(NOTIFY) 72731,347
(CONTACT-NAME) David A. Kain
(CONTACT-PHONE) (312) 861-6050
PAGE 0
DOCUMENT HEADER
DOCUMENT DESCRIPTION 8-K
DOCUMENT TYPE 1
COUNT 5
PAGE 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_____________________
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported)
January 28, 1994
FMC CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 1-2376 94-0479804
(State or other jurisdiction (Commission (I.R.S. Employer
of incorporation) File Number) Identification No.)
200 East Randolph Drive, Chicago, Illinois 60601
(Address of principal executive offices) Zip Code)
(312) 861-6000
Registrant's telephone number,
including area code
PAGE 2
Item 2. Acquisition or Disposition of Assets.
On January 28, 1994, the Registrant contributed
substantially all of the assets and liabilities of its
Defense Systems Group (the "FMC Defense Business") and
$32,138,000 in cash to a newly formed partnership,
United Defense, L.P. (the "Partnership"), in exchange
for a 60% common equity interest in the Partnership,
effective as of January 1, 1994 (the "Closing Date").
The Registrant is the general partner of the
Partnership, and Harsco Defense Holding, Inc. ("HDH"),
a wholly owned subsidiary of Harsco Corporation, a
Delaware corporation ("Harsco"), is the limited
partner. Effective as of the Closing Date, Harsco
contributed substantially all of the assets (other than
certain accounts receivable) and liabilities of its BMY-
Combat Systems Division (the "Harsco Defense Business")
and $5,200,000 in cash to the Partnership in exchange
for a 40% common equity interest in the Partnership.
The Partnership Agreement provides for certain special
capital account allocations and cash distributions and
otherwise allocates and distributes income in
proportion to the partners' percentage ownership. The
Harsco Defense Business engages in the design,
development, production and after-sale support of
tracked military vehicles.
FMC, as managing general partner of the
Partnership, will provide certain management services
to the Partnership. The prices and amounts of certain
of the services are subject to the consent of Harsco,
which consent has been given for 1994.
The business of the Partnership is to engage in
the development, manufacture, retrofit, installation,
overhaul, repair, engineering, design, service, sale
and marketing of any military vehicle system (excluding
trucks and busses) or weapon station, including any
component part or subsystem thereof.
At any time after the 18-month anniversary of the
Closing Date, either the Registrant or HDH may require
that the Partnership (i) become incorporated as a
Delaware corporation, and the Partnership shall then
issue shares of its common stock to the Registrant and
HDH, pro rata in accordance with their ownership
interests in the Partnership immediately prior to
incorporation and (ii) register such shares of common
stock with the Securities and Exchange Commission
(which registration shall not become effective before
the 25-month anniversary of the Closing Date) and
commence a public offering of such common stock. In
addition, at any time after the 25-month anniversary of
the Closing Date: (i) either the Registrant or HDH may
PAGE 3
sell or otherwise dispose of its ownership interest in
the Partnership to an unaffiliated third party
(provided that HDH's right to sell its ownership
interest is subject to the Registrant's right of first
refusal to purchase such interest and the Registrant's
right to sell its ownership interest is subject to
HDH's right to include in such sale a proportionate
amount of HDH's ownership interest in the Partnership);
(ii) the Registrant shall have the option to purchase,
or cause the Partnership to purchase, HDH's entire
ownership interest in the Partnership for an amount in
cash equal to 110% of its then current appraised value
plus the capitalized amount of a limited partner
allocation interest; and (iii) HDH shall have the
option to require the Partnership to purchase HDH's
entire ownership interest in the Partnership for an
amount equal to 95% of its then current appraised value
plus the capitalized amount of a limited partner
allocation interest, such purchase price to be
evidenced by a senior, unsecured note of the
Partnership. Any obligation of the Partnership under
any of the operative agreements entered into in
connection with the formation of the joint venture is
specifically nonrecourse to the Registrant.
Thomas W. Rabaut, formerly the Group Manager of
the Registrant's Defense Systems Group, will serve as
Chief Executive Officer of the Partnership.
Item 7. Financial Statements and Exhibits.
(a) Financial Statements of Business Acquired.
It would be impracticable for the Registrant to file
any financial statements and pro forma financial
information which may be required to be filed under
Form 8-K at the time of the filing of this report. The
Registrant will file such statements under amended Form
8-K/A as soon as practicable, but in no event later
than 60 days from the date hereof.
(b) Pro Forma Financial Information. See (a)
above.
(c) Exhibits
4.1 Participation Agreement, dated as of
January 1, 1994, by and among FMC
Corporation, Harsco Corporation, Harsco
Defense Holding, Inc. and United
Defense, L.P.*
4.2 Partnership Agreement, dated as of
January 1, 1994, by and among FMC
Corporation, Harsco Defense Holding,
Inc. and United Defense, L.P.*
PAGE 4
4.3 Annex A -- Definitions Relating to the
Partnership Agreement and the
Participation Agreement
4.4 Registration Rights Agreement, dated as
of January 1, 1994, by and among FMC
Corporation, Harsco Defense Holding,
Inc. and United Defense, L.P.
4.5 Management Services Agreement, dated as
of January 1, 1994, by and between FMC
Corporation and United Defense, L.P.*
4.6 Form of Senior Promissory Note Agreement
by and between Harsco Defense Holding,
Inc. and United Defense, L.P.
*The Registrant has omitted the schedules and certain
exhibits to the Participation Agreement, the
Partnership Agreement and the Management Services
Agreement and agrees to furnish supplementally a copy
of such schedules and exhibits to the Commission upon
request.
PAGE 5
SIGNATURES
Pursuant to the requirements of the
Securities Exchange Act of 1934, the Registrant has
duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
FMC CORPORATION
By Robert L. Day
Robert L. Day
Corporate Secretary
Date February 14, 1994
PAGE 0
DOCUMENT HEADER
DOCUMENT DESCRIPTION EXHIBIT INDEX
DOCUMENT TYPE 2
COUNT 1
PAGE 1
EXHIBIT INDEX
Page
Number in
Exhibit Table Description
of Document Page Number
in document
Numbering System
4.1 Participation Agreement, dated as of January 1, 1994, by and
among FMC Corporation, Harsco Corporation, Harsco Defense
Holding, Inc.. and United Defense, L.P.
4.2 Partnership Agreement, dated as of January 1, 1994, by and
among FMC Corporation, Harsco Defense Holding, Inc.. and United
Defense, L.P.
4.3 Annex A -- Definitions Relating to the Partnership Agreement
and the Participation Agreement
4.4 Registration Rights Agreement, dated as of January 1, 1994,
by and among FMC Corporation, Harsco Defense Holding, Inc. and
United Defense, L.P.
4.5 Management Services Agreement, dated as of January 1, 1994,
by and between FMC Corporation and United Defense, L.P.
4.6 Form of Senior Promissory Note Agreement by and between
Harsco Defense Holding, Inc. and United Defense, L.P.
PAGE 0
DOCUMENT HEADER
DOCUMENT DESCRIPTION PARTICIPATION AGREEMENT
DOCUMENT TYPE 2
COUNT 89
PAGE 1
PARTICIPATION AGREEMENT
AMONG
FMC CORPORATION,
HARSCO CORPORATION,
HARSCO DEFENSE HOLDING, INC.
AND
UNITED DEFENSE, L.P.
DATED AS OF JANUARY 1, 1994
PAGE 2
TABLE OF CONTENTS
Page
ARTICLE I 1
SECTION 1.1 DEFINITIONS 8
ARTICLE II 1
SECTION 2.0 CLOSING 8
2.1 Actions at Closing 8
2.2 Time and Place of Closing 9
2.3 Post-Closing Adjustments 10
2.3.1 Preliminary Closing Balance Sheets 10
2.3.2 Final Closing Balance Sheets 11
2.3.3 Post-Closing Payment 12
ARTICLE III 5
SECTION 3.0 CONDITIONS PRECEDENT TO CLOSING 13
3.1 Performance 13
3.2 Authorization, Execution and Delivery of
Operative Documents 13
3.3 Governmental and Private Actions; Burdensome
Governmental Conditions 14
3.4 Governmental Rules 14
3.5 Standard Closing Documents 15
3.6 Representations and Warranties 16
3.7 Officer's Certificates 16
3.8 No Material Adverse Change 16
3.9 Insurance 16
3.10 Due Diligence 17
3.11 Proceedings, Opinions and Documents 17
3.12 Partnership Capitalization 17
3.13 Novation Agreement 17
3.14 Intellectual Property Agreements 17
3.15 Lease Agreement 18
3.16 Management Services Agreement 18
3.17 Partnership Agreement 18
3.18 Registration Rights Agreement 18
3.19 Effects Bargaining 18
3.20 Title Insurance 18
ARTICLE IV 9
SECTION 4.0 REPRESENTATIONS AND WARRANTIES. 19
4.1 Organization; Ownership; Interest, Etc. 19
4.2 Authorization; No Conflict 19
4.3 Enforceability 20
4.4 Proceedings 20
4.5 Special Purpose Representation as to Partners 21
4.6 No Defaults; Operative Documents and Contracts 21
4.7 No Outstanding Rights 21
4.8 Title and Liens 22
4.8.1 Title to Assets Other Than Real Property 22
PAGE 3
4.8.2 Title to Real Property 22
4.9 Assets in Good Condition and Working Order 23
4.10 Contracts, Etc. 23
4.11 Legal Matters 25
4.12 Liabilities 25
4.13 No Broker's or Finder's Fees 26
4.14 Financial Information 26
4.15 Events Subsequent to December 31, 1992 26
4.16 Consents 27
4.17 Notice of Governmental Authorization and
Compliance With Laws 28
4.18 Government Contracts 28
4.19 Capital Stock and Equity Interests of Defense
Affiliates and Defense Subsidiaries 29
4.20 Intellectual Property Rights 30
4.21 Employee Benefits and Contracts 31
4.22 Bargaining Agents 35
4.23 Impact of Transaction 35
4.24 Employment Contracts and Benefits 35
4.25 Labor Controversies; Affirmative Action 35
4.26 Disclosure 36
4.27 Operation of Schedule Disclosures. 36
4.28 Post-employment Benefits 36
ARTICLE V 23
SECTION 5.0 COVENANTS 37
5.1 Covenants of Parents 37
5.1.1 Conduct of Businesses 37
5.1.1.1 Ordinary Course 37
5.1.1.2 Access to Information 38
5.1.1.3 Advice of Changes 38
5.1.1.4 Revisions to Contracts 38
5.1.2 Other Agreements 39
5.1.3 Planning Information 39
5.1.4 Taxes; Charges; Laws 39
5.1.5 Liens 40
5.1.6 No Solicitation 40
5.1.7 Environmental Permits, Licenses and
Other Authorizations 40
5.2 Transfer and Deliveries at Closing; Deferrals
of Transfer and Assumption 41
5.2.1 Transfer and Deliveries 41
5.2.2 Deferrals 41
5.3 Further Assurances 41
5.3.1 Pre-Closing 41
5.3.2 Post-Closing 42
5.4 Parent Undertaking as to Partner Obligations 42
5.5 Transfer of or Liens on Ownership Interests of
Partners 42
5.5.1 General Rule 42
5.5.2 Intra-Parent Exception 43
PAGE 4
5.6 Public Announcements 43
5.7 Certain Taxes 43
5.8 Confidential Information 44
5.9 Employee and Employee Benefits Matters 45
5.9.1 Offers of Employment 45
5.9.2 Transition Benefit Plans 46
5.9.3 Partnership Benefit Plans 47
5.9.4 Development of Partnership Benefit
Plans and Policies 48
5.9.5 Qualified Pension Plans 49
5.9.6 401(k) Plans 52
5.9.7 Postretirement Benefit and Other Plans 53
5.9.8 Nonqualified Plans 54
5.9.9 Other Benefit Plans 54
5.9.10 Collective Bargaining Agreements 54
5.9.11 No Rights 55
5.9.12 FICA 55
5.9.13 NSD Decree 55
5.9.14 Stock Option Plans 55
5.9.15 Long-term Incentive Compensation 56
5.10 Lack of Consents 56
5.11 Third Party Consent Procedures 56
5.12 Non-Dissolution 59
5.13 Santa Clara Properties 59
5.14 Buyback of Accounts Receivable. 60
5.15 Pre-Closing Workers' Compensation. 60
5.16 Slow-Moving Inventory 60
5.17 Consultant and Audit Costs 61
5.18 Post-Closing Cash Advances 61
5.19 Responsibility for Inactive Contracts 62
5.20 Accounts Receivable 63
5.21 Responsibility for Pre-Closing Letters of
Credit, Etc. 63
5.22 Environmental Matters 64
5.22.1 Payments by Parents to Account for Losses
Resulting from Remedial Expenditures 64
5.22.2 Presumptions Regarding Environmental
Liability Events 65
5.22.3 Quarterly Status Reports; Realization
Efforts 66
5.22.4 Record keeping; Resolution of Amount of
Realization 67
5.22.5 Contributions to Capital 73
5.22.6 Monitoring by Harsco 74
5.22.7 Examples 75
5.23 Goodyear Litigation 75
ARTICLE VI 54
SECTION 6.0 INDEMNITIES. 76
6.1 General 76
6.2 Liability for Environmental Matters 77
PAGE 5
6.3 Indemnification for Pension, Retiree Medical
and Other Employee Benefits 78
6.4 Indemnification for Demolition Costs. 79
6.5 Procedures 80
6.6 Defense of Third Party Claims 80
6.7 Indemnification Payments 81
6.8 Limitations and Exclusions 83
6.9 Liability of Partnership 83
ARTICLE VII 59
SECTION 7.0 MISCELLANEOUS 83
7.1 Notices 83
7.2 Severability 83
7.3 Entire Agreement; Amendment and Waiver;
Remedies 84
7.4 Limitations 84
7.5 Table of Contents; Headings 85
7.6 Parties in Interest; Limitation on Rights of
Others 85
7.7 Binding Effect. 85
7.8 Governing Law 85
7.9 Jurisdiction; Court Proceedings 86
7.10 Termination 86
7.11 Expenses 87
7.12 Survival 87
7.13 Advice of Legal Counsel 87
7.14 Noncompetition 87
Annex A Definitions
Annex B Terms of Contingent Rights and Obligations of
FMC and Harsco
Schedule 2.3.1 Adjustments
Schedule 4.2 Authorization; No Conflict
Schedule 4.4 Proceedings
Schedule 4.8.2A Real Property Transferred or Leased by FMC
Schedule 4.8.2B Real Property Transferred or Leased by Harsco
Schedule 4.9A FMC Aged Receivables
Schedule 4.9B Harsco Aged Receivables
PAGE 6
Schedule 4.10 Certain Existing Contracts and Defaults
Schedule 4.11 Litigation, Investigations and/or Other Proceedings
Schedule 4.12 Liabilities
Schedule 4.14A FMC Pro Forma Balance Sheet
Schedule 4.14B Harsco Pro Forma Balance Sheet
Schedule 4.15 Events Subsequent to December 31, 1992
Schedule 4.16 Consents
Schedule 4.17 Notice of Governmental Authorizations and
Compliance with Laws
Schedule 4.18 Government Contracts
Schedule 4.19 Capital Stock and Equity Interests
of Defense Affiliates and Defense Subsidiaries
Schedule 4.20 Intellectual Property
Schedule 4.21.1 Employee Benefits and Contracts
Schedule 4.21.8 Actuarial Assumptions
Schedule 4.21.11 Employee Benefit Cost Disallowances
Schedule 4.22 Bargaining Agents
Schedule 4.24 Binding Commitments, Promises and
Representations to Employees
Schedule 4.25 Labor Controversies; Affirmative Action
Schedule 5.9.1 Transferred Employees
Schedule 5.9.3 Partnership Nonunion Pension Plans
Schedule 5.11 Procedure for Obtaining Consents
Schedule 5.14 VLS Receivables
Schedule 5.16 Slow-Moving Inventory
Schedule 5.22.2 Environmental Liability Events
Schedule 5.22.7 Examples
PAGE 7
Schedule 6.1 Accrued Liabilities
Schedule 7.1 Notices, Addresses, Fax Numbers, Etc.
Exhibit A Demand Note
Exhibit B Assumption Agreement
Exhibit C Confidentiality Agreement
Exhibit D Promissory Note
Exhibit E Opinions of Counsel
Exhibit F Intellectual Property Agreements
Exhibit G Lease Agreement
Exhibit H Management Services Agreement
Exhibit I Partnership Agreement
Exhibit J Registration Rights Agreement
PAGE 8
This PARTICIPATION AGREEMENT (this "Agreement") is made
as of January 1, 1994, by and among FMC CORPORATION, a Delaware
corporation ("FMC"), HARSCO CORPORATION, a Delaware corporation
("Harsco"), HARSCO DEFENSE HOLDING, INC., a Delaware corporation
("Harsco L.P.") and UNITED DEFENSE, L.P., a Delaware limited
partnership ("Partnership").
WHEREAS, FMC and Harsco each possess distinctive
competencies relating to the manufacturing, marketing, selling,
and servicing of defense products and systems; and
WHEREAS, FMC and Harsco desire to create a limited
partnership for the manufacture and sale of defense-related
products as generally provided for in this enabling agreement and
as further described in the Operative Documents (as defined
herein).
NOW, THEREFORE, in consideration of the mutual
covenants, and subject to the terms and conditions, contained
herein, the parties hereby agree that:
ARTICLE I
SECTION 1.1 DEFINITIONS. Except as
otherwise defined herein, terms used herein
in capitalized form shall have the meanings
attributed to them in Annex A to this Agreement.
ARTICLE II
SECTION 2.0 CLOSING.
2.1 Actions at Closing. At or prior to
the Closing, in reliance upon the representations
and warranties set forth herein and subject to the
satisfaction (or waiver by the applicable party) of
the conditions set forth herein, FMC and Harsco
shall (or shall cause their respective Affiliates
to) accomplish the following actions and consummate
the following transactions:
2.1.1 A Certificate of Good Standing
shall have issued by the Delaware Secretary of State
with respect to FMC. An appropriate Certificate of
Incorporation for Harsco L.P. shall have been filed
with the Secretary of State of the State of
Delaware. A Certificate of Good Standing shall have
issued by the Delaware Secretary of State with
respect to Harsco L.P. and appropriate By-Laws shall
have been adopted. FMC and Harsco L.P. shall have
executed and filed in the Office of the Secretary of
State of
PAGE 9
Delaware a Certificate of Limited Partnership,
thereby forming a Delaware limited partnership to be
known as United Defense, L.P.; and
2.1.2 Except for the Novation Agreement,
the Operative Documents not theretofore executed and
delivered shall be executed and delivered. Those
agreements which have been attached hereto as
Exhibits at the Signing Date shall be executed and
delivered substantially in the respective forms
attached to this Agreement, and those agreements
which have not been attached hereto as Exhibits at
the Signing Date shall be in form and substance
satisfactory to the parties when executed; and
2.1.3 Except as otherwise agreed by the
parties in writing, FMC shall transfer, or cause to
be transferred, to the Partnership the FMC Assets
and the FMC Liabilities (provided, that FMC may
elect not to transfer accounts receivable equal to
its estimate of the excess, if any, of the Net Book
Value of the FMC Assets and FMC Liabilities (with
such accounts receivable included) over FMC's Target
Net Asset Value); and
2.1.4 Except as otherwise agreed by the
parties in writing, Harsco shall transfer, or cause
to be transferred, to the Partnership the Harsco
Assets and the Harsco Liabilities (provided, that
Harsco may elect not to transfer accounts receivable
equal to its estimate of the excess, if any, of the
Net Book Value of the Harsco Assets and Harsco
Liabilities (with such accounts receivable included)
over Harsco L.P.'s Target Net Asset Value); and
2.1.5 If the estimated Net Book Value of
the transfer under 2.1.3 or 2.1.4 above is less than
the Target Net Asset Value for the affected party,
such party shall transfer or cause to be transferred
to the Partnership an amount of additional cash or a
demand note in the form of Exhibit A equal to the
difference between such estimated Net Book Value and
such Target Net Asset Value. The aggregate
transfers by or on behalf of each of FMC and Harsco
L.P. pursuant to Sections 2.1.3, 2.1.4 and 2.1.5
shall constitute each party's Initial Capital
Contribution subject to adjustment pursuant to
Section 2.3.3; and
2.1.6 The Partnership shall execute the
Assumption Agreement (or Agreements), substantially in
the form of Exhibit B hereto, necessary to assume the
Liabilities.
2.2 Time and Place of Closing. The Closing
shall take place at the offices of FMC, 200 East Randolph
Drive, Chicago, Illinois. The parties intend to
PAGE 10
Close effective as of 12:01 A.M. Chicago time on
January 1, 1994. The parties agree that if the
Closing has not occurred by February 1, 1994 or such
later date as the parties mutually agree, either
Parent may by written notice to the other Parent,
advise the other Parent of its intention not to
proceed with the transactions contemplated herein
and in the other Operative Documents, without any
penalty or any obligation of any sort owed to any
other party other than any ongoing obligations of
confidentiality contained in the Confidentiality
Agreement, attached hereto as Exhibit C, other than
any liability for prior breach of this Agreement and
other than any liability under Section 5.17 or
Section 7.11.
In order to effectuate the foregoing
intent to Close effective as of 12:01 A.M. Chicago
time on January 1, 1994 if all conditions to Closing
(other than those set forth in Sections 3.2, 3.5,
3.7 and 3.14 to 3.18) have not been met or waived by
such date, each Parent agrees (i) to close the
financial books of its Defense Business as of
December 31, 1993 and (ii) to calculate, within
fifteen Business Days following the actual date of
Closing, the amount of cash flow of its Defense
Business from January 1, 1994 to the actual date of
Closing and to remit such amount to the Partnership
by such fifteenth Business Day; provided, however,
that if either Parent's Defense Business has
negative cash flow during such period, the Target
Net Asset Value of such Parent's Partner shall be
reduced by the amount of such negative cash flow.
It is the parties' intention (i) to close on January
28, 1994, (ii) that the Partnership will assume all
Liabilities and the Parents will transfer all Assets
on the actual date of Closing and (iii) that the
Preliminary Closing Balance Sheets will be audited
as of January 1, 1994 based on the Assets and
Liabilities that would have been contributed or
transferred to the Partnership if the actual date of
Closing had been January 1, 1994. The Accountants
shall review the Partners' respective cash flow
calculations to determine whether such calculations
are consistent with the cash flow that the
Partnership would have received had the Closing
occurred on January 1, 1994. In the event that the
Accountants determine that there is an inconsistency
in any Partner's calculation, such Partner shall
make an adjustment to the amount of cash flow
remitted by it in accordance with the Accountants'
determination.
2.3 Post-Closing Adjustments.
2.3.1 Preliminary Closing Balance Sheets. As
soon as practicable, but in no event more than 45
days, after the actual date of Closing,
PAGE 11
each Parent will prepare (and the Partnership will
assist and cooperate in such preparation at no cost
to the Parents) a balance sheet as of January 1,
1994 for its Defense Business which reflects the
Assets and Liabilities which would have been
contributed or transferred to the Partnership at the
Closing had the Closing occurred on January 1, 1994
(the "Preliminary Closing Balance Sheet"). Each of
the Preliminary Closing Balance Sheets (i) will be
audited and reported on by such Parent's certified
public accountants as being in accordance with GAAP
and the Principal Accounting Procedures, prepared on
a basis consistent with the appropriate Pro Forma
Balance Sheet, except as set forth on Schedule 2.3.1
and (ii) will reflect the types of Assets and
Liabilities reflected on the Pro Forma Balance Sheet
and the cash and any demand note contributed or
transferred to the Partnership by such Parent and
its Affiliates (and no other assets or liabilities).
Each Parent and its representatives will be entitled
to review such Preliminary Closing Balance Sheet and
all relevant books, records and workpapers of the
other Parent and its accountants.
2.3.2 Final Closing Balance Sheets. Within 30 days after
its receipt of the other Parent's Preliminary
Closing Balance Sheet, each Parent shall notify the
other whether it accepts or disputes the accuracy of
the Preliminary Closing Balance Sheet. If such
reviewing Parent accepts the preparing Parent's
Preliminary Closing Balance Sheet, such Preliminary
Closing Balance Sheet shall be deemed to be the
final balance sheet as of the end of business on the
Closing Date ("Final Closing Balance Sheet"). If
the reviewing Parent disputes the accuracy of the
Preliminary Closing Balance Sheet, it will in the
notice of such dispute set forth in reasonable
detail those items that it believes are not fairly
presented and the reasons for its opinion. The
parties shall then meet and in good faith use all
reasonable efforts to resolve their disagreements
over the disputed items on such Preliminary Closing
Balance Sheet. If the parties resolve their
disagreements in accordance with the foregoing
sentence, the Preliminary Closing Balance Sheets
with those modifications to which the parties will
have agreed shall be deemed to be the Final Closing
Balance Sheets. If the parties have not resolved
their disagreements over the disputed items on the
Preliminary Closing Balance Sheets within 20 days
after notice of the dispute was given, the parties
shall jointly select an independent accounting firm
of national reputation, and such firm will make,
PAGE 12
within 30 days after its engagement, a binding
determination of those disputed items in accordance
with the terms of this Participation Agreement. The
Preliminary Closing Balance Sheets with such
modifications as determined by such independent
accounting firm to be appropriate will be deemed to
be the Final Closing Balance Sheets. The fees and
expenses of each Parent in connection with the
preparation of its Preliminary and Final Closing
Balance Sheets will be paid by such Parent, and the
fees and expenses of any independent accounting firm
will be shared equally by the Parents.
2.3.3 Post-Closing Payment. If either Partner's estimated
Initial Capital Contribution pursuant to Sections
2.1.3, 2.1.4 and 2.1.5 as shown on its Final Closing
Balance Sheet is less than such Partner's Target Net
Asset Value, then FMC or Harsco L.P., or both, as
the case may be, will, within three Business Days of
the final determination of such Final Closing
Balance Sheet, pay to the Partnership cash or assign
to the Partnership accounts receivable of its
Defense Business equal to such difference. Any such
payment or assignment required to be made to the
Partnership by FMC or Harsco L.P. shall bear
interest at the rate of three month LIBOR at the
actual date of Closing, plus 100 basis points, from
the actual date of Closing through the date such
payment is made. If accounts receivable are
assigned in lieu of cash, the assigning Partner
shall pay interest, at the rate of three month LIBOR
at the actual date of Closing, plus 100 basis
points, on such receivables from the actual date of
Closing to the earlier of the date on which such
account receivable is collected in full or the date
on which such account receivable is repurchased in
its entirety by the assigning Partner pursuant to
Section 5.14. If either Partner's estimated Initial
Capital Contribution pursuant to Sections 2.1.3,
2.1.4 and 2.1.5 as shown on its Final Closing
Balance Sheet is greater than such Partner's Target
Net Asset Value, then the Partnership will within
three Business Days of the final determination of
such Final Closing Balance Sheets transfer to FMC or
Harsco L.P., as the case may be, an amount in
accounts receivable or demand notes contributed by
such Partner equal to such excess. If there are
insufficient accounts receivable and demand notes
for this purpose, the Partnership shall issue a one-
year promissory note to such Partner for the
remainder of such excess estimated Initial Capital
Contribution.
PAGE 13
Such Promissory Note shall be in the form attached
hereto as Exhibit D and shall be repaid in full
prior to making any distributions to any Partner
other than distributions pursuant to Sections 6.1,
6.2 and 6.3 of the Partnership Agreement. Any such
payment in accounts receivable or demand notes
required to be made by the Partnership to FMC or
Harsco L.P. shall bear interest at the rate of one
year LIBOR at the actual date of Closing, plus 100
basis points, from the actual date of Closing
through the date such payment is made. Any one-year
promissory note delivered by the Partnership to
either FMC or Harsco L.P. shall bear interest from the actual date of
Closing at the rate of one year LIBOR at the actual
date of Closing, plus 100 basis points.
ARTICLE III
SECTION 3.0 CONDITIONS PRECEDENT TO
CLOSING. The obligation of a party hereto (a
"Closing Party") to complete the transactions
contemplated hereunder ("Close") is subject to the
fulfillment or waiver at or before the Closing of
the conditions set forth in this Article III. The
Closing of the transactions contemplated hereby
constitutes a waiver by each party hereto of any
nonfulfillment of a condition set forth below solely
for purposes of its obligation to Close.
3.1 Performance. Each
other Closing Party and each other party to any
other Operative Documents which is not an Affiliate
of such other Closing Party (the "Condition Party")
shall have performed and complied with each
agreement and condition in each Operative Document
required to be performed or complied with by such
Condition Party at or before the Closing, except for
the Novation Agreement which will be entered into
following the Closing and except to the extent that
such noncompliance by any other Condition Party
would not have a Material Adverse Effect on the
Partnership.
3.2 Authorization, Execution and Delivery
of Operative Documents. Except for the
Novation Agreement, each Operative Document shall
have been
PAGE 14
duly authorized, executed and delivered by each
Condition Party which is a party thereto and
executed and delivered by the Partnership and an
executed counterpart shall have been delivered to
such Closing Party. The Partnership Agreement shall
have been duly authorized, executed and delivered by
the Partners, a Certificate of Limited Partnership
shall have been filed with the Secretary of State of
Delaware and the Registration Rights Agreement shall
have been duly authorized, executed and delivered by
the respective parties thereto.
3.3 Governmental and Private Actions;
Burdensome Governmental Conditions. There shall be no pending or threatened
Burdensome Governmental Condition with respect to
the transactions contemplated hereby and no known
DOJ or FTC antitrust investigation pending or in
progress with respect to such transactions. Except
for execution and delivery of the Novation
Agreement, all Governmental Actions (other than
routine qualifications and permits to do business
intended to be obtained as needed and other than
employee pension and thrift plan approvals) and all
Private Actions (except for third-party Consents to
Restricted Contracts, which are governed by Section
5.11 hereof) required to be taken, given or obtained
that are necessary in connection with the
transactions contemplated by any Operative Document
shall (i) have been taken, given or obtained on
terms reasonably satisfactory to each Parent, (ii)
be in full force and effect as of the Closing and
(iii) not be subject to any Burdensome Governmental
Condition.
3.4 Governmental Rules. No Governmental Rule shall have been
instituted or issued to set aside, restrain, enjoin
or prevent the consummation of the transactions
contemplated by any Operative Document. No change
shall have occurred since the Signing Date in any
Governmental Rule that, in such Closing Party's
reasonable opinion, would make it illegal for such
Closing Party, any Affiliate of such Closing Party
or the Partnership to consummate the transactions
contemplated by the Operative Documents or subject
such Closing Party, any Affiliate of such Closing
Party or the Partnership to any substantial penalty
or other substantial liability under or pursuant to
any existing Governmental Rule.
PAGE 15
3.5 Standard Closing Documents. Such Closing Party shall
have received, with respect to each other Closing
Party:
3.5.1 a certificate or certificates dated
the Closing Date of a senior corporate officer,
secretary or other appropriate authorized signatory
of such Closing Party certifying as to:
3.5.1.1 the corporate charter and
bylaws, recently certified, in the case of the
charter, by the secretary of state or similar
Governmental Authority of the jurisdiction in which
such Closing Party is incorporated, or the
equivalent for a partnership, to the extent that
such certification legally exists;
3.5.1.2 the absence of amendments
since the date of the last amendment shown on the
official evidence as to such charter furnished
pursuant to this Section 3.5.1;
3.5.1.3 resolutions, delegations or
other written evidence of corporate or other action
of the appropriate authority within such Closing
Party and, if applicable, the stockholders or
partners of such Closing Party duly authorizing or
ratifying its execution, delivery and performance of
each Operative Document to which it is or is to be
party and the absence of other resolutions,
delegations or such other corporate action relating
thereto;
3.5.1.4 the absence of proceedings
for the merger, consolidation, sale of all or
substantially all assets, dissolution, liquidation
or similar proceedings with respect to such Closing
Party; and
3.5.1.5 the incumbency and
signatures of the individuals authorized to execute
and deliver documents on such Closing Party's
behalf;
3.5.2 recent official evidence from
appropriate Governmental Authorities as to (A)
charter documents on file and good standing in such
Closing Party's jurisdiction of organization and (B)
in the case of the Partners, qualification to do
business in each jurisdiction in which its Defense
PAGE 16
Business is required to be qualified, which shall be
at least one jurisdiction; and
3.5.3 an opinion of counsel to such
Closing Party with respect to the matters set forth
in Exhibit E hereto, dated as of the actual date of
Closing.
3.6 Representations and Warranties. The representations
and warranties of each Closing Party in Article IV
shall be true and correct at and as of the Signing
Date and the actual date of Closing, in each case in
all material respects, except as otherwise
contemplated by this Agreement.
3.7 Officer's Certificates.
3.7.1 Each Closing Party shall have
received an officer's certificate (or a similar
certificate) from the Secretary (or more senior
officer) of each of the other Closing Parties (other
than the Partnership) dated the Closing Date
certifying that the conditions set forth in Sections
3.1, 3.2, 3.3, 3.4, 3.6 and 3.8 have been satisfied
as to such Closing Party.
3.7.2 FMC shall have received a
Secretary's Certificate from the Corporate Secretary
of Harsco certifying to the fact that as of both the
Signing Date and the actual date of Closing, Harsco
L.P. was and is a wholly-owned Subsidiary of Harsco.
3.8 No Material Adverse Change. Since the Signing Date,
there shall not have occurred any material adverse
change in (i) the assets, liabilities, operations,
financial condition or prospects of either Defense
Business or (ii) the financial condition of either
Parent, on a consolidated basis together with its
Affiliates.
3.9 Insurance. All
insurance policies and programs reflected on Exhibit
A to the Partnership Agreement shall be in full
force and effect on the actual date of Closing and
all premiums, commissions and fees then due thereon
shall have been paid (or arrangements, reasonably
satisfactory to Harsco, shall have been made for
such payment).
PAGE 17
3.10 Due Diligence.
The results of any due diligence investigation by
each Closing Party shall not have revealed any event
or condition not disclosed to such Closing Party
prior to the Signing Date that would have a Material
Adverse Effect on the Partnership.
3.11 Proceedings, Opinions and Documents. All opinions,
certificates and other documents to be delivered to
such Closing Party pursuant to Section 2.0 and this
Article III and all proceedings in connection with
the transactions contemplated by Section 2.0 and
this Article III shall be reasonably satisfactory to
such Closing Party. Such Closing Party shall have
received (i) evidence reasonably satisfactory to it
that each condition set forth in this Article III
has been satisfied and (ii) copies of all other
documents and other evidence as it may reasonably
request, in form and substance reasonably
satisfactory to it, with respect to such
transactions and the taking of all necessary
corporate or other proceedings in connection
therewith.
3.12 Partnership Capitalization. The Parents shall have
paid or caused to be paid their respective portions
of initial cash contributions required to be made by
the Closing Date pursuant to Sections 2.1.3, 2.1.4
and 2.1.5 of this Agreement as of the actual date of
Closing.
3.13 Novation Agreement. There shall have been no written
statements from DOD that it will only novate the
Contracts to which it is a party on terms that would
have an adverse effect on the Partnership or any
Parent or that it will not approve novation of such
Contracts.
3.14 Intellectual Property Agreements14
Intellectual Property Agreements. FMC and Harsco
shall have each entered into Intellectual Property
Agreements with the Partnership, substantially in
the forms of Exhibits F-1 and F-2 hereto, and
Limited Non-Exclusive Licenses with the Partnership.
PAGE 18
3.15 Lease Agreement.
FMC and the Partnership shall have entered into the
Lease Agreement, substantially in the form of
Exhibit G hereto.
3.16 Management Services Agreement. FMC shall have
entered into a Management Services Agreement with
the Partnership, substantially in the form of
Exhibit H hereto.
3.17 Partnership Agreement. FMC and Harsco L.P.
shall have entered into the Partnership Agreement, substantially in the
form of Exhibit I.
3.18 Registration Rights Agreement. FMC, Harsco and the
Partnership shall have entered into the Registration
Rights Agreement, substantially in the form of
Exhibit J hereto.
3.19 Effects Bargaining. To the best of each Closing Party's
Knowledge, any "effects bargaining" by Harsco and
FMC with their respective Defense Business
collective bargaining representatives shall not have
resulted in claims or demands by either collective
bargaining representative which would have a
reasonable likelihood of resulting in a Material
Adverse Effect on the Partnership.
3.20 Title Insurance.
Each of FMC and Harsco shall have delivered to the
Partnership (i) at least ten Business Days prior to
the actual date of Closing, a commitment, issued by
a title insurance company reasonably acceptable to
the other Parent, to insure the Owned Property
contributed by it to the Partnership, showing title
to such property in such contributing Parent, (ii)
an ALTA owner's title insurance policy (4-6-90
version or the most recent version in use in the
state where any particular parcel of Owned Property
is located) in the amount of $7,821,000 in the case
of FMC's Owned Property and $12,700,000 in the case
of Harsco's Owned Property, containing no exceptions
other than those listed (or not required to be
listed) on Schedule 4.8.2A or 4.8.2B and insuring
fee simple title to all Owned Property contributed
by it to the Partnership (the
PAGE 19
cost of which policy shall be paid for or reimbursed
by the Partnership after the Closing) and (iii)
limited warranty deeds in recordable form conveying
to the Partnership such Owned Property.
ARTICLE IV
SECTION 4.0 REPRESENTATIONS AND
WARRANTIES. Each of the Parents represents and
warrants to the other Parent and the Partnership,
and, with respect to Sections 4.1 through 4.4, the
Partnership represents and warrants to both Parents,
at and as of the Signing Date and the actual date of
Closing that:
4.1 Organization; Ownership; Interest,
Etc1 Organization; Ownership; Interest, Etc. It and
each of its Defense Affiliates is, or will be by the
actual date of Closing, in the case of its Defense
Affiliates, duly organized or established, validly
existing and in good standing under the laws of its
jurisdiction of organization or establishment and it
and each of its Defense Affiliates has, or will have
by the actual date of Closing, in the case of its
Defense Affiliates, the power and authority to carry
on its business as then conducted, to own or hold
under lease its properties and to enter into and perform its
obligations under each Operative Document to which
it is or is to be a party.
It and each of its Defense Affiliates is
or, in the case of its Defense Affiliates, will be
in timely fashion duly organized, qualified to own
or lease its properties and generally to conduct
business as currently or proposed to be conducted in
each jurisdiction necessary for purposes of the
transactions contemplated by the Operative
Documents. All of the ownership interest in Harsco
L.P. will be held by Harsco free from any Liens on
the actual date of Closing.
4.2 Authorization; No Conflict. It and each of its
Defense Affiliates has or, in the case of its
Defense Affiliates, will have by the actual date of
Closing, duly authorized by all necessary action the
execution, delivery and performance of each
Operative
PAGE 20
Document to which it is or is to be a party, and,
except as set forth on Schedule 4.2, neither its
execution and delivery thereof nor its consummation
of the transactions contemplated thereby nor its
compliance therewith does or will (i) require any
approval of its stockholders not theretofore
obtained or any approval or consent of any trustee
or holders of any of its Debt or obligations, (ii)
contravene any Governmental Rule applicable to or
binding on it or any of its properties, (iii)
contravene or result in any breach of or constitute
any default under, or result in the creation of any
Lien (other than Permitted Liens) upon any of its
property under, any indenture, mortgage, chattel
mortgage, deed of trust, conditional sales contract,
loan or credit agreement, charter, bylaw or other
agreement or document to which it is a party or by
which it or any of its properties is bound or
affected or (iv) require the taking of any
Governmental Action or any Private Action, in each
case except such as have been, or by the actual date
of Closing will be, duly obtained, made, taken or
waived (except, in the cases of clauses (ii), (iii)
and (iv), as would not have a Material Adverse
Effect on such Parent, its Defense Business or the
Partnership).
4.3 Enforceability.
It and each of its Affiliates, as applicable, have
duly executed and delivered this Agreement, and this
Agreement constitutes, and each other Operative
Document to which it and each of its Defense
Affiliates, as applicable, are or are to be parties
upon execution and delivery thereof by it or the
applicable Defense Affiliate will constitute, its or
the applicable Defense Affiliate's legal, valid and
binding obligation, enforceable against it or the
applicable Defense Affiliate in accordance with its
terms, except as may be limited by bankruptcy,
insolvency, reorganization and similar laws
affecting creditors generally and by the
availability of equitable remedies.
4.4 Proceedings. Except
as set forth on Schedule 4.4, there are no actions
or proceedings pending
or, to its Knowledge, threatened, before any
Governmental Authority that, if adversely determined
against it, would have a Material Adverse Effect on
such Parent, its Defense Business or the
Partnership.
PAGE 21
4.5 Special Purpose Representation as to
Partners. In the case of any Affiliate that will
become a Partner in the Partnership, such Partner on
the actual date of Closing: (i) will be duly
incorporated and sufficiently capitalized to meet
its then current obligations to make contributions
to the Partnership; (ii) will not have conducted any
business other than to enter into and perform its
obligations under the Operative Documents; (iii)
will have no outstanding Debt or other obligations
other than Debt owed to its Parent or pursuant to
the Operative Documents and Contracts to which it is
a party; and (iv) will not be a party to or be bound
by any contract or other document other than such
Operative Documents to which it is a party, its
organizational documents, and such other documents,
agreements and contracts between it, its Parents and
Affiliates of its Parents necessary and desirable to
enable it fully to perform the functions and
activities contemplated by this Agreement and the
other Operative Documents.
4.6 No Defaults; Operative Documents and
Contracts. It has not received any notification to
the effect that any material Contract is not in full
force and effect or will not be immediately after
the Closing, and it has not received any
notification of default, repudiation or
disaffirmance from any other party thereto and has
no reason to believe that any material Contract will
not be in full force and effect immediately after
the Closing, except to the extent that such event or
condition as would not have a Material Adverse
Effect on such Parent, its Defense Business or the
Partnership.
4.7 No Outstanding Rights. There are no outstanding
rights, options, agreements or other commitments and
on the actual date of Closing, except as provided in
the Operative Documents or the Schedules attached
thereto, there will be no outstanding rights,
options, agreements or other commitments, giving any
Person any current or future right to require such
Partner, its Parent or any of their Affiliates (or,
following the actual date of Closing, the
Partnership) to transfer to any Person any ownership
or possessory interests in any Assets,
PAGE 22
Contracts and Liabilities of such Partner, its
Parent or any of their Affiliates.
4.8 Title and Liens.
4.8.1 Title to Assets Other Than Real
Property. Such Partner or one of its Affiliates
has, and at the Closing, the Partnership shall
receive, good title to all tangible Assets other
than Real Property that are purportedly owned, free and clear of all
Liens, other than Permitted Liens.
4.8.2 Title to Real Property. Schedules 4.8.2A and 4.8.2B set
forth a complete list of all real property and
interests in real property owned in fee by the FMC
Defense Business and the Harsco Defense Business,
respectively, that will be transferred to the
Partnership at Closing (individually, an "Owned
Property"). Schedules 4.8.2A and 4.8.2B also set
forth a complete list of all real property and
interests in real property owned or leased by the
FMC Defense Business and the Harsco Defense
Business, respectively, that will be leased by the
Partnership as the tenant or lessee thereof after
the Closing (individually, a "Leased Property") and
identify any material leases relating thereto.
Except as set forth on Schedule 4.8.2A or 4.8.2B,
each Parent has (i) good and marketable fee title to
all Owned Property and (ii) good and valid title to
the leasehold estates in all Leased Property,
including subleases, in each case free and clear of
all mortgages, liens, leases, security interests,
easements, covenants, rights-of-way and other
similar restrictions or encumbrances of any nature
whatsoever, except (a) Permitted Liens,
(b) easements, covenants, rights-of-way and other
similar restrictions or encumbrances of record and
(c) (i) zoning, building and other similar
restrictions, (ii) mortgages, liens, leases,
security interests or encumbrances that have been
placed by any developer, landlord or other third
party on property over which either Defense Business
has easement rights appurtenant to or used in
connection with any Owned Property or on any Leased
Property and subordination or similar agreements
relating thereto and (iii) unrecorded easements and
rights-of-way, encroachments and discrepancies in
area or boundary lines, none of which items set
forth in clauses (b)
PAGE 23
and (c) above, individually or in the aggregate,
materially impair the continued use and operation in
either Defense Business, as presently conducted, of
the property to which they relate and the
improvements located on such property.
4.9 Assets in Good Condition and Working
Order. To its Knowledge, all property, plant,
equipment and inventories included in each Parent's
Assets are in normal working order, except for
ordinary wear and tear, retirements in the ordinary
course of business, normal maintenance and repair
and breakdowns that do not significantly affect
normal operations. All inventories included in each
Parent's Assets are accurately valued and carried on
an average cost basis and, except for such
inventories that constitute Slow-Moving Inventory
(i) are usable or saleable in the normal course of
the Parent's Defense Business; (ii) at the actual
date of Closing, will not be excessive in kind or
amount in light of prior inventory levels at
comparable periods and anticipated sales; and (iii)
are reasonably adequate and sufficient in kind and
amount with respect to actual sales commitments as
of the date hereof and anticipated sales
commitments, in light of historic rates of inventory
turnover. Except as shown on Schedules
4.9A and 4.9B, there is not, with respect to such
Partner's accounts receivable, any known existing
default or any receivable that such Partner does not
reasonably expect to collect within six months of
the actual date of Closing, except as would not,
individually or in the aggregate, have a Material
Adverse Effect on the Partnership. Attached hereto
as Schedules 4.9A and 4.9B are schedules of aged
accounts receivable of the FMC Defense Business and
the Harsco Defense Business, respectively. On the
actual date of Closing, each Parent will submit to
the Partnership an updated list of aged receivables
being transferred to the Partnership.
4.10 Contracts, Etc.
Set forth on Schedule 4.10 are lists of all
contracts, agreements, licenses and commitments
relating to its Defense Business which: (a) provide
for the sale or other disposition of products or
services to customers of, or for the purchase of raw
materials, products or services from suppliers to,
such Defense Business (excluding
PAGE 24
consulting contracts, sales representative
agreements, marketing agreements and lobbying
agreements), other than contracts, agreements,
licenses and commitments which individually (i) do
not involve future payments or receipts of more than
$1,000,000 or (ii) permit cancellation by either
Parent or any Defense Affiliate thereof upon 90 or
fewer days' notice without any liability, penalty or
premium in excess of $100,000; (b) provide the terms
and conditions pursuant to which distributors,
distributor branches, service dealers and direct
dealers (foreign and domestic) provide Defense
Business products, service and parts to end user
customers or relating to the compensation of or
termination of arrangements with such persons or
entities by either Defense Business; (c) set forth
the terms of any material subcontracts, joint
ventures, teaming arrangements, collective
bargaining agreements, leases, employment,
confidentiality or non-competition agreements,
related party transactions or arrangements,
guarantees, debt instruments, off-sets with foreign
governments or intellectual property agreements;
(d) are otherwise material to the business,
operations, financial condition or prospects of the
Partnership; or (e) provide for the procurement by
either Parent of consulting, sales representative,
marketing or lobbying services, regardless of the
amount involved in each such contract. The list of
Contracts set forth on Schedule 4.10 shall indicate
those Contracts for which a novation agreement or
consent to assignment of contract may be required
and shall be separated into the following
categories: (i) government contracts; (ii)
consulting contracts; (iii) sales representative
contracts; (iv) lobbying contracts; (v) supply,
services, and vendor contracts; and (vi) other
contracts. True and complete copies (or originals,
if available) of all Contracts that are listed on
Schedule 4.10 shall be made available, as requested,
to the other Parent for review as soon as
practically possible. There are no known
liabilities in excess of $100,000 in the aggregate
with regard to all classified U.S. Government
contracts to which such Partner is a party. Each
contract providing for the provision of products and
services to customers by either Parent shall be
designated as either an Active Contract or an
Inactive Contract on Schedule 4.10. Except as set
forth in Schedule 4.10, to its Knowledge, there is
not, with respect to the Contracts, any existing
default, or an event of default, or event which with
PAGE 25
due notice or lapse of time or both would constitute
a default or an event of default, on the part of FMC
or Harsco, as the case may be, or the other party
thereto, except such defaults, events of default and
other events which would not, individually or in the
aggregate, have a Material Adverse Effect on the
Partnership. Except as disclosed in Schedule 4.10
(or as not required to be disclosed), no other
contract exists which would bind the Partnership or
which would restrict the ability of the Partnership
to consummate the transactions contemplated hereby
or engage in any business within its Scope of
Activity.
4.11 Legal Matters.
Except as set forth on Schedule 4.11 and except for
provisions in any contract with the U.S. Government
that permit the U.S. Government to terminate such
contract for its convenience, neither Parent nor any
Subsidiary thereof is subject to any Governmental
Rule, Private Action or contract or agreement that
may have a Material Adverse Effect on the
Partnership. There are no material legal
impediments to the operation of such business
activity within the Scope of Activity in the
ordinary course. Except as set forth in Schedule
4.11, there is no governmental or private
litigation, arbitration or other proceeding or
investigation by any Governmental Authority pending
or, to the Knowledge of such Parent, threatened
against such Parent or any Subsidiary thereof that
would materially and adversely affect the Assets or
Contracts (including their transfer to or use by the
Partnership), the Liabilities or the continued
operation of such Assets or Contracts by the
Partnership in the manner in which they have been
operated by each of the Parents to date or have a
Material Adverse Effect on the Partnership.
Further, except as set forth on Schedule 4.11, there
currently exist no judgments unsatisfied against
either Parent or any of its Affiliates in connection
with its Defense Business, nor any consent decree or
injunction to which it is subject. Except as set
forth in Schedule 4.11, neither FMC nor Harsco is
aware of any unfair labor practice on its part or
any acts or omissions on its part which are
reasonably expected to constitute an unfair labor
practice under the National Labor Relations Act.
4.12 Liabilities. Except
for liabilities of the types and in the amounts set
forth on the Pro Forma
PAGE 26
Balance Sheet or the Final Closing Balance Sheet and
liabilities otherwise disclosed on Schedule 4.12 or
on any other Schedule to this Agreement, there are
no liabilities or obligations of any kind (absolute,
accrued, contingent or otherwise), including, but
not limited to, liabilities or obligations relating
to or arising out of the operation of either Defense
Business, that are reasonably expected, individually
or in the aggregate, to have a Material Adverse
Effect on such Parent's Defense Business or the
Partnership.
4.13 No Broker's or Finder's Fees. Neither Parent nor any
Subsidiary has incurred any liability for any
broker's or finder's fees or commissions or similar
payments in connection with any of the transactions
contemplated hereby which will, directly or
indirectly, become the responsibility of, or be
borne by, the Partnership or the other Parent or any
Affiliate thereof.
4.14 Financial Information. Attached hereto as Schedule 4.14A or
4.14B, as the case may be, is such Partner's good
faith estimate at the time of preparation thereof,
based on reasonable assumptions, of the projected
September 30, 1993 balance sheets (each a "Pro Forma
Balance Sheet") of its Defense Business, except as
noted therein. Each Pro Forma Balance Sheet has
been prepared in accordance with GAAP and such
Parent's historical accounting procedures with
respect to its Defense Business, except as noted
therein.
4.15 Events Subsequent to December 31, 1992.
Except as indicated in Schedule 4.15 with respect to
it, from and after December 31, 1992, neither
Parent, with respect to its Defense Business, has:
(i) suffered or experienced any material adverse
change in its financial condition, Assets,
Liabilities, business, results of operations, net
worth or prospects, other than changes in the
ordinary course of business, none of which
(individually or in the aggregate) has been
materially adverse to its financial condition,
Assets, Liabilities, business, results of operation,
net worth or prospects; (ii) suffered any damage,
destruction or loss, whether or not covered by
insurance, which adversely affects its properties,
PAGE 27
Assets or business in any material respect;
(iii) made or granted any increase in the
compensation payable or to become payable to any
employees, or any increase in any bonus, insurance,
pension or other employee benefit arrangement to,
for or with any such employees, other than in the
ordinary course of business or terminated, given
notice of termination to or received notice of the
resignation of any key employee; (iv) mortgaged,
pledged, hypothecated or otherwise encumbered any of
its material assets; (v) sold, licensed or
transferred, or agreed to sell, license or transfer,
any of its assets, other than in the ordinary course
of business; (vi) sold or transferred, or agreed to
sell or transfer, any material patents, trademarks,
trade names, copyrights, licenses, rights to special
processes or other intangible assets previously used
in its operations; (vii) agreed to any material
amendment to or termination of a Contract, or
entered into, accelerated, terminated or modified
any Contract, lease, sublease, rental agreement or
license, in any such case involving more than
$1,000,000; (viii) incurred any new commitment
(through negotiations or otherwise) or liability to
any labor organization; (ix) entered or agreed to
enter into any agreement or arrangement granting
preemptive rights, preferential rights or rights of
first refusal with respect to its Assets;
(x) delayed or postponed beyond its normal and usual
practice the payment of any accounts payable and
other liabilities; (xi) canceled, compromised,
waived, settled or released outside of the ordinary
course of business any right or claim (or series of
related rights and claims) involving more than
$1,000,000; or (xii) entered into any other material
transaction other than in the ordinary course of
business as theretofore conducted.
4.16 Consents. No consent,
authorization, order or approval of, or filing or
registration with, any Governmental Authority is
required for or in connection with the consummation
by each Parent of the transactions contemplated
hereby, except for: (i) those that have been
obtained, (ii) the Novation Agreement, (iii)
circumstances where the failure to obtain such
consent, authorization, order or approval would not
have a Material Adverse Effect on such Parent's
Defense Business or the Partnership and (iv) those
set forth in Schedule 4.16.
PAGE 28
4.17 Notice of Governmental Authorization
and Compliance With Laws. Since
January 1, 1988, except as set forth on Schedule
4.17, with respect to its Assets and its Defense
Business, it has not received any written
notification of any asserted present or past failure
to comply in any material respect with any
applicable laws, regulations or other requirements
of any Governmental Authority having jurisdiction
over it, except for such noncompliance as would
reasonably be expected not to have a Material
Adverse Effect on such Parent's Defense Business or
the Partnership. With respect to its Assets and its
Defense Business, it has obtained all material
permits, certificates, licenses, approvals and other
authorizations (other than pursuant to the Novation
Agreement) required in connection with its present
operations, none of which will lapse, expire,
terminate, be revoked or rescinded or otherwise
become lost or unavailable to the Partnership by
reason of the transactions contemplated by this
Agreement. To the best of its Knowledge, the Assets
and the Defense Business have been operated in
compliance in all material respects with all terms
and conditions of any and all material permits,
licenses and authorizations. Since January 1, 1988,
except as set forth on Schedule 4.17, there has been
no (a) criminal proceeding (whether regarding a
felony or misdemeanor offense) threatened in writing
or commenced with respect to its Defense Business,
however resolved, (b) suspension or debarment
proceeding threatened in writing or commenced by any
Governmental Authority, (c) civil proceeding under
the False Claims Act, as amended, commenced with
respect to its Defense Business, however resolved,
or (d) claim made or threatened in writing by any
Governmental Authority under the Truth in
Negotiations Act or under the Foreign Corrupt
Practices Act of 1977, each as amended.
4.18 Government Contracts. Except as set forth in
Schedule 4.18, it has not received, with respect to its Assets, notice
of any default under or notice of any violation of
the terms of any government contract which relates
to its Defense Business, either directly or as a
subcontractor, consultant or otherwise. Except for
routine audits in the ordinary course of business
and as set forth in Schedule 4.18, it is not
participating in any investigation by any
Governmental Authority relating to its government
PAGE 29
contracts, billings, claims or business practices
that could lead to criminal or civil penalties, and,
to its Knowledge, it is not the subject of any such
investigation relating to its Defense Business.
Except as set forth in Schedule 4.18, since January
1, 1983 it has not been and is not debarred or
suspended by any Governmental Authority from bidding
for or obtaining any government contract (including
as a result of any listing proceeding under 40
C.F.R. Part 15), and no such proceeding is pending,
or to its Knowledge, threatened, which could result
in the debarment or suspension of it or any part of
its Defense Business.
4.19 Capital Stock and Equity Interests of
Defense Affiliates and Defense Subsidiaries. Schedule 4.19
sets forth for each Defense Affiliate and Defense
Subsidiary, as applicable, the amount of its
authorized capital stock, the amount of its
outstanding capital stock, the record owners of its
outstanding capital stock, or the record owners of
its partnership interests and such record owners'
percentage ownership. All the outstanding shares of
capital stock of each Defense Affiliate and Defense
Subsidiary have been duly authorized and validly
issued and are fully paid and nonassessable. Except
as set forth on Schedule 4.19, the shares of capital
stock or partnership interests of any Defense
Affiliate or Defense Subsidiary have not been issued
in violation of, and none of such shares of capital
stock or partnership interests is subject to, any
preemptive or subscription rights. Except as set
forth on Schedule 4.19, there are no shares of
capital stock or other equity securities or
partnership interests of any Defense Affiliate or
Defense Subsidiary outstanding. Except as set forth
on Schedule 4.19, there are no outstanding warrants,
options, "phantom" stock rights, agreements,
convertible or exchangeable securities or other
commitments (other than this Agreement or any other
Operative Document) pursuant to which the
Partnership is or may become obligated to issue,
sell, purchase, return or redeem any shares of
capital stock or other securities of any Defense
Affiliate or Defense Subsidiary, and there are not
any equity securities of any Defense Affiliate or
Defense Subsidiary reserved for issuance for any
purpose. Except as set forth on Schedule 4.19, each
Parent directly or through one or more wholly-owned
subsidiaries has
PAGE 30
good and valid title to all the outstanding shares
of capital stock or partnership interests of each
Defense Subsidiary, free and clear of any liens,
claims, encumbrances, security interests, options,
charges and restrictions whatsoever, and all
outstanding shares of capital stock are duly
authorized and validly issued and outstanding, fully
paid and nonassessable. Except as set forth on
Schedule 4.19, neither Defense Business directly or
indirectly owns any capital stock of or other equity
interests in any corporation, partnership or other
entity.
4.20 Intellectual Property Rights.
4.20.1 The Transferred Intellectual
Property Rights, Licensed Intellectual Property and
Licensed Third Party Rights comprise all of the
intellectual property rights necessary for the
operation of its Defense Business as currently
conducted or proposed to be conducted; it owns,
possesses with the right to use or has a valid and
enforceable license with respect thereto free and
clear of all liens, security interests, encumbrances
and other restrictions and no claim by any third
party contesting the validity, enforceability, use,
possession or ownership of any of the Transferred
Intellectual Property Rights or Licensed
Intellectual Property is currently outstanding or
known to be threatened.
4.20.2 Schedule 4.20 sets forth a
complete and correct list of its Statutory Rights
and Marks constituting Transferred Intellectual
Property Rights and Licensed Intellectual Property
and all licenses or other agreements (including
teaming agreements) to which it is a party relating
to Licensed Third Party Rights and/or Transferred
Intellectual Property Rights or Licensed
Intellectual Property. The Transferred Intellectual
Property Rights will be transferred and/or assigned
to the Partnership at the Closing.
4.20.3 The loss or expiration of any
Statutory Right or Mark or related group of
Statutory Rights or Marks would not have a Material
Adverse Effect and no such loss or expiration is
threatened, pending or reasonably foreseeable;
neither Parent (or any of its Defense Affiliates)
has received any notice of, nor is aware of any
facts which indicate a
PAGE 31
likelihood of, any infringement or misappropriation
by, or conflict with, any third party with respect
to any of its Data Rights, Statutory Rights, Marks
or Licensed Third Party Rights (including, without
limitation, any demand or request that such Parent
or its Defense Affiliates license any rights from a
third party).
4.20.4 The transactions contemplated by
this Agreement will have no material adverse impact
on the right, title and interest in the Transferred
Intellectual Property Rights or Licensed
Intellectual Property or the licenses and other
agreements relating to the Licensed Third Party
Rights. It has taken the necessary action to
maintain and protect the Statutory Rights and Marks
prior to Closing.
4.21 Employee Benefits and Contracts. With respect to
employee benefit programs and contracts applicable
to Plan Participants or other persons:
4.21.1 Except as set forth on Schedule
4.21.1, neither Parent, with respect to its Defense
Business, maintains, contributes to or is a party to
any (i) nonqualified deferred compensation, bonus or
retirement plans or arrangements, (ii) qualified
defined contribution or defined benefit plans or
arrangements which are employee pension benefit
plans (as defined in Section 3(2) of ERISA),
(iii) employee welfare benefit plans (as defined in
Section 3(1) of ERISA) or fringe benefit plans or
programs, (iv) invention and disclosure agreements
and secrecy agreements, or (v) employment contracts,
letters of employment, competition agreements,
compensation, commission, bonus, fee or profit
sharing agreements or stock purchase agreements.
Unless stated otherwise, when used in this Section
4.21, the terms "Pension Plan" and "Welfare Plan"
refer to such respective pension and welfare plans
of Harsco and FMC as listed on Schedule 4.21.1.
4.21.2 Neither Parent, with respect to
its Defense Business, within the last five years,
has contributed to any multiemployer pension plan
(as defined in Section 3(37) of ERISA). Neither
Parent, with respect to its Defense Business, is
aware of any circumstances which would or could
subject it or any successor to withdrawal liability
pursuant to the Multiemployer Pension Plan
Amendments Act.
PAGE 32
4.21.3 Neither Parent, with respect to
its Defense Business, maintains or contributes to
any plan which provides health, accident or death
benefits to former employees, their spouses or
dependents, other than in accordance with Section
4980B of the Code or as disclosed on Schedule
4.21.1.
4.21.4 To each Parent's Knowledge, each
Pension Plan and Welfare Plan (and related trust and
insurance contract) complies in form and in
operation in all material respects with the
applicable requirements of ERISA, the Code and
Federal securities laws; and, with the exception of
the Nonqualified Plans listed on Schedule 4.21.1 and
identified as such, the Pension Plans meet the
requirements of "qualified plans" under Section
401(a) of the Code, each trust related thereto has
been determined to be exempt from tax pursuant to
section 501(a) of the Code, each such Pension Plan
has received a favorable determination letter from
the Internal Revenue Service, and neither FMC nor
Harsco is aware of any event that has occurred since
the date of such determination, including changes in
laws or regulations or modifications to such Pension
Plans, that would adversely affect such
qualification or tax exempt status with respect to
their respective Pension Plans.
4.21.5 To each Parent's Knowledge, all
required reports and descriptions (including, but
not limited to, Form 5500 Annual Reports, Summary
Annual Reports, PBGC-1s and Summary Plan
Descriptions) with respect to each Pension Plan and
Welfare Plan have been properly filed with the
appropriate Governmental Authority and/or
distributed to participants or other interested
parties, and each of FMC and Harsco has complied
with the requirements of Section 4980B of the Code.
4.21.6 With respect to each Pension Plan,
all contributions which are due (including all
employer contributions and employee salary reduction
contributions) have been paid to such Pension Plan
and benefits which are payable from such Pension
Plan have been paid or adequate provision therefore
has been made. With respect to each Welfare Plan,
all premiums, contributions or other payments and
all benefits which are due have been paid.
PAGE 33
4.21.7 No Pension Plan has been
completely or partially terminated nor has it been
the subject of a "reportable event" as that term is
defined in Section 4043 of ERISA as to which notices
would be required to be filed with the PBGC; and no
proceeding by the PBGC to terminate any such Pension
Plan has been instituted or threatened. To its
Knowledge, neither FMC nor Harsco has incurred any
liability to the PBGC, the IRS, the Department of
Labor, any multiemployer plan or otherwise with
respect to any Pension Plan or Welfare Plan
currently or previously maintained by members of
their respective controlled group or their
affiliated service group of companies (as defined in
Sections 414(b) and (c) and (m) of the Code, the
"Controlled Group")that has not been satisfied in
full, and no condition exists under any Pension Plan
or Welfare Plan that presents a material risk to
either FMC or Harsco or any member of FMC's or
Harsco's respective Controlled Group of incurring
such a liability, other than liability for premiums
due the PBGC.
4.21.8 The Accumulated Benefit Obligation
(as defined in Statement of Financial Accounting
Standards No. 87 as to (i), (ii), (iii) and (iv)
below) and the Accumulated Postretirement Benefit
Obligation (as defined in Statement of Accounting
Standards No. 106 as to (v) and (vi) below) as of
December 31, 1993 associated with Plan Participants
under the (i) Qualified Pension Plans maintained by
FMC is estimated to be $154,472,000 using FMC's
actuarial assumptions shown on Schedule 4.21.8, and
the corresponding Fair Market Value of assets
(determined in accordance with Section 5.9.5.2 is
estimated to be $216,118,000; (ii) Qualified Pension
Plans maintained by Harsco is estimated to be
$34,700,000 using Harsco's actuarial assumptions
shown on Schedule 4.21.8, and the corresponding Fair
Market Value of assets (determined in accordance
with Section 5.9.5.2 is estimated to be $44,783,000;
(iii) Nonqualified Plans maintained by FMC is
estimated to be $1,375,000 using FMC's actuarial
assumptions shown on Schedule 4.21.8, and the
corresponding Fair Market Value of assets
(determined in accordance with Section 5.9.8) is
estimated to be $0; (iv) Postretirement Benefit
Plans maintained by FMC is estimated to be
$60,858,000 using FMC's actuarial assumptions shown
on Schedule 4.21.8, and the corresponding Fair
Market Value of assets (determined in accordance
with Section 5.9.7) is estimated to be $20,795,000;
and (v) Postretirement
PAGE 34
Benefit Plans maintained by Harsco is estimated to
be $4,330,000, using Harsco's actuarial assumptions
shown on Schedule 4.21.8, and the corresponding Fair
Market Value of assets (determined in accordance
with Section 5.9.7) is estimated to be $0. The
assets of each Pension Plan described in clauses (i)
and (ii) above will on the actual date of Closing
exceed the respective Accumulated Benefit Obligation
(as defined in Statement of Financial Accounting
Standards No. 87) under such plan.
4.21.9 With respect to each Pension Plan
and each Welfare Plan, (i) there have been no known
prohibited transactions as defined in Section 406 of
ERISA or Section 4975 of the Code, (ii) there has
not been asserted against any fiduciary (as defined
in Section 3(21) of ERISA) or any disqualified
person (as defined in Section 4975 of the Code) any
claim for liability for breach of fiduciary duty or
any other failure to act or comply in connection
with the administration of the plan or the
investment of the assets of such plan, and (iii) no
actions, investigations, suits, claims or any
similar matters (other than routine claims for
benefits) are pending or threatened against such
plan or its respective sponsor, and neither FMC nor
Harsco has Knowledge of any facts which would give
rise to or could reasonably be expected to give rise
to any such actions, suits or claims.
4.21.10 With respect to each Pension Plan
and each Welfare Plan, each of FMC and Harsco has
furnished to the other true and complete copies of
(i) the most recent plan documents, summary plan
descriptions and summaries of material
modifications, (ii) the most recent determination
letter received from the Internal Revenue Service,
where applicable, (iii) the most recent Form 5500
Annual Report, actuarial valuation report, and
accountant's opinion where applicable, (iv) any
related trust agreements, insurance contracts or
other funding agreements which implement such plans
and (v) Part VII of the most recent CASB Disclosure
Statement.
4.21.11 Except as set forth on Schedule
4.21.11 or otherwise disclosed in writing on January
24, 1994, (i) there are no employee benefit cost
disallowances pending or threatened by any agency of
the U.S. Government and neither FMC nor Harsco has
Knowledge of any facts which would give rise to or
could reasonably be expected to give rise to any
such
PAGE 35
actions and (ii) all employee benefit costs have
been properly determined and, with respect to
Qualified Pension Plans, funded in a timely manner
in accordance with any applicable CAS or FAR and any
such determination is consistent with the CASB
Disclosure Statement and established practices of
FMC or Harsco.
4.22 Bargaining Agents22 Bargaining
Agents. Schedule 4.22 lists each bargaining agent
representing or purporting to represent any
Transferred Employees (whether or not recognized by
such Parent as the recognized collective bargaining
agent) and each collective bargaining agreement
currently applicable to any Transferred Employee to
which such Parent is a party, and such Parent has
furnished to the other Parent and to the Partnership
true and complete copies of each such agreement.
4.23 Impact of Transaction. To its Knowledge, except as
contemplated by this Agreement, no Transferred
Employee of such Parent will become entitled to any
compensation, bonus, retirement, severance, job
security or similar benefit or enhanced benefit
solely as a result of the transactions contemplated
by this Agreement, including the transfer of
Transferred Employees hereunder.
4.24 Employment Contracts and Benefits. Except as set
forth on Schedule 4.24, neither such Parent nor its
directors, officers, shareholders or employees has
made any binding commitments, promises or
representations, including in connection with any
"effects bargaining" required by Section 8(a)(5) of
the National Labor Relations Act, to the employees
of its Defense Business with respect to any change
in the terms and conditions of employment, either
before or after the Closing.
4.25 Labor Controversies; Affirmative Action.
There are no controversies, pending or threatened,
between such Parent and any employees or any
employee benefit plan which may have a Material
Adverse Effect on such Parent's Defense Business
and, to such Parent's Knowledge, no action has been
taken, or has failed to have been taken,
PAGE 36
which would provide a reasonable basis for such a
controversy. To its Knowledge, such Parent has
complied in all material respects with all laws
relating to the employment of labor, including any
provisions relating to wages, hours, collective
bargaining, occupational safety and health,
affirmative action and the payment of vacations,
retirement, social security and similar taxes or
benefits with respect to their respective Defense
Businesses. Such Parent has no Knowledge of any
activities or proceedings of any labor union (or
representatives of labor unions) to organize any
unorganized employees of its Defense Business, or of
any work stoppages, or threats thereof, by or with
respect to those employees. During the twelve month
period preceding the date of this Agreement, there
has not been any significant labor dispute involving
employees of its Defense Business except as listed
in Schedule 4.25. Such Parent does not have has any
affirmative action plans and is not operating under
any compliance commitments with any equal employment
opportunity governmental agency or bureau with
respect to its Defense Business, except those listed
on Schedule 4.25.
4.26 Disclosure. The
representations and warranties contained in this Article IV, and all
written information given by it or any of its
Affiliates to another party pursuant to the terms of
this Agreement, do not contain any untrue statement
of a material fact or omit to state any material
fact necessary to make the statements made, in the
light of the circumstances under which they were
made, not misleading.
4.27 Operation of Schedule Disclosures. To the extent
that an item is disclosed on one of the Schedules
hereto, and the applicability of such item to
another Schedule is reasonably apparent by reference
to the provisions of this Agreement and/or such
other Schedule, such item shall be deemed to be
incorporated into such other Schedule and disclosed
thereon.
4.28 Post-employment Benefits. Harsco's obligations with
respect to its Defense Business for post-employment
benefits, as defined in SFAS 112 but as modified
below, on the actual date of Closing will
PAGE 37
not exceed $2 million in the aggregate and FMC's
obligations with respect to its Defense Business for
post-employment benefits, as defined in SFAS 112 but
as modified below, will not exceed $3 million. For
purposes of this Section 4.28, obligations for post-
employment benefits as defined in SFAS 112 exclude
severance and salary continuation benefits and
exclude workers' compensation benefits and
obligations; provided, however, that, as to FMC,
such severance and salary continuation benefits
satisfy the following conditions: (i) FMC has
currently on reserve approximately $525,000 for
severance and salary continuation benefits with
respect to its Armament Systems Division and such
reserve will be reflected in FMC's Final Closing
Balance Sheet and (ii) substantially all severance
and salary continuation benefits that do not
constitute Consolidation Costs with respect to the
Ground Systems Division's Bradley contract are, to
FMC's knowledge, reimbursable by the U.S.
Government.
ARTICLE V
SECTION 5.0 COVENANTS
5.1 Covenants of Parents. Each Parent covenants to the
other Parent, on behalf of itself and its Defense Affiliates,
that:
5.1.1 Conduct of Businesses. Until the Closing:
5.1.1.1 Ordinary Course. It shall carry on, or
cause to be carried on, its normal and usual activities and
business in connection with the design, development,
manufacture, marketing, sale, maintenance and
support of FMC Assets or Harsco Assets, as the case
may be, in the usual, regular and ordinary course
and, except in connection with any reversal of
reserves which will not be reflected on the Final
Closing Balance Sheets, shall refrain from taking
any action to accelerate the receipt of revenues or
the recognition of income beyond its usual, regular
and ordinary practices as engaged in prior to
September 30, 1993; use, or cause to be used,
efforts no less diligent than heretofore conducted
to preserve intact the activities of its Defense
Business; use all reasonable efforts to keep
PAGE 38
available the services of present officers and key
employees employed in its Defense Business; and use
all reasonable efforts to preserve relationships
with customers, suppliers and others having business
dealings with such Business consistent with its
obligations hereunder. It shall not engage in (i)
any activities outside the ordinary course of the
its Defense Business, including, but not limited to,
the acquisition of, merger with or into or
consolidation with another business operating in the
defense industry and (ii) any activity described in
Section 4.15 above.
5.1.1.2 Access to Information. It shall provide the other
Parent, as reasonably requested, financial
information relating to its Assets and Liabilities
and will provide the other Parent with reasonable
opportunities to physically inspect its books and
records and principal properties and facilities, to
review permits and licenses, correspondence and
other documents issued by or submitted to any
Governmental Authority, including any agency with
jurisdiction relative to Environmental Requirements,
and to interview and obtain information from current
employees, provided that such inspection and
information relate primarily to its Defense
Business.
5.1.1.3 Advice of Changes. It shall promptly notify the
other Parent of any change or event having, or
which, insofar as can reasonably be foreseen, would
have, a Material Adverse Effect on the Partnership,
or which would result in any material inaccuracy in
any representation or warranty at Closing.
5.1.1.4 Revisions to Contracts. In the event that
it or its Subsidiaries enters into contracts in the ordinary
course of business after the Signing Date and prior
to Closing and such contracts are of the type which
would have constituted Contracts if held by such
Parent (or any Defense Affiliate or Defense Subsidi
ary) on the Signing Date, Schedule 4.10 will be
amended on or prior to the actual date of Closing to
include such contracts as Contracts. In addition,
such Schedules shall be amended to delete Contracts
completed or terminated after the Signing Date in
the ordinary course of business in connection with
the business. If there are any
PAGE 39
contracts which are to be added to Schedule 4.10
pursuant to this Section, it shall use reasonable
efforts to cause such additional contracts to be
freely transferable to its appropriate Defense
Affiliate and then to the Partnership.
5.1.2 Other Agreements. Prior to or at the Closing, it will
enter into, or cause its Defense Subsidiaries that
will be parties to any Operative Document to enter
into, the other Operative Documents.
5.1.3 Planning Information. Subject to any restrictions
set forth in this Agreement or in the Partnership Agreement,
it recognizes the need for on-going communication
with the Partnership. Therefore, from time to time
in its sole discretion, it intends to disclose to
the Partnership planning and product trend
information which may be relevant and reasonably
necessary to the Scope of Activity of the
Partnership.
5.1.4 Taxes; Charges; Laws. It shall, and shall cause its
Defense Subsidiaries that are parties to Operative
Documents to (i) unless being contested by
appropriate proceedings, promptly pay all applicable
Taxes and other governmental charges allocable and
taxable to it or them under applicable federal,
foreign, state and local tax laws, which relate to
the business of the Partnership; (ii) report,
subject to any obligations of notification and
consultation set forth in the Partnership Agreement,
its allocable share of income, loss or other
Partnership items consistent with the manner in
which such items are reported by the Partnership to
such Partner on Federal Form 1065, Schedule K-1, or
disclose any inconsistency in the treatment of such
items on its Federal income Tax returns; (iii) use
all reasonable efforts to comply with all
Governmental Rules; (iv) preserve and keep, free of
charge, all books, papers and records, which relate
to the Assets and Liabilities contributed by such
Parent or its Partner to the Partnership (which
Parent or Partner shall provide access to the
Partnership to such books and records as reasonably
requested by the Partnership); and (v) cooperate
with and provide such information to the
Partnership, as reasonably requested by the
Partnership.
PAGE 40
5.1.5 Liens. Prior to the
Closing, it shall not create or otherwise allow any
Lien to attach to or otherwise to affect any of its
Assets or Contracts to be transferred by it or its
Subsidiaries, except Permitted Liens and those
otherwise permitted or required pursuant to the
Operative Documents.
5.1.6 No Solicitation. Except as permitted under Section
5.1.1.1, prior to the Closing or the earlier
termination of this Agreement, none of the Parents
and their Affiliates will, directly or indirectly,
through any officer, director, employee, agent or
otherwise, solicit, initiate or encourage submission
of proposals, offers or other indications of
interest from any Person relating to any
acquisition, purchase, new joint venture or other
extraordinary transaction involving the disposition
of either Defense Business or participate in any
negotiations or other discussions regarding, or
furnish to any other Person any information with
respect to, or otherwise cooperate in any way with,
or assist, participate in, facilitate or encourage,
any effort or attempt by any other Person to do or
seek any of the foregoing.
5.1.7 Environmental Permits, Licenses and Other Authorizations.
Prior to or after Closing, each Parent shall, at its own cost,
use all reasonable efforts to arrange transfer or
reissuance, as necessary and appropriate, of any
permits, licenses and other authorizations issued
pursuant to Environmental Requirements with respect
to the Real Property and other Assets transferred to
the Partnership by such Parent. Such Parent shall
use all reasonable efforts to complete such transfer
or reissuance in a manner which maximizes the
operational flexibility of the Partnership and
minimizes ongoing capital and operating costs and
other burdens. In the event such transfer or
reissuance could, in the judgment of such Parent,
result in material impediments to ongoing
operations, in material capital or operating costs
to the Partnership or in the existence of any
Burdensome Governmental Condition, such Parent shall
so notify the other Parent promptly.
PAGE 41
5.2 Transfer and Deliveries at Closing;
Deferrals of Transfer and Assumption.
5.2.1 Transfer and Deliveries. At or before the Closing,
FMC shall transfer or cause to be transferred to the
Partnership and Harsco shall transfer or cause to be
transferred to the Partnership, their respective
Assets, Liabilities, Active Contracts and, subject
to Sections 5.3.2 and 6.1(c), Inactive Contracts.
Such transfers shall be pursuant to the applicable
Operative Documents and other duly executed deeds,
assignments of leases, bills of sale and other
documents of transfer, in form and substance
reasonably satisfactory to the other Parent.
Without limiting the foregoing, deeds conveying
Owned Property shall, pursuant to Section 3.20
above, be limited warranty deeds containing
covenants of warranty of title against the claims of
all persons claiming by, through or under the
grantor but not claiming otherwise.
5.2.2 Deferrals.
Notwithstanding any other provision in any Operative
Document, the transfer of any Assets and Contracts
and the assumption of related Liabilities for which
a Consent is required shall be deferred until such
Consent is legally obtained pursuant to the
procedures set forth in Section 5.11.
5.3 Further Assurance.
5.3.1 Pre-Closing. Prior
to Closing, each party shall take all reasonable
actions necessary to obtain (and shall cooperate
with the others in obtaining) any Governmental
Action (including preliminary arrangements to obtain
the Novation Agreement) or Private Action (including
Consents, but subject to Section 5.11) required to
be obtained or made by it in connection with any of
the transactions contemplated by this Agreement,
except that it shall not be required to accept any
Burdensome Governmental Condition.
PAGE 42
5.3.2 Post-Closing.
From and after Closing, except as otherwise provided
herein or in the other Operative Documents, each
party shall, at its own cost, do, execute and
perform all such other acts, deeds and documents as
the other parties or the Partnership may from time
to time reasonably require in order to consummate
the transactions contemplated by this Agreement,
including using its best efforts to enter into the
Novation Agreement as soon as practicable following
the Closing (provided, that no party shall be
required to novate any Inactive Contract if the
conditions of such novation would, in the judgment
of such party, impose an unacceptable financial
burden on such party).
5.4 Parent Undertaking as to Partner Obligations.
Each Parent agrees with the other
Parent that it shall take no action which would
interfere with the full and faithful performance or
observance by such Parent's Affiliates of all
covenants, conditions, representations, warranties
and agreements under the Operative Documents to
which such Parent's Affiliates are parties. Each
Parent will exercise, and will cause its affiliate
Partner to exercise, good faith, fairness and
integrity either in connection with, or in the
conduct of, the business and affairs of the
Partnership.
5.5 Transfer of or Liens on Ownership Interests of Partners.
5.5.1 General Rule. For
so long as the Partnership Agreement (or any
successor agreement or agreements) is in effect, a
Parent may not transfer or subject to any Liens
(other than Permitted Liens), or suffer to exist any
such Liens on, all or any part of its ownership
interest in any of its Affiliates which is a Partner
or all or any part of the partnership interest held
by such Parent or its Partner, as applicable, except
with the consent of the other Parent (which may be
withheld in its sole discretion) or as otherwise
permitted by this Agreement, the Partnership
Agreement or the Registration Rights Agreement, and
any attempt to do so shall be void.
PAGE 43
5.5.2 Intra-Parent Exception. Without being deemed to have
violated Section 5.5.1, a Parent may, upon 30 days'
prior written notice to the other Parent, transfer
all, but not less than all, of its ownership
interest in the Partnership held by the Partner or
by it, as applicable, or in any Affiliate which is a
Partner to another corporation (i) incorporated in a
domestic jurisdiction and (ii) 100% directly or
indirectly owned by such Parent, provided that such
transfer does not have a Material Adverse Effect on
the Partnership, and provided further that such
Parent shall not thereafter transfer or permit to be
transferred the stock of such transferee corporation
to a third party, except as otherwise permitted
under this Agreement, the Partnership Agreement or
the Registration Rights Agreement. In no event
shall the transferring Parent or Partner be relieved
of any obligations for which such transferring
Parent or Partner would otherwise be liable
hereunder in the absence of such a transfer.
5.6 Public Announcements. No party shall, without the consent
of the other Parent prior to the actual date of
Closing, issue any press release or make any written
public announcement with respect to this Agreement
and the transactions contemplated hereby, except as
may be required by Governmental Rule (and, if so
required, such party shall give such Parent a
reasonable opportunity to comment thereon). For
purposes of the foregoing, no periodic report filed
with the U.S. Securities and Exchange Commission
shall be deemed to be a public announcement. After
the actual date of Closing, each Parent shall use
reasonable endeavors to coordinate the dissemination
of material public information concerning the
Partnership and its business.
5.7 Certain Taxes. The
Partnership will pay up to $400,000 per Parent in
any Transfer Taxes payable in connection with the
formation of the Partnership with respect to the
Assets and Liabilities transferred by either Parent
to its Partner and by either Parent or its Partner
to the Partnership. The Partnership will not assume
or pay any other Taxes of a Parent or its Partner
except to the extent such Taxes are accrued on such
Parent's Final Closing Balance Sheet or otherwise
provided for in the Partnership Agreement.
PAGE 44
5.8 Confidential Information. No employee of the
Partnership or employee made available to the
Partnership while remaining an employee of a Parent
or an Affiliate shall be obligated to reveal
confidential or proprietary information belonging to
either Parent (or either Parent's Affiliates)
without the consent of such Parent. All secrecy
agreements between Harsco and employees of Harsco
who, as of the Closing Date, will become Transferred
Employees and all secrecy agreements between FMC and
employees of FMC who, as of the Closing Date, will
become Transferred Employees will, if necessary and
to the extent feasible, be amended by the actual
date of Closing so as to protect the confidentiality
of information relating to the businesses of Harsco,
FMC and the Partnership. Each Parent will use all
reasonable efforts to cause any such agreement
necessary to be entered into in order to protect
such information to be entered into by the actual
date of Closing.
Subject to the Intellectual Property
Agreements, Harsco shall, and shall cause its
Affiliates, directors, officers, employees, advisors
and agents to, keep all proprietary or confidential
information in its possession from and after the
Closing which in any way relates to the business or
properties of the Partnership confidential and not
use any such information which is proprietary in
nature for any commercial purpose other than as is
required to monitor its investment in the
Partnership, to familiarize any prospective
purchaser of all or any portion of Harsco L.P.'s
partnership interest in the Partnership upon such
prospective purchaser's signing a form of
confidentiality agreement reasonably acceptable to
the Partnership, in connection with the preparation
of Harsco's periodic reports filed with the SEC or
in the defense or prosecution of litigation (so long
as Harsco uses reasonable efforts to obtain a
protective court order relating to such
information); provided, however, that (i) this
covenant shall not apply to any information which
(A) is or shall come into the public domain other
than by reason of a breach of this Section 5.8, (B)
becomes available on a non-confidential basis from a
source that, to the Knowledge of Harsco, is not
bound by a confidentiality agreement protecting such
information, (C) is or was independently developed
by Harsco without violating this Section 5.8 or
other
PAGE 45
confidentiality agreement which, to the Knowledge of
Harsco, protects such information, (D) is required
to be disclosed to a Governmental Authority under
any applicable Governmental Rule or (E) is
disseminated to the public in the manner
contemplated by Section 5.6; and (ii) the right of
any prospective purchaser of all or any portion of
Harsco L.P.'s partnership interest in the
Partnership which competes with the Partnership or
any of its Subsidiaries in any material way within
the Scope of Activity to receive (and the right of
Harsco to provide), upon, after or prior to such
purchase of such interest, any proprietary or
confidential information required to be provided or
made available pursuant to the terms of this
Agreement or the Partnership Agreement shall be
subject to such prospective purchaser's signing of a
separate form of confidentiality agreement, which
shall be reasonably satisfactory to the Partnership
and which shall contain appropriate restrictions on
disclosure of competitively sensitive information to
such prospective purchaser (which will permit
disclosure of such information to an independent
third party agent of such prospective purchaser in
lieu of such prospective purchaser to permit such
agent to evaluate and monitor the investment
characteristics of the Partnership).
5.9 Employee and Employee Benefits Matters.
5.9.1 Offers of Employment. Upon consummation of the Closing and
effective as of the Closing Date, the Partnership
will make employment available to all people listed
on Schedule 5.9.1 (which Schedule shall be updated
by each Parent on the first day of every month
between the Signing Date and the actual date of
Closing and delivered to the other Parent promptly
thereafter). Schedule 5.9.1 shall include those
people employed by FMC in the FMC Defense Business
and those people employed by Harsco in the Harsco
Defense Business, but shall exclude any employee of
either Parent with the consent of the other Parent.
FMC or Harsco may with the consent of the other list
additional people on Schedule 5.9.1. All people
listed on Schedule 5.9.1 who accept employment with
the Partnership will be deemed the "Transferred
Employees." The Transferred Employees shall include
all employees on approved leaves of absence,
including those on long-term or short-term
disability
PAGE 46
or on lay-off, and Schedule 5.9.1 shall identify
those employees on leave of absence, disability or
lay-off. Unless otherwise provided in this
Agreement or otherwise agreed by the Parents prior
to the Closing, the Partnership will make employment
available to the Transferred Employees at the
salaries and other compensation, with the benefits
(excluding the stock option and long term incentive
plans described in Sections 5.9.14 and 5.9.15), and
subject to the terms of all contracts (including
collective bargaining agreements) applicable to
them, and under the employment practices and
policies applicable to them, agreed to or provided
or adopted by the respective Parent immediately
prior to the Closing Date; provided, however, that
this provision is not intended to create any
contractual right to employment or to any term of
employment for any Transferred Employee, except as
otherwise expressly provided in applicable
collective bargaining agreements. Notwithstanding
the foregoing, the unwillingness of any collective
bargaining representative to concur in the
applicability of the terms of any collective
bargaining agreement to any Transferred Employees
after the Closing shall not be construed as a
failure by either Parent to fulfill its obligations
under this Section 5.9.1. After the Closing Date,
the Partnership shall have the same rights as the
respective Parent would have had, should employment
of Transferred Employees have continued with the
Parent, to change or terminate such salaries and
compensation, benefits, contracts and employment
practices and policies and all employees of the
Partnership, whether employed pursuant to this
provision or otherwise, will be employed at will by
the Partnership.
5.9.2 Transition Benefit Plans. The Partnership shall
establish and administer certain benefit plans for
the Transferred Employees and other Plan
Participants. The Partnership intends to adopt
competitive compensation plans for its executive and
senior management personnel to replace the stock
option plans and long term incentive plans
(described in Sections 5.9.14 and 5.9.15) which
shall not form a part of the Transition Plans
described herein. Subject to the preceding sentence
and Section 5.9.1 hereof, as of the Closing Date,
the Partnership shall, to the extent permitted by
applicable law, establish or adopt, and assume
obligations under, the same benefit plans for the
Transferred Employees and
PAGE 47
other Plan Participants which their respective
Parent maintained for and applied to them
immediately prior to the Closing Date ("Transition
Benefit Plans"), each of such plans to be identified
on Schedule 4.21.1. Such obligations shall include,
without limitation, obligations which a Parent may
have relating or attributable to periods of service
prior to the Closing Date (but excluding severance
obligations for employees who terminated prior to
the Closing Date), but only if such obligations are
reflected on the Final Closing Balance Sheet of the
Parent or are not so reflected and would be
considered obligations for post-employment benefits
(other than pre-closing workers' compensation
obligations described in Section 5.15) of the type
described in SFAS 112. For purposes of this entire
Section 5.9 and Section 6.3, where any such
reflected item represents the Parent's estimate of
its obligation, such Parent shall have no further
liability with respect to such obligation once it is
assumed by the Partnership; provided, however, that
the estimate was based upon reasonable actuarial
assumptions consistent where applicable with those
set forth on Schedule 4.21.8 and calculated in
recognition of all material facts. Harsco and FMC
shall each transfer to the Transition Benefit Plans,
as hereinafter described, assets to fund certain
obligations assumed by the Partnership under the
Transition Benefit Plans. Unless otherwise
indicated herein, the Transition Benefit Plans
shall, to the extent permitted by applicable law,
credit Transferred Employees and other Plan
Participants with years of service with FMC or
Harsco, as the case may be, and with predecessor
employers to the extent recognized by FMC or Harsco,
as the case may be, for the purpose of vesting,
accrual of benefits and meeting eligibility or other
service requirements. All employees, other than the
Transferred Employees, hired by the Partnership
following the Closing Date and prior to the
Partnership's establishment of the Partnership
Benefit Plans described in Section 5.9.3 will be
eligible for coverage under the Transition Benefit
Plans applicable to employees at the location of the
employment of such new hires.
5.9.3 Partnership Benefit Plans. The Partnership shall
use its reasonable best efforts to adopt, on or
before July 1, 1994, benefit plans ("Partnership
Benefit Plans") which shall be effective as of the
Closing Date or as soon as practicable thereafter in
PAGE 48
the discretion of the Partnership. Subject to the
Partnership's right to change or terminate the
Transition Benefit Plans, as described in Section
5.9.1 hereof, the Partnership Benefit Plans shall
replace the Transition Benefit Plans in any
reasonable manner deemed appropriate by the
Partnership; provided, however, that the
Partnership, in establishing the Partnership Benefit
Plans, shall not cause any Plan Participant to lose
or be denied any vested benefit, right or feature
with respect to benefits accrued under any
Transition Benefit Plan which is the successor to a
Pension Plan (as defined in Section 4.21.1). The
Partnership shall establish one or more Qualified
Pension Plans for all employees not covered under a
collective bargaining agreement ("Partnership
Nonunion Pension Plans") and such Partnership
Nonunion Pension Plans shall provide comparable
levels of future benefit accruals for all covered
employees, making no distinction with respect to any
such employee on the basis of his or her former
employment, except as otherwise required by
applicable law. The preceding sentence shall be
interpreted in a manner consistent with any
applicable example in Schedule 5.9.3 which provides
for future benefit accruals based on past and future
benefit service. The Partnership shall fund all of
the Partnership Nonunion Pension Plans in accordance
with reasonably similar funding policies and fund
earnings assumptions, except to the extent different
policies or assumptions may be necessitated by
government contract cost reimbursement
considerations; provided, however, that such plans
shall be merged into one Partnership Nonunion
Pension Plan at such time as the Partnership decides
that such a merger will not result in a material
disadvantage to the Partnership or its Parents.
5.9.4 Development of Partnership Benefit
Plans and Policies. As soon as practicable
after the Closing Date, the Parents shall use
reasonable efforts to provide the Partnership with
such information as may reasonably be required in
connection with the Partnership's development or
implementation of the Partnership Benefit Plans,
employment practices and policies. The Parents
shall make available to the Partnership their human
resources staffs and other employees, agents and
representatives to assist in such planning,
development and implementation. The Partnership
shall take into consideration the differences in
PAGE 49
benefit structures and policies of each of the
Parents and shall endeavor to reconcile those
differences, wherever possible, including the
offering of Harsco stock as an ongoing investment
option under 401(k) plans; provided, however, that
no additional purchases of Harsco stock shall be
made under the Transition Benefit Plans or the
Partnership Benefit Plans unless a favorable
interpretive letter ruling is obtained from the
Department of Labor to the effect that Harsco stock
is not an employer security or is a qualifying
employer security with respect to such plans or
unless an opinion is received from legal counsel
selected by the Partnership indicating that such
purchases would not be a prohibited transaction.
Where appropriate or required to fulfill the terms
of this Agreement, FMC, Harsco and the Partnership
shall each make such filings and submissions in
connection with the Partnership Benefit Plans to the
appropriate governmental agencies.
5.9.5 Qualified Pension Plans. As described herein, each
of FMC and Harsco shall transfer all Qualified
Pension Plan assets and obligations associated with
its Defense Business to the appropriate Transition
Benefit Plans designated by the Partnership, which
assets shall be invested in the FMC Master Trust.
The Partnership shall take all necessary action to
ensure that each such Transition Benefit Plan
satisfies the applicable provisions of the Code.
Assets segregated pursuant to Section 401(h) of the
Code are not considered as Qualified Pension Plan
assets for purposes of this Section 5.9.5.
5.9.5.1 Transfer of Obligations.
Obligations associated with the accrued benefits of
each Plan Participant in any Qualified Pension Plan
maintained by FMC or Harsco in connection with its
respective Defense Business shall be assumed by a
Transition Benefit Plan designated by the
Partnership, and assets with respect to such
obligations shall be transferred in accordance with
the provisions hereunder.
5.9.5.2 Amount of Pension Assets to
be Transferred. Qualified Pension Plan assets
associated with the accrued benefit obligations
transferred to a Transition Benefit Plan pursuant to
Section 5.9.5.1 shall be transferred to the FMC
PAGE 50
Master Trust, which shall form a part of such
Transition Benefit Plan. If an entire Qualified
Pension Plan of FMC or Harsco is adopted by the
Partnership as a Transition Benefit Plan, then all
assets associated with such Qualified Pension Plan
shall likewise be transferred to the FMC Master
Trust with respect to such Transition Benefit Plan.
If a portion of a Qualified Pension Plan of FMC or
Harsco is adopted by the Partnership as a Transition
Benefit Plan, the amount of assets to be transferred
shall be determined in accordance with, and shall
equal the minimum amount necessary to satisfy, the
applicable provisions of CAS 413 and any other CAS
and FAR provisions which the government may deem
applicable; provided, however, that if the
requirements of Code section 414(l) require that a
greater amount of assets be transferred, then such
greater amount shall be transferred. With regard to
the Harsco Employees Pension Plan, FMC and Harsco
agree that based on the information provided to both
parties prior to the Closing, the amount of assets
allocated to the Harsco Defense Business under the
applicable provisions of CAS 413 is estimated to be
approximately $22,000,000 and such amount of assets,
when transferred, will be in excess of the amount
required under Code section 414(l); provided,
however, that such agreement shall not alter the
responsibility of the Harsco Employees Pension Plan
to transfer any additional amount which, pursuant to
a final non-appealable decision, may be required
under Code section 414(l).
5.9.5.3 Investment of Pension
Assets. FMC and Harsco intend that assets
transferred with respect to the Transition Benefit
Plans designated by the Partnership in accordance
with Section 5.9.5.2 shall be commingled for
investment purposes in the FMC Master Trust;
however, separate accounting shall be maintained
within the FMC Master Trust for all such Transition
Benefit Plans. Such separate accounting shall also
apply to any Partnership Benefit Plan which replaces
a Transition Benefit Plan.
5.9.5.4 Initial Asset Transfers. As
of the Closing Date, FMC and Harsco shall cause the
trustees of their respective Qualified Pension Plans
to take the following steps:
PAGE 51
(i) All assets associated with the
following plans shall continue to be held
under the FMC Master Trust, and the
sponsorship of such plans shall be
transferred from FMC to the Partnership:
Retirement Plan for Hourly Employees of
FMC Corporation, San Jose, California;
Retirement Plan for Hourly Employees of
FMC Corporation, Steel Products Divisions,
Anniston, Alabama; FMC Corporation
Northern Ordnance Division Pension Plan
for Hourly Employees; and FMC Corporation
Northern Ordnance Division Pension Plan
for Certain Employees.
(ii) In conjunction with the change
of sponsorship of the portion of the plan
allocable to the obligations to FMC
Transferred Employees under the FMC
Corporation Salaried Employees' Retirement
Plan, FMC shall cause the trustee of the
FMC Corporation Salaried Employees'
Retirement Plan to continue to hold in
cash or in securities with a readily
determinable market value an amount equal
to $74,851,000 in the FMC Master Trust
with respect to such portion of such plan.
An additional amount, if necessary, shall
be allocated to such portion at a later
time as described below.
(iii) All assets associated with the
Bowen-McLaughlin-York Hourly Employees
Pension Plan shall be transferred to the
FMC Master Trust, and sponsorship of such
Plan shall be transferred from Harsco to
the Partnership. Such assets shall be in
the form of cash or securities with a
readily determinable market value.
(iv) In conjunction with the transfer of
pension obligations from the Harsco Employees
Pension Plan to a Transition Benefit Plan
designated by the Partnership, Harsco shall
cause the trustee of such Plan to transfer to
the FMC Master Trust in cash or in securities
with a readily determinable market value an
amount equal to $21,889,000 with respect to the
Harsco Employees Pension Plan. An additional
amount, if necessary, shall be transferred at a
later time as described below.
PAGE 52
5.9.5.5 Follow-up Asset Transfers. As
soon as practical after the Closing Date, but in no
event later than six months after said Closing Date,
FMC and Harsco shall complete the asset transfers
described in Sections 5.9.5.4(ii) and 5.9.5.4(iv)
above with regard to the FMC Corporation Salaried
Employees' Retirement Plan and the Harsco Employees
Pension Plan. The parties shall determine the
difference, if any, between (A) the assets which
should have been Transferred as of the Closing Date
pursuant to Section 5.9.5.2 and (B) the amounts that
were transferred on the Closing Date pursuant to
Sections 5.9.5.4(ii) and 5.9.5.4(iv). FMC and
Harsco will cause such difference to be transferred
in the same manner described in Section 5.9.5.4 or,
if the amount transferred exceeded the amount which
should have been transferred, FMC and Harsco shall
cause such difference to be returned to the
transferror that transferred an excess amount;
provided that the amount so transferred shall
reflect an adjustment for any interim benefit
payments as appropriate and shall include interest
from the Closing Date to the date of the final
transfer at the 90-day Treasury Bill rate on the
auction date immediately preceding the Closing Date.
5.9.5.6 Verification. FMC and Harsco
each agrees to provide an actuary designated by the
other party with all information necessary to verify
the calculations required by this Section 5.9.
5.9.6 401(k) Plans. The
Partnership shall establish, as one of its
Partnership Benefit Plans, a 401(k) Plan which shall
be a qualified plan under Section 401(a) of the Code
("Partnership 401(k) Plan"). As soon as practicable
after the establishment of the Partnership 401(k)
Plan, subject to the receipt of all appropriate
Governmental Actions, FMC and Harsco respectively
shall cause the trustee of its 401(k) Plan(s) to
transfer to a Partnership Master Trust established
in connection with the Partnership 401(k) Plan (i)
the number of shares of FMC or Harsco stock held
under its 401(k) Plan for Plan Participants and (ii)
cash, cash equivalents or other securities with a
readily determinable market value such that the
total of (i) and (ii) shall equal the Fair Market
Value of the assets of the respective FMC and Harsco
401(k) Plans representing the account balances of
Plan Participants as of the date such assets are
transferred. The Partnership 401(k) Plan shall
PAGE 53
provide or arrange for the proper procedures to
continue the status of "securities of the employer
corporation" of the FMC and Harsco stock transferred
hereunder so as to preserve certain tax advantages
to Plan Participants when such stock is distributed
to them. Subject to Section 5.9.4, the Partnership
401(k) Plan shall also allow Plan Participants the
right to invest their before- and after-tax
contributions in any investment option offered under
the plan (including FMC or Harsco stock), and to
have their Partnership matching contributions (which
shall be made in cash) invested in FMC or Harsco
stock, to the extent such rights are in accordance
with applicable law.
5.9.7 Postretirement Benefit and Other Plans.
As described herein, FMC and Harsco shall transfer
all Postretirement Benefit Plan assets and
obligations associated with Plan Participants to the
Partnership. FMC and Harsco plan assets segregated
pursuant to Section 401(h) of the Code are
considered Postretirement Benefit Plan assets for
purposes of this Section 5.9.7.
5.9.7.1 Transfer of Obligations.
Obligations associated with each Plan Participant in
any Postretirement Benefit Plan maintained by FMC or
Harsco in connection with its respective Defense
Business shall be assumed by the Partnership, but
only to the extent such obligations are reflected on
FMC's or Harsco's Final Closing Balance Sheet, as
applicable.
5.9.7.2 Postretirement Benefit Plan
Assets Segregated under Code Section 401(h). All
assets accumulated pursuant to Section 401(h) of the
Code under Postretirement Benefit Plans sponsored by
FMC or Harsco that are attributable to Plan
Participants shall be transferred to the FMC Master
Trust; provided that such amounts shall be accounted
for separately. If the amount of such assets
attributable to Plan Participants has not been
separately accounted for historically, FMC and
Harsco will agree on a reasonable allocation basis.
5.9.7.3 Postretirement Benefit Plan
and Other Trusts Described in Code Section 501(c)(9)
to be Transferred in their Entirety. All trusts
described in Section 501(c)(9) of the Code under
Postretirement Benefit Plans or other plans
sponsored
PAGE 54
by FMC or Harsco maintained solely for the benefit
of Plan Participants shall be transferred to a
trustee designated by the Partnership on the Closing
Date.
5.9.7.4 Postretirement Benefit Plan
and Other Trusts Described in Code Section 501(c)(9)
not to be Transferred in their Entirety. The
portion of the assets held in trusts described in
Section 501(c)(9) of the Code that are attributable
to Plan Participants under Postretirement Benefit
Plans or other plans sponsored by FMC or Harsco that
also cover individuals other than Plan Participants
shall be transferred to a trustee designated by the
Partnership on the Closing Date. If the amount of
such assets attributable to Plan Participants has
not been separately accounted for historically, FMC
and Harsco will agree on a reasonable allocation
basis.
5.9.8 Nonqualified Plans. FMC and Harsco shall transfer to the
Partnership all obligations with respect to Plan
Participants under Nonqualified Plans maintained by
FMC or Harsco in connection with its respective
Defense Business, but only to the extent such
obligations are reflected on FMC's or Harsco's Final
Closing Balance Sheet, as applicable. FMC and
Harsco shall transfer to the Partnership any assets
associated with such Nonqualified Plans.
5.9.9 Other Benefit Plans. FMC and Harsco shall transfer
to the Partnership all obligations with respect to Plan
Participants under all other benefit plans not
described in Sections 5.9.5 - 5.9.8 hereof
maintained by FMC or Harsco in connection with its
respective Defense Business, but only to the extent
such obligations are reflected on FMC's or Harsco's
Final Closing Balance Sheet, as applicable, or are
not so reflected and would be considered obligations
for post employment benefits (other than pre-closing
workers' compensation obligations described in
Section 5.15) of the type described in SFAS 112.
FMC and Harsco shall transfer to the Partnership any
assets associated with such other benefit plans.
5.9.10 Collective Bargaining Agreements.
The Partnership shall expressly recognize any
collective bargaining representative recognized by
FMC or Harsco as of the Closing Date for those units
that include Transferred Employees and shall
PAGE 55
expressly assume any and all of FMC's and Harsco's
obligations under any collective bargaining
agreements existing on the Closing Date with respect
to the Transferred Employees; provided, however,
that neither FMC nor Harsco shall have any liability
after the actual date of Closing for any claims by
any such collective bargaining representative
arising as a result of the consummation of the
transactions contemplated hereby.
5.9.11 No Rights. Except
with respect to any assumed collective bargaining
agreements, nothing herein expressed or implied
shall confer upon any of the employees of the
Partners or their Affiliates or legal
representatives thereof, any rights or remedies,
including, without limitation, any right to
employment or continued employment for any specified
period of any nature or kind whatsoever or to any
specific kind or level of compensation or benefit
under or by reason of this Agreement.
5.9.12 FICA. The standard
procedure established in Section 4 of Revenue
Procedure 84-77, 1984-2 C.B. 753, relating to
employment tax returns and statements shall be
adopted by FMC, Harsco and the Partnership for
Transferred Employees. In timely fashion, FMC and
Harsco will furnish the Partnership with information
they have which the Partnership needs to comply with
this procedure. The Partnership, as to each Parent,
will be the "successor employer" for FICA/FUTA
purposes.
5.9.13 NSD Decree. The
Partnership shall be bound by the terms of the
Settlement Agreement and Consent Decree entered into
by FMC with respect to its Naval Systems Division in
the so-called Smith/Cappellupo litigation, Civil
Action Nos. 4-85-1239, 4-86-945, and 4-89-1044 in
the United States District Court for the District of
Minnesota.
5.9.14 Stock Option Plans. The Partnership shall
not assume any responsibility or obligation to any former employee
of either Parent with respect to stock options held
by any such employees, including, without
limitation, options which may terminate or expire as
a consequence of leaving the employment of
PAGE 56
such Parent and becoming an employee of the
Partnership.
5.9.15 Long-term Incentive Compensation.
The Partnership shall not assume any responsibility
or obligation to any former employee of either
Parent with respect to any long-term incentive
compensation or multi-year cash bonus.
5.10 Lack of Consents.
To the extent that it is either legally or factually
impossible or impracticable for one party to assign
or otherwise transfer either a Contract or any Asset
to the Partnership, such transferring party hereby
undertakes to otherwise provide the Partnership with
a substantially similar economic benefit, which, in
the case of Assets, shall require the transferring
party to contribute in lieu of the Asset additional
cash in an amount equal to the net Book Value of
such Asset and, in the case of Contracts, shall
require the transferring party to comply with the
provisions of Section 5.11.
5.11 Third Party Consent Procedures11
Third Party Consent Procedures. To the extent that
any rights under any Contract (other than a Contract
with the U.S. Government to be novated pursuant to
the terms of the Novation Agreement) to be assigned
under the Operative Documents may not be assigned
without the consent of another Person which such
Person will not provide, this Agreement shall not
constitute an agreement to assign such Contract if
such assignment would constitute a breach thereof or
be unlawful or impracticable. Such Contracts are
referred to herein as the "Restricted Contracts."
The Partner with an obligation to transfer a
Restricted Contract (the "Transferring Partner")
shall take the following actions with respect
thereto:
5.11.1 At the Partnership's request, such
Partner shall, with the cooperation of the
Partnership, take the actions described in Schedule
5.11 to obtain all required Consents to all
Restricted Contracts as soon as practical after the
execution and delivery hereof and shall promptly
notify the Partnership as such consents are
received. Upon receipt of such Consents, such
Restricted Contracts shall be deemed assigned to the
Partnership
PAGE 57
on the Closing Date, regardless of whether any
subcontracting arrangement has been entered into
pursuant to Section 5.11.2 below. If a
subcontracting arrangement has been entered into
with respect to a Restricted Contract for which a
Consent to assignment is received, such
subcontracting arrangement shall, unless otherwise
agreed between the Partners, terminate automatically
without further action by the Partner or the
Partnership.
5.11.2 As soon as practical after the
Closing, a Transferring Partner shall enter into a
subcontracting relationship with the Partnership
with respect to each of such Partner's Restricted
Contracts for which the required Consent to
assignment has not been received and which do not,
by their terms, require consent to subcontracting.
Such subcontracting arrangements shall provide for
terms which will reasonably achieve for the
Partnership the economic benefit which it would have
achieved through an assignment of such Restricted
Contract. As between the Transferring Partner and
the Partnership, the Restricted Contract shall be
treated to the maximum extent possible as if it had
been assigned to the Partnership, i.e., all terms
and conditions, including price, of such Restricted
Contracts shall be binding on the Partnership, and
the Partnership shall bear any liabilities arising
from events occurring after the Closing Date
thereunder, and with respect to such Restricted
Contracts, all revenues invoiceable for work
performed after the Closing Date shall be for the
account of the Partnership and the risk of shall be
borne solely by the Partnership. The Partnership
and the Transferring Partner shall cooperate and use
all reasonable efforts to achieve the above-
described results. In addition, the Partnership
agrees that if, as a condition to securing the
Consent to the assignment of any Contract, a Parent
is required to guarantee the performance by the
Partnership of any obligation under that Contract,
the Partnership shall indemnify and defend such
Parent against, and hold such Parent harmless from,
any liability with respect to the failure by the
Partnership, for whatever reason, to perform any
such obligation. At the Closing, each Partner shall
advise the Partnership in writing as to such
Partner's Restricted Contracts and the steps which
each Partner proposes to take with respect thereto.
Notwithstanding the foregoing provisions of this
Section 5.11.2 relating to subcontracting
arrangements, unless objected to by the other
PAGE 58
Partner, a Partner may propose to become subject to
the terms of this Section 5.11.2 with respect to any
or all of such Restricted Contracts and to dispense
with any further subcontracting arrangements with
respect to each such designated Restricted
Contracts, so long as such Partner fully complies
with the obligations on its part set forth herein
with respect to such Restricted Contracts.
5.11.3 If any Restricted Contract also
requires a Consent of a third party to the valid
subcontracting of all rights and obligations of the
Transferring Partner thereunder and if a Consent to
assignment has been refused by such third party,
then after the Closing, the Transferring Partner
shall, with the cooperation of the Partnership, take
the actions described on Schedule 5.11 to obtain all
such Consents to subcontracting as soon as practical
after the Closing and shall promptly notify the
Partnership upon receipt of such Consent. If such
Consent is so received, the Restricted Contract
shall be subcontracted by the Transferring Partner
to the Partnership as contemplated by Section 5.11.2
above.
5.11.4 In the event that a Transferring
Partner is unable to secure any required Consent to
assignment or subcontracting with respect to a
Restricted Contract, the Parent of the Transferring
Partner and the Partnership shall negotiate and
enter into such agreements as are necessary so that
as closely as possible the result will be to
reasonably provide the equivalent economic benefit
which the Partnership would have enjoyed had such
Restricted Contract been assigned to the
Partnership. In order to effect this, such
agreements may call for the Transferring Partner to
contract with the Partnership for the provision of
personnel and/or services of the Partnership. It is
expected that all benefits and obligations under
such Restricted Contract which would have been
transferred to the Partnership (including, without
limitation, the obligation to perform all work and
services required under such Restricted Contract and
to provide all materials, equipment and products
required pursuant to such contracts), shall be
assumed and performed by the Partnership. The
Partnership shall provide the personnel to perform
the work and services under such Restricted Contract
to the Transferring Partner, and the Partnership
shall receive all revenues paid to the Transferring
Partner by such customers as
PAGE 59
consideration for the provision of the Partnership's
personnel.
5.12 Dissolution. Neither Parent shall, or shall allow its
Subsidiaries to, petition any court for the
involuntary dissolution of the Partnership in the
event that any party to the Operative Documents
defaults on its obligations under an Operative
Document, and the remedies for any such default
shall be solely those set forth in the Partnership
Agreement, or other Operative Document, as the case
may be.
5.13 Santa Clara Properties. Notwithstanding that
FMC is expressly not transferring to the Partnership its title to and
ownership interest in the Santa Clara Properties,
FMC shall lease the Santa Clara Properties to the
Partnership for the Partnership's exclusive use, on
the terms set forth in the Lease Agreement, attached
hereto as Exhibit G. To the extent that the Fair
Market Value (excluding any costs relating to the
remediation of any FMC Environmental Liability
Event) of the Santa Clara Properties to FMC at the
termination of the Lease Agreement shall have
increased from the Fair Market Value (excluding any
costs relating to the remediation of any FMC
Environmental Liability Event) of such properties to
FMC as of the Closing Date as a result of capital
improvements made thereon by the Partnership, FMC
shall, upon the termination of the Lease Agreement,
reimburse the Partnership for the unamortized,
unrecovered and unrecoverable cost to the
Partnership of such capital improvements (to the
extent such costs have not been otherwise recovered
by the Partnership through insurance proceeds).
Upon termination of the Lease Agreement, the
Partnership shall indemnify FMC and hold FMC
harmless from and against any unpaid taxes relating
to such properties which the Partnership is
obligated to pay under the Lease Agreement and which
accrued during the lease term. As used in this
Section 5.13, "capital improvements" shall not
include any expenditure, however characterized
elsewhere, regarding environmental matters, it being
the parties' intention that their respective rights
and obligations regarding environmental expenditures
be governed solely by Sections 5.22 and 6.2 below.
PAGE 60
5.14 Buyback of Accounts Receivable.14
Buyback of Accounts Receivable. In the event that
any account receivable (including all VLS
Receivables, the due dates of which are set forth on
Schedule 5.14) assigned to the Partnership by either
Parent is not fully paid within ninety (90) days
after its due date, the Parent that assigned such
account receivable covenants and agrees promptly to
repurchase such account receivable for cash, and the
Partnership shall, upon the request of the
repurchasing Parent, act as the Parent's agent for
collection of the repurchased receivable. Neither
Parent will contribute at Closing any receivable
that is more than 90 days past due.
5.15 Pre-Closing Workers' Compensation. Except as
provided in the following paragraph, it is agreed
that subsequent to the Closing each Parent will be
responsible for, and will reimburse the Partnership
with respect to, all payments made by the
Partnership to any of such Parent's former employees
for workers' compensation relating to pre-Closing
occurrences. These obligations on the part of FMC
and Harsco to make such payments shall continue for
as long as any such payments become due to any
former employee of either Parent. With respect to
any workers' compensation claim based upon
conditions arising out of facts and circumstances
occurring both before and after the Closing, the
obligations of FMC or Harsco, as the case may be,
shall be determined in accordance with applicable
Governmental Rules governing the apportionment of
responsibility for workers' compensation between
predecessor and successor employers.
5.16 Slow-Moving Inventory. The Partnership shall
use reasonable efforts to use all Assets contributed at the Closing
which are Slow-Moving Inventory (as identified on
Schedule 5.16 hereto) in the ordinary course of the
Partnership's business. All such Slow-Moving
Inventory that is held by the Partnership on the
second anniversary of the Closing Date shall as soon
thereafter as practicable be disposed of by the
Partnership. At such time, the Parent that
contributed such Slow-Moving Inventory will make a
payment to the Partnership equal to the excess, if
any, of the book value of such Slow-Moving
Inventory, as reflected on the applicable Final
Closing Balance Sheet, over the sum of any reserve
on such Final
PAGE 61
Closing Balance Sheet which was applicable to such
Slow-Moving Inventory and any amounts realized upon
disposition of such Slow-Moving Inventory.
5.17 Consultant and Audit Costs. Whether or not the
transaction contemplated hereby shall be
consummated, FMC shall bear 60% and Harsco shall
bear 40% of (i) the costs, not to exceed $1,700,000,
of the study performed prior to December 31, 1993 in
connection with the combination of the FMC Defense
Business and the Harsco Defense Business by Booz,
Allen & Hamilton and (ii) the costs for the audits
referred to in the last sentence of Section 5.3 of
the Partnership Agreement, not to exceed $400,000 in
the case of the FMC audit and $70,000 in the case of
the Harsco audit. If either party's audit costs
exceed the amount above stated, such party shall be
responsible for such excess.
5.18 Post-Closing Cash Advances. After the Closing Date and
prior to the second anniversary of the Closing Date,
FMC and Harsco agree to make to the Partnership at
any time and from time to time, upon 3 Business
Days' notice, such cash advances, pro rata in
accordance with their respective Share Percentages,
as the Managing General Partner deems necessary or
advisable to meet the Partnership's short-term cash
requirements; provided, however, that (i) such cash
advances be in the aggregate amount of not less than
$1,000,000, (ii) in no event shall the aggregate
amount of such advances outstanding at any time from
any Parent exceed $12,000,000 in the case of FMC and
$8,000,000 in the case of Harsco, (iii) in no event
shall such cash advances be used to finance business
activities outside the Scope of Activity and (iv) in
no event shall such cash advances be available to
the Partnership until the credit facility described
in the following sentence is exhausted or otherwise
unavailable in accordance with its terms. In
addition, from and after the Closing Date, FMC
agrees to make to the Partnership at any time and
from time to time, upon 3 Business Days' notice,
such cash advances as the Managing General Partner
deems necessary or advisable to meet the
Partnership's short-term cash requirements;
provided, however, that such cash advances shall not
at any one time exceed an amount equal to the
difference between (i) the aggregate amount of VLS
Receivables and (ii) the aggregate amount, if any,
of such VLS Receivables
PAGE 62
that have at such time been collected by the
Partnership or repurchased by FMC in accordance with
the terms of this Agreement. As such accounts
receivable are collected or repurchased, the
Partnership shall promptly repay to FMC the portion,
if any, of such cash advances which exceeds the
aggregate amount of such accounts receivable that
have at such time not been collected or repurchased
in accordance with the terms of this Agreement, and
such amounts repaid shall not be subject to
reborrowing. Such advances will be evidenced by a
senior promissory note maturing on the second
anniversary of the Closing Date (or, in the case of
advances pursuant to the immediately preceding
sentence, as and when the VLS Receivables are
repurchased or collected) and bearing interest at a
floating rate (to be recalculated monthly) equal to
the one year LIBOR in effect on the first Business
Day of such month plus 100 basis points and may be
repaid (pro rata in the case of advances pursuant to
the first sentence of this Section) at any time
(subject to reborrowing) without penalty or premium.
The Parents acknowledge that these facilities are
intended to be available to provide for short-term
working capital and are not intended to provide a
two-year financing source. The Partnership shall
repay any cash advance made pursuant to this Section
5.18 before it makes any voluntary or optional
prepayment on any other debt outstanding.
5.19 Responsibility for Inactive Contracts. Upon the
final close-out or other settlement and any interim settlements
with the U.S. Government of any Partner's Inactive Contract (which
settlement shall be subject to the approval of such
Partner), (i) if such settlement requires a payment
by the Partnership to the U.S. Government, the
Parent which contributed such Inactive Contract to
the Partnership shall promptly deliver to the
Partnership an amount in cash equal to the amount of
such payment or (ii) if such settlement results in a
payment from the U.S. Government to the Partnership,
the Partnership shall promptly deliver to the Parent
which contributed such Inactive Contract an amount
in cash equal to such payment. The Partnership
shall be responsible for the administration of the
settlement of such Inactive Contracts.
PAGE 63
5.20 Accounts Receivable. Except in respect of accounts
receivable (i) withheld from the Partnership
pursuant to Section 2.1.3 or Section 2.1.4 (and not
subsequently assigned to the Partnership pursuant to
Section 2.3.3), (ii) transferred to a Parent
pursuant to Section 2.3.3 and (iii) withheld or
repurchased from the Partnership by a Parent
pursuant to Section 5.14, each Parent shall promptly
forward or cause to be forwarded to the Partnership
any and all proceeds from accounts receivable
relating to its Defense Business that are received
by such Parent after the Closing Date and that were
outstanding as of the Closing Date. With respect to
accounts receivable (i) withheld from the
Partnership pursuant to Section 2.1.3 or 2.1.4 (and
not subsequently assigned to the Partnership
pursuant to Section 2.3.3), (ii) transferred to a
Parent pursuant to Section 2.3.3 and (iii) withheld
or repurchased from the Partnership by a Parent
pursuant to Section 5.14, the Partnership shall
promptly forward to the appropriate Parent any and
all proceeds relating to such accounts receivable
received by the Partnership after the Closing Date.
5.21 Responsibility for Pre-Closing
Letters of Credit, Etc. The parties hereto
agree that any letter of credit, performance bond or
bid bond relating to any Active Contract that is
issued by either Parent prior to the Closing Date
shall be the responsibility of the Partnership after
the Closing Date and shall be assumed by the
Partnership on the Closing Date. The Partnership
agrees to reimburse the appropriate Parent in cash
within three Business Days for any draw or claim
against any such letter of credit, performance bond
or bid bond made on or after the Closing Date.
PAGE 64
5.22 Environmental Matters.
5.22.1 Payments by Parents to Account for
Losses Resulting from Remedial Expenditures. The parties believe
that each of them, with respect to its Defense
Business as conducted prior to the Closing, and the
Partnership, with respect to its business conducted
after the Closing, is legally entitled to include
all Remedial Expenditures in its pricing under
customer contracts arising in such business.
However, in the event that circumstances result in
an inability on the part of the Partnership to
obtain inclusion of such Remedial Expenditures in
the ordinary course of business in conjunction with
the incurrence of such Remedial Expenditures, the
parties agree that a mechanism should exist to limit
the degree to which returns otherwise payable to
either Parent from the operations of the Partnership
would be impaired as a result of the Partnership's
inability at any point in time to obtain such
inclusion with respect to the other Parent's prior
conduct of its Defense Business. In furtherance of
the foregoing, each Parent agrees that:
(i) in the event that an
Environmental Realization Status Report
delivered pursuant to Section 5.22.3.1 shows
that, during the relevant Fiscal Quarter, the
Partnership has incurred any FMC Unrealized
Remedial Expenditures or Harsco Unrealized
Remedial Expenditures (including as a result of
any FRA determination during such Fiscal
Quarter), then a special allocation (an
"Environmental Special Allocation") of such
incurrences shall be made in accordance with
Section 4.3(c)(vi) of the Partnership Agreement
to the Partner of the Parent to which such
Unrealized Remedial Expenditures relate in an
amount equal to 100% of such Unrealized
Remedial Expenditures;
(ii) in the event that an
Environmental Realization Status Report
delivered pursuant to 5.22.3.1 shows that,
during the relevant Fiscal Quarter, the
Partnership has Realized (including as a result
of any FRA determination during such Fiscal
Quarter) FMC Qualifying Realized Remedial
PAGE 65
Expenditures or Harsco Qualifying Realized
Remedial Expenditures which were previously
reported under Section 5.22.3.1 as Unrealized
Remedial Expenditures, then an Environmental
Special Allocation of such Realization shall be
made in accordance with Section 4.3(c)(iv) and
(v) of the Partnership Agreement to the Partner
of the Parent to which such Realized Remedial
Expenditure relates in an amount equal to 100%
of such Realized Remedial Expenditure.
5.22.2 Presumptions Regarding
Environmental Liability Events.
5.22.2.1 It shall be conclusively
presumed for purposes of this Section 5.22 that all
environmental matters set forth on Schedule 5.22.2
are FMC Environmental Liability Events or Harsco
Environmental Liability Events as indicated on such
Schedule.
5.22.2.2 There shall be a rebuttable
presumption, for purposes of this Section 5.22, that
any Environmental Liability Event not set forth on
Schedule 5.22.2 and pertaining either to the past
conduct by FMC of its Defense Business or to the
ownership, operation or use of any facility or
property now or previously owned, operated or used
in FMC's Defense Business is an FMC Environmental
Liability Event.
5.22.2.3 There shall be a rebuttable
presumption, for purposes of this Section 5.22, that
any Environmental Liability Event (i) not set forth
on Schedule 5.22.2, (ii) pertaining either to the
past conduct by Harsco of its Defense Business or
the ownership, operation or use of any facility or
property now or previously owned, operated or used
in Harsco's Defense Business and (iii) discovered
and reported in writing to the Advisory Committee on
or before the first to occur of the fifth
anniversary of the Closing Date or the date on which
FMC purchases Harsco's ownership interest in the
Partnership under its call option pursuant to
Section 7.2(a) of the Partnership Agreement is a
Harsco Environmental Liability Event. Any
Environmental Liability Event pertaining to the
ownership, operation or use of any facility or
property now or previously owned, operated or used
in Harsco's Defense Business which
PAGE 66
is not subject to the conclusive presumption
established by Section 5.22.2.1 or the rebuttable
presumption established by the preceding sentence of
this Section 5.22.2.3 (including any Environmental
Liability Event discovered and reported in writing
to the Advisory Committee after the date on which
FMC purchases Harsco's ownership interest in the
Partnership under its call option pursuant to
Section 7.2(a) of the Partnership Agreement) shall
not be presumed to be a Harsco Environmental
Liability Event.
5.22.2.4 If the Partnership believes any
environmental matter, which is not subject either to
a conclusive or a rebuttable presumption, to be a
Harsco Environmental Liability Event, the
Partnership shall provide Harsco with a reasonably
detailed written notice setting forth the facts and
circumstances pertaining to such matter, the reasons
leading the Partnership to conclude that such
environmental matter constitutes a Harsco
Environmental Liability Event and the data relied
upon by the Partnership in reaching such conclusion.
The Partnership shall promptly provide any
additional information related to such environmental
matter as Harsco may reasonably request. Within
sixty (60) days after receipt of such notification
and information, Harsco shall notify the Partnership
in writing whether Harsco agrees with the
Partnership's conclusion or disagrees in whole or in
part with such conclusion. If Harsco disagrees in
whole or in part with the Partnership's conclusion,
Harsco shall set forth in its notification the
reasons for its conclusion and any data relied upon
by Harsco in reaching such conclusion.
5.22.2.5 Any rebuttable presumption under
Section 5.22.2.2 or 5.22.2.3 can be rebutted on the
basis of clear and convincing evidence to the
contrary in a judicial proceeding culminating in a
final, non-appealable order (unless otherwise
resolved by the parties). Until any such rebuttable
presumption has been so rebutted, the Environmental
Liability Event that is subject to such presumption
shall be treated, for purposes of this Section 5.22,
as an FMC Environmental Liability Event or a Harsco
Environmental Liability Event, as appropriate.
5.22.3 Quarterly Status Reports; Realization Efforts.
PAGE 67
5.22.3.1 On or before the 30th day after
the end of each Fiscal Quarter, the Partnership
shall send to each Parent an "Environmental
Realization Status Report." The Environmental
Realization Status Report shall set forth, in
reasonable detail, all Remedial Expenditures (i)
planned, (ii) accrued as a liability or (iii)
expended, in each case during such Fiscal Quarter.
Such Environmental Realization Status Report shall
also set forth in reasonable detail all Realizations
of Remedial Expenditures during such Fiscal Quarter.
For purposes of such Environmental Realization
Status Reports, a planned Remedial Expenditure shall
be any such expenditure included in the forward
pricing with respect to any contract with a vendee.
5.22.3.2 The Partnership shall diligently
pursue its right to cost inclusion under customer
contracts and to reimbursement from all other
Persons (except the Parents, the Partners and the
directors, officers and employees of each of them)
having liability under applicable law (whether
pursuant to CERCLA or otherwise) with respect to all
Qualifying Remedial Expenditures, in each case
together with any legally available interest
thereon. The Partnership shall have sole control
and management authority over any claim, litigation
or other proceeding or matter covered by the
preceding sentence or the Partnership
indemnification set forth in Section 6.2, including
the right to negotiate and enter into settlements
with interested Persons with respect thereto and to
defend or prosecute with counsel of its selection
any claim, litigation or other proceeding with
respect thereto; provided, however, that the
Partnership shall not enter into any such settlement
which would give rise to Qualifying Remedial
Expenditures without the prior consent of the Parent
to which such Qualifying Remedial Expenditures
relate (which will not be unreasonably withheld or
delayed).
5.22.4 Recordkeeping; Resolution of
Amount of Realization.
5.22.4.1 The Partnership shall maintain,
and make available to each Parent for inspection as
reasonably requested, books and records which
present in reasonable detail (i) information
pertaining to the past conduct by each Parent of its
Defense Business (including forward pricing rates)
and the
PAGE 68
ownership, operation or use by each such Parent of
any facility or property now or previously owned,
operated or used in its Defense Business, as such
information would bear on any determination of
whether a Remedial Expenditure is a Qualifying
Remedial Expenditure, a Realized Remedial
Expenditure or an Unrealized Remedial Expenditure;
(ii) all relevant supporting data in connection with
contract-based claims or requests for reimbursement
of Remedial Expenditures; and (iii) all U.S.
Government and other customer reports, letters,
requests for information or other pertinent
information submitted to the Partnership by the U.S.
Government and other customers regarding the
Partnership's inclusion of Remedial Expenditures in
its contract pricing. In addition, the Partnership
shall establish not less frequently than annually
and periodically submit to the DOD forward pricing
rates with respect to its costs, including Remedial
Expenditures to be incurred by the Partnership,
which costs shall be identified in sufficient detail
to permit the Partnership to calculate FMC
Qualifying Remedial Expenditures, Harsco Qualifying
Remedial Expenditures and other Remedial
Expenditures. Subject to applicable Governmental
Rules, such forward pricing rates, as they relate to
Remedial Expenditures, will be determined on the
basis of the Partnership's best judgment as to the
Remedial Expenditures the Partnership will incur and
the volume of business the Partnership will transact
during the relevant period. These forward pricing
rates will also be used (and appropriate records
shall be maintained by the Partnership) to identify
Realized Remedial Expenditures attributable to
contracts with commercial customers (including Major
SPD Contracts) which are not subject to government
accounting and auditing procedures.
5.22.4.2 The Partnership shall maintain,
and make available quarterly to each Parent for
inspection, a memo account (and sub-accounts for
each of FMC, Harsco and the Partnership) reflecting
all Remedial Expenditure costs and Realizations (the
"Remedial Costs Account") to which shall be charged
or credited, as applicable, the following: (i) all
environmental reserves for Remedial Expenditures
reflected on the Final Closing Balance Sheets of FMC
and Harsco, which reserves shall be allocated as a
credit to the Parent that contributed the reserve;
(ii) all receipts from vendees of either Parent or
the Partnership (including commercial customers as
PAGE 69
contemplated by Section 5.22.4.1 above) attributable
to the Realization of Remedial Expenditures pursuant
to Existing Contracts, which receipts shall be
allocated as a credit to the Parent that contributed
the Existing Contracts; (iii) all receipts from
vendees of either Parent or the Partnership
(including commercial customers as contemplated by
Section 5.22.4.1 above) attributable to the
Realization of Remedial Expenditures pursuant to New
Contracts, which receipts shall be allocated as a
credit among FMC, Harsco and the Partnership sub-
accounts in accordance with Section 5.22.4.3 below;
(iv) receipts, if any, from such vendees
attributable to the Realization by the Partnership
of FMC Qualifying Remedial Expenditures or Harsco
Qualifying Remedial Expenditures by means other than
the Realization thereof under procurement contracts
between the Partnership and its vendees, and all
receipts from sources other than vendees, which
receipts shall be allocated as a credit to the sub-
account of FMC or Harsco, as the case may be, and
all such receipts attributable to post-Closing
Environmental Liability Events, which receipts shall
be allocated as a credit to the Partnership; (v) all
FMC Qualifying Remedial Expenditures or Harsco
Qualifying Remedial Expenditures incurred by the
Partnership (including, for this purpose, Remedial
Expenditures that are reflected in reserves assumed
by the Partnership), which Qualifying Remedial
Expenditures shall be allocated as a charge to the
sub-account of FMC or Harsco, as the case may be,
and all other Remedial Expenditures attributable to
post-Closing Environmental Liability Events, which
Remedial Expenditures shall be allocated as a charge
to the sub-account of the Partnership; (vi) all
Environmental Special Allocations under Section
4.3(c)(vi) of the Partnership Agreement to each
Parent's Partner of Unrealized Remedial
Expenditures, which Environmental Special
Allocations shall be reflected as a charge to the
sub-account of the Parent to which such allocations
were made; (vii) all Environmental Special
Allocations under Section 4.3(c)(iv) and (v) of the
Partnership Agreement to each Parent's Partner of
Realizations of Remedial Expenditures previously
reported under Section 5.22.3.1 as Unrealized
Remedial Expenditures, which Environmental Special
Allocations shall be reflected as a credit in the
sub-account of the Parent to which such allocations
were made; (viii) any special capital contributions
made by a Parent to the Partnership pursuant to
Section 5.22.5, which capital
PAGE 70
contribution shall be reflected as a credit in the
sub-account of such Parent; (ix) any adjustment
calculated as a result of a rebuttal of a
presumption with respect to a presumed Qualifying
Remedial Expenditure, which adjustment shall be
reflected as a credit to the sub-account of the
Parent that rebutted the presumption; (x) any
special distribution made by the Partnership to a
Parent's Partner pursuant to Section 6.4 of the
Partnership Agreement, which distribution shall be
reflected as a charge in the sub-account of such
Parent; (xi) any payment under Section 6.2 in
respect of Qualifying Remedial Expenditures shall be
reflected as a charge to the sub-account of the
Parent with respect to which such payment is made;
(xii) Major Contract FRAs, which shall be allocated
as a credit or a charge to the sub-account of the
Partnership, FMC and Harsco in accordance with
Section 5.22.4.4 below; (xiii) any Environmental
Cash Flow Loan made by a Parent to the Partnership
pursuant to Annex B, which loan shall be reflected
as a credit in the sub-account of such Parent; and
(xiv) any repayment of an Environmental Cash Flow
Loan to a Partner pursuant to Annex B, which
repayment shall be reflected as a charge in the sub-
account of such Parent.
5.22.4.3 With respect to each Fiscal
Quarter of the Partnership in which receipts from
vendees under New Contracts attributable to
Realization of Remedial Expenditures are received,
such receipts shall be allocated among the Parents
and the Partnership in proportion to the actual
expenditures by the Partnership for Remedial
Expenditures attributable to FMC, Harsco or the
Partnership since the inception of the Partnership
on a cumulative basis. By way of example, if 50% of
the Remedial Expenditures of the Partnership in its
first Fiscal Quarter were expended with respect to
FMC Environmental Liability Events, 25% with respect
to Harsco Environmental Liability Events and 25%
with respect to post-Closing Environmental Liability
Events, all receipts representing Realizations from
vendees under New Contracts of Remedial Expenditures
in that Fiscal Quarter would be allocated 50% to the
FMC sub-account, 25% to the Harsco sub-account and
25% to the Partnership sub-account. In each
subsequent Fiscal Quarter of the Partnership, these
percentages will be recomputed on a cumulative basis
of actual expenditures since the Closing Date, and
all Realizations from vendees of Remedial
Expenditures during such Fiscal Quarter will be
PAGE 71
allocated to the three sub-accounts in accordance
with the then applicable cumulative percentage
factors.
5.22.4.4 The amount of Realization of
Remedial Expenditures from purchasers of goods and
services from the Partnership shall be determined as
follows: (i) with respect to each production
contract other than a Major Contract, and each other
contract other than a Major Contract, regardless of
amount, the amount of Realization of Remedial
Expenditures shall be the amount provided for
Remedial Expenditures in the contract price based
upon the Parent's or Partnership's forward pricing
rate used in such bid or proposal as determined in
accordance with Section 5.22.4.1 and shall be
allocated to the appropriate sub-account of the
Remedial Costs Account proportionately as each unit
of production or other deliverable is paid for by
the vendee as provided in Section 5.22.4.3 above,
and no further adjustment shall be made with respect
to any such contract, irrespective of any payments
made to or by the vendee in connection with contract
close-out; (ii) with respect to each Major Contract,
the Tentative Remedial Expenditure Realization shall
be the Remedial Expenditure amount included in the
data used by the Partnership in its forward pricing
rate to establish the contract price as determined
in accordance with Section 5.22.4.1 and the
Tentative Remedial Expenditure Realization shall be
allocated to the appropriate sub-account of the
Remedial Costs Account proportionately as each unit
of production or other deliverable is paid for by
the vendee as provided in Section 5.22.4.3 above.
The Tentative Remedial Expenditure Realizations with
respect to each Major Contract shall be adjusted to
reconcile any previously recorded Realization with a
revised Realization calculated in accordance with
the following methodology:
PAGE 72
A "Normative Fee" is hereby established
for each category of Major Contracts as follows:
Normative Fee
Major Contract Category
GSD/CSD ASD
SPD
Competitive Contract (U.S., FMS and direct foreign)
8%
7%
7%
Sole source negotiated contract (U.S. and FMS)
12%
10%
10%
Direct foreign sole source contract
15%
15%
15%
The Actual Fee (determined in the manner provided
below) shall be compared to the Normative Fee. If
the Actual Fee exceeds or is less than the Normative
Fee applicable to the Major Contract, then the
Tentative Remedial Expenditure Realization shall be
adjusted as follows (such adjustment being referred
to hereinafter as the Final Remedial Adjustment or
"FRA"):
ARER = AF x TRER
NF
where ARER = Adjusted Remedial Expenditure
Realization;
AF = Actual Fee;
TRER = Tentative Remedial Expenditure
Realization; and
NF = Normative Fee;
provided, that no such adjustment shall cause the
final adjusted Remedial Expenditure Realization to
be less than zero or more than 200% of the tentative
Remedial Expenditure Realization.
PAGE 73
For purposes of the foregoing
calculations, the "Contract Price" shall be the
total revenues payable to the Partnership under the
Major Contract, the "Actual Cost" of performing the
Major Contract shall be the total costs incurred by
the Partnership in the performance of the Major
Contract, including all direct costs and a fully
allocated portion of the Partnership's general and
administrative and other indirect costs, in each
case determined in accordance with government
contract accounting policies and procedures
applicable to the Partnership and the "Actual Fee"
shall be determined as follows:
Actual Fee = Contract Price - 1
Actual Cost
The following examples are intended to be
illustrative:
Assume the Contract Price is $108, the
Normative Fee is 8% and the tentative
Remedial Expenditure recognition is $4.
(1) If the Actual Cost of performing the
Major Contract is $102, TRER shall be
adjusted to $2.94.
(i.e., ARER = (((108/102) - 1)/.08) x
4 = $2.94.)
(2) If the Actual Cost of performing the
Major Contract is $98, TRER shall be
increased to $5.10.
(i.e., ARER = (((108/98) - 1)/.08) x
4 = $5.10.)
(3) If the Actual Cost of performing the
Major Contract is $100, there is no
adjustment.
(i.e., ARER = (((108/100) - 1)/.08) x
4 = $4.00.)
The Partnership shall make a FRA
determination with respect to a Major Contract
within ninety days after the end of the Fiscal Year
in which the last deliverable under such contract
has been received by the customer or the billing has
been sent to the customer with respect to such last
deliverable, whichever is later, and shall include
the results of such determination in the next
Environmental Realization Status Report delivered to
the Parents pursuant to Section 5.22.3.1.
5.22.5 Contributions to Capital. The
provisions hereof and of the Partnership Agreement providing
for Environmental Special Allocations are based upon the
Partnership's anticipated levels of Qualifying
PAGE 74
Remedial Expenditures and Realizations. In order to
protect the Partnership against extraordinary cash
flow disruptions, the Parents agree that, in the
event that the Cumulative Remedial Balance of FMC at
any time exceeds $10,000,000 or the Cumulative
Remedial Balance of Harsco at any time exceeds
$6,666,667, then such Parent shall promptly
contribute or cause its Partner to contribute to the
capital of the Partnership an amount in cash equal
to such excess; provided, however, that during any
period in which there shall be outstanding any cash
advances to the Partnership pursuant to the first
sentence of Section 5.18, then FMC shall make such
contribution to the capital of the Partnership at
any time that its Cumulative Remedial Balance
exceeds $5,000,000 and Harsco shall make such
contribution to the capital of the Partnership at
any time that its Cumulative Remedial Balance
exceeds $3,333,333.
The parties intend that the obligation to
make contributions to capital pursuant to this
Section 5.22.5 shall be recognized as a contractual
obligation treated as an account receivable included
as an asset (matched as to the current or long term
status of the related liability) in the financial
statements prepared by the Partnership and reported
on by the Accountants to the extent that the
Partnership determines that it is required by GAAP
to accrue for Remedial Expenditures. Each Parent
agrees that it shall take such steps as may be
reasonably required by the Accountants, including as
to the Managing General Partner obtaining a standby
letter of credit with rights of enforcement vested
in the Limited Partner (as long as the Limited
Partner has a 20% or greater Share Percentage) and
as to the Limited Partner obtaining a standby letter
of credit with rights of enforcement vested in the
Managing General Partner (provided that all such
rights of enforcement are available only to the
extent required to make contributions to capital
under this Section 5.22.5), to support the
contractual obligation set forth in this Section
5.22.5 and to permit the recognition by the
Partnership of this contractual obligation as set
forth above.
For GAAP purposes, accrued Qualifying
Remedial Expenditures will be specially allocated to
the earnings share of the responsible Partner.
5.22.6 Monitoring by Harsco. Harsco
shall have the right to inspect, sample and monitor
at the premises formerly utilized by the Harsco
Defense Business at all reasonable times and without
unreasonable interference with the Partnership's
operations for a period of five years following the
Closing Date or the date on which FMC purchases
PAGE 75
Harsco's ownership interest in the Partnership under
its call option pursuant to Section 7.2(a) of the
Partnership Agreement, whichever is the first to
occur. The Partnership shall promptly undertake and
diligently pursue to conclusion such further
environmental studies with respect to the premises
formerly utilized by the Harsco Defense Business as
Harsco may specify; provided, however that (i)
except as required by law or by any Governmental
Authority, the Partnership shall not be obligated to
proceed with any aspect of such further studies at a
time and place which would unreasonably interfere
with the Partnership's conduct of its business and
(ii) such obligation shall not limit the
Partnership's right to undertake such environmental
studies of such premises as the Partnership shall
determine.
5.22.7 Examples. Attached hereto as
Schedule 5.22.7 are examples intended to illustrate
the manner in which the foregoing provisions of this
Section 5.22 would operate in practice. In the
event of any discrepancy, or conflict in
interpretation, between Schedule 5.22.7 and the
provisions of this Agreement and the Partnership
Agreement, the provisions of Schedule 5.22.7 shall
control.
In the event of any of (i) the
incorporation of the Partnership pursuant to the
Registration Rights Agreement, (ii) the acquisition
by FMC of the entire interest of Harsco L.P. in the
Partnership as a result of the exercise by FMC of
its right of first refusal pursuant to Section
7.1(a) of the Partnership Agreement, (iii) the
closing pursuant to the exercise by FMC of the call
option pursuant to Section 7.2(a) of the Partnership
Agreement, (iv) the closing pursuant to the exercise
by Harsco L.P. of the put option pursuant to Section
7.2(b) of the Partnership Agreement, (v) the sale by
Harsco L.P. of its entire interest in the
Partnership as a result of and in conjunction with
the sale by FMC of its entire interest in the
Partnership pursuant to Section 7.1(a) of the
Partnership Agreement or (vi) the sale by Harsco
L.P. of its entire interest in the Partnership in a
private sale pursuant to Section 7.1(a) of the
Partnership Agreement, the parties hereto shall be
subject to the terms of Annex B hereto.
5.23 Goodyear Litigation.
5.23.1 The Partnership agrees to perform
after the Closing under the terms of the contract that
is the subject of the Goodyear Litigation. FMC shall
continue to prosecute the Goodyear Litigation, at its
own expense, with counsel of its choice, and
PAGE 76
shall, on a quarterly basis, reimburse the
Partnership for any and all legal and other expenses
incurred by the Partnership in connection with such
litigation. FMC shall indemnify the Partnership
against, and shall hold it harmless from, any Loss
as incurred (payable promptly upon request), for or
on account of or arising from or in connection with
or otherwise with respect to the Goodyear
Litigation. The Partnership will provide assistance
to FMC in connection with the Goodyear Litigation in
the manner, and subject to the terms and conditions,
set forth in Section 5.8 of the Partnership
Agreement.
5.23.2 In the event that a resolution
of the Goodyear Litigation (whether by settlement
agreement or judicial determination) determines that
the price to be paid to The Goodyear Tire & Rubber
Company ("Goodyear") under such contract is lower
than the price set forth in the provisional
agreement under which Goodyear and FMC are currently
operating, the parties hereto agree that the amount
to be repaid by Goodyear under such contract shall
be remitted to FMC and not to the Partnership. In
the event that such resolution determines that the
price to be paid to Goodyear under such contract is
higher than the price set forth in such provisional
agreement, FMC, and not the Partnership, shall be
responsible for remitting to Goodyear an amount
equal to such excess. The parties agree that, to
the extent that notwithstanding the above any
remittances referred to in the preceding two
sentences are made by or to the Partnership, such
remittances shall be deemed to have been made to or
by the Partnership as agent for FMC, and the
benefits and burdens of such remittances shall at
all times remain with FMC.
ARTICLE VI
SECTION 6.0 INDEMNITIES.
6.1 General1 General. Subject to this
Article, each Parent shall indemnify the other
Parent, such other Parent's Partner, the Partnership
and their officers, directors and employees
(collectively the "Indemnified Parties") against,
and shall hold them harmless from, any Loss as
incurred (payable promptly upon request), for or on
account of or arising from or in connection with or
otherwise with respect to any (a) breach on the part
of the indemnifying party or any of its Affiliates
of any surviving representation or warranty
contained in any Operative Document, (b) breach on
the part of the indemnifying party or any of its
Affiliates of any covenant contained in this
PAGE 77
Agreement requiring performance after the Closing
Date, (c) Excluded Liability or any other liability
of such Parent or any of its Affiliates other than
its Defense Affiliates not expressly assumed by the
Partnership under any of the Operative Documents,
(d) liability of any Defense Affiliate of such
indemnifying party listed on Schedule B to Annex A
hereto that is not taken into account in determining
the amount by which such indemnifying party's
investment in such Defense Affiliate is recorded on
such indemnifying party's Final Closing Balance
Sheet or (e) accrued pre-Closing Liabilities of the
types set forth for such Parent on its Final Closing
Balance Sheet (excluding those Liabilities of the
types set forth on Schedule 6.1) in excess of the
amount reflected for such Liabilities on such
Parent's Final Closing Balance Sheet, provided no
Parent or its Partner shall recover any amount for
any diminution in value of its interest in the
Partnership to the extent that the Partnership is
entitled to be indemnified and obtains full
indemnification for the underlying Loss.
Indemnification under clauses (a) and (e)
of this Section 6.1 shall be unavailable to any
Indemnified Party until all amounts to which such
Indemnified Party is entitled exceed $1 million in
the aggregate, whereupon only the amount of such
excess shall be available. Indemnification shall be
unavailable with respect to any claim for a breach
of a representation or warranty made in any
applicable agreement between the parties hereto and
their Affiliates, as of a date on or prior to
Closing, if the claim is made or notice of possible
claim of reasonable specificity is received after
the survival period for such representation or
warranty set forth in Section 7.12.
6.2 Liability for Environmental Matters.
Pursuant to the Assumption Agreement
referred to in Section 2.1.6, the Partnership shall
assume all liabilities and obligations relating to
Environmental Liability Events. Subject to Section
6.1, the Partnership shall be solely responsible for
post-Closing compliance with Environmental and
Safety Requirements applicable to its operations and
facilities. Subject to the procedures, limitations
and qualifications set forth in Sections 6.5, 6.6,
6.7 and 6.8, the Partnership shall indemnify and
defend each Parent, such Parent's Partner, and their
officers, directors and employees against, and hold
them harmless from, any Loss as incurred (payable
promptly upon request) for or on account of or
arising from or in connection with or otherwise with
respect to any Environmental Liability Event,
PAGE 78
whenever arising or caused, but only to the extent
that such Loss, or any portion thereof, is not paid
by such Parent's insurers under general liability
insurance policies (or any other applicable
insurance policy). Notwithstanding anything to the
contrary in this Section 6.2, each Parent shall be
obligated to seek payment under its general
liability policies only for all such Losses and
shall retain any liability or obligation relating to
Environmental Liability Events to the extent
necessary to maintain its right to pursue and obtain
payment under its general liability policies. The
Partnership shall be entitled to receive all sums
reimbursed to, Realized by or otherwise paid to each
Parent under its general liability policies (or any
other applicable insurance policy) for costs
incurred by the Partnership in connection with
Environmental Liability Events pursuant to this
Section 6.2, less the cost of collection (including
attorneys' and consultants' fees). It is
acknowledged by the parties that the inclusion of
costs incurred in connection with Environmental
Liability Events in pricing customer contracts are
(i) in advance of potential Realization from a
Parent's general liability insurers, (ii) not in
lieu of such Realization and (iii) not designed to
permit double payment for costs to the Partnership
or either Parent. This Section 6.2 is not intended
to limit, reduce, define or otherwise restrict
either Parent's rights to recovery under its general
liability policies in connection with Environmental
Liability Events.
6.3 Indemnification for Pension, Retiree
Medical and Other Employee Benefits. Subject to the
procedures and limitations set forth in Sections
6.5, 6.6, 6.7 and 6.8, each Parent agrees to
indemnify and defend the Indemnified Parties
against, and hold them harmless from, any Loss for
or on account of or arising from or in connection
with or otherwise with respect to any liability
relating to a pension benefit plan, retiree medical
benefit plan or any other employee benefit plan
caused by or attributable to employment service with
or the funding of such plans by the Parent prior to
the Closing Date, and not as part of this
transaction, either (i) funded through the transfer
of assets or (ii) assumed by the Partnership as an
unfunded liability either (A) reflected on the
Parent's Final Closing Balance Sheet or (B) not so
reflected if such liability is an obligation for
post employment benefits (other than pre-closing
workers' compensation) of the type described in SFAS
112; provided, however, that no such indemnity shall
apply to any pension, retiree medical or other
employee benefit provided for in a
PAGE 79
Partnership benefit plan to the extent that such
plan confers different or greater benefits than the
predecessor plans of either Parent (it being
understood that neither Parent assumes any
responsibility for any Partnership benefit
attributable to pre-Closing employment service in an
amount greater than such Parent would have been
responsible for under the terms of its pre-Closing
benefit plans); and provided further that (i) FMC
shall indemnify the Indemnified Parties to the
extent that the proviso in Section 4.28 above is
inaccurate and (ii) Harsco shall indemnify the
Indemnified Parties to the extent that the
representation in Section 4.21.11 is inaccurate with
respect to Harsco, disregarding the information
disclosed pursuant to the exception to such Section
4.21.11. Each such Parent further agrees to
indemnify and defend the Indemnified Parties
against, and hold them harmless from, any Loss on
account of any final non-appealable decision that
the transfer (or failure to transfer) of pension
assets from such Parent's Qualified Pension Plan to
the Qualified Pension Plan of the Partnership as
described in Section 5.9.5 does not comply with
applicable Governmental Rules. In such event, the
legally-required amount of additional assets shall
be transferred to the appropriate Qualified Pension
Plan of the Partnership, increased by the actuarial
rate of earnings from the period since the Closing
Date. In addition, and subject to the foregoing
procedures and limitations, FMC agrees to indemnify
and defend Harsco or the Partnership, as applicable,
and to hold it harmless, for any Loss for or on
account of or arising from or in connection with or
otherwise with respect to any liability relating to
(a) benefit reductions continued through the
Partnership's adoption and implementation of a
retiree medical benefit plan which continues certain
benefit reductions, with respect to former FMC
employees, initiated by FMC in 1993 (including,
without limitation, an employer cost limitation
scheduled to take effect in 1996) and (b) the
Partnership's being part of the "controlled group"
which includes FMC or under "common control" with
FMC as those terms are defined or used in ERISA
and/or the Code. Notwithstanding the foregoing
provisions of Section 6.3, no Parent or its Partner
shall recover any amount for any diminution in value
of its interest in the Partnership to the extent
that the Partnership is entitled to be indemnified
and obtains full indemnification for the underlying
Loss.
6.4 Indemnification for Demolition Costs.
FMC shall indemnify the Partnership against, hold it
harmless from, and promptly reimburse it with
respect to any and all
PAGE 80
liability for costs and expenses relating to,
arising out of or incurred in connection with the
demolition of any buildings located on the Santa
Clara Properties ("Demolition Costs"), but only to
the extent that such Demolition Costs were not
incurred in furtherance of a valid business purpose
of the Partnership.
6.5 Procedures. With
respect to any indemnification under this Article VI
in respect of, arising out of or involving a claim
made by any Person against an Indemnified Party (the
"Third Party Claim"), such Indemnified Party must
notify the indemnifying party of the Third Party
Claim within a reasonable time after receipt by such
Indemnified Party of written notice of the Third
Party Claim; provided, however, that the failure of
any Indemnified Party to give such notice shall not
relieve the indemnifying party of its obligations
under this Article VI except to the extent that the
indemnifying party is actually prejudiced by such
failure to give notice. Thereafter, the Indemnified
Party shall deliver to the indemnifying party,
within ten (10) Business Days after the Indemnified
Party's receipt thereof, copies of all notices and
documents (including court papers) received by the
Indemnified Party relating to the Third Party Claim.
6.6 Defense of Third Party Claims. If a
Third Party Claim is made against an Indemnified Party,
the indemnifying party shall be entitled to participate
in the defense thereof and, if it so chooses, to assume
the defense thereof with counsel selected by the
indemnifying party, if (a) such counsel is not
reasonably objected to by the Indemnified Party within
five days of the Indemnified Party's having knowledge
of such counsel's identity and (b) the indemnifying
party first admits in writing that the claim is of the
kind that is covered by this Article. Should the
indemnifying party so elect to assume the defense of a
Third Party Claim, the indemnifying party shall not be
liable to the Indemnified Party for any legal expenses
subsequently incurred by the Indemnified Party in
connection with the defense thereof. If the
indemnifying party elects to assume the defense of a
Third Party Claim, the Indemnified Party shall (a)
cooperate in all reasonable respects with the
indemnifying party in connection with such defense and
(b) not admit any liability with respect to, or settle,
compromise or discharge ("Settle"), such Third Party
Claim without the indemnifying party's prior written
consent. If the indemnifying party assumes the defense
of any Third Party Claim, the Indemnified Party shall
be entitled to observe such defense with its own
counsel at its own expense.
PAGE 81
If the indemnifying party does not assume the
defense of any such Third Party Claim, the
Indemnified Party may defend the same in such manner
as it may deem appropriate, including Settling such
claim or litigation after giving reasonable notice
to the indemnifying party of the terms of such
settlement, and the indemnifying party shall
promptly, upon request of the Indemnified Party,
advance funds to the Indemnified Party in the amount
of any legal and other expenses reasonably incurred
by the Indemnified Party in connection with
investigating, defending or settling any such Third
Party Claim unless there is a bona fide question of
whether the claim in question is one requiring the
indemnifying party in fact to indemnify the other.
However, the indemnifying party shall not be
entitled to assume the defense of any Third Party
Claim if the Third Party Claim seeks an order,
injunction or other specific equitable relief or
specific relief for other than money damages against
the Indemnified Party; but in its defense of such
Third Party Claim, the Indemnified Party shall
neither Settle any portion thereof that seeks money
damages without the indemnifying party's prior
written consent, which shall not be unreasonably
withheld, nor Settle any other portion thereof that
seeks a remedy against the Indemnified Party without
such prior written consent.
6.7 Indemnification Payments.
(a) Indemnification payments under this
Article VI shall be reduced by (i) any insurance
payments or judgments against or settlements with third
parties that have been recovered by the Indemnified
Party and (ii) any Tax Benefits. For purposes of this
Section 6.7, "Tax Benefits" shall mean the present
value of any tax benefits available to the Indemnified
Party (or any consolidated, combined or unitary group
of which it is a member) under federal, state, local or
foreign Tax law attributable to any indemnified loss,
liability, claim, damage, or expense. For purposes of
determining Tax Benefits (i) present value shall be
determined using a discount rate equal to the
appropriate Applicable Federal Rate under Section 1274
of the Code in effect for the month in which the
indemnification payment is made, (ii) all deductions
and losses shall be determined on the assumption that
all such items are useable at the maximum Federal
marginal income Tax rate applicable to a corporation
under Section 11 of the Code in effect for the taxable
year in which such deduction or loss may be claimed,
plus 5 percentage points, and (iii) no benefit shall be
taken into account for any item that increases the
basis of property not subject to depreciation or
amortization. If the Indemnified
PAGE 82
Party is the Partnership, no Tax Benefit shall be
taken into account to the extent that any Tax loss
or deduction attributable to any indemnified loss,
liability, claim, damage, or expense is allocated to
the indemnifying Parent or its Partner under
Sections 4.3(c)(iii) and 4.4 of the Partnership
Agreement.
(b) The indemnifying party shall
indemnify the Indemnified Party (and the other
Parent if the Indemnified Party is the Partnership)
against any Taxes imposed on any payment under this
Article VI (including any payment pursuant to this
sentence).
(c) The Indemnified Party shall make
repayments to the indemnifying party with respect to
indemnification payments received by the Indemnified
Party pursuant to this Article VI hereof but only to
the extent that the Indemnified Party has received
(A) any insurance payments or the proceeds of
judgments against or settlements with third parties
("Recovery Items") or (B) Tax Benefits not taken
into account pursuant to Section 6.7(a). The
repayments hereunder shall not exceed the excess, if
any, of the sum of the indemnification payments, the
Recovery Items received by the Indemnified Party and
such Tax Benefits, over the liability imposed on the
Indemnified Party. For purposes of such
calculation, Recovery Items shall not be taken into
account to the extent that Recovery Items have been
allocated or distributed to the indemnifying party
or its affiliate pursuant to Article IV or Article
VI of the Partnership Agreement, or otherwise. Tax
Benefits shall be calculated by taking into account
any tax liability associated with the receipt of any
indemnification payments or Recovery Items. Tax
Benefits shall not include any item that increases
the basis of property not subject to depreciation or
amortization. Repayments, if any, under this
Section 6.7(c) shall be made promptly after the
Indemnified Party's receipt of a Recovery Item and,
in the case of Tax Benefits, promptly after the
closing of the period of limitations on assessments
with respect to the Indemnified Party's taxable year
to which the Tax Benefits pertain. Such repayment
with respect to Tax Benefits shall bear interest at
the rate of twelve month LIBOR prevailing on the
repayment date, plus 100 basis points, for the
period between the filing date of the Indemnified
Party's federal income tax return on which such Tax
Benefits are claimed and the date of the repayment.
PAGE 83
6.8 Limitations and Exclusions8
Limitations and Exclusions. All losses, damages,
claims and expenses subject to indemnification under
this Article VI shall be limited to actual, direct
damages, losses, expense, or costs. ALL
CONSEQUENTIAL AND PUNITIVE DAMAGES ARE HEREBY
EXCLUDED.
Third party claims subject to
indemnification shall not be deemed to be
consequential or punitive damages but shall be
considered actual damages once liquidated and the
subject of a court enforced judgment, provided that
the indemnifying party has been offered a reasonable
opportunity to defend such third party claim.
6.9 Liability of Partnership. Any liability of the
Partnership under any Operative Document to any
party hereto shall be the sole obligation of the
Partnership and shall be explicitly nonrecourse to
FMC, Harsco, Harsco L.P. and the Affiliates (other
than the Partnership) of each of them.
ARTICLE VII
SECTION 7.0 MISCELLANEOUS.
7.1 Notices. All notices,
demands and other communications required or
permitted by the terms of this Agreement to be given
to any Person shall be in writing, and shall be
given by personal delivery, by mail or overnight
courier or by electronic means of communication.
Any such item shall deemed effective (i) five
Business Days after being deposited in the mails,
certified or registered, with appropriate postage
prepaid and return receipt requested, (ii) when
received, if delivered by hand or courier or
overnight service that provides for a signed receipt
upon delivery or (iii) when received, in the form of
a telex, telegram or telecopy. Such item shall be
directed to the address, telex number or telecopy
number of such Person set forth in Schedule 7.1 to
this Agreement, or at such other address, telex
number or telecopy number as such Person shall
designate by like notice to the other parties.
7.2 Severability. In case any one or
more of the provisions contained in this Agreement
or any Annex or Exhibit hereto shall, for any
reason, be held to be invalid, illegal, or
unenforceable in any respect, all other provisions
of this Agreement or any Annex or Exhibit hereto
shall nevertheless remain in full force and effect,
but if the economic or legal
PAGE 84
substance of the transactions contemplated hereby is
affected in a manner materially adverse to either
party as a result of the determination that a
provision is invalid, illegal or unenforceable, the
parties hereto agree to negotiate in good faith to
modify this Agreement and, if appropriate the
Annexes and Exhibits hereto, so as to effect the
original intent of the parties as closely as
possible in an acceptable manner to the end that the
transactions contemplated hereby are fulfilled to
the fullest extent possible.
7.3 Entire Agreement; Amendment and
Waiver; Remedie sAssignment. This Agreement,
together with the other Operative Documents and
other documents referred to herein, constitutes the
entire agreement of the parties hereto or thereto
with respect to the subject matter hereof or thereof
and supersedes all prior written and oral agreements
(including the parties' letter of understanding
dated November 23, 1992) and understandings with
respect to such subject matter. Neither this
Agreement nor any of the terms hereof may be
terminated, amended, supplemented, waived or
modified orally, but only by a document in writing
signed by the party against which the enforcement of
the termination, amendment, supplement, waiver or
modification is sought. No failure or delay of any
party hereto in exercising any power or right under
this Agreement shall operate as a waiver thereof,
nor shall any single or partial exercise of any such
right or power, or any abandonment or discontinuance
of steps to enforce such a right or power, preclude
any other or further exercise thereof or the
exercise of any other right or power. Except as
otherwise provided herein, neither party hereto may
assign this Agreement without the prior written
consent of the other party.
7.4 Limitations. IN ANY
ACTION FOR DAMAGES OR ENFORCEMENT RELATING TO THIS
AGREEMENT, NO PARTY HERETO SHALL BE ENTITLED TO
CONSEQUENTIAL OR PUNITIVE DAMAGES, BUT THE
PREVAILING PARTY IN ANY SUCH PROCEEDING SHALL BE
ENTITLED TO RECEIVE ALL OF ITS COSTS AND EXPENSES
(INCLUDING REASONABLE COUNSEL FEES). THIS PROVISION
IS INTENDED EXCLUSIVELY FOR THE BENEFIT OF THE
PARTIES HERETO AND SHALL NOT BE CONSTRUED TO GIVE
RISE TO ANY THIRD PARTY BENEFICIARY RIGHTS.
PAGE 85
Third party claims subject to
indemnification shall not be deemed to be
consequential or punitive damages but shall be
considered actual damages once liquidated and the
subject of a court enforced judgment, provided that
the indemnifying party has been offered a reasonable
opportunity to defend such third party claim.
7.5 Table of Contents; Headings. The table of contents and
headings of the articles, sections and other
subdivisions of this Agreement are for convenience
of reference only and shall not modify, define or
limit any of the terms or provisions of this
Agreement.
7.6 Parties in Interest; Limitation
on Rights of Others. The terms of this Agreement
shall be binding upon and inure to the benefit of
the parties hereto and their successors and
permitted assigns. Nothing in this Agreement,
whether express or implied, shall be construed to
give any Person (other than the parties hereto and
their successors and assigns and as expressly
provided herein) any legal or equitable right,
remedy or claim under or in respect of this
Agreement or any covenants, conditions or provisions
contained herein. No assignment or transfer of this
Agreement or a party's interest in the Partnership
or its Partner shall relieve such party from its
obligations hereunder or under any other Operative
Document.
7.7 Binding Effect.
Although the parties intend that each of the
Partnership and Harsco L.P. shall duly authorize,
execute and deliver this Agreement upon its
formation on or before the Closing Date, this
Agreement shall be binding upon the Parents when
executed and delivered by each Parent.
7.8 Governing Law. This
Agreement will be governed by and construed in
accordance with the domestic laws of the State of
Delaware, without giving effect to any choice of law
or conflict of law provision or rule (whether of the
State of Delaware or any other jurisdiction) that
would cause the application of the laws of any
jurisdiction other than the State of Delaware. In
furtherance of the foregoing, the internal law of
the State of Delaware shall control the
interpretation and construction of this Agreement,
even though under that jurisdiction's choice of law
or conflict of law analysis, the
PAGE 86
substantive law of some other jurisdiction would
ordinarily apply.
7.9 Jurisdiction; Court Proceedings. Any suit, action or
proceeding against any party hereto arising out of
or relating to this Agreement or under any other
Operative Document, any transaction contemplated
hereby or any judgment entered by any court in
respect of any such suit, action or proceeding may
be brought in any Federal or State court located in
the state of the principal place of business of the
Partnership or such other district as may contain
the Partnership's principal place of business, and
each party hereto hereby submits to the jurisdiction
of such courts for the purpose of any such suit,
action or proceeding. To the extent that service of
process by mail is permitted by applicable law, each
such party irrevocably consents to the service of
process in any such suit, action or proceeding in
such courts by the delivery of such process by mail,
at its address for process provided for in Schedule
8.1 to this Agreement, and no such service shall be
effective until such delivery is made. Each such
party irrevocably agrees not to assert any objection
which it may ever have to the laying of venue of any
such suit, action or proceeding in any Federal or
State court located in any state which contains the
Partnership's principal place of business, and any
claim that any such suit, action or proceeding
brought in any such court has been brought in an
inconvenient forum.
7.10 Termination. This
Agreement may be terminated at any time before
Closing:
(a) by consent of both Parents;
(b) by either Parent if there has
been a material breach of any representation,
warranty, covenant or agreement on the part of the
other Parent or its Affiliates set forth in this
Agreement and material to the transactions
contemplated hereby and, if it is susceptible of
cure, it is not cured within 10 days after written
notice to such Parent; or
(c) by either Parent if the Closing
has not occurred by February 1, 1994, subject to
Section 2.2 hereof.
PAGE 87
7.11 Expenses. Except as
otherwise stated herein, each party shall bear its
own expenses incurred prior to Closing in connection
herewith.
7.12 Survival. All of
the representations and warranties of the parties
contained in this Agreement shall survive until the
close of business on March 31, 1996, regardless of
whether such party continues to hold an ownership
interest in the Partnership or any corporate
successor (other than Section 4.8, which shall
survive indefinitely). All of the indemnities and
covenants of the parties contained in this Agreement
shall, unless otherwise provided herein, survive
indefinitely or for the period set forth in any
applicable statute of limitations; provided,
however, that upon the purchase of Harsco's interest
in the Partnership under the call provided for in
Section 7.2 of the Partnership Agreement, the
indemnity set forth in Section 6.1(a) and, in the
event of a Change in Control of FMC, the covenants
set forth in Sections 5.6 and 5.12 on the part of
Harsco shall be extinguished.
7.13 Advice of Legal Counsel. Each party hereto acknowledges
and represents that, in executing this Agreement, it
has had the opportunity to seek advice as to its
legal rights from legal counsel and that the person
signing on its behalf has read and understood all of
the terms and provisions of this Agreement. This
Agreement shall not be construed against any party
hereto by reason of the drafting or preparation
thereof.
7.14 Noncompetition. Each Parent agrees
that, until such time as the Share Percentage of
such Parent's Partner (or equivalent common equity
interest in any corporate successor to the
Partnership) falls below 20% and for an additional
period of three (3) years thereafter, it will not
engage, directly or indirectly, anywhere in the
world in any line of business within the Scope of
Activity; provided, however, that (i) Harsco shall
be entitled to continue to engage in the
development, manufacture, retrofit, installation,
repair, overhaul, engineer, design, service, sale
and marketing of wheeled trucks (whether armed or
unarmed), trailers, busses, armor and armor kits for
sale to the military and other customers and (ii)
either Parent shall be entitled to continue to
engage in the development, manufacture, retrofit,
installation, repair, overhaul, engineer, design,
service, sale and marketing of any component part or
subsystem of military vehicle systems or weapon
PAGE 88
stations which are similar to classes of products or
services that primarily are commercially sold by
such Parent for non-military uses. If any court of
competent jurisdiction shall finally hold that the
time, territory or any other provision set forth in
this Section 7.14 constitutes an unreasonable
restriction, such provision shall not be rendered
void, but shall apply as to such time, territory or
to such other extent as such court may determine
constitutes a reasonable restriction under the
circumstances involved. Each Parent acknowledges
that the restrictions contained in this Section 7.14
are reasonable and necessary to protect the
legitimate interests of the Parents and the
Partnership and that any breach by either Parent of
any provision hereof will result in irreparable
injury to the Partnership. Each Parent acknowledges
that, in addition to all remedies available at law,
the Partnership or a Parent shall be entitled to
equitable relief, including injunctive relief, and
an equitable accounting of all losses and damages,
including consequential damages, arising from such
breach. Any Parent and any of its Affiliates may
engage in other business ventures and dealings
within or without the Partnership's Scope of
Activity, except to the extent that such ventures
and dealings are prohibited by this Section 7.14.
PAGE 89
IN WITNESS WHEREOF, this Agreement has
been executed and delivered as of the date first
above written.
FMC CORPORATION
By:
Its:
HARSCO CORPORATION
By:
Its:
HARSCO DEFENSE HOLDING, INC.
By:
Its:
With respect only to the obligations of it
expressly set forth herein:
UNITED DEFENSE, L.P.
By: FMC CORPORATION
its general partner
By:
Its:
PAGE 0
DOCUMENT HEADER
DOCUMENT DESCRIPTION PARTNERSHIP AGREEMENT
DOCUMENT TYPE 2
COUNT 75
PAGE 1
EXHIBIT I
PARTNERSHIP AGREEMENT
BY AND AMONG
FMC CORPORATION,
HARSCO DEFENSE HOLDING, INC.
AND
UNITED DEFENSE, L.P.
DATED AS OF JANUARY 1, 1994
PAGE 2
TABLE OF CONTENTS
Page
ARTICLE I DEFINITIONS 5
1.1 Definitions 5
ARTICLE II ORGANIZATION 6
2.1 Formation and Term of the Partnership 6
2.2 Scope of Activity 7
2.3 Property Ownership 7
2.4 Business Dealings with the Partnership 7
2.5 Confidential Information 7
2.6 Powers 8
ARTICLE III GOVERNANCE AND ADMINISTRATION 9
3.1 Matters Requiring the Consent of the Limited
Partner 9
3.2 Reports to the Limited Partner 13
3.3 Restrictions on Partners 14
3.4 Managing General Partner 14
3.5 The Advisory Committee 16
3.6 Officers 20
3.7 Insurance 22
3.8 Employee and Officer Confidentiality
Agreements 22
3.9 Consolidation Costs 22
3.10 Other Business 23
3.11 Revolving Credit 23
3.12 Dispute Resolution on A Services 24
ARTICLE IV CONTRIBUTIONS, CAPITAL ACCOUNTS, ALLOCATIONS 26
4.1 Capital Accounts 26
4.2 Partnership Profits and Losses 29
4.3 Allocation of Profits and Losses 32
4.4 Allocation of Taxable Income and Loss 36
4.5 Additional Capital Contributions 38
4.6 Loss Limitation and Special Allocation 39
4.7 No Interest 41
4.8 No Withdrawal 41
4.9 Loans From Partners 41
4.10 Loans to Partners 41
4.11 No Deficit Capital Account Make-Up
Obligation. 41
ARTICLE V FISCAL MATTERS 41
5.1 Fiscal Years and Fiscal Quarters 41
PAGE 3
5.2 Location of Books of Account 41
5.3 Books and Records 42
5.4 Annual Financial Statements 42
5.5 Interim Financial Statements and Other
Information 43
5.6 Estimated Tax Information 44
5.7 Tax Return Information 44
5.8 Inspection of Facilities and Records;
Partnership Assistance 44
5.9 Principal Accounting Procedures 45
5.10 1993 Parent Financial Statements 47
5.11 Retention of Certain Items 47
5.12 Responsibilities of Accountants 47
5.13 State Income Taxes. 48
ARTICLE VI DISTRIBUTIONS 49
6.1 Distribution of Limited Partner Allocation 49
6.2 Environmental Carrying Cost Distributions 50
6.3 Tax Distributions 50
6.4 Special Distributions 51
6.5 Additional Cash Distributions 51
ARTICLE VII TRANSFER OF INTERESTS 53
7.1 Private Sale 53
7.2 Put and Call Options 56
7.3 Additional Matters 59
ARTICLE VIII INDEMNIFICATION 61
8.1 Indemnification of Partners 61
8.2 Indemnification by Partners 63
8.3 Insurance 63
8.4 Contract Right 63
ARTICLE IX DISSOLUTION; WITHDRAWAL 63
9.1 Causes of Dissolution 63
9.2 Dissolution by Agreement 64
9.3 Winding Up 64
9.4 Distribution Upon Liquidation 64
9.5 Withdrawal Prohibited 65
ARTICLE X CERTAIN TAX MATTERS 65
10.1 Taxation as a Partnership 65
10.2 Election to Adjust Tax Basis 66
10.3 Partners' Share of Excess Nonrecourse
Liabilities 66
10.4 Organizational Expenses 66
10.5 Withholding and Certain Other Taxes 66
10.6 Books, Records and Cooperation 67
PAGE 4
10.7 Tax Elections 67
10.8 Tax Matters Partner 67
10. Amendment to Code or Treasury Regulations 68
ARTICLE XI NOTICE 68
11.1 Manner of Giving Notice 68
11.2 Addresses 69
ARTICLE XII MISCELLANEOUS 70
12.1 Amendment 70
12.2 Applicable Law 70
12.3 Further Assurances 70
12.4 Headings 70
12.5 Section Numbers 71
12.6 Parties Bound 71
12.7 Severability 71
12.8 Waiver 71
12.9 Entire Agreement 71
12.10 Advice of Legal Counsel 71
12.11 Dispute Resolution 72
12.12 Parties in Interest; Limitation on Rights of
Others 72
12.13 Counterparts 73
12.14 Jurisdiction, Court Proceedings 73
12.15 Waiver of Rights of Partition and
Dissolution 74
12.16 Determination of Fair Market Value 74
Schedule 3.2 Reports to the Limited Partner 56
Schedule 4.1 Determination of Initial Capital Accounts 57
Schedule 5.9 Accounting Methods, Tax Elections and
Tax Depreciation Methods 58
Exhibit A Insurance Coverages 59
Exhibit B Form of Confidentiality Agreement for
Officers and Advisory Committee Members 60
Exhibit C Form of Confidentiality Agreement for
Prospective Employees 61
Exhibit D Form of Senior Promissory Note 62
PAGE 5
THIS PARTNERSHIP AGREEMENT is entered into as of
January 1, 1994 by and among FMC Corporation, a
Delaware corporation ("Managing General Partner"),
Harsco Defense Holding, Inc., a Delaware corporation
("Limited Partner"), which is a direct wholly-owned
subsidiary of Harsco Corporation, a Delaware
corporation ("Harsco"), and United Defense, L.P., a
Delaware limited partnership ("the Partnership"). Each
of Managing General Partner and Limited Partner is
sometimes referred to herein as "Partner," and
collectively they are sometimes referred to as
"Partners" or "Parties."
WHEREAS, the Managing General Partner and Harsco
have entered into a Participation Agreement dated as of
January 1, 1994, as amended from time to time in
accordance with its terms (the "Participation
Agreement"), setting forth certain representations and
warranties, conditions and agreements dealing with
their relationships and certain relationships of their
Affiliates and Subsidiaries and the establishment and
operation of this Partnership;
NOW, THEREFORE, in consideration of the mutual
covenants, and subject to the terms and conditions,
contained herein, the Partners hereby form and create
the Partnership under and pursuant to the Delaware
Revised Uniform Limited Partnership Act, as amended or
its successor, Title 6, Chapter 17 of the Civil Code of
the State of Delaware, for the purposes and upon the
terms, provisions and conditions as hereinafter set
forth.
ARTICLE I
DEFINITIONS
1.1 Definitions Except as otherwise defined
herein, terms used herein in capitalized form shall
have the meanings attributed to them in Annex A to this
Partnership Agreement.
PAGE 6
ARTICLE II
ORGANIZATION
2.1 Formation and Term of the Partnership.
(a) Formation; Compliance. As of the date
hereof, the Partners enter into and form the
Partnership as a limited partnership under the laws of
the State of Delaware. The Partnership shall promptly
file with the appropriate Governmental Authorities all
documents in connection with the formation and
operation of the Partnership as may be required or
appropriate under the laws of the State of Delaware
(including, but not limited to, the Delaware Revised
Uniform Limited Partnership Act) or any other
jurisdiction in which the Partnership proposes to carry
on business. The Partnership shall provide to each
Partner upon request a copy of each such document as
filed.
(b) Business Names. The activities and
business of the Partnership shall be conducted under
the name United Defense, L.P. The Partnership may also
do business under other names agreed to by both of the
Partners. If required by an applicable Governmental
Rule, (i) the Partnership shall cause appropriate
partnership certificates or fictitious business name
certificates to be filed with the appropriate
Governmental Authorities and (ii) the Managing General
Partner shall as expeditiously as reasonably possible
register the Partnership to do business as a foreign
limited partnership in all appropriate jurisdictions.
(c) Principal Office. The "Principal
Office" of the Partnership shall be in or around
Arlington, Virginia. Other offices may be established,
and the location of any office of the Partnership
(including the Principal Office) may be changed by the
Managing General Partner or, if other than the
Principal Office, by the CEO, at any time and from time
to time.
PAGE 7
(d) Partnership Term. The term of the
Partnership shall commence as of the date hereof and
shall continue until dissolved as hereinafter provided
in Article IX hereof.
2.2 Scope of Activity. The "Scope of Activity"
of the Partnership shall be to engage in the
development, manufacture, retrofit, installation,
overhaul, repair, engineering, design, service, sale
and marketing of any military vehicle system (excluding
trucks and busses) or weapon station, including any
component part or subsystem thereof.
2.3 Property Ownership. Except as provided in
the Operative Documents or any other contract to which
the Partnership is or becomes a party, (i) all assets
and property, whether real, personal or mixed, tangible
or intangible, including contractual rights, owned or
possessed by the Partnership shall be held or possessed
in the name of the Partnership, (ii) all such assets,
property and rights shall be deemed to be owned or
possessed by the Partnership as an entity and
(iii) none of the Partners individually shall have any
separate ownership in such assets, property or rights.
2.4 Business Dealings with the Partnership.
Subject to any approvals required pursuant to Sections
3.1 or 3.3 and subject to Section 3.4(b) hereof,
whichever may apply, a Partner or any Affiliate thereof
may enter into contracts or agreements with the
Partnership on an arms-length and commercially
reasonable basis and derive and retain profits
therefrom. Subject to the requirements of Section 3.1
hereof, the validity of any such contract, agreement,
transaction or dealing or any payment or profit related
thereto or derived therefrom shall not be affected by
any relationship between the Partnership and such
Partner or any of its Affiliates.
2.5 Confidential Information. No member of the
Advisory Committee, employee of the Partnership or
employee made available to the Partnership by a Partner
or an Affiliate of such Partner shall be obligated to
reveal confidential or proprietary information
PAGE 8
belonging to either Partner, or either Partner's
Affiliate, without the consent of such Partner or
Partner's Affiliate.
2.6 Powers. Subject to and modified by the
terms, conditions and stipulations provided in Sections
3.1 and 3.3 below and any other terms, conditions and
stipulations of this Agreement, the Participation
Agreement or any other Operative Document, as
applicable, the Partnership may exercise all of the
powers and privileges granted by this Agreement and by
law, together with any other powers incidental thereto,
including, but not limited to, the power and privilege
to:
(a) Receive by contribution, purchase, lease
or otherwise acquire, employ, use or otherwise deal in
and with real or personal property, or any interest
therein, wherever situated, and subject to the terms of
this Agreement, sell, convey, lease, exchange, transfer
or otherwise dispose of, mortgage or pledge, all or any
of its property and assets, or any interest therein,
wherever situated;
(b) Appoint such managers, employees and
agents as deemed appropriate and pay or otherwise
provide for them suitable compensation;
(c) Participate with others in any
transaction, undertaking or arrangement which the
Partnership by itself would have the power to conduct
within the Scope of Activity, whether or not such
participation involves sharing or delegation of control
of such activity with or to others;
(d) Make contracts, including contracts of
guaranty and suretyship, incur liabilities, borrow
money, issue its notes, bonds and other obligations,
and secure any of its obligations by mortgage, pledge
or other encumbrance of all or part of its property,
franchises and income;
(e) Lend money for Partnership purposes,
invest and reinvest its funds, and take, hold and deal
with real and personal property as security for the
payment of funds so loaned or invested;
PAGE 9
(f) Sue and be sued in all courts and
participate, as a party or otherwise, in any judicial,
administrative, arbitrative or other proceedings, in
its Partnership name;
(g) Establish and carry out employment
policies, including, but not limited to, policies
regarding hours of work, vacation, discipline and
termination, and pension, profit sharing, retirement,
benefit, incentive and compensation plans and trusts;
(h) Establish and maintain a risk management
program (including insurance) for (i) all assets and
properties of the Partnership, (ii) all potential legal
liabilities arising out of Partnership activities,
(iii) all statutory responsibilities regarding
employees, and (iv) any other possible exposures of the
Partnership;
(i) Execute and deliver the Operative
Documents to which it is to be a party;
(j) Adopt: (i) forms of agreements and
employment policies with respect to the protection of
confidential information and (ii) business plans; and
(k) Exercise such additional powers and
privileges as are otherwise permitted to be exercised
by the Delaware Revised Uniform Limited Partnership
Act.
ARTICLE III
GOVERNANCE AND ADMINISTRATION
3.1 Matters Requiring the Consent of the Limited
Partner. The following is a list of actions which may
not be taken by the Partnership without the written
consent of the Limited Partner, so long as the Limited
Partner's Share Percentage is at least 20%:
PAGE 10
(a) Subject to Section 12.1, any changes to
or amendments of this Agreement; or in the event of the
incorporation of the Partnership pursuant to Section 2
of the Registration Rights Agreement, the adoption of
the initial certificate of incorporation and by-laws of
the successor corporation and any subsequent amendments
to its certificate of incorporation and by-laws;
(b) (i) Except as otherwise expressly
permitted by this Agreement, the Registration Rights
Agreement or any other Operative Document, the
voluntary winding up, dissolution or liquidation of the
Partnership, the filing of a petition in bankruptcy, or
for the reorganization or rehabilitation under the
Federal bankruptcy law or any state law, for the relief
of debtors, consenting to an order for relief entered
against it under any Federal bankruptcy law or
otherwise consenting to having the Partnership
adjudicated bankrupt or insolvent, the making of an
assignment for the benefit of creditors or the
suffering beyond 90 days of the appointment of a
receiver, trustee or custodian for a substantial
portion of its business or properties by virtue of an
allegation of insolvency, (ii) any similar action under
any foreign law or (iii) the decision not to oppose any
filing or petition which seeks to have the Partnership
declared bankrupt or insolvent under any such law;
(c) The sale of all or a substantial part of
the assets of the Partnership;
(d) The making of any distribution to a
Partner by the Partnership in contravention of Article
VI hereof, or any repurchase, redemption or acquisition
of the equity of the Partnership not in proportion to
the Partners' respective Share Percentages;
(e) The entry by the Partnership into any
business activity outside the Scope of Activity, except
that the Partnership shall be entitled to engage in the
business of developing, manufacturing, retrofitting,
overhauling, repairing, engineering, designing,
servicing, selling and marketing of forgings, castings
and fabrications for commercial customers as such
business is engaged in by the FMC Defense Business
immediately prior to the Closing Date and as such
business may be subsequently modified, extended or
PAGE 11
developed by the Partnership so long as such
modification, extension or development is financed
solely with internally generated funds and does not
occasion a capital call;
(f) The replacement of the Accountants for
the Partnership;
(g) (i) The issuance of additional general
Partnership interests to any Person other than the
Managing General Partner pursuant to Section 4.5 or
clause (ii) below and (ii) the issuance for cash of
additional limited or general Partnership interests
unless the Partnership shall first have offered to sell
to each holder of Partnership interests, on the same
terms (which terms shall be reasonably determined by
the Managing General Partner), a percentage portion of
such newly issued limited Partnership interests (or
general Partnership interests if offered to the
Managing General Partner) equal to such holder's Share
Percentage;
(h) Any dilution of the Limited Partner's
Share Percentage below 20%;
(i) Any change in the name of the
Partnership;
(j) Any Related Party Transaction consisting
of (i) the provision of management services for value
(other than management services covered by Section 4(b)
of the Management Services Agreement) by the Managing
General Partner or any of its Affiliates to the
Partnership; (ii) all sales of products or services
(other than services covered by clause (i) above) by
the Managing General Partner or any of its Affiliates
to the Partnership in any Fiscal Year in excess of an
aggregate of $500,000; or (iii) the purchase of
products by the Managing General Partner or any of its
Affiliates from the Partnership or the entry into any
other agreements between the Partnership and the
Managing General Partner or any of its Affiliates
which, in any such case, involves the payment of money
or the assumption or release of any reasonably
estimable liability that individually exceeds $100,000
or collectively in any Fiscal Year exceeds $1,000,000
in the aggregate. The "A Services" performed pursuant
PAGE 12
to Section 4(a) of the Management Services Agreement by
FMC and its Affiliates will be subject to the annual
consent of the Limited Partner under this Section
3.1(j), which annual consent has been given with
respect to Fiscal Year 1994. Such annual consent shall
constitute the Limited Partner's consent with respect
to such A Services. If the Limited Partner's consent
is not obtained with respect to any such A Services to
be obtained from FMC in any Fiscal Year subsequent to
the Fiscal Year ended December 31, 1994, no such A
Services shall be provided unless and until an
arbitration proceeding pursuant to Section 3.12 shall
have been concluded; provided, however, that any such
nonapproved A Services may continue to be provided only
to the extent permitted by Section 4(d) of the
Management Services Agreement. Thereafter any such A
Services shall be provided only if the Arbitrator has
determined that Harsco's consent to the provision of
such services was unreasonably withheld. All Related
Party Transactions shall be generally consistent with
normal commercial practices by providers of similar
products and services in arm's-length transactions and
all sales of products and services pursuant to clause
(ii) above shall be consistent with the normal profit
margins of the Managing General Partner or its
Affiliates. The parties hereby agree that (i) any
subcontract between the Partnership and FMC's Corporate
Technology Center providing for work which relates to
any Partnership engineering contract or other contract
which requires the submission of certified cost or
pricing data, (ii) any cash advances made to the
Partnership pursuant to Section 5.18 of the
Participation Agreement, (iii) any transaction that is
limited to a direct pass-through of amounts billed by
an unaffiliated third party and (iv) any capital
contributed to the Partnership pursuant to Section 4.5
of this Agreement or Sections 2.1.3, 2.1.4, 2.1.5 or
2.3.3 or Article VI of the Participation Agreement
shall not constitute Related Party Transactions for
purposes of this Section 3.1(j).
(k) Determining the share of Profits and
Losses under Section 4.3(c)(vii); and
(l) Any amendment to the Lease Agreement.
PAGE 13
Whenever the Managing General Partner wishes
to propose any action by the Partnership requiring the
consent of the Limited Partner, the Managing General
Partner shall provide such a proposal to the Designated
Representative of the Limited Partner not less than ten
Business Days in advance of the proposed implementation
of such proposal. The proposal shall be in writing and
shall set forth, in reasonable detail, the reasons for
the proposed action, the anticipated consequences
thereof and any appropriate background information
needed by the Limited Partner to evaluate the proposal.
If the Limited Partner reasonably concludes that
additional information is needed in order to reach its
conclusion, the Designated Representative of the
Limited Partner shall so advise the Managing General
Partner, in a writing specifying in reasonable detail
the requested additional information, within ten
Business Days after receipt of the Proposal and the
Managing General Partner shall provide the requested
information as expeditiously as reasonably possible.
If no request is made for additional information, the
Limited Partner through its Designated Representative
shall advise the Managing General Partner in writing
whether the consent is given within ten Business Days
after receipt of the proposal. If additional
information is requested, the Designated Representative
of the Limited Partner shall respond within ten
Business Days after receipt of the requested
information. Nothing herein shall require the Managing
General Partner to provide information that cannot be
obtained with reasonable effort.
Because the breach by the Managing General
Partner of any of its obligations under this Section
3.1 would cause irreparable harm to the Limited Partner
that would be difficult to quantify and would not be
compensable by damages alone and because the Limited
Partner would not have entered into this agreement in
the absence of Section 3.1, the Managing General
Partner expressly agrees that the Limited Partner will
have the right to enforce Section 3.1 by injunction,
specific performance or other equitable relief without
prejudice to any other rights and remedies the Limited
Partner may have with respect to the breach of any
provision of Section 3.1 by the Managing General
Partner. The reference to specific performance in this
Section is not a waiver of either party's rights to
seek equitable relief for breaches of other sections of
this Agreement.
3.2 Reports to the Limited Partner. The
Partnership shall deliver to the Limited Partner on a
timely basis such information as is reasonably
requested by the Limited Partner in order to fulfill
PAGE 14
financial reporting and other legal requirements, in
addition to that information listed on Schedule 3.2.
3.3 Restrictions on Partners. Except as
specified in this Agreement, neither Partner may,
without the written consent of the other Partner:
(a) make any agreement with any third party
on behalf of or otherwise purport to bind the other
Partner or do any act in contravention of this
Agreement; or
(b) release a Partner from any obligation
under this Agreement or, to the extent it relates to
the Partnership, any Operative Document.
3.4 Managing General Partner.
(a) The Managing General Partner will act as
Managing General Partner of the Partnership. The
Managing General Partner shall have the right to
exercise, on behalf of the Partnership, all the powers
not requiring the consent of the Limited Partner
pursuant to Section 3.1 above. Subject to the
provisions of this Agreement, the Managing General
Partner shall have the sole power and authority to
represent and to act for the Partnership and to bind
the Partnership with respect to Partnership property
and affairs. Without limiting the foregoing, the
Managing General Partner, acting through those of its
officers, employees and agents as it shall designate in
writing from time to time, shall, in addition to the
officers of the Partnership, have the authority to
certify claims against the U.S. Government on behalf of
UDS for purposes of Section 6(c) of the Contract
Dispute Act, 41 U.S.C. 605(c), as amended. The
Limited Partner will take no part in the control,
management, direction or operation of the affairs of
PAGE 15
the Partnership and will have no power to bind the
Partnership. The Limited Partner will not be
personally liable for any obligations of the
Partnership and will have no obligation to make
contributions to the Partnership in excess of those
specified in this Agreement or Articles II, and VI and
Section 5.22.5 of Article V of the Participation
Agreement except to the extent set forth under the laws
of the State of Delaware.
(b) The Managing General Partner shall at
all times act in a fiduciary manner with respect to the
Partnership and the Partners, shall have fiduciary
responsibility for the safekeeping and use of all funds
and assets of the Partnership, whether or not in its
immediate possession or control, and shall exercise
good faith and integrity in all aspects of its handling
of the affairs of the Partnership; provided, however,
that, except as expressly provided in the Management
Services Agreement, in no event shall the Managing
General Partner have any liability to the Partnership
or any other Partner for simple negligence in an action
for an alleged breach of the duty of care. The
Managing General Partner shall not employ, or allow any
other Person to employ, such funds or assets, in any
manner except in any manner which the Managing General
Partner reasonably believes in good faith to be in or
not opposed to the best interests of the Partnership.
Notwithstanding any Delaware judicial precedent to the
contrary and without in any way limiting its rights
under Delaware law, the Limited Partner shall be
entitled to bring an action against the Managing
General Partner, its Affiliates or the directors,
officers or employees of any of them in the right of
the Partnership under Section 17-1001 of the Delaware
Corporation Law or any other applicable provision of
Delaware law to recover a judgment in the Partnership's
favor if the Managing General Partner has refused to
bring the action within ninety (90) days after the
receipt by the Partnership of the Limited Partner's
demand that such action be commenced.
(c) Except as caused by actions which are
otherwise expressly contemplated by this Agreement, the
Registration Rights Agreement or any other Operative
Document, while conducting the business of the
Partnership, the Managing General Partner will use all
PAGE 16
reasonable efforts not to act in any manner which will
(i) cause the termination of the Partnership for
federal income tax purposes or (ii) cause the
Partnership to be treated for federal income tax
purposes as an association taxable as a corporation.
(d) The Managing General Partner shall use
reasonable efforts to cause to be prepared and timely
filed with appropriate Governmental Authorities all
material reports required to be filed with such
entities under then current applicable laws, rules and
regulations and to cause such reports to be prepared on
substantially the accounting or reporting basis
required by such Governmental Authorities. Upon
request, the Managing General Partner shall promptly
provide the Limited Partner with a copy of any such
report.
(e) The Managing General Partner shall use
reasonable efforts to take all actions reasonably
required by the Limited Partner and necessary, appropri
ate or desirable for the continuation of the
Partnership's valid organization and existence as a
limited partnership affording limited liability to the
Limited Partner under the laws of the State of
Delaware. The Managing General Partner shall not be
responsible or liable for any action taken by the
Limited Partner that is deemed to be or interpreted as
an action on behalf of the Partnership or involving
participation in the control or management of the
Partnership's business.
3.5 The Advisory Committee.
(a) General. To facilitate the exercise by
the Managing General Partner of its powers and
responsibilities under this Agreement, the Partnership
shall have a committee, comprised of ten individuals
designated in the manner described below (the "Advisory
Committee" or "Committee"), which will consider and
discuss any or all matters regarding the direction and
control of the Partnership.
PAGE 17
(b) Members, etc. The Managing General
Partner shall designate six members of the Advisory
Committee and the Limited Partner shall designate four
members of the Advisory Committee. Upon any adjustment
of the Share Percentages, the number of members of the
Advisory Committee designated by each Partner shall, if
necessary, also be adjusted so that such number shall
be the whole number closest to one-tenth of such
Partner's Share Percentage; provided, that, if the
Share Percentages are whole numbers ending in five,
then the General Partner shall round its Share
Percentage to the next highest multiple of ten, and the
Limited Partner shall round its Share Percentage to the
next lowest multiple of ten, to determine their
respective numbers of Designees. Each such Designee
shall serve at the pleasure of the Partner which
designated such Designee. Each Partner may appoint one
or more alternate Designees to replace at any meeting
of the Committee any of its Designees who may be
disqualified or absent. Each Partner shall bear the
cost incurred by its Designees in their capacities as
such, and no Committee member or alternate shall be
entitled to compensation from the Partnership for
serving in such capacity. Subject to applicable
Governmental Rules, each member of the Advisory
Committee shall be entitled to review classified
information of the Partnership.
(c) Initial Committee Members. The initial
Committee Designees are:
(i) for the Managing General Partner:
Robert N. Burt
Larry D. Brady
Francis A. Riddick
Randy S. Ellis
Edward C. Meyer
Robert L. Day
(ii) for the Limited Partner:
Leonard A. Campanaro
Derek C. Hathaway
Barrett W. Taussig
Robert L. Kirk
PAGE 18
(d) Changes to Members. Each Partner shall
notify the Partnership and the other Partner of any
change to the business address and business telephone
and telecopy numbers of each Designee designated by
such Partner. Each Partner shall promptly notify the
Partnership and the other Partner of any change in such
Partner's Designees to the Committee which notice shall
include the name of the Designee being replaced with a
new Designee and the name, address, telephone and
telecopy numbers for the such new Designee. Each
Partner's Designees to the Committee shall remain in
effect until the Partner making such appointment
notifies the Partnership and the other Partner of a
change in such appointment in accordance with (b) above
or such Designee notifies the Partnership of his or her
resignation as a member of the Committee.
(e) Meetings, etc. Meetings of the Advisory
Committee shall be held at the Principal Offices of the
Partnership or at such other place as may be determined
by the Advisory Committee. Regular meetings of the
Advisory Committee shall be held six times per year
(including within a reasonable period of time after the
end of each Fiscal Quarter) until the second
anniversary of the Closing Date and four times per year
thereafter on such dates and at such times as shall be
determined by the Advisory Committee. Special meetings
of the Advisory Committee may be called by the CEO or
either Partner for any reason on at least (i) five
Business Days' prior written notice by U.S. first class
mail, (ii) three Business Days' actual telephonic
notice to each Designee personally for a meeting other
than a telephonic meeting or (iii) 36 hours' prior
written or telephonic notice for a telephonic meeting.
The actions taken by the Advisory Committee at any
meeting, however called and noticed, shall be as valid
as though taken at a meeting duly held after regular
call and notice if (but not until), either before, at
or after such meeting, the Designee as to whom it was
improperly noticed, if any, signs, (i) a written waiver
of notice, (ii) a consent to the holding of such
meeting or (iii) an approval of the minutes thereof. A
meeting of the Advisory Committee may be held by
conference telephone or similar communications
equipment by means of which all individuals
participating in the meeting can be heard
simultaneously by all other participants and each can
speak to all others.
PAGE 19
(f) Meeting Rules. The Managing General
Partner shall prepare and provide to the Limited
Partner a proposed agenda not less than ten Business
Days before each regularly scheduled meeting of the
Advisory Committee. Upon the written request of the
Limited Partner made at least five Business Days before
a regularly scheduled meeting of the Advisory
Committee, the proposed agenda shall be expanded to
include any additional agenda items suggested by the
Limited Partner. At each regular meeting of the
Advisory Committee, officers of the Partnership shall
update the Committee with respect to financial and
operational matters and the status of all material
claims and indemnification matters. Such officers
shall also report on such other matters as may be
reasonably requested by the Limited Partner. The
Advisory Committee may establish reasonable rules and
regulations to (i) require the Partnership to call
meetings and perform other administrative duties, (ii)
place reasonable limits on the number and participation
of observers and to require such observers to observe
confidentiality obligations and (iii) otherwise provide
for the keeping of minutes.
(g) Discussion of Matters Requiring the
Limited Partner's Consent. At the request of either
the Managing General Partner or the Limited Partner,
any proposed action by the Partnership requiring the
consent of the Limited Partner may be considered and
discussed at a regular or special meeting of the
Advisory Committee, but no such action may be taken
without the consent of the Limited Partner.
(h) Dispute Resolution. At the request of
either the Managing General Partner or the Limited
Partner, the Advisory Committee shall attempt in good
faith to resolve any dispute between such Partners
(other than matters covered by Sections 3.1 or 3.12
hereof) before either such party may invoke the dispute
resolution mechanism set forth in Section 12.11. If
the Advisory Committee does not resolve the dispute to
the satisfaction of both parties within 60 days after
the Advisory Committee receives notice of such dispute,
then either party may invoke the dispute resolution
mechanism set forth in Section 12.11.
PAGE 20
(i) Notwithstanding anything to the contrary
herein provided, the Advisory Committee shall have no
responsibility or authority to manage the affairs of
the Partnership.
3.6 Officers.
(a) General. The officers of the
Partnership shall be a Chief Executive Officer
(sometimes referred to as the "CEO") and such other
officers as may be set forth in this Agreement or any
other Operative Document or determined by the Managing
General Partner from time to time to be necessary or
advisable for the conduct of the business and affairs
of the Partnership. All officers of the Partnership
shall be appointed by the Managing General Partner and
shall be subject to removal with or without cause by
the Managing General Partner. Any individual may hold
more than one office. All officers of the Partnership
shall (i) report to the Chief Executive Officer, who
shall report to the Managing General Partner, (ii) have
the powers and duties set forth in this Section 3.6 or
as otherwise prescribed by the Managing General Partner
or, in the case of officers other than the CEO, the CEO
and (iii) serve for the term designated by this
Agreement or the Managing General Partner, subject to
removal as provided above.
(b) Chief Executive Officer. The initial
Chief Executive Officer shall be Thomas W. Rabaut.
Subsequent CEOs shall be selected by the Managing
General Partner. Subject to the powers of the Managing
General Partner and the provisions of Section 3.1
hereof, he or she shall be in the general and active
charge of the entire business, affairs and property of
the Partnership, shall be its chief policy making
officer and have control over its officers, agents and
employees; and shall see that all orders and
resolutions of the Managing General Partner or the
Partners are carried into effect, including compliance
with the terms and conditions of any consent by the
Limited Partner pursuant to Section 3.1. Subject to
Sections 3.1 and 3.3 above, he or she may execute
bonds, mortgages and other contracts within the powers
set forth in Section 2.6 above or as delegated by the
Managing General Partner, as appropriate, except where
PAGE 21
required or permitted by law to be otherwise signed and
executed and except where the signing and execution
thereof shall be expressly delegated by the Managing
General Partner or the CEO to some other officer or
agent of the Partnership. The Chief Executive Officer
may vote or execute written consents with respect to
the capital stock of each Subsidiary of the Partnership
in accordance with this Agreement.
(c) Chief Financial Officer. The Chief
Financial Officer shall be selected by the CEO, subject
to the approval of the Managing General Partner. The
Chief Financial Officer of the Partnership shall, under
the direction of the Managing General Partner and the
Chief Executive Officer, be responsible for all
financial and accounting matters and for the direction
of the office of treasurer. The Chief Financial
Officer shall have such other powers and perform such
other duties as may be prescribed by the Chief
Executive Officer or the Managing General Partner or as
may be provided in this Agreement.
(d) Vice-Presidents. The vice-president, or
if there shall be more than one, the vice-presidents
shall act with all of the powers and be subject to all
the restrictions as authorized by the CEO and approved
by the Managing General Partner. The vice-presidents
shall also perform such other duties and have such
other powers as the Managing General Partner, the Chief
Executive Officer or this Agreement may, from time to
time, prescribe.
(e) The Secretary. The Secretary shall
attend all meetings of the Advisory Committee and
record all the proceedings of the meetings in a book or
books to be kept for that purpose. Under the Chief
Executive Officer's supervision, the Secretary shall
give, or cause to be given, all notices required to be
given by the Partnership under this Agreement; shall
have such powers and perform such duties as the
Managing General Partner, the Chief Executive Officer
or this Agreement may, from time to time, prescribe.
(f) Other Officers and Agents. Officers,
assistant officers and agents, if any, other than those
whose duties are provided for in this Agreement, shall
have
PAGE 22
such authority and perform such duties as may from time
to time be prescribed by the CEO or the Managing
General Partner.
3.7 Insurance. The Partnership's initial
insurance coverages shall be substantially as set forth
in Exhibit A hereto. The Partnership may change any
such coverages in any manner (and may self-insure as
the Managing General Partner reasonably determines) and
may maintain insurance coverages against such other
liabilities and risks associated with the conduct by
the Partnership of its operations and in such amounts
as are generally maintained by companies engaged in a
business similar to that of the Partnership.
3.8 Employee and Officer Confidentiality
Agreements. Each officer of the Partnership and each
member of the Advisory Committee, upon assuming office,
shall enter into a confidentiality agreement in the
form of Exhibit B hereto. Each Partner shall assign to
the Partnership, if assignable, any confidentiality
agreements with its employees who accept employment by
the Partnership. Each prospective employee of the
Partnership not otherwise bound by a confidentiality
agreement, whose job exposes such employee to
confidential information shall, upon accepting
employment by the Partnership, enter into a
confidentiality agreement in the form of Exhibit C
hereto.
3.9 Consolidation Costs. No material
Consolidation Cost shall be incurred, and no commitment
for the incurrence of a material Consolidation Cost
shall be entered into, by the Partnership unless the
Managing General Partner shall have made a good faith
determination and reported in writing to the Limited
Partner that:
(i) a projection of the cost savings to
be achieved as a result of the
incurrence of the Consolidation Cost in
question reflects that such
Consolidation Cost will be offset
PAGE 23
by cost savings which will be realized by the
Partnership in the twenty-four month period
following the incurrence of such
Consolidation Cost; or
(ii) the Partnership has entered into an
Advance Agreement with the DOD (or any agency
or department thereof) which permits future
recognition or recovery of the Consolidation
Cost in question as an allowable cost or
retention by the Partnership of at least
equivalent future cost savings resulting from
the consolidation; or
(iii) such Consolidation Cost can be
recognized or recovered as an allowable cost
under one or more of the Partnership's
customer contracts; or
(iv) such Consolidation Cost can be
offset, recognized or recovered through a
combination of the sources referred to in
clauses (i) through (iii) above.
3.10 Other Business. Each Partner's interest
in the business endeavor of the other Partner is
limited to its interest in the Partnership, and, except
as provided in Section 7.14 of the Participation
Agreement, no Partner's future business activities are
restricted. Accordingly, in addition to the business
of the Partnership, each Partner may, subject to
Section 7.14 of the Participation Agreement, invest or
engage in any other business activity for which it is
lawfully organized.
3.11 Revolving Credit. Notwithstanding
anything in Section 5.18 of the Participation
Agreement, the Partnership will use reasonable efforts
to establish an independent revolving line of credit
sufficient to meet the liquidity requirements of the
Partnership as soon as practicable after the Closing
Date (it being understood that the obligations of the
Partnership under such line of credit shall be
nonrecourse to the Managing General Partner).
PAGE 24
3.12 Dispute Resolution on A Services. In
the event that the Managing General Partner believes
that the Limited Partner has unreasonably withheld its
consent to the Partnership's procurement of A Services
from the Managing General Partner in any Fiscal Year
subsequent to the Fiscal Year ending December 31, 1994,
then, in lieu of the dispute mechanism set forth in
Section 12.11, the following provision shall apply.
The Managing General Partner may commence arbitration
hereunder within forty (40) Business Days after the
Managing General Partner's receipt of written notice of
the Limited Partner's withholding of its consent to the
Partnership's procurement of A Services from the
Managing General Partner for the given year by
delivering to the Limited Partner a notice of
arbitration (a "Notice of Arbitration"), and any
failure by the Managing General Partner to commence an
arbitration within such period shall constitute an
absolute bar to the commencement of any such
arbitration proceeding and a waiver of all claims
relating to the reasonableness of such withholding of
consent. Such Notice of Arbitration shall specify the
matters as to which arbitration is sought, the nature
of any dispute and any other matters required to be
included therein by the Rules and Commentary for Non-
Administered Arbitration of Business Disputes, as in
effect from time to time (the "Rules"), of the Center
for Public Resources, Inc. ("CPR"). A partner of Ernst
& Young or Price Waterhouse, whichever is not the
Accountants, to be selected by such accounting firm and
not by either Partner, shall be the arbitrator (the
"Arbitrator"); provided, however, that, in the event
that the Arbitrator for any reason withdraws or is
disqualified from serving in that capacity and cannot
be replaced by another qualified partner of such
accounting firm because of such accounting firm's
withdrawal or disqualification, CPR shall select as a
substitute Arbitrator a person who is or has been
actively employed in an executive or managerial
capacity in the private-sector defense industry or with
an independent public accounting firm having expertise
in that area.
The Arbitrator will determine the allocation
of the costs and expenses of arbitration (except for
fees and expenses of legal counsel, if any, selected by
PAGE 25
a party, which shall be borne by such party) as well as
the resolution of any dispute governed by this Section
3.12. The arbitration shall be conducted in Arlington,
Virginia under the Rules, except as modified by the
agreement of all of the parties to this Agreement. In
any arbitration under this Section 3.12, there shall be
a rebuttable presumption that the withholding of
consent by the Limited Partner to the Partnership's
procurement of A Services from the General Managing
Partner was reasonable, and the Managing General
Partner shall have the burden of rebutting that
rebuttable presumption by a preponderance of the
evidence. The pendency of any arbitration under this
Section 3.12 shall not in any way relieve the Managing
General Partner or the Partnership of the obligation to
discontinue, within the transition periods set forth on
Schedule A to the Management Services Agreement, the
provision of any A Service or Services not consented to
by the Limited Partner.
Evidentiary hearings, if any, shall not
exceed 3 Business Days. The Arbitrator shall conduct
the arbitration so that a final result, determination,
finding or judgment (the "Final Determination") is made
or rendered as soon as practicable, but in no event
later than 50 Business Days after the receipt by the
Limited Partner of the Notice of Arbitration nor later
than 10 Business Days following the completion of all
other aspects of the arbitration.
The Final Determination shall be signed by
the Arbitrator, and shall be limited to a decision that
the withholding by the Limited Partner of its consent
to the Partnership's procurement of A Services from FMC
for the given year was either reasonable or
unreasonable. In the event that the Final
Determination states that the Limited Partner's consent
was unreasonably withheld, the Managing General Partner
may provide such A Services on the terms originally
proposed by it. The Final Determination shall be final
and binding on all parties (but shall have no bearing
upon any withholding of consent by the Limited Partner
in or with respect to any subsequent year), and there
shall be no appeal or reexamination of the Final
Determination, except as provided in Sections 10 and 11
of the Federal Arbitration Act, 9 U.S.C. 1 et seq.
Either Partner may enforce any Final Determination in
PAGE 26
any state or federal court having jurisdiction over the
dispute. For the purpose of any action or proceeding
instituted with respect to any Final Determination,
each party hereto irrevocably consents to the service
of process by registered mail or personal service and
hereby irrevocably waives, to the fullest extent
permitted by law, any objection which it may have or
hereafter have as to personal jurisdiction, the laying
of the venue of any such action or proceeding brought
in any such court and any claim that any such action or
proceeding brought in any court has been brought in an
inconvenient forum.
ARTICLE IV
CONTRIBUTIONS, CAPITAL ACCOUNTS, ALLOCATIONS
Except as otherwise provided in this Article IV,
the provisions of this Article IV relate solely to
allocations of income, gain, loss, deduction, and
credit for Federal income tax purposes and to the
maintenance of capital accounts for purposes of Section
704(b) of the Code and corresponding Treasury
Regulations (and do not relate to accounts maintained
for GAAP or other purposes).
4.1 Capital Accounts. (a) The Partnership shall
maintain a capital account ("Capital Account") for each
Partner. The Managing General Partner agrees to
contribute capital to the Partnership as provided in
Article II of the Participation Agreement. The Limited
Partner agrees to contribute capital to the Partnership
as provided in Article II of the Participation
Agreement. The Partners agree that, based on their
arm's-length negotiations (i) the Fair Market Value of
the contribution agreed to be made by the Managing
General Partner is $138,600,000 and (ii) the Fair
Market Value of the contribution agreed to be made by
the Limited Partner is $92,400,000. The Partners have
agreed that the Fair Market Value of the contribution
of the Managing General Partner shall be allocated
among the FMC Assets, the FMC Liabilities and cash in
the manner prescribed on Schedule 4.1 and that the Fair
Market Value of the contribution of the Limited Partner
shall be allocated among the Harsco Assets, the Harsco
Liabilities and cash in the manner prescribed on
Schedule 4.1.
PAGE 27
(b) After giving effect to the contributions
and distributions described in Section 4.1(a), the
Capital Accounts shall be
(i) increased by:
(A) any amount of cash transferred to
the Partnership by such Partner as a capital
contribution;
(B) the Fair Market Value (determined
in accordance with Section 12.16 below) of
any property (other than cash) transferred to
the Partnership by the Partner as a capital
contribution (net of liabilities secured by
such property); and
(C) the amount of any Profits allocated
to such Partner pursuant to Section 4.3; and
(ii) decreased by:
(A) the amount of cash distributed to
the Partner by the Partnership pursuant to
this Agreement;
(B) the Fair Market Value (determined
in accordance with Section 12.16 below) of
any property (other than cash) distributed to
the Partner by the Partnership pursuant to
this Agreement (net of liabilities secured by
such property); and
(C) the amount of any Losses allocated
to such Partner pursuant to Section 4.3.
(c) Any indemnification payment made by a
Partner or a Parent of the Partner to the Partnership
pursuant to Article VI of the Participation Agreement
shall be treated as cash transferred to the Partnership
by such Partner as a capital contribution.
(d) (i) Subject to the provisions of clause
(ii) of this Section 4.1(d), the Managing General
Partner may cause the Capital Accounts to be increased
or decreased in accordance with Treasury Regulations
PAGE 28
Section 1.704-1(b)(2)(iv)(f) based on the Fair Market
Value of the Partnership's property (determined in
accordance with Section 12.16 below).
(ii) In the case of a Significant Event,
the Managing General Partner shall cause the Capital
Accounts to be increased or decreased in accordance
with Treasury Regulations Section 1.704(b)(2)(iv)(f)
based on the Fair Market Value of the Partnership's
property (determined in accordance with Section 12.16
below). For purposes of this Section 4.1(d), the term
"Significant Event" means the contribution by a new or
existing Partner of more than $10 million in the form
of money or property to the Partnership in exchange for
a Partnership interest or the distribution by the
Partnership of more than $10 million in the form of
money or property to a Partner in exchange for a
Partnership interest.
(iii) Any adjustments to Capital Accounts
pursuant to this Section 4.1(d) shall reflect the
manner in which any income, gain, loss or deduction
inherent in such property would have been allocated to
the Partners if such property had been sold at such
time in a taxable transaction at Fair Market Value.
(e) A transferee of a Partnership Interest
shall succeed to that portion of the Capital Account of
the transferor relating to the Partnership Interest
transferred to the extent provided in Treasury
Regulation Section 1.704-1(b)(2)(iv)(1). However, if
the transfer causes a termination of the Partnership
under Section 708(b)(1)(B) of the Code, the Partnership
properties shall, except for purposes of distributions
made pursuant to Article VI, be deemed to have been
distributed in liquidation of the Partnership to the
Partners (including the transferee of a Partnership
Interest) and deemed recontributed by such Partners and
transferees in reconstitution of the Partnership.
(f) The amount of any reserve for contract
closeouts shall, for purposes of this Section 4.1, be
treated as a liability with a Fair Market Value equal
to the amount of such reserve.
PAGE 29
(g) The amount of any environmental reserves
contributed by a Partner shall, for purposes of this
Section 4.1, be treated as a liability with a Fair
Market Value equal to the amount of such reserve.
(h) The provisions of this Agreement
relating to Capital Accounts are intended to comply
with Treasury Regulation Section 1.704-1(b)(2)(iv).
With respect to the treatment of liabilities under
Treasury Regulation Section 1.704-1(b)(2)(iv), the
amount of any liability shall be its Fair Market Value.
(i) Any distribution or transfer required by
Section 6.3 hereof shall be treated as cash transferred
to the Partner by the Partnership as a distribution.
4.2 Partnership Profits and Losses2
Partnership Profits and Losses.
(a) "Profits" shall mean items of
Partnership income and gain determined according to
Section 4.2(b). "Losses" shall mean items of
Partnership loss and deduction determined according to
Section 4.2(b).
(b) For purposes of computing the amount,
character and source of any item of income, gain,
deduction, loss, credit and basis included in Profits
or Losses, the determination, recognition and
classification of any such item shall be the same as
its determination, recognition and classification for
Federal income tax purposes; provided that:
(i) Depreciation, amortization and cost
recovery shall be calculated using the Partnership's
method for Federal income tax purposes; provided,
however, that if an asset has a zero adjusted tax
basis, the Partnership shall select a method of
depreciation, amortization or cost recovery recommended
by the Accountants as a method which will not dispropo
rtionately advantage or disadvantage either Partner.
Any deductions for depreciation, cost recovery or
amortization attributable to property contributed to
the Partnership by a Partner shall be determined as if
the adjusted basis of such property on the date it was
acquired by the Partnership were
PAGE 30
equal to the Fair Market Value (determined in
accordance with Section 12.16 below) of such
property at such time. If Capital Accounts are
restated pursuant to Section 4.1(d), subsequent
deductions for depreciation, cost recovery or
amortization attributable to property owned by the
Partnership at the time of the restatement shall
be determined as if the adjusted basis of such
property on the date of such restatement were
equal to the Fair Market Value of such property at
such time.
(ii) Any income, gain or loss attributable to
the taxable disposition of any property shall be
determined as if the adjusted basis of such
property as of the date of such disposition were
equal in amount to the Partnership's Carrying
Value with respect to such property as of such
date.
(iii) If the Partnership's adjusted basis in a
depreciable or cost recovery property is reduced
for Federal income tax purposes pursuant to
Section 50(c) of the Code (or any analogous
provisions), the amount of such reduction shall,
solely for purposes hereof, be deemed to be an
additional item of depreciation or cost recovery
deduction in the year such property is placed in
service. Any restoration of such basis pursuant
to Section 50(a) (or any analogous provisions) of
the Code shall be allocated in the same manner as
the deemed deduction was allocated.
(iv) All fees and other expenses incurred by
the Partnership to promote the sale of (or to
sell) a Partnership interest that can neither be
deducted nor amortized under Section 709 of the
Code shall be treated as an item of deduction and
shall be allocated pursuant to Section 4.3.
(v) Except as otherwise provided in Treasury
Regulation Section 1.704-1(b)(2)(iv)(m), the
computation of all items of income, gain, loss and
deduction shall be made without regard to any
election under Section 754 of the Code which may
be made by the Partnership.
PAGE 31
(vi) Items of income and gain exempt from
Federal income tax shall be included as items of
income and gain.
(vii) Partnership expenditures that are not
deductible for Federal income tax purposes and are
not chargeable to capital and any losses on
Partnership property sold to a related person that
are disallowed for Federal income tax purposes
shall be treated as items of loss or deduction.
(viii) If Partnership property is distributed
to a Partner, such property shall be treated as if
it were first sold for an amount equal to its Fair
Market Value (determined in accordance with
Section 12.16 below). Any income, gain, loss or
deduction resulting from such deemed sale shall be
allocated to the Partners pursuant to Section 4.3.
(ix) To the extent that any payment described
in Section 4.1(c) relates to a loss, liability,
claim, damage or expense for which a Partner or
the Partner's Parent makes, has made or is
obligated to make an Indemnification Payment to
the Partnership under Article VI of the
Participation Agreement that does not otherwise
result in an item of loss or deduction or
capitalized basis or cost to be allocated under
Section 4.3(c)(iii), such payment shall be treated
as an item of loss or deduction under Section
4.2(b)(vii) at the time it is made.
(x) Losses shall not include any items of
loss or deduction which result from the
satisfaction of a liability (including any
contributed environmental reserves) that reduced a
Partner's Capital Account under Section 4.1 except
to the extent that the amount of such items
exceeds such reduction.
(xi) Any Qualifying Remedial Expenditure of
the Partnership which has not been charged against any
environmental reserves (which reserves were contributed
by a Partner to the Partnership as part of its Initial
Capital Contribution) shall be treated as an item of
loss or deduction in
PAGE 32
computing Losses in accordance with the preceding
provisions of this Section 4.2(b).
Notwithstanding the foregoing, to the extent that
a Qualifying Remedial Expenditure results in the
capitalization of an asset for Federal Income Tax
purposes, then the amount which shall be treated
as an item of loss or deduction in computing
Losses pursuant to this Section 4.2(b)(xi) shall
be equal to the amount of depreciation,
amortization or other basis recovery which is
allowed or allowable for such Fiscal Year with
respect to such asset.
(xii) The amount of Realization of Qualifying
Remedial Expenditures (as determined under Section
5.22.4.4(i) of the Participation Agreement) shall
be treated as an item of income in computing
Profits in accordance with the preceding
provisions of this Section 4.2(b).
(xiii) An amount equal to the TRER on each
Major Contract shall be treated as an item of
income in computing Profits in accordance with the
preceding provisions of this Section 4.2(b).
4.3 Allocation of Profits and Losses3 Allocation
of Profits and Losses.
(a) Except as otherwise provided herein, the
Profits of the Partnership for each Fiscal Year shall
be allocated as follows:
(i) First, to the Limited Partner, an amount
equal to the sum of (x) the lesser of the Limited
Partner Allocation or the Profits of the Partnership
for such Fiscal Year plus (y) the Carryover Amount. In
the case of a Fiscal Year (other than Fiscal Year 1994)
consisting of less than 365 days, the dollar amount
specified in the preceding sentence shall be equal to
the product of the Limited Partner Allocation times a
fraction, the numerator of which is the number of days
in the Fiscal Year and the denominator of which is 365.
For purposes of this Section 4.3(a)(i), the term
"Carryover Amount" shall be the sum of (x) the amount,
if any, by which the aggregate amount of Profits
allocated to the Limited Partner for all prior Fiscal
Years under this Section 4.3(a)(i) is less than the
PAGE 33
aggregate amount of Profits that would have been
allocated to the Limited Partner had the Profits
of the Partnership in each fiscal period been
equal to or greater than the Limited Partner
Allocation for such fiscal period plus (y)
interest on such amount for the period of time
beginning on the last day of the earliest prior
Fiscal Year for which the Carryover Amount
allocated in the present Fiscal Year could not be
allocated because of insufficient Profits and
ending on the last day of the Fiscal Year for
which the Carryover Amount is allocated, such
interest to be calculated at rate of twelve month
LIBOR prevailing on the first day of such period
of time plus 100 basis points; provided, however,
that in calculating such product the dollar amount
specified in this sentence for any short Fiscal
Year shall be equal to the product of the Limited
Partner Allocation times a fraction, the numerator
of which is the number of days in the Fiscal Year
and the denominator of which is 365.
Notwithstanding the foregoing provisions of this
clause (i) or any other provision of the Operative
Documents, the Limited Partner shall not be
entitled to any further allocations under this
clause (i) or otherwise in respect of the Limited
Partner Allocation (except to the extent of any
remaining Carryover Amounts) with respect to any
period in which FMC or its permitted successor in
interest is not entitled, whether due to
termination, resignation or replacement as
Managing General Partner, breach or any other
cause, to receive its Annual Fee under Section
4(b) of the Management Services Agreement. In the
event that the Limited Partner is entitled to a
distribution of Limited Partner Allocation Late
Payment Interest under Section 6.1 hereof, then
the allocation of Profits under this Section
4.3(i) shall be increased by an amount equal to
the amount of such Limited Partner Allocation Late
Payment Interest.
(ii) Second, to the Limited Partner and the
Managing General Partner, an amount equal to the sum of
(x) the product of (1) the quotient of (A) such
Partner's Share Percentage and (B) 1 minus such
Partner's Share Percentage and (2) the other
PAGE 34
Parent's respective CRB Carrying Costs for such
Fiscal Year and (y) the CRBCC Carryover Amount,
pro rata based on each Partner's percentage of the
aggregate amount allowable to both Partners. For
purposes of this Section 4.3(a)(ii), the term
"CRBCC Carryover Amount" shall be the amount, if
any, by which the aggregate amount of Profits
allocated to either Partner for all prior Fiscal
Years under this Section 4.3(a)(ii) is less than
the aggregate amount of Profits that would have
been allocated to such Partner had the Profits of
the Partnership in each fiscal period been equal
to or greater than the sum of the Limited Partner
Allocation and all CRB Carrying Costs allocable
hereunder for such fiscal period.
(iii) Third, the balance of the Profits to the
Partners in proportion to the Share Percentages in
effect for the Fiscal Year, as adjusted from time
to time, in which such Profits are recognized.
(b) Except as otherwise provided herein, the
Losses of the Partnership for each Fiscal Year shall be
allocated to the Partners in proportion to the Share
Percentages in effect for the Fiscal Year, as adjusted
from time to time, in which such Losses are recognized.
(c) The following special allocations shall
be made:
(i) If, and to the extent that, any Partner
is deemed to receive a distribution or recognize
income (or is denied a deduction) as a result of
any transaction between such Partner and the
Partnership pursuant to Sections 1272-1274,
Section 7872, Section 83, Section 61, Section 446
or Section 482 or 483 of the Code, or any other
similar rule now or hereafter in effect, any
corresponding resulting loss or deduction of the
Partnership shall be allocated to the Partner who
was charged with such income if, and to the
extent, that such allocation is necessary to avoid
consequences that were not anticipated by the
parties at the time of the transaction.
PAGE 35
(ii) Items of loss or deduction attributable
to partner nonrecourse debt (as defined in
Treasury Regulation Section 1.704-2(b)(4)) shall
be allocated in the manner required by Treasury
Regulation Section 1.704-2(i). If there is a net
decrease in partnership minimum gain (determined
pursuant to Treasury Regulation Section 1.704-
2(d)) or partner nonrecourse debt minimum gain (as
defined in Treasury Regulation Section 1.704-
2(i)(3)) during any calendar year, each Partner
shall be allocated items of income and gain for
amounts and of such character to the extent
required by Treasury Regulation Section 1.704-2(f)
and (i)(4), respectively. This Section 4.3(c)(ii)
is intended to be a minimum gain chargeback
provision that complies with the requirements of
Treasury Regulation Section 1.704-2(f) and (i).
Allocations made pursuant to this
Section 4.3(c)(ii) shall be made before any other
allocation of Partnership items is made pursuant
to this Section 4.3(c). To the extent possible
without violating the provisions or purposes of
Code Section 704 or the Treasury Regulations
thereunder, the Partnership's subsequent income,
gains, losses, deductions and credits shall be
allocated so as to achieve as nearly as possible
the results that would have been achieved if this
Section 4.3(c)(ii) were not in this Agreement.
(iii) Any item of deduction or loss (including
items treated as an item of loss or deduction
under Section 4.2(b) (vii) and Section 4.2(b)(ix)
and including any basis or cost recovery or other
reduction of income) attributable to a loss,
liability, claim, damage or expense for which a
Partner or a Parent of a Partner makes, has made
or is obligated to make an indemnification payment
to the Partnership under Article VI of the
Participation Agreement shall be allocated to, and
reduce the Capital Account of, such Partner to the
extent of the indemnification payment or
obligation.
PAGE 36
(iv) An amount equal to the Realization
described in Section 4.2(b)(xii) shall be
allocated to, and increase the Capital Account of,
the Partner of the Parent to which such
Realization relates.
(v) An amount equal to each Partner's share
of the TRER (as determined under Section
5.22.4.4(ii) of the Participation Agreement and
treated as an item of income under Section
4.2(b)(xii) hereof) shall be allocated to and
increase the Capital Account of the Partner of the
Parent to which such amount relates.
(vi) Any Qualifying Remedial Expenditure
which has been treated as an item of loss or
deduction in computing Losses under Section
4.2(b)(xi) shall be allocated to, and decrease the
Capital Account of, the Partner of the Parent to
which such Qualifying Remedial Expenditure
relates. If an amount of any Qualifying Remedial
Expenditure has not been so charged against the
aforesaid environmental reserves and at the time
of liquidation of the Partnership under Section
9.4 such amount has not been treated as an item of
loss or deduction under Section 4.2(b)(xi) but is
carried on the Partnership's tax books as an
asset, such asset shall be deemed to be
distributed in liquidation to and reduce the
Capital Account of the Partner of the Parent to
which such Qualifying Remedial Expenditure relates
and shall be valued at no less than its adjusted
tax basis for such purposes.
(vii) In determining the share of Profits and
Losses allocated to a Partner whose interest
varies during any Fiscal Year, the parties hereby
agree to use the pro rata method described in
Treasury Regulations Section 1.706-1(c)(2)(ii),
except to the extent a different method is agreed
to in accordance with Section 3.1(k) above.
4.4 Allocation of Taxable Income and Loss4
Allocation of Taxable Income and Loss.
(a) (i) Except as otherwise provided
herein, the amount, character and source of
all
PAGE 37
items of taxable income, gain, loss, deduction,
credit and basis for each Fiscal Year shall be
allocated for tax purposes to the Partners in
accordance with the allocation of any such item as
provided in Section 4.3.
(ii) Notwithstanding any other provision
of this Agreement, any item of taxable income,
loss or deduction resulting from any Qualified
Remedial Expenditure which reduced any contributed
environmental reserve shall be specifically
allocated to the Partner who contributed such
reserve.
(b) (i) As required by Section 704(c) of
the Code, in the case of property contributed to
the Partnership by a Partner as a capital
contribution, items of income, gain, loss and
deduction attributable thereto shall be allocated
among the Partners for Federal income tax purposes
in a manner that takes into account the variation
between the Fair Market Value (determined in
accordance with Schedule 4.1) of such property and
its adjusted tax basis at the time of
contribution.
(ii) To the extent not otherwise subject
to the provisions of clause (i) of this Section
4.4(b), any item of income attributable to a
decrement in any LIFO reserve or to a difference
between the amount allocated to inventory pursuant
to Schedule 4.1 and the tax basis of such
inventory at the time of contribution shall be
allocated to the Partner that contributed such
inventory to the Partnership.
(iii) If Capital Accounts are adjusted
pursuant to Section 4.1(d), items of income, gain,
loss and deduction attributable thereto shall be
allocated among the Partners for Federal income
tax purposes in a manner that takes into account
the variation between the Fair Market Value (deter
mined in accordance with Section 12.16 below) of
such property and its adjusted tax basis at the
time of such adjustment.
PAGE 38
(c) Except to the extent attributable to
Partner nonrecourse debt, tax credits shall be
allocated according to the Partners' Share Percentages
for the Fiscal Year in which the credits arise. Tax
credits attributable to Partner nonrecourse debt shall
be allocated to the Partner who bears the economic risk
of loss for such nonrecourse financing. Any recapture
of such tax credits shall be allocated pro rata to
those Partners who were allocated the original credits
based on their relative shares of such original
credits.
(d) All items of income, gain, loss,
deduction, credit and basis allocation recognized by
the Partnership for Federal income tax purposes and
allocated in accordance with the provisions hereof
shall be determined without regard to any election
under Section 754 of the Code which may be made by the
Partnership; provided, however, such allocations, once
made, shall be adjusted, as necessary or appropriate,
to take into account those adjustments permitted by
Sections 734 and 743 of the Code.
(e) Allocations under this Section 4.4 are
for tax purposes only and shall not be taken into
account in determining Capital Accounts.
4.5 Additional Capital Contributions5 Additional
Capital Contributions. Except as otherwise provided in
this Agreement and in Sections 2.3.3 or 5.22.5 or
Article VI of the Participation Agreement, neither
Partner shall have any obligation to make any
additional capital contribution to the Partnership. In
the event that the Managing General Partner requests
additional capital contributions from the Partners to
meet the Partnership's anticipated cash requirements,
investment opportunities within the Scope of Activity
and other cash requirements (as deemed necessary or
advisable by the Managing General Partner), the
Partners may, at their option, make cash contributions
to the Partnership in proportion to their Share
Percentages. If any Partner declines to make such a
contribution within 40 Business Days (or 20 Business
Days for the Limited Partner if the capital
contribution requested is less than $2 million and for
the Managing General Partner if the capital
contribution requested is less than $5 million) of the
PAGE 39
Managing General Partner's request, the other Partner
may elect to make such declining Partner's additional
capital contribution (or any portion thereof). In the
event that a Partner declines to make such a
contribution, and regardless of whether or to what
extent the contributing Partner elects to make
additional capital contributions requested from the
declining Partner, the contributing Partner may, at its
option, treat its entire additional capital
contribution as either (i) a senior unsecured loan to
the Partnership bearing interest at 100 basis points
(1.0%) above the U.S. Treasury rate then applicable to
the term of repayment (which shall be determined by the
contributing Partner) or (ii) an equity contribution to
the Partnership. In the event that such contributing
Partner elects to treat such additional capital
contribution as an equity contribution to the
Partnership, then (i) the Partnership shall promptly
determine, at its expense, the Appraised Value of the
Partnership in the manner prescribed in Section 7.2(c)
below, (ii) the contributing Partner's Share Percentage
will be increased such that its Share Percentage after
such contribution will equal (a) the sum of (x) the
amount of such contribution plus (y) the product of its
Share Percentage prior to such contribution and the
Appraised Value of the Partnership prior to such
contribution divided by (b) the sum of (x) the
Appraised Value of the Partnership prior to such
contribution plus (y) the amount of such contribution
and (iii) each non-contributing Partner's Share
Percentage will be reduced (subject to the limitation
contained in Section 3.1(h) above) such that (A) its
Share Percentage after such contribution will be in the
same relative proportion to the total Share Percentages
of all non-contributing Partners and (B) the total of
all Partners' Share Percentages will equal 100%.
4.6 Loss Limitation and Special Allocation6 Loss
Limitation and Special Allocation.
(a) No allocation of Losses shall be made to
the Limited Partner if such allocation will cause or
increase an Adjusted Capital Account Deficit with
respect to such Limited Partner taking into account the
adjustments, allocations and distributions described in
Treasury Regulation Sections 1.704-1(b)(2)(ii)(d)(4),
PAGE 40
(5) and (6). Any losses not allocated to the Limited
Partner under this Section 4.6(a) shall be allocated to
the Managing General Partner and to its Reallocated
Loss Account. In the event a Limited Partner
unexpectedly receives any such adjustments, allocations
or distributions described in said Treasury Regulations
that cause or increase an Adjusted Capital Account
Deficit with respect to the Limited Partner, items of
Partnership income and gain shall be specially
allocated to such Limited Partner in amounts and manner
sufficient to eliminate the Adjusted Capital Account
Deficit as quickly as possible. To the extent such
items of Partnership income and gain are specially
allocated to the Limited Partner pursuant to the
preceding sentence, subject to the provisions of the
first sentence of this section 4.6(a), subsequent
allocations to the Managing General Partner shall be
made so as to put the Managing General Partner and the
Limited Partner in the same position they would have
been in had such allocation to the Limited Partner not
been made. For purposes of this Section 4.6(a),
"Adjusted Capital Account Deficit" means with respect
to a Limited Partner, the deficit balance, if any, in
such Limited Partner's Capital Account as of the end of
the relevant Fiscal Year, after crediting to such
Capital Account any amount such Limited Partner is
deemed to be obligated to restore under the Treasury
Regulations and debiting to such Capital Accounts the
adjustments, allocations and distributions described in
Treasury Regulations Sections 1.704-1(b)(2)(ii)(d)(4),
(5) and (6).
(b) Notwithstanding any other provision of
this Agreement, to the extent there is outstanding at
any time a Reallocated Loss Amount, then an amount of
Adjusted Profits of the Partnership shall be allocated
to the Managing General Partner in an amount equal to
its Reallocated Loss Amount. No allocation of Adjusted
Profits shall be made to the Limited Partner until such
time as the Reallocated Loss Account (including any
Losses allocated to the Managing General Partner
pursuant to Section 4.6(a) covering the current Fiscal
Year) is reduced to zero. For purposes of this Section
4.6(b), "Adjusted Profits" means with respect to a
Fiscal Year the excess of any of the Profits of the
Partnership for such Fiscal Year determined according
to Section 4.2(b) over the amount allocated to the
Limited Partner pursuant to Section 4.3(a)(i) and (ii).
PAGE 41
4.7 No Interest. No interest shall be payable to
the Partners on the balances in their Capital Accounts
or otherwise in respect of the capital of the
Partnership.
4.8 No Withdrawal. No Partner shall be entitled
to withdraw any part of its capital contribution or
Capital Account or to receive any distribution from the
Partnership, except as provided in Article VI and
Article IX and in Section 2.3.3 of the Participation
Agreement.
4.9 Loans From Partners. Loans by a Partner to
the Partnership shall not be considered capital
contributions.
4.10 Loans to Partners10 Loans to Partners. The
Partnership shall not make loans to Partners or
Affiliates of Partners.
4.11 No Deficit Capital Account Make-Up
Obligation.11 No Deficit Capital Account Make-Up
Obligation. Except as may otherwise be required by
Delaware law, in no event shall a Partner be obligated
to contribute capital at any time, including upon
dissolution, to the Partnership for the purpose of
eliminating a negative balance in its Capital Account.
ARTICLE V
FISCAL MATTERS
5.1 Fiscal Years and Fiscal Quarters. The Fiscal
Year of the Partnership shall end on December 31 of
each year and the Fiscal Quarters shall be the calendar
quarters ending March 31, June 30, September 30 and
December 31. The Partnership's first Fiscal Year shall
end December 31, 1994.
5.2 Location of Books of Account. The books of
account for the Partnership shall be kept and
maintained at the Principal Office or at such other
place as the Managing General Partner shall determine.
PAGE 42
5.3 Books and Records. For financial reporting
purposes (and not for purposes of maintaining Capital
Accounts or determining taxable income or loss), the
books of account shall be maintained on an accrual
basis in accordance with GAAP, consistently applied
except as otherwise permitted by Section 5.9, with
reference to all Partnership transactions. The books
and records shall include the designation and
identification of any property in which the Partnership
owns an interest; such records shall also include, but
shall not be limited to, the ownership of property
(real, personal, and mixed). The Partnership shall
keep full and complete books of account, which shall be
maintained in a manner that provides sufficient
assurance that transactions of the Partnership are
recorded so as to comply with all applicable laws and
to permit (a) the preparation of the Partnership's
financial statements in accordance with GAAP; (b) the
Partners to account for their interests in the
Partnership in accordance with GAAP; and (c) the
Partners to facilitate compliance with the public
reporting obligations of their respective Parents. For
financial reporting purposes, allocations of items
described in Section 4.4(b) shall be consistent with
the allocations made for tax purposes. Each Partner
shall prepare and provide to the other Partner such
audited financial statements relating to pre-Closing
periods as reasonably requested by the other Partner in
order to facilitate the compliance by such Partner's
Parent with the financial statement filing
requirements, as applicable, of Regulation S-X, 17
C.F.R. 210.3-05 et seq.
5.4 Annual Financial Statements. As soon as
practicable following the end of each Fiscal Year and
the review and approval of the Accountants referred to
below (but not later than 16 Business Days after the
end of such Fiscal Year), the Partnership shall prepare
and deliver to each Partner such financial data as may
be reasonably requested by such Partner for use in
preparation of annual earnings releases, which data
shall have been (or have been derived from) data that
has been reviewed and approved by the Accountants as
reflecting all necessary year-end audit adjustments.
Following the completion and audit of the Partnership's
annual audited financial statements in the normal
course (but not later than 30 Business Days after the
PAGE 43
end of such Fiscal Year), or on such other date as may
be agreed upon by the parties hereto in the event of
any change in any Parent's earnings reporting require
ments, the Partnership shall prepare and deliver to
each Partner and the members of the Advisory Committee,
a balance sheet of the Partnership as of the end of
such Fiscal Year and the related statements of
operations, changes in Partners' equity and cash flow
of the Partnership for such Fiscal Year, together with
appropriate notes to such financial statements, and a
balance sheet as of the end of such prior Fiscal Years
and related statements for such number of additional
fiscal years as may be reasonably requested by a
Partner in order for such Partner to comply with
Regulation S-X, 17 C.F.R. 210.3-09 et seq. These
statements shall reflect all of the Partnership's
expenses and contingent liabilities as if the
Partnership were a stand-alone entity consistent with
GAAP. These financial statements shall also comply
with the other relevant provisions of Regulation S-X,
17 C.F.R. 210, and shall be audited and reported on
by the Accountants. At the same time, the Partnership
shall deliver (at its expense) to each Partner a report
indicating a reasonable estimate of such Partner's
share of all items of income, gain, loss, deduction and
credit of the Partnership for such Fiscal Year and any
other financial information related to the Partnership
which is reasonably requested by either Partner for
Federal, national, state, local or foreign income or
franchise tax purposes or for financial reporting
purposes.
5.5 Interim Financial Statements and Other
Information5 Interim Financial Statements and Other
Information. As soon as practicable following the end
of each month (and in any event, with respect to each
month other than the last month of the Partnership's
Fiscal Year, not later than the 8th Business Day after
the end of each such month during the Partnership's
first Fiscal year or the 6th Business Day after the end
of each such month during each subsequent Fiscal Year),
the Partnership shall prepare and deliver to each
Partner such financial data as may be reasonably
requested by such Partner for use in preparation of
internal monthly financial statements and quarterly
earnings releases and whatever regularly prepared
reports the Partnership delivers to the
PAGE 44
Managing General Partner at such time as such reports
are delivered to the Managing General Partner. Such
financial information and reports shall reflect all
adjustments necessary to a fair presentation, all of
which adjustments shall be of a normal, recurring
nature, except as indicated otherwise.
5.6 Estimated Tax Information. The Partnership
shall prepare and deliver to each Partner such
information and at such times as reasonably requested
by either Partner to aid it in meeting its obligation
to make returns of estimated Taxes to Federal,
national, state, local and foreign income taxing
jurisdictions.
5.7 Tax Return Information. The Partnership
shall prepare and deliver to each Partner such
information and at such times as reasonably requested
by either Partner to aid it in meeting its obligation
to make returns of Taxes to Federal, state, local and
foreign income taxing jurisdictions. Notwithstanding
the foregoing, the Partnership shall prepare and
deliver to each Partner its copy of Form K-1 for each
taxable year of the Partnership on or before July 15
next following the end of such taxable year.
5.8 Inspection of Facilities and Records;
Partnership Assistance. Each Partner shall have the
right in a reasonable manner at all reasonable times
during usual business hours to inspect the facilities
of the Partnership and to examine all books of account,
files, records and databases of the Partnership,
whether in written form or contained on computer tapes
or disks. Such right may be exercised through any
agent, employee or representative of such Partner
designated by it or by an independent public accountant
(subject to any confidentiality assurances that the
Partnership may reasonably request). The Partner
conducting such examination or inspection shall bear
all costs and expenses incurred in connection
therewith. The Partnership and the Partners agree (a)
to retain all books and records which are relevant to
(i) the determination of the Tax liabilities pertinent
to the Assets and the Partners relating to any pre-
Closing Tax period until the expiration of the
applicable statute of limitations and to abide by all
record retention agreements entered into with any
PAGE 45
taxing authority and (ii) the support for the items
reflected on each Partner's Final Closing Balance Sheet
until the third anniversary of the Closing Date and (b)
to give the other parties reasonable written notice
prior to destroying or discarding any such books and
records and, if any of the other parties so requests,
the Partnership or the Partner, as the case may be,
shall allow the other party to take possession of such
books and records.
Upon the reasonable request by either Partner, the
Partnership will promptly assist such Partner and its
Parent in the prosecution or defense of any claim,
audit or investigation or proceeding by or against any
Governmental Authority or any vendee of the Defense
Business of such Partner. Such assistance shall be
provided by the Partnership employee or employees best
qualified to provide the requested assistance
expeditiously; provided, however, that (i) such
assistance does not unreasonably disrupt the conduct of
the Partnership's operations and (ii) the Partnership
shall incur no monetary liability to such Parent or its
Partner in connection with the provision of such
assistance. Such assistance shall include, without
limitation, to the extent reasonably practicable,
extracting from the files and records of the
Partnership all information relevant to the matter,
consultation concerning such matter, testimony, if
necessary, in any proceeding relating to such matter
and assistance with the preparation of any pleadings or
other submissions with respect to such matter. Such
requesting Partner shall reimburse the Partnership for
its out-of-pocket expenses and, to the extent not
allowable under any customer contracts, its
administrative costs incurred in connection with such
request.
5.9 Principal Accounting Procedures9
Principal Accounting Procedures.
The Principal Accounting Procedures to be
elected, adopted and followed by the Partnership for
purposes of determining the amount and timing of items
of Partnership income, gain, loss, deduction and credit
for purposes of U.S. federal income taxation and for
purposes of financial reporting as of the Closing Date
are set forth on Schedule 5.9 annexed hereto. No
PAGE 46
change in any such Principal Accounting Procedure shall
be made without the approval of the Limited Partner, so
long as the Limited Partner's Share Percentage is at
least 20 percent, unless such change (i) is required by
law, (ii) is required to comply with GAAP or (iii) is
not material. Any such approval shall be deemed given
by the Limited Partner if such Limited Partner does not
notify the Partnership in writing of an objection to
such change within 45 days of its receipt of notice of
such change. For these purposes, a change is not
material only if:
(A) such change would not have resulted in
the amount of either the Partnership's net
earnings or sales, as applicable, for the prior
Fiscal Year differing by more than 3 percent or
$1,000,000 (whichever is greater) from the actual
amount of the Partnership's net earnings or sales
for such Fiscal Year;
(B) such change would not have resulted in
the amount of any Partner's Capital Account as of
the end of the prior Fiscal Year differing by more
than 3 percent or $1,000,000 (whichever is
greater) from the actual amount of the Partner's
Capital Account as of such time (provided that
this paragraph (B) shall be applied as if there
were no allocations or distributions to the
Limited Partner with respect to its Limited
Partner Allocation);
(C) such change would not have resulted in
the amount of the Partnership's total assets or
total liabilities as of the end of the prior
Fiscal Year differing by more than 3 percent or
$1,000,000 (whichever is greater) from the actual
amount of the Partnership's total assets or total
liabilities as of such time;
(D) such change would not have resulted in
(1) the percentage of an item of Partnership income,
gain, loss, deduction or credit reported as a separate
line item on the Partnership's Form K-1 for the prior
Fiscal Year and allocated to a Partner differing by
more than 3 percent or $1,000,000 (whichever is
greater) from the actual amount of the percentage of
such item that was
PAGE 47
allocable to such Partner or (2) the receipt by a
Partner of a percentage of the amount of cash that
would have been distributable to the Partners by
the Partnership in the prior Fiscal Year differing
by more than 3 percent from the percentage of cash
actually distributed to such Partner (provided
that this paragraph (D) shall be applied as if
there were no allocations or distributions to the
Limited Partner with respect to its Limited
Partner Allocation);
(E) such change does not require the consent
of the Commissioner of Internal Revenue; and
(F) in the event the Partnership becomes a
registrant, such change will not require the
filing of a preferability letter (of the type
described in Item 601(b)(18) of Regulation S-K)
with the SEC.
5.10 1993 Parent Financial Statements. The
Partnership shall assist and cooperate, as reasonably
requested by each Parent and at no cost to such Parent,
in such Parent's preparation of its audited financial
statements as of and for the year ended December 31,
1993.
5.11 Retention of Certain Items. Any item of
income or gain or any item of deduction or loss
attributable to the final determination of (a) all
reserves with respect to contracts which have been
completed as of the date of Closing and (b) reserves
that are not transferred (but that are maintained by
the Partners pursuant to the Principal Accounting
Procedures) with respect to contracts which have not
been completed as of the date of Closing shall not be
treated as a Partnership item but shall be retained by
the Partner who maintained the reserve. This provision
shall not apply to allocations provided by Section
4.4(b).
5.12 Responsibilities of Accountants. The
parties agree that the Accountants shall, in accordance
with their usual and customary practices (including
practices as to materiality judgments, negative
assurances and reliance on officer certification),
PAGE 48
provide accounting and related services to the
Partnership which include the following on an annual
basis (except as provided in (d) below):
(a) reviewing the Partnership's U.S. Federal
and foreign income tax return and schedules,
confirming that all elections have been properly
made in accordance with this Agreement and the
Participation Agreement and signing such returns
as paid preparer;
(b) verifying that each Partner's Capital
Account has been properly maintained and that the
Partners' Capital Account balances as of the close
of the Fiscal Year are correctly stated in
accordance with this Agreement and the
Participation Agreement;
(c) verifying that tax allocations have been
made in accordance with Section 4.4 of the
Partnership Agreement;
(d) confirming (on the basis of a limited
review) that the quarterly "split" of income or
loss for book purposes in accordance with GAAP and
for U.S. Federal income tax purposes, including
the amount, character and source of all items of
income, gain, loss, deduction, credit and basis,
are allocated between the Partners in compliance
with this Agreement and the Participation
Agreement;
(e) confirming that the accounting policies
and methods of accounting used for book purposes
in accordance with GAAP and for U.S. Federal
income tax purposes are in compliance with this
Agreement and the Participation Agreement; and
(f) verifying that distributions of cash or
property to the Partners have been made in
compliance with this Agreement and the
Participation Agreement.
5.13 State Income Taxes.
(a) The Partnership shall pay the State and
local Income Taxes, if any, attributable to the taxable
income of the Partnership whether such Income Taxes
PAGE 49
are imposed on the Partnership or on a Partner or the
Partners under applicable tax law. Notwithstanding the
foregoing, the Partnership shall undertake to obtain an
Advance Agreement from the DOD regarding the
recoverability of State Income Taxes paid by the
Partners. In the event that the Partnership obtains
such an Advance Agreement, then the Partnership shall
no longer be obligated to pay on behalf of the Partners
any State Income Taxes.
(b) The Partners shall be required to
provide such information as the Partnership shall
reasonably require in order to comply with the
requirements of the Defense Contract Audit Agency
regarding the recoverability of State Income Taxes paid
by the Partnership on behalf of the Partners. Each of
the Partners shall provide the Partnership with
reasonable access to such books and records of such
Partner as are required to meet the requirements of the
Defense Contract Audit Agency.
(c) Notwithstanding any other provision of
this Agreement, the Partnership shall not be required
to make a payment of State Income Taxes on behalf of a
Partner if the making of such payment by the
Partnership would result in the Partnership's being
treated as making a tax distribution (under Section
6.3(c) hereof) on behalf of such Partner in an amount
greater than the product of (i) such Partner's positive
taxable income (as determined in accordance with
Section 6.3(a) hereof) multiplied by (ii) the maximum
Federal marginal income tax rate under Section 11 of
the Code in effect for such Fiscal Year, plus five
percentage points.
ARTICLE VI
DISTRIBUTIONS
A distribution to a Partner or Partners under this
Article VI shall be made in the same order of priority
as the order in which it is set forth below. Thus, a
distribution identified in a Section with a lower
number shall be made in full before any portion of a
distribution identified in a Section with a higher
number is made.
6.1 Distribution of Limited Partner Allocation.
Subject to applicable law, the Partnership shall
distribute to the Limited Partner, on or before the
15th day of the third month after the end of the Fiscal
Year, an amount of cash equal to the Profits of the
Partnership allocable to the Limited Partner under
PAGE 50
Section 4.3(a)(i) for such Fiscal Year in respect of
its Limited Partner Allocation. The Partnership shall
make quarterly estimated distributions of such amount
during the Partnership's Fiscal Year (taking into
account any prior distributions under this Section for
such Fiscal Year). Distributions with respect to the
Limited Partner Allocation, including quarterly
estimated distributions with respect thereto, shall
bear interest at the rate of one year LIBOR prevailing
on the date the distribution is payable plus 100 basis
points for the period between the date the distribution
is payable and the date of the payment of the
distribution ("Limited Partner Allocation Late Payment
Interest"). The Limited Partner shall promptly return
to the Partnership, on or before the 15th day of the
third month after the end of the Fiscal Year, any
amount distributed hereunder on an estimated basis to
the extent that the total of such amounts exceeds the
amount of Profits allocable to the Limited Partner
under Section 4.3(a)(i).
6.2 Environmental Carrying Cost Distributions.
Subject to applicable law, the Partnership shall
distribute to the Limited Partner or the Managing
General Partner, as the case may be, on or before the
last Business Day of the third month after the end of
each Fiscal Year, an amount of cash equal to the
Profits of the Partnership allocable to such Partner
under Section 4.3(a)(ii) for such Fiscal Year.
6.3 Tax Distributions.
(a) Subject to applicable law, the
Partnership shall make a tax distribution to each
Partner on or before the date on which Federal income
tax payments are due with respect to the Fiscal Year.
A Partner's tax distribution for any particular Fiscal
Year shall be equal to the product of (i) the Partner's
positive taxable income from the Partnership for the
Fiscal Year (excluding the items allocated by Sections
4.3(a)(i), 4.3(a)(ii), 4.3(c)(iv), 4.3(c)(v),
4.3(c)(vi), 4.4(a)(ii), 4.4(b) and 4.6) and (ii) the
maximum Federal marginal income tax rate applicable to
a corporation under Section 11 of the Code in effect
for the Fiscal Year, plus five percentage points.
(b) The Partnership shall make estimated
distributions under the principles of (a) above during
the Fiscal Year on or before the dates on which Federal
estimated income tax payments must be made by the
Partners. Such estimated tax distributions shall
reduce a Partner's required tax distribution under (a)
above and shall be returned to the Partnership on or
PAGE 51
before the date on which Federal income tax payments
are due with respect to the Fiscal Year to the extent
in excess of a Partner's required tax distribution
under (a) above.
(c) To the extent that the Partnership makes
payments on behalf of a Partner pursuant to Section
5.13 hereof, such payments shall for purposes of this
Section 6.3 be treated as a tax distribution and
therefore reduce such Partner's required tax
distribution under Section 6.3(a) hereof.
6.4 Special Distributions. Subject to applicable
law, the Partnership shall, within 30 Business Days
after the close of a Fiscal Quarter, distribute in cash
to each Partner the lesser of (i) the amount that such
Partner's Cumulative Remedial Balance would otherwise
be reduced below zero at the end of such Fiscal Quarter
or (ii) the amount by which the cumulative amount of
all special contributions made by the Partner (or its
Parent) pursuant to Section 5.22.5 of the Participation
Agreement exceeds the amount of all distributions
previously made to such Partner pursuant to this
Section 6.4.
6.5 Additional Cash Distributions. Subject to
applicable law and to (a) and (b) below, at least
annually the Partnership shall distribute to the
Partners in proportion to their respective allocations
of Profits under Section 4.3(a)(iii) all cash not
reasonably required for (i) payment of any distribution
required by Sections 6.1, 6.2, 6.3 and 6.4 and (ii) the
operation of its business, including planned capital
projects and other cash requirements. All such
distributions shall be made by the fifteenth Business
Day following the end of the Fiscal Year.
(a) For each of the periods ending on the
last day of the fourth full calendar quarter and the
eighth full calendar quarter commencing on or after the
Closing Date, the Partnership shall distribute at least
annually to the Partners in proportion to their respec
tive allocations of Profits under Section 4.3(a)(iii)
an amount of cash (determined as of the end of each of
such periods) which, when added to the amount of all
tax distributions under Section 6.3 made or anticipated
to be made in respect of such period, is equal to not
less than 70% and not more than 120% of the Partner
ship's Modified Taxable Income for that period.
"Modified Taxable Income" shall mean the Partnership's
cumulative taxable income (excluding the items
allocated by Sections 4.3(a)(i), 4.3(a)(ii),
4.3(c)(iv), 4.3(c)(v), 4.3(c)(vi), 4.4(a)(ii), 4.4(b)
PAGE 52
and 4.6) for such period, as estimated by the
Partnership. During such period, the Managing General
Partner shall review at least quarterly the
Partnership's cash resources and anticipated
requirements and may (but shall not be obligated to)
make distributions under this Section more frequently
than annually. The following example is intended to be
illustrative only:
If the Modified Taxable Income for a given
Fiscal Year is $100 and the aggregate amount
of special distributions made pursuant to
Section 6.4 is $20, then the amounts to be
distributed for such annual period to the
Partners under this Section 6.5(a) are:
at least 70%, and not more than 120%, of
($100)-($20) = $80 in the aggregate
or
at least $22.40 and not more than $38.40 to
Harsco L.P. and at least $33.60 and not more
than $57.60 to FMC.
(b) The Managing General Partner may
withhold from distributions pursuant to this Section
6.5 that amount of cash deemed by the Managing General
Partner to be necessary or advisable to meet the
Partnership's existing cash requirements and investment
opportunities; provided, however, that the Managing
General Partner shall not withhold from distribution
cash to fund investment opportunities or capital
investments (other than Permitted Capital Investments)
unless (i) in the case of cash withheld prior to 24
months after the Closing Date, 120% of the
Partnership's Modified Taxable Income shall have been
distributed to the Partners pursuant to this Section
6.5; (ii) the amount of cash withheld in respect of any
Fiscal Year in excess of $20 million does not exceed an
additional $20 million (measured on December 31 in each
of the first two Fiscal Years and on the last Business
Day of each Fiscal Quarter in each subsequent Fiscal
Year); and (iii) that any withholding of cash for such
purposes shall only be in such amounts as are necessary
for specifically identified investment opportunities
anticipated within the following twelve months and
reported to the Advisory Committee. For purposes of
this Section 6.5(b), investment opportunities and
capital investments refer to the type of out-of-pocket
expenditures by the Partnership that would be reflected
in the consolidated statement of cash flows as cash
required by investing activities in the Partnership's
PAGE 53
regularly prepared financial statements, excluding
changes in the investment account reflecting earnings
or losses during the period for affiliated companies
for that period. The provisions of this Section 6.5(b)
are limited to the withholding from distribution of
cash balances of the Partnership and shall not be
construed to restrict, or require any consent or
approval of the Limited Partner not otherwise required
by Section 3.1 of this Agreement for, any capital
expenditure or investment of the Partnership or any
financing thereof from a source other than cash
balances of the Partnership, whether by capital calls,
third-party borrowings or otherwise.
ARTICLE VII
TRANSFER OF INTERESTS
7.1 Private Sale.
(a) At any time more than 25 months after
the Closing Date, either Partner may sell or otherwise
dispose of its ownership interest in the Partnership,
or any portion thereof which represents a Share
Percentage of at least 10%, to a single, unaffiliated
third party; provided, that (i) any such sale or
disposition by the Limited Partner shall include a
ratable share of the Limited Partner Allocation and the
allocation to the Limited Partner of the other Parent's
respective CRB Carrying Costs and shall be subject to
the Managing General Partner's right of first refusal,
as described in Section 7.1(b) below, to purchase such
interest at a price the same as that at which the
Limited Partner proposes to make such sale or
disposition to a third party and (ii) prior to the time
that 30% of the equity of the Partnership (including
the common equity of any corporate successor thereto)
is publicly held, any such sale or disposition by the
Managing General Partner shall be subject to the
Limited Partner's right to include in such sale or
disposition a percentage of its ownership interest in
the Partnership equal to that percentage of the
Managing General Partner's ownership interest in the
Partnership which the Managing General Partner wishes
to sell or dispose of (provided that the Limited
Partner shall make such reasonable representations,
warranties and covenants, and provide such
indemnifications with respect thereto, to a single, non-
affiliated third party purchaser and otherwise abide by
such terms as the Managing General Partner makes or is
subject to in such a sale or disposition, and provided,
further, that if the Limited Partner is not entitled to
or does not elect to include in such
PAGE 54
sale the Limited Partner's entire ownership interest in
the Partnership, the Limited Partner shall not be
required to sell all or any part of its Limited Partner
Allocation and the Managing General Partner shall not
be obligated to require the purchaser to purchase all
or any part of such Limited Partner Allocation). The
parties acknowledge that in the event FMC sells its
entire ownership interest in the Partnership, FMC shall
no longer be entitled to receive any portion of the
Annual Fee under the Management Services Agreement. In
the event that either Partner sells or otherwise
disposes of its ownership interest in the Partnership
in one or more related transactions in which such
Partner and/or its Affiliates also sells assets other
than such Partnership interest to the same purchaser or
agrees to provide services, the portion of such
consideration to be received by such selling Partner
and/or its Affiliates allocable to such Partnership
interest only shall be as mutually agreed by both
Partners (or, if no agreement is reached, shall be
deemed to be the Appraised Value as set forth in
Section 7.2(c) below, subject to a right to cancel in
the manner provided in Section 7.2(d)). Except as
otherwise expressly provided above or in the
Participation Agreement or Registration Rights
Agreement, neither Partner may, directly or indirectly,
transfer or subject to any Lien all or any part of its
ownership interest in the Partnership. This Section
7.1(a) shall not apply to any sale of either Partner's
ownership interest or any part thereof to an
underwriter in contemplation of a public offering
pursuant to the Registration Rights Agreement.
(b) Prior to making any sale or disposition
subject to Section 7.1(a)(i), the Limited Partner will
give written notice (the "Sale Notice") to the Managing
General Partner. The Sale Notice will disclose in
reasonable detail the identity of the prospective
purchaser, the amount of its ownership interest to be
sold and the terms and conditions of the proposed sale
or disposition. The Managing General Partner may elect
to purchase the amount of the Limited Partner's
ownership interest proposed to be sold upon the same
terms and conditions as those set forth in the Sale
Notice by delivering a written notice of such election
to the Limited Partner prior to the thirtieth day
following the date the Sale Notice is given to the
Managing General Partner (the "Authorization Date");
provided, however, that if the terms and conditions set
forth in the Sale Notice provide for other than all
cash payment, the Managing General Partner may exercise
its election by paying in cash the Fair Market Value of
the non-cash consideration; provided, further, that the
Managing General Partner can pay in a security having
PAGE 55
equivalent terms (including covenants, representations
and warranties, rating (if any) by a nationally
recognized rating agency and equivalent value) if part
of the consideration set forth in the Sale Notice was
such a security. If the Managing General Partner
elects not to purchase the ownership interest specified
in the Sale Notice, the Limited Partner may sell the
ownership interest specified in the Sale Notice at a
price and on terms no more favorable to the purchaser
thereof than specified in the Sale Notice upon the
earlier to occur of (i) the date on which the Managing
General Partner notifies the Limited Partner of its
election not to purchase such ownership interest and
(ii) the Authorization Date. If the sale of the
Limited Partner's ownership interest as contemplated in
such Sale Notice is not thereafter consummated within
180 days of the Authorization Date, then the Limited
Partner's ownership interest shall again be subject to
the provisions of this Section 7.1(b) in connection
with any subsequent proposed sale.
(c) Prior to making any sale or disposition
subject to Section 7.1(a)(ii), the Managing General
Partner will give a Sale Notice to the Limited Partner.
The Managing General Partner Sale Notice will disclose
in reasonable detail the identity of the prospective
purchaser, the amount of its ownership interest to be
sold and the terms and conditions of the proposed sale
or disposition. The Limited Partner may elect to sell
the amount of the Limited Partner's ownership interest
permitted to be sold pursuant to Section 7.1(a)(ii)
upon the same terms and conditions as those set forth
in the Sale Notice by delivering a written notice of
such election to the Managing General Partner prior to
the thirtieth day following the date the Sale Notice is
given to the Limited Partner (the "Authorization
Date"). If the Limited Partner so delivers such notice
of election and the sale of the Managing General
Partner's ownership interest as contemplated in such
Sale Notice is not thereafter consummated within 180
days of the Authorization Date, then the Managing
General Partner's ownership interest shall, subject to
the terms of Section 7.1(a)(ii), again be subject to
the provisions of this Section 7.1(c) in connection
with any subsequent proposed sale.
(d) The Managing General Partner shall be
entitled to assign its right of first refusal pursuant
to Section 7.1(a)(i) above to the Partnership or to an
Affiliate of the Managing General Partner, and such
assignee shall be entitled to all of the rights and
subject to all of the obligations set forth in this
Article VII with respect to such right of first
refusal; provided, however, that the Parent of the
PAGE 56
Managing General Partner shall be jointly and severally
liable for the payment of the purchase price.
(e) The Managing General Partner shall take
all actions necessary to cause any Person who acquires
an ownership interest from the Limited Partner to be
admitted promptly as a limited partner of the
Partnership.
7.2 Put and Call Options.
(a) Call Option. At any time more than 25
months after the Closing Date, the Managing General
Partner shall have the option to purchase, or cause the
Partnership to purchase, for cash, upon 60 days' prior
written notice to the Limited Partner (which may be
delivered at any time on or after the sixtieth day
preceding the 25-month anniversary of the Closing
Date), the Limited Partner's entire ownership interest
in the Partnership for a price equal to the sum of (x)
the product of 110% of the Appraised Value of the
Partnership, determined in accordance with Section
7.2(c) below, multiplied by the Limited Partner's Share
Percentage plus (y) the Capitalized Limited Partner
Allocation; provided, however, that (i) the Managing
General Partner may exercise such call option at any
time following a Change in Control of Harsco or the
Limited Partner, irrespective of the 25-month period
referred to above, and (ii) in the event of such a
Change in Control of Harsco or the Limited Partner, the
price shall be the sum of (x) 100% of the Appraised
Value of the Partnership multiplied by the Limited
Partner's Share Percentage plus (y) the Capitalized
Limited Partner Allocation; and provided, further, that
if the Limited Partner has delivered a Sale Notice in
respect of 100% of its ownership interest in the
Partnership to the Managing General Partner under
Section 7.1(b) prior to notification by the Managing
General Partner with respect to this Section 7.2(a),
then the Managing General Partner may only exercise
such call option at the higher of the amount to be paid
under this Section 7.2(a) or the amount to be paid
under Section 7.1(b).
(b) Limited Partner Put Option. At any time
more than 25 months after the Closing Date, the Limited
Partner shall have the option to require the
Partnership to purchase, upon 60 days' prior written
notice to the Partnership (which may be delivered at
any time on or after the sixtieth day preceding the 25-
month anniversary of the Closing Date), the Limited
Partner's entire ownership interest in the Partnership
for a price equal to the sum of (x) the product of 95%
of the Appraised Value of the Partnership, determined
PAGE 57
in accordance with Section 7.2(c) below, multiplied by
the Limited Partner's Share Percentage plus (y) the
Capitalized Limited Partner Allocation; provided,
however, that (i) the put option may be exercised at
any time following a Change in Control of the Managing
General Partner, irrespective of the 25-month period
referred to above and (ii) in the event of such a
Change in Control of the Managing General Partner, the
price shall be equal to the sum of (x) 100% of the
Appraised Value of the Partnership multiplied by the
Limited Partner's Share Percentage and (y) the
Capitalized Limited Partner Allocation; provided,
further, that if the Managing General Partner has
delivered a Sale Notice in respect of 100% of its
ownership interest in the Partnership to the Limited
Partner under Section 7.1(c) prior to notification by
the Limited Partner with respect to this Section
7.2(b), then the Limited Partner may only exercise such
put option at the lower of the amount to be paid under
this Section 7.2(b) or the amount to be paid under
Section 7.1(c). The full purchase price payable by the
Partnership will be paid by means of a senior unsecured
note without any right of set-off by the Partnership.
Such note shall be in substantially the form and
contain substantially the terms of the form of note
annexed hereto as Exhibit D.
(c) Appraised Value. In order to determine
the Appraised Value of any Partner's ownership interest
in the Partnership, each Partner shall, within 15 days,
select a nationally recognized investment bank which is
regularly engaged in the financial valuation of
businesses and their securities, and those two
investment banking firms shall, within 15 days after
the engagement of the last to be engaged of such
investment banks, in turn select a third nationally
recognized investment bank which is regularly engaged
in the financial valuation of businesses and their
PAGE 58
securities. Each of the three investment banks shall
independently estimate the fully distributed public
equity trading value of the Partnership, employing
customary investment banking valuation methodologies,
including as appropriate (i) analysis of average public
trading values of comparable companies over the
preceding six months adjusted for all relevant
differences between the Partnership and the respective
comparable companies, (ii) comparable block sale
transactions or comparable acquisition transactions
without giving recognition to any control premium or
illiquidity discount and (iii) a discounted cash flow
analysis of the Partnership. Under each methodology,
the investment bank will assume (i) the income from the
Partnership will be taxed at corporate income tax
rates, (ii) a reasonable capital structure for
comparable businesses, with debt at current market
rates as of the date of the valuation, (iii) the public
has access to and knowledge of the Partnership's long
range plan, forecast, future prospects and all other
information provided to the investment banks for the
purpose of this valuation and (iv) that each Partner's
Cumulative Remedial Balance has been funded in
accordance with Annex B to the Participation Agreement.
Each of the methodologies will take into account the
value of any non-operating assets and liabilities of
the Partnership, provisions of this Partnership
Agreement and other Operative Documents requiring
special allocations or distributions (including, in the
case of the Limited Partner Allocation, treatment of
the Limited Partner Allocation as a recurring operating
expense), the future prospects of the Partnership and
the comparable companies used in the valuation and
indemnities to the Partnership. The investment banks
will conduct a due diligence review with each Parent as
well as with the Partnership and will consider each
party's input concerning the Partnership's long-range
plan, forecast and future prospects. Each of the three
investment banks shall report its determination to the
Partners within thirty days of its engagement. The
three estimates shall be averaged, and the estimate
that deviates furthest from the average shall be
ignored. The average of the remaining two estimates
shall be the "Appraised Value" of the Partnership.
(d) Option to Cancel. At any time within 10
days after the determination of the Appraised Value, a
Partner exercising its put or call option, as the case
may be, may cancel the exercise of such option, in
which case such canceling Partner shall pay, or
reimburse the Partnership for, the cost of determining
the Appraised Value (including the fees of all
valuation firms). In the event that the put or call
option is not canceled, each Partner shall pay the fees
PAGE 59
of the valuation firm selected by it, and the
Partnership shall pay the fees of the third firm and
all other expenses of the appraisal determination
process.
(e) The Managing General Partner shall be
entitled to assign its call option pursuant to (a)
above to the Partnership or to an Affiliate of the
Managing General Partner, and the Limited Partner shall
be entitled to assign its put option pursuant to (b)
above to an Affiliate of the Limited Partner (in
connection with the Limited Partner's assignment of its
Partnership interest to its Affiliate) and such
assignee shall be entitled to all of the rights and
subject to all of the obligations set forth in this
Article VII with respect to such call or put option.
(f) The put option provided in (b) above
shall not be exercisable (i) after the occurrence of
any event that triggers the dissolution of the
Partnership under Article IX or (ii) while the
Partnership is in the process of winding-up under
Section 9.3 or distributing its assets under Article
IX.
(g) In the event that the Partnership
purchases the Limited Partner's ownership interest
pursuant to Section 7.2(a) or Section 7.2(b), the
Limited Partner shall make such customary
representations and warranties to the Partnership as to
title to the ownership interest purchased and freedom
of such ownership interest from liens or claims of
third parties as the purchaser shall reasonably
request.
7.3 Additional Matters.
(a) Accruals and Carryovers of the CRB and
the Limited Partner Allocation. In the event of (i)
the exercise by the Limited Partner of the put option,
(ii) the exercise by the Managing General Partner of
the call option, (iii) the incorporation of the
Partnership pursuant to the Registration Rights
Agreement, (iv) the sale by the Limited Partner of its
entire interest in the Partnership as a result of and
in conjunction with the sale by the Managing General
Partner of its entire interest in the Partnership
pursuant to Section 7.1(a) above, (v) the sale by the
Limited Partner of its entire interest in the
Partnership in a private sale pursuant to Section
7.1(a) above or (vi) the acquisition by the Managing
General Partner of the entire interest of the Limited
Partner in the Partnership as a result of the exercise
by the Managing General Partner of its right of first
PAGE 60
refusal pursuant to Section 7.1(a) above, the
Partnership will pay, in cash, on the date of the
transfer of the Limited Partner's ownership interest in
the Partnership or the date of incorporation of the
Partnership, as the case may be, (A) to the Limited
Partner amounts equal to the aggregate amount on such
date of (1) any accrual of the Limited Partner
Allocation, (2) any Carryover Amount of the Limited
Partner Allocation, (3) any accrual of the CRB Carrying
Costs payable to the Limited Partner and (4) any CRBCC
Carryover Amount payable to the Limited Partner and (B)
to the Managing General Partner amounts equal to the
aggregate amount on such date of (1) any accrual of the
CRB Carrying Costs payable to the Managing General
Partner and (2) any CRBCC Carryover Amount payable to
the Managing General Partner. All such payments shall
be made on the applicable payment date irrespective of
the Partnership's cash position or any limitations on
the Partnership's obligations to make distributions to
a Partner or Partners. To the extent that any amounts
referred to in clause (A) or (B) above are not
determinable on the applicable payment date, they shall
be payable to the applicable Partner as soon as such
amounts can be determined (but no later than 30
Business Days after the applicable payment date) with
interest at the rate of one year LIBOR at the
applicable payment date plus 100 basis points from the
applicable payment date through the date such payment
is made.
(b) Tax and Additional Cash Distributions.
Following any of the events described in Section
7.3(a)(i) through (vi) above, the Partnership shall
continue to be obligated to make all tax distributions
and additional cash distributions to the Limited
Partner to which it is entitled under (i) Section 6.3
determined in accordance with Section 4.3(c)(vii)
hereof, if applicable, and (ii) with respect to the
first eight full Fiscal Quarters commencing on or after
the Closing Date, Section 6.5 hereof through the date
of the transfer of the Limited Partner's ownership
interest in the Partnership or the date of
incorporation of the Partnership, as the case may be.
(c) Annex B. Following the occurrence of
any of the events described in Section 7.3(a)(i)
through (vi) above, but subject to Section 7.3(b)
above, the provisions of Annex B to the Participation
Agreement shall control, notwithstanding any provisions
in Article IV or VI hereof to the contrary.
PAGE 61
ARTICLE VIII
INDEMNIFICATION
8.1 Indemnification of Partners.
(a) The Partnership shall indemnify any
Person who was or is a party or is threatened to be
made a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal,
administrative or investigative (other than an action
by or in the right of the Partnership) by reason of the
fact that such Person is or was the Managing General
Partner or the Limited Partner of the Partnership (but
only if, in the case of the Managing General Partner,
any resulting liability was not caused by conduct that
would give rise to liability under Section 3.4(b) as
determined initially by the Managing General Partner on
behalf of the Partnership or thereafter in a judicial
proceeding culminating in a final, non-appealable order
(unless otherwise resolved by the parties)), is or was
a director or officer of the Managing General Partner
or the Limited Partner or an officer of the Partnership
or a member of the Advisory Committee or is or was
serving at the request of the Partnership as a
director, officer or trustee of another corporation,
partnership, joint venture, trust or other enterprise
(in each case if acting within the scope of such
Person's authority), against expenses (including
attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by such
Person in connection with such action, suit or
proceeding if such Person (other than the Managing
General Partner, whose conduct shall be subject to
indemnification hereunder only to the extent that such
conduct would not give rise to liability under Section
3.4(b) as determined by agreement between the Partners
or in a judicial proceeding culminating in a final, non-
appealable order) acted in good faith and in a manner
such Person reasonably believed to be in or not opposed
to the best interests of the Partnership, and, with
respect to any criminal action or proceeding, had no
reasonable cause to believe such Person's conduct was
unlawful. The termination of any action, suit or
proceeding by judgment, order, settlement, conviction,
or upon a plea of nolo contendere or its equivalent,
shall not, of itself, create a presumption that the
Person did not act in good faith and in a manner which
such Person reasonably believed to be in or not opposed
to the best interests of the Partnership, and, with
respect to any criminal action or proceeding, had
reasonable cause to believe that such Person's conduct
was unlawful. Except as provided in Article VI of the
Participation Agreement, the foregoing indemnity shall
PAGE 62
include, but not be limited to, any Losses for or on
account of or arising from or in connection with or
otherwise with respect to (i) any Liability assumed by
the Partnership under any of the Operative Documents
and (ii) the conduct of the business of the Partnership
after the Closing and any liability of the Partnership
incurred in connection therewith.
(b) The Partnership shall indemnify any
Person who was or is a party or is threatened to be
made a party to any threatened, pending or completed
action or suit by or in the right of the Partnership to
procure a judgment in its favor by reason of the fact
that such Person is or was the Managing General Partner
or the Limited Partner of the Partnership, is or was a
director or officer of the Managing General Partner or
the Limited Partner or an officer of the Partnership or
a member of the Advisory Committee, or is or was
serving at the request of the Partnership as a
director, officer or trustee of another corporation,
partnership, joint venture, trust or other enterprise
against expenses (including attorneys' fees) actually
and reasonably incurred by such Person in connection
with the defense or settlement of such action or suit
if such Person (other than the Managing General
Partner, whose conduct shall be subject to
indemnification hereunder only to the extent that such
conduct would not give rise to liability under Section
3.4(b) as determined initially by the Managing General
Partner on behalf of the Partnership or thereafter in a
judicial proceeding culminating in a final, non-
appealable order (unless otherwise resolved by the
parties)) acted in good faith and in a manner such
Person reasonably believed to be in or not opposed to
the best interests of the Partnership and except that
no indemnification shall be made in respect of any
claim, issue or matter as to which such Person shall
have been adjudged to be liable to the Partnership
unless and only to the extent that the Court of
Chancery or the court in which such action or suit was
brought shall determine upon application that, despite
the adjudication of liability but in view of all the
circumstances of the case, such Person is fairly and
reasonably entitled to indemnity for such expenses
which the Court of Chancery or such other court shall
deem proper.
(c) The Partnership shall pay the expenses
(including attorneys' fees) incurred by any Person
described in Section 8.1(a) or 8.1(b) in advance of the
final disposition of the action, suit or proceeding to
which such Person is a party upon receipt of an
undertaking by or on behalf of such Person to repay
such amount (plus interest equal to one year LIBOR plus
PAGE 63
100 basis points) if it shall ultimately be determined
that such Person is not entitled to be indemnified by
the Partnership.
8.2 Indemnification by Partners. Each Partner
shall indemnify and hold the other Partner, each
officer of the Partnership and the Partnership and each
member of the Advisory Committee harmless, from and
against any loss, cost, liability and expense arising
out of or in any way connected with any action,
commitment, contract, covenant or undertaking of such
Partner for and on behalf of the Partnership which was
not within the scope of its authority hereunder or
which required the approval of the Limited Partner but
for which no such approval was obtained. Each Partner
further agrees that it will indemnify the Partnership
and the other Partner against any and all damages to
which the Partnership or the other Partner may be or
become subject arising or resulting from the breach by
such Partner of Sections 3.1 or 3.3 herein. Any
obligations pursuant to this Section 8.2 shall survive
(i) any termination, dissolution, winding up or
liquidation of the Partnership and (ii) any direct or
indirect transfer or disposition by a Partner
(including such indemnifying Partner) of its
Partnership interest.
8.3 Insurance. The Partnership may, to the full
extent permitted by law, purchase and maintain
insurance against any liability that may be asserted
against any Person entitled to indemnity hereunder.
8.4 Contract Right. The indemnification
provisions set forth in this Article VIII, including
Section 8.1(c), shall be a contract right. The rights
set forth in this Article VIII and the indemnification
provisions of the Participation Agreement shall not be
construed cumulatively.
ARTICLE IX
DISSOLUTION; WITHDRAWAL
9.1 Causes of Dissolution. The Partnership shall
be dissolved upon any of the following conditions:
(a) Mutual Consent. The mutual agreement of
the Partners that the Partnership should be dissolved
in accordance with Section 9.2 below; or
(b) Governmental Action. The issuance by
any court of competent jurisdiction or Governmental
Authority of a final decree or order, which cannot be
appealed and which (i) directs the Partnership to
PAGE 64
dissolve; (ii) requires any Partner or any Affiliate of
a Partner to withdraw from the Partnership or otherwise
divest itself of its interest in the Partnership; or
(iii) declares that the Partnership has been dissolved.
9.2 Dissolution by Agreement. If the Partners
decide to dissolve and liquidate the Partnership, the
Partners shall proceed as promptly as practicable to
wind up the affairs of the Partnership and distribute
the assets thereof in accordance with Section 9.4(b)
and applicable law, but the business and assets of the
Partnership shall be liquidated in an orderly and
businesslike manner, and a final accounting shall be
made by the Partnership. The Accountants shall review
the final accounting and shall render their opinion
with respect thereto.
9.3 Winding Up. Dissolution of the Partnership
shall be effective on the day on which the event giving
rise to the dissolution occurs, but the Partnership
shall not terminate until the assets of the Partnership
shall have been distributed as provided herein. The
business of the Partnership and the affairs of the
Partners, as such, shall continue to be governed by
this Agreement until the Partnership is terminated as
aforesaid. Upon dissolution, the Managing General
Partner shall satisfy the liabilities and liquidate the
assets of the Partnership and apply and distribute the
net proceeds thereof as provided in Section 9.4 below.
9.4 Distribution Upon Liquidation
(a) Procedure. The Partnership shall cause
to be prepared a statement setting forth the assets and
liabilities of the Partnership as of the date of
dissolution and shall furnish a copy of such statement
to each Partner. The assets which the Managing General
Partner determines should be liquidated shall be
divested in a commercially reasonable manner to avoid
undue loss. The affairs of the Partnership shall then
be wound up and the proceeds of the Partnership
distributed as follows: the Managing General Partner
shall set up such reserves as it deems reasonably
necessary for any contingent or unforeseen liabilities
or obligations of the Partnership. Such reserves may
be held in escrow for the purpose of paying any such
contingent or unforeseen liabilities or obligations
and, at the expiration of such period as the Managing
General Partner may deem advisable, such reserves shall
be distributed to the Partners or their assigns in the
manner set forth in subsection (b) of this Section 9.4.
PAGE 65
(b) Distributions. After providing for such
liabilities and such reserves, the Managing General
Partner, subject to the applicable provisions of
Sections 3.1 and 4.3(c)(vi) hereof, shall cause the
remaining net assets of the Partnership to be
distributed to the Partners, pro rata in proportion to
their respective positive Capital Account balances as
determined after giving effect to all allocations under
this Agreement. For purposes of effecting such
distributions the Partnership assets shall be valued at
their then Fair Market Value as determined by the
Managing General Partner.
9.5 Withdrawal Prohibited. Except pursuant to a
written agreement between the Partners or pursuant to
the other Operative Documents or except as set forth in
Article VII above, neither Partner may withdraw from
the Partnership without the consent of the other
Partner or effect or cause a termination or dissolution
of the Partnership.
ARTICLE X
CERTAIN TAX MATTERS
10.1 Taxation as a Partnership.
(a) The Partners intend that the Partnership
be treated as a limited partnership for Federal, state,
local and foreign tax purposes and (i) shall take all
reasonable action, including the amendment of this
Agreement and the execution of other documents, as may
be required to qualify for and receive treatment as a
partnership for Federal tax purposes and (ii) shall
take no position for any purpose that is inconsistent
with the position that the Partnership is taxed as a
Partnership for Federal income tax purposes.
(b) No election shall be made by the
Partnership or any Partner for the Partnership to be
excluded from the application of Subchapter K, Chapter
1 of Subtitle A of the Code or any similar provisions
of state tax laws.
(c) Each Partner shall either (i) report its
taxable income, gain or loss in a manner consistent
with Schedule K-1 (or any successor schedule or form)
as issued by the Partnership or (ii) disclose such
inconsistency on its Federal income Tax returns and
notify the other Partner of the inconsistency.
PAGE 66
10.2 Election to Adjust Tax Basis The Managing
General Partner may, but shall not be required to,
cause the Partnership to make an election or to revoke
any such election previously made under section 754 of
the Code to adjust the basis of Partnership property
under sections 734 and 743 of the Code; provided that,
if the Limited Partner, while its Share Percentage is
at least 20% (measured immediately prior to the
transfer described herein), transfers all or substan
tially all of its interest to a Person admitted as a
partner pursuant to Article VII, the Managing General
Partner shall make such election at the written request
of the Limited Partner.
10.3 Partners' Share of Excess Nonrecourse Liabilities.
For purposes of Section 752 of the Code, the Partners shall
share excess nonrecourse liabilities under Treasury
Regulation Section 1.752-3(a)(3) in proportion to their Share
Percentages.
10.4 Organizational Expenses. The Partnership
shall elect to amortize any organizational expenses
pursuant to Section 709(b) of the Code.
10.5 Withholding and Certain Other Taxes.
(a) Notwithstanding any other provision of
this Agreement, if the Partnership is or may be
obligated to pay any amount to a governmental taxing
authority (or otherwise make a payment) because of the
status of a Partner or otherwise attributable to such
Partner (including, without limitation, Federal
withholding taxes, state personal property or personal
property replacement taxes and state unincorporated
business taxes), the Managing General Partner is
authorized to take any action that it reasonably
determines to be necessary or appropriate to cause the
Partnership to comply with any such requirements,
including, in the event that the Limited Partner fails
to make any such payment attributable to it, to cause
the Partnership to make such payment and treat such
payment as a distribution to the Limited Partner in an
amount equal to such payment.
(b) Any obligations pursuant to this Section
10.5 shall survive (i) any termination, dissolution,
winding up or liquidation of the Partnership and (ii)
any transfer or disposition by a Partner of its
Partnership interest.
PAGE 67
10.6 Books, Records and Cooperation. Each Partner
shall preserve and keep, free of charge, all books,
papers, and records (including, but not limited to, tax
records) ("Records") which relate to the Assets and
Liabilities contributed by such Partner to the
Partnership. Each Partner shall provide access to the
Partnership and the other Partner to such Records as
reasonably requested by the Partnership or the other
Partner and cooperate with and provide information to
the Partnership and the other Partner as reasonably
requested by the Partnership or the other Partner. If
either Partner disposes of its interest in the
Partnership, such Partner shall retain and not destroy,
and share with the Partnership upon its request, all
Records which relate (i) primarily to the Assets and
Liabilities previously contributed by such Partner to
the Partnership and (ii) to any fiscal years for which
federal income tax returns have not been closed. These
obligations shall remain in full force and effect
irrespective of whether either Partner disposes of its
interest in the Partnership.
10.7 Tax Elections. Except as otherwise provided
in this Agreement, all other elections by the
Partnership for federal, state and local income and
franchise tax purposes shall be determined by the
Managing General Partner except where law provides that
the election shall be made by the Partners. Unless the
Managing General Partner shall determine, in its best
judgment, that another election shall be in the best
interest of the Partnership and the Partners, the
Managing General Partner shall make those elections
which best defer recognition of taxable income,
accelerate claiming of deductions and maximize tax
credits. The federal and state income tax returns
shall be filed only after the Partners have had at
least fifteen Business Days to review such returns.
The Partners will communicate their comments on such
returns directly to the Managing General Partner.
10.8 Tax Matters Partner. Each Partner does
hereby appoint and designate initially the Managing
General Partner as "Tax Matters Partner" of the
Partnership as such term is defined under the Code but
shall otherwise be considered to have retained such
rights (and obligations, if any) as are provided for
under the Code with respect to any examination,
proposed adjustment or proceeding relating to
Partnership items. The Tax Matters Partner shall
notify the other Partners, within ten Business Days
after it receives notice from the IRS, of all
administrative proceedings with respect to an
examination of, or proposed adjustments to Partnership
items. Any Partner (other than the Tax Matters
PAGE 68
Partner) may notify the Tax Matters Partner of such
Partner's intention to represent itself, or to cause
independent tax counsel or accountants to represent it,
in connection with any such examination, proceeding or
proposed adjustment. In the event that a Partner
(other than the Tax Matters Partner) notifies the Tax
Matters Partner of its intention to represent itself,
or to cause independent tax counsel or accountants to
represent it, in connection with any such examination,
proceeding or proposed adjustment, the Tax Matters
Partner agrees, upon request, to supply such Partner
and its tax counsel or accountants, as the case may be,
with copies of all written communications received by
the Tax Matters Partner with respect thereto, together
with such other information as may be reasonably re
quested in connection herewith. The Tax Matters
Partner further agrees, in the event of such separate
representation, to cooperate with the Partner and its
tax counsel or accountants, as the case may be, in
connection with such separate representation, to the
extent reasonably practicable. In addition to the
foregoing, the Tax Matters Partner shall notify the
Limited Partner prior to submitting a request for
administrative adjustment on behalf of the Partnership.
10.9 Amendment to Code or Treasury Regulations.
If any section of the Code or Treasury Regulations
referred to in this Agreement is amended after December
31, 1993, the Managing General Partner and the Limited
Partner agree, at the request of either party, to
discuss in good faith whether any amendment to this
Agreement is desirable.
ARTICLE XI
NOTICE
11.1 Manner of Giving Notice. Whenever notice is
required to be given pursuant to this Agreement, it
shall be by letter, or facsimile electronic
transmission receipt of which is confirmed by telephone
by the addressee, or by overnight air courier sent to
the Partners or the Partnership at the addresses set
forth below and, except as otherwise provided herein,
shall be deemed to be given when sent or transmitted.
PAGE 69
11.2 Addresses. The addresses of the Partners for
purposes of notice shall be as follows:
For the Managing General Partner:
FMC Corporation
200 East Randolph Drive
Chicago, IL 60601
Attn: Corporate Secretary
For the Limited Partner:
Harsco Defense Holding, Inc.
P.O. Box 8888
Camp Hill, PA 17011
Attn: President
The address of the Partnership for purposes of notice
shall be as follows:
United Defense, L.P.
1525 Wilson Boulevard, Suite 700
Arlington, VA 22209
Attn: Chief Executive Officer
Any Person whose address is listed in this Section
11.2 may change its address at any time by giving
written notice, as provided herein, to the other
Persons listed herein.
PAGE 70
ARTICLE XII
MISCELLANEOUS
12.1 Amendment. This Agreement may be amended or
modified by the Partners only by a written instrument
executed by both Partners. The Limited Partner hereby
agrees that it will not unreasonably withhold or delay
its consent to any amendment proposed by the Managing
General Partner to permit the entry of (i) one or more
new limited partners, each with an initial investment
of at least $10,000,000, upon the Limited Partner's or
Managing General Partner's election not to exercise
preemptive rights under Section 3.1(g) and (ii) any new
limited partner that is acquiring its interest in the
Partnership for consideration other than cash. For
purposes of the foregoing, it is understood that the
Limited Partner may withhold its consent based on the
value of the consideration to be received only in the
event that (x) the new limited partner is acquiring its
interest in the Partnership for consideration other
than cash and (y) the Fair Market Value of such
consideration is less than the Fair Market Value of the
interest in the Partnership being acquired in exchange
therefor, in each case as determined under Section
12.16 below.
12.2 Applicable Law. This Agreement will be
governed by and construed in accordance with the
domestic laws of the State of Delaware, without giving
effect to any choice of law or conflict of law
provision or rule (whether of the State of Delaware or
any other jurisdiction) that would cause the
application of the laws of any jurisdiction other than
the State of Delaware. In furtherance of the
foregoing, the internal law of the State of Delaware
shall control the interpretation and construction of
this Agreement, even though under that jurisdiction's
choice of law or conflict of law analysis, the
substantive law of some other jurisdiction would
ordinarily apply.
12.3 Further Assurances. Each of the Partners
agrees to execute and deliver all such other and
additional instruments and documents and to do such
other acts and things as may be necessary more fully to
effectuate this Agreement and the Partnership created
hereby and to carry on the business of the Partnership
in accordance with this Agreement.
12.4 Headings. The headings used in this
Agreement are for reference purposes only and do not
constitute substantive matter to be considered in
construing the terms of this Agreement.
PAGE 71
12.5 Section Numbers. Unless otherwise indicated,
reference to Section numbers are to Sections of this
Agreement.
12.6 Parties Bound. This Agreement shall be
binding upon and inure to the benefit of the parties
hereto and their respective legal representatives,
successors, and permitted assigns where permitted by
law.
12.7 Severability. In case any one or more of the
provisions contained in this Agreement shall, for any
reason, be held to be invalid, illegal, or
unenforceable in any respect, all other provisions of
the Agreement shall nevertheless remain in full force
and effect, but if the economic or legal substance of
the transactions contemplated hereby is affected in a
manner materially adverse to either party as a result
of the determination that a provision is invalid,
illegal or unenforceable, the parties hereto agree to
negotiate in good faith to modify this Agreement so as
to effect the original intent of the parties as closely
as possible in an acceptable manner to the end that the
transactions contemplated hereby are fulfilled to the
fullest extent possible.
12.8 Waiver. No waiver by any Partner
of the performance of any provision, condition or
requirement herein shall be deemed to be a waiver of,
or in any manner release the other Partner from,
performance of any other provision, condition or
requirement herein; nor deemed to be a waiver of, or in
any manner release the other Partner from, future
performance of the same provision, condition or
requirement; nor shall any delay or omission by any
Partner to exercise any right hereunder in any manner
impair the exercise of any such right accruing to it
thereafter.
12.9 Entire Agreement. This Agreement, the
Participation Agreement and the other Operative
Documents constitute the entire agreement between the
Partners concerning the subject matter hereof or
thereof and supersede any prior understanding or
written or oral agreements respecting the subject
matter of this Agreement or such documents.
12.10 Advice of Legal Counsel. Each Partner
acknowledges and represents that, in executing this
Agreement, it has had the opportunity to seek advice as
to its legal rights from legal counsel and that the
person signing on its behalf has read and understood
all of the terms and provisions of this Agreement.
PAGE 72
This Agreement shall not be construed against either
Partner or any of its Affiliates or Subsidiaries by
reason of the drafting or preparation thereof.
12.11 Dispute Resolution. Subject to Sections
3.5(h) and 3.12, either Parent shall have the right, at
any time after good faith efforts have failed to
resolve a dispute as to any matter governed by this
Agreement or the Participation Agreement, to request a
review of such matter by the chief executive officers
of each Parent ("CEO Review"). Either Parent shall
exercise its right to request a CEO Review by
furnishing written notice to the Partnership and the
other Parent identifying the matter in dispute and
setting forth the positions of the parties with respect
thereto. The chief executive officers of the two
Parents shall meet within 30 days of the date on which
such notice is received and shall engage in good faith
efforts to resolve the dispute. Within 15 days of such
meeting, the chief executive officers shall provide
notice to the Partnership stating whether they have
been able to resolve the dispute and, if so, full
details with respect to such resolution. Any such
resolution shall be binding on the Partnership, the
Partners and the Parents. If the chief executive
officers are unable to resolve the dispute within the
time limit set forth above, either party shall be free
to seek judicial relief by appropriate proceedings.
12.12 Parties in Interest; Limitation on Rights
of Others. Subject to the other provisions
of this Section, the terms of this Agreement shall be
binding upon and inure to the benefit of the parties
hereto and their successors and permitted assigns.
Nothing in this Agreement, whether express or implied,
shall be construed to give any Person (other than the
parties hereto and their successors and permitted
assigns and as expressly provided herein) any legal or
equitable right, remedy or claim under or in respect of
this Agreement or any covenants, conditions or
provisions contained herein. This Agreement is not
assignable in whole or in part by the Limited Partner
or the Managing General Partner unless assigned in
connection with the assignment of a Share Percentage in
excess of 20% (in the case of the Limited Partner) or
30% (in the case of the Managing General Partner) of
the aggregate Share Percentages in the Partnership and,
if applicable, in accordance with the Managing General
Partner's right of first refusal set forth in Section
7.1(b) above or pursuant to the terms of Section 7.2(e)
above. Any such assignment by the Managing General
Partner shall not include an assignment of the Annual
Fee payable under the Management Services Agreement
unless the assignee becomes the Managing General
PAGE 73
Partner. No assignee of any portion of the Managing
General Partner's interest shall be entitled to become
the Managing General Partner unless such assignee
acquires a greater ownership interest in the
Partnership than is then held by Harsco L.P. Notwith
standing the foregoing, in the event that the Limited
Partner assigns to a third party, in accordance with
the terms of this Agreement, any portion of its
ownership interest in the Partnership, such assignment
shall be subject to, and entitled to the benefits of,
the continued application of the terms of Sections
7.1(a)(i), 7.1(c) and 7.2, and such third party shall
be entitled to all of the rights and subject to all of
the obligations of the Limited Partner therein set
forth; provided, however, that (i) such third party
shall only be entitled to be assigned the consent
rights set forth in Section 3.1(a) in the event that it
holds a Share Percentage in excess of 20% of the
aggregate Share Percentages (in which event the
assignor shall not have and may not, directly or
indirectly, exercise any such consent rights) and (ii)
such third party shall only be entitled to exercise the
right set forth in Annex A to agree to the amount of
the Limited Partner Allocation (without the consent or
approval of any other partner or holder of a
Partnership interest) in the event that it holds a
Share Percentage in excess of 20% of the aggregate
Share Percentages (in which event the assignor shall
not have and may not, directly or indirectly, exercise
any such right). No assignment or transfer of this
Agreement or a party's interest in the Partnership or
its Partner shall relieve such party from its
obligations hereunder or under any other Operative
Document.
12.13 Counterparts. This Agreement and any
written consents required to be executed by both
Partners hereunder may be executed by the Partners in
separate counterparts, each of which when so executed
and delivered shall be an original, but all such coun
terparts shall together constitute but one and the same
document.
12.14 Jurisdiction, Court Proceedings. Any
suit, action or proceeding against any party hereto
arising out of or relating to this Agreement or any
other Operative Document, any transaction contemplated
hereby or any judgment entered by any court in respect
of any such suit, action or proceeding may be brought
in any Federal or State court located in the Northern
District of Virginia or such other district as may
contain the Partnership's principal place of business,
and each party hereto hereby submits to the
PAGE 74
jurisdiction of such courts for the purpose of any such
suit, action or proceeding. To the extent that service
of process by mail is permitted by applicable law, each
such party irrevocably consents to the service of
process in any such suit, action or proceeding in such
courts by the delivery of such process by mail, at its
address set forth in Article XI, and no such service
shall be effective until such delivery is made. Each
such party irrevocably agrees not to assert any
objection which it may ever have to the laying of venue
of any such suit, action or proceeding in any Federal
or State court in the Northern District of Virginia (or
such other district which contains the Partnership's
principal place of business), and any claim that any
such suit, action or proceeding brought in any such
court has been brought in an inconvenient forum.
12.15 Waiver of Rights of Partition and
Dissolution. Each Partner waives all rights
it may have at any time to maintain any action for
partition or sale of any Partnership assets as now or
hereafter permitted under applicable law. Each Partner
waives its rights to seek a court decree of dissolution
or to seek the appointment of a court receiver for the
Partnership as now or hereafter permitted under
applicable law.
12.16 Determination of Fair Market Value. Except as
provided in Section 4.1, the Managing General Partner
shall determine the Fair Market Value of any property or
liability where such Fair Market Value is relevant for
purposes of this Agreement (including, without limitation,
any determination of the Fair Market Value of property
acquired by the Partnership in exchange for the issuance
of a partnership interest). If the Limited Partner
objects in writing to the Managing General Partner's
determination of Fair Market Value within 15 Business Days
of receiving notice from the Managing General Partner of
such valuation and the Limited Partner and the Managing
General Partner are unable to agree on the Fair Market
Value of the property or liability within 30 days of the
date of the Limited Partner's objection, the Fair Market
Value of the property or liability shall be determined by
an independent appraiser mutually acceptable to the
Partners (with the costs of such determination to be borne
by the Partnership). Notwithstanding the foregoing
sentence, in the event that Fair Market Value is
determined pursuant to Section 12.1 and the Limited
Partner objects in writing to such determination within 15
Business Days of receiving notice of such valuation, such
Fair Market Value shall be redetermined by either Ernst &
Young or Price Waterhouse, whichever is not the
Accountants, which shall be required to make a valuation
within 30 days of its retention.
PAGE 75
IN WITNESS WHEREOF, this Agreement has been duly
executed on behalf of the Partners by their respective
authorized representatives all as of the day and year
first above written.
FMC CORPORATION
By: _____________________________
Its: _____________________________
HARSCO DEFENSE HOLDING, INC.
By: _____________________________
Its: _____________________________
UNITED DEFENSE, L.P.
By: FMC Corporation
Its General Partner
By: __________________________
Its: __________________________
PAGE 0
DOCUMENT HEADER
DOCUMENT DESCRIPTION ANNEX A DEFINITIONS
RELATING TO THE PARTNERSHIP AGREEMENT
DOCUMENT TYPE 2
COUNT 35
PAGE 1
ANNEX A
DEFINITIONS RELATING TO THE PARTNERSHIP AGREEMENT
among
FMC CORPORATION,
HARSCO DEFENSE HOLDING, INC.
and
UNITED DEFENSE, L.P.
Dated as of January 1, 1994
AND
THE PARTICIPATION AGREEMENT
among
FMC CORPORATION,
HARSCO CORPORATION,
HARSCO DEFENSE HOLDING, INC.
and
UNITED DEFENSE, L.P.
Dated as of January 1, 1994
PAGE 2
"$" denominates U.S. Dollars.
"401(k) Plan" means a defined contribution
plan as defined in Section 3(34) of ERISA that is
qualified under Section 401(a) of the Code and that
meets the requirements of Section 401(k) of the Code.
"Accountants" means a nationally-recognized
independent certified public accounting firm mutually
agreed to by the Partners for the Partnership. Unless
otherwise agreed by the Partners, the Accountants for
the Partnership shall be either Ernst & Young or Price
Waterhouse, as determined by the Partnership on or
before February 28, 1994. With respect to FNSS, the
term "Accountants" shall refer to Arthur Andersen &
Co. In any other foreign jurisdiction, the term
"Accountants" for purposes of Section 5.12 of the
Partnership Agreement shall refer to the nationally
recognized independent certified public accounting
firm selected by the Partnership to represent it in
such foreign jurisdiction.
"Active Contract" means those Contracts
which provide for the delivery of products or the
rendering of services by a Parent and with respect to
which the final product has not yet been delivered or
the final service has not yet been rendered.
"Adjusted Capital Account Deficit" has the
meaning set forth in Section 4.6(a) of the Partnership
Agreement.
"Adjusted Profits" has the meaning set forth
in Section 4.6(b) of the Partnership Agreement.
"Advance Agreement" means a written
agreement entered into between UD and a contracting
officer or administrative contracting officer of the
U.S. Federal government that specifies the
allowability, reasonableness and allocability of
certain special or unusual contract costs incurred by
UD after the date of the Agreement.
"Advisory Committee" has the meaning set
forth in Section 3.5(a) of the Partnership Agreement.
"Affiliate" of any Person means any other
Person directly or indirectly controlling (within the
meaning of Rule 12b-2 under the Securities Exchange
Act of 1934, as amended, as in effect on the Closing
Date), directly or indirectly controlled by or under
PAGE 3
direct or indirect common control with such Person,
but such term does not, as to FMC or Harsco, include
the Partnership or any Affiliate of the Partnership
which is directly or indirectly controlled by the
Partnership.
"Appraised Value" has the meaning set forth
in Section 7.2(c) of the Partnership Agreement.
"Arbitrator" has the meaning set forth in
Section 3.12 of the Partnership Agreement.
"Assets" means the FMC Assets, and the
Harsco Assets, or any of them, depending on the
context.
"Assignment" means an assignment of a
Contract to the Partnership which assignment is
reasonably acceptable to the Parents and, in the case
of Contracts with a Governmental Authority, acceptable
to the Governmental Authority.
"Assumption Agreement" means an assumption
agreement, substantially in the form of Exhibit B to
the Participation Agreement.
"Authorization Date" has the meaning set
forth in Section 7.1(b) of the Partnership Agreement.
"Average Limited Partner Allocation" means
an amount equal to the arithmetic average of the
Limited Partner Allocation, without regard to whether
there has been any allocation or payment of such
Limited Partner Allocation under the terms of the
Partnership Agreement, for the three Fiscal Years
immediately preceding the calculation of the
Capitalized Limited Partner Allocation.
"Book Value" of an Asset or Liability means,
as of any particular date, the value at which the
Asset or Liability is reflected on the books and
records of the appropriate entity, computed under the
accrual method of accounting in accordance with GAAP
and the Principal Accounting Procedures and, except to
the extent otherwise required by the reserve policies
reflected in the Principal Accounting Procedures or as
set forth on Schedule 2.3.1, on an accounting basis
consistent with the principles used in the preparation
of the appropriate Pro Forma Balance Sheet.
PAGE 4
"Burdensome Governmental Condition" to a
transaction shall be deemed to exist when a court of
competent jurisdiction or any Governmental Authority
acting within its regulatory authority has issued an
order, injunction or preliminary injunction against
the Partnership, any Partner, any party or any
Affiliate of any party which would prohibit the
transaction or which would compel the applicable
Person to dispose of or hold separate a material
portion of its business or assets as a result of such
transaction.
"Business Day" means a day other than a
Saturday, Sunday or other day on which banks are
required or authorized to be closed in Arlington,
Virginia.
"Capital Account" has the meaning set forth
in Section 4.1(a) of the Partnership Agreement.
"Capital Contribution" means a contribution
to the capital of the Partnership in cash or property
as required or permitted by the Partnership Agreement.
"Capitalized Limited Partner Allocation"
means the product of (x) the Earnings Multiple, (y)
the Average Limited Partner Allocation and (z) one (1)
minus the then current Tax Rate. In the event that
any put or call by a Partner is exercised before three
years of data are available, then the data for all
Fiscal Quarters completed since the inception of the
Partnership shall be used to determine the Earnings
Multiple and Average Limited Partner Allocation.
Notwithstanding the foregoing or any other provision
of the Operative Documents, the Capitalized Limited
Partner Allocation shall be equal to zero in the event
that, immediately after giving effect to the
transaction in connection with which the Capitalized
Limited Partner Allocation is being determined, the
Managing General Partner or its permitted successor in
interest will not be entitled, whether due to
termination, resignation or replacement as Managing
General Partner, breach or any other cause, to receive
its Annual Fee under Section 4(b) of the Management
Services Agreement.
"Carrying Value" means (a) with respect to
property contributed to the Partnership by or for the
account of a Partner, the Fair Market Value of such
property at contribution, reduced (but not below zero)
by all depreciation, amortization and cost recovery
PAGE 5
deductions charged to the Partners' Capital Accounts
pursuant to Article IV of the Partnership Agreement
with respect to such property and increased by all
post-contribution improvements to such property, (b)
if Capital Accounts are restated pursuant to Section
4.1(d) of the Partnership Agreement, with respect to
property owned by the Partnership at the time of the
restatement, the Fair Market Value of such property at
the time of the restatement, reduced (but not below
zero) by all subsequent depreciation, amortization and
cost recovery deductions charged to the Partners'
Capital Accounts pursuant to Article IV of the
Partnership Agreement with respect to such property
and increased by all post-restatement improvements to
such property and (c) with respect to any other
property, the adjusted basis of such property for
Federal income tax purposes, as of the time of
determination.
"Carryover Amount" has the meaning set forth
in Section 4.3(a)(i) of the Partnership Agreement.
"CAS" means Cost Accounting Standards as
promulgated by the Cost Accounting Standards Board.
"CEO" has the meaning set forth in Section
3.6(a) of the Partnership Agreement.
"CEO Review" has the meaning set forth in
Section 12.11 of the Partnership Agreement.
"CERCLA" means the Comprehensive
Environmental Response, Compensation and Liability
Act, 42 U.S.C. Section 9601, et seq.
"Change in Control" shall be deemed to have
occurred with respect to a Person at such time as (1)
a "person" or "group" (within the meaning of Sections
13(d) and 14(d)(2) of the Securities Exchange Act of
1934, as amended (the "1934 Act")), becomes the
"beneficial owner" (as defined in Rule 13d-3 under the
1934 Act) of shares representing more than fifty
percent (50%) of the then outstanding common stock of
the Parent; or (2) the Person consolidates into or
merges with any other Person pursuant to a transaction
that results in the stockholders of the Person immedi
ately preceding the effectiveness of such transaction
owning, directly or indirectly, immediately after the
effectiveness of the transaction, less than fifty
percent (50%) of the outstanding voting stock of such
new or surviving corporation.
PAGE 6
"Close" has the meaning set forth in Section
3.0 of the Participation Agreement.
"Closing" means the closing of the
transactions described in Section 2 of the
Participation Agreement.
"Closing Date" means January 1, 1994,
subject to Section 2.2 of the Participation Agreement.
"Closing Party" has the meaning set forth in
Section 3.0 of the Participation Agreement.
"Code" means the Internal Revenue Code of
1986, as amended and effective as of December 31,
1993.
"Common Excluded Assets" means those assets
set forth as common excluded assets on Schedule A
annexed hereto.
"Competitive Contract" means, in the case of
a contract with the U.S. government (including any FMS
contract), any contract which does not require the
submission of certified cost or pricing data.
"Condition Party" has the meaning set forth
in Section 3.1 of the Participation Agreement.
"Confidentiality Agreement" means the
confidentiality agreement dated January 16, 1992 and
amended July 27, 1992 between FMC and Harsco which is
attached as Exhibit C to the Participation Agreement.
"Consent" means a consent, reasonably
acceptable to the Parents, from a counterparty (other
than the Parents) to a Contract transferred by a
Parent to a Partner or the Partnership.
"Consolidation Costs" means out-of-pocket
costs that would not have been incurred after the
Closing Date but for the combination of the FMC
Defense Business and the Harsco Defense Business,
including, without limitation, costs incurred in
connection with (i) severance payments; (ii) land
preparation; (iii) relocation of equipment and
tooling; (iv) re-layout of facilities; (v)
standardization of computer-aided-design and computer-
aided-manufacturing techniques and processes; (vi)
construction of an oval test track; (vii) work
transfer; (viii) retraining of employees; (ix)
relocation of employees; (x) purchasing and systems
PAGE 7
conversions; and (xi) sale or other disposal of
redundant plant, equipment, tooling and other property
(including any losses thereby incurred); but excluding
transfer taxes and other transaction costs incident to
the combination.
"Contract Price" has the meaning set forth
in Section 5.22.4.4 of the Participation Agreement.
"Contracts" means FMC Contracts or Harsco
Contracts.
"Controlled Group" has the meaning set forth
in Section 4.21.7 of the Participation Agreement.
"CPR" has the meaning set forth in Section
3.12 of the Partnership Agreement.
"CRB Carrying Costs" of a Partner or its
Parent for any Fiscal Quarter means the product of (i)
2.5% and (ii) the average of the relevant Partner's
Cumulative Remedial Balances as of the beginning and
as of the end of such Fiscal Quarter. In the case of
a Fiscal Quarter consisting of less than 3 calendar
months, the "CRB Carrying Costs" of a Partner or its
Parent for such short Fiscal Quarter means (a) the
product of (i) 2.5%, (ii) the average of the relevant
Partner's Cumulative Remedial Balances as of the
beginning and as of the end of such Fiscal Quarter and
(iii) a fraction the numerator of which is the number
of days in such short Fiscal Quarter and the
denominator of which is the number of days in the
calendar quarter of which the short Fiscal Quarter is
a part.
"CRBCC Carryover Amount" has the meaning set
forth in Section 4.3(a) of the Partnership Agreement.
"Cumulative Remedial Balance" of a Partner
or its Parent means the cumulative amount since
formation of the Partnership of all charges (net of
all credits) to the relevant Partner's Remedial Cost
Account in excess of the amount of the environmental
reserves for Remedial Expenditures reflected on such
Partner's Final Closing Balance Sheet; provided that
charges and credits to such Remedial Cost Account
under clauses (i), (vi) and (vii) of Section 5.22.4.2
of the Participation Agreement shall be ignored for
this purpose.
"Data Rights" means unregistered copyrights
and trade secrets and confidential information and
knowledge possessed by each Parent as of the Closing
PAGE 8
Date, including, but not limited to, ideas,
inventions, blueprints, know-how, formulae,
manufacturing and production processes and techniques,
research and development information, software,
drawings, specifications, designs, plans, proposals,
technical data, financial and accounting data,
business and marketing plans and customer and supplier
lists.
"Debt" of any Person as used in Sections 4.2
and 4.5 of the Participation Agreement means (a)
obligations of such Person for borrowed money, (b)
obligations of such Person evidenced by bonds,
debentures, notes or other similar instruments, (c)
obligations of such Person to pay the deferred
purchase price of property or services (other than
trade payables), (d) obligations of such Person as
lessee under capital leases, (e) Debt of another
secured by a Lien on any asset of such Person, whether
or not such Debt is assumed by such Person, and (f)
Debt of others guaranteed directly or indirectly by
such Person or as to which such Person has an
obligation which is the economic equivalent of a
guarantee.
"Defense Affiliate" means, as to FMC, any
Affiliate operating in the FMC Defense Business and,
as to Harsco, any Affiliate operating in the Harsco
Defense Business, which Affiliates are listed on
Schedule B annexed hereto.
"Defense Business" means the FMC Defense
Business or the Harsco Defense Business.
"Defense Subsidiary" means, as to FMC, any
Subsidiary operating in the FMC Defense Business and,
as to Harsco, any Subsidiary operating in the Harsco
Defense Business, which Subsidiaries are listed on
Schedule B annexed hereto. Such term shall not
include, as to FMC or Harsco, the Partnership.
"Defense Systems Group" means the Ground
Systems, Armament Systems, Steel Products and Defense
Systems International Divisions of FMC's Defense
Systems Group, including FMC's investment in and
contractual relations with FNSS, but specifically
excluding the properties set forth as FMC Excluded
Assets or Common Excluded Assets on Schedule A annexed
hereto.
"Demolition Costs" has the meaning set forth
in Section 6.4 of the Participation Agreement.
PAGE 9
"Designated Representative" means Barrett W.
Taussig, or any successor designated by Harsco L.P.
"Designee" means any of a Partner's
designated representatives to the Advisory Committee,
as provided in Section 3.5(b) of the Partnership
Agreement.
"DOD" means the U.S. Department of Defense.
"DOJ" means the U.S. Department of Justice.
"Earnings Multiple" means the quotient
obtained by dividing the Appraised Value of the
Partnership by the arithmetic average of the annual
after-tax income of the Partnership determined in
accordance with GAAP (as reduced by the Limited
Partner Allocation) for the three Fiscal Years
immediately preceding the calculation of the
Capitalized Limited Partner Allocation (as determined
from the Partnership's regularly prepared financial
statements, but assuming that the Partnership paid
corporate tax on such income at a rate equal to the
Tax Rate for each such Fiscal Year), provided that the
Earnings Multiple shall never be less than 5 nor more
than 15.
"Environmental Requirements" means all civil
and criminal federal, state, local and foreign
statutes, regulations, ordinances and similar
provisions having the force or effect of law, all
common law, and any currently effective judicial and
administrative orders, permits and licenses (and
conditions of the same) and determinations binding on
the FMC Defense Business, the Harsco Defense Business,
the FMC Assets, or the Harsco Assets, which
provisions, common law, permits, licenses and orders
and determinations concern public health and safety,
worker health and pollution or protection of the
environment, including without limitation all those
relating to the presence, use, production, generation,
handling, transport, treatment, storage, disposal,
distribution, labeling, testing, processing,
discharge, release, threatened release, control, or
cleanup of any Hazardous Substances but excluding any
of the foregoing to the extent relating to worker
safety, all as may be amended or superseded from time
to time.
"Environmental Liability Event" means any of
the following: (a) the Release (as hereinafter
defined) of any Hazardous Substance at, from or onto
PAGE 10
any property or facility at any time owned, operated
or used by either Defense Business or the Partnership,
(b) the offsite treatment, storage, disposal,
handling, disposition or Release of any Hazardous
Substance generated, handled or in any fashion
originating from or at any property or facility at any
time owned, operated or used by, or otherwise in
connection with, either Defense Business or the
business of the Partnership or (c) any failure by
either Parent, with respect to its Defense Business,
or by the Partnership to comply with applicable
Environmental Requirements (as such Environmental
Requirements are constituted prior to the Closing
Date).
"Environmental Realization Status Report"
has the meaning set forth in Section 5.22.3.1 of the
Participation Agreement.
"Environmental Special Allocation" has the
meaning set forth in Section 5.22.1 of the
Participation Agreement.
"ERISA" means the Employee Retirement Income
Security Act of 1974, as amended.
"Excluded Assets" means the FMC Excluded
Assets and the Harsco Excluded Assets.
"Excluded Liabilities" means, in connection
with each Defense Business:
(i) all liabilities relating to Income
Taxes of either Parent or any of its Affiliates;
(ii) all liabilities relating to Taxes,
other than Income Taxes, to the extent not
accrued on the Final Closing Balance Sheet;
(iii) all liabilities for borrowed money as
of the Closing Date other than FMC Liabilities
relating to FNSS;
(iv) all liabilities relating to claims with
respect to government contracts, whether asserted
or unasserted by the government, arising prior to
the Closing Date to the extent not accrued on the
Final Closing Balance Sheet;
(v) all liabilities relating to "holdback
reserves," "management contingency reserves" and
"sales reserves" for all Inactive Contracts, and
PAGE 11
all "holdback reserves" (except for those
relating to fixed-price incentive fee Contracts),
on Active Contracts;
(vi) all liabilities relating to any claims
for pre-Closing breaches of contract or
violations of Governmental Rules, to the extent
not accrued on the Final Closing Balance Sheet;
provided, however, that liabilities that are
Remedial Expenditures shall be assumed to the
extent provided in the Operative Documents;
(vii) all liabilities not set forth on or
identified on an exhibit to the Final Closing
Balance Sheet or on any Schedule to the
Participation Agreement, in each case listing
liabilities to be assumed by the Partnership,
other than the liabilities set forth in clause
(viii)(B), (xi) and (xii) of the definition of
FMC Liabilities and the liabilities set forth in
clauses (viii), (x) and (xi) of the definition of
Harsco Liabilities;
(viii) all liabilities for pre-Closing
workers' compensation (subject to Section 5.15 of
the Participation Agreement) and, to the extent
not accrued on the Final Closing Balance Sheet,
pre-Closing general and product liability
occurrences; and
(ix) all liabilities resulting from an
Excluded Asset or any other Asset not acquired by
the Partnership.
"Existing Contract" means any contract
entered into by either Parent prior to the Closing.
"Fair Market Value" means the price a
willing buyer would pay a willing seller in an arm's-
length transaction, neither being under any compulsion
to buy or sell and both having reasonable knowledge of
relevant facts. As applied to a liability, Fair
Market Value means the price a buyer would demand in
exchange for assuming the liability from the seller.
"FAR" means the Federal Acquisition
Regulation, 48 C.F.R. Chapter 1, as promulgated by the
U.S. government.
"Final Closing Balance Sheet" has the
meaning set forth in Section 2.3.2 of the
Participation Agreement.
PAGE 12
"Fiscal Quarter" has the meaning set forth
in Section 5.1 of the Partnership Agreement.
"Fiscal Year" means a calendar year for the
Partnership (as set forth in Section 5.1 of the
Partnership Agreement).
"FMC" means FMC Corporation, a Delaware
corporation.
"FMC Assets" means (a) $14,800,000 in cash
and (b) all of the right, title and interest that FMC
possesses in and to the following assets exclusively
used or intended for exclusive use in the business of
its Defense Systems Group:
(i) all inventories of raw materials,
packaging materials, work in process, consigned
goods and finished goods (including warehoused
inventories and inventories covered by purchase
orders), including any such inventories acquired
after the date hereof but excluding any such
inventories sold or otherwise disposed of after
the date hereof in the ordinary course of
business consistent with past practices;
(ii) all supplies, furniture, fixtures,
machinery, equipment, vehicles and other fixed
assets;
(iii) all FMC Contracts;
(iv) all Transferred Intellectual Property
Rights;
(v) the Real Property listed or described
on Schedule 4.8.2A to the Participation
Agreement;
(vi) all accounts, notes and other
receivables;
(vii) any permits or licenses issued by any
Governmental Authority;
(viii) all stock or other debt or equity
interests (including partnership interests) in
the FMC Defense Affiliates set forth on Schedule
B annexed hereto; and
(ix) all other tangible or intangible
assets.
PAGE 13
The FMC Assets shall not include the FMC Excluded
Assets or the Common Excluded Assets.
"FMC Capital Account Value" has the meaning
set forth in Schedule 4.1 to the Partnership
Agreement.
"FMC Contracts" means all contracts (other
than Restricted Contracts), indentures, agreements,
commitments, purchase orders, letters of credit,
guarantees, foreign exchange contracts, commodity
hedges, leases and other legally binding arrangements,
whether oral or written, entered into in connection
with the FMC Defense Business.
"FMC Defense Business" means the entire
business and operations of the Defense Systems Group,
as conducted on the date hereof.
"FMC Environmental Liability Event" means
any Environmental Liability Event relating to or
arising out of the conduct by FMC prior to the Closing
Date of its Defense Business or the ownership,
operation or use by FMC or any of its Affiliates prior
to the Closing Date of any facility or property now or
previously owned, operated or used in its Defense
Business.
"FMC Excluded Assets" means those assets of
FMC set forth on Schedule A annexed hereto.
"FMC Liabilities" means the following
liabilities and obligations of FMC arising out of the
operations of the FMC Defense Business or the
ownership, operation or use of the FMC Assets (whether
asserted or unasserted, absolute or contingent,
accrued or unaccrued, liquidated or unliquidated, or
due or arising before the Closing Date):
(i) all liabilities to vendors and other
creditors for goods purchased or services
received on open account;
(ii) amounts received from customers as
advance payments to be applied to the related
receivable when a sale is recorded at time of
shipment or completion of service;
(iii) amounts withheld from employees'
compensation for Federal, state or local taxes
and for other payroll deductions;
PAGE 14
(iv) sundry accounts payable;
(v) amounts accrued for salaries, wages,
commission and other remuneration earned by
employees;
(vi) commissions earned by salesmen, dealers
or other agents who are not employees;
(vii) all liabilities relating to accrued
Taxes, other than Income Taxes, including but not
limited to Taxes assessed against real and
personal property based on the valuation of such
property as determined by the laws of the state
or local taxing authority;
(viii) (A) accruals for FMC's cost of Federal,
state or local taxes on payroll that are not an
Excluded Liability and (B) all liabilities for
other employee benefits to the extent provided in
Section 5.9 of the Participation Agreement, but
excluding workers compensation liabilities to the
extent provided in Section 5.15 of the
Participation Agreement;
(ix) accruals for royalties payable in
accordance with terms of royalty agreements;
legal and professional fees for services
rendered; insurance premiums (excluding workers'
compensation and general and product liability
coverages); policy and warranty claims and
product and service liabilities, but excluding
pre-Closing products liability or general
liability occurrences (except to the extent, but
not in excess of, any amount reserved for and
reflected on FMC's Final Closing Balance Sheet);
and miscellaneous expenses;
(x) all liabilities associated with FMC's
ownership of or interest in the Defense
Affiliates of FMC set forth on Schedule B annexed
hereto;
(xi) all liabilities and obligations
associated with any FMC Environmental Liability
Event; and
(xii) obligations under FMC Contracts
remaining unperformed on the Closing Date.
The FMC Liabilities shall not include any Excluded
Liability.
PAGE 15
"FMC Master Trust" means the Master Trust
established by the Master Trust Agreement between FMC
Corporation and Bankers Trust Company dated January 1,
1976 implementing the pension benefit plans of FMC and
its Subsidiaries and Affiliates.
"FMC Qualifying Remedial Expenditure" means
any Remedial Expenditure to the extent arising out of
any FMC Environmental Liability Event.
"FMS" means Foreign Military Sales.
"FNSS" means FMC-Nurol Savunma Sanayii A.S.,
a Turkish corporation.
"FRA" means the final remedial adjustment as
described in Section 5.22.4.4 of the Participation
Agreement.
"FTC" means the U.S. Federal Trade
Commission.
"GAAP" means generally accepted accounting
principles in the United States of America.
"Goodyear" has the meaning set forth in
Section 5.23 of the Participation Agreement.
"Goodyear Litigation" means the litigation
styled as FMC Corporation v. The Goodyear Tire &
Rubber Company (N.D. Ala., Eastern Div., Civil Action
No. CV-90-H-01018E), including all appeals therefrom
and all settlements thereof.
"Governmental Actions" means all
authorizations, orders, consents, approvals, waivers,
exceptions, variances, franchises, permissions,
permits and licenses of, and filings and declarations
with, by or in respect of, any Governmental
Authorities.
"Governmental Authority" means any national,
federal, state, local or foreign governmental Person,
authority or agency, court, regulatory commission,
stock exchange or other body and any arbitrator having
jurisdiction over the matter; provided, that any
arbitrators within this definition shall include only
arbitrators having the right to issue a binding order
or decision in such matter.
PAGE 16
"Governmental Rule" means any statute, law,
treaty, rule, code, ordinance, regulation, permit,
certificate or order of any Governmental Authority or
any judgment, decree, injunction, writ, order or like
action of any court, arbitrator or other judicial or
quasi-judicial tribunal, other than an ex-parte or
temporary order if either party takes prompt action to
set aside such action and such temporary order does
not become final.
"Harsco" means Harsco Corporation, a
Delaware corporation.
"Harsco Assets" means (a) $5,200,000 in cash
and (b) all of the right, title and interest that
Harsco possesses in and to the following assets
exclusively used or intended for exclusive use in the
business of its BMY-Combat Systems Division:
(i) all inventories (net of progress
payments) of raw materials, packaging materials,
work in process, consigned goods and finished
goods (including warehoused inventories and
inventories covered by purchase orders),
including any such inventories acquired after the
date hereof but excluding any such inventories
sold or otherwise disposed of after the date
hereof in the ordinary course of business
consistent with past practices;
(ii) all supplies, furniture, fixtures,
machinery, equipment, vehicles and other fixed
assets;
(iii) all Harsco Contracts;
(iv) all Transferred Intellectual Property
Rights;
(v) the Real Property listed or described
on Schedule 4.8.2B to the Participation
Agreement;
(vi) all accounts, notes and other
receivables;
(vii) any permits or licenses issued by any
Governmental Authority; and
(viii) all other tangible and intangible
assets.
PAGE 17
The Harsco Assets shall not include the Harsco
Excluded Assets or the Common Excluded Assets.
"Harsco Capital Account Value" has the
meaning set forth in Schedule 4.1 to the Partnership
Agreement.
"Harsco Contracts" means all contracts
(other than Restricted Contracts), indentures,
agreements, commitments, purchase orders, letters of
credit, guarantees, foreign exchange contracts,
commodity hedges, leases and other legally binding
arrangements, whether oral or written, entered into in
connection with the Harsco Defense Business.
"Harsco Defense Business" means the entire
business and operations of Harsco's BMY-Combat Systems
Division, whose principal address is Wolf Church Road,
York, Pennsylvania 17404, as conducted on the date
hereof.
"Harsco Environmental Liability Event" means
any Environmental Liability Event relating to or
arising out of the conduct by Harsco prior to the
Closing Date of its Defense Business or the ownership,
operation or use by Harsco or any of its Affiliates
prior to the Closing Date of any facility or property
now or previously owned, operated or used in its
Defense Business.
"Harsco Excluded Assets" means those assets
of Harsco set forth on Schedule A annexed hereto.
"Harsco L.P." means Harsco Defense Holding,
Inc., a Delaware corporation which is to be the Harsco
limited partner of the Partnership and which is
directly and wholly-owned by Harsco.
"Harsco Liabilities" means the following
liabilities and obligations of Harsco arising out of
the operations of the Harsco Defense Business or the
ownership, operation or use of the Harsco Assets
(whether asserted or unasserted, absolute or
contingent, accrued or unaccrued, liquidated or
unliquidated, or due or arising before the Closing
Date):
(i) all liabilities to vendors and other
creditors for goods purchased or services
received on open account;
PAGE 18
(ii) amounts received from customers as
advance payments to be applied to the related
receivable when a sale is recorded at time of
shipment or completion of service;
(iii) amounts withheld from employees'
compensation for Federal, state or local taxes
and for other payroll deductions;
(iv) sundry accounts payable;
(v) amounts accrued for salaries, wages,
commission and other remuneration earned by
employees;
(vi) commissions earned by salesmen,
dealers, or other agents who are not employees;
(vii) all liabilities relating to accrued
Taxes, other than Income Taxes, including but not
limited to Taxes assessed against real and
personal property based on the valuation of such
property as determined by the laws of the state
or local taxing authority;
(viii) (A) accruals for Harsco's cost of
Federal, state or local taxes on payroll that are
not an Excluded Liability and (B) all liabilities
for other employee benefits to the extent
provided in Section 5.9 of the Participation
Agreement, but excluding workers compensation
liabilities to the extent provided in Section
5.15 of the Participation Agreement;
(ix) accruals for royalties payable in
accordance with terms of royalty agreements;
legal and professional fees for services
rendered; insurance premiums (excluding workers'
compensation and general and products liability
coverages); policy and warranty claims and
product and service liabilities, but excluding
pre-Closing products liability or general
liability occurrences (except to the extent, but
not in excess of, any amount reserved for and
reflected on Harsco's Final Closing Balance
Sheet); and miscellaneous expenses;
(x) all liabilities and obligations
associated with any Harsco Environmental
Liability Event; and
PAGE 19
(xi) obligations under Harsco Contracts
remaining unperformed on the Closing Date.
The Harsco Liabilities shall not include any Excluded
Liability.
"Harsco Qualifying Remedial Expenditure"
means any Remedial Expenditure to the extent arising
out of any Harsco Environmental Liability Event.
"Hazardous Substance" means any material,
substance or waste that poses or causes, or is alleged
to pose or cause, any damage to property or personal
injury, including death, or any threat to the
environment, including without limitation those
substances defined, listed, designated, or classified
as hazardous, toxic, radioactive, or dangerous or
otherwise regulated or governed under any
Environmental Requirements, including without
limitation any hazardous substance for purposes of
CERCLA, any hazardous waste for purposes of RCRA, any
petroleum product or by-product, crude oil or any
fraction thereof, natural gas, natural gas liquids,
liquefied natural gas, synthetic gas usable as fuel,
polychlorinated biphenyls, asbestos, heat, noise,
microwave, odor, radioactive material or any substance
that has been identified as a carcinogen or
reproductive toxin under the Safe Drinking Water and
Toxic Enforcement Act of 1986 of the State of
California.
"Inactive Contract" means those Contracts
which provide for the delivery of products or the
rendering of contract-defined deliverable services,
excluding warranties, by a Parent and with respect to
which the final product has been delivered and the
final service has been rendered prior to the Closing
Date.
"Income Taxes" means Taxes measured by or
based on income, and franchise, capital stock or net
worth Taxes.
"Indemnified Parties" has the meaning set
forth in Section 6.1 of the Participation Agreement.
"Initial Capital Contribution" of each of
FMC and Harsco L.P. means the aggregate transfers by
or on behalf of FMC or Harsco L.P., as applicable,
pursuant to Sections 2.1.3, 2.1.4 and 2.1.5 of the
Participation Agreement, as adjusted pursuant to
Section 2.3.3 thereof.
PAGE 20
"Intellectual Property Agreements" means the
agreements to be entered into between FMC and the
Partnership and between Harsco and the Partnership on
or prior to the Closing Date, substantially in the
forms of Exhibits F-1 and F-2 to the Participation
Agreement.
"IRS" means the U.S. Internal Revenue
Service.
"Knowledge" means the actual knowledge of
the individuals listed on Schedule C.1 hereto in the
case of FMC and the individuals listed on Schedule C.2
hereto in the case of Harsco, in each case after
reasonable investigation unless otherwise expressly
specified.
"Lease Agreement" means the agreement to be
entered into between FMC and the Partnership on or
prior to the Closing Date, substantially in the form
of Exhibit G to the Participation Agreement.
"Leased Property" has the meaning set forth
in Section 4.8.2 of the Participation Agreement.
"Liabilities" means FMC Liabilities or
Harsco Liabilities.
"LIBOR" means the applicable London
Interbank Offered Rate as set forth in The Wall Street
Journal.
"Licensed Intellectual Property" means, with
respect to each Parent, Data Rights, Statutory Rights
and Marks used or intended for use, but not
exclusively, in its Defense Business that will be
licensed to the Partnership under the Intellectual
Property Agreements.
"Licensed Third Party Rights" means, as to
each Parent, copyrights and trade secrets and
confidential information and knowledge and letters
patent, utility models, inventor's certificates,
registered copyrights, registered mask works and
applications therefor under which such Parent has been
granted license or other rights by a third party.
"Lien" means any lien, mortgage,
encumbrance, pledge, charge, lease restriction,
easement, servitude, right of others or security
interest of any kind, including any thereof arising
PAGE 21
under conditional sales or other title retention
agreements.
"Limited Non-Exclusive Licenses" means the
licenses to be entered into between FMC and the
Partnership and between Harsco and the Partnership on
or prior to the Closing Date.
"Limited Partner" has the meaning set forth
in the preface to the Partnership Agreement.
"Limited Partner Allocation" shall be an
amount equal to $13,300,000 in the first Fiscal Year
of the Partnership, and in each subsequent Fiscal Year
of the Partnership shall equal the amount agreed to by
FMC and the Limited Partner (so long as the Limited
Partner's Share Percentage is at least 20%) or any
other third party assignee from the Limited Partner
who was assigned a Share Percentage in excess of 20%
of the aggregate Share Percentages (which agreement
shall not require the consent or approval of any other
partner or holder of an interest of the Partnership)
prior to the beginning of such Fiscal Year. If no
such agreement is reached, then the Limited Partner
Allocation shall equal the prior year's Limited
Partner Allocation (as the same may have previously
been adjusted by agreement and/or for inflation), as
further adjusted for inflation by the percentage
increase (or decrease) in the Producer Price Index for
Finished Goods (unadjusted index) for such prior
Fiscal Year.
"Limited Partner Allocation Late Payment
Interest" has the meaning set forth in Section 6.1 of
the Partnership Agreement.
"Loss" means any loss, liability, claim,
damage or expense (including reasonable legal fees and
expenses).
"Major ASD Contract" means any New Contract
(excluding any engineering contract) that provides for
the production of products which are of the type
currently produced by FMC's Armament Systems Division
and that has a Contract Price, after giving effect to
the exercise of any options which are exercised under
such New Contract, of at least $50,000,000.
"Major Contract" means any Major ASD
Contract, Major GSD/CSD Contract or Major SPD
Contract.
PAGE 22
"Major GSD/CSD Contract" means any New
Contract (excluding any engineering contract) that
provides for the production of products which are of
the type currently produced by FMC's Ground Systems
Division or the Harsco Defense Business and that has a
Contract Price, after giving effect to the exercise of
any options which are exercised under such New
Contract, of at least $50,000,000.
"Major SPD Contract" means any New Contract
(excluding any engineering contract) that provides for
the production of products which are of the type
currently produced by FMC's Steel Products Division
and that has a Contract Price, after giving effect to
the exercise of any options which are exercised under
such New Contract, of at least $50,000,000.
"Management Services Agreement" means the
agreement to be entered into between FMC and the
Partnership on or prior to the Closing Date
substantially in the form of Exhibit H to the
Participation Agreement.
"Managing General Partner" has the meaning
set forth in the preface to the Partnership Agreement.
"Marks" means, with respect to each Parent,
registered and unregistered trademarks, tradenames,
service marks, trade dress, logos and applications for
registration thereof, all right, title and interest in
which is owned by such Parent as of the Closing Date.
"Material Adverse Effect" means: (a) with
respect to either Parent's Defense Business, a
material adverse effect on (i) the financial
condition, results of operation, properties, business
or prospects of such Parent's Defense Business, (ii)
the Partnership's ability to conduct such Parent's
Defense Business or (iii) the ability of such Parent
or any of its Affiliates to perform any of its
material obligations under any Operative Document; and
(b) with respect to the Partnership, a material
adverse effect on (i) the financial condition, results
of operation, properties, business or prospects of the
Partnership, (ii) the Partnership's ability to conduct
its business or (iii) the ability of the Partnership
to perform any of its material obligations under any
Operative Document.
"Modified Taxable Income" has the meaning
set forth in Section 6.5(a) of the Partnership
Agreement.
PAGE 23
"Net Book Value" means, with respect to each
Parent, the Book Value of its Assets which are of the
types reflected on the Pro Forma Balance Sheet minus
the Book Value of its Liabilities which are of the
types reflected on the Pro Forma Balance Sheet.
"Net Working Capital" means the excess of
current assets over current liabilities.
"New Contract" means (i) any contract that
was entered into by the Partnership after the Closing
Date and (ii) that portion of any Existing Contract
which relates to any increase in the quantity of
deliverables subsequent to the Closing beyond the
quantity (including priced options thereunder)
formerly specified in such Existing Contract, which
increase involves an increase in the contract price of
at least $50 million.
"Nonqualified Plan" means a plan described
in Section 3(34) or 3(35) of ERISA that is not
qualified under Section 401(a) of the Code.
"Normative Fee" has the meaning specified in
Section 5.22.4.4 of the Participation Agreement.
"Notice of Arbitration" has the meaning set
forth in Section 3.12 of the Partnership Agreement.
"Novation Agreement" means the novation
agreement, substantially consistent with the standard
form of novation agreement set forth in the Federal
Acquisition Regulation, 48 C.F.R. 42.12, among FMC,
Harsco, the Partnership and the U.S. Government.
"Operative Documents" means the Assignments,
the Assumption Agreements, the Consents, the
Intellectual Property Agreements, the Lease Agreement,
the Sublease and Assignment of Option to Purchase
Aiken, South Carolina Facilities, the Limited Non-
Exclusive Licenses, the Management Services Agreement,
the Novation Agreement, the Partnership Agreement, the
Registration Rights Agreement, the Participation
Agreement and any other agreements that the parties
mutually agree in writing to treat as Operative
Documents.
"Owned Property" has the meaning set forth
in Section 4.8.2 of the Participation Agreement.
PAGE 24
"Parent" means FMC or Harsco, as appropriate
given the context of the Participation Agreement. For
purposes of the Operative Documents, FMC shall be
deemed to be the Parent of the FMC Partner.
"Participation Agreement" means the
Participation Agreement dated as of January 1, 1994 by
and between FMC, Harsco, Harsco L.P. and the
Partnership as amended from time to time in accordance
with its terms.
"Partner" means FMC (in the case of FMC) or
Harsco L.P. (in the case of Harsco). For purposes of
the Operative Documents, FMC shall be deemed to be the
Partner of FMC.
"Partners" means FMC and Harsco L.P.
"Partnership" means United Defense, L.P.,
the Delaware limited partnership formed in accordance
with the Partnership Agreement.
"Partnership 401(k) Plan" has the meaning
set forth in Section 5.9.6 of the Participation
Agreement.
"Partnership Agreement" means the Delaware
limited partnership agreement to be entered into by
and among the Partners and the Partnership on or
before the Closing Date and substantially in the form
of Exhibit I of the Participation Agreement.
"Partnership Benefit Plans" has the meaning
set forth in Section 5.9.3 of the Participation
Agreement.
"Partnership Master Trust" means the
Partnership Master Trust described in Section 5.9.6 of
the Participation Agreement.
"Partnership Nonunion Pension Plan" has the
meaning set forth in Section 5.9.3 of the
Participation Agreement.
"PBGC" means the Pension Benefit Guaranty
Corporation.
"Permitted Capital Investments" means
capital investments for (i) new equipment and
equipment upgrades and replacements for existing lines
of business; (ii) plant and equipment for existing or
new programs at or adjoining existing Partnership
PAGE 25
facilities that are within the Partnership's Scope of
Activity or carried on by SPD not primarily for
commercial purposes; and (iii) research and
development for programs within the Partnership's
Scope of Activity.
"Permitted Liens" means (a) the rights and
interests of the Partnership, any Parent or its
Affiliates as provided in the Operative Documents, (b)
Liens for Taxes either not yet due or being contested
in good faith and by appropriate proceedings and (c)
materialmen's, mechanics', workers', repairmen's,
employees' or other Liens arising in the ordinary
course of business for amounts either not yet due or
being contested in good faith and by appropriate
proceedings, so long as such proceedings shall not
involve any substantial danger of the sale, forfeiture
or loss of any part of the relevant asset, title
thereto or any interest therein and shall not
interfere with the use or disposition thereof.
"Person" means any individual, corporation,
partnership, joint venture, association, joint-stock
company, trust, unincorporated organization or
Governmental Authority.
"Plan Participant" means, as the context
requires, (a) a Transferred Employee who, on the
Closing Date, participated under the terms of on the
applicable plan, (b) a former employee who terminated
employment before the Closing Date but as of the
Closing Date had not incurred a break in service
sufficient under the terms of the applicable plan to
eliminate such former employee's right to prior
service credit with respect to such plan or (c) a
former employee (including the spouse or other
dependent of a former employee) who terminated
employment before the Closing Date but as of the
Closing Date had rights to a benefit under the terms
of the applicable plan; provided, however, that, in
the case of (b) or (c), in order to be a Plan
Participant such former employee, when terminating
employment with FMC or Harsco, must have been employed
in the Defense Business of FMC or Harsco.
"Postretirement Benefit Plan" means an
employee welfare benefit plan as defined in Section
3(1) of ERISA that provides benefits to retired
employees and their dependents.
PAGE 26
"Preliminary Closing Balance Sheet" has the
meaning set forth in Section 2.3.1 of the
Participation Agreement.
"Principal Accounting Procedures" means
those accounting procedures described in Section 5.9
of the Partnership Agreement.
"Principal Office" of the Partnership has
the meaning set forth in Section 2.1(c) of the
Partnership Agreement.
"Private Actions" means all authorizations,
consents, approvals, waivers, exceptions, variances,
franchises, permissions, permits and licenses of (a)
Persons other than Governmental Authorities and (b)
Governmental Authorities acting in private capacities.
"Profits" or "Losses" has the meaning set
forth in Section 4.2(a) of the Partnership Agreement.
"Pro Forma Balance Sheet" has the meaning
set forth in Section 4.14 of the Participation
Agreement.
"Qualified Pension Plan" means a defined
benefit plan as described in Section 3(35) of ERISA
that is qualified under Section 401(a) of the Code.
"Qualifying Remedial Expenditure" means any
Remedial Expenditure to the extent arising out of any
FMC Environmental Liability Event or Harsco
Environmental Liability Event, as the case may be.
"RCRA" means the Resource Conservation and
Recovery Act, 42 U.S.C. 6901 et seq.
"Real Property" means the Owned Property and
the Leased Property.
"Realization" includes, with respect to each
Major Contract, the Remedial Expenditures amount
included in the forward pricing rate used by the
Partnership to establish the contract price as
adjusted as provided in Section 5.22.4.4 of the
Participation Agreement and, with respect to each
production contract other than a Major Contract and
each other contract, regardless of amount, the
Remedial Expenditures amount included in the forward
pricing rate used by the Partnership to establish the
contract price. In addition, any amount reflected as
a credit to FMC or Harsco in accordance with Section
5.22.4.2 of the Participation Agreement (including
PAGE 27
under clause (i) therein, but excluding clauses (vii)
and (viii) therein) shall be deemed to be a
Realization.
"Realize" means to obtain a Realization.
"Realized Remedial Expenditure" means any
Remedial Expenditure (i) which has been (or is deemed
to have been under Section 5.22.4 of the Participation
Agreement) Realized pursuant to customer contracts or
any other source (it being understood that Remedial
Expenditures may be offset by such Realizations for
purposes of the Operative Documents, irrespective of
whether or not such Remedial Expenditures relate to
the circumstances giving rise to such Realizations),
(ii) as to which any related rebuttable presumption
under Section 5.22.2.2 or 5.22.2.3 has been rebutted
or (iii) which has been charged against the
environmental reserves referred to in clause (i) of
Section 5.22.4.2 (it being understood that Remedial
Expenditures may be offset by such reserves for
purposes of the Operative Documents, irrespective of
whether or not such Remedial Expenditures relate to
the historical basis for the creation of such
reserves). The Parents acknowledge that the
Partnership may have Realizations prior to such time
as the Partnership incurs the related Remedial
Expenditures. FMC Realized Remedial Expenditure and
Harsco Realized Remedial Expenditure have corollary
meanings.
"Reallocated Loss Account" means the account
into which Losses, which, but for the application of
Section 4.6(a) of the Partnership Agreement, would
have been allocated to the Limited Partner.
"Reallocated Loss Amount" means the quotient
of (i) the amount of Losses allocated to the Managing
General Partner's Reallocated Loss Account pursuant to
Section 4.6(a) of the Partnership Agreement divided by
(ii) 1 minus the Managing General Partner's Share
Percentage. The Reallocated Loss Amount shall be as
adjusted from time to time as provided in Section
4.6(b) of the Partnership Agreement.
"Records" has the meaning set forth in
Section 10.6 of the Partnership Agreement.
"Recovery Items" has the meaning set forth
in Section 6.7(d) of the Participation Agreement.
PAGE 28
"Registration Rights Agreement" means the
agreement between FMC and Harsco L.P. to be entered
into on or before the Closing Date substantially in
the form of Exhibit J of the Participation Agreement.
"Related Party Transaction" means any
transaction between the Partnership and any Partner or
any Affiliate of any Partner.
"Release" means "release" as such term is
defined for purposes of CERCLA.
"Remedial Costs Account" has the meaning set
forth in Section 5.22.4.2 of the Participation
Agreement.
"Remedial Expenditure" means any expenditure
by the Partnership with respect to any Environmental
Liability Event either for (i) the treatment,
containment or removal of contaminated soil or
groundwater or the disposal of removed material
(including such activity as conducted in connection
with a corrective action pursuant to RCRA or a removal
or remedial action pursuant to CERCLA), (ii)
corrective or remedial action to cure a failure by
either Parent or the Partnership, with respect to its
Defense Business, prior to the Closing Date, to comply
with applicable Environmental Requirements (as such
Environmental Requirements are constituted prior to
the Closing Date) and any governmental fines,
penalties or other sanctions, whether civil or
criminal, to the extent arising from such failure or
(iii) legal and administrative proceedings against
Persons other than either Parent regarding the nature
and extent of the Partnership's or such other Persons'
legal and financial responsibility for matters
described in (i) and (ii) herein.
"Restricted Contracts" has the meaning set
forth in Section 5.11 of the Participation Agreement.
"Rules" has the meaning set forth in Section
3.12 of the Partnership Agreement.
"Sale Notice" has the meaning set forth in
Section 7.1(b) of the Partnership Agreement.
"Santa Clara Properties" means the following
properties owned by FMC in Santa Clara County,
California, used by and recorded on the financial
statements of the FMC Defense Business, and leased by
PAGE 29
FMC to the Partnership pursuant to the terms of the
Lease Agreement:
(i) 333 W. Brokaw Road, Santa Clara,
California;
(ii) 328 W. Brokaw Road, Santa Clara,
California;
(iii) 333 W. Julian Street, San Jose,
California (except for that certain
parcel thereof that is leased from
Southern Pacific Railway and not owned
by FMC); and
(iv) 1107, 1115 and 1125 Coleman Avenue, San
Jose, California.
"Scope of Activity" has the meaning set
forth in Section 2.2 of the Partnership Agreement.
"SEC" means the U.S. Securities and Exchange
Commission.
"Settle" has the meaning set forth in
Section 6.6 of the Participation Agreement.
"Share Percentage" means 60% as to FMC and
40% as to Harsco L.P., as adjusted from time to time
pursuant to Section 4.5 of the Partnership Agreement.
"Significant Event" has the meaning set
forth in Section 4.1(d) of the Partnership Agreement.
"Signing Date" means the date on which the
Participation Agreement is executed.
"Slow-Moving Inventory" means the inventory
set forth on Schedule 5.16 to the Participation
Agreement. This definition excludes inventory charged
or allocated to cost-type contracts. Inventory
charged or allocated to cost-type contracts is owned
by the Government and therefore outside the scope of
Slow-Moving Inventory. The gross level of Slow-Moving
Inventory will be reduced but not completely offset by
reserves on the Preliminary Closing Balance Sheet.
"SPD" means the Steel Products Division of FMC.
"Statutory Rights" means, with respect to
each Parent, (i) letters patent, utility models,
inventor's certificates, registered copyrights,
registered mask works, (ii) applications for any of
the foregoing and rights which may issue on such
PAGE 30
applications and (iii) any reissues, continuations,
continuations-in-part, extensions, divisions,
reexaminations or renewals of the foregoing, in which
such Parent owns all or a part of the right, title and
interest as of the Closing Date.
"Subsidiary" of any Person means a
corporation, partnership, company or other entity (a)
more than 50% of whose outstanding shares or
securities (representing the right to vote for the
election of directors or other managing authority) are
or (b) which does not have outstanding shares or
securities (as may be the case in a partnership, joint
venture or unincorporated association), but more than
50% of whose ownership interest representing the right
to make decisions for such other entity is, now or
hereafter owned or controlled, directly or indirectly,
by such Person; provided that such corporation,
partnership, company or other entity shall be deemed
to be a Subsidiary only so long as such ownership
exists.
"Target Net Asset Value" means (i) in the
case of FMC, $138,600,000, including $14,800,000 of
cash and (ii) in the case of Harsco L.P., $29,600,000,
including $5,200,000 of cash.
"Tax Benefits" has the meaning set forth in
Section 6.7(a) of the Participation Agreement.
"Taxes" means any and all governmental or
quasi-governmental fees (including license, filing and
registration fees), taxes (including income, gross
receipts, franchise, sales, use and property (real or
personal, tangible or intangible), interest
equalization and stamp taxes, assessments, levies,
imposts, duties, charges, withholdings or other taxes
of any kind or nature whatsoever, together with any
and all penalties, fines or interest thereon.
"Tax Matters Partner" has the meaning set
forth in Section 10.8 of the Partnership Agreement.
"Tax Rate" means an amount equal to the
maximum Federal marginal income tax rate applicable to
a corporation under Section 11 of the Code in effect
for the relevant Fiscal Year plus five percentage
points.
"Tentative Remedial Expenditure Realization"
or "TRER" means the Remedial Expenditure amount
determined in accordance with clause (ii) of Section
5.22.4.4 of the Participation Agreement.
PAGE 31
"Third Party Claim" has the meaning set
forth in Section 6.5 of the Participation Agreement.
"Transfer Taxes" means any sales, use,
recording, deed, value added, stamp, documentary or
other transfer Taxes.
"Transferred Contract" means a contract
entered into by a Parent or an Affiliate thereof
transferred to the Partnership in accordance with the
Participation Agreement.
"Transferred Employee" has the meaning set
forth in Section 5.9.1 of the Participation Agreement.
"Transferred Intellectual Property Rights"
means, with respect to each Parent, Data Rights,
Statutory Rights and Marks (together with goodwill
associated therewith) exclusively used or intended for
exclusive use in its Defense Business, along with all
income, royalties, damages and payments due or payable
at the Closing or thereafter (including, without
limitation, damages and payments for past and future
infringements or misappropriations thereof), and the
right to sue for damages and injunctive relief.
"Transferring Partner" has the meaning set
forth in Section 5.11 of the Participation Agreement.
"Transition Benefit Plans" has the meaning
set forth in Section 5.9.2 of the Participation
Agreement.
"Treasury Regulations" means the income tax
regulations promulgated under the Code and effective
as of December 31, 1993.
"UD" means United Defense, L.P., the
Delaware limited partnership formed in accordance with
the Partnership Agreement.
"Unrealized Remedial Expenditure" means any
Qualifying Remedial Expenditure which is not a
Realized Remedial Expenditure. FMC Unrealized
Remedial Expenditure and Harsco Unrealized Remedial
Expenditure have corollary meanings.
"VLS Receivables" means any unbilled account
receivable relating to FMC's VLS contract included in
the FMC Assets which will not become due until after
the Closing.
PAGE 32
Schedule A
Excluded Assets
FMC Excluded Assets:
Rights to damages or other recoveries arising
from the following litigation: FMC Corporation v.
The Goodyear Tire & Rubber Company (N.D. Ala.,
Eastern Div., Civil Action No. CV-90-H-01018E),
subject to Section 5.23 of the Participation
Agreement; ASBCA Case No. 39546; and FMC
Corporation v. Liberty Mutual Insurance Co. et
al., subject to Section 6.2 of the Participation
Agreement.
Cash and cash equivalents in excess of
$14,800,000
The Minneapolis Tech Center
Any rights in the trade name or trademark "FMC,"
subject to the Limited License Agreement, dated
the date hereof, between FMC and the Partnership
The Santa Clara Properties (except as the Lease
Agreement provides for their lease to the
Partnership)
Harsco Excluded Assets:
Cash and cash equivalents in excess of $5,200,000
Any rights in the trade name or trademark
"Harsco" or, subject to the Limited License
Agreement, dated the date hereof, between Harsco
and the Partnership, "BMY"
The contracts set forth in Article I of the Non-
Transfer and Indemnification Agreement
Common Excluded Assets:
Intellectual property rights (including patents,
marks, know-how and rights and licenses thereto
and interests therein), other than Transferred
Intellectual Property Rights, to the extent, if
any, applicable to The Field (as defined in the
Intellectual Property Agreements).
PAGE 33
Credits and claims for refunds with respect to
Taxes related to periods prior to the Closing
Policies, manuals, financial statements and other
material not relating exclusively to the
contributed Assets or Business
Items prepaid or for which charges were deferred,
to the extent the benefit of such items will not
accrue to the Partnership
Insurance policies and contracts and claims
thereunder relating to periods prior to Closing
(subject to Article VI of the Participation
Agreement)
Licenses, permits and other assets not
transferable by law
Intra-company accounts receivable and payable
Claims against and recoveries from third parties
arising out of acts or omissions (in the case of
Active Contracts, only if a claim has been
asserted in writing) prior to the Closing except
to the extent included in the Final Closing
Balance Sheets or as may be provided otherwise in
any of the Operative Documents
Any receivable referred to in Section 5.14 of the
Participation Agreement
PAGE 34
Schedule B
Defense Affiliates and Defense Subsidiaries;
Defense Affiliate Stock and Equity Interests Transferred by FMC
FMC
1. FMC-Nurol Savunma Sanayii A.S., a Turkish
corporation
Armored Vehicle Technologies Associated, a
partnership of FMC and General Dynamics Land
Systems, Inc.
G&F, a partnership of FMC and General Motors
Corporation
FMC Arabia Ltd., a Saudi Arabian limited
liability company
Harsco
1. Harsco Defense Holding, Inc.
PAGE 35
Schedule C.1
FMC
Robert N. Burt
Larry D. Brady
Arthur D. Lyons
William H. Schumann, III
Randy S. Ellis
Thomas W. Rabaut
David I. Kolovat
Eugene M. McCluskey
Robert L. Day
Francis A. Riddick, III
Robert N. Sankovich
Francis Raborn
Schedule C.2
Harsco
Malcolm W. Gambill
Derek C. Hathaway
Barrett W. Taussig
Paul C. Coppock
Leonard A. Campanaro
Warren A. Weisel
Salvatore D. Fazzolari
Richard C. Hawkins
Daniel J. Sharp
Richard E. Clemens
Stuart J. Levey
FMC
1. FMC-Nurol Savunma Sanayii A.S., a Turkish
corporation
Armored Vehicle Technologies Associated, a
partnership of FMC and General Dynamics Land
Systems, Inc.
G&F, a partnership of FMC and General Motors
Corporation
FMC Arabia Ltd., a Saudi Arabian limited
liability company
Harsco
1. Harsco Defense Holding, Inc.
PAGE 36
Schedule C.1
FMC
Robert N. Burt
Larry D. Brady
Arthur D. Lyons
William H. Schumann, III
Randy S. Ellis
Thomas W. Rabaut
David I. Kolovat
Eugene M. McCluskey
Robert L. Day
Francis A. Riddick, III
Robert N. Sankovich
Francis Raborn
Schedule C.2
Harsco
Malcolm W. Gambill
Derek C. Hathaway
Barrett W. Taussig
Paul C. Coppock
Leonard A. Campanaro
Warren A. Weisel
Salvatore D. Fazzolari
Richard C. Hawkins
Daniel J. Sharp
Richard E. Clemens
Stuart J. Levey
PAGE 0
DOCUMENT HEADER
DOCUMENT DESCRIPTION REGISTRATION RIGHTS AGREEMENT
DOCUMENT TYPE 2
COUNT 27
PAGE 1
Exhibit J
REGISTRATION RIGHTS AGREEMENT
among
FMC CORPORATION,
HARSCO DEFENSE HOLDING, INC.
and
UNITED DEFENSE, L.P.
Dated as of January 1, 1994
PAGE 2
REGISTRATION RIGHTS AGREEMENT
THIS AGREEMENT is made as of January 1,
1994, by and among FMC Corporation, a Delaware
corporation ("FMC"), Harsco Defense Holding, Inc.,
a Delaware corporation ("Harsco L.P.") and United
Defense, L.P., a Delaware limited partnership
("UD").
FMC and Harsco L.P. desire to form UD
pursuant to the terms of a Partnership Agreement,
dated as of the date hereof, by and among FMC,
Harsco L.P. and UD (the "Partnership Agreement").
The execution and delivery of this Agreement is a
condition to the obligations of FMC, Harsco
Corporation, a Delaware corporation ("Harsco") and
Harsco L.P. under the Participation Agreement
dated as of the date hereof (the "Participation
Agreement"), to which this Agreement is attached
as Exhibit J.
NOW, THEREFORE, in consideration of the
mutual covenants contained herein and other good
and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the
parties to this Agreement hereby agree as follows:
1. Certain Definitions.
Unless otherwise defined below,
capitalized terms used herein will have the
meanings set forth in Annex A to the Participation
Agreement.
"Demand Registration" has the meaning
set forth in Section 3(a).
"Included Securities" has the meaning
set forth in Section 3(a).
"IPO" has the meaning set forth in
Section 4(e).
"Net Public Price" has the meaning set
forth in Section 3(c).
"Piggyback Registration" has the meaning
set forth in Section 4(a).
PAGE 3
"Public Price" has the meaning set forth
in Section 3(c).
"Registrable Securities" means all
shares of UD's common stock, issued to FMC or
Harsco L.P. (i) upon the incorporation of UD
pursuant to Section 2 hereof and (ii) as a
dividend or other distribution with respect to or
in exchange for or in replacement of the shares
referenced in (i) above. As to any particular
Registrable Securities, such securities will cease
to be Registrable Securities when they have been
distributed to the public pursuant to an offering
registered under the Securities Act or sold to the
public through a broker, dealer or market maker in
compliance with Rule 144 or Rule 144A under the
Securities Act (or any similar rule then in
force). For purposes of this Agreement, a Person
will be deemed to be a holder of Registrable
Securities on any given date whenever such Person
has the right to acquire directly or indirectly
such Registrable Securities (upon conversion or
exercise in connection with a transfer of
securities or otherwise within six months of such
date, but disregarding any restrictions or
limitations upon the exercise of such right),
whether or not such acquisition has actually been
effected.
"Registration Expenses" has the meaning
set forth in Section 7(a).
"Requesting Party" has the meaning set
forth in Section 2(a).
"Securities Act" means the Securities
Act of 1933, as amended.
"Total Common Equity Value" has the
meaning set forth in Section 2(b).
2. Incorporation of UD.
(a) At any time after the eighteen-
month anniversary of the Closing Date, either FMC
or Harsco L.P. (the "Requesting Partner") may
request in a written notice to the non-requesting
Partner and UD that UD be incorporated or
organized as a corporation in the State of
Delaware. UD will thereafter make all filings
required and take all other reasonable steps to
effect such incorporation under
PAGE 4
the Delaware General Corporation Law; provided
that (i) such incorporation is subject to UD's
receipt of all required government approvals
(including any approval required by the Hart-Scott-
Rodino Antitrust Improvements Act of 1976, as
amended, but excluding any novation agreement that
is required between UD and the U.S. Government)
and any third-party consent which if not received
would have a Material Adverse Effect on UD, which
the parties hereto agree to use their reasonable
best efforts to obtain and (ii) the effectiveness
of such incorporation need not take place until
immediately prior to the effectiveness of a
registration statement (or, if required by the SEC
as a condition to such effectiveness, the day
prior to the anticipated effectiveness of such
registration statement) pursuant to a request for
registration under Section 3(a) below by a
Requesting Partner. Effective as of the date of
such incorporation, shares of common stock in the
new corporation will be issued to each of FMC and
Harsco L.P. in proportion to their respective
Share Percentages immediately prior to incorpora
tion.
(b) Upon the effectiveness of the
incorporation of UD, the parties will continue to
be governed, to the fullest extent possible (but
subject to the stockholders' agreement referred to
below), by the terms of the Participation
Agreement and all rights and obligations
thereunder (including those relating to indemnifi
cation) will remain in full force and effect.
Effective as of the date of such incorporation,
(i) the Limited Partner Allocation to be
distributed by UD in accordance with Section 6.1
of the Partnership Agreement shall be terminated
and (ii) the incorporated UD shall authorize and
issue to Harsco L.P. all of the shares of a series
of preferred stock having the terms outlined on
Annex A hereto and having an aggregate par value
determined by calculating the Capitalized Limited
Partner Allocation as of the date of issuance of
the preferred stock; provided that, for purposes
of determining the Earnings Multiple in connection
therewith, the "Total Common Equity Value" shall
be used in lieu of the Appraised Value, where
Total Common Equity Value equals the product of
(i) the gross public offering price per share of
the UD common stock being sold in the offering and
(ii) the number of shares of UD common stock
issued to the partners of UD upon its
incorporation pursuant to this Agreement. In
connection with the incorporation
PAGE 5
of UD, the parties hereto will, pursuant to
Section 3.1(a) of the Partnership Agreement,
negotiate in good faith to adopt an appropriate
certificate of incorporation and by-laws and to
enter into (i) all amendments to the Operative
Documents necessary to effect the conversion of UD
from a partnership to a corporation and otherwise
to give effect to the provisions contemplated by
the Operative Documents after such incorporation
and (ii) a stockholders' agreement having the
terms outlined on Annex B hereto. In addition,
the actions contemplated by Section 7.3 of the
Partnership Agreement will be taken upon
incorporation of UD.
3. Demand Registrations.
(a) Requests for Registration. Each
Partner may request a total of two registrations
under the Securities Act, in which UD will pay all
Registration Expenses, of all or a part of its
Registrable Securities on Form S-1 or other form
permitted by the rules of the SEC, to be effective
at any time after the twenty-five month
anniversary of the Closing Date, upon at least 90
days' (180 days' in the case of an initial public
offering) prior notice; provided, that any such
request must be in writing and delivered to UD and
must specify such number of Registrable Securities
as is reasonably anticipated by the Requesting
Partner to yield a minimum aggregate price to
public of $50,000,000, unless such request relates
to all of the Registrable Securities then held by
the Requesting Partner. Within five (5) Business
Days after receipt of such request, UD will give
written notice of such requested registration to
all other holders of Registrable Securities. UD
will include in such registration (i) the number
of Registrable Securities requested to be included
by the Requesting Partner (the "Included
Securities") and (ii) that number of Registrable
Securities, held by other holders who have
delivered to UD (within ten (10) Business Days
after receipt of UD's notice) a written request
for inclusion, which the lead managing underwriter
advises UD in writing does not exceed the number
that can be sold in an orderly manner in such
offering within a price range acceptable to the
Requesting Partner. A registration requested
pursuant to this Section 3(a) is referred to
herein as a "Demand Registration," and the
Registrable Securities
PAGE 6
registered thereby will be offered and sold to the
public in an underwritten offering.
(b) Selection of Underwriters. At the
time of requesting a Demand Registration, the
Requesting Partner will select the lead managing
underwriter of such Demand Registration from among
the following three investment banking firms: (1)
Morgan Stanley & Co. Incorporated, (2) Salomon
Brothers Inc and (3) Goldman, Sachs & Co. UD may
then select one or two nationally recognized
investment banking firms to act as co-manager of
such Demand Registration.
(c) Determination of Public Price. In
connection with any Demand Registration by Harsco
L.P., and prior to the filing of any registration
statement, UD will select a nationally recognized
investment banking firm from among the co-managers
selected by UD which, together with the lead
managing underwriter, will promptly select a third
nationally recognized investment banking firm.
Each of the three firms will provide to UD, within
thirty (30) days of its engagement, a good faith
estimate of the initial public market voting
listed common equity offering value of the
Included Securities (or, if applicable, the
partnership interests that are intended to be
Included Securities). The three estimates will be
averaged, and the estimate that deviates from the
average by the greatest amount will be ignored,
and the average of the two remaining values will
be the "Public Price." The Public Price less the
actual proposed underwriting discount (which shall
be comparable to that charged by the proposed
managing underwriter in similar offerings) will be
the "Net Public Price."
(d) Right of First Refusal.
Notwithstanding the foregoing, FMC (or any of its
Affiliates) may, in its discretion at any time
after Harsco L.P. has given notice of any of its
Demand Registrations but before the filing of the
registration statement relating to such Demand
Registration with the SEC, purchase all of the
Included Securities (or, in the event that UD is
not yet a corporation, then all of the partnership
interests to be included in the public offering to
which such Demand Registration applies) pursuant
to such Demand Registration at a purchase price in
cash equal to the Net Public Price; provided,
however,
PAGE 7
that FMC (or any of its Affiliates) shall not be
entitled to purchase any such Included Securities
(or corresponding partnership interests) if,
within three (3) Business Days after receipt of
notice from FMC (or one of its Affiliates) of its
intent to exercise its right of first refusal
pursuant to this sentence, Harsco L.P. withdraws
its request for Demand Registration. In addition,
if a registration statement is filed pursuant to a
Demand Registration initiated by Harsco L.P. and
Harsco L.P. intends to sell the Included
Securities for an aggregate price (net of
underwriting commissions) equal to less than 90%
of the Net Public Price, Harsco L.P. will so
promptly notify FMC and FMC will have the right to
purchase, within two (2) Business Days after
receiving such notice, all of the Included
Securities for an aggregate price in cash equal to
that set forth in such notice. In the event that
FMC (or any of its Affiliates) exercises its right
of first refusal to purchase, and does so
purchase, Included Securities of Harsco L.P.
pursuant to this Section 3(d), UD will pay all
Registration Expenses applicable to the Included
Securities, all reasonable expenses customarily
paid out of the underwriter's discount, with such
reasonable expenses not to exceed $100,000 and any
fees of underwriters which Harsco L.P. is
obligated to pay, not to exceed $250,000.
(e) Restrictions on Demand
Registrations. UD may postpone for up to three
months the filing or the effectiveness of a
registration statement for the Demand Registration
if UD determines in good faith that such filing or
effectiveness of a registration statement (i)
would have a material adverse effect on any
current proposal or plan by UD or any of its
Subsidiaries to engage in any acquisition of
assets (other than in the ordinary course of
business), any merger, consolidation, tender offer
or similar material transaction, any financing or
any other material transaction or (ii) would
require public disclosure of information, the
public disclosure of which would materially and
adversely affect UD's business or financial
position; provided that in such event, the
Requesting Partner will be entitled to withdraw
its request for such Demand Registration and, if
such request is withdrawn, such Demand
Registration will not count as a permitted Demand
Registration hereunder and UD will pay all
Registration Expenses in connection with such
withdrawn registration. In the event that the
PAGE 8
Requesting Partner withdraws its request for a
Demand Registration other than as provided in the
foregoing sentence, such Requesting Partner may
elect either to treat such withdrawn registration
as a permitted Demand Registration or to pay all
Registration Expenses and other expenses
(including any fees and expenses of underwriters)
in connection with such withdrawn registration.
(f) Other Registration Rights. Except
as provided in this Agreement, UD will not grant
to any Person the right to request UD to register
any equity securities of UD, or any securities
convertible or exchangeable into or exercisable
for such securities, without the prior written
consent of the holders of at least eighty percent
(80%) of the Registrable Securities; provided that
UD may grant rights to other Persons to request UD
to register any equity securities of UD, or any
securities convertible or exchangeable into or
exercisable for such securities, on a basis which
is pari passu with (or less favorable than) rights
given to holders of Registrable Securities
hereunder, including with respect to priorities
under Sections 3(a), 4(c) and 4(d), so long as it
complies with the provisions of the Shareholder
Agreement described in Section 4 of Annex A to
this Agreement and Section 3.1(g) of the
Partnership Agreement, whichever is applicable, or
in the event that UD issues such securities in a
transaction that does not require compliance with
any of such Sections.
4. Piggyback Registrations.
(a) Right to Piggyback. Whenever UD
proposes to register any of its equity securities
under the Securities Act (otherwise than on Form S-
4, Form S-8 or any successor form), including
pursuant to a Demand Registration by FMC or Harsco
L.P., UD will give prompt written notice (in any
event within three (3) Business Days after its
receipt of notice of any exercise of demand
registration rights other than under this Agreement)
to all holders of Registrable Securities of its
intention to effect such a registration (a
"Piggyback Registration") and, subject to the
provisions of Sections 4(c), 4(d) and 4(e) below,
will include in such registration all Registrable
Securities with respect to which UD has received
written requests for inclusion therein within
PAGE 9
ten (10) Business Days after the receipt of UD's
notice.
(b) Piggyback Expenses. The
Registration Expenses of the holders of
Registrable Securities will be paid by UD in all
Piggyback Registrations.
(c) Priority on Primary Registrations.
If a Piggyback Registration is an underwritten
primary registration on behalf of UD, and the lead
managing underwriter advises UD in writing that
the number of securities requested to be included
in such registration exceeds the number which can
be sold in an orderly manner in such offering
within a price range acceptable to UD, then UD
will include in such registration (i) first, the
securities UD proposes to sell, (ii) second (but
subject to Section 3(f)), the Registrable
Securities requested to be included in such
registration by FMC and Harsco L.P., pro rata on
the basis of the number of shares owned by each
and (iii) third, other securities requested to be
included in such registration, pro rata on the
basis of the number of shares owned by the holders
thereof.
(d) Priority on Secondary
Registrations. If a Piggyback Registration is an
underwritten secondary registration on behalf of
holders of UD's securities (including a holder of
Registrable Securities), and the managing
underwriter advises UD in writing that the number
of securities requested to be included in such
registration exceeds the number which can be sold
in an orderly manner in such offering within a
price range acceptable to the holders initially
requesting such registration, then UD will include
in such registration (i) first (but subject to
Section 3(f)), the Registrable Securities
requested to be included in such registration by
FMC and Harsco L.P., pro rata on the basis of the
number of shares owned by each and (ii) second,
other securities requested to be included in such
registration, pro rata on the basis of the number
of shares owned by the holders thereof.
(e) Other Registrations. If UD has
previously received a request for a Demand
Registration pursuant to Section 3 to file a
registration statement or has filed a registration
statement with respect to Registrable Securities
pursuant to Section 3, and if such request for
Demand Registration or previous registration has
not been
PAGE 10
withdrawn or abandoned, UD will not file or cause
to be effected any other registration of any of
its equity securities or securities convertible or
exchangeable into or exercisable for its equity
securities under the Securities Act (except on
Form S-4, Form S-8 or any successor form), whether
on its own behalf or at the request of any holder
or holders of such securities, until a period of
at least ninety (90) days (or, in the case of the
initial public offering by UD (the "IPO"), one
hundred eighty (180) days) has elapsed from the
effective date of such previous registration
unless the managing underwriters of the previous
registered public offering otherwise agree in
writing.
5. Holdback Agreements.
(a) Each holder of Registrable
Securities agrees not to effect any public sale or
distribution (including sales pursuant to Rule 144
or Rule 144A under the Securities Act) of equity
securities of UD, or any securities convertible
into or exchangeable or exercisable for such
securities, during the thirty (30) days prior to
and the 90-day period (or, in the case of the IPO,
180-day period) beginning on the effective date of
any underwritten Demand Registration or any
underwritten Piggyback Registration in which
Registrable Securities are (or could have been)
included (except as part of such underwritten
registration), unless the underwriters managing
the registered public offering otherwise agree.
(b) UD agrees not to effect any public
sale or distribution of its equity securities, or
any securities convertible into or exchangeable or
exercisable for such securities, during the thirty
(30) days prior to and during the 90-day period
(or, in the case of the IPO, 180-day period)
beginning on the effective date of any
underwritten Demand Registration or any
underwritten Piggyback Registration (except as
part of such underwritten registration or pursuant
to registrations on Form S-4, Form S-8 or any
successor form), unless the underwriters managing
the registered public offering otherwise agree.
6. Registration Procedures. Whenever
any Requesting Partner has requested that any
Registrable Securities be registered pursuant to
this Agreement, UD will, subject to the provisions
of this Agreement,
PAGE 11
use its reasonable best efforts to effect the
registration and the sale of such Registrable
Securities in accordance with the intended method
of disposition thereof, and pursuant thereto UD
will as expeditiously as reasonably possible:
(a) prepare and file with the SEC a
registration statement with respect to such
Registrable Securities and use its reasonable best
efforts to cause such registration statement to
become effective (provided that before filing a
registration statement or prospectus or any
amendments or supplements thereto, UD will furnish
to the counsel selected by the Requesting Partner
and the counsel selected by the lead managing
underwriter copies of all such documents proposed
to be filed, which documents will be subject to
the review of such counsel);
(b) (1) prepare and file with the SEC
such amendments and supplements to such
registration statement and the prospectus used in
connection therewith as may be necessary to keep
such registration statement effective for a period
of not more than nine months and (2) comply with
the provisions of the Securities Act with respect
to the disposition of all securities covered by
such registration statement during such period in
accordance with the intended methods of
disposition by the sellers thereof set forth in
such registration statement;
(c) furnish to each seller of
Registrable Securities such number of copies of
such registration statement, each amendment and
supplement thereto, the prospectus included in
such registration statement (including each
preliminary prospectus) and such other documents
as such seller may reasonably request in order to
facilitate the disposition of the Registrable
Securities owned by such seller;
(d) use its reasonable best efforts to
register or qualify such Registrable Securities
under such other securities or blue sky laws of
such jurisdictions as any seller reasonably
requests and do any and all other acts and things
which may be reasonably necessary or advisable to
enable such seller to consummate the disposition
in such jurisdictions of the Registrable
Securities owned by such seller (provided that UD
will not be required to (i) qualify generally to
do business in any
PAGE 12
jurisdiction where it would not otherwise be
required to qualify but for this Section,
(ii) subject itself to taxation in any such
jurisdiction or (iii) consent to general service
of process in any such jurisdiction);
(e) notify each seller of such
Registrable Securities, at any time when a
prospectus relating thereto is required to be
delivered under the Securities Act, of the
happening of any event as a result of which the
prospectus included in such registration statement
contains an untrue statement of a material fact or
omits any material fact necessary to make the
statements therein not misleading in light of the
circumstances then existing, and, at the request
of any such seller, UD will prepare and furnish to
such seller a reasonable number of copies of a
supplement or amendment to such prospectus so
that, as thereafter delivered to the purchasers of
such Registrable Securities, such prospectus will
not contain an untrue statement of a material fact
or omit to state any material fact necessary to
make the statements therein not misleading in
light of the circumstances then existing;
(f) use its reasonable best efforts to
cause all such Registrable Securities to be listed
on each securities exchange on which similar secu
rities issued by UD are then listed and, if not so
listed, to become listed on either (as UD
determines) a national securities exchange or the
NASD automated quotation system and, if listed on
the NASD automated quotation system, use its
reasonable best efforts to secure designation of
all such Registrable Securities covered by such
registration statement as a NASDAQ "national
market system security" or, failing that, to
secure NASDAQ authorization for such Registrable
Securities and, without limiting the generality of
the foregoing, to arrange for at least two market
makers to register as such with respect to such
Registrable Securities with the NASD;
(g) provide a transfer agent and
registrar for all such Registrable Securities not
later than the effective date of such registration
statement;
(h) enter into such customary
agreements (including underwriting agreements in
customary form consistent with this Agreement) and
take all such
PAGE 13
other actions customary for such offerings as the
Requesting Partner or the underwriters reasonably
request in order to expedite or facilitate the
disposition of the UD securities being sold
(including, without limitation, effecting a stock
split or a combination of shares);
(i) use its reasonable best efforts to
make available for inspection by any seller of
Registrable Securities, any underwriter
participating in any disposition pursuant to such
registration statement and any attorney retained
by any such seller or underwriter, an executed
copy of (i) an opinion of counsel for UD addressed
to such seller and such underwriter and (ii) a
"comfort" letter from the independent public
accountants who have reported on UD's financial
statements included or incorporated by reference
in such registration statement addressed to such
seller and such underwriter, covering
substantially the same matters with respect to
such registration statement, and the prospectus
included therein (including, in the case of the
accountants' comfort letter, with respect to
events subsequent to the date of such financial
statements), as are customarily covered in
opinions of issuer's counsel and in accountants'
comfort letters delivered to the underwriters in
underwritten public offerings of securities (and
dated the dates such opinions and comfort letters
are customarily dated) and, in the case of the
accountants' comfort letter, such other financial
matters, and in the case of the legal opinion,
such other legal matters, as such seller or such
underwriter may reasonably request;
(j) otherwise use its reasonable best
efforts to comply with all applicable rules and
regulations of the SEC, and make available to its
security holders, as soon as reasonably practica
ble, an earnings statement covering the period of
at least twelve months beginning with the first
day of UD's first full calendar quarter after the
effective date of the registration statement,
which earnings statement will satisfy the
provisions of Section 11(a) of the Securities Act
and Rule 158 thereunder;
PAGE 14
(k) permit any holder of Registrable
Securities which holder is or might be deemed to
be an underwriter or a controlling person of UD,
to participate in the preparation of such
registration or comparable statement;
(l) in the event of the issuance of any
stop order suspending the effectiveness of a
registration statement, or of any order suspending
or preventing the use of any related prospectus or
suspending the qualification of any common stock
included in such registration statement for sale
in any jurisdiction, use its reasonable best
efforts promptly to obtain the withdrawal of such
order; and
(m) use its reasonable best efforts to
cause such Registrable Securities covered by such
registration statement to be registered with or
approved by such other governmental agencies or
authorities as may be necessary to enable the
sellers thereof to consummate the disposition of
such Registrable Securities.
If any such registration or comparable
statement refers to any holder by name or
otherwise as the holder of any securities of UD
and if such holder is or might be deemed to be a
controlling person of UD, such holder will have
the right to require (i) the insertion therein of
language, in form and substance satisfactory to
such holder and presented to UD in writing, to the
effect that the holding by such holder of such
securities is not to be construed as a
recommendation by such holder of the investment
quality of UD's securities covered thereby and
that such holding does not imply that such holder
will assist in meeting any future financial
requirements of UD, or (ii) in the event that such
reference to such holder by name or otherwise is
not required by the Securities Act or any similar
Federal statute then in force, the deletion of the
reference to such holder; provided that with
respect to this clause (ii) such holder will
furnish to UD an opinion of counsel to such
effect, which opinion of counsel will be reason
ably satisfactory to UD. In the event of a Demand
Registration under this Agreement, the Requesting
Party will furnish any information, execute any
customary agreements (including a customary
underwriting agreement) and take any other action
in connection with such Demand Registration that
is
PAGE 15
reasonably requested by UD or the managing
underwriter of such Demand Registration.
7. Registration Expenses.
(a) All expenses incident to UD's
performance of or compliance with this Agreement,
including without limitation all registration,
qualification and filing fees, fees and expenses
of compliance with securities or blue sky laws,
printing expenses, messenger and delivery
expenses, fees and disbursements of counsel for UD
and of all independent certified public
accountants and of other Persons retained by UD
(all such expenses being herein called
"Registration Expenses"), will be borne by UD,
except as provided in this Agreement. In
addition, UD will pay its internal expenses
(including, without limitation, all salaries and
expenses of its officers and employees performing
legal or accounting duties), the expense of any
annual audit or quarterly review and the expenses
and fees for listing the securities to be
registered on each securities exchange on which
similar securities issued by UD are then listed or
on the NASD automated quotation system. Holders
of Registrable Securities included in any proposed
public offering will in any event pay all fees and
expenses of counsel and underwriters retained by
them, except as otherwise provided in Section 3(d)
above.
(b) Except as provided in Sections
3(a), 3(d), 3(e), 4(b) or 7(a) above, each holder
of securities included in any registration
hereunder will pay those Registration Expenses
allocable to the registration of such holder's
securities so included, and any Registration
Expenses not so allocable will be borne by all
sellers of securities included in such
registration in proportion to the aggregate
selling price of the securities to be so
registered.
8. Indemnification.
(a) UD agrees to indemnify, to the
extent permitted by law, each holder of
Registrable Securities included in a registration
under the terms of this Agreement, its officers
and directors and each Person who controls such
holder (within the meaning of Section 15 of the
Securities Act) and its officers and directors
against all losses, claims, damages, liabilities
and expenses arising out of or based on
PAGE 16
any untrue or alleged untrue statement of a
material fact contained in any registration
statement, prospectus or preliminary prospectus or
any amendment thereof or supplement thereto or any
omission or alleged omission of a material fact
required to be stated therein or necessary to make
the statements therein not misleading in light of
the circumstances then existing, and will
reimburse each such holder, its officers and
directors and each Person who controls such holder
(within the meaning of Section 15 of the
Securities Act) and its officers and directors for
any legal and other expenses reasonably incurred
by them in connection with investigating,
defending or settling any such losses, claims,
damages, liabilities and expenses, except insofar
as the same arise out of or are based on any
untrue statement or omission contained in any
information furnished in writing to UD by such
holder expressly for use therein or by such
holder's failure to deliver a copy of the
registration statement or prospectus or any
amendments or supplements thereto after UD has
furnished such holder with a sufficient number of
copies of the same. In connection with an under
written offering, UD will indemnify such underwrit
ers, their officers and directors and each Person
who controls such underwriters (within the meaning
of Section 15 of the Securities Act) and its
officers and directors to the same extent as
provided above with respect to the indemnification
of the holders of Registrable Securities.
(b) In connection with any registration
statement in which a holder of Registrable
Securities is participating, each such holder will
furnish to UD in writing such information and
affidavits as UD reasonably requests for use in
connection with any such registration statement or
prospectus and, to the extent permitted by law,
agrees to indemnify UD, its directors and officers
and each Person who controls UD (within the
meaning of Section 15 of the Securities Act) and
its officers and directors against any losses,
claims, damages, liabilities and expenses
resulting from any untrue or alleged untrue
statement of a material fact contained in the
registration statement, prospectus or preliminary
prospectus or any amendment thereof or supplement
thereto or any omission or alleged omission of a
material fact required to be stated therein or
necessary to make the statements therein not
misleading in light of the circumstances then
PAGE 17
existing, but only to the extent that such untrue
or alleged untrue statement or omission or alleged
omission is contained in any information or
affidavit so furnished in writing by such holder
expressly for use therein; provided that the
obligation to indemnify pursuant to this
Section 8(b) will be individual to each holder and
will be limited to the net amount of proceeds
received by such holder from the sale of
Registrable Securities pursuant to such
registration statement.
(c) Any Person entitled to
indemnification hereunder will (i) give prompt
written notice to the indemnifying party of any
claim with respect to which it seeks
indemnification and (ii) permit such indemnifying
party to assume the defense of such claim with
counsel reasonably satisfactory to the indemnified
party unless in such indemnified party's
reasonable judgment representation of both parties
by the same counsel would be inappropriate due to
actual or potential differing interests between
them. In any event, the indemnifying party will
not be subject to any liability for any settlement
made by the indemnified party without its consent
(which consent will not be unreasonably withheld).
An indemnifying party who is not entitled to, or
elects not to, assume the defense of a claim will
not be obligated to pay the fees and expenses of
more than one counsel for all parties indemnified
by such indemnifying party with respect to such
claim, unless in the reasonable judgment of any
indemnified party a conflict of interest may exist
between such indemnified party and any other of
such indemnified parties with respect to such
claim.
(d) The indemnification provided for
under this Agreement will remain in full force and
effect regardless of any investigation made by or
on behalf of the indemnified party or any officer,
director or controlling Person of such indemnified
party and will survive the transfer of securities.
UD also agrees to make such provisions, as are
reasonably requested by any indemnified party, for
contribution to such party in the event UD's
indemnification is unavailable for any reason.
9. Participation in Underwritten
Registrations. No Person may participate in any
registration hereunder which is underwritten
unless such Person (a) agrees to sell such
Person's
PAGE 18
securities on the basis provided in any
underwriting arrangements approved by the Person
or Persons initiating such registration and
(b) completes and executes all questionnaires,
powers of attorney, indemnities, customary
underwriting agreements and other documents
required under the terms of such underwriting
arrangements for persons in comparable positions.
10. Rule 144. For so long as either
Partner holds any Registrable Securities, UD will
use its reasonable best efforts to (i) make and
keep adequate current public information (within
the meaning of Rule 144(c) under the Securities
Act) with respect to UD available at all times
from and after ninety (90) days following the
effective date of the first registration under the
Securities Act filed by UD for an offering of
securities to the general public; (ii) file with
the SEC in a timely manner all reports and other
documents required of UD under the Securities Act
and the Securities Exchange Act of 1934 at any
time after it has become subject to such reporting
requirements; and (iii) upon request by either
Partner, deliver to such Partner a written
statement as to whether it has complied with the
requirements referred to in (i) and (ii) above.
11. Miscellaneous.
(a) No Inconsistent Agreements. UD
will not hereafter enter into any agreement with
respect to its securities which is inconsistent
with or violates the rights granted to the holders
of Registrable Securities in this Agreement.
(b) Remedies. Any Person having rights
under any provision of this Agreement will be
entitled to enforce such rights specifically to
recover damages caused by reason of any breach of
any provision of this Agreement and to exercise
all other rights granted by law. The parties
hereto agree and acknowledge that money damages
may not be an adequate remedy for any breach of
the provisions of this Agreement and that any
party may apply to any court of law or equity of
competent jurisdiction for specific performance
and for other injunctive relief in order to
enforce or prevent violation of the provisions of
this Agreement.
(c) Amendments and Waivers. No term or
provision of this Agreement may be amended or
waived unless in writing signed by the party
against which such amendment or waiver is sought
to be enforced, provided that Harsco L.P. will not
unreasonably withhold or delay its consent to any
such amendment or waiver proposed by FMC in order
to effect the
PAGE 19
granting of registration rights to a third party
in a transaction which complies with Section 3(f)
hereof.
(d) Successors and Assigns. All
covenants and agreements in this Agreement by or
on behalf of any of the parties hereto will bind
and inure to the benefit of the respective
successors and permitted assigns of the parties
hereto whether so expressed or not. In addition,
whether or not any express assignment has been
made, the provisions of this Agreement which are
for the benefit of purchasers or holders of
Registrable Securities are also for the benefit
of, and enforceable by, any permitted subsequent
holder of Registrable Securities. No sale of
Registrable Securities hereunder will relieve the
holder of its obligations under this Agreement or
under any other Operative Document. The right of
Harsco L.P. to request incorporation of UD
pursuant to Section 2(a) may not be assigned,
directly or indirectly, unless in connection with
the assignment of a Share Percentage in excess of
20%.
(e) Severability. Whenever possible,
each provision of this Agreement will be
interpreted in such manner as to be effective and
valid under applicable law, but if any provision
of this Agreement is held to be prohibited by or
invalid under applicable law, such provision will
be ineffective only to the extent of such
prohibition or invalidity, without invalidating
the remainder of this Agreement.
(f) Counterparts. This Agreement may
be executed simultaneously in two or more
counterparts, any one of which need not contain
the signatures of more than one party, but all
such counterparts taken together will constitute
one and the same Agreement.
(g) Descriptive Headings. The
descriptive headings of this Agreement are
inserted for convenience only and do not
constitute a part of this Agreement.
(h) Governing Law. This Agreement will
be governed by and construed in accordance with
the domestic laws of the State of Delaware,
without giving effect to any choice of law or
conflict of law provision or rule (whether of the
State of Delaware or any other jurisdiction) that
would cause the application of the laws of any
jurisdiction other than the State of Delaware. In
furtherance of the foregoing, the internal law of
the State of Delaware will control the
interpretation and construction of this Agreement,
even though under that jurisdiction's choice of
law or conflict of law analysis, the
PAGE 20
substantive law of some other jurisdiction would
ordinarily apply.
(i) Liability of UD. Any liability
under this Agreement of UD to Harsco L.P. or to
any underwriter or other Person retained by Harsco
L.P. or to any Person who controls any of the
foregoing (within the meaning of Section 15 of the
Securities Act) arising out of the transactions
contemplated hereby shall be the sole obligation
of UD and shall be explicitly nonrecourse to FMC,
Harsco, Harsco L.P. and the Affiliates (other than
UD) of each of them.
(j) Notices. Any notice provided for
in this Agreement will be in writing and will be
either personally delivered, or mailed first class
mail (postage prepaid) or sent by reputable
overnight courier service (charges prepaid) to UD,
FMC and Harsco L.P. at the addresses set forth
below and to any subsequent holder of UD
securities subject to this Agreement at such
address as indicated by UD's records, or at such
address or to the attention of such other person
as the recipient party has specified by prior
written notice to the sending party. Notices will
be deemed to have been given hereunder when
delivered personally, three (3) days after deposit
in the U.S. mail and one day after deposit with a
reputable overnight courier service.
To UD:
United Defense, L.P.
1525 Wilson Boulevard
Suite 700
Arlington, VA 22209
Attn: Chief Executive Officer
Telephone: (703) 312-6100
Telecopy: (703) 312-6111
PAGE 21
To FMC:
FMC Corporation
200 East Randolph Drive
Chicago, IL 60601
Attn: Corporate Secretary
Telephone: (312) 861-5923
Telecopy: (312) 861-7127
with a copy to:
Kirkland & Ellis
200 East Randolph Drive
Chicago, IL 60601
Attn: Michael G. Timmers
Telephone: (312) 861-2224
Telecopy: (312) 861-2200
To Harsco L.P.:
Harsco Defense Holding, Inc.
P.O. Box 8888
Camp Hill, PA 17011
Attn: President (with a copy to the
General Counsel)
Telephone: (717) 763-6406
Telecopy: (717) 763-6402
PAGE 22
IN WITNESS WHEREOF, the parties have
executed this Agreement as of the date first
written above.
UNITED DEFENSE, L.P.
By: FMC CORPORATION,
a Delaware
corporation,
Its Managing General
Partner
By____________________
Its___________________
FMC CORPORATION
By______________________________________
Its_____________________________________
HARSCO DEFENSE HOLDING,
INC.
By______________________________________
Its_____________________________________
PAGE 23
ANNEX A
Terms of Senior Preferred Stock
Designation
Senior Preferred Stock, par value $100 per
share
Dividend Rights
Equal to Limited Partner Allocation, subject
to annual adjustment
Payable quarterly
Cumulative, whether or not earned
Preferential: no dividends may be paid on
any other capital stock and no other
distribution may be made while any
accumulated dividend is unpaid
No stock may be acquired for value while any
accumulated dividend is unpaid and no capital
stock pari passu with or junior to the Senior
Preferred may be acquired for value while any
Senior Preferred is outstanding
Redemption
Redeemable at par plus accumulated dividends
Must be redeemed before any other capital
stock is redeemed or acquired for value
by issuer
At any time while shares of Senior Preferred
are outstanding, UD has the right, at its option,
to call for redemption any or all shares of the
Senior Preferred for an amount equal to their par
value plus accrued but unpaid dividends. Upon any
sale of shares of UD common stock by Harsco L.P.
to an unrelated third party (including the initial
public offering), UD shall be required to call for
redemption (for the amount set forth in the
preceding sentence) that number of shares of
Senior Preferred held by
PAGE 24
Harsco L.P. which bears the same proportion
to the total number of shares of Senior
Preferred issued to Harsco L.P. upon
incorporation of UD pursuant to the
Registration Rights Agreement as the number
of shares of common stock sold by Harsco L.P.
bears to the total number of shares of common
stock issued to Harsco L.P. upon such
incorporation
Voting Rights
If UD defaults in the timely and full payment
of any quarterly dividend on the Senior
Preferred Stock, then the amount of each of
the next three monthly payments of Annual
Fees to be paid to FMC under the Management
Services Agreement shall be reduced by an
amount equal to one twelfth of the difference
between the Annual Fee in effect and
$5,000,000, multiplied by the fraction, the
numerator of which is the amount of the
quarterly dividend paid and the denominator
of which is the amount of the dividend
payable
If UD (i) defaults in the timely and full
payment of a total of four quarterly
dividends on the Senior Preferred Stock and
(ii) has failed to reduce the monthly
payments of Annual Fees to FMC (as provided
for above) for each such default in the
timely and full payment of quarterly
dividends, then until all arrearages of all
accumulated dividends have been paid, the
Senior Preferred voting separately, as a
single class, shall have the sole right to
elect a majority of the full board of
directors of UD
When all arrearages are paid, the Senior
Preferred right to vote, if any, shall
terminate and the terms of directors elected
by the Senior Preferred shall expire
Any vacancy in the office of any director
elected by the Senior Preferred shall be
filled by the Senior Preferred
PAGE 25
Consents Required from Senior Preferred
Creation of any class of capital stock
ranking pari passu with or senior to the
Senior Preferred with respect to either
payment of dividends or distributions or in
the event of voluntary or involuntary
liquidation, dissolution or winding up
Amendment or alteration of or change in the
powers, preferences or special rights of the
Senior Preferred
Merger into or consolidation with any other
entity or disposition of all or substantially
all of UD's assets
Liquidation
Senior Preferred entitled to receive out of
assets of UD cash in an amount equal to par
value plus all accumulated dividends before
any payment or distribution shall be made on
any other capital stock
PAGE 26
ANNEX B
Terms of Stockholders' Agreement
1. Parties: UD, FMC and Harsco L.P.
*2. Board representation: FMC agrees to vote for
four Harsco L.P.-nominated directors if
Harsco L.P. has maintained a Share Percentage
of 40%. Upon any adjustment of the Share
Percentages, FMC agrees to vote for the
number of Harsco L.P.-nominated directors
closest to one-tenth of Harsco L.P.'s Share
Percentage, provided that if Harsco L.P.'s
Share Percentage is a whole number ending in
five, then FMC agrees to vote for the number
of such directors closest to one-tenth of
such Share Percentage rounded down to the
next lowest multiple of ten. For purposes of
this item 2, in the event that UD has been
incorporated, "Share Percentage" means
Harsco's percentage ownership of UD's
outstanding common stock. The provisions of
this item 2 shall be proportionately adjusted
in the event that the Board of UD has a
number of directors which is more or less
than ten.
*3. Corporate governance provisions substantially
the same as in Section 3.1 of the Partnership
Agreement (other than Section 3.1(k))
*4. Harsco L.P. to have preemptive right with re
spect to issuances of common stock for cash
(except employee stock options for up to 5%
of the total outstanding number of shares of
common stock of UD)
5. Prohibition on transfer of Harsco L.P. stock
except pursuant to underwritten registered
offering (subject to FMC right of first
refusal) as provided in Registration Rights
Agreement or private sale (subject to FMC
right of first refusal) as provided in
Partnership Agreement.
6. Put/call provisions in Harsco L.P. stock
substantially the same as in Section 7.2 of
the Partnership Agreement.
PAGE 27
7. UD assumes all of Partnership's rights and
obligations under the Partnership Agreement
and Participation Agreement, including
indemnification provisions.
* These terminate at such time as Harsco L.P.'s
ownership of UD common stock is less than 20%
of total UD outstanding common stock. Stock
issued or issuable pursuant to employee stock
options is ignored for purposes of
determining Harsco L.P.'s percentage
ownership of UD stock.
PAGE 0
DOCUMENT HEADER
DOCUMENT DESCRIPTION MANAGEMENT SERVICES AGREEMENT
DOCUMENT TYPE 2
COUNT 13
PAGE 1
Exhibit H
MANAGEMENT SERVICES AGREEMENT
between
FMC CORPORATION
and
UNITED DEFENSE, L.P.
Dated as of January 1, 1994
PAGE 2
MANAGEMENT SERVICES AGREEMENT dated as of
January 1, 1994 between FMC CORPORATION, a Delaware
corporation ("FMC"), and United Defense, L.P., a
Delaware limited partnership ("UDLP").
FMC and UDLP have entered into a
Participation Agreement dated as of January 1, 1994
(the "Participation Agreement") with Harsco
Corporation ("Harsco") and Harsco Defense Holding,
Inc., providing for, among other things, the
contribution to UDLP of certain assets and
liabilities related to each party's defense
business on the terms and subject to the conditions
set forth therein. The entering into of this
management services agreement is a condition to the
Closing of the transactions contemplated by the
Participation Agreement. All terms used but not
otherwise defined herein shall have the meanings
set forth for such terms in Annex A to the
Participation Agreement.
Accordingly, the parties hereto hereby
agree as follows:
SECTION 1. Definitions. For the
purposes of this Agreement, the following terms
shall have the following meanings:
"A Services" shall mean the services
described in the Schedule of A Services.
"Annual Fee" shall have the meaning set
forth in Section 4(b) below.
"B Services" shall mean the services
described in the Schedule of B Services.
"Business" shall mean the business of
UDLP.
"Loss" shall have the meaning set forth
in Section 8 below.
"Schedule of A Services" shall mean the
Schedule of Services attached hereto as Schedule A.
"Schedule of B Services" shall mean the
Schedule of Services attached hereto as Schedule B.
PAGE 3
"Services" shall mean the A Services and
the B Services.
SECTION 2. Services. FMC shall provide
to UDLP and its affiliates the Services for use in
connection with the Business, on the terms and
subject to the conditions set forth in this
Agreement.
SECTION 3. Use and Resale. The
Services shall be used only by UDLP and its
affiliates (including accountants and other
advisers to UDLP and its affiliates) solely in
connection with the operation of the Business and
UDLP shall not resell, license the use of or
otherwise permit the use by others of any Service
provided hereunder except in the ordinary course of
business consistent with past practice in the
conduct of the FMC Defense Business.
SECTION 4. Pricing; Invoicing; Payments.
(a) A Services. FMC shall provide the A
Services reasonably required and requested by UDLP
for the Fiscal Year ended December 31, 1994 to UDLP
at the prices set forth opposite such Services on
Schedule A hereto. The types and amounts of A
Services and the prices therefor in each Fiscal
Year subsequent to the Fiscal Year ended December
31, 1994 shall be agreed upon by FMC and UDLP prior
to the beginning of such Fiscal Year (with the
consent of Harsco as required under the Partnership
Agreement which consent shall not be unreasonably
withheld). UDLP shall pay for such services within
30 days of receipt of each periodic invoice.
Within 30 days following the submission of each
invoice, FMC shall provide to Harsco information
setting forth in reasonable detail the quantities,
prices and descriptions of A Services covered by
such invoice and such further supporting data as
may be reasonably requested by Harsco.
As soon as reasonably practicable and in
any event no later than August 1, 1994, FMC shall
cause its Employee Service Center to issue all
employee checks and all communications to employees
on forms bearing the name United Defense, L.P.
which make no reference to FMC, except as
contemplated by the Limited Non-Exclusive License,
dated as of the date hereof, by and between UDLP
and FMC.
PAGE 4
(b) B Services. FMC shall provide the B
Services to UDLP at an amount equal to $23,000,000
for the Fiscal Year ended December 31, 1994 (the
"Annual Fee"). The Annual Fee for such services in
each Fiscal Year subsequent to the Fiscal Year
ended December 31, 1994 shall be agreed upon by FMC
and UDLP prior to the beginning of such Fiscal Year
(with the written approval of Harsco). If no such
agreement is reached, then the Annual Fee for such
Fiscal Year shall be equal to the actual Annual Fee
for the prior Fiscal Year (as the same may have
previously been adjusted by agreement and/or for
inflation), as further adjusted for inflation by
the percentage increase (or decrease) in the
Producer Price Index for Finished Goods (unadjusted
index) for such prior Fiscal Year. UDLP shall pay
such amount based on simple monthly proration of
such Fiscal Year's Annual Fee prior to the tenth
day of each month. In the event that the B
Services are provided for a partial Fiscal Year,
such amount shall be paid based on simple monthly
or daily proration of such Fiscal Year's Annual
Fee; provided, however, that FMC shall be entitled
to the full twelve month Annual Fee with respect to
Fiscal Year 1994. The B Services do not include
services of the type described on the Schedule of B
Services which are provided by third parties on a
project or consulting basis.
(c) Quality of Services. Each of the A
Services and B Services provided to UDLP by FMC
hereunder will be provided in a prompt, efficient
and workmanlike manner with properly functioning
equipment, where applicable. FMC will take
reasonable steps to ensure that its employees and
agents who are authorized to provide such services
have been trained appropriately and are proficient
in the performance of their functions. No A
Services will be provided to UDLP except at its
request.
(d) Transitions With Respect to
Discontinued A Services. Commencing in 1994, UDLP
shall provide to Harsco, no later than November 1
of each year, a listing of the types of A Services
proposed to be purchased from FMC in the following
year, the unit prices of each of such A Services
and the amounts budgeted for the purchase of each
category of A Services to be procured from FMC in
such year. On or before December 1 of each year
Harsco shall either consent in writing to the
procurement of such services
PAGE 5
at the stated prices and budgeted annual
expenditures, or shall advise UDLP of Harsco's
withholding of such consent in whole or in part.
In the event that Harsco does not provide its
written consent to the procurement by UDLP from FMC
of any category or categories of A Services, UDLP
shall arrange for the provision of such services by
UDLP or an independent third party, to the extent
required, as soon as reasonably possible and in no
event later than the transition period set forth,
with respect to such service, in Schedule A annexed
hereto (except as may be otherwise required by
customer contracts which relate to provision of
services by the Corporate Tech Center). The
specified transition period shall commence on the
date of receipt by UDLP of Harsco's written notice
of the withholding of its consent. In such event,
FMC shall continue to provide such A Services under
this Agreement during the transition period in
which UDLP is arranging for an alternative source.
Such A Services shall be furnished at prices equal
to the prices charged during the prior Fiscal Year,
as adjusted for inflation by the percentage
increase (or decrease) in the Producer Price Index
for Finished Goods (unadjusted index) for such
prior Fiscal Year.
If FMC believes that Harsco has
unreasonably withheld its consent to the
procurement of any A Services by UDLP from FMC, FMC
shall be entitled to contest the reasonableness of
Harsco's action in an arbitration proceeding (in
which FMC shall have all relevant evidentiary
burdens of proof that Harsco was unreasonable in
withholding its consent), pursuant to Section 3.12
of the Partnership Agreement; provided, however,
that the pendency of any such arbitration
proceeding shall not relieve FMC and UDLP from the
obligation to discontinue, within the transition
periods set forth on Schedule A, the provision of
any A Service or Services not consented to by
Harsco.
(e) Letters of Credit and Bonds.
Notwithstanding Section 3.1(j) of the Partnership
Agreement, FMC may act as the contracting party on
behalf of UDLP in respect of any letter of credit
or performance bond or bid bond issued on behalf of
UDLP. UDLP shall promptly reimburse FMC for any
issuance fees, premiums or out-of-pocket expenses
incurred by FMC in connection therewith. Within
three Business
PAGE 6
Days of any draw against or payment under any
letter of credit or bond, UDLP shall reimburse FMC
in cash for the aggregate amount of such draw or
payment.
SECTION 5. Provision of A Services. FMC
shall provide the A Services to UDLP, at the prices
per Service set forth on Schedule A hereto, only
upon, and to the extent of, the request of UDLP.
UDLP may, with respect to certain of the A
Services, adopt a financial budget, approved by the
President of UDLP, that reflects the purchase of
such A Services for any period, or portion thereof,
which financial budget shall be deemed a request by
UDLP for such A Services from FMC. In making any
decision as to the types and amounts of A Services
to request on behalf of UDLP, FMC, in its capacity
as Managing General Partner of UDLP, shall at all
times act in a fiduciary manner with respect to
UDLP and shall request the A Services solely in
light of the best interests of UDLP.
SECTION 6. Confidentiality. FMC shall
treat all confidential information of UDLP which it
acquires after the Closing in the performance of
its obligations hereunder (i) in strict compliance
with applicable governmental confidentiality and
security clearance requirements, and (ii) with at
least the same degree of confidentiality that it
accords similar types of confidential information
of FMC.
SECTION 7. Mutual Cooperation. UDLP and
FMC shall cooperate with each other in connection
with the performance of Services hereunder and the
transition at the end of the term of this
Agreement, including, without limitation, by making
available on a timely basis all information which
is reasonably requested with respect to the
performance of Services and the transition at the
end of the term of this Agreement. Without
limiting the foregoing, FMC shall provide to each
of UDLP and Harsco reasonable access to the records
upon which the invoicing of A Services is based,
provided that such access does not unreasonably
interfere with the normal conduct of FMC's
financial and accounting operations.
SECTION 8. Indemnification. Each party
(the "Indemnitor") will indemnify the other party
("Indemnitee") against and hold such Indemnitee
harmless from all losses, damages, injuries,
claims,
PAGE 7
suits, judgments, fines or costs (including
reasonable legal fees and expenses) ("Losses")
resulting from or arising out of the negligence,
breach of contract or willful misconduct of the
Indemnitor, and its employees, officers or agents
acting within the scope of their authority, in
connection with the Indemnitor's performance of
this Agreement, except to the extent caused by the
negligence, breach of contract or willful
misconduct of any Indemnitee. All Losses subject
to indemnification under this Section 8 shall be
limited to actual direct Losses. ALL CONSEQUENTIAL
AND PUNITIVE DAMAGES ARE HEREBY EXCLUDED. The
Indemnitor's obligations under this paragraph will
survive the termination of this Agreement.
SECTION 9. Remedies for Breach. If
either party commits a material breach of this
Agreement with respect to the services to be
provided pursuant to Section 4(a) above and such
breach continues for 30 days after written notice
of such default to the defaulting party then the
other party may terminate this Agreement with
respect to the services provided pursuant to
Section 4(a) upon 10 days further written notice to
the defaulting party, without prejudice to any
other rights or remedies the non-defaulting party
may have; provided, however, that such thirty day
period shall not include any period during which
the breaching party is proceeding diligently and by
appropriate means to remedy such breach.
SECTION 10. Term; Termination. This
Agreement shall automatically terminate at the
earlier of (i) the time at which FMC is replaced as
the Managing General Partner; or (ii) such time as
FMC or an Affiliate of FMC no longer holds a Share
Percentage larger than the Share Percentage held by
Harsco, L.P.
In addition, either party shall be
entitled forthwith to terminate this Agreement by
giving notice to the other party if:
(i) the other party shall consent to the
appointment of a receiver, trustee, or liquidator
of itself or of a substantial part of its property,
or shall admit in writing its inability to pay its
debts generally as they come due, or
PAGE 8
shall make a general assignment for the
benefit of creditors; or
(ii) the other party shall file a
voluntary petition in bankruptcy or a
voluntary petition or an answer seeking
reorganization in a proceeding under any
bankruptcy laws (as now or hereafter in
effect) or an answer admitting the material
allegations of a petition filed against such
other party in any such proceeding, or shall
by voluntary petition, answer, or consent seek
relief under the provisions of any other now
existing or future bankruptcy or other similar
law providing for the reorganization or
winding up of corporations, or providing for
an agreement, extension, or adjustment with
its creditors; or
(iii) an order, judgment, or decree shall
be entered by any court of competent
jurisdiction appointing, without the consent
of the other party, a receiver, trustee, or
liquidator of the other party or of any
substantial part of its property, or
sequestering any substantial part of the
property of the other party, and any such
order, judgment, or decree of appointment or
sequestration shall remain in force
undismissed, unstayed, or unvacated for a
period of 90 days after the date of entry
thereof; or
(iv) a petition against the other party
in a proceeding under the Federal bankruptcy
laws or other insolvency laws, as now or
hereafter in effect shall be filed and shall
not be withdrawn or dismissed within 90 days
thereafter, or, under the provisions of any
law providing for reorganization or winding-up
of corporations which may apply to the other
party, any court of competent jurisdiction
shall assume jurisdiction, custody, or control
of the other party or of any substantial part
of its property and such jurisdiction,
custody, or control shall remain in force
unrelinquished, unstayed, or unterminated for
a period of 90 days.
SECTION 11. Force Majeure. FMC shall be
excused from its performance under this Agreement
to the extent and for so long as its performance
may be hindered or prevented by fire, flood,
earthquake, other acts of God, war, riot, strike,
lockout or any other
PAGE 9
circumstances beyond its reasonable control;
provided, however, that FMC shall notify UDLP in
writing as soon as practicable after the
commencement of the condition hindering or
preventing its performance and shall make every
reasonable effort to minimize the effect of such
condition. For the duration of the condition
hindering or preventing FMC's performance, UDLP
shall be relieved of its obligation to make payment
for any A Service not provided as a result of such
condition. If any B Service is affected by such
condition, the amount payable to FMC by UDLP
pursuant to Section 4(b) above shall be
proportionately reduced to make equitable provision
for the procurement of the affected B Services from
a third party.
SECTION 12. Assignment. This Agreement
or any rights hereunder may not be assigned or
otherwise transferred by any party and shall not
inure to the benefit of any trustee in bankruptcy,
receiver or other successor of any party, whether
by operation of law or otherwise, without the prior
written consent of the other party or parties, as
the case may be, and the prior written consent of
the third party beneficiaries referred to in
Section 13 below, and any assignment or transfer
without such consent shall be null and void;
provided, however, that this provision shall not
apply to any assignment to an Affiliate of FMC.
SECTION 13. Third-Party Beneficiaries.
This Agreement is for the sole benefit of the
parties hereto, and Harsco and Harsco Defense
Holding, Inc. as third party beneficiaries and
nothing herein expressed or implied shall give or
be construed to give to any person, other than the
parties hereto and the two third party
beneficiaries referred to above, any legal or
equitable rights hereunder.
SECTION 14. Amendments. No amendment to
this Agreement shall be effective unless it shall
be in writing, signed by the parties hereto and
approved, if required, by Harsco Defense Holding,
Inc. pursuant to Section 3.1 of the Partnership
Agreement dated as of February 1, 1994 between FMC
and Harsco Defense Holding, Inc.
PAGE 10
SECTION 15. Notices. All notices or
other communications required or permitted to be
given hereunder shall be in writing and shall be
delivered by hand or sent prepaid telex, cable or
telecopy, or sent, postage prepaid, by registered,
certified or express mail, or reputable overnight
courier service and shall be deemed given when so
delivered by hand, telexed, cabled or telecopied,
or if mailed, three days after mailing (one
business day in the case of express mail or
overnight courier service), as follows:
(i) if to UDLP,
United Defense, L.P.
1525 Wilson Boulevard, Suite 700
Arlington, Virginia 22209
Attention: Chief Executive Officer
(ii) if to FMC,
FMC Corporation
200 East Randolph Drive
Chicago, Illinois 60601
Attention: Corporate Secretary
with a copy to:
Kirkland & Ellis
200 East Randolph Drive
Chicago, Illinois 60601
Attention: Glen E. Hess, P.C.
An information copy of all such notices
shall be sent to:
Harsco Defense Holding, Inc.
P.O. Box 8888
Camp Hill, PA 17011
Attention: President
SECTION 16. Interpretation. The
headings contained in this Agreement, the table of
contents and the Schedules are for reference
purposes only and shall
PAGE 11
not affect in any way the meaning or interpretation
of this Agreement.
SECTION 17 . Counterparts. This
Agreement may be executed in one or more
counterparts, all of which shall be considered one
and the same agreement, and shall become effective
when one or more such counterparts have been signed
by each of the parties and delivered to each of the
other parties.
SECTION 18. Entire Agreement. This
Agreement, including the Exhibits and Schedules
hereto, the Partnership Agreement and any other
agreements referenced herein, contain the entire
agreement and understanding among the parties with
respect to the subject matter hereof and supersede
all prior agreements and understandings relating to
such subject matter.
SECTION 19. Severability. In case any
one or more of the provisions contained in this
Agreement or any Annex or Exhibit hereto shall, for
any reason, be held to be invalid, illegal or
unenforceable in any respect, all other provisions
of this Agreement or any Annex or Exhibit hereto
shall nevertheless remain in full force and effect,
but if the economic or legal substance of the
transactions contemplated hereby is affected in a
manner materially adverse to any party as a result
of the determination that a provision is invalid,
illegal or unenforceable, the parties hereto agree
to negotiate in good faith to modify this Agreement
and, if appropriate the Annexes and Exhibits
hereto, so as to effect the original intent of the
parties as closely as possible in an acceptable
manner to the end that the transactions
contemplated hereby are fulfilled to the closest
extent possible. Any such modification shall
require the consent (which shall not be
unreasonably withheld) of Harsco if Harsco
continues to own a twenty percent (20%) or greater
voting interest in UDLP.
SECTION 20. Consent to Jurisdiction.
Each of FMC and UDLP irrevocably submits to the
exclusive jurisdiction of (i) the state courts of
Virginia, Arlington County, and (ii) the United
States District Court for the Eastern District of
Virginia for the purposes of any suit, action or
other proceeding
PAGE 12
arising out of this Agreement or any transaction
contemplated hereby (and agrees not to commence any
action, suit or proceeding relating hereto except
in such courts). Each of FMC and UDLP further
agrees that service of any process, summons, notice
or document by registered mail to such party's
respective address set forth above shall be
effective service of process for any action, suit
or proceeding in the State of Virginia with respect
to any matters to which it has submitted to
jurisdiction as set forth above in the immediately
preceding sentence. Each of FMC and UDLP
irrevocably and unconditionally waives any
objection to the laying of venue of any action,
suit or proceeding arising out of this Agreement or
the transactions contemplated hereby in (i) the
state courts of Virginia, Arlington County, or (ii)
the United States District Court for the Eastern
District of Virginia, and hereby further
irrevocably and unconditionally waives and agrees
not to plead or claim in any such court that any
such action, suit or proceeding brought in any such
court has been brought in an inconvenient forum.
SECTION 21. Governing Law. This
Agreement shall be governed by and construed in
accordance with the internal laws of the State of
Delaware applicable to agreements made and to be
performed entirely within such State, without
regard to the conflicts of law principles of such
State.
SECTION 22. Relationship of Parties.
FMC is an independent contractor and is not an
agent of UDLP for any purpose hereunder whatsoever.
Employees or agents of FMC rendering Services to
the Business pursuant to this Agreement shall not
be deemed employees or agents of UDLP. FMC shall
retain the exclusive right of control with respect
to such persons. Such matters as supervision,
daily direction and control, payment of salary
(including withholding of income taxes and social
security), workers' compensation, disability
benefits and the manner and means through which the
Services provided under this Agreement will be
performed are entirely the responsibility of FMC.
SECTION 23. Schedules of Services. The
Schedules to this Agreement and all terms and
conditions contained therein shall be construed
with
PAGE 13
and as integral parts of this Agreement to the same
extent as if they were set forth verbatim herein.
SECTION 24. Waivers. No failure or
delay of any party in exercising any power or right
hereunder shall operate as a waiver thereof, nor
shall any single or partial exercise of any such
right or power, or any abandonment or
discontinuance of steps to enforce such a right or
power, preclude any other or further exercise
thereof or the exercise of any other right or
power. The rights and remedies of the parties are
cumulative and are not exclusive of any rights or
remedies which they would otherwise have. Neither
this Agreement nor any provision may be waived
except pursuant to any agreement in writing
executed by each of the parties.
IN WITNESS WHEREOF, the parties have
caused this Agreement to be duly executed as of the
date first above written.
FMC CORPORATION
By:______________
Title:___________
UNITED DEFENSE, L.P.
By: FMC CORPORATION,
Delaware corporation,
Its Managing General Partner
By:________________
Title:_____________
PAGE 0
DOCUMENT HEADER
DOCUMENT DESCRIPTION FORM OF SENIOR PROMISSORY NOTE
AGREEMENT
DOCUMENT TYPE 2
COUNT 33
PAGE 1
Exhibit D
SENIOR PROMISSORY NOTE AGREEMENT
[UNITED DEFENSE, L.P.]
SENIOR PROMISSORY NOTE AGREEMENT
[UNITED DEFENSE, L.P.]
PAGE 2
1. Definitions. 1
2. Description of Senior Note and Commitment. 5
3. Ranking of Debt. 5
4. No Right of Set-off. 5
5. Redemption of Senior Notes. 5
6. Affirmative Covenants of the Company. 6
7. Negative Covenants of the Company. 10
8. Default. 16
9. Manner of Giving Notice 18
10. Applicable Law. 19
11. Transfer, Exchange, Replacement, Etc. Of
Senior Notes. 19
12. Successors. 21
13. No Waiver; Amendments. 21
14. Representations Regarding Senior Notes. 21
15. Confidentiality. 22
PAGE 3
[UNITED DEFENSE, L.P. LETTERHEAD]
[Date]
[Harsco Defense Holding, Inc.]
[Address]
Re: $[Aggregate Principal Amount]
Six-Month LIBOR Plus 100 B.P. Senior Notes
Due: [Maturity Date]
Gentlemen:
The undersigned, [UNITED DEFENSE, L.P., a
Delaware [limited partnership/corporation] with its
principal office at [Address]] (the "Company"),
agrees with you as follows:
1. Definitions. Definitions. Unless otherwise
defined below or in the form of Senior Note
attached hereto as Exhibit A, capitalized terms
used herein will have the meanings set forth in
Annex A to a certain Partnership Agreement, dated
as of January 1, 1994 by and between FMC
Corporation, a Delaware corporation, Harsco Defense
Holding, Inc., a Delaware corporation, and the
Company (the "Partnership Agreement"), a copy of
which is appended hereto. No reference herein to
the Partnership Agreement, and no provision of this
Agreement or of the Partnership Agreement, shall
alter or impair the obligation of the Company,
which is absolute and unconditional, to pay the
principal of and interest on any Senior Note issued
hereunder at the times, place and rates prescribed
therein.
1.1. "Bank Credit" means Debt outstanding
under revolving lines of credit offered by
commercial banks to the Company or its Subsidiaries
to finance the working capital, capital
expenditures, and Debt service needs of the Company
and its Subsidiaries.
1.2. "Capital" means, with respect to any
Person, as at any date of determination, the
aggregate capital of all of the partners, if such
Person is a partnership, or, if such Person is a
corporation, the sum of the capital stock,
additional paid-in capital, retained earnings or
deficit and other cumulative equity adjustments,
less treasury stock if any, of such Person, in each
instance determined in accordance with
PAGE 4
GAAP; provided, however, that the Capital of the
Company, as of the date of issuance of the Senior
Notes, shall be deemed to be an amount equal to the
product of the aggregate share percentages
[percentage share ownership], immediately preceding
the issuance of the Senior Notes, of all of the
Company's Partners [shareholders] other than
Harsco. L.P. (or its permitted successor in
interest) multiplied by the Appraised Value of the
Company, for purposes of establishing the put
option price, pursuant to Section 7.2(c) of the
Partnership Agreement [Section of the
Agreement]. Subsequent determinations of Capital
for purposes of applying the ratio set forth in
Section 6.4 hereof and for purposes of Sections
7.2.11, 7.3.4 and 7.6.5 hereof shall be predicated
upon such initially determined Capital amount
(which shall not be subject to amortization)
adjusted to reflect: (i) results of operations
determined in accordance with GAAP; (ii)
contributions to (including as a result of the
issuance of equity) and distributions and dividends
by the Company; and (iii) other cumulative equity
adjustments determined in accordance with GAAP.
1.3. "Consolidated Capital" means, with
respect to any Person, as at any date of
determination, the Capital of such Person.
1.4. "Consolidated Capitalization" means,
with respect to any Person, as at any date of
determination, the sum of (a) Consolidated Capital
and (b) Consolidated Total Debt, in each case of
such Person and its Consolidated Subsidiaries at
such date on a consolidated basis determined in
accordance with GAAP.
1.5. "Consolidated Subsidiaries" means, for
any Person, all Subsidiaries of such Person that
would properly be consolidated with such Person for
financial reporting purposes in accordance with
GAAP.
1.6. "Consolidated Total Debt" means, with
respect to any Person, as at any date of
determination, all Debt of such Person and its
Consolidated Subsidiaries at such date determined
on a consolidated basis in accordance with GAAP.
1.7. "Controlled Subsidiary" means any
Subsidiary a majority of the shares of voting stock
of which are at the time directly or indirectly
owned by the Company.
PAGE 5
1.8. "Debt" of any Person means (a)
obligations of such Person for borrowed money, (b)
obligations of such Person evidenced by bonds,
debentures, notes or other similar instruments, (c)
obligations of such Person upon which interest
charges are customarily charged, (d) obligations of
such Person under conditional sale or other title
retention agreements relating to property or assets
purchased by such Person, (e) obligations of such
Person to pay the deferred purchase price of
property or services (other than trade payables),
(f) obligations of such Person as lessee under
capital leases, (g) obligations of another secured
by a Lien on any asset of such Person, and (h)
obligations of others Guaranteed directly or
indirectly by such Person or as to which such
Person has an obligation which is the economic
equivalent of a Guarantee.
1.9. "Determination Date" has the meaning set
forth in the form of Senior Note attached hereto as
Exhibit A.
1.10. "Events of Default" has the meaning set
forth in Section of this Agreement.
1.11. "Guarantee", as applied to any Person, means any direct o
r indirect liability, contingent or otherwise, of
such Person with respect to any Debt of another,
including, without limitation, any such obligation
directly or indirectly guaranteed, endorsed
(otherwise than for collection or deposit in the
ordinary course of business) or discounted or sold
with recourse by such Person, or in respect of
which such Person is otherwise directly or
indirectly liable, including, without limitation,
any such obligation in effect guaranteed by such
Person through any agreement (contingent or
otherwise) to purchase, repurchase or otherwise
acquire such obligation or any security therefor,
or to provide funds for the payment or discharge of
such obligation (whether in the form of loans,
advances, stock purchases, capital contributions or
otherwise), or to maintain the solvency or any
balance sheet or other financial condition of the
obligor of such obligation, or to make payment for
any products, materials or supplies or for any
transportation or services regardless of the non-
delivery or non-furnishing thereof, in any such
case if the purpose or intent of such agreement is
to provide assurance that such obligation will be
paid or discharged, or that any agreements relating
thereto will be complied with, or that the holders
of such
PAGE 6
obligation will be protected against loss in
respect thereof. The amount of any Guaranty shall
be equal to the outstanding principal amount of the
Debt guaranteed.
1.12. "Holder" means [Harsco Defense Holding,
Inc., a Delaware corporation,] or such other Person
in whose name a Senior Note is registered in the
Senior Note Register.
1.13. "Interval Debt" means any Debt incurred
in the interval between the receipt by the Company
of the Limited Partner's notice of the exercise of
its put option and the issuance of the Senior Notes
pursuant to either a business plan or a specific
proposal for the incurrence of a specified amount
of Debt presented to the Advisory Committee [board
of directors] of the Company prior to its receipt
of such notice.
1.14. "Investments", as applied to any
Person, means any direct or indirect purchase or
other acquisition by such Person of stock or other
securities of any other Person, or any direct or
indirect loan, advance or capital contribution by
such Person to any other Person, including all Debt
and accounts receivable from such other Person
which did not arise from sales to such other Person
in the ordinary course of business. In computing
the amount involved in any Investment at the time
outstanding, (i) undistributed earnings of, and
interest accrued in respect of Debt owing by, such
other Person accrued after the date of such
Investment shall not be included, (ii) there shall
not be deducted from the amounts invested in such
other Person any amounts received as earnings (in
the form of dividends, interest or otherwise) on
such Investment or as loans from such other Person,
and (iii) unrealized increases or decreases in
value, or write-ups, write-downs or write-offs, of
Investments in such other Person shall be
disregarded.
1.15. "Material Subsidiary" means any
Subsidiary of the Company organized under the laws
of the United States of America or any state
thereof or the District of Columbia in which the
Company has an Investment, direct or indirect, of
at least $20 million.
1.16. "Senior Note Register" has the meaning
set forth in Section of this Agreement.
1.17. "Redemption Price" has the meaning set
forth in Section of this Agreement.
PAGE 7
1.18. "Reference Debt to Capitalization
Ratio" means the result of dividing Consolidated
Total Debt outstanding immediately following the
issuance of the Senior Notes (including the Senior
Notes and any Interval Debt) by Consolidated
Capitalization outstanding immediately following
the issuance of the Senior Notes (including the
Senior Notes and any Interval Debt), provided,
however, that for the purposes of this Section
1.19, neither Consolidated Total Debt nor
Consolidated Capitalization shall include any Debt
incurred in the interval between the receipt by the
Company of the Limited Partner's notice of the
exercise of its put option and the issuance of the
Senior Notes, unless such Debt is Interval Debt.
(Attached hereto as Exhibit A is a worksheet
intended to illustrate the manner in which the
"Reference Debt to Capitalization Ratio" is to be
computed.)
1.19. "Senior Notes" includes each note
issued and delivered pursuant to this Agreement.
1.20. "Subordinated Debt" means any Debt of
the Company or any Subsidiary which by its terms is
subordinate in right of payment to the Senior
Notes.
1.21. "Tax Sharing Agreement" means any
agreement, contract, or other arrangement between
FMC Corporation and the Company, provided that the
Company is a corporation, pursuant to which the
Company reimburses FMC Corporation for the
Company's pro rata portion of Federal, state, or
local income taxes paid by FMC Corporation on
behalf of a consolidated group of which the Company
forms a part, determined as if the Company were
required to pay such taxes on a separate company
return basis, based on the maximum Federal marginal
income tax rate applicable to a corporation under
Section 11 of the Code in effect for the applicable
year, plus five percentage points.
2.Description of Senior Note and Commitment. The Company will
authorize the issue of $ aggregate
principal amount of its Senior Notes to be dated
the date of issue, to mature on the fifth
anniversary thereof, to be repaid in five equal
annual installments of principal beginning on the
first anniversary of the date of issuance, to bear
interest on the unpaid principal sum from the date
of issuance at the rate equal to the six-month
LIBOR rate in effect on the Determination Date plus
100 basis points,
PAGE 8
payable semi-annually beginning on the six-month
anniversary of the date of issuance, to bear
interest on any overdue installment of principal
and, to the extent lawful, interest at the rate
equal to the three-month LIBOR rate in effect on
the Determination Date plus 200 basis points, and
to have such other terms and conditions as set
forth in, and to be substantially in the form of,
Exhibit B attached hereto. If the day on which
payment of principal or interest is due falls on a
Saturday, Sunday or legal holiday, then such
payment shall be made on the first Business Day
thereafter. Payments of principal and interest
shall be made to account [Number] of Holder with
[Depository institution] by wire transfer of
immediately available funds or to such other place
as Holder shall designate to the Company in
writing. Any obligation of the Company under any
Senior Note to any Holder thereof shall be the sole
obligation of the Company and shall be explicitly
nonrecourse to FMC Corporation [or any other
general Partner of the Company].
3. Ranking of Debt. Ranking of Debt. The Debt
evidenced by the Senior Notes shall be general,
unsecured (subject to Section of this Agreement)
Debt of the Company. The Senior Notes shall at all
times rank and be treated pari passu with Debt,
other than Subordinated Debt, incurred by the
Company on or after the date hereof.
4. No Right of Set-off. The Company agrees that
its obligations under this Agreement and any Senior
Note are absolute and unconditional, and the
Company hereby waives any right of set-off that it
may have or that may arise.
5. Redemption of Senior Notes.
5.1. The Company may, upon at least five Business Days' notice
to each Holder, redeem, without penalty or premium,
any Senior Note in whole at any time, or from time
to time in part (but if in part then in units of
$10,000,000 or an integral multiple of $1,000,000
in excess thereof), by paying the principal amount
being redeemed together with interest accrued
thereon to the date of prepayment (the "Redemption
Price"). Each such optional redemption shall be
applied to prepay ratably the Senior Notes of all
Holders of Senior Notes. Partial prepayments made
pursuant to this Section shall
PAGE 9
be applied to the installments of principal thereof
in the inverse order of maturity.
5.2. Notice of redemption having been given
as provided for in Section above, the Senior Notes
so to be redeemed shall, on the date of prepayment,
become due and payable at the specified Redemption
Price, and from and after such date (unless the
Company shall default in the payment of the
Redemption Price, including accrued interest) such
Senior Notes shall cease to bear interest. Upon
tender of such Senior Notes for redemption in
accordance with the notice, such Senior Notes shall
be paid by the Company at the Redemption Price,
including accrued interest to the date of
prepayment, by wire transfer of immediately
available funds. If any Senior Note called for
redemption shall not be so paid upon tender thereof
for redemption, the principal and, to the extent
lawful, any unpaid interest shall, until paid, bear
interest from the date of prepayment at the rate of
the three-month LIBOR rate in effect on the date of
prepayment plus 200 basis points.
5.3. Any Senior Note which is to be prepaid
only in part shall be tendered to the Company at
its principal office (with, if the Company so
requires, due endorsement by, or a written
instrument of transfer in form satisfactory to the
Company duly executed by, the Holder thereof or his
attorney duly authorized in writing), and the
Company shall execute and deliver to the Holder of
such Senior Note without service charge, a new
Senior Note or Senior Notes in aggregate principal
amount equal to and in exchange for the unprepaid
portion of the principal of the Senior Note
tendered.
6. Affirmative Covenants of the Company.
Affirmative Covenants of the Company. Until the
principal amount of any Senior Note plus accrued
interest due thereunder is repaid in full, the
Company will:
6.1. Quarterly Financials. Provide to Holder not later than fo
rty-five (45) days after the end of each calendar
quarter, a balance sheet of the Company as of the
end of such quarter and the related statements of
operations and cash flow of the Company for such
quarter and for the Fiscal Year to date, in each
case together with a certificate of the Chief
Financial Officer to the effect that such financial
statements have been prepared under such officer's
supervision and
PAGE 10
that, although such financial statements may not
contain the footnotes and other disclosures
required by GAAP, such financial statements, in
such officer's judgment, fairly present in accor
dance with GAAP, consistently applied except as
otherwise noted, the interim financial position,
results of operations and cash flows of the Company
as of the date and for the periods indicated,
subject to normal year-end audit adjustments;
6.2. Quarterly Certifications; Notice of
Events of Default. Provide Holder, (i) within
forty-five (45) days from the end of each calendar
quarter, the written certification of the Chief
Financial Officer that, to the best of his or her
knowledge after due inquiry, no Event of Default
has occurred under this Agreement; and (ii)
promptly after the occurrence of any Event of
Default or event, act or condition which with
notice or the lapse of time, or both, would
constitute an Event of Default, written notice of
the same, providing reasonable descriptive detail
with respect thereto and of the action the Company
proposes to take in respect thereof;
6.3. Certified Annual Financials. Provide to
Holder not later than ninety (90) days after the
end of each Fiscal Year, a balance sheet of the
Company as of the end of such Fiscal Year and the
related statements of operations and cash flow of
the Company for such Fiscal Year, together with
appropriate notes to such financial statements.
These financial statements shall be audited by the
Company's independent public accountants and shall
be prepared in accordance with GAAP unless
otherwise noted;
6.4. Financial Condition. Maintain, at all
times, a Consolidated Total Debt to Consolidated
Capitalization ratio of no more than 1.2 times the
Reference Debt to Capitalization Ratio, provided
there has occurred no Change in Control of the
Company or FMC Corporation. In the event of a
Change in Control of the Company or FMC
Corporation, the Company shall maintain at all
times a Consolidated Total Debt to Consolidated
Capitalization ratio of no more than 1.1 times the
Reference Debt to Capitalization Ratio;
6.5. Government Filings. Provide Holder, within thirty (30) da
ys of filing, with copies of all material reports
filed by the Company or any of its Subsidiaries
with Governmental Authorities (other than the
Department of Defense and other Governmental
Authorities in their capacities as vendees of the
PAGE 11
Company or any of its Subsidiaries) as may be
reasonably requested by Holder;
6.6. Notice of Litigation. Notify Holder of
any litigation to which the Company or any of its
Subsidiaries is a party for which the amount of any
stated claims (or if no amount is stated, the
amount of claims reasonably expected to be
asserted) against the Company and any of its
Subsidiaries taken as a whole exceeds $10 million
by mailing to Holder by registered mail, a copy of
all pleadings received or obtained by the Company
in regard to such litigation, or, if no pleadings
are obtained, a letter setting out the facts known
about the litigation, within thirty (30) days of
notice thereof;
6.7. Notice of Default. Give Holder prompt
notice of (i) any material default or default in
payment under, or any threatened or asserted
violation of the terms of, any agreement, bond,
note, debenture or other evidence of Debt for money
borrowed the aggregate principal balance of and
unpaid interest on which exceeds $1 million to
which the Company is a party or by which it is
bound; (ii) any threatened or asserted violation of
the terms of any government contract which involves
reasonably expected payments or receipts of more
than $10 million which relates to the Company's or
any Subsidiary's business; (iii) any material
default under any lease material to the Company;
and (iv) any judgment entered against the Company
(by mailing a copy to Holder within ten (10) days
of receipt thereof);
6.8. Insurance. Maintain, and cause each
Subsidiary to maintain, adequate insurance
coverages in such forms and amounts and against
such risks as are customary for businesses of
established reputation engaged in the same or
similar business and owning and operating similar
properties, and, upon Holder's request, the Company
shall provide Holder with a list of its insurance
coverages;
6.9. Payments. Promptly make all payments of
principal and interest when due under the Senior
Notes;
6.10. Inspection. Keep, and cause each Subsidiary to keep, pro
per books of record and account in which full, true
and correct entries in conformity with GAAP shall
be made of all dealings and transactions in
relation to its business and activities. Subject
to limitations imposed by law or contract on access
to and dissemination of classified
PAGE 12
or other confidential information, the Company will
permit, and will cause each Subsidiary to permit,
representatives of any Holder to visit and inspect
any of their respective properties, to examine
their respective corporate, financial and operating
records and make copies thereof or abstracts
therefrom, and to discuss their respective affairs,
finances and accounts with their respective
Advisory Committee members, directors, officers,
employees and Accountants (who are by this covenant
irrevocably instructed to respond fully to such
inquiries), all at such reasonable times and as
often as may reasonably be desired, upon reasonable
advance notice to the Company;
6.11. Fulfillment of Obligations. Observe
and comply with all of the terms, conditions and
covenants to be performed by it hereunder or under
the Senior Notes;
6.12. Preservation of Existence, Etc.
Preserve and maintain, and cause each of its
Subsidiaries to preserve and maintain, its
existence and all rights, franchises, privileges,
licenses and permits necessary to the proper
conduct of its business or the ownership of its
properties; provided, however, that nothing in this
Section shall prohibit (i) the merger of a
Subsidiary into the Company in a transaction
permitted under Section or the merger or
consolidation of a Subsidiary with or into another
Person if, in each case, after giving effect
thereto, no Event of Default shall have occurred
and be continuing or (ii) the termination of the
corporate existence of any Subsidiary if the
Company in good faith determines that such
termination is in the best interest of the Company
and is not disadvantageous to Holder;
6.13. Compliance with Laws, etc. Comply, and
cause each of its Subsidiaries to comply, promptly
with all applicable laws, rules, regulations,
orders or other requirements of any Governmental
Authority, political subdivision or agency thereof
having jurisdiction over it, the noncompliance with
which would reasonably be expected to materially
adversely affect the business, properties,
prospects or condition, financial or otherwise, of
the Company and its Subsidiaries or would result in
any Lien (other than any Lien referred to in
Sections through below) or charge upon any
property of the Company or any of its Subsidiaries;
PAGE 13
6.14. Payment of Taxes and Claims. Pay, and will cause each Su
bsidiary to pay, as the same shall become
due and payable and before any penalty or interest
accrues thereon, all lawful taxes, assessments and
governmental charges or levies upon it or its
property or assets, and all claims (including,
without limitation, claims for labor, services,
materials and supplies), except to the extent that
any such obligation or liability may be promptly
and diligently contested in good faith by
appropriate proceedings, and the Company will
maintain, and will cause each Subsidiary to
maintain, in accordance with GAAP, appropriate
reserves for the accrual of any such obligation or
liability;
6.15. Keeping of Records and Books of
Account. Keep, and cause each of its Subsidiaries
to keep, proper records and books of account, in
which full and correct entries will be made in
accordance with GAAP, of all dealings or
transactions of or in relation to the business and
affairs of the Company and its Subsidiaries, and in
which, for each Fiscal Year, all proper reserves
for depreciation, depletion, obsolescence,
amortization, taxes, bad debts and other purposes
in connection with its business shall be made; and
6.16. Maintenance of Properties, etc.
Maintain and preserve, and cause each of its
Subsidiaries to maintain and preserve, all of its
properties (whether owned in fee or a leasehold
interest), necessary or useful for the proper
conduct of its business, in good repair, working
order and condition (ordinary wear and tear
excepted).
7. Negative Covenants of the Company. Until the
principal amount of the Senior Notes plus accrued
interest due thereunder is repaid in full, the
Company will not, and will not cause or permit any
Subsidiary to, without the prior written consent of
Holder:
7.1. Changes in Business. Engage in any
business if, as a result, the general nature of the
business, taken on a consolidated basis, which
would then be engaged in by the Company and its
Subsidiaries would be substantially changed from
the general nature of the business engaged in by
the Company and its Subsidiaries on the date
hereof;
PAGE 14
7.2. Liens, etc. Create, incur, assume or
permit to exist, directly or indirectly, any Lien
on or with respect to any property or asset
(including any document or instrument in respect of
goods or accounts receivable) of the Company or any
of its Subsidiaries, whether now owned or held or
hereafter acquired, or any income or profits
therefrom, except:
7.2.1. Liens for taxes, assessments or
other governmental charges the payment of
which is not at the time required by Section ;
7.2.2. Statutory Liens of landlords and
Liens of carriers, warehousemen, mechanics and
materialmen incurred in the ordinary course of
business for sums not yet due or the payment
of which is not at the time required by
Section ;
7.2.3. Liens (other than any Lien
imposed by ERISA) incurred or deposits made in
the ordinary course of business in connection
with workers' compensation, unemployment
insurance and other types of social security,
or to secure the performance of tenders,
statutory obligations, surety and appeal
bonds, bids, leases, Government Contracts,
performance and return-of-money bonds and
other similar obligations (exclusive of
obligations for the payment of borrowed
money);
7.2.4. Any attachment or judgment Lien,
unless the judgment it secures shall not,
within sixty (60) days after the entry
thereof, have been discharged or execution
thereof stayed pending appeal, or shall not
have been discharged within sixty (60) days
after the expiration of any such stay;
7.2.5. Leases or subleases granted to
others, easements, rights-of-way, restrictions
and other similar charges or encumbrances, in
each case incidental to, and not materially
interfering with, the ordinary conduct of the
business of the Company or any of its
Subsidiaries;
7.2.6. Liens on property or assets of
any Subsidiary securing Indebtedness of such
Subsidiary owing to the Company or a wholly-
owned Subsidiary; and
PAGE 15
7.2.7. Liens existing as of the date of
the issuance of the Senior Notes on any
property or assets owned or leased by the
Company or any of its Subsidiaries;
7.2.8. Liens arising from the
assignment of moneys due and to become due
under contracts between the Company or any of
its Subsidiaries and the United States of
America or any agency, department,
instrumentality or political subdivision
thereof; or Liens in favor of the United
States of America or any agency, department,
instrumentality or political subdivision
thereof, to secure progress, advance or other
payments pursuant to any contract or provision
of any statute;
7.2.9. Liens in favor of a
governmental unit to secure payments under any
contract or statute, or to secure any Debt
incurred in financing the acquisition,
construction or improvement of property
subject thereto, including Liens on, and
created or arising in connection with the
financing of the acquisition, construction or
improvement of, any facility used or to be
used in the business of the Company or any
Subsidiary through the issuance of
obligations, the income from which shall be
excludable from gross income by virtue of
Section 103 of the Internal Revenue Code (or
any subsequently adopted provisions thereof
providing for a specific exclusion from gross
income);
7.2.10. Any extension, renewal,
substitution or replacement (or successive
extensions, renewals, substitutions or
replacements), as a whole or in part, of any
Lien referred to in Sections through above
or the Debt secured thereby; provided that
such extension, renewal, substitution or
replacement Lien shall be limited to all or
any part of the same property or assets that
secured the Lien extended, renewed,
substituted or replaced; and
7.2.11. Other Liens to secure Debt not
exceeding 10% of the Consolidated Capital of
the Company and its Consolidated Subsidiaries
.
PAGE 16
7.3. Compliance with ERISA.
7.3.1. Engage in any transaction (other
than a transaction involving the securities
issued by Harsco Corporation) in connection
with which the Company or any of its
Subsidiaries would, to its knowledge, be
subject to either a civil penalty assessed
pursuant to Sections 502(i) and 502(l) of
ERISA or a tax imposed by Section 4975 of the
Code that would have a Material Adverse Effect
on the Company and any of its Subsidiaries
taken as a whole;
7.3.2. Terminate any Partnership Benefit
Plan in a manner, or take any other action
with respect to a Partnership Benefit Plan (or
any successor Benefit Plan), which may
reasonably be expected to result in any
material liability of the Company or any of
its Subsidiaries to the PBGC or any other
Governmental Authority;
7.3.3. Fail to make full payment when
due of all amounts which, under the provisions
of any Partnership Benefit Plan, the Company
or any of its Subsidiaries is required to pay
as contributions thereto, or permit to exist
any accumulated funding deficiency with
respect to any Plan; or
7.3.4. Permit the current value of all
vested accrued benefits under all Partnership
Benefit Plans to exceed the fair market value
of the assets of such Plans allocable to such
vested accrued benefits by more than the
greatest of (i) $10,000,000, (ii) 20% of the
current value of liabilities under such Plans
and (iii) 10% of the Consolidated Capital of
the Company and its Consolidated Subsidiaries.
As used in this Section , the term
"accumulated funding deficiency" has the
meaning specified in Section 302 of ERISA and
Section 412 of the Code and the term "accrued
benefit" has the meaning specified in Section
3 of ERISA;
7.4. Related-Party Transactions. Enter into
or engage, or permit any Subsidiary to enter
into or engage, directly or indirectly, in
transactions:
PAGE 17
7.4.1. consisting of the provision in
any Fiscal Year of B Services pursuant to the
Management Services Agreement by a
[Partner/shareholder] or any of its Affiliates
to the Company or any of its Subsidiaries that
involves the payment to such
[Partner/shareholder] and its Affiliates of an
Annual Fee in excess of the actual Annual Fee
paid by the Company in the immediately
preceding Fiscal Year, as adjusted for
inflation by the percentage increase (or
decrease) in the Producer Price Index for
Finished Goods (unadjusted index) for such
prior Fiscal Year;
7.4.2. consisting of the provision of
services other than those specified in Section
above by a [Partner/shareholder] or any of its
Affiliates to the Company or any of its
Subsidiaries that involves the payment to such
[Partner/shareholder] and its Affiliates in
any Fiscal Year of more than (a) in the case
of any Fiscal Year commenced prior to the date
hereof, the aggregate amount of actual charges
agreed upon for that Fiscal Year and to which
Harsco Defense Holding, Inc. had consented as
required under the Partnership Agreement;
and/or (b) in the case of any Fiscal Year
commencing on or after the date hereof, an
amount determined by multiplying the total
payments by the Company and its Consolidated
Subsidiaries in the preceding Fiscal Year by a
fraction the numerator of which is gross sales
revenues of the Company and its Consolidated
Subsidiaries in such Fiscal Year and the
denominator of which is the gross sales
revenues of the Company and its Consolidated
Subsidiaries in the preceding Fiscal Year; or
7.4.3. consisting of the sale of
products, business or assets (exclusive of
those provided for in Sections and by a
[Partner/shareholder] or any of its Affiliates
to the Company or any of its Subsidiaries that
involves the payment to such
[Partner/shareholder] and its Affiliates of
more than an aggregate of $5,000,000 in any
Fiscal Year.
No such related-party transaction (other than for
services specified in Section above) shall be
entered into or engaged in by the Company or any
Subsidiary unless it is reasonably required by the
Company or its Subsidiary and is on fair and
reasonable terms no less favorable to the Company
or its Subsidiary than could be obtained in a
comparable arm's-length transaction
PAGE 18
with a Person that is not a [Partner/shareholder]
or one of its Affiliates.
7.5. Consolidation, Merger, Sale of
Substantially All Assets, etc. In the case of the
Company and any Material Subsidiary, consolidate
with, or sell, convey or lease all or substantially
all of its assets to, or merge with or into any
other corporation, unless:
7.5.1. either the Company or a
Material Subsidiary (as the case may be)
is the surviving entity or the successor
corporation shall be organized and
validly existing under the laws of the
United States of America or any state
thereof or the District of Columbia and
shall expressly assume the due and
punctual payment of the principal of and
interest on all of the Senior Notes and
the due and punctual performance and
observance of all covenants and
conditions of this Agreement to be
performed or observed by the Company or a
Material Subsidiary (as the case may be);
and
7.5.2. the Company and its
Consolidated Subsidiaries or such
successor corporation, as the case may
be, shall not, immediately after such
merger or consolidation, or such sale,
conveyance or lease, be in material
default in the performance or observance
of any such covenant or condition;
7.6. Investments, Guaranties, etc.
Directly or indirectly make or own any
Investment in any Person or create or
become or be liable with respect to any
Guarantee, or permit any Subsidiary to
engage in any of the above acts, except:
7.6.1. the Company and its Subsidiaries
may make and own Investments in (x)
marketable direct obligations issued or
unconditionally guaranteed by the United
States of America or any agency thereof
maturing within one year from the date of
acquisition thereof, marketable direct
obligations issued by any state of the
United States of America or any political
subdivision of any such state or any
public instrumentality thereof maturing
within one year from the date of
acquisition thereof and currently having
the highest
PAGE 19
rating obtainable from either Standard &
Poor's Corporation or Moody's Investors
Service, Inc, (y) commercial paper maturing
no more than 270 days from the date of
creation thereof and currently having the
highest rating obtainable from either Standard
& Poor's Corporation or Moody's Investors
Service, Inc., and (z) certificates of deposit
maturing within one year from the date of
acquisition thereof issued by commercial banks
incorporated under the laws of the United
States of America or any state thereof or the
District of Columbia, each having combined
capital and surplus of not less than
$100,000,000;
7.6.2. the Company and its Subsidiaries
may make and own Investments in any Subsidiary
or any Person which simultaneously therewith
becomes a wholly-owned Subsidiary;
7.6.3. any Subsidiary may make and
permit to be outstanding loans and advances to
the Company;
7.6.4. the Company and its Subsidiaries
may (i) make and own Investments constituting
twenty-five percent (25%) or more of the stock
or other securities of another Person so long
as such Investments do not consist of
Investments in any of the Company's Affiliates
(other than any of its wholly-owned
Subsidiaries or Controlled Subsidiaries) and
(ii) create or become or be liable with
respect to Guarantees of the Indebtedness of
any of the Company's wholly-owned Subsidiaries
or Controlled Subsidiaries, so long as such
Investments and Guarantees, individually or in
the aggregate, do not result in a violation of
Section 7.1 hereof;
7.6.5. the Company and its Subsidiaries
may, in addition to the Investments permitted
by the foregoing subdivisions of this Section
, make and own Investments in any Person
(other than any Affiliate of the Company) if
immediately after giving effect to the making
of any such Investment, the amount of all such
Investments made pursuant to this subdivision
(but disregarding any such Investment which on
the date of determination could be made
pursuant to one of the foregoing subdivisions
of this Section ) would not exceed 10% of the
Consolidated Capital of the Company and its
Consolidated Subsidiaries;
PAGE 20
7.7. Restricted Payments and Distributions.
7.7.1. Directly or indirectly declare,
order, pay, make or set apart any sum or
property for any distribution to any
[Partner/shareholder] or Affiliate thereof, or
become obligated to make any distribution to
any [Partner/shareholder] or Affiliate
thereof, unless, immediately after giving
effect to any such proposed distribution: (a)
no condition or event shall exist which
constitutes an Event of Default or an event
which with notice and lapse of time would
become an Event of Default; and (b) the
aggregate amount of all distributions to
[Partners/shareholders] and Affiliates thereof
directly or indirectly made by the Company and
its Subsidiaries, or which the Company and its
Subsidiaries have become obligated to make,
does not exceed the sum of (i) fifty percent
(50%) of the consolidated cumulative pre-tax
income of the Company and its Subsidiaries
since the date of this Agreement (if a
partnership) or fifty percent (50%) of the
consolidated cumulative after-tax income of
the Company and its Subsidiaries since the
date of this Agreement (if a corporation) and
(ii) the aggregate amount of all capital
contributions received by the Company since
the date of this Agreement, including as a
result of the issuance of equity; provided,
however, that no payment made under any Tax
Sharing Agreement or payment of a divided on
preferred stock of the Company issued pursuant
to the terms of the Registration Rights
Agreement shall be deemed to be a distribution
for purposes of this Section ;
7.7.2. Make any payment (other than any
mandatory payment on Debt outstanding prior to
the date hereof) of principal on or redemption
of any Subordinated Debt or any preferred
stock of the Company (other than any preferred
stock issued pursuant to the terms of the
Registration Rights Agreement) or any of its
Subsidiaries or amend, modify or change, or
consent or agree to any amendment,
modification or change to any of the terms of
any such Subordinated Debt (other than any
such amendment, modification or change which
would extend the maturity or reduce the amount
of any payment of principal thereof or which
would reduce the rate or extend the date for
payment of interest thereon) or preferred
stock; or
PAGE 21
7.7.3. Make any amortization payments on
Debt other than: (a) Debt evidenced by the
Senior Notes; (b) Debt outstanding prior to
the date hereof; (c) Bank Credit; or (d) Debt
issued in connection with any extension,
renewal, substitution, refinancing or
replacement of Debt referred to in (a), (b) or
(c) above, provided that the cumulative amount
of any amortization payments payable under any
Debt issued in reliance on this clause (d)
prior to the maturity date of the Senior Notes
shall not exceed the cumulative amount of
scheduled amortization payments payable on or
prior to such maturity date under the Debt
which is being extended, renewed, substituted,
refinanced or replaced; or
7.8. Agreements, Etc. Enter into any
agreement (other than any agreement entered into in
the ordinary course of business) which limits its
legal capacity or legal ability to perform its
obligations under this Agreement or any Senior
Note.
8. Default
8.1. Events of Default. If any one of the
events of default listed below ("Events of
Default") occurs prior to payment in full of any
Senior Note, then an Event of Default may be
declared at the option of Holder without
presentment, demand, protest or further notice of
any kind, all of which are hereby expressly waived:
8.1.1. Payment Default. Default in the
payment of principal or interest when due and
payable and (in the case of interest)
continuance of such default for a period of 30
days;
8.1.2. Failure to Perform Any Other
Covenant or Undertaking. Default in the
performance of, or breach of, any other
covenant or undertaking herein if such default
shall continue for a period of 30 days after
there has been given, by registered or
certified mail, to the Company by the Holders
of at least 25% in principal amount of the
Senior Notes outstanding a written notice
specifying such default or breach and
requiring it to be remedied (it being
understood that a failure to maintain the
ratios required by Section may be remedied at
any time within the 30-day period
PAGE 22
specified above through additional capital
obtained by the Company);
8.1.3. Default Under Agreements. The
Company shall default in any payment of
principal or of interest on any obligation
under any agreement, bond, note, debenture or
other evidence of Debt for money borrowed to
which the Company is a party or by which it is
bound beyond any period of grace provided with
respect thereto, provided that the aggregate
principal amount of all obligations as to
which such a payment default shall occur and
be continuing exceeds $25,000,000;
8.1.4. Judgment. The Company shall fail
to pay any final judgment aggregating more
than $25,000,000 unless execution thereunder
has been stayed within ten (10) days of entry
thereof;
8.1.5. Bankruptcy. The Company shall
make an assignment for the benefit of
creditors, or shall admit in writing its
inability to pay its Debt as they become due,
or shall file a voluntary petition in
bankruptcy, or shall be adjudicated a bankrupt
or insolvent, or shall file any petition or
answer seeking for itself any reorganization,
arrangement, composition, readjustment,
liquidation, dissolution or similar relief
under any present or future bankruptcy,
insolvency or similar statute, law or
regulation pertinent to such circumstances, or
shall file any answer admitting or not
contesting the material allegations of a
petition filed against it in any such
proceedings, or shall seek or consent to or
acquiesce in the appointment of any trustee,
receiver, or liquidator of it or of all or any
substantial part of its properties; or the
Company or any affiliated
[Partner/shareholder] shall take any action
initiating its dissolution or liquidation;
8.1.6. Action Seeking Reorganization.
Sixty (60) days shall have expired after the
commencement of an action against the Company
seeking reorganization, arrangement,
composition, readjustment, liquidation,
dissolution or similar relief under any
present or future bankruptcy, insolvency or
similar statute, law or regulation, without
such action being dismissed or all orders or
proceedings thereunder affecting the
operations or the business of the Company
being stayed; or a
PAGE 23
stay of any such order or proceedings shall
thereafter be set aside and the action setting
it aside shall not be timely appealed;
8.1.7. Appointment of Trustee. Sixty
(60) days shall have expired after the
appointment, without the consent or
acquiescence of the Company, of any trustee,
receiver or liquidator of the Company or of
all or any substantial part of its properties,
without such appointment being vacated; or
8.2. Remedies Upon an Event of Default. If
an Event of Default occurs and is continuing with
respect to the Senior Notes, then, unless the
principal of all such Senior Notes shall have
already become due and payable, the Holders of at
least 25% of the principal amount of the Senior
Notes outstanding may declare the principal of and
any accrued interest on all such Senior Notes held
by them to be due and payable immediately, and upon
any such declaration the same shall become and
shall be immediately due and payable. Holders of
more than 50% in principal amount of Senior Notes
outstanding may waive any such acceleration if all
regularly scheduled payments of principal and
interest are current.
From and after the occurrence and during the
continuance of any Event of Default, the Company
shall pay all expenses of any nature including, but
not limited to, reasonable attorneys' fees and
costs, whether incurred in or out of court, and
whether incurred before or after the Senior Note
shall become due at its maturity date or otherwise,
which the Holders of more than 50% in principal
amount of Senior Notes outstanding may reasonably
deem necessary or proper in connection with the
satisfaction of the indebtedness under the Senior
Note.
9. Manner of Giving Notice. Whenever notice is
required to be given pursuant to this Agreement, it
shall be by letter, or facsimile electronic
transmission receipt of which is confirmed by
telephone by the addressee, or by overnight air
courier sent to [the Managing General Partner],
[Harsco Defense Holding, Inc.] or the Company at
the addresses set forth below and, except as
otherwise provided herein, shall be deemed to be
given when sent or transmitted.
PAGE 24
The addresses of the parties for purposes of
notice shall be as follows:
For [the Managing General Partner:
FMC Corporation
200 East Randolph Drive
Chicago, Illinois 60601
Attention: Corporate Secretary]
For [Harsco Defense Holding, Inc.:
Harsco Defense Holding, Inc.
Post Office Box 8888
Camp Hill, Pennsylvania 17011
Attention: President (with a copy to
the General Counsel)]
For the Company:
United Defense, L.P.
1525 Wilson Boulevard, Suite 700
Arlington, Virginia 22209
Attention: Chief Executive Officer
Any person whose address is listed in this
Section may change its address at any time by
giving written notice, as provided herein, to the
other persons listed herein.
10. Applicable Law. This Agreement shall be
governed by and construed in accordance with the
domestic laws of the State of Delaware, without
giving effect to any choice of law or conflict of
law provision or rule (whether of the State of
Delaware or any other jurisdiction) that would
cause the application of the laws of any
jurisdiction other than the State of Delaware. In
furtherance of the foregoing, the internal law of
the State of Delaware shall control the
interpretation and construction of this Agreement,
even though under that jurisdiction's choice of law
or conflict of law analysis, the substantive law of
some other jurisdiction would ordinarily apply.
PAGE 25
11. Transfer, Exchange, Replacement, Etc. Of
Senior
Notes.
11.1. Registration, Registration of
Transfer and Exchange. The Company shall
cause to be kept at its principal office
a register (the register maintained in
such office being herein sometimes
referred to as the "Senior Note
Register") in which, subject to such
reasonable regulations as it may
prescribe, the Company shall provide for
the registration of Senior Notes and of
transfers of Senior Notes. At any time,
and from time to time, the Holder of any
Senior Note which has been registered as
provided hereunder may transfer such
Senior Note upon tender thereof at the
principal office of the Company, duly
endorsed by, or accompanied by a written
instrument of transfer in form
satisfactory to the Company duly executed
by, the Holder thereof or his attorney
duly authorized in writing. The Company
shall be the Senior Note registrar for
the purpose of registering Senior Notes
and transfers of Senior Notes as herein
provided. Upon tender for registration
of transfer of any Senior Note at its
principal office, the Company shall
execute, and deliver in the name of the
designated transferee or transferees one
or more new Senior Notes of any
authorized denominations, of a like
aggregate principal amount. At the
option of a Holder, Senior Notes may be
exchanged for other Senior Notes of any
authorized denominations, of a like
aggregate principal amount, upon tender
of the Senior Notes to be exchanged at
such office. Whenever any Senior Notes
are so tendered for exchange, the Company
shall execute and deliver the Senior
Notes which the Holder making the
exchange is entitled to receive. All
Senior Notes issued upon any registration
of transfer or exchange of Senior Notes
shall be the valid obligations of the
Company, evidencing the same
indebtedness, and entitled to the same
benefits under this Agreement, as the
Senior Notes tendered upon such
registration of transfer or exchange.
Every Senior Note presented or tendered
for registration of transfer or for
exchange shall be duly
PAGE 26
` endorsed, or be accompanied by a written
instrument of transfer in form satisfactory to the
Company duly executed, by the Holder thereof or his
attorney duly authorized in writing. No service
charge shall be made for any registration of
transfer or exchange of Senior Notes, but the
Company may require payment of a sum sufficient to
cover any tax or other governmental charge that may
be imposed in connection with any registration of
transfer or exchange of Senior Notes, other than
exchanges pursuant to the partial redemption of
Senior Notes hereunder not involving any transfer.
11.2. Mutilated, Destroyed, Lost and Stolen
Senior Notes. If any mutilated Senior Note is
tendered to the Company, the Company shall execute
and deliver in exchange therefor a new Senior Note
of like tenor and principal amount and bearing a
number not contemporaneously outstanding. If there
shall be delivered to the Company (i) evidence to
its satisfaction of the destruction, loss or theft
of any Senior Note and (ii) such security or
indemnity as may be required by it to save it and
any agent of it harmless, then, in the absence of
notice to the Company that such Senior Note has
been acquired by a bona fide purchaser, the Company
shall execute and deliver, in lieu of any such
destroyed, lost or stolen Senior Note, a new Senior
Note of like tenor and principal amount and bearing
a number not contemporaneously outstanding. In
case any such mutilated, destroyed, lost or stolen
Senior Note has become or is about to become due
and payable, the Company in its discretion may,
instead of issuing a new Senior Note, pay such
Senior Note. Upon the issuance of any new Senior
Note under this Section, the Company may require
the payment of a sum sufficient to cover any tax or
other governmental charge that may be imposed in
relation thereto and any other expenses connected
therewith. Every new Senior Note issued pursuant
to this Section in lieu of any destroyed, lost or
stolen Senior Note shall constitute an original
additional contractual obligation of the Company,
whether or not the destroyed, lost or stolen Senior
Note shall be at any time enforceable by anyone,
and shall be entitled to all the benefits of this
Agreement equally and proportionately with any and
all other Senior Notes duly issued hereunder.
PAGE 27
12. Successors. All covenants, stipulations,
promises and agreements contained in this Agreement
shall be binding upon and inure to the benefit of
and be enforceable by the successors and assigns of
the Company or the Holder, as the case may be,
except as provided in Section below.
13. No Waiver; Amendments. No failure by Holder
to insist upon the strict performance of any term
hereof or to exercise any right, power or remedy
consequent upon a breach thereof and no acceptance
of any payment of interest accrued on the Senior
Note or of any prepayment of principal on account
of the Senior Note during the continuance of any
such breach, shall constitute a waiver of any such
term or of any such breach. No waiver of any
breach shall affect or alter this Agreement, which
shall continue in full force and effect with
respect to any other then existing or subsequent
breach. The provisions of this Agreement may be
amended or waived only upon the prior written
consent of the Company and Holders of more than 50%
in principal amount of Senior Notes outstanding.
14. Representations Regarding Senior Notes. Each
Senior Note will be imprinted with a legend
substantially in the following form:
The payment of principal and interest on
this Senior Note is subject to the
provisions of the Agreement. This Senior
Note was originally issued on _________,
199_, and has not been registered under
the Securities Act of 1933, as amended.
The transfer of this Senior Note is
subject to certain restrictions set forth
in the Agreement. The issuer of this
Senior Note will furnish a copy of these
provisions to the holder hereof without
charge upon written request.
Notwithstanding any other provisions of
this Agreement or of the Senior Note,
each Holder desiring to transfer a
Senior Note first must furnish the
Company with (i) a written opinion
satisfactory to the Company in form and
substance from counsel satisfactory to
the Company to the effect that the
Holder may transfer the Senior Note as
desired without registration under state
or Federal securities laws and (ii) a
written
PAGE 28
undertaking executed by the desired
transferee satisfactory to the Company
in form and substance agreeing to be
bound by the restrictions on transfer
contained herein.
15. Confidentiality. Holder agrees to keep
confidential all confidential or proprietary
information provided pursuant to this Agreement and
not to use any such information for any commercial
purpose other than monitoring the financial
condition of the Company and familiarizing any
prospective purchaser of all or any portion of the
Senior Notes held by Holder with the business and
affairs of the Company upon such prospective
purchaser's signing a form of confidentiality
agreement reasonably acceptable to the Company;
provided, however, that (i) this Section shall not
apply to any such information that (A) is or shall
come into the public domain other than by reason of
a breach of this Section , (B) becomes available on
a non-confidential basis from a source that, to the
Knowledge of Holder, is not bound by a
confidentiality agreement protecting such
information, (C) is or was independently developed
by Holder without violating this Section or other
confidentiality agreement that, to the Knowledge of
Holder, protects such information or (D) is
required to be disclosed to a Governmental
Authority under any applicable Governmental Rule
and (ii) the rights of any such prospective
purchaser to receive upon, after or prior to the
purchase of all or any portion of the Senior Notes
held by such Holder, and the right of any Holder to
provide, any proprietary or confidential
information required to be provided or made
available pursuant to the terms of Section above
shall be subject to the Company's reasonable
determination that such prospective purchaser is
not competing with the Company or its Subsidiaries
in any material way within the Scope of Activity.
PAGE 29
If the foregoing correctly sets forth our
agreement, please indicate your acceptance thereof
by executing this instrument below in the space
indicated and returning the attached copy to the
Company, whereupon the foregoing shall become a
binding agreement between us.
Very truly yours,
[UNITED DEFENSE, L.P.
By: FMC Corporation
Its Managing
General Partner
By: _
Title]
THE FOREGOING IS ACCEPTED.
[HARSCO DEFENSE HOLDING, INC.
By: _
Title]
PAGE 30
EXHIBIT A
"Reference Debt to Capitalization Ratio" (Section
1.16) to be determined as follows:
The sum of:
(a) Consolidated Total Debt (1)
(b) Interval Debt
(c) Senior Notes
(A) Total (a)+(b)+(c)
Divided by:
The sum of:
(i) Appraised Value (2) _
(ii) Consolidated Total Debt (1) _
(iii) Interval Debt _
(iv) Senior Notes _
(B) Total (i)+(ii)+(iii)+(iv) _
Ratio Calculation:
(A) Total (a)+(b)+(c) _
(B) Total (i)+(ii)+(iii)+(iv)
Reference Debt to Capitalization Ratio (A)/(B) = _
Financial Condition Ratio: Determination of the
permitted Ratio of Consolidated Total Debt to
Consolidated Capitalization (pursuant to "Financial
Condition" (Section 6.4)):
Reference Debt to Capitalization Ratio (as above) _
Times 1.2 X 1.2
Permitted Ratio of Consolidated Total Debt to
Consolidated Capitalization _
(1) Consolidated Total Debt outstanding on the
date of the receipt of the Company of the Limited
Partner's notice of the exercise of its put option
(2) The Appraised Value of the Company for
purposes of establishing the put option price,
pursuant to Section 7.2(c) of the Partnership
Agreement, multiplied by the aggregate share
percentages immediately preceding the issuance of
the Senior Notes of all of the Company's Partners
other than Harsco L.P.
PAGE 31
EXHIBIT B
[UNITED DEFENSE, L.P.]
Six-Month LIBOR Plus 100 B.P. Senior Notes
$ Dated: _
FOR VALUE RECEIVED, the undersigned, [UNITED
DEFENSE, L.P., a Delaware limited partnership with its
principal office at [Address]] ("the Company"), hereby
promises to pay to the order of _____________________
("Holder"), the principal sum of $ , payable in
five equal annual installments beginning on the first
anniversary of the date hereof, and to pay interest
semiannually beginning on the six-month anniversary of
the date hereof, on the unpaid principal sum from the
date hereof at the interest rate equal to the six-month
LIBOR rate in effect on the Determination Date plus 100
basis points. If the day on which payment of principal
or interest is due falls on a Saturday, Sunday or legal
holiday, then such payment shall be made on the first
Business Day thereafter. If the entire principal sum or
any installment of interest on the unpaid principal sum
is not paid in full on the respective due dates thereof,
interest on the unpaid principal amount and, to the
extent lawful, unpaid interest shall accrue at the rate
of the three-month LIBOR rate in effect on the
Determination Date plus 200 basis points. Payments of
principal and interest shall be made to account [Number]
of Holder with [Depository institution] by wire transfer
of immediately available funds or to such other place as
Holder shall designate to the Company in writing.
Reference is hereby made to the further
provisions of this Senior Note set forth on the reverse
hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.
IN WITNESS WHEREOF, the Company has caused this
instrument to be duly executed under its corporate seal.
Dated: [UNITED DEFENSE, L.P.
By: FMC Corporation
Its Managing General Partner
By:
Title]
Attest:
_________________________
PAGE 32
[FORM OF REVERSE OF SENIOR NOTE]
This Senior Promissory Note is a duly
authorized issue of Senior Notes of the Company
designated as its Six-Month LIBOR Plus 100 B.P.
Senior Notes (the "Senior Notes"), issued and to be
issued under and pursuant to a Senior Promissory
Note Agreement (the "Agreement"), dated
, between the Company and Harsco Defense Holding,
Inc., a Delaware corporation, to which Agreement
reference is hereby made for a statement of the
respective rights, limitations of right, duties,
and immunities thereunder of the Company and the
Holder. No reference herein to or provision of the
Agreement or any other agreement between the
Company and the Holder shall alter or impair the
obligation of the Company, which is absolute and
unconditional, to pay the principal of and interest
on this Senior Note at the times, place and rates,
prescribed herein.
This Senior Note is subject to prepayment
upon not less than five Business Days' notice by
mail at any time, as a whole or in part, at the
election of the Company at a Redemption Price equal
to 100% of the principal amount, together with
accrued interest to the date of prepayment. If any
Senior Note called for redemption shall not be paid
upon tender thereof for redemption, the principal
and, to the extent lawful, any unpaid interest
shall, until paid, bear interest from the date of
prepayment at the rate of the three-month LIBOR
rate in effect on the prepayment date plus 200
basis points. In the event of redemption of this
Senior Note in part only, a new Senior Note or
Senior Notes for the unredeemed portion hereof will
be issued in the name of the Holder hereof upon the
cancellation hereof.
The Debt evidenced by this Senior Note
shall be general, unsecured (subject to Section of
the Agreement) Debt of the Company. The Senior
Notes shall at all times rank and be treated pari
passu with Debt, other than Subordinated Debt,
incurred by the Company on or after the date
hereof.
For purposes of this Senior Note,
"Determination Date" means (i) with respect to the
initial semi-annual payment of interest hereunder,
the six-month anniversary of the date hereof (or if
such six-month anniversary falls on a day other
than a Business Day, the next Business Day); (ii)
with respect to any subsequent semi-annual payment
of interest
PAGE 33
hereunder, the first Business Day of the period for
which interest is being paid; and (iii) with
respect to any payment of interest on any overdue
installment of principal and/or interest, the date
on which such installment of principal and/or
interest was due (or if such date falls on a day
other than a Business Day, the next Business Day).
"LIBOR" means the applicable London Interbank
Offered Rate as set forth in The Wall Street
Journal.
The payment of principal and interest on
this Senior Note is subject to the provisions of
the Agreement. This Senior Note was originally
issued on _________, 199_, and has not been
registered under the Securities Act of 1933, as
amended. The transfer of this Senior Note is
subject to certain restrictions set forth in the
Agreement. The issuer of this Senior Note will
furnish a copy of these provisions to the holder
hereof without charge upon written request.
As provided in the Agreement and subject
to certain limitations therein set forth, the
transfer of this Senior Note is registrable in the
Senior Note Register, upon tender of this Senior
Note for registration of transfer at the Company's
principal office, duly endorsed by, or accompanied
by a written instrument of transfer in form
satisfactory to the Company duly executed by, the
Holder hereof or his attorney duly authorized in
writing, and thereupon one or more new Senior
Notes, of authorized denominations and for the same
aggregate principal amount, will be issued to the
designated transferee or transferees.
If any Event of Default shall occur and
be continuing, the principal of the Senior Note may
be declared due and payable in the manner and with
the effect provided in the Agreement.
Prior to due presentment of this Senior
Note for registration of transfer, the Company and
any agent of the Company may treat the Person in
whose name this Senior Note is registered as the
owner hereof for all purposes, whether or not this
Senior Note be overdue, and neither the Company nor
any such agent shall be affected by notice to the
contrary.
Unless otherwise defined herein, all
terms used in this Senior Note which are defined in
the Agreement (including definitions incorporated
therein by reference) shall have the meanings
assigned to them in the Agreement.
