Exhibit 10.60
EMPLOYMENT AGREEMENT
This Employment Agreement (the "Agreement") is made as of July 1, 1996, between
MK RAIL CORPORATION, a Delaware corporation ("Company"), and XXXXXXX X. XXXX
("Employee").
In consideration of the covenants and agreements herein contained, the parties
agree as follows:
1. EMPLOYMENT TERM
The Company shall employ Employee as President and Chief Executive
Officer of the Company and Employee hereby accepts such employment with
the Company, from the date hereof for a period of twenty-four (24)
months. After the first calendar month of employment under this
Agreement and each succeeding calendar month through June 30, 1999,
this Agreement will be extended by one month, so that there remains a
twenty-four (24) month term at all times through June 30, 1999.
Thereafter, this Agreement shall be for a term expiring on July 1,
2001, unless sooner terminated in accordance with the terms hereof.
2. DUTIES
During the term of this Agreement, Employee shall devote his full
business time and energies to the business and affairs of the Company
and shall not accept other employment or permit his personal business
interests to interfere with the performance of his duties hereunder.
Employee agrees to use his reasonable best efforts, skills and
abilities to promote the interests of the Company, to serve as
President and Chief Executive Officer of the Company and to perform
such duties consistent with this appointment as may be assigned to him,
and shall be supervised by the Chairman of the Company's Board of
Directors ("Chairman") and the Company's Board of Directors (the
"Board"). Employee will be nominated to fill the vacant seat on the
Board formerly held by Xxxxxxx X. Xxxxxxx, formerly the Company's Chief
Executive Officer, for the remaining term thereof (until the 1997
annual meeting of stockholders). During the term of this Agreement, the
Company will use all reasonable best efforts to support and recommend
the Employee for the Board, including placing his name on management's
list of nominees for the Board in the Company's proxy statements, and
if requested by the Chairman or the Board, the Employee shall serve as
a member of the board of directors and as an officer of any of the
Company's subsidiaries.
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3. COMPENSATION
3.1 Salary
In consideration for Employee's services hereunder, the
Company will pay to Employee, beginning July 1, 1996, a base
salary at the annual gross rate of $375,000, which will be
paid in accordance with the Company's normal payroll practice
in arrears, less normal payroll deductions, and less any
deferrals under the terms of the Deferred Compensation Plan
for Xxxxxxx X. Xxxx (as described in Section 3.5 hereof). The
Company's Compensation Committee shall review Employee's
salary periodically in accordance with its customary salary
review practices not less often than it conducts salary
reviews of other executives of the Company. From time to time,
the Company may, but shall not be obligated to, award Employee
cost of living or merit increases, or other additional amounts
as the Compensation Committee determines, in its discretion.
3.2 Lump Sum Signing Bonus
The Company will also pay Employee a single lump sum payment
of $100,000 upon execution of this Agreement. However, if
Employee voluntarily terminates his employment before July 1,
1997, Employee agrees to repay to the Company the amount of
$100,000 within thirty (30) days of the date of termination.
3.3 Incentive Bonus Plan
The Company intends to prepare (with the assistance of the
Employee) a bonus plan for the Company's senior management,
under which a bonus may be earned by Employee with respect to
1997 and subsequent calendar years. The performance
objectives, criteria and formulae that will be used to
determine the amount of bonus payable for each year will be
determined by the Compensation Committee of the Board as soon
as administratively practicable after the approval of the
bonus plan.
3.4 Restricted Stock and Stock Options
As an additional material inducement for the Employee's
entering into this Agreement and his undertaking to perform
the services referred to herein, the Employee will receive
upon his commencement of employment hereunder:
(a) 100,000 shares of common stock restricted as to their
ability to be sold (the "Restricted Stock"), the
restrictions to lapse at the close of business on June
30, 2001, so long as the Employee is still in the employ
of the Company on that date, unless otherwise expressly
provided in this Agreement. On the date on which the
restrictions lapse or as soon as thereafter as
reasonably
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practicable, all legends will be removed and fully
registered and freely transferrable stock certificates
for the shares for which the restrictions have lapsed
shall be issued to the Employee. The grant of the
Restricted Stock shall be made under the Company's Stock
Incentive Plan ("Stock Incentive Plan"), a copy of which
has been provided to the Employee.
(b) Stock appreciation rights ("SARs") entitling the
Employee to the appreciation in the value of 400,000
shares of common stock of the Company from the May 13,
1996 to the date of exercise. Due to the current
insufficiency of stock available under the Stock
Incentive Plan, SARs in respect of all 400,000 shares
shall be issued pursuant to a Stock Appreciation Right
Agreement (the "SAR Agreement"), a copy of which is
attached hereto as Exhibit A. The terms of the SARs
shall be governed solely by the SAR Agreement attached
hereto as Exhibit A. The SAR Agreement is not part of
the Stock Incentive Plan, but provides, in effect, that
an option granted under the Stock Incentive Plan (the
"Plan Option") may be partially substituted for the
SARs, all as set forth in the SAR Agreement. The
exercise price of the Plan Option, if issued, shall be
as set forth in paragraph 2(d) of the SAR Agreement, and
the terms thereof shall otherwise be as set forth in the
form of Stock Option Agreement under Stock Incentive
Plan attached as Exhibit 1 to the SAR Agreement (the
"Option Agreement").
(c) The Company will accurately, correctly and timely
prepare and file or caused to be prepared and filed all
reports required to be filed by the Employee pursuant to
Section 16 of the Securities Exchange Act of 1934 and
amendments thereto or similar provisions of any state
statutory or common law, including without limitation
Forms 3, 4 and 5 required to be filed with the
Securities and Exchange Commission. The Employee will
cooperate with the Company in assisting it in preparing
and filing the reports.
3.5 Deferred Compensation Plan
Employee is entitled to participate in the Deferred
Compensation Plan for Xxxxxxx X. Xxxx and the Trust Agreement
related thereto, copies of which are attached as Exhibit B
hereto.
3.6 Fringe Benefits
(a) Employee shall, during the term of this Agreement, be
entitled to participate in all perquisites and health
and welfare benefits consistent with the Company's
policies for other executive personnel.
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(b) In addition to any policies of life insurance obtained
on the life of Employee in accordance with the Company's
customary policies and practices, to the extent
commercially available at standard rates, the Company
shall purchase a policy of one-year renewable term life
insurance on the life of Employee, naming as beneficiary
or beneficiaries such person or persons as may be
designated by Employee, with a death benefit of $1
million; provided, however, that if the cost of such
insurance now or at any time during the term of this
Agreement exceeds the cost of insuring a person of the
same age as Employee who is in generally good health
(the cost of insuring such a person is referred to as
the "Standard Policy Cost"), the Company shall so advise
Employee, who shall have the option of (i) paying the
premiums in excess of the Standard Policy Cost, in which
case the Company shall purchase a one- year renewable
term life insurance policy on the life of Employee with
a $1 million death benefit, or (ii) declining to pay the
premiums in excess of the Standard Policy Cost, in which
case the Company shall purchase a one-year renewable
term life insurance policy on the life of Employee with
a death benefit of such amount as can be purchased for
the Standard Policy Cost. Any policy purchased by the
Company shall provide that Employee will be able to
continue the coverage, at Employee's sole option and
expense, on termination of his employment under this
Agreement with no additional physical examination after
issuance of such policy for a period of at least 12
years.
3.7 Expenses
Employee shall, during the term of this Agreement, be entitled
to receive prompt reimbursement for all reasonable expenses
incurred by the Employee in the performance of his duties
hereunder in accordance with the policies and procedures of
the Company in effect as of the date thereof.
In addition, Employee's cost of relocating to the Pittsburgh,
Pennsylvania area will be reimbursed to him in accordance with
the Company's relocation benefit policy, any exceptions to be
agreed upon in advance with the Chairman. The Company will
reimburse the Employee for reasonable temporary living
expenses incurred in the greater Pittsburgh, Pennsylvania area
for 30 days following the commencement of his employment
hereunder.
4. DISCHARGE FOR CAUSE
4.1 The Company shall have the right to terminate this Agreement
and to discharge Employee for cause at any time without prior
notice (except as provided below). Any termination notice sent
to Employee shall be accompanied by a written statement of the
reasons.
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4.2 As used in this Agreement, the term "cause" shall mean and be limited to
the following events:
(a) Employee's conviction with respect to any crime or
offense involving money or other property of the
Company, or of any other crime (whether or not involving
the Company) that constitutes a felony in the
jurisdiction involved; or
(b) A determination by a licensed physician that Employee is
a chronic alcoholic or a narcotics addict; or
(c) Employee's (1) material and repeated failure to perform
his duties in accordance with Section 2 of this
Agreement, (2) material and repeated breach of any other
provision of this Agreement, or (3) material violation
of specific written directions of the Chairman or the
Board, which directions are reasonably consistent with
the provision of this Agreement; provided, however, that
no discharge shall be deemed for cause under this
Section 4.2(c) unless Employee shall have first received
written notice from the Chairman or the Board advising
Employee of the specific acts or omissions alleged to
constitute a failure to perform his duties, and Employee
has thereafter failed to correct the acts or omissions
so complained of within a reasonable time, not to exceed
30 days, thereafter.
4.3 If terminated for cause as defined at Sections 4.2(a)-(c),
Employee will not be entitled to receive any compensation or
benefits with respect to any period after the effective date
of such termination.
5. OTHER TERMINATION
5.1 In addition to a termination for cause as set forth in Section
4 of this Agreement, this Agreement and Employee's employment
may be terminated as follows:
(a) This Agreement and the Company's obligation to pay
salary and benefits hereunder shall terminate
immediately upon Employee's death. In such event, net
salary owed to Employee for work performed through the
date of his death shall be paid by the Company to
Employee's surviving wife; if Employee dies without a
wife surviving, said payment will be made by the Company
to Employee's legal heirs in accordance with relevant
law. If Employee dies with a wife surviving, any health
and dental insurance which was being provided to her per
Section 3.6 at the time of Employee's death shall be
continued at the Company's cost for a period of one year
following the Employee's death.
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(b) If, during the period of employment under this
Agreement, Employee, in the opinion of a certified
physician acceptable to the Company and Employee,
becomes mentally or physically disabled so that Employee
is unable to perform the regular duties of his
employment on a full-time basis, Employee's salary will
thereupon cease, and he shall be entitled to participate
in the Company's salary continuation and long-term
disability plans, in accordance with their terms and
subject to their eligibility requirements.
(c) By the Company, without cause, upon prior written notice
to Employee.
(d) By Employee, without cause, upon written notice to the
Company.
5.2 (a) If terminated by the Company other than for cause
pursuant to Section 5.1(c) hereof, Employee as his sole
remedy (in lieu of all other rights and remedies) shall
receive, at the option of the Company, either (i)
continuation of his salary for the period, if any, that,
absent such termination, would otherwise be remaining
under the term of this Agreement, at the rate in effect
immediately prior to such termination, or (ii) an amount
equal to the present value of such salary continuation
payments, payable within thirty (30) days following such
termination, in each case subject to all normal payroll
deductions. The present value shall be determined based
on the prime or base rate of BankAmerica Business
Credit, Inc. most recently announced as of the date the
computation is made, or if BankAmerica Business Credit,
Inc. ceases to announce such rate, as most recently
reported in The Wall Street Journal as of the date the
computation is made. If Employee dies before all such
payments are made, they will be made instead to his
surviving wife, or if his wife does not survive him, to
his legal heirs in accordance with relevant law.
(b) If Employee dies, is terminated by disability pursuant
to Section 5.1(b) hereof or is terminated by the Company
other than for cause pursuant to Section 5.1(c) hereof,
Employee will retain any rights with respect to the SARs
and, if provided, Plan Options, which have been awarded
to him pursuant to this Agreement, and all shares not
previously exercised will be exercisable as of the date
of termination to the extent provided in the SAR
Agreement and, if provided, in the Option Agreement.
(c) If Employee dies, is terminated by disability pursuant
to Section 5.1(b) hereof or is terminated by the Company
other than for cause pursuant to Section 5.1(c) hereof,
Employee will be immediately vested in the grant of
100,000 shares of the Company's common stock provided
for in this Agreement.
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(d) If Employee is terminated by the Company other than for
cause pursuant to Section 5.1(c) hereof, all employee
benefits plans provided to Employee under Section 3.6(b)
and (c) will continue for twelve months or until
Employee finds new employment (whichever is sooner).
. (e) If Employee dies, is terminated by disability
pursuant to Section 5.1(b) hereof or is terminated by
the Company other than for cause pursuant to Section
5.1(c) hereof or if this Agreement expires by its own
terms on July 1, 2001, Employee and his spouse (or, in
the event of Employee's death, either while employed or
after termination, his surviving spouse alone) may
continue to receive benefits under any group health care
insurance plan, at Employee's (or his surviving
spouse's) expense, to the extent permitted by the
Consolidated Omnibus Budget Reconciliation Act of 1985
and, thereafter, for so long as Employee (or his
surviving spouse) may desire and as may be permitted by
the Company's health insurance provider. The Company
will take reasonable measures to cause such coverage to
be continued for so long as Employee (or his surviving
spouse) may desire, provided that the Company shall not
be obligated to incur any costs whatsoever to continue
such coverage.
(f) If Employee is terminated by the Company other than for
cause pursuant to Section 5.1(c) hereof, the Company
will pay expenses up to an amount equal to fifteen
percent (15%) of Employee's annual salary at the time of
such termination, reasonably incurred by Employee for
legitimate commercial out placement service mutually
acceptable to the parties. Promptly upon being advised
of the name and address of any such service as has been
selected by Employee, the Company will send that service
written confirmation of the foregoing maximum
commitment.
(g) If Employee is terminated by the Company other than for
cause pursuant to Section 5.1(c) hereof, he shall
receive a lump sum payment as compensation for his costs
of relocating from Pittsburgh in an amount equal to
$50,000 less $10,000 for each full year of employment
with the Company.
5.3 Change of Control
(a) For purposes of this Agreement, the term "Change of Control" shall
mean the occurrence of any of the following events:
(1) The Company is merged, consolidated or reorganized into
or with another corporation or other entity, and as a
result of the merger, consolidation or reorganization
less than a majority of the combined voting power of the
then-outstanding securities of the corporation
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or entity immediately after the transaction is held in
the aggregate by the holders of Voting Stock immediately
prior to the transaction;
(2) The Company sells or otherwise transfers all or
substantially all of its assets to another corporation
or other entity and, as a result of the sale or
transfer, less than a majority of the combined voting
power of the then-outstanding securities of the other
corporation or entity immediately after the sale or
transfer is held in the aggregate by the holders of
Voting Stock immediately prior to the sale or transfer;
(3) There is a report filed on Schedule 13D or Schedule
14D-1 (or any successor schedule, form or report or item
therein), each as promulgated pursuant to the Exchange
Act, disclosing that any Person, other than an Existing
Stockholder or an MK Creditor Stockholder, has become
the beneficial owner (as the term "beneficial owner" is
defined under Rule 13d-3 or any successor rule or
regulation promulgated under the Exchange Act) of
securities representing 25% or more of the combined
voting power of the Voting Stock;
(4) If, during any period of two consecutive years
commencing on the date of this Agreement, individuals
who at the beginning of that period constitute the Board
of Directors of the Company cease for any reason to
constitute at least two-thirds (2/3rds) thereof;
provided, however, that for purposes of this clause (4)
each Director of the Company who is first elected, or
first nominated for election by the Company's
stockholders, by a vote of at least a majority of the
Directors of the Company (or a committee of the Board)
then still in office who were Directors of the Company
at the beginning of that period shall be deemed to have
been a Director of the Company at the beginning of that
period; or
(5) If Xxxxxxxx Xxxxxxx Corporation becomes the direct or
indirect beneficial owner of Voting Stock which
constitutes at least 75% of the voting power of all of
the Voting Stock outstanding by reason of a tender offer
made pursuant to Rule 13e-3 or 14d-1 of the rules under
the Exchange Act as to which the Board of Directors of
the Company has recommended that the Company's
stockholders accept.
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(b) For purposes of Section 5.3(a) the following terms shall
have the following meanings:
(1) "Exchange Act" means the Securities Exchange Act
of 1934, as amended.
(2) "Existing Stockholder" shall mean any Person who
is the beneficial owner (as the term "beneficial
owner" is defined under Rule 13d-3 or any
successor rule or regulation promulgated under the
Exchange Act) of securities representing 25% or
more of the combined voting power of the Voting
Stock as of the date hereof.
(3) "MK Creditor Stockholder" shall mean any Person
who has acquired Voting Stock directly or
indirectly from Xxxxxxxx Xxxxxxx Corporation in
full or partial satisfaction of any indebtedness
or obligation of Xxxxxxxx Xxxxxxx Corporation owed
to such Person.
(4) "Person" means any "person" as used in Section
13(d)(3) or Section 14(d)(2) of the Exchange Act.
(5) "Voting Stock" means stock of the Company of any
class or series entitled to vote generally in the
election of Directors.
(c) If such Change of Control occurs and Employee fully
cooperates and assists with such Change of Control as
reasonably requested by the Company, and:
(1) If after such Change of Control the
purchaser/conveyee does not hire Employee and
assume all obligations of this Agreement; or
(2) Employee is terminated other than for cause as
defined at Sections 4.2(a)-(c), of this Agreement,
either after such Change in Control occurs or in
contemplation of or within ninety (90) calendar
days prior to the occurrence of such Change in
Control,
then the Company shall provide to Employee salary, stock
options, stock grant, deferred compensation, benefit
continuations, and benefits provided in Section 5.2.
6. CONFIDENTIAL INFORMATION
6.1 Beginning on the date hereof and at all times hereafter, Employee
shall treat as confidential any proprietary, confidential or secret
information. relating to the
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business or interests of the Company, including information
relating to its organizational structure, operations, business
plans, research data or results, inventions, customer lists or
other work product, whether developed by or for the Company
and whether developed on the premises of the Company or
elsewhere ("Confidential Information"). Beginning on the date
hereof and at any time hereafter, Employee shall not, without
the prior written consent of the Company, disclose or make use
of in any manner or in any form Confidential Information,
except to the extent necessary to perform the services
required of him under this Agreement.
Within, a reasonable time after the termination of this
Agreement, all Company records, information documents and
other property of the Company in the possession of Employee,
shall be returned by Employee to the Company.
6.2 The provisions of this section shall not apply to any
proprietary, confidential or secret information which is, at
the commencement of this Agreement or at some later date,
known to the general public under circumstances involving no
breach of this Agreement, or is lawfully and in good faith
made available to Employee without restriction as to
disclosure by a third party entitled to such information.
6.3 In consideration of the Company's payments to Employee under
Section 5.1 or 5.2, and his employment hereunder, Employee
agrees that, for a period of two (2) years from termination of
employment, Employee will not:
(a) Contact, with a view towards selling any product or
service competitive with any product or service sold by
the Company at the time of the termination of Employee's
employment with the Company (or within the preceding
three years), or sell any such product or service to,
any person, firm, association or corporation
(1) to which the Company sold any product or service
during the 24 months immediately preceding the
termination of Employee's employment with the
Company; or
(2) which Employee solicited, contacted or otherwise
dealt with on behalf of the Company during the 24
months immediately preceding the termination of
Employee's employment with the Company;
(b) Make any such contact or sale either for the benefit of
himself or for the benefit of any person, firm,
association or corporation;
(c) In any manner, directly or indirectly, assist any
person, firm, association or corporation to make any
such contact or sale;
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(d) Participate, engage or be interested, directly or
indirectly, whether as director, officer, employee,
advisor, consultant, stockbroker, partner, joint
venture, owner, agent or in any other capacity, in any
business, in whole or in part, in the nature of or
competitive with the business of the Company in any
geographic territory served by the Company at the time
of termination of Employee's employment with the
Company; or
(e) Directly or indirectly, employ or solicit for employment
(by any person, firm, association or corporation other
than the Company), or engage in any manner any employees
of the Company, without the prior written consent of the
Company.
The Company agrees to furnish to Employee a reasonable listing
of competitors and customers within 90 days of termination.
6.4 Employee acknowledges that the restrictions contained in this
Section 6 are reasonable in view of the nature of the business
in which the Company is engaged, Employee's critical role in
the Company's operations and Employee's detailed knowledge of
the Company's Confidential Information, its business,
customers, employees and suppliers and that such restrictions
will not prevent Employee from earning a livelihood hereafter.
6.5 The parties acknowledge that any breach of this Section 6 will
cause the Company irreparable harm for which the Company will
have no adequate remedy at law. As a result, the Company will
be entitled to the issuance by an arbitrator or court of
competent jurisdiction of an injunction, restraining order or
other equitable relief prohibiting Employee from committing or
continuing any such violation. Any right to obtain an
injunction, restraining order or other equitable relief
hereunder will not be deemed a waiver of any right to assert
any other remedy the Company may have under this Agreement or
otherwise at law or in equity. The obligations of Employee
pursuant to this Section 6 shall survive any termination of
this Agreement.
7. OTHER OBLIGATIONS
Employee represents and warrants to the Company that he is not now
under any obligation to any person, firm, corporation or other entity,
and has no other interest which is known to be in conflict with his
duties and obligations, and the terms and conditions of which would
prevent, limit or impair in any way the performance by him of any of
the covenants or duties set forth herein.
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8. NOTICES
All notices which either party hereto is required or permitted to give
to the other will be given by certified mail or by personal delivery.
The certified date of receipt of any such notice will deemed to be the
date of delivery thereof.
9. WAIVERS
No waiver by either party of any breach of nonperformance of any
provision or obligation of this Agreement shall be deemed to a waiver
of any preceding or succeeding breach of the same or any other
provision of this Agreement.
10. ENTIRE AGREEMENT
This Agreement constitutes the entire agreement between the parties and
there are no representations, warranties, covenants or obligations
except as set forth herein. This Agreement supersedes all prior and,
contemporaneous agreements, understandings, negotiations and
discussions, written or oral, between the parties hereto, relating to
any transaction contemplated by the Agreement.
11. AMENDMENTS
This Agreement may be amended only in writing executed by the parties
hereto.
12. RECITALS; ENUMERATION AND HEADINGS
The enumeration and headings contained in this Agreement are for
convenience of reference only and are not intended to have any
substantive significance in interpreting this Agreement.
13. GENDER AND NUMBER
Unless the context otherwise requires, whenever used in this Agreement
the singular shall include the plural, the plural shall include the
singular, and the masculine gender shall include the neuter or feminine
gender and vice versa.
14. COMPUTATION OF TIME
Whenever any determination is to be made or action to be taken on a
date specified in this Agreement, if such date shall fall upon a
Saturday, Sunday or a legal holiday, the date for such determination or
action shall be extended to the first business day immediately
thereafter.
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15. COUNTERPARTS
This Agreement may be executed in any number of counterparts and by the
different parties hereto on separate counterpart each of which when so
executed and delivered shall be an original document, but all of which
counterparts shall together constitute one and the same instrument.
This Agreement shall not be effective unless and until executed by all
parties hereto.
16 NONASSIGNABILITY
This Agreement and the benefits hereunder are personal to Employee and
are not assignable or transferable by Employee to any person, firm or
corporation. The Company may only assign this Agreement and the
benefits hereunder to an affiliated person, firm or corporation.
17. MISCELLANEOUS
Should any of the provisions of this Agreement require judicial
interpretation, it is agreed that the court or arbitrator interpreting
or construing the Agreement shall not apply a presumption that any
provision shall be more strictly construed against one party by reason
of the rule of construction, that a document is to be construed more
strictly against the party who itself or through its agents prepared
the same, it being agreed that both parties and their respective agents
have participated in the preparation of this Agreement,.
18. PARTIAL INVALIDITY
If any provision of this Agreement shall for any reason be held invalid
or unenforceable by any court, governmental agency or arbitrator of
competent jurisdiction, such invalidity or unenforceability shall be
construed as if such invalid or unenforceable provision had never been
contained herein.
19. GOVERNING LAWS
This Agreement shall be governed by and construed in accordance with
the laws of the Commonwealth of Pennsylvania.
20. ARBITRATION
With the exception of the exercise by the Company of its injunctive
rights hereunder, all disputes arising under the agreement shall be
submitted to binding arbitration in, Pittsburgh, Pennsylvania, to a
single arbitrator chosen in accordance with the rules of the American
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Arbitration Association as to the selection of the arbitrators and the
procedures for the conduct of the arbitrator. Such arbitrator's
decision shall be final and binding upon the parties, and shall be
entitled to enforcement in any court of competent jurisdiction. The
costs and expenses of the arbitrator shall be shared equally by the
parties.
IN WITNESS WHEREOF, the parties have Agreement as of the day and year first
above written.
BY:________________________________ DATE:____________
Xxxxxxx X. Xxxx
By: MK RAIL CORPORATION
BY:________________________________ DATE:____________
Xxxx X. Xxxx
Its Chairman
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MK RAIL CORPORATION
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STOCK APPRECIATION RIGHT AGREEMENT
This Stock Appreciation Right Agreement ("Agreement") dated as of July
1, 1996 is entered into between MK Rail Corporation ("Company") and Xxxxxxx X.
Xxxx (the "Holder").
THE PARTIES HERETO AGREE AS FOLLOWS:
1. Grant of Stock Appreciation Right. In consideration of the Holder's
acceptance of employment as President and Chief Executive Officer of the
Company, effective as of July 1, 1996, the Company hereby grants to the Holder a
Stock Appreciation Right ("Right") as to 400,000 Shares of the Company's common
stock, $0.01 par value ("Shares" or "Common Stock"), all upon the terms and
conditions hereinafter set forth.
(a) Upon exercise of the Right, the Company shall pay to the
Holder, in cash or Shares at the sole and absolute discretion of the Committee
(as hereinafter defined), the Settlement Price (as hereinafter defined), less
any tax withheld as provided in paragraph 4 hereof. Subject to the provisions of
2(d) hereof, the Settlement Price for each Share exercised shall be equal to the
amount determined by the difference of (i) the greater of (A) any tender or
exchange offer price per Share in connection with any tender offer or merger or
consolidation of the Company with another Company, or (B) the closing price of
the Shares as reported on Nasdaq as of the trading day last ended as of the time
the Right is exercised, over (ii) $5.25 per Share, the closing price of the
Shares as reported on Nasdaq on May 13, 1996, the date upon which the parties
hereto agreed to the granting of the Right as part of the compensation
arrangement to be offered to the Holder upon his acceptance of employment as the
Company's President and Chief Executive Officer.
(b) The Right shall terminate on May 12, 2006, unless earlier
terminated as provided in this Agreement.
2. Exercise Rights.
The Holder's exercise of the Right shall be subject to the
following additional conditions and limitations:
(a) Subject to 100% of the Right becoming earlier exercisable
as provided in paragraph 2(b), (c) or (d) hereof, the Right shall become
exercisable in 20 percent increments,
1.
with the first 20 percent increment exercisable on or after July 1, 1997 and
each remaining 20 percent increment exercisable on or after July 1, 1998, July
1, 1999, July 1, 2000 and July 1, 2001, respectively, provided that the Holder
has not voluntarily terminated his employment with the Company before any of
those dates. Vesting under this Section 2(a) terminates once the Holder
voluntarily terminates his employment with the Company.
(b) Except as otherwise provided in paragraph 2(c) or (d), (i)
if the Company terminates Holder's employment with the Company for any reason
other than Cause (as that term is defined in paragraph 4.2 of the Employment
Agreement between the Company and the Holder dated as of July 1, 1996
("Employment Agreement")), 100% of the Right shall become immediately
exercisable and will continue to be exercisable by the Holder or his
beneficiaries or legal representatives until the later to occur of (A) the date
three months after the termination or (B) the January 15th next following the
termination; (ii) if the Holder's employment with the Company is terminated due
to his death or disability, 100% of the Right shall become immediately
exercisable and will continue to be exercisable by the Holder or his
beneficiaries or legal representatives until one year after the date of
termination; (iii) if the Holder's employment with the Company shall be
terminated by the Company for Cause, vesting shall cease and the Right shall
immediately cease to be exercisable; and (iv) if the Holder's employment is
terminated for any reason other than those set forth in Paragraphs 2(b)(i), (ii)
or (iii), vesting shall cease, and any then vested and exercisable portion of
the Right will continue to be exercisable by the Holder until the later to occur
of (A) the date three months after the termination or (B) the January 15th next
following the termination.
(c) Notwithstanding anything to the contrary set forth herein,
in the event that (1) the Company shall propose to enter into an arrangement or
a transaction which shall constitute or result in a Change of Control (as
defined under Section 5.3(a) of the Employment Agreement), and (2) the Holder
proposes to exercise the Right on or before July 1, 1997 and, prior to the
exercise of the Right, either the Holder or the Company shall terminate or be
deemed to have terminated the Holder's employment with the Company (including a
termination of Holder's employment by the Company for Cause), then the Right
shall become immediately exercisable, on a provisional basis, as to any shares
as to which the Right had not previously become exercisable as provided above
(the "Provisional Shares") from the date ten (10) business days prior to the
scheduled date of the Change of Control until the time immediately prior to the
occurrence thereof; provided, however that (i) if made by the Holder, the
exercise of the Right as to any Provisional Shares shall be deemed to occur
immediately prior to the time of the Change of Control (and shall be ineffective
if the Change of Control does not occur); and (ii) if the Company announces that
it does not intend to proceed with any previously proposed arrangement or
transaction which would constitute or result in a Change of Control, the Right
shall thereupon cease to be immediately exercisable as to any Provisional Shares
(and the Holder's prior election to exercise the Right shall be deemed to be
withdrawn), but shall again become immediately exercisable on a provisional
basis as described above if the arrangement or transaction or another
arrangement or transaction which would constitute or result in a Change of
Control is thereafter
2.
proposed to be consummated. The Right shall terminate upon the occurrence of a
Change of Control.
(d) Notwithstanding anything to the contrary set forth herein, in the
event that (i) the Shareholders of the Company approve an increase in the number
of Shares which may be awarded under the Company's Stock Incentive Plan
effective April 1, 1994 (the "Plan"), which increase is sufficient to enable the
Company to issue to Holder the Plan Option (as hereinafter defined) to purchase
400,000 shares of the Common Stock, and (ii) the Company issues to the Holder
within sixty (60) days after such approval an option under the Plan (the "Plan
Option") to purchase 400,000 shares of the Common Stock for an exercise price
equal to the closing price of the Common Stock as reported on Nasdaq on the
first trading day ended following the Shareholders' approval of an increase in
the number of Shares which may be awarded under the Plan, all on such terms as
are set in an option agreement in the form attached hereto as Exhibit 1, the
Settlement Price of the Right shall be the lesser of (i) the exercise price of
the Plan Option over $5.25 per Share or (ii) the Settlement Price determined as
provided in paragraph 1(a). The Right shall be exercisable independently of the
Plan Option, and shall survive the earlier exercise of the Plan Option.
3. The Committee.
The plan created by this Agreement shall be administered by a
committee (the "Committee"), which shall be comprised of two or more members of
the Board of Directors, each of whom shall be a "disinterested person" as
defined in Rule 16b-3 under the Exchange Act (or any successor provision)
promulgated by the Securities and Exchange Commission. A majority of the members
of the Committee shall constitute a quorum for the transaction of business, and
any determination or action may be taken at a meeting by a majority vote or may
be taken without a meeting by a written resolution signed by all members of the
Committee. Members of the Committee acting under the plan created by this
Agreement shall be fully protected in relying in good faith upon the advice of
counsel and shall incur no liability except for willful misconduct in the
performance of their duties.
4. Taxes.
Neither the Company nor the Committee nor any of their
representatives or agents has made any representations or warranties to the
Holder with respect to the amount of tax or other consequences of the
transactions contemplated by this Agreement, and the Holder is in no manner
relying on the Company, the Committee or any of their representatives or agents
for an assessment of the tax or other consequences. The Company's payment of the
Settlement Price shall be subject to the Company's obligation to withhold taxes
in accordance with its interpretation of applicable Federal and state tax laws.
3.
5. Miscellaneous.
(a) The Right may not be assigned, encumbered or transferred,
except, in the event of death of the Holder, by will or the laws of descent and
distribution.
(b) This Agreement shall bind and inure to the benefit of the
Company and its successors and assigns, and the Holder and any heir, legatee, or
legal representative of the Holder.
(c) This Agreement shall be governed by and construed in
accordance with the law of the state of Delaware, regardless of the law that
might otherwise govern under applicable principles of conflicts of laws.
(d) All disputes arising under this Agreement, including any
questions regarding the interpretation of any provisions hereof, shall be
submitted to binding arbitration in Pittsburgh, Pennsylvania, to a single
arbitrator chosen in accordance with the rules of the American Arbitration
Association as to the selection of the arbitrators and the procedures for the
conduct of the arbitrator. Such arbitrator's decision shall be final and binding
upon the parties, and shall be entitled to enforcement in any court of competent
jurisdiction. The costs and expenses of the arbitrator shall be shared equally
by the parties.
IN WITNESS WHEREOF, the parties have executed this Agreement in
duplicate as of the day and year first above written.
MK RAIL CORPORATION
---------------------------------
Xxxx X. Xxxx
Chairman
HOLDER:
---------------------------------
Xxxxxxx X. Xxxx
4.
EXHIBIT 1
MK RAIL CORPORATION
-----------
STOCK OPTION AGREEMENT
UNDER STOCK INCENTIVE PLAN
This Stock Option Agreement ("Agreement") dated and effective as of
____[the date of the Shareholders' approval of an increase in the number of
Shares which may be awarded under the Plan], the date on which the Option
evidenced hereby was granted, is entered into between MK Rail Corporation
("Company") and Xxxxxxx X. Xxxx (the "Optionee"), pursuant to the MK Rail
Corporation Stock Incentive Plan ("Plan") as approved by Company shareholders on
March 29, 1994 and last amended on the date hereof.
THE PARTIES HERETO AGREE AS FOLLOWS:
1. Grant of Option
In consideration of the Optionee's acceptance of employment as
President and Chief Executive Officer of the Company, effective as of July 1,
1996 and the services performed or to be performed by the Optionee the Company
hereby grants to the Optionee an Option ("Option") under the Plan to purchase a
total of 400,000 Shares of the Company's common stock, $0.01 par value ("Shares"
or "Common Stock"), all upon the terms and conditions hereinafter set forth.
(a) The Option is granted under and pursuant to the Plan, a
copy of which is attached hereto and incorporated herein by reference, and,
except as modified or limited hereby, is subject to all of the provisions
thereof. The Optionee represents and warrants that he has read the Plan and is
fully familiar with all the terms and conditions of the Plan and agrees to be
bound thereby.
(b) The Exercise Price per share of the Common Stock
exercisable under the Option shall be $___ per share [the closing price of the
Common Stock as reported on Nasdaq on the first trading day ended following the
Shareholders' approval of an increase in the number of Shares which may be
awarded under the Plan].
(c) The Option shall terminate on May 12, 2006, unless earlier
terminated as provided in this Agreement.
1.
2. Exercise Rights
In addition to the terms and conditions for exercise of the
Option set forth in the Plan, the Optionee's right to exercise the Option shall
be subject to the following additional conditions and limitations:
(a) Subject to 100% of the Option becoming earlier exercisable
as provided in paragraph 2(b) or (c) hereof, the Option shall become exercisable
in 20 percent increments, with the first 20 percent increment exercisable on or
after July 1, 1997 and each remaining 20 percent increment exercisable on or
after July 1, 1998, July 1, 1999, July 1, 2000 and July 1, 2001, respectively,
provided that the Optionee has not voluntarily terminated his employment with
the Company before any of those dates. Vesting under this Section 2(a)
terminates once the Optionee voluntarily terminates his employment with the
Company.
(b) Except as otherwise provided in paragraph 2(c) hereof, (i)
if the Company terminates Optionee's employment with the Company for any reason
other than Cause (as that term is defined in paragraph 4.2 of the Employment
Agreement between the Company and the Optionee dated as of July 1, 1996
("Employment Agreement")), 100% of the Option shall become immediately
exercisable and will continue to be exercisable by the Optionee or his
beneficiaries or legal representatives until the later to occur of (A) the date
three months after the termination or (B) the January 15th next following the
termination; (ii) if the Optionee's employment with the Company is terminated
due to his death or disability, 100% of the Option shall become immediately
exercisable and will continue to be exercisable by the Optionee or his
beneficiaries or legal representatives until one year after the date of
termination; (iii) if the Optionee's employment with the Company shall be
terminated by the Company for Cause, vesting shall cease and the Option shall
immediately cease to be exercisable; and (iv) if the Optionee's employment is
terminated for any reason other than those set forth in Paragraphs 2(b)(i), (ii)
and (iii), vesting shall cease, and any then vested and exercisable portion of
the Option will continue to be exercisable by the Optionee until the later to
occur of (A) the date three months after the termination or (B) the January 15th
next following the termination.
(c) Notwithstanding anything to the contrary set forth herein,
in the event that (1) the Company shall propose to enter into an arrangement or
a transaction which shall constitute or result in a Change of Control (as
defined under Section 5.3(a) of the Employment Agreement), and (2) the Optionee
proposes to exercise the Option on or before July 1, 1997 and, prior to the
exercise of the Option, either the Optionee or the Company shall terminate or be
deemed to have terminated the Optionee's employment with the Company (including
a termination of Optionee's employment by the Company for Cause), then the
Option shall become immediately exercisable, on a provisional basis, as to any
shares as to which the Option had not previously become exercisable as provided
above (the "Provisional Shares") from the date ten (10) business days prior to
the scheduled date of the Change of Control until the time immediately prior to
the occurrence thereof; provided, however that (i) if made by the Optionee, the
exercise of the Option as to any Provisional Shares shall be deemed to occur
immediately prior to the time of the Change of Control (and shall be ineffective
if the Change of Control does not occur); and (ii) if the Company announces that
it does not intend to
2.
proceed with any previously proposed arrangement or transaction which would
constitute or result in a Change of Control, the Option shall thereupon cease to
be immediately exercisable as to any Provisional Shares (and the Optionee's
prior election to exercise the Option shall be deemed to be withdrawn), but
shall again become immediately exercisable on a provisional basis as described
above if the arrangement or transaction or another arrangement or transaction
which would constitute or result in a Change of Control is thereafter proposed
to be consummated. The Option shall terminate upon the occurrence of a Change of
Control.
(d) The Option shall be exercisable independently of the Stock
Appreciation Right (the "Right") granted to the Optionee under that certain
Stock Appreciation Right Agreement dated as of July 1, 1996 between the Company
and Optionee, and shall survive the earlier exercise of the Right.
3. Taxes
Neither the Company nor the Committee nor any of their
representatives or agents has made any representations or warranties to the
Optionee with respect to the amount of tax or other consequences of the
transactions contemplated by this Agreement, and the Optionee is in no manner
relying on the Company, the Committee or any of their representatives or agents
for an assessment of the tax or other consequences. The Company's payment of the
Settlement Price shall be subject to the Company's obligation to withhold taxes
in accordance with its interpretation of applicable Federal and state tax laws.
4. Miscellaneous
(a) The Option may not be assigned, encumbered or transferred,
except, in the event of death of the Optionee, by will or the laws of descent
and distribution.
(b) This Agreement shall bind and inure to the benefit of the
Company and its successors and assigns, and the Optionee and any heir, legatee,
or legal representative of the Optionee.
(c) This Agreement shall be governed by and construed in
accordance with the law of the state of Delaware, regardless of the law that
might otherwise govern under applicable principles of conflicts of laws.
3.
IN WITNESS WHEREOF, the parties have executed this Agreement in
duplicate as of the day and year first above written.
MK RAIL CORPORATION
---------------------------------
Xxxx X. Xxxx
Chairman
OPTIONEE:
---------------------------------
Xxxxxxx X. Xxxx
4.
EXHIBIT B
MK RAIL CORPORATION
DEFERRED COMPENSATION PLAN
FOR XXXXXXX X. XXXX
Effective July 1, 1996
TABLE OF CONTENTS
Page
ARTICLE I PURPOSE AND BACKGROUND.....................................1
----------------------
ARTICLE 11 DEFINITIONS................................................1
-----------
2.1 Account.............................................1
-------
2.2 Administrative Committee............................1
------------------------
2.3 Beneficiary.........................................2
-----------
2.4 Cause...............................................2
-----
2.5 Code................................................2
----
2.6 Compensation........................................2
------------
2.7 Compensation Committee..............................2
----------------------
2.8 Deferral Commitment.................................2
-------------------
2.9 Deferral Period.....................................2
---------------
2.10 Determination Date..................................3
------------------
2.11 Earnings Index......................................3
--------------
2.12 Elective Deferred Compensation ...3
------------------------------
2.13 Employer .......................................3
--------
2.14 ERISA...............................................3
-----
2.15 Financial...........................................3
---------
2.16 Participant.........................................3
-----------
2.17 Participation Agreement.............................3
-----------------------
2.18 Plan Benefit........................................4
------------
2.19 Rate of Return......................................4
--------------
2.20 SARs................................................4
----
ARTICLE III PARTICIPATION AND DEFERRAL COMMITMENTS.....................4
--------------------------------------
3.1 Eligibility and Participation.......................4
-----------------------------
3.2 Form of Deferral....................................4
----------------
3.3 Limitations on Deferral Commitment..................5
----------------------------------
3.4 Modification of Deferral Commitment................5
-----------------------------------
ARTICLE IV DEFERRED COMPENSATION ACCOUNT..............................5
-----------------------------
4.1 Account.............................................5
-------
4.2 Elective Deferred Compensation......................6
------------------------------
4.3 Allocation of Elective Deferred Compensation........6
--------------------------------------------
4.4 Makeup Contributions................................6
--------------------
4.5 Employer Discretionary Contributions................7
------------------------------------
4.6 Rate of Return......................................7
--------------
4.7 Determination of Account............................7
------------------------
Page
4.8 Vesting of Account..................................7
------------------
4.9 Statement of Account................................8
--------------------
ARTICLE V PLAN BENEFITS..............................................8
-------------
5.1 Distributions Prior to Termination of Employment....8
------------------------------------------------
5.2 Distributions Following Termination of Employment...9
-------------------------------------------------
5.3 Form of Benefit Payment Following Termination
of Employment......................................10
-------------
5.4 Commencement of Deferral Payment...................10
--------------------------------
5.5 Death Benefit......................................11
-------------
5.6 Accelerated Distribution...........................11
------------------------
5.7 Withholding for Taxes..............................12
---------------------
5.8 Valuation and Settlement ....................12
------------------------
5.9 Payment to Guardian................................12
-------------------
ARTICLE VI BENEFICIARY DESIGNATION...................................13
-----------------------
6.1 Beneficiary Designation............................13
-----------------------
6.2 Changing Beneficiary...............................13
--------------------
6.3 Community Property.................................13
------------------
6.4 No Beneficiary Designation.........................14
--------------------------
ARTICLE VII ADMINISTRATION............................................15
--------------
7.1 Committee: Duties..................................15
-----------------
7.2 Agents.............................................15
------
7.3 Binding Effect of Decisions........................15
---------------------------
7.4 Indemnity of Administrative Committee ..15
-------------------------------------
ARTICLE VII CLAIMS PROCEDURE..........................................16
----------------
8.1 Claim..............................................16
-----
8.2 Review of Claim....................................16
---------------
8.3 Notice of Denial of Claim..........................16
-------------------------
8.4 Reconsideration of Denied Claim....................17
-------------------------------
8.5 Arbitration........................................18
-----------
8.6 Employer to Supply Information.....................18
------------------------------
ARTICLE IX AMENDMENT AND TERMINATION OF PLAN.........................18
---------------------------------
9.1 Amendment..........................................18
---------
9.2 Termination........................................19
-----------
Page
ARTICLE X MISCELLANEOUS.............................................20
-------------
10.1 Unfunded Plan......................................20
-------------
10.2 Unsecured General Creditor.........................20
--------------------------
10.3 Trust Fund.........................................21
----------
10.4 Nonassignability...................................21
----------------
10.5 Not a Contract of EDI..............................21
---------------------
10.6 Protective Provisions..............................21
---------------------
10.7 Governing Law......................................22
-------------
10.8 Validity...........................................22
--------
10.9 Notice.............................................22
------
10.10 Successors.........................................22
----------
SIGNATURE PAGE...........................................................23
MK RAIL CORPORATION
DEFERRED COMPENSATION PLAN
FOR XXXXXXX X. XXXX
-----------------------------------------------------
ARTICLE I
PURPOSE AND BACKGROUND
The purpose of this Deferred Compensation Plan (the "Plan") is to
provide current tax planning opportunities as well as supplemental funds for the
retirement or death of Xxxxxxx X. Xxxx, the President and CEO of MK Rail
Corporation ("Company"). The Plan shall be effective as of July 1, 1996
("Effective Date").
ARTICLE II
DEFINITIONS
For the purposes of the Plan, the following terms shall have the
meanings indicated, unless the context clearly indicates otherwise.
2.1 Account. "Account" means the Account as maintained by the
Employer in accordance with Article IV with respect to any deferral of
Compensation pursuant to the Plan. The Participant's Account shall be utilized
solely as a device for the determination and measurement of the amounts to be
paid to the Participant pursuant to the Plan. Separate subaccounts shall be
maintained to properly reflect the Participant's balance and earnings thereon.
The Participant's Account shall not constitute or be treated as a trust fund of
any kind.
2.2 Administrative Committee. "Administrative Committee" means
the committee appointed to administer the employee benefit plans of the Company.
2.3 Beneficiary. "Beneficiary" means the person, persons or
entity entitled under Article VI to receive any Plan Benefits payable after the
Participant's death.
2.4 Cause. "Cause" is defined as provided in the Participant's
Employment Agreement.
2.5 Code. "Code" means the Internal Revenue Code of 1986, as
amended.
2.6 Compensation. "Compensation" means the salary and all
bonuses payable to the Participant during the calendar year and considered to be
"wages" for purposes of federal income tax withholding, before reduction for
amounts deferred under the Plan, salary reduction contributions under Section
401 (k) of the Code, or any other deferral arrangements. For purposes of the
Plan, the term "bonus" includes cash payments made to the Participant upon the
exercise of SARS. Compensation does not include expense reimbursements, any form
of noncash Compensation or benefits, group life insurance premiums, or any other
payments or benefits other than salary or bonuses (as described above).
2.7 Compensation Committee. "Compensation Committee" means the
Compensation Committee of the Employer's Board of Directors.
2.8 Deferral Commitment. "Deferral Commitment" means an
election to defer Compensation made by the Participant pursuant to Article III
and for which a separate Participation Agreement has been submitted by the
Participant to the Administrative Committee.
2.9 Deferral Period. "Deferral Period" means the period over
which the Participant has elected to defer a portion of his Compensation. Each
calendar year shall be a separate Deferral Period, provided that the Deferral
Period may be modified pursuant to Section 3.4. The initial Deferral Period
shall be from July 1, 1996 through December 31, 1996.
2.10 Determination Date. "Determination Date" means the last
day of each calendar month.
2.
2.11 Earnings Index. "Earnings Index" means a portfolio or
fund selected by the Participant to be used in calculating the Rate of Return.
The portfolio may include stocks, bonds and other types of securities that are
traded on a national securities exchange. Employer shall have no responsibility
for the Earnings Indices selected by the Participant.
2.12 Elective Deferred Compensation. "Elective Deferred
Compensation" means the amount of Compensation that the Participant elects to
defer pursuant to a Deferral Commitment.
2.13 Employer. "Employer" means MK Rail Corporation or any
successor to the business thereof.
2.14 ERISA. "ERISA" means the Employee Retirement Income
Security Act of 1974, as amended.
2.15 Financial Hardship. "Financial Hardship" means an
unanticipated emergency that is caused by an event beyond the control of the
Participant that would result in severe financial hardship if an early
withdrawal from the Plan were not permitted.
2.16 Participant. "Participant" means Xxxxxxx X. Xxxx, the
President and CEO of the Employer.
2.17 Participation Agreement. "Participation Agreement" means
the agreement submitted by the Participant to the Administrative Committee prior
to the beginning of the Deferral Period, with respect to a Deferral Commitment
made for such Deferral Period.
2.18 Plan Benefit. "Plan Benefit" means the benefit payable to
the Participant as calculated in Article V.
3.
2.19 Rate of Return. "Rate of Return" means the amount
credited to the Participant's Account under Section 4.6 to be determined by the
Administrative Committee based upon the net performance of the Earnings Indices
selected by the Participant. If the Employer elects, in its sole discretion, to
make investments that correspond to the Earnings Indices periodically elected by
the Participant, the Rate of Return shall be determined after subtracting any
transaction costs (e.g., commissions).
2.20 SARS. "SARS" means stock appreciation rights provided by
the Employer to the Participant.
ARTICLE III
PARTICIPATION AND DEFERRAL COMMITMENTS
3.1 Eligibility and Participation. Xxxxxxx X. Xxxx, the
President and CEO of the Employer, shall be the only Participant. His
participation begins as of July 1, 1996.
3.2 Form of Deferral. The Participant may elect Deferral
Commitments in the Participation Agreement as follows:
(a) Salary Deferral Commitment. A salary Deferral
Commitment shall apply to the salary payable by the Employer
to the Participant during the Deferral Period. The amount to
be deferred shall be stated as a percentage or dollar
amount.
(b) Bonus Deferral Commitment. A bonus Deferral
Commitment shall apply to the bonus Compensation payable to
the Participant during the Deferral Period. If the bonus is
cash payable upon the exercise of SARS, the Deferral
Commitment shall apply to SARs that are exercised during the
Deferral Period. The amount to be deferred shall be stated
as a percentage or dollar amount.
4.
3.3 Limitations on Deferral Commitment. The following
limitations shall apply to Deferral Commitments:
(a) Minimum. The minimum salary deferral amount shall
be one hundred dollars ($100) for each pay period. There shall be no
minimum deferral amount for bonus in a bonus Deferral Commitment.
(b) Maximum. The maximum deferral amount shall be
fifty percent (50%) of salary in a salary Deferral Commitment and one
hundred percent (1 00%) of bonus in a bonus Deferral Commitment.
3.4 Modification of Deferral Commitment. A Deferral Commitment
shall be irrevocable except that the Administrative Committee may permit the
Participant to reduce the amount to be deferred, or waive the remainder of the
Deferral Commitment, upon a finding that the Participant has suffered a
Financial Hardship.
ARTICLE IV
DEFERRED COMPENSATION ACCOUNT
4.1 Account. For record keeping purposes only, an Account
shall be maintained for the Participant. Separate subaccounts shall be
maintained to the extent necessary to properly reflect the Participant's
election of Earnings Indices and total vested or nonvested Account balance.
4.2 Elective Deferred Compensation. The Participant's Elective
Deferred Compensation shall be credited to the Participant's Account as the
corresponding nondeferred portion of the Compensation becomes or would have
become payable. Any withholding of taxes
5.
or other amounts with respect to deferred Compensation which is required by
state, federal or local law shall be withheld from the Participant's nondeferred
Compensation to the maximum extent possible with any excess being withheld from
the Participant's Account.
4.3 Allocation of Elective Deferred Compensation. The
Participant shall allocate the Account among the Earning Indices. The initial
allocation shall be made in the Participation Agreement. If the Participant has
not made an allocation election, the Participant's Account shall be allocated to
a money market or equivalent Earnings Index. The Participant may change his
allocation among the Earning Indices as of the first day of each month by prior
notice to the Administrative Committee.
The Employer shall be under no obligation to make investments
that correspond to the Earnings Indices elected by the Participant, even though
the Participant's elections are used to determine the Rate of Return.
4.4 Makeup Contributions.
(a) The Participant shall receive a makeup
contribution equal to two percent (2%) of the Participant's
Compensation, less the matching contribution to the 401 (k) plan
required to be allocated to Employer stock. The Participant is not
required to defer any amounts into the Plan in order to receive a
makeup contribution under this subsection.
(b) If the Participant defers into the Employer's 401
(k) plan an amount equal to the limit as set forth in Section 402(g) of
the Code, the Participant shall receive an additional makeup
contribution equal to fifty percent (50%) of the first six percent (6%)
deferred into the 401 (k) plan and the Plan. This makeup amount shall
be reduced by the
6.
matching contribution to the 401 (k) plan which is directed by the
Participant. This makeup contribution shall be allocated as elected by
the Participant.
The total Employer contribution under this Section may never
exceed five percent (5%) of Compensation. All makeups under this Section shall
be credited to the Participant's Account no later than forty-five (45) days
after the end of the calendar year they would have been credited to the
underlying qualified plans if not for the limitations contained in the Code.
4.5 Employer Discretionary Contributions. The Employer may
make Discretionary Contributions to the Participant's Account. Discretionary
Contributions shall be credited at such times and in such amounts as the
Administrative Committee in its sole discretion shall determine. The amount of
the Discretionary Contributions shall be evident in a special Participation
Agreement approved by the Administrative Committee.
4.6 Rate of Return. The Participant's Account shall be
credited monthly with the Rate of Return specified in Section 2.19.
4.7 Determination of Account. The Participant's Account as of
each Determination Date shall consist of the balance of the Participant's
Account as of the immediately preceding Determination Date, plus the
Participant's Elective Deferred Compensation credited, any makeup contributions
and the applicable Rate of Return., minus the amount of any distributions made
since the immediately preceding Determination Date.
4.8 Vesting of Account. The Participant shall be vested in the
amounts credited to the Participant's Account and earnings thereon as follows:
7.
(a) Amounts Deferred. The Participant shall be one hundred
percent (100%) vested at all times in the amount of Compensation elected to be
deferred under the Plan and Rate of Return thereon.
(b) Employer Makeups. The Employer makeups contributed to the
Participant's Account, and Rate of Return thereon, shall be vested to the same
extent that contribution in the underlying qualified plans are vested.
(c) Employer Discretionary Contributions. The Employer
Discretionary Contributions and Rate of Return thereon shall be vested as set
forth in the special Participation Agreement.
4.9 Statement of Account. The Administrative Committee shall
submit to the Participant, within one hundred twenty (1 20) days after the close
of each calendar year, or at such other time as determined by the Administrative
Committee, a statement setting forth the balance to the credit of the
Participant's Account.
ARTICLE V
PLAN BENEFITS
5.1 Distributions Prior to Termination of Employment. The
Participant's Account may be distributed to the Participant prior to termination
of employment with the Employer as follows:
(a) Early Withdrawals. The Participant may elect in a
Participation Agreement to withdraw all or any portion of
the amount deferred by that Participation Agreement as of a
date specified in the election. Such date shall not be
sooner than seven (7) years after the date the Deferral
Period commences. The amount withdrawn shall not
8.
exceed the amount of Compensation deferred, without
earnings, and shall not include any makeup contribution.
Such election shall be made at the time the Deferral
Commitment is made and shall be irrevocable.
(b) Hardship Withdrawals. Upon a finding that the
Participant has suffered a Financial Hardship, the
Administrative Committee may, in its sole discretion, make
distributions from the Participant's Account. The amount of
such a withdrawal shall be limited to the amount reasonably
necessary to meet the Participant's needs resulting from the
Financial Hardship. If payment is made due to Financial
Hardship under the Plan, the Participant's deferrals under
the Plan shall cease for a twelve (12) month period. Any
resumption of the Participant's deferrals under the Plan
after such twelve (12) month period shall be made only at
the election of the Participant in accordance with Article
III herein.
(c) Form of Payment and Time. Any distribution pursuant
to Sections 5.1(a) or 5.1 (b) shall be payable in a lump
sum. The distribution shall be paid in the case of a partial
withdrawal, as provided in the Participation Agreement, and
in case of a Financial Hardship, within thirty (30) days
after the Administrative Committee approves the Financial
Hardship.
5.2 Distributions Following Termination of Employment. Upon
the Participant's termination of employment with the Employer for any reason
(which termination shall be for a period of at least five (5) days), the
Employer shall pay the Participant or, in the case of death, the Participant's
Beneficiary, benefits equal to the vested balance in the Participant's Account.
9.
5.3 Form of Benefit Payment Following Termination of
Employment.
(a) Subject to Section 5.3(b), benefits shall be paid
in the form selected by the Participant in the Participation
Agreement. Options include:
(i) A lump sum payment.
(ii) Equal annual installments of the Account and Rate
of Return amortized over a period of five (5), ten (1 0), or
fifteen (1 5) years. The Account shall be amortized with an
assumed Rate of Return of seven percent (7%) unless the
Participant selects, and the Administrative Committee
approves, an alternative assumed Rate of Return. The Account
shall be reamortized annually based upon the actual Rate of
Return.
(b) Small Account(s). Notwithstanding Section 5.3(a),
if the Partici pant's Account is less than fifty thousand
dollars ($50,000) on the date of termination, the
benefit shall be paid in a lump sum.
5.4 Commencement of Deferral Payment.
(a) Subject to Section 5.4(b), benefits that are
payable upon the Participant's termination of employment
with the Employer shall commence as elected by the
Participant in the Participation Agreement. Options are:
(i) Payments to commence as soon as practical after
termination but in no case more than sixty (60) days after
termination.
(ii) Payment to commence as soon as practical in the
calendar year following termination but in no case more than
ninety (90) days after the beginning of the calendar year.
10.
(iii) Payments to commence as soon as practical in the
calendar year following the later of the Participant's
termination or attainment of an age selected by the
Participant which shall not exceed age sixty-five (65). If
the Participant has selected this option and has an Account
balance less than fifty thousand dollars ($50,000) at
termination, the benefit shall commence as if the
Participant had selected Section 5.4(a)(ii) above.
(b) Notwithstanding Section 5.4(a), if the Participant is a
"covered employee" as defined in Section 162(m)(3) of the Code, the
Participant shall receive his first benefit payment as if the
Participant had elected option Section 5.4(a)(ii) above, unless the
Participant has elected Section 5.4(a)(iii) above and such
commencement date is after the date payable under Section 5.4(a)(ii).
5.5 Death Benefit. Upon the death of the Participant, the Employer shall I
pay to the Participant's Beneficiary an amount equal to the remaining unpaid
balance of the Participant's Account in a lump sum.
5.6 Accelerated Distribution. Notwithstanding any other provision of the
Plan, at any time the Participant shall be entitled to receive, upon written
request to the Administrative Committee, a lump sum distribution equal to ninety
percent (90%) of the vested Account balance as of the Determination Date
immediately preceding the date on which the Administrative Committee receives
the written request. The remaining balance shall be forfeited by the
Participant. The amount payable under this Section shall be paid in a lump sum
within thirty (30) days following the receipt of the notice by the
Administrative Committee from the Participant.
11.
If the Participant receives a distribution under this Section,
his Deferral Commitments for the remaining portion of that calendar year shall
be revoked and he shall not be permitted to make Deferral Commitments for the
next succeeding calendar year.
5.7 Withholding for Taxes. To the extent required by the law
in effect at the time payments are made, the Employer shall withhold from the
payments made hereunder any taxes required to be withheld by federal, state or
local government, including any amount which the Employer determines is
reasonably necessary to pay any generation-skipping transfer tax which is or may
become due. A Beneficiary, however, may elect not to have withholding of federal
income tax pursuant to Section 3405(a)(2) of the Code, or any successor
provision thereto.
5.8 Valuation and Settlement. The amount of a lump sum payment
and the initial amount of installments shall be based on the value of the
Participant's Account on the Determination Date immediately preceding the
payment or commencement of installment payments.
5.9 Payment to Guardian. The Administrative Committee may
direct payment to the duly appointed guardian, conservators or other similar
legal representative of the Participant or Beneficiary to whom payment is due.
In the absence of such a legal representative, the Administrative Committee may,
in it sole and absolute discretion, make payment to a person having the care and
custody of a minor, incompetent or person incapable of handling the disposition
of property upon proof satisfactory to the Administrative Committee of
incompetency, minority, or incapacity. Such distribution shall completely
discharge the Administrative Committee from all liability with respect to such
benefit.
12.
ARTICLE VI
BENEFICIARY DESIGNATION
6.1 Beneficiary Designation. Subject to Section 6.3, the
Participant shall have the right, at any time, to designate one (1) or more
persons or an entity as Beneficiary (both primary as well as secondary) to whom
benefits under the Plan shall be paid in the event of the Participant's death
prior to complete distribution of the Participant's Account. Each Beneficiary
designation shall be in a written form prescribed by the Administrative
Committee and shall be effective only when filed with the Administrative
Committee during the Participant's lifetime.
6.2 Changing Beneficiary. Subject to Section 6.3, any
Beneficiary designation may be changed by the Participant without the consent of
the previously named Beneficiary by the filing of a new designation with the
Administrative Committee. The filing of a new designation shall cancel all
designations previously filed.
6.3 Community Property. If the Participant resides in a
community property state, the following rules shall apply:
(a) If the Participant is married, the designation of
a Beneficiary other than the Participant's spouse shall not be
effective unless the spouse executes a written consent that
acknowledges the effect of the designation, or it is established the
consent cannot be obtained because the spouse cannot be located.
(b) If the Participant is married, the Participant's
Beneficiary designation may be changed with the consent of the
Participant's spouse as provided for in Section 6.3(a) by the filing of
a new designation with the Administrative Committee.
13.
(c) If the Participant's marital status changes after the
Participant has designated a Beneficiary, the following shall
apply:
(i) If the Participant is married at the
time of death but was unmarried when the designation was made,
the designation shall be void unless the spouse has consented
to it in the manner prescribed in Section 6.3(a).
(ii) If the Participant is unmarried at the
time of death but was married when the designation was made:
a) The designation shall be void if the spouse was
named as Beneficiary.
b) The designation shall remain valid if a nonspouse
Beneficiary was named.
(iii) If the Participant was married when the
designation was made and is married to a different spouse at
death, the designation shall I be void unless the new spouse
has consented to it in the manner prescribed above.
6.4 No Beneficiary Designation. If the Participant fails to designate
a Beneficiary in the manner provided above, if the designation is void, or
if the Beneficiary designated by the Participant dies before the
Participant or before complete distribution of the Participant's benefits,
the Participant's Beneficiary shall be the person in the first of the
following classes in which there is a survivor:
(a) The Participant's spouse;
14.
(b) The Participant's children in equal shares,
except that if any of the children predecease the Participant
but leaves issue surviving, then such issue shall take by
right of representation the share the parent would have taken
if living;
(c) The Participant's estate.
ARTICLE VII
ADMINISTRATION
7.1 Committee; Duties. The Plan shall be administered by the
Administrative Committee. The Administrative Committee shall consist of at least
three (3) individuals appointed by the Compensation Committee. The
Administrative Committee shall have the authority to amend (but not terminate)
the Plan (subject to Section 9.1), interpret and enforce all appropriate rules
and regulations for the administration of the Plan and decide or resolve any and
all questions, including interpretations of the Plan, as may arise in such
administration. A majority vote of the Administrative Committee members shall
control any decision.
7.2 Agents. The Administrative Committee may, from time to
time, employ agents and delegate to them such administrative duties as it sees
fit, and may from time to time consult with counsel who may be counsel to the
Company.
7.3 Binding Effect of Decisions. The decision or action of the
Administrative Committee with respect to any question arising out of or in
connection with the administration, interpretation and application of the Plan
and the rules and regulations promulgated hereunder shall be final, conclusive
and binding upon all persons having any interest in the Plan.
15.
7.4 Indemnity of Administrative Committee. The Company shall
indemnify and hold harmless the members of the Administrative Committee against
any and all claims, loss, damage, expense or liability arising from any action
or failure to act with respect to the Plan on account of such person's service
on the Administrative Committee, except in the case of gross negligence or
willful misconduct.
ARTICLE VIII
CLAIMS PROCEDURE
8.1 Claim. The Administrative Committee shall establish rules
and procedures to be followed by the Participant and Beneficiaries in (a) filing
claims for benefits, and (b) for furnishing and verifying proofs necessary to
establish the right to benefits in accordance with the Plan, consistent with the
remainder of this Article. Such rules and procedures shall require that claims
and proofs be made in writing and directed to the Administrative Committee.
8.2 Review of Claim. The Administrative Committee shall review
all claims for benefits. Upon receipt by the Administrative Committee of such a
claim, it shall determine all facts which are necessary to establish the right
of the claimant to benefits under the provisions of the Plan and the amount
thereof as herein provided within ninety (90) days of receipt of such claim. If
prior to the expiration of the initial ninety (90) day period, the
Administrative Committee determines additional time is needed to come to a
determination on the claim, the Administrative Committee shall provide written
notice to the Participant, Beneficiary or other claimant of the need for the
extension, not to exceed a total of one hundred eighty (1 80) days from the date
the application was received.
16.
8.3 Notice of Denial of Claim. In the event that the
Participant, Beneficiary or other claimant claims to be entitled to a benefit
under the Plan, and the Administrative Committee determines that such claim
should be denied in whole or in part, the Administrative Committee shall, in
writing, notify such claimant that the claim has been denied, in whole or in
part, setting forth the specific reasons for such denial. Such notification
shall be written in a manner reasonably expected to be understood by such
claimant and shall refer to the specific sections of the Plan relied on, shall
describe any additional material or information necessary for the claimant to
perfect the claim and an explanation of why such material or information is
necessary, and where appropriate, shall include an explanation of how the
claimant can obtain reconsideration of such denial.
8.4 Reconsideration of Denied Claim.
(a) Within sixty (60) days after receipt of the
notice of the denial of a claim, such claimant or duly authorized
representative may request, by mailing or delivery of such written
notice to the Administrative Committee, a reconsideration by the
Administrative Committee of the decision denying the claim. If the
claimant or duly authorized representative fails to request such a
reconsideration within such sixty (60) day period, it shall be
conclusively determined for all purposes of the Plan that the denial of
such claim by the Administrative Committee is correct. If such claimant
or duly authorized representative requests a reconsideration within
such sixty (60) day period, the claimant or duly authorized
representative shall have thirty (30) days after filing a request for
reconsideration to submit additional written material in support of the
claim, review pertinent documents, and submit issues and comments in
writing.
17.
(b) After such reconsideration request, the
Administrative Committee shall determine within sixty (60) days of
receipt of the claimant's request for reconsideration whether such
denial of the claim was correct and shall notify such claimant in
writing of its determination. The written notice of decision shall be
in writing and shall include specific reasons for the decision, written
in a manner calculated to be understood by the claimant, as well as
specific references to the pertinent Plan provisions on which the
decision is based. In the event of special circumstances determined by
the Administrative Committee, the time for the Administrative Committee
to make a decision may be extended by an additional sixty (60) days
upon written notice to the claimant prior to the commencement of the
extension.
8.5 Arbitration. Any decision of the Administrative Committee
may be appealed to arbitration, pursuant to the arbitration procedure provided
for in the Participant's Employment Agreement.
8.6 Employer to Supply Information. To enable the
Administrative Committee to perform its functions, the Employer shall supply
full and timely information to the Administrative Committee and to the
Participant of all matters relating to the retirement, death or other cause for
termination of employment of the Participant, and such other pertinent facts as
the Administrative Committee or the Participant may require.
18.
ARTICLE IX
AMENDMENT AND TERMINATION OF PLAN
9.1 Amendment. The Administrative Committee may at any time
amend the Plan by written instrument with the Participant's written consent and
the written consent of any Beneficiaries to whom a benefit is due, subject to
the following:
(a) Preservation of Account Balance. No amendment shall
reduce the amount accrued in the Participant's Account to the
date such notice of the amendment is given.
(b) Changes in Earnings Rate. No amendment shall reduce the
Rate of Return to be credited after the date of the amendment to
the amount already accrued in the Account and any Deferred
Compensation credited to the Account under Deferral Commitments
already in effect on that date.
9.2 Termination. The Compensation Committee may at any time
partially or completely terminate the Plan with the Participant's written
consent, if, in the Compensation Committee's judgment, the tax, accounting or
other effects of the continuance of the Plan, or potential payments thereunder
would not be in the best interests of the Employer and the Participant.
(a) Partial Termination. With the Participant's written
consent, the Compensation Committee may partially terminate the
Plan by instructing the Administrative Committee not to accept
any additional Deferral Commitments. If such a partial
termination occurs, the Plan shall continue to operate and be
effective with regard to Deferral Commitments entered into prior
to the effective date of such partial termination.
19.
(b) Complete Termination. With the Participant's written
consent, the Compensation Committee may completely terminate the
Plan by instructing the Administrative Committee not to accept
any additional Deferral Commitments, and by terminating all
ongoing Deferral Commitments. If such a complete termination
occurs, the Plan shall cease to operate and the Employer shall
pay out the Account. Payment shall be made in substantially equal
annual installments over the following period, based on the
Account balance:
Account Balance Payout Period
Less than $1 00,000 Lump Sum
$100,000 but less than $500,000 3 Years
More than $500,000 5 Years
Payments shall commence within sixty (60) days after the
Compensation Committee terminates the Plan and earnings shall continue to be
credited on the unpaid Account balance.
ARTICLE X
MISCELLANEOUS
10.1 Unfunded Plan. The Plan is an unfunded plan maintained
primarily to provide deferred compensation benefits for a select group of
"management or highly compensated employees" within the meaning of Sections 201,
301 and 401 of ERISA, and therefore is exempt from the provisions of Parts 2, 3
and 4 of Title I of ERISA.
10.2 Unsecured General Creditor. The Participant and his
Beneficiaries shall be unsecured general creditors, with no secured or
preferential right to any assets of the Employer or any other party for payment
of benefits under the Plan. Any life insurance policies, annuity contracts or
other property purchased by the Employer in connection with the Plan shall
remain
20.
its general, unpledged and unrestricted assets. The Employer's obligation under
the Plan shall be an unfunded and unsecured promise to pay money in the future.
10.3 Trust Fund. At its discretion, the Employer may establish
one (1) or more trusts, with such trustees as the Compensation Committee may
approve, for the purpose of providing for the payment of benefits owed under the
Plan. Although such a trust shall be irrevocable, its assets shall be held for
payment of all the Company's general creditors in the event of insolvency or
bankruptcy. To the extent any benefits provided under the Plan are paid from any
such trust, the Employer shall have no further obligation to pay them. If not
paid from the trust, such benefits shall remain the obligation of the Employer.
10.4 Nonassignability. Neither the Participant nor any other
person shall have any right to commute, sell, assign, transfer, pledge,
anticipate, mortgage or otherwise encumber, transfer, hypothecate or convey in
advance of actual receipt the amounts, if any, payable hereunder, or any part
thereof, which are, and all rights to which are, expressly declared to be
unassignable and nontransferable. No part of the amounts payable shall, prior to
actual payment, be subject to seizure or sequestration for the payment of any
debts, judgments, alimony or separate maintenance owed by the Participant or any
other person, nor be transferable by operation of law in the event of the
Participant's or any other person's bankruptcy or insolvency.
10.5 Not a Contract of Employment. The Plan shall not
constitute a contract of employment between the Employer and the Participant.
Nothing in the Plan shall give the Participant the right to be retained in the
service of the Employer or to interfere with the right of the Employer to
discharge the Participant pursuant to the Participant's Employment Agreement.
21.
10.6 Protective Provisions. The Participant will cooperate
with the Employer by furnishing any and all information requested by the
Employer in order to facilitate the payment of benefits hereunder, and by taking
such physical examinations as the Employer may deem necessary and taking such
other action as may be requested by the Employer.
10.7 Governing Law. The provisions of the Plan shall be
construed and interpreted according to the laws of the Commonwealth of
Pennsylvania, except as preempted by ERISA or other federal law.
10.8 Validity. In case any provision of the Plan shall be held
illegal or invalid for any reason, said illegality or invalidity shall not
affect the remaining parts hereof, but the Plan shall be construed and enforced
as if such illegal and invalid provision had never been inserted herein.
10.9 Notice. Any notice required or permitted under the Plan
shall be sufficient if in writing and hand delivered or sent by registered or
certified mail. Such notice shall be deemed as given as of the date of delivery
or, if delivery is made by mail, as of the date shown on the postmark on the
receipt for registration or certification. Mailed notice to the Administrative
Committee shall be directed to the Company's address. Mailed notice to the
Participant or Beneficiary shall be directed to the individual's last known
address in the Employer's records.
10.10 Successors. The provisions of the Plan shall bind and
inure to the benefit of the Employer and its successors and assigns. The term
successors as used herein shall include any corporate or other business entity
which shall, whether by merger, consolidation, purchase or otherwise, acquire
all or substantially all of the business and assets of the Employer, and
successors of any such corporation or other business entity.
22.
MK RAIL CORPORATION
Dated , 1996 By
Its
23.
EXHIBIT B (Cont.)
TRUST AGREEMENT
TRUST UNDER DEFERRED COMPENSATION PLAN FOR
XXXXXXX X. XXXX
(a) This Agreement made this day of 1996 by and ----------
----------------------- between M. K. RAIL CORPORATION ("Company") and
("Trustee");
(b) WHEREAS, Company has adopted a nonqualified deferred
compensation plan (the "Deferred Compensation Plan") for Xxxxxxx X. Xxxx (the
"Participant");
(c) WHEREAS, Company has incurred or expects to incur
liability under the terms of such Deferred Compensation Plan with respect to the
Participant;
(d) WHEREAS, Company wishes to establish a trust (hereinafter
called "Trust") and to contribute to the Trust assets that shall be held
therein, subject to the claims of Company's creditors in the event of Company's
Insolvency, as herein defined, until paid to the Participant and his
beneficiaries in such manner and at such times as specified in the Deferred
Compensation Plan;
(e) WHEREAS, it is the intention of the parties that this
Trust shall constitute an unfunded arrangement and shall not affect the status
of the Deferred Compensation Plan as an unfunded plan maintained for the purpose
of providing deferred compensation for a select group of management or highly
compensated employees for purposes of Title I of the Employee Retirement Income
Security Act of 1974; and
1.
(f) WHEREAS, it is the intention of Company to make
contributions to the Trust to provide itself with a source of funds to assist it
in the meeting of its liabilities under the Deferred Compensation Plan;
NOW THEREFORE, the parties do hereby establish the Trust and
agree that the Trust shall be comprised, held and disposed of as follows:
Section 1. Establishment of Trust
(a) Company hereby deposits with Trustee in trust $ ,
which shall become the principal of the Trust to be held,
administered and disposed of by Trustee as provided in this
Trust Agreement.
(b) The Trust hereby established shall be irrevocable.
(c) The Trust is intended to be a grantor trust of
which Company is the grantor, within the meaning of subpart
E, part 1, subchapter J, chapter 1, subtitle A of the
Internal Revenue Code of 1986, as amended, and shall be
construed accordingly.
(d) The principal of the Trust and any earnings thereon
shall be held separate and apart from other funds of Company
and shall be used exclusively for the uses and purposes of
the Participant and general creditors as herein set forth.
The Participant and his beneficiaries shall have no
preferred claim on, or any beneficial ownership interest in,
any assets of the Trust. Any rights created under the
Deferred Compensation Plan and this Trust Agreement shall be
mere unsecured contractual rights of the Participant and his
beneficiaries against Company. Any assets held by the Trust
will be subject to the claims of Company's general creditors
under federal and state law in the event of Insolvency, as
defined in Section 3(a) herein.
2.
(e) Company, in its sole discretion, may at any time, or from
time to time, make additional deposits of cash or other property in trust with
Trustee to augment the principal to be held, administered and disposed of by
Trustee as provided in this Trust Agreement. Neither Trustee nor the Participant
or his beneficiaries shall have any right to compel such additional deposits.
(f) Upon a Change in Control, Company shall, as soon as
possible, but in no event longer than 30 days following the Change in Control,
as defined herein, make an irrevocable contribution to the Trust in an amount
that is sufficient to pay the Participant or his beneficiary the benefits to
which the Participant or his beneficiaries would be entitled pursuant to the
terms of the Deferred Compensation Plan as of the date on which the Change in
Control occurred.
For purposes of this Trust, the term Change in Control shall
have the same meaning as in the Participant's Employment Agreement with Company.
Section 2. Payments to the Participant and His Beneficiaries
(a) Company shall deliver to Trustee a schedule (the "Payment
Schedule") that indicates the amounts payable in respect of the Participant (and
his beneficiaries), that provides a formula or other instructions acceptable to
Trustee for determining the amounts so payable, the form in which such amount is
to be paid (as provided for or available under the Deferred Compensation Plan),
and the time of commencement for payment of such amounts. Except as otherwise
provided herein, Trustee shall make payments to the Participant and his
beneficiaries in accordance with such Payment Schedule. Trustee shall make
provision for the reporting and withholding of any federal, state or local taxes
that may be required to be withheld
3.
with respect to the payment of benefits pursuant to the terms of the Deferred
Compensation Plan and shall pay amounts withheld to the appropriate taxing
authorities or determine that such amounts have been reported, withheld and paid
by Company.
(b) The entitlement of the Participant or his beneficiaries to
benefits under the Deferred Compensation Plan shall be determined by Company or
such party as it shall designate under the Deferred Compensation Plan, and any
claim for such benefits shall be considered and reviewed under the procedures
set out in the Deferred Compensation Plan.
(c) Company may make payment of benefits directly to the
Participant or his beneficiaries as they become due under the terms of the
Deferred Compensation Plan. Company shall notify Trustee of its decision to make
payment of benefits directly prior to the time amounts are payable to the
Participant or his beneficiaries. In addition, if the principal of the Trust,
and any earnings thereon, are not sufficient to make payments of benefits in
accordance with the terms of the Deferred Compensation Plan, Company shall make
the balance of each such payment as it falls due. Trustee shall notify Company
where principal and earnings are not sufficient.
Section 3. Trustee Responsibility Regarding Payments to Trust Beneficiary
When Company Is Insolvent
(a) Trustee shall cease payment of benefits to the Participant
and his beneficiaries if Company is Insolvent. Company shall be considered
"Insolvent" for purposes of this Trust Agreement if (i) Company is unable to pay
its debts as they become due, or (ii) Company is subject to a pending proceeding
as a debtor under the United States Bankruptcy Code.
4.
(b) At all times during the continuance of this Trust, as
provided in Section l(d) hereof, the principal and income of the Trust shall be
subject to claims of general creditors of Company under federal and state law as
set forth below.
(1) The Board of Directors and the Chairman of the Board of
Company shall have the duty to inform Trustee in writing of
Company's Insolvency. If a person claiming to be a creditor of
Company alleges in writing to Trustee that Company has become
Insolvent, Trustee shall determine whether Company is Insolvent
and, pending such determination, Trustee shall discontinue
payment of benefits to the Participant or his beneficiaries.
(2) Unless Trustee has actual knowledge of Company's
Insolvency, or has received notice from Company or a person
claiming to be a creditor alleging that Company is Insolvent,
Trustee shall have no duty to inquire whether Company is
Insolvent. Trustee may in all events rely on such evidence
concerning Company's solvency as may be furnished to Trustee and
that provides Trustee with a reasonable basis for making a
determination concerning Company's solvency.
(3) If at any time Trustee has determined that Company is
Insolvent, Trustee shall discontinue payments to the Participant
or his beneficiaries and shall hold the assets of the Trust for
the benefit of Company's general creditors. Nothing in this Trust
Agreement shall in any way diminish any rights of the Participant
or his beneficiaries to pursue their rights as general creditors
of Company with respect to benefits due under the Deferred
Compensation Plan or otherwise.
5.
(4) Trustee shall resume the payment of benefits to the
Participant or his beneficiaries in accordance with Section 2 of
this Trust Agreement only after Trustee has determined that
Company is not Insolvent (or is no longer Insolvent).
(c) Provided that there are sufficient assets, if Trustee
discontinues the payment of benefits from the Trust pursuant to Section 3(b)
hereof and subsequently resumes such payments, the first payment following such
discontinuance shall include the aggregate amount of all payments due to the
Participant or his beneficiaries under the terms of the Deferred Compensation
Plan for the period of such discontinuance, less the aggregate amount of any
payments made to the Participant or his beneficiaries by Company in lieu of the
payments provided for hereunder during any such period of discontinuance.
Section 4. Payments to Company
Except as provided in Section 3 hereof, Company shall have no
right or power to direct Trustee to return to Company or to divert to others any
of the Trust assets before all payments of benefits have been made to the
Participant and his beneficiaries pursuant to the terms of the Deferred
Compensation Plan.
Section 5. Investment Authority
(a) The assets of the Trust may be invested and reinvested
in common and preferred stocks, shares, or certificates of
participation issued by investment companies, investment trusts,
and mutual funds, common or pooled investment funds, bonds,
debentures, insurance and annuity contracts, limited partnership
interests, obligations of governmental bodies, both domestic and
foreign, notes, commercial paper, certificates of deposit, and
other securities or evidences of indebtedness, secured or
unsecured, including variable amount notes, convertible
6.
securities of all types and kinds, interest-bearing savings or deposit accounts
with any federally insured bank or trust company (including Trustee), or any
federally insured savings and loan association, and-any other property permitted
as trust investments under applicable law.
(b) Trustee has the power to hold any or all securities or
property in Trustee's name, as Trustee, or in the name of a
nominee or nominee of an affiliate, and in accounts or deposits
administered in any location by Trustee or any affiliate of
Trustee. In the event the same are held in its own name or in the
name of a nominee or nominees, suitable designation is to be made
upon the books and records of Trustee that said securities or
property are so held as part of any trusts hereunder.
(c) In no event may Trustee invest in securities (including
stock or rights to acquire stock) or obligations issued by
Company, other than a de minimis amount held in common investment
vehicles in which Trustee invests. All rights associated with
assets of the Trust shall be exercised by Trustee or the person
designated by Trustee, and shall in no event be exercisable by or
rest with the Participant.
Section 6. Disposition of Income
During the term of this Trust, all income received by the
Trust, net of expenses and taxes, shall be accumulated and reinvested.
Section 7. Accounting by Trustee
Trustee shall keep accurate and detailed records of all
investments, receipts, disbursements, and all other transactions required to be
made, including such specific records as shall be agreed upon in writing between
Company and Trustee. Within 30 days following the
7.
close of each calendar year and within 30 days after the removal or resignation
of Trustee, Trustee shall deliver to Company a written account of its
administration of the Trust during such year or during the period from the close
of the last preceding year to the date of such removal or resignation, setting
forth all investments, receipts, disbursements and other transactions effected
by it, including a description of all securities and investments purchased and
sold with the cost or net proceeds of such 'purchases or sales (accrued interest
paid or receivable being shown separately), and showing all cash, securities and
other property held in the Trust at the end of such year or as of the date of
such removal or resignation, as the case may be.
Section 8. Responsibility of Trustee
(a) Trustee shall act with the care, skill, prudence and
diligence under the circumstances then prevailing that a prudent person acting
in like capacity and familiar with such matters would use in the conduct of an
enterprise of a like character and with like aims; provided, however, that
Trustee shall incur no liability to any person for any action taken pursuant to
a direction, request or approval given by Company which is contemplated by, and
in conformity with, the terms of the Deferred Compensation Plan or this Trust
and is given in writing by Company. In the event of a dispute between Company
and a party, Trustee may apply to a court of competent jurisdiction to resolve
the dispute.
(b) Trustee may consult with legal counsel (who may also be
counsel for Company generally) with respect to any of its duties or obligations
hereunder.
(c) Trustee shall have, without exclusion, all powers
conferred on Trustees by applicable law, unless expressly provided otherwise
herein; provided, however, that if an insurance policy is held as an asset of
the Trust Trustee shall have no power to name a
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beneficiary of the policy other than the Trust to assign the policy (as distinct
from conversion of the policy to a different form) other than to a successor
Trustee, or to loan to any person the proceeds of any borrowing against such
policy.
(d) Notwithstanding any powers granted to Trustee pursuant to
this Trust Agreement or to applicable law, Trustee shall not have any power that
could give this Trust the objective of carrying on a business and dividing the
gains therefrom, within the meaning of section 301.7701-2 of the Procedure and
Administrative Regulations promulgated pursuant to the Internal Revenue Code.
(e) Trustee, its affiliates, their officers, directors,
employees and agents, shall not be liable for any act or omission of Company,
any investment manager (other than an investment manager affiliated with
Trustee), or any officer, director, employee or agent of any of them (other than
an officer, director, employee or agent of an investment manager affiliated with
Trustee).
Section 9. Compensation and Expenses of Trustee
Company shall pay all administrative and Trustee's fees and
expenses. If not so paid, the fees and expenses shall be paid from the Trust.
Trustee shall be entitled to receive compensation for its
services hereunder, to be determined from time to time by the application of the
schedule of fees as published by Trustee and in effect at the time such fees are
charged for trusts of a similar size and character, and in the event that
Trustee shall be called upon to render any extraordinary services, it shall be
entitled to additional compensation therefor.
9.
Section 10. Resignation and Removal of Trustee
(a) Trustee may resign at any time by written notice to
Company, which shall be effective 30 days after receipt of such notice unless
Company and Trustee agree otherwise.
(b) Trustee may be removed by Company on 30 days notice or
upon shorter notice accepted by Trustee.
(c) Upon resignation or removal of Trustee and appointment of
a successor Trustee, all assets shall subsequently be transferred to the
successor Trustee. The transfer shall be completed within 30 days after receipt
of notice of resignation, removal or transfer, unless Company extends the time
limit.
(d) If Trustee resigns or is removed, a successor shall be
appointed, in accordance with Section 1.1 hereof, by the effective date of
resignation or removal under paragraph(s) (a) or (b) of this section. If no such
appointment has been made, Trustee may apply to a court of competent
jurisdiction for appointment of a successor or for instructions. All expenses of
Trustee in connection with the proceeding shall be allowed as administrative
expenses of the Trust.
Section 11. Appointment of Successor
If Trustee resigns or is removed in accordance with Section I
0(a) or (b) hereof, Company may appoint any third party, such as a bank trust
department or other party that may be granted corporate trustee powers under
state law, as a successor to replace Trustee upon resignation or removal. 'Me
appointment shall be effective when accepted in writing by the new Trustee, who
shall have all of the rights and powers of the former Trustee, including
ownership
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rights in the Trust assets. The former Trustee shall execute any instrument
necessary or reasonably requested by Company or the successor Trustee to
evidence the transfer.
Section 12. Amendment or Termination
(a) This Trust Agreement may be amended by a written
instrument executed by Trustee and Company. Notwithstanding the foregoing, no
such amendment shall conflict with the terms of the Deferred Compensation Plan
or shall make the Trust revocable after it has become irrevocable in accordance
with Section I (b) hereof.
(b) The Trust shall not terminate until the date on which the
Participant and his beneficiaries are no longer entitled to benefits pursuant to
the terms of the Deferred Compensation Plan. Upon termination of the Trust, any
assets remaining in the Trust shall be returned to Company.
(c) Upon written approval of the Participant or his
beneficiaries entitled to payment of benefits pursuant to the terms of the
Deferred Compensation Plan, Company may terminate this Trust prior to the time
all benefit payments under the Deferred Compensation Plan have been made. All
assets in the Trust at termination shall be returned to Company.
Section 13. Miscellaneous
(a) Any provisions of this Trust Agreement prohibited by law
shall be ineffective to the extent of any such prohibition, without invalidating
the remaining provisions thereof.
(b) Benefits payable to the Participant and his beneficiaries
under this Trust Agreement may not be anticipated, assigned (either at law or in
equity), alienated, pledged,
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encumbered or subjected to attachment, garnishment, levy, execution or other
legal or equitable process.
(c) This Trust Agreement shall be governed by and construed in
accordance with the laws of Michigan.
Section 14. Effective Date
The effective date of this Trust Agreement shall be_____ 1996.
IN WITNESS OF WHICH, Company and Trustee have executed this
Trust Agreement by their duly authorized officers.
MK RAIL CORPORATION
By
Its
PNC BANK, NATIONAL ASSOCIATION
By
Its: Trustee
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