effectiveness thereof; provided, further, that
the Seller shall not be authorized to encumber any of the assets of any Buyer
Indemnitee or to agree to any restriction that would apply to any Buyer
Indemnitee or to its conduct of business; and provided, further, that a
condition to any such settlement shall be a complete release of such Buyer
Indemnitee with respect to such claim. Such Buyer Indemnitee shall be entitled
to participate in (but not control) the defense of any such action, with its own
counsel and at its own expense. Each Buyer Indemnitee shall, and shall cause
each of its Affiliates, officers, employees, consultants and agents to,
cooperate fully with the Seller in the defense of any claim or Proceeding being
defended by the Seller pursuant to this Section 9.05. If the Seller does assume
the defense of any claim or Proceeding resulting therefrom in accordance with
the terms of this Section 9.05, such Buyer Indemnitee may defend against such
claim or Proceeding in such manner as it may deem appropriate, including
settling such claim or Proceeding after giving notice of the same to the Seller,
on such terms as such Buyer Indemnitee may deem reasonably appropriate. If the
Seller seeks to question the manner in which such Buyer Indemnitee defended such
claim or Proceeding or the amount of or nature of any such settlement, the
Seller shall have the burden to prove by a preponderance of the evidence that
such Buyer Indemnitee did not defend such claim or Proceeding in a reasonably
prudent manner.
ARTICLE X
INDEMNIFICATION OF SELLER INDEMNITEES
FOLLOWING THE CLOSING
10.01. AGREEMENT TO INDEMNIFY. If the Closing shall occur, the
Seller and each of the MK Affiliates (collectively, the "Seller Indemnitees")
shall be indemnified and held harmless to the extent set forth in this Article X
by the Buyer in respect of any and all Damages incurred by any Seller Indemnitee
as a result of each of the following:
51
(a) breach of any representation or warranty made by the Buyer in
this Agreement or in any exhibit or schedule of the Buyer hereto;
(b) the breach or failure to perform by the Buyer after the Closing
Date of any of the covenants, agreements or obligations of the Buyer contained
in this Agreement or the Conveyance Documents, or in any exhibit or schedule,
hereto;
(c) any Buyer Obligations;
(d) any Environmental Liability of the Buyer or the Seller that
arises out of or results from the Business or any of the Purchased Assets from
and after the Closing Date, other than any Environmental Liability that arises
out of or results from the failure of the Seller to have obtained an approval,
authorization, certificate, consent, license, order, permit or other similar
authorization of any Governmental Authority or other Person required by any
Environmental Law;
(e) any Liability that arises out of or results from the Business or
any of the Purchased Assets from and after the Closing Date; and
(f) all actions, suits, proceedings, demands, assessments, judgments,
costs and expenses incident to the foregoing.
10.02. SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS. All
representations and warranties made by the Buyer in this Agreement or in any
exhibit or schedule hereto shall survive the Closing for a period of two years.
Notwithstanding any investigation or audit conducted before or after the Closing
Date or the decision of any party to complete the Closing, each party shall be
entitled to rely upon the representations and warranties set forth herein and
therein. Any claim for indemnification pursuant to Section 10.01(a) made prior
to the end of the survival period shall continue to be subject to
indemnification in accordance with this Agreement. All covenants of the Buyer
contained in this Agreement or in any exhibit or schedule hereto shall survive
the Closing.
10.03. CLAIMS FOR INDEMNIFICATION. If any Seller Indemnitee shall
believe that such Seller Indemnitee is entitled to indemnification pursuant to
this Article X in respect of any Damages, such Seller Indemnitee shall give the
Buyer prompt written notice thereof. Any such notice shall set forth in
reasonable detail and to the extent then known the basis for such claim for
indemnification. The failure of such Seller Indemnitee to give notice of any
claim for indemnification promptly shall not adversely affect such Seller
Indemnitee's right to indemnity hereunder except to the extent that such failure
adversely affects the right of the Buyer to assert any reasonable defense to
such claim. The Buyer shall have twenty (20) Business Days following its
receipt of such notice either (y) to acquiesce in such claim by giving such
Seller Indemnitee written notice of such acquiescence or (z) to object to the
claim by giving such Seller Indemnitee written notice of the objection. If the
Buyer acquiesces in such claim or does not object thereto within such twenty
(20) Business Day period, such Seller Indemnitee shall be entitled to be
indemnified for all Damages incurred by such Seller Indemnitee in respect of
such claim. If the Buyer timely objects to such claim
52
and such Seller Indemnitee and the Buyer are unable to resolve their dispute
within ten (10) Business Days following such objection (or such additional
period of time as may be mutually agreed to by such Seller Indemnitee and the
Buyer), the claim shall be submitted immediately to arbitration pursuant to
Section 10.04.
10.04. ARBITRATION OF DISPUTES RELATING TO INDEMNIFICATION.
(a) Any dispute between any Seller Indemnitee and the Buyer under this
Article X shall be resolved by one arbitrator in accordance with the procedures
set forth in this Section 10.04. Within ten (10) Business Days after expiration
of the ten (10) Business Day period referred to in Section l0.03, each of (y)
the relevant Seller Indemnitee(s) and (z) the Buyer shall designate a mutually
acceptable arbitrator who is, in any such case, not affiliated with any party in
interest to such arbitration and who has substantial professional experience
with regard to corporate legal matters. If the Buyer and the relevant Seller
Indemnitee(s) fail to agree upon such arbitrator within such ten (10) Business
Day period, the arbitrator shall be appointed by the American Arbitration
Association as soon as practicable and shall be, in any such case, a person who
is not affiliated with any party in interest to such arbitration and who has
substantial professional experience with regard to corporate legal matters.
(b) The arbitrator shall consider the dispute at issue at a mutually
agreed upon time and place within thirty (30) (or such longer period as may be
acceptable to such Seller Indemnitee(s) and the Buyer) days of the designation
of the arbitrator. The arbitration proceeding shall be held in accordance with
the Center for Public Resources Rules for Non-Administered Arbitration of
Business Disputes in effect on the date of the initial request by the relevant
Seller Indemnitee(s) or the Buyer, as the case may be, that gave rise to the
dispute to be arbitrated (as such rules are modified by the terms of this
Agreement or may be further modified by mutual agreement of the relevant Seller
Indemnitee(s) and the Buyer) and shall include an opportunity for the parties to
conduct discovery in advance of the proceeding. Notwithstanding the foregoing,
the relevant Seller Indemnitee(s) and the Buyer agree that they will attempt,
and they intend that they and the arbitrator should use their best efforts in
that attempt, to conclude the arbitration proceeding and have a final decision
from the arbitrator within ninety (90) days (or such longer period as may be
mutually acceptable to such Seller Indemnitee(s) and the Buyer) from the date of
selection of the arbitrator; provided, however, that the arbitrator shall be
entitled to extend such 90-day period one or more times to the extent necessary
for such arbitrator to place a dollar value on any claim that may be
unliquidated. The arbitrator shall immediately deliver his or her written
decision with respect to the dispute to each of the parties, who shall promptly
act in accordance therewith. Each Seller Indemnitee and the Buyer agree that
any decision of the arbitrator shall be final, conclusive and binding and that
they will not contest any action by the other party in accordance with a
decision of the
53
arbitrator. It is specifically understood and agreed that any party may enforce
any award rendered pursuant to the arbitration provisions of this Section 10.04
by bringing suit in any court of competent jurisdiction.
(c) All fees, costs and expenses (including attorneys' fees and
expenses) incurred by the party that prevails in any such arbitration commenced
pursuant to this Section 10.04 or any judicial action or proceeding seeking to
enforce the agreement to arbitrate disputes as set forth in this Section 10.04
or seeking to enforce any order or award of any arbitration commenced pursuant
to this Section 10.04 may be assessed against the party or parties that do not
prevail in such arbitration in such manner as the arbitrator or the court in
such judicial action, as the case may be, may determine to be appropriate under
the circumstances. All costs and expenses attributable to the arbitrator shall
be allocated among the parties to the arbitration in such manner as the
arbitrator shall determine to be appropriate under the circumstances.
10.05. DEFENSE BY THE BUYER OF CLAIMS. In connection with any claim
which may give rise to indemnity under this Article X resulting from or arising
out of any claim or Proceeding against a Seller Indemnitee by a Person that is
not a party hereto, the Buyer may (unless such Seller Indemnitee elects not to
seek indemnity hereunder for such claim), upon written notice to the relevant
Seller Indemnitee, assume the defense of any such claim or Proceeding if the
Buyer acknowledges to the relevant Seller Indemnitee the right of such Seller
Indemnitee to indemnity pursuant hereto in respect of the entirety of such claim
(as such claim may have been modified through written agreement of the parties
or arbitration hereunder) and provides assurances, reasonably satisfactory to
such Seller Indemnitee, that the Buyer will be financially able to satisfy such
claim in full if such claim or Proceeding is decided adversely. If the Buyer
assumes the defense of any such claim or Proceeding, the Buyer shall select
counsel reasonably acceptable to such Seller Indemnitee to conduct the defense
of such claim or Proceeding, shall take all steps necessary in the defense or
settlement thereof and shall at all times diligently and promptly pursue the
resolution thereof. If the Buyer shall have assumed the defense of any claim or
Proceeding in accordance with this Section 10.05, the Buyer shall be authorized
to consent to a settlement of, or the entry of any judgment arising from, any
such claim or Proceeding, without the prior written consent of such Seller
Indemnitee; PROVIDED, HOWEVER, that the Buyer shall pay or cause to be paid all
amounts arising out of such settlement or judgment concurrently with the
effectiveness thereof; PROVIDED, FURTHER that the Buyer shall not be authorized
to encumber any of the assets of any Seller Indemnitee or to agree to any
restriction that would apply to any Seller Indemnitee or to its conduct of
business; PROVIDED, FURTHER that a condition to any such settlement shall be a
complete release of such Seller Indemnitee with respect to such claim. Such
Seller Indemnitee shall be entitled to participate in (but not control) the
defense of any such action, with its own counsel and at its own expense. Each
Seller Indemnitee shall, and shall cause each of his, her or its Affiliates,
officers, employees,
54
consultants and agents to, cooperate fully with the Buyer in the defense of any
claim or Proceeding being defended by the Buyer pursuant to this Section 10.05.
If the Buyer does not assume the defense of any such claim or Proceeding
resulting therefrom in accordance with the terms of this Section 10.05, such
Seller Indemnitee may defend against such claim or Proceeding in such manner as
such Seller Indemnitee may deem appropriate, including settling such claim or
Proceeding after giving notice of the same to the Buyer, on such terms as such
Seller Indemnitee may deem reasonably appropriate. If the Buyer seeks to
question the manner in which such Seller Indemnitee defended such claim or
Proceeding or the amount of or nature of any such settlement, the Buyer shall
have the burden to prove by a preponderance of the evidence that such Seller
Indemnitee did not defend such claim or Proceeding in a reasonably prudent
manner.
10.06. POST-CLOSING OBLIGATIONS. Notwithstanding anything in this
Agreement to the contrary, it is expressly agreed that none of the Sureties or
the Banks have any obligations or liabilities under this Agreement.
ARTICLE XI
LIMITATIONS ON INDEMNIFICATION AND REMEDIES
11.01 LIMITATIONS ON INDEMNIFICATION UNDER SECTION 9.01(A) AND
SECTION 10.01(A).
(a) Except as provided in Section 11.01(b) hereof, notwithstanding any
other provision hereof or of any Applicable Law, with respect to all claims
under Section 9.01(a) or 10.01(a), (i) no Buyer Indemnitee or Seller Indemnitee
(collectively, "Indemnitee") will be entitled to make a claim against an
indemnifying party ("Indemnifying Party") under Section 9.01(a) or 10.01(a)
unless and until the aggregate amount of indemnifiable losses under Section
9.01(a) or 10.01(a), as the case may be ("Indemnifiable Losses"), exceeds
$4,000,000 in which event, such Indemnitee may assert its right to
indemnification under such Section to the extent of its Indemnifiable Losses
thereunder in excess of such amount; and (ii) the maximum aggregate amount that
all Indemnifying Parties shall be responsible for, for all Indemnifiable Losses
arising under Section 9.01(a) or 10.01(a), shall not exceed $10,000,000.
(b) Notwithstanding anything to the contrary in Section 11.01(a) or
any other part of this Agreement, there shall be no minimum or maximum
limitation on, and Section 11.01(a) shall not apply to, (i) any Indemnitee's
right under Section 9.01(a) or 10.01(a), or otherwise, to bring actions for
Damages resulting from an inaccurate representation or
55
warranty made with scienter or (ii) any Buyer Indemnitee's rights with respect
to claims under Section 9.01(a) or 10.01(a) arising out of breach of any
representation or warranty contained in the second sentence of Section 3.09(a)
or contained in Sections 3.10, 3.12, 3.21 or 3.24.
11.02. EXCLUSIVE REMEDY FOR CERTAIN BREACHES OF REPRESENTATIONS AND
WARRANTIES. Notwithstanding any provision to the contrary contained in this
Agreement or in any other document, the parties hereto (on behalf of themselves,
and each of their Affiliates, associates and third party beneficiaries) hereby
agree that the remedies provided for in Article IX and Article X hereof shall be
the sole and exclusive remedy for any breach of any representation or warranty
made in this Agreement or in any certificate, exhibit or schedule hereto, not
resulting from an inaccurate representation or warranty made with scienter.
ARTICLE XII
MISCELLANEOUS
12.01. NOTICES. All notices, requests, demands, claims and other
communications hereunder shall be in writing. Any notice, request, demand,
claim, or other communication hereunder shall be deemed duly given (i) if
personally delivered, when so delivered, (ii) if mailed, ten Business Days after
having been sent by registered or certified mail, return receipt requested,
postage prepaid and addressed to the intended recipient as set forth below,
(iii) if given by telex or telecopier, once such notice or other communication
is transmitted to the telex or telecopier number specified below and the
appropriate answer back or telephonic confirmation is received, provided that
such notice or other communication is promptly thereafter mailed in accordance
with the provisions of clause (ii) above or (iv) if sent through an overnight
delivery service in circumstances to which such service guarantees next day
delivery, the day following being so sent:
IF TO THE BUYER TO:
American Passenger Rail Car Company, L.L.C.
000 Xxxx 000xx Xxxxxx
Xxxxxxx, XX 00000
Attention: Xxxxx X. Xxxxxx
Telecopier: (000) 000-0000
56
IF TO THE SELLER TO:
Xxxxxxxx Xxxxxxx Corporation
000 Xxxx Xxxxxxxxx
Xxxxx, XX 00000
Attention: Xxxxxxx X. Xxxxx
Telecopier: (000) 000-0000
Copy to:
Xxxxx, Day, Xxxxxx & Xxxxx
00 Xxxx Xxxxxx Xxxxx
Xxxxxxx, XX 00000-0000
Attention: Xxxxx X. Xxxxx
Telecopier: (000) 000-0000
Any party may give any notice, request, demand, claim or other
communication hereunder using any other means (including ordinary mail or
electronic mail), but no such notice, request, demand, claim or other
communication shall be deemed to have been duly given unless and until it
actually is received by the individual for whom it is intended. Any party may
change the address to which notices, requests, demands, claims and other
communications hereunder are to be delivered by giving the other parties notice
in the manner herein set forth.
12.02. AMENDMENTS; NO WAIVERS.
(a) Any provision of this Agreement may be amended or waived if, and
only if, such amendment or waiver is in writing and signed, in the case of an
amendment, by the Buyer and the Seller, or in the case of a waiver, by the party
against whom the waiver is to be effective.
(b) No waiver by a party of any default, misrepresentation or breach
of warranty or covenant hereunder, whether intentional or not, shall be deemed
to extend to any prior or subsequent default, misrepresentation or breach of
warranty or covenant hereunder or affect in any way any rights arising by virtue
of any prior or subsequent occurrence. Except as expressly provided herein, no
failure or delay by a party in exercising any right, power or privilege
hereunder shall operate as a waiver thereof nor shall any single or partial
exercise thereof preclude any other or further exercise thereof or the exercise
of any other right, power or privilege.
12.03. EXPENSES. Except as otherwise provided herein, all costs and
expenses
57
incurred in connection with this Agreement shall be paid by the party incurring
such cost or expense.
12.04. SUCCESSORS AND ASSIGNS. No party hereto may assign either
this Agreement or any of its rights, interests or obligations hereunder without
the prior written approval of each other party, which approval shall not be
unreasonably withheld.
12.05. GOVERNING LAW. This Agreement and the legal relations between
the parties hereto shall be governed by and construed in accordance with the
laws of the State of New York, without regard to its conflict of laws doctrine.
Except as expressly provided in Sections 2.07, 9.04 and 10.04, any legal action
or proceeding with respect to this Agreement may be brought in the courts of the
District of Columbia or of the United States for the District of Columbia, and
by execution and delivery of this Agreement, the parties hereto each consents,
for itself and in respect of its property, to the jurisdiction of those courts.
The parties hereto each 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. The parties hereto each waives personal service of any summons,
complaint or other process, which may be made by any other means permitted by
District of Columbia law.
12.06. COUNTERPARTS; EFFECTIVENESS. This Agreement may be signed in
any number of counterparts, each of which shall be an original, with the same
effect as if the signatures thereto and hereto were upon the same instrument.
This Agreement shall become effective when each party hereto shall have received
a counterpart hereof signed by the other parties hereto.
12.07. ENTIRE AGREEMENT. This Agreement (including the Disclosure
Schedule and Exhibits referred to herein which are hereby incorporated by
reference) constitutes the entire agreement between the parties with respect to
the subject matter hereof and supersedes and extinguishes all prior agreements,
understandings and negotiations, both written and oral, between the parties with
respect to the subject matter of this Agreement including the T-Co Term Sheet.
12.08. BINDING EFFECT. This Agreement shall be binding upon and
inure to the benefit of all of the parties and, to the extent permitted by this
Agreement, their respective successors a and assigns. For so long as any
obligations remain outstanding under the Guaranty Documents or the Bond
Documents, the Sureties shall be express, intended third party beneficiaries of
this Agreement. Except as provided in the immediately preceding sentence,
neither this Agreement nor any provision hereof is intended to confer upon any
Person other than the parties hereto any rights or remedies hereunder.
58
12.09. CAPTIONS. The captions herein are included for convenience of
reference only and shall be ignored in the construction or interpretation
hereof. All references to an Article or Section include all subparts thereof.
12.10. SEVERABILITY. If any provision of this Agreement, or the
application thereof to any Person, place or circumstance, shall be held by a
court of competent jurisdiction to be invalid, unenforceable or void, the
remainder of this Agreement and such provisions as applied to other Persons,
places and circumstances shall remain in full force and effect only if, after
excluding the portion deemed to be unenforceable, the remaining terms shall
provide for the consummation of the transactions contemplated hereby in
substantially the same manner as originally set forth at the later of the date
this Agreement was executed or last amended.
12.11. CONSTRUCTION.
(a) Whenever required by the context, any gender shall include any
other gender, the singular shall include the plural and the plural shall include
the singular. The words "herein," "hereof," "hereunder," and words of similar
import refer to the Agreement as a whole and not to a particular section.
Whenever the word "including" is used in this Agreement, it shall be deemed to
mean "including, without limitation," "including, but not limited to" or other
words of similar import such that the items following the word "including" shall
be deemed to be a list by way of illustration only and shall not be deemed to be
an exhaustive list of applicable items in the context thereof. All references
in this Agreement to Seller shall include the predecessor thereof.
(b) The parties hereto intend that each representation, warranty, and
covenant contained herein shall have independent significance. If any party has
breached any representation, warranty or covenant contained herein in any
respect, the fact that there exists another representation, warranty or covenant
relating to the same subject matter (regardless of the relative levels of
specificity) which the party has not breached shall not detract from or mitigate
the fact that the party is in breach of the first representation, warranty or
covenant.
12.12. CUMULATIVE REMEDIES. Except as expressly provided in Section
11.02 hereof, the rights, remedies, powers and privileges herein provided are
cumulative and not exclusive of any rights, remedies, powers and privileges
provided by law.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
59
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed by their respective authorized officers on October 10, 1995.
THE BUYER:
AMERICAN PASSENGER RAIL CAR
COMPANY, L.L.C.
/s/ Xxxxx X. Xxxxxx
By:
----------------------
Name Xxxxx X. Xxxxxx
Title
THE SELLER:
XXXXXXXX XXXXXXX CORPORATION
/s/ Xxxxxxx X. Xxxxx
BY:
----------------------
Name Xxxxxxx X. Xxxxx
Title Executive Vice President
MK DELAWARE:
XXXXXXXX XXXXXXX CORPORATION
/s/ Xxxxxxx X. Xxxxx
BY:
----------------------
Name Xxxxxxx X. Xxxxx
Title Executive Vice President
MK AFFILIATES
NATIONAL PROJECTS, INC.
/s/ Xxxxxxx X. Xxxxx
By:
----------------------
Name Xxxxxxx X. Xxxxx
Title Senior Vice President
and Secretary
60
XXXXXXXX-XXXXXXX SERVICES, INC.
By: /s/ Xxxxxxx X. Xxxxx
----------------------------------
Name Xxxxxxx X. Xxxxx
Title Secretary
XXXXXXXX-XXXXXXX FINANCIAL
COMPANY, INC.
By: /s/ Xxxxxxx X. Xxxxx
----------------------------------
Name Xxxxxxx X. Xxxxx
Title Chairman, President and Secretary
ATASCOSA MINING CO.
By: /s/ Xxxxxxx X. Xxxxx
----------------------------------
Name Xxxxxxx X. Xxxxx
Title Secretary
CENTENNIAL ENGINEERING, INC.
By: /s/ Xxxxxxx X. Xxxxx
----------------------------------
Name Xxxxxxx X. Xxxxx
Title Executive Vice President
CF SYSTEMS CORPORATION
By: /s/ Xxxxxxx X. Xxxxx
----------------------------------
Name Xxxxxxx X. Xxxxx
Title Secretary
CHEMICAL DEMILITARIZATION OF
ANNISTON COMPANY
By: /s/ Xxxxxxx X. Xxxxx
----------------------------------
Name Xxxxxxx X. Xxxxx
Title Secretary
JOY MK PROJECTS COMPANY
By: /s/ Xxxxxxx X. Xxxxx
----------------------------------
Name Xxxxxxx X. Xxxxx
Title Vice President and Secretary
61
MK CAPITAL COMPANY
By: /s/ Xxxxxxx X. Xxxxx
----------------------------------
Name Xxxxxxx X. Xxxxx
Title Vice President and Secretary
XX-XXXXXXXX ENGINEERING COMPANY
By: /s/ Xxxxxxx X. Xxxxx
----------------------------------
Name Xxxxxxx X. Xxxxx
Title Assistant Secretary
XX-XXXXXXXX OF IDAHO COMPANY
By: /s/ Xxxxxxx X. Xxxxx
----------------------------------
Name Xxxxxxx X. Xxxxx
Title Assistant Secretary
XX-XXXXXXXX OF OAK RIDGE COMPANY
By: /s/ Xxxxxxx X. Xxxxx
----------------------------------
Name Xxxxxxx X. Xxxxx
Title Assistant Secretary
MK INFRASTRUCTURE CORPORATION
By: /s/ Xxxxxxx X. Xxxxx
----------------------------------
Name Xxxxxxx X. Xxxxx
Title Secretary
MK TRAIN CONTROL, INC.
By: /s/ Xxxxxxx X. Xxxxx
----------------------------------
Name Xxxxxxx X. Xxxxx
Title Vice President and Secretary
NAVASOTA MINING COMPANY, INC.
By: /s/ Xxxxxxx X. Xxxxx
----------------------------------
Name Xxxxxxx X. Xxxxx
Title Vice President and Secretary
62
YAMPA MINING CO.
By: /s/ Xxxxxxx X. Xxxxx
----------------------------------
Name Xxxxxxx X. Xxxxx
Title Secretary
XXXXXXXX-XXXXXXX COMPANY, INC.
By: /s/ Xxxxxxx X. Xxxxx
----------------------------------
Name Xxxxxxx X. Xxxxx
Title Chairman and President
XXXXXXXX-XXXXXXX ENGINEERS, INC.
By: /s/ Xxxxxxx X. Xxxxx
----------------------------------
Name Xxxxxxx X. Xxxxx
Title Vice President and Secretary
XXXXXXXX-XXXXXXX INTERNATIONAL
COMPANY, INC.
By: /s/ Xxxxxxx X. Xxxxx
----------------------------------
Name Xxxxxxx X. Xxxxx
Title Vice President and Secretary
63
SCHEDULE 1
MK AFFILIATES
National Projects, Inc.
Xxxxxxxx-Xxxxxxx Services, Inc.
Xxxxxxxx-Xxxxxxx Financial Company, Inc.
Atascosa Mining Co.
Centennial Engineering, Inc.
CF Systems Corporation
Chemical Demilitarization of Anniston Company
Joy MK Projects Company
MK Capital Company
XX-Xxxxxxxx Engineering Company
XX-Xxxxxxxx of Idaho Company
XX-Xxxxxxxx of Oak Ridge Company
MK Infrastructure Corporation
MK Train Control, Inc.
Navasota Mining Company, Inc.
Yampa Mining Co.
Xxxxxxxx-Xxxxxxx Company, Inc.
Xxxxxxxx-Xxxxxxx Engineers, Inc.
Xxxxxxxx-Xxxxxxx International Company, Inc.
64
SCHEDULES AND EXHIBITS
THE REGISTRANT AGREES TO PROVIDE TO THE
SECURITIES AND EXCHANGE COMMISSION, UPON REQUEST,
WITH COPIES OF THE SCHEDULES AND EXHIBITS HERETO.
65
