EXHIBIT 10.3
MORRISON KNUDSEN CORPORATION
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DERIVATIVE LITIGATION
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MEMORANDUM OF UNDERSTANDING
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The Parties (as defined below) to this Memorandum of Understanding ("MOU")
have reached an agreement in principle providing for the settlement of the
pending derivative cases in Idaho and Delaware, entitled:
Antonicello v. Agee, et al. Civ. Action 14182 Delaware Chancery Court
Caffrey v. Agee, et al. Civ. Action 14033 Delaware Chancery Court
Citron v. Agee, et al. Civ. Action 14136 Delaware Chancery Court
DeKlotz, et al. v. Agee, CV 9500605 D Idaho District Court
et al.
Flinn v. Agee, et al. CV 9500765D Idaho District Court
Hager v. Agee, et al. Civ. Action. 14034 Delaware Chancery Court
Hammerslough v. Agee, et al. Civ. Action 14042 Delaware Chancery Court
Rosenn v. Agee, et al. Civ. Action 14106 Delaware Chancery Court
Steiner v. Agee, et al. CV 9500745D Idaho District Court
Stern v. Agee, et al. Civ. Action 14032 Delaware Chancery Court
Troy v. Agee Civ. Action 14167 Delaware District Court
Wohlgelernter v. Agee, CV 9500656 Idaho District Court
et al.
(collectively termed "the Derivative Actions").
DEFINITIONS
A. "MK" means Morrison Knudsen Corporation.
B. "MK Rail" means MK Rail Corporation
C. "Individual Defendants" means Stephen G. Hanks, William J. Agee, John
Arrillaga, Christopher B. Hemmeter, Lindsay E. Fox, Peter S. Lynch,
Robert A. McCabe, Irene C. Peden, Gerard R. Roche, John W. Rogers,
Jr., Peter V. Ueberroth, Robert Tinstman, Gunnar E. Sarsten, Stephen
R. Grant, Michael J. Farrell, John P. Herbots, Joseph G. Fearon,
Thomas J. Smith, James F. Cleary.
D. "Director Defendants" means John Arrillaga, Christopher B. Hemmeter,
Lindsay E. Fox, Peter S. Lynch, Robert A. McCabe, Irene C. Peden,
Gerard R. Roche, John W. Rogers, Jr., and Peter V. Ueberroth.
E. "Parties" means the MK Derivative Plaintiffs, MK and the Individual
Defendants.
F. "Idaho Court" means the District Court, Ada County, Idaho.
G. "Delaware Court" means Court of Chancery, New Castle County, Delaware.
H. "Great American" means Great American Insurance Company.
I. "Reliance" means Reliance Insurance Company.
J. "CNA" means Continental Casualty Company.
K. "Fidelity" means The Fidelity and Casualty Company of New York.
L. "Insurers" means Great American, Reliance, Fidelity, and CNA, each of
which has issued a directors and officers liability insurance policy
under which coverage has been requested by the Individual Defendants.
M. "Securities Actions" means the cases consolidated before the United
States District Court for the District of Idaho in IN RE: MORRISON
KNUDSEN SECURITIES LITIGATION, Case No. 94-334 (the "MK Securities
Actions"); NEWMAN V. MK RAIL CORP., ET AL., Case No. 94-478; and
SUSSER V. MK RAIL, ET AL., Case No. 94--477 (the "MK Rail Securities
Actions").
N. "Settlement Account" means the fund created after Final Court Approval
of the Securities Actions and the MK Derivative Actions.
O. "MK Derivative Plaintiffs" means the named plaintiffs individually and
derivatively on behalf of MK.
P. "MK Derivative Counsel" means those individuals and firms set forth on
Exhibit A. "MK Rail Derivative Counsel" means the individual and firm
set forth on Exhibit B. (Collectively "Derivative Counsel")
Q. "Defendants" means MK and the Individual Defendants.
R. "Bank Syndicate" means the group of financial institutions that
provide financing to MK.
S. "Idaho Derivative Cases" means: DEKLOTZ, ET AL. V. MK, ET AL., Case
No. CV9500605; FLINN V. AGEE, ET AL., Case No. CV9500765; STEINER V.
AGEE, ET AL., Case No. CV9500745; WOHLGELERNTER V. AGEE, ET AL., Case
No. CV9500656.
T. "Delaware Derivative Cases" means: ANTONICELLO V. AGEE, ET AL., No.
14182; CAFFREY V. AGEE, ET AL., No 14033; CITRON V. AGEE, ET AL., No.
14136; HAGER V. AGEE, ET AL., No.. 14034, HAMMERSLOUGH V. AGEE, ET
AL., No. 14042; ROSENN V. AGEE, ET AL., No. 14106; STERN V. AGEE, ET
AL., No. 14032; TROY V. AGEE, ET AL., No. 14167
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U. "MK Derivative Actions" means the Idaho Derivative Cases and the
Delaware Derivative Cases brought derivatively on behalf of MK. "MK
Rail Derivative Action" means that part of the case, WOHLGELERNTER V.
AGEE, Case No. CV 95000656 brought derivatively on behalf of MK Rail.
(Collectively "Derivative Actions")
V. "Final Court Approval" means that an order entered by a court of
competent jurisdiction approving the settlement on terms mutually
satisfactory to the Parties and the Insurers has become final and non-
appealable.
W. "Effective Date" means the date when the following has occurred: (1)
Final Court Approval and (2) satisfaction of all conditions set forth
in this MOU.
CLAIMS AND BENEFITS OF SETTLEMENT
The MK Derivative Plaintiffs and MK Derivative Counsel believe that the
claims asserted in the MK Derivative Actions have merit and that the evidence
developed to date supports the claims asserted. The Individual Defendants and
their counsel deny any liability whatsoever and believe that they have good
defenses to the claims made by MK Derivative Plaintiffs. The MK Derivative
Plaintiffs and MK Derivative Counsel recognize and acknowledge the expense and
length of continued proceedings necessary to prosecute the MK Derivative Actions
against the Defendants through trial and through appeals. The MK Derivative
Plaintiffs and MK Derivative Counsel also have taken into account the uncertain
outcome and the risk of any litigation, especially in complex actions such as
the MK Derivative Actions, as well as the difficulties and delays inherent in
such litigation and the likelihood of protracted appellate review. The MK
Derivative Plaintiffs and MK Derivative Counsel also are mindful of the inherent
problems of proof and the defenses Defendants have asserted and can assert to
the federal securities law violations as alleged in the complaints filed in the
MK Derivative Actions and other claims asserted in the MK Derivative Actions,
including the defenses alleged by the Defendants in the pleadings filed in the
MK Derivative Actions. As a consequence of the foregoing investigation and
analyses,
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MK Derivative Counsel have engaged in intensive arms-length negotiations with
counsel for the Defendants with a view toward achieving the substantial benefits
provided by the settlement on the terms as set forth in this MOU. The MK
Derivative Plaintiffs and MK Derivative Counsel believe that the settlement of
the MK Derivative Actions set forth in this MOU confers substantial benefits
upon MK. Based on their evaluations, the MK Derivative Plaintiffs and MK
Derivative Counsel have determined that the settlement set forth in this MOU is
fair, reasonable and adequate and in the best interests of the MK Derivative
Plaintiffs, the current holders of MK common stock and MK.
MK, after having appointed a committee of the disinterested directors
("Special Committee") to review and act relative to this settlement, and the
Special Committee having given extensive consideration to all of the foregoing,
has determined independently that the settlement reflected herein is fair,
reasonable and adequate to MK.
The Individual Defendants have requested the Insurers to fund the
settlement on their behalf as set forth herein.
TERMS
1. A settlement has been reached with respect to the claims asserted
against the Individual Defendants and nominal defendant MK in the MK Derivative
Actions in the amount of $9.85 million and such other consideration as set forth
in Paragraph 5 of this MOU, subject to the terms and conditions of a Stipulation
of Settlement and other documentation as may be required to evidence and obtain
prompt, Final Court Approval of the settlement (collectively the "Stipulation")
to be negotiated in good faith among the MK Derivative Plaintiffs, the
Individual Defendants, the Insurers and MK. Nothing
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contained herein, however, obligates the Derivative Plaintiffs or the Insurers
to negotiate with one another.
2. The Parties and the Insurers will act in good faith to complete a
Stipulation. The Parties shall present the Stipulation to the Delaware Court
for hearing and approval as soon as practicable following such notice to MK
stockholders as may be required by the court, and will use their best efforts to
obtain Final Court Approval of the settlement. Upon dismissal of the Delaware
Derivative Cases by the Delaware Court, the Parties will move the Idaho Court to
dismiss the Idaho Derivative Cases with prejudice.
3. At the direction of the Individual Defendants and at the request of
MK, to which request Derivative Plaintiffs do not object, within twenty (20)
business days after the signing of this MOU and the MOUs in the Securities
Actions, Great American will pay $9,850,000 into a joint interest-bearing
account ("Derivative Cash Account") located in Boise, Idaho, and controlled
jointly by MK Derivative Counsel (Marian Rosner and Mack Redford), counsel for
the Director Defendants, counsel for William J. Agee, counsel for Stephen G.
Hanks, counsel for James F. Cleary, lead counsel in the Securities Actions and
counsel for Great American. MK acknowledges that it has no interest in the
Derivative Cash Account until all conditions for the payment or transfer of
funds from such account have been met. The Derivative Cash Account will be
structured so that withdrawals will require the concurrence of all counsel
exercising joint control subject to Court oversight.
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4. MK Derivative Counsel have agreed to request a total of no more than
$2,955,000.00 of the Derivative Cash Account in fees plus reasonable costs and
expenses in the MK Derivative Actions.
5. On or before the Effective Date, MK will adopt the following
procedures:
a. In setting the location for all meetings of the Board of
Directors, there shall be a presumption that the proper location
for such meetings is at MK's headquarters in Boise, Idaho, or a
location in the United States where there are significant MK
facilities. In the event of a material reason to use a facility
other than those described above, MK may schedule Board of
Director meetings in such other places as a majority of the Board
shall approve.
b. The annual meetings of the stockholders of MK shall be held in
Boise, Idaho, where the corporate headquarters may be, or, if
there is a requirement otherwise, in other U.S. cities with a
SMSA population in excess of 3 million, if so approved by a
majority of the Board.
c. Following Final Court Approval, MK will take reasonable steps to
recruit seven (7) new directors. MK further agrees to: (i)
recruit not less than three (3) new directors prior to the Annual
Meeting of Stockholders to be held in 1996; and (ii) recruit up
to four (4) additional new directors (not to exceed a total of
seven (7) new directors) prior to the Annual Meeting of
Stockholders to be held in 1997. This number may be reduced by
one for each Director Defendant who resigns or who designates
that he or she will not stand
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for re-election. In the event a new director is selected after
the next stockholder meeting, his/her name shall be placed on the
proxy statement and recommended for stockholder vote in
accordance with MK's Certificate of Incorporation. New directors
shall be selected in a manner provided by law and consistent with
the best interests of MK. In the selection of new directors, due
regard and consideration shall be given to the submission of
names supplied by Derivative Counsel. Those names and the names
of other director candidates shall be submitted for
recommendation by members of the board who are not parties to the
Derivative Actions.
d. The annual meeting of stockholders in 1996 will be held within
the time period provided under Delaware law.
e. The majority of the Board will be comprised of non-employee
directors. Disclosure must be made in any proxy statement
provided to MK stockholders, the annual report to stockholders
and Form 10-K of any common membership of any board member or
members of their immediate families as officers or members of any
governing board of any for-profit or not-for-profit organization,
excluding churches or religious affiliations, but including
common membership on the board or governing body of an
organization or entity with a religious affiliation.
f. Upon retirement as a director, to the extent the director is
entitled to participate in MK's group health and dental plan,
group life insurance plan and group travel or accident insurance
plan, he/she may continue
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to participate but must reimburse MK for the cost thereof. Such
provision does not apply to any director who has served more than
twenty (20) years as a non-employee director of MK.
g. Except as provided in Exhibit C attached hereto, no further
payment to William J. Agee shall be made by MK, its affiliates,
subsidiaries or related entities.
h. With respect to executive compensation, no such compensation
shall be based upon non-recurring items unless allowed by a two-
thirds (2/3) vote of the Board of Directors and full disclosure
to and ratification by the stockholders in compliance with the
procedures set forth in the then-applicable Internal Revenue
Service regulations regarding stockholder notification and
approval of such compensation regardless of whether MK determines
such amounts to be deductible or not. No compensation based upon
non-recurring revenue items shall be paid or pledged prior to
such vote of stockholders.
i. At each regularly-scheduled Board of Directors meeting, MK's
chief financial officer or his designee shall provide a report
as to MK's financial condition and prospects, including but not
limited to a discussion of all reasons for material increases in
expenses and liabilities, if any, and decreases in revenues and
earnings, if any, management plans for ameliorating or reversing
such negative trends and the success or failure of any such plans
presented in the past.
j. MK shall not make expenditures of money or benefits that
materially and personally benefit any member of MK management or
its Board
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of Directors unless such expenditure is included as part of the
publicly disclosed terms of such person's compensation package
designated for that individual's position based upon merit,
except that the Board may approve such additional expenditures to
the extent the Board determines such expenditures to be in the
best interests of MK by an affirmative two-thirds (2/3) vote of
the Board.
k. In the event stockholder approval is required for implementation
of any provision of this MOU, MK agrees that it will prepare
resolutions proposing such provisions for inclusion in the proxy
statement preceding the next annual meeting following Final Court
Approval and shall recommend stockholder approval of such
resolutions.
l. In recognition of the current financial condition of MK and in
the event that a case is commenced by or against MK under Title
11 of the United States Code or similar law, the Director
Defendants will not pursue their rights to pension benefits based
upon past service as a director or employee of MK.
m. In recognition of the current financial condition of MK, the
Director Defendants shall each surrender to MK, sixty (60) months
of accrued service under the MK Retirement Plan for Non-Employee
Directors. In recognition of the scientific and engineering
experience and expertise Dr. Irene C. Peden has brought to the MK
Board of Directors, this provision shall not apply to Dr. Peden.
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6. Upon the satisfaction of the conditions set forth below, the funds in
the Derivative Cash Account provided for in Paragraph 3 above, together with all
interest earned thereon, will be paid and transferred as follows:
a. MK Derivative Counsel will be paid such fees as may be awarded by
the Delaware Court (which shall in no event exceed $2,955,000)
and such reasonable costs, expenses and interest from the
Derivative Cash Account as may be awarded by the Delaware Court,
in consideration of the benefits obtained for MK by such counsel
under this settlement; and
b. The remaining funds will be immediately transferred to the
Settlement Account established in the Securities Litigation in
such manner as MK shall have agreed.
The conditions to any payment or transfer of funds from the Derivative Cash
Account are:
i. the entry of an order by the Delaware Court that has become final
and nonappealable (a) approving the material provisions of the
settlement described in this MOU, (b) containing findings to the
effect that the consideration to be paid in respect of the MK
Derivative Actions is fair, reasonable and adequate and provides
reasonably equivalent value to MK for the releases each is
providing and that such consideration is fair, reasonable and
adequate and provides reasonably equivalent value to MK for the
released claims in the MK Derivative Actions and (c) setting the
fees and costs for MK Derivative Counsel; and
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ii. the entry of an order by the Idaho Court which has become final
and nonappealable dismissing the Idaho Derivative Cases with
prejudice; and
iii. Final Court Approval of the MK Rail Derivative Action; and
iv. an order has been entered which has become final and non-
appealable dismissing the case STATE BOARD OF ADMINISTRATION OF
FLORIDA, ETC. V. AGEE, ET AL., Case No. CVOC 9502463 filed in the
Fourth District Court of Ada County, Idaho, with prejudice; and
v. (a) Final Court Approval of the settlement of the Securities
Actions and the MK Rail Derivative Action; and (b) all other
conditions to such settlements have been satisfied or waived and
such settlements are being consummated contemporaneously with
this settlement and either:
vi. (a) No case has been commenced by or against MK under Title 11 of
the United States Code or any similar law and no trustee,
receiver, conservator or similar custodian has been appointed for
MK or its property (any such case or appointment, a "Bankruptcy
Case") and (b) MK and its Bank Syndicate have executed and
delivered a debt restructuring agreement under which (i) the
final maturity date of a material portion of the indebtedness to
remain outstanding is more than one year after the date of such
execution and delivery, (ii) all currently existing defaults of
MK to the Bank Syndicate are waived permanently or for a period
of more than one year from such date of execution and delivery
and (iii) the Bank Syndicate has given all
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waivers and consents necessary to permit MK to effect this
settlement; or
vii. If a Bankruptcy Case has been commenced in respect of MK, an
order has been entered by the court having jurisdiction over the
Bankruptcy Case and has become final and nonappealable that (a)
approves the settlement, (b) authorizes MK's performance of all
of its obligations in respect of the settlement and (c)
authorizes the use of the insurance policies to make such
payments into the Settlement Account, and for attorneys' fees and
costs all in form and substance satisfactory to the Parties and
Great American. By agreeing to this condition neither the
Parties nor the Insurers concede that such court has any
jurisdiction over the debtor's estate, or has any interest in the
insurance proceeds or the proceeds of the settlement.
All funds in the Derivative Cash Account shall be (a) used to pay the fees and
costs described in subparagraph 6 a. above, (b) paid into the Settlement
Account pursuant to this Paragraph 6 b., or (c) repaid to Great American
pursuant to Paragraph 11.
7. Upon Final Court Approval of the settlement described herein, all
claims arising out of, or in any respect having their origin in, or relating to,
any claim or facts giving rise to claims that were or could have been alleged or
asserted in the MK Derivative Actions shall be dismissed with prejudice and
without cost to any Party. The MK Derivative Plaintiffs and MK shall provide
releases as appropriate to MK, the Individual Defendants, the Insurers and their
respective affiliates, (including MK's and the Insurers' current and former
officers, directors, employees, attorneys and agents) from any and all claims
arising out of, or in any respect having their origin in, and/or relating to,
any claims or facts giving
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rise to the claims that were or could have been asserted in the MK Derivative
Actions. MK Derivative Plaintiffs and MK Derivative Counsel will cooperate
with the Defendants in obtaining appropriate bar orders against claims asserted
against MK, the Individual Defendants and the Insurers and their respective
affiliates. The entry of a bar order satisfactory to the Individual Defendants
and the Insurers and containing provisions for a proportionate fault finding as
to any party subject to the bar order and, alternatively, provisions for
reduction of judgment or indemnification of settling parties and their
affiliates against claims over shall be a condition of the settlement.
8. MK will cooperate to complete confirmatory discovery, including
depositions, as necessary.
9. Counsel for all Parties shall cooperate in good faith in presenting
motions seeking Final Court Approval of the settlement.
10. This document may be executed in counterparts, each of which when so
executed, shall constitute an original, but all of which together shall
constitute the same instrument.
11. This MOU shall be inadmissible in any proceeding before any court or
tribunal except to enforce its provisions. If the settlement is not
consummated on the terms set forth herein, neither this MOU nor the fact of its
execution shall be deemed to prejudice in any way the positions of the Parties
with respect to the claims and defenses asserted in the MK Derivative Actions
and, if the settlement contemplated by this MOU is not approved or is
terminated, the Parties shall be returned to their respective positions as of
June 5, 1995. In such event, all funds then existing in the Derivative Cash
Account provided for in Paragraph 3 shall be returned to Great American,
together with all interest earned thereon.
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12. If an action has been commenced by or against MK under Title 11 of the
United States Code or any similar law or a trustee, receiver, conservator or
similar custodian has been appointed for MK or its property ("Bankruptcy Case")
and the court having jurisdiction over the Bankruptcy Case enters an order
which has become final and nonappealable determining the payment of any funds
into the Settlement Account or to Derivative Counsel pursuant to Paragraph 6
above to be recoverable by MK as a preference, voidable transfer, fraudulent
transfer or similar transaction, then the rights of the Parties and the Insurers
shall be governed by Paragraph 10 of the Memorandum of Understanding between MK
and the plaintiffs in the MK Securities Actions. The releases provided as part
of the settlement of the Derivative Actions shall remain in full force and
effect.
13. This MOU shall be governed by the law of the State of Delaware. It
may not be modified except by a writing signed by all of the Parties and the
Insurers..
14. The effectiveness of this MOU is conditioned upon the execution and
delivery by MK, MK Rail, and the Individual Defendants to the Insurers of
agreements, in form and substance satisfactory to the Insurers, regarding
releases and related matters.
/s/ J. Dennis Faucher /s/ David D. Aufhauser
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J. Dennis Faucher David D. Aufhauser
Miller, Faucher, Chertow, Cafferty Williams & Connolly
and Wexler Attorney for Defendant William J. Agee
Co-Lead Counsel for Idaho
Consolidated Derivative Plaintiffs
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/s/ Jill Abrams /s/ John Edwards
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Jill Abrams John Edwards
Abbey & Ellis Jones Day Reavis & Pogue
Co-Lead Counsel for Delaware Counsel for Morrison Knudsen
Consolidated Derivative Plaintiffs
/s/ Marian Rosner /s/ Thomas J Nolan
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Thomas J. Nolan
Wolf Popper Ross Wolf & Jones LLP Howrey & Simon
Co-Lead Counsel for Delaware Attorney for Stephen G. Hanks
Consolidated Derivative Plaintiffs
/s/ Mack A. Redford /s/ P. Craig Storti
- ------------------------------- ------------------------------
Mack A. Redford P. Craig Storti
Park Redford Thomas & Burkett Hawley Troxell Ennis & Hawley
Attorney for Idaho Consolidated Attorney for James F. Cleary
Derivative Plaintiffs
/s/ Jules Brody /s/ Cezar M. Froelich
- ------------------------------ ------------------------------
Jules Brody Cezar M. Froelich
Stull Stull & Brody Michael J. Howlett, Jr.
Attorney for Wohlgelernter Shefsky Froelich & Devine Ltd.
Attorney for: John Arrillaga,
Christopher
B. Hemmeter, Lindsay E. Fox, Peter S.
Lynch,
Robert A. McCabe, Irene C. Peden, Gerard
R. Roche, John W. Rogers, Jr. Peter V.
Ueberroth
/s/ Douglas M. Kraus
----------------------------------------
Douglas M. Kraus
Skadden Arps Slate Meagher & Flom
Attorney for: Joseph F. Fearon and
Michael J. Farrell
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/s/ James M. Doyle, Jr.
--------------------------------
James M. Doyle, Jr.
Matthews & Branscomb
Attorney for John Herbots
/s/ Jim Jones
--------------------------------
Jim Jones
Jim Jones & Associates
Attorney for Thomas Smith
/s/ Lawrence T. Hoyle, Jr.
--------------------------------
Lawrence T. Hoyle, Jr.
Hoyle Morris & Kerr
Attorney for Gunnar E. Sarsten
/s/ Steven Hibbard
--------------------------------
Steven Hibbard
McCutchen Doyle Brown & Enersen
Attorney for Stephen R. Grant
/s/ Robert Tinstman
--------------------------------
Robert Tinstman
/s/ James Skarzynski
-------------------------------
James Skarzynski
Peterson & Ross
Attorney for Great American Insurance
Co.
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/s/ Michael Gassmann
------------------------------------
Michael Gassmann
Drinker, Biddle & Reath
Attorney for Reliance Insurance Co.
/s/ Cathy A. Simon
-------------------------------------
Cathy A. Simon
Ross Dixon & Masback
Attorney for Continental Casualty
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EXHIBIT A
LIST OF PLAINTIFFS' COUNSEL IN THE MK DERIVATIVE ACTIONS
Steven Price Wolf, Popper, Ross, Wolf & Jones, LLP
Stanley W. Walsh Mager, Liebenberg & White
John Day Bernstein, Liebhard & Lifshitz
Abbey & Ellis Bruce Bistline
Miller, Faucher, Chartow, Donald L. Harris
Cofferty & Wexler Theodore Nelson
Evans, Keane Stull, Stull & Brody
Park Redford, Thomas & Burkett Holden, Kidwell, Hahn & Crapo
Cosho, Humphrey, Greemer & Welsh, Rosenthal, Manhait, Gross & Goddess,
P.A. P.A.
Farugi & Farugi Berman, DeValerio & Pease
Law Offices of Curtis V. Trinko Stamell, Tabacco & Schayer
Bernstein Liebhard & Lifschitz Wechsler, Skirnick, Harwood,
Halebian & Feffer, LLP
Goodkind, Labaton, Rudoff
& Sucharow, LLP
Schiffrin & Craig
Law Offices of A. Arnold Gershon, P.C.
EXHIBIT B
PLAINTIFFS' COUNSEL IN MK RAIL DERIVATIVE CASE
Stull, Stull & Brody
Bruce S. Bustline
MK DERIVATIVE MOU
EXHIBIT C
1 SUPPLEMENTAL EMPLOYEE RETIREMENT PENSION PLAN
a. Agee will receive, as full payment under a supplemental employee
retirement pension plan ("SERP"), the sum of $99,750, per year for the
term of his life, with a right of survivorship for the term of his
wife's life.
b. Payments under the SERP will be made on a monthly basis, on or about
the 10th of each month, at a rate of $8,312.50 per month, less
applicable taxes.
c. SERP payments will be made retroactive to Agee's separation from the
company (as of February 10, 1995) and will commence upon the signing
of the Memorandum of Understanding ("MOU") in the MK Derivative
Litigation.
2. DEFERRED SAVINGS PLAN
MK will remit to Agee all of his deferred savings plan at the value of such
plan on the date of his Severance Agreement.
3. MEDICAL AND DENTAL INSURANCE
a. Agee, his spouse and his unmarried dependent children under the age of
24, will be provided, at MK's expense, with comprehensive medical,
health and dental insurance benefits. The current such plan in which
the Agees will participate at least through the end of 1995 is the
Aetna Comprehensive Medical and Dental Plan.
b. Agee and his family will be provided with the same level and choice of
benefits offered to MK's retired employees or to retired non-employee
directors, whichever plan Agee or his survivor elects to participate
in on a yearly basis.
c. MK will pay to Agee the additional sum of $4,344.75 as reimbursement
for COBRA payments made by Agee for the period of March 1, 1995
through and including December 31, 1995.
d. Commencing and effective on December 31, 1995, MK will pay all costs
associated with the above-described medical, health and dental
insurance benefits for Agee, his spouse and his unmarried dependent
children under the age of 24.
e. The medical and dental coverage provided to Agee's spouse and children
herein shall survive his death.
4. INDEMNIFICATION AND ADVANCE OF LEGAL EXPENSES
a. In accordance with Section 145(f) of the General Corporation Law of
Delaware, MK hereby agrees to advance legal fees and expenses, and to
indemnify Agee against all expenses (including attorney's fees),
losses, judgments, fines and amounts paid in settlement actually and
reasonably incurred by him in connection with any claims, threatened
or filed, whether civil, criminal, administrative or investigative, by
reason of, or arising out of, or which refer or relate in any manner
to his tenure at MK, its subsidiaries and affiliates.
b. Notwithstanding the provisions of 5.A., above, MK further hereby
agrees to advance legal fees and expenses, and to indemnify Agee in
accordance with Sections 145(a), (d) and (e) of the General
Corporation Law of Delaware against all expenses (including attorney's
fees), losses, judgments, fines and amounts paid in settlement
actually and reasonably incurred in connection with the following
specific matters:
(i) The SEC investigation of MK and MK Rail and any claims based on
said investigation;
(ii) Final approval of the MK and MK Rail Securities Litigation, MK
Derivative Actions, and MK Rail Derivative Actions;
(iii) Any post-approval challenges to (ii) above;
(iv) JACOBS, FRI and NELSON V. AGEE, CA #95-1168 (W.D. Tenn.) and
any claims based on the sale of Touchstone, Inc. to MK;
(v) STATE BOARD OF ADMINISTRATION OF FLORIDA V. MORRISON KNUDSEN,
CV OC 95024630 (Idaho);
(vi) Opt-outs in the MK Rail and MK Securities Litigation;
(vii) DANIEL PETE EVEN V. AGEE, ET AL., Cause No. 98320 (Idaho).