<PAGE>
Form 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1994
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 1-9294
Imo Industries Inc.
(Exact name of registrant as specified in its charter)
Delaware 21-0733751
(State of other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1009 Lenox Drive, Building Four West
Lawrenceville, New Jersey 08648
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code 609-896-7600
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date: Common Stock, $1.00 Par
Value-- 16,965,556 shares as of October 31, 1994.
<PAGE> 1
INDEX
Page
Number
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited).
Consolidated Statements of Income--Three and nine
months ended September 30, 1994 and 1993 2
Consolidated Balance Sheets--September 30, 1994 and
December 31, 1993 3
Consolidated Statements of Cash Flows--Nine
months ended September 30, 1994 and 1993 4
Notes to Consolidated Financial Statements--
September 30, 1994 5-13
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations. 13-19
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K. 20
SIGNATURES 21
<PAGE> 2
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements.
<TABLE>
Imo Industries Inc. and Subsidiaries
Consolidated Statements of Income
(Dollars in thousands except per share amounts)
<CAPTION>
Three Months Nine Months
Ended September 30, Ended September 30,
1994 1993* 1994 1993*
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
NET SALES $ 113,421 $ 117,546 $ 347,393 $ 382,057
Cost of products sold 81,792 82,295 250,765 269,678
GROSS PROFIT 31,629 35,251 96,628 112,379
Selling, general and
administrative expenses 19,571 26,947 63,123 81,396
Research and development expenses 1,333 2,233 4,471 6,988
Unusual Items --- (6,000) --- (6,000)
INCOME FROM OPERATIONS 10,725 12,071 29,034 29,995
Interest expense 8,504 10,336 25,787 30,626
Interest income (355) (195) (1,002) (470)
Other (income) net (245) (946) (359) (949)
Equity in (income) loss of
unconsolidated companies (25) 2 25 281
INCOME FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES, MINORITY
INTEREST AND EXTRAORDINARY ITEM 2,846 2,874 4,583 507
INCOME TAXES (BENEFIT)
Current 861 1,091 1,766 193
Deferred --- 1,390 --- (193)
TOTAL INCOME TAXES 861 2,481 1,766 ---
Minority interest (66) 46 267 106
INCOME FROM CONTINUING OPERATIONS
BEFORE EXTRAORDINARY ITEM 2,051 347 2,550 401
Income (loss) from discontinued operations
(net of income taxes of $.3 million
and $.4 million for the 1994 and
1993 three month periods, and
$.6 million for the 1994 nine
month period) 737 (6,584) 2,895 (7,314)
Extraordinary item - loss on
extinguishment of debt (5,299) (6,876) (5,299) (18,095)
NET INCOME (LOSS) $ (2,511) $ (13,113) $ 146 $ (25,008)
Earnings (loss) per share:
Continuing operations before
extraordinary item $0.12 $0.02 $0.15 $0.02
Discontinued operations $0.04 ($0.39) $0.17 ($0.43)
Extraordinary item ($0.31) ($0.41) ($0.31) ($1.07)
Net income (loss) ($0.15) ($0.78) $0.01 ($1.48)
Weighted average number of shares
outstanding 16,917,738 16,888,770 16,913,857 16,884,270
</TABLE>
See accompanying notes to consolidated financial statements.
*Reclassified to conform to 1994 presentation.
<PAGE> 3
<TABLE>
Imo Industries Inc. and Subsidiaries
Consolidated Balance Sheets
(Dollars in thousands)
<CAPTION>
September 30, December 31,
1994 1993*
(Unaudited)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ $ 22,356
Trade accounts and notes receivable, less
allowance of $2,822 in 1994 and $2,951 in 1993 91,153 79,293
Inventories--net 88,179 89,106
Recoverable income taxes --- 3,826
Deferred income taxes 1,023 2,680
Net assets of discontinued operations - current 68,302 73,766
Prepaid expenses and other current assets 8,320 13,685
TOTAL CURRENT ASSETS 302,781 284,712
PROPERTY, PLANT AND EQUIPMENT--on the basis of cost 236,568 247,395
Less allowances for depreciation and amortization (115,729) (109,870)
NET PROPERTY, PLANT AND EQUIPMENT 120,839 137,525
INTANGIBLE ASSETS, PRINCIPALLY GOODWILL 85,601 88,250
INVESTMENTS IN AND ADVANCES TO UNCONSOLIDATED COMPANIES 3,736 3,337
NET ASSETS OF DISCONTINUED OPERATIONS - NONCURRENT 72,994 67,945
OTHER ASSETS 23,425 23,784
TOTAL ASSETS $ 609,376 $ 605,553
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES
Notes payable $ 10,562 $ 42,759
Trade accounts payable 49,880 39,978
Accrued expenses and other liabilities 64,672 73,657
Accrued costs related to discontinued operation 13,912 12,688
Income taxes payable 2,347 ---
Current portion of long-term debt 17,329 8,527
TOTAL CURRENT LIABILITIES 158,702 177,609
LONG-TERM DEBT 382,019 353,752
DEFERRED INCOME TAXES 12,307 13,944
ACCRUED POSTRETIREMENT BENEFITS - LONG-TERM 30,012 33,186
ACCRUED PENSION EXPENSE AND OTHER LIABILITIES 54,804 61,034
TOTAL LIABILITIES 637,844 639,525
MINORITY INTEREST 2,168 1,746
SHAREHOLDERS' EQUITY (DEFICIT)
Preferred Stock: $1.00 par value; authorized and
unissued 5,000,000 shares --- ---
Common Stock: $1.00 par value; authorized
25,000,000 shares; issued 18,607,951 shares
in 1994 and 18,584,058 shares in 1993 18,608 18,584
Additional paid-in capital 79,232 79,080
Retained earnings (deficit) (110,087) (110,233)
Cumulative foreign currency translation adjustments 1,399 (3,361)
Minimum pension liability adjustment (1,768) (1,768)
Treasury stock at cost--1,672,788 shares in 1994
and 1993 (18,020) (18,020)
TOTAL SHAREHOLDERS' EQUITY (DEFICIT) (30,636) (35,718)
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT) $ 609,376 $ 605,553
</TABLE>
See accompanying notes to consolidated financial statements.
* Reclassified to conform to 1994 presentation.
<PAGE> 4
<TABLE>
Imo Industries Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(Dollars in thousands)
<CAPTION>
Nine Months
Ended September 30,
1994 1993*
(Unaudited)
<S> <C> <C>
OPERATING ACTIVITIES
Net income (loss) $ 146 $ (25,008)
Adjustments to reconcile net income (loss) to net
cash provided by (used in) continuing operations:
Discontinued operations (2,895) 7,314
Depreciation 12,344 14,471
Amortization 4,389 3,427
Provision for losses on accounts receivable 589 719
Deferred tax benefit --- (193)
Equity in earnings of unconsolidated companies
in excess of dividends received (25) (281)
Minority interest in net income 267 106
Extraordinary item 5,299 18,095
Gain on sale of property, plant and equipment (10) (47)
Unusual items --- (6,000)
Other changes in operating assets and liabilities:
(Increase) decrease in accounts and notes receivable (13,030) 2,417
(Increase) decrease in inventories (2,939) 6,235
Decrease in recoverable income taxes 3,826 7,168
Increase in accounts payable and accrued expenses 6,689 3,014
Other operating assets and liabilities 4,057 (7,845)
Net cash provided by continuing operations 18,707 23,592
Net cash provided (used) by discontinued operations 7,721 (3,376)
NET CASH PROVIDED BY OPERATING ACTIVITIES 26,428 20,216
INVESTING ACTIVITIES
Purchases of property, plant and equipment (4,395) (6,700)
Proceeds from sale of property, plant and equipment 174 49
Proceeds from sale of businesses, net 12,681 60,006
Net cash used by discontinued operations (2,199) (3,607)
Other (1,097) (292)
NET CASH PROVIDED BY INVESTING ACTIVITIES 5,164 49,456
FINANCING ACTIVITIES
Decrease in notes payable (32,860) (33,334)
Proceeds from long-term borrowings 85,302 2,593
Principal payments on long-term debt (50,245) (38,789)
Payment of debt financing costs (10,953) (7,870)
Proceeds from stock options exercised 176 ---
Dividends paid to minority interests --- (82)
Other 82 (20)
NET CASH USED IN FINANCING ACTIVITIES (8,498) (77,502)
Effect of exchange rate changes on cash 354 (17)
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 23,448 (7,847)
Cash and cash equivalents at beginning of period 22,356 16,669
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 45,804 $ 8,822
Supplemental disclosures of cash flow information:
Cash paid (received) during the period for:
Interest expense $ $
Income taxes $ $
</TABLE>
See accompanying notes to consolidated financial statements.
* Reclassified to conform to 1994 presentation.
<PAGE> 5
Imo Industries Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited with respect to
September 30, 1994 and 1993 and the periods then ended.)
NOTE A--SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation: The accompanying unaudited consolidated financial
statements have been prepared in accordance with generally accepted accounting
principles for interim financial information and with the instructions to Form
10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all
of the information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of management,
all adjustments (consisting only of normal recurring accruals) considered
necessary for a fair presentation have been included. Operating results for
the nine months ended September 30, 1994 are not necessarily indicative of the
results that may be expected for the year ending December 31, 1994. For
further information, refer to the consolidated financial statements and
footnotes thereto included in the Company's annual report on Form 10-K for the
year ended December 31, 1993.
Restatements: The Consolidated Financial Statements, and the notes thereto,
have been restated to reflect the Company's Turbomachinery business segment,
along with its Electro-Optical Systems business segment, as discontinued
operations, in accordance with Accounting Principles Board Opinion No. 30.
The 1993 and 1994 amounts have been restated to conform to the current year
presentation.
NOTE B--DISCONTINUED OPERATIONS
Electro-Optical Business
In January 1994, pursuant to a plan approved by the Board of Directors, the
Company announced its intention to dispose of its Electro-Optical Systems
operations. On September 28, 1994, the Company announced that it had entered
into a letter of intent for the acquisition of its Baird Analytical
Instruments Division by a subsidiary of Thermo Instruments Systems Inc. for
approximately $13.5 million, and on October 17, 1994, the Company announced
that it had entered into a definitive agreement to sell the Varo Inc. and
Baird Optical Systems operations of its Electro-Optical Systems business to a
subsidiary of Texas Pacific Group for approximately $70 million in cash. These
two sales will substantially complete the Company's planned divestiture of its
Electro-Optical Systems operations. The closings of the sales of these
operations are expected to occur by the end of 1994. The sale of the Varo
Inc. and Baird Optical Systems operations is subject to the fulfillment of
various conditions, including receipt of certain government approvals.
Turbomachinery Business
On July 28, 1994, the Company announced that it had reached an agreement in
principle to sell its Delaval Turbine and TurboCare divisions, which comprise
<PAGE> 6
substantially all of the Company's Turbomachinery business segment, and its
50% interest in Delaval-Stork, a Dutch joint venture, to Mannesmann Demag of
Dusseldorf, Germany, for $124 million in cash. The parties entered into a
letter of intent in August 1994 and the sale has been approved by the
Company's Board of Directors. On November 4, 1994, the parties entered into a
definitive agreement. Closing of the sale, which is expected to occur during
the first quarter of 1995, is subject to receipt of certain government
approvals. Management estimates that the sale of its Turbomachinery business
and its 50% interest in Delaval-Stork will result in a significant net gain to
the Company.
In accordance with APB Opinion No. 30, the disposals of each of these business
segments have been accounted for as discontinued operations and, accordingly,
their operating results have been segregated and reported as Discontinued
Operations in the accompanying Consolidated Statements of Income. Certain 1993
and 1994 amounts have been reclassified to conform to the current year
presentation.
Net assets and liabilities of the Discontinued Operations consist of the
following:
September 30, December 31,
(Dollars in thousands) 1994 1993
(Unaudited)
Current Assets:
Receivables $48,162 $48,122
Inventories 69,721 80,241
Other current assets 1,783 2,068
119,666 130,431
Current Liabilities:
Trade accounts payable 21,420 23,637
Other current liabilities 29,944 33,028
51,364 56,665
Net Current Assets $68,302 $73,766
Long-term Assets $87,233 $84,597
Long-term Liabilities 14,239 16,652
Net Long-term Assets $72,994 $ 67,945
Net Assets $141,296 $141,711
Net Assets related to the Electro-Optical Systems business are $85 million as
of September 30, 1994 and December 31, 1993, and net assets related to the
Turbomachinery business are $56.3 million and $56.7 million as of September
30, 1994 and December 31, 1993, respectively.
<PAGE> 7
A condensed summary of operations for the Discontinued Operations is as follows:
Three Months Ended Nine Months Ended
September 30, September 30,
(Dollars in thousands) 1994 1993 1994 1993
(Unaudited) (Unaudited)
Net Sales $80,185 $84,514 $256,555 $232,032
Income (loss) from
operations before
income taxes and
minority interest 1,020 (5,972) 3,476 (6,944)
Income taxes 283 370 581 ---
Minority interest --- 242 --- 370
Income (loss) from
operations $ 737 $(6,584) $ 2,895 $(7,314)
Income (loss) from operations of the Discontinued Operations for the three and
nine month periods ended September 30, 1994 and 1993 include allocated
interest expense of $4.2 million, $4.3 million, $12.5 million and $12.8
million, respectively. Interest expense was allocated based on the ratio of
the estimated net assets to be sold in relation to the sum of the Company's
shareholders' equity and the aggregate of outstanding debt at each period end.
See Note H for discussion of contingencies related to the Electro-Optical
Systems and Turbomachinery businesses.
NOTE C--INVENTORIES
Inventories (in thousands of dollars) are summarized as follows:
September 30, December 31,
1994 1993
(Unaudited)
Finished products $33,310 $ 38,476
Work in process 34,911 28,669
Materials and supplies 34,663 36,037
_________ __________
102,884 103,182
Less customers' progress payments 1,552 2,255
Less valuation allowance 13,153 11,821
_________ __________
$88,179 $89,106
<PAGE> 8
NOTE D--ACCRUED EXPENSES AND OTHER LIABILITIES
Accrued expenses and other liabilities (in thousands of dollars) consist of
the following:
September 30, December 31,
1994 1993
(Unaudited)
Accrued contract completion costs $ 578 $ 886
Accrued product warranty costs 4,837 4,050
Accrued litigation and claim costs 7,846 14,312
Payroll and related items 15,947 13,872
Accrued interest payable 10,045 11,590
Accrued restructuring costs 3,700 7,189
Other 21,719 21,758
__________ __________
$64,672 $73,657
NOTE E--NOTES PAYABLE AND LONG TERM DEBT
Effective August 5, 1994, the Company obtained credit facilities for
borrowings up to $150 million from a group of lenders (the "New Credit
Agreement"), secured by the assets of the Company's domestic operations and
all or a portion of the stock of certain of the Company's subsidiaries. The
New Credit Agreement provides for a $65 million revolving credit facility
through July 31, 1997, a $40 million term loan amortizing to July 1997, and a
$45 million bridge loan maturing January 1996. Both the revolving credit
facility and the term loan are extendible to July 1999 under certain
conditions. Proceeds from the New Credit Agreement were used to repay the
Company's working capital loans under the former domestic senior credit
facilities, its $30 million 12.75% Senior Note and its $12.4 million Make-
Whole Note.
Pursuant to the New Credit Agreement, net cash proceeds from the Company's
sale of its Electro-Optical Systems must be applied on a dollar-for-dollar
basis to repay the Company's bridge loan, then on a $.50-on-the-dollar basis
to repay the Company's term loan, and thereafter to any outstanding loans
under the revolving credit facility.
As of September 30, 1994, there were no borrowings against the $65 million
revolving credit facility; however, $35.1 million in standby letters of credit
were outstanding. The Company currently has approximately $35 million in
foreign short-term credit facilities with approximately $10.6 million
outstanding thereunder.
<PAGE> 9
Long-term debt of continuing operations consists of the following:
September 30, December 31,
(Dollars in thousands) 1994 1993
(Unaudited)
Promissory note with interest at 12.75%,
due March 31, 1995 $ --- $ 30,000
Promissory note with interest at 10.35%,
$5 million due annually from
1994 to 2003 --- 4,379
Make-Whole Notes with interest at 2%
over the prime rate, due December 31, 1996 --- 11,519
Bridge Loan due January 31, 1996 (1) 45,000 ---
Term Loan, $3.3 million due quarterly
October 31, 1994 to July 31, 1997 (2) 40,000 ---
Senior subordinated debentures with
interest at 12.25%, due August 15, 1997 150,000 150,000
Senior subordinated debentures with
interest at 12%, due November 1,
1999 to 2001 150,000 150,000
Other 14,348 16,381
399,348 362,279
Less current portion 17,329 8,527
$382,019 $353,752
(1) This loan bears interest at a rate equal to the sum of the "Eurodollar
Rate" calculated in accordance with the New Credit Agreement plus 4.5% for
the first six months after the closing date of the New Credit Agreement, and
increasing by 0.25% every three months thereafter; provided, however, that the
margin is subject to reduction by 0.5% per annum under certain circumstances
specified in the New Credit Agreement.
(2) This loan bears interest at the rate of 2.75% in excess of the
"Eurodollar Rate" calculated in accordance with the New Credit Agreement;
provided, however, that the 2.75% margin is subject to reduction by 0.5% per
annum under certain circumstances specified in the New Credit Agreement.
______________________________________________________________________________
The aggregate annual maturities of long-term debt from continuing operations,
in thousands, for the four years subsequent to 1994 are: 1995 - 16,708; 1996
- - - $60,421; 1997 - $161,445; and 1998 - $926.
Total debt of the discontinued operations, in thousands, amounted to $1,881
and $1,919 for September 30, 1994 and December 31, 1993, respectively. Of
these amounts, approximately $1,774 and $1,807 represent the long-term
portion.
The 12.25% senior subordinated debentures are redeemable in whole or in part,
at the option of the Company at any time, at 100% of their principal amount,
<PAGE> 10
plus accrued interest. Interest is payable semi-annually on February 15 and
August 15.
The 12% senior subordinated debentures are currently redeemable in whole or in
part, at the option of the Company, at 105% of their principal amount, plus
accrued interest, declining to 100% of their principal amount, plus accrued
interest at any time on or after November 1, 1996. Interest is payable semi-
annually on May 1 and November 1.
The New Credit Agreement requires the Company, among other things, to meet
certain objectives with respect to financial ratios and it and the 12.25% and
12% senior subordinated debentures contain provisions which place certain
limitations on dividend payments and outside borrowings. Under the most
restrictive of such provisions, the Company must maintain certain minimum
consolidated net worth levels, interest coverage and fixed charge coverage
levels and the Company is prohibited from declaring or paying cash dividends
through at least July 31, 1997.
Bank, advisory and legal fees associated with the refinancing of the New
Credit Agreement amounted to approximately $5.6 million payable in 1994. In
addition, a $5.3 million ($.31 per share) charge related to the extinguishment
of senior debt under the former domestic senior credit facilities was recorded
as an extraordinary item in 1994. The $5.3 million charge is comprised of a
$3.7 million premium paid in 1994 on the prepayment of its $30 million 12.75%
senior promissory note and the write-off of approximately $1.6 million of
previously deferred loan costs.
NOTE F--EARNINGS (LOSS) PER SHARE
Earnings (loss) per share for 1994 and 1993 are based upon the weighted
average number of shares of common stock outstanding. Common stock equivalents
related to stock options and warrants are excluded because their effect is not
material.
NOTE G--POSTRETIREMENT BENEFITS
In March 1994, the Company amended its policy regarding retiree medical and
life insurance. This amendment, which affects some current retirees and all
future retirees, phases out the Company subsidy for retiree medical and life
insurance over a three year period ending December 31, 1996. The Company
expects to amortize associated reserves to income from continuing operations
over the phase out period at approximately $4 million per year on a pretax
basis. The pretax amounts amortized to income were $1.0 million and $3.1
million for the three and nine month periods ended September 30, 1994,
respectively. The Company does not anticipate a significant increase or
decrease in cash requirements related to this change in policy during the
phase out period.
NOTE H--CONTINGENCIES
In August 1985, the Company was named as defendant in a lawsuit filed by Long
Island Lighting Company ("LILCO"). The action stemmed from the sale of three
<PAGE> 11
diesel generators to LILCO for use at its Shoreham Nuclear Power Station.
During testing of the diesel generators, the crankshaft of one of the diesel
generators severed. The Company's insurers have defended the action under a
reservation of rights.
On April 10, 1991, a jury, in a trial limited to liability, in the U.S.
District Court in the Southern District of New York, found that the warranty
was in effect from the time of shipment of the diesel generators until July
1986. On July 22, 1992, the trial court entered a judgment in the amount of
$18.3 million which included interest to the judgment date.
On September 22, 1993, the Second Circuit Court of Appeals affirmed all lower
court decisions in this matter. On October 25, 1993, the judgment against the
Company was satisfied by payment to LILCO of approximately $19.3 million by
two of the Company's insurers.
In late June 1992, the Company filed an action in the Northern District of
California against one of its insurers in an attempt to collect amounts for
defense costs paid to counsel retained by the Company in defense of the LILCO
litigation. The insurer has refused to reimburse the Company for
approximately $8 million in defense costs paid by the Company alleging that
defense costs above reasonable levels were expended in defending this
litigation. Upon motion by the defendant this action has now been transferred
to the Southern District of New York and assigned to one of the judges who
heard the underlying LILCO trial.
In January 1993, the Company was served a complaint in a case brought in
California by another insurer alleging that the insurer was entitled to
recover $10 million in defense costs previously paid in connection with the
LILCO matter and $1.2 million of the judgment which was paid on behalf of the
Company. The complaint alleges inter alia that the insurer's policies did not
cover the matters in question in the LILCO case. An Answer and various
motions have been filed in connection with this matter.
The Company and one of its subsidiaries are two of a large number of
defendants in a number of lawsuits brought by approximately 20,000 claimants
who allege injury caused by exposure to asbestos. Although the Company and
its subsidiary have never been producers or direct suppliers of asbestos, it
is alleged that the industrial and marine products sold by the Company and the
subsidiary had components which contained asbestos. The allegations state a
claim for asbestos exposure when Company-manufactured equipment was maintained
or installed. Suits against the Company have been tendered to its insurers who
are defending under their stated reservation of rights. The insurers for the
subsidiary are being identified and have been and will be provided notice.
Settlement agreements relating to approximately 10,000 claimants have been
reached. Should additional settlements be reached at comparable levels, the
settlements would not be expected to have a material effect on the Company.
The activities of certain employees of the Ni-Tec Division of the Company's
Varo Inc. subsidiary ("Ni-Tec"), headquartered in Garland, Texas, are the
focus of an ongoing investigation by the Office of the Inspector General of
the United States Department of Defense and the Department of Justice
<PAGE> 12
(Criminal Division). On July 16, 1992, Ni-Tec received a subpoena for certain
records as a part of the investigation, which subpoena has been responded to.
Additional subpoenas for additional documents were received in September 1992,
February 1993, and March 1994. The Company responded to the September and
March subpoenas and the government subsequently withdrew the February
subpoena. The investigation appears directed at quality control, testing and
documentation activities which began at Ni-Tec while it was a division of
Optic-Electronic Corp. Optic-Electronic Corp. was acquired by the Company in
November 1990 and subsequently merged with Varo Inc. in 1991. The Company
continues to cooperate fully with the investigation.
The Securities and Exchange Commission (the "Commission") is conducting an
inquiry into, among other things, certain accounting practices at Ni-Tec and
the 1991 and 1992 fiscal year financial reporting by the Company with respect
thereto. The Commission has sought certain information from the Company
relating to such inquiry and the Company has cooperated with this request.
The Company was notified in August 1994 that its Electro-Optical operations
are being investigated by the United States Attorney for the District of
Columbia. The investigation concerns the appropriateness of certifications
submitted by Company personnel regarding its contracts with the Arab Republic
of Egypt that were funded by the United States Government. In connection with
this investigation, the Company has received and has responded to a subpoena
issued by the Grand Jury for the District of Columbia.
Regarding environmental matters, the operations of the Company, like those of
other companies engaged in similar businesses, involve the use, disposal and
cleanup of substances regulated under environmental protection laws.
In a number of instances the Company has received Notice of Potential
Liability from the United States Environmental Protection Agency alleging that
various of its divisions had arranged for the disposal of hazardous wastes at
a number of facilities that have been targeted for cleanup pursuant to the
Comprehensive Environmental Response Compensation and Liability Act
("CERCLA"). Although CERCLA liability is joint and several, the Company
believes that its liability will not have a material adverse effect on the
financial condition of the Company since it believes that it qualifies as a de
minimis or minor contributor to each site with a large number of Potential
Responsible Parties ("PRP's") having a greater share. Accordingly, the Company
believes that the portion of remediation costs that it will be responsible for
will therefore not be material.
The Company is a defendant in an action filed in the United States District
Court for the Middle District of Louisiana brought by Gulf States Utilities
Company ("GSU"). The complaint alleges that the Company breached its contract
for the sale of two emergency diesel generators delivered to GSU's River Bend
Nuclear Generating Station in 1981 and 1982. GSU alleges that it has incurred
a loss of $8 million and claims additional amounts for the use of money and an
equitable adjustment of the purchase price. In July 1992, the District Court
for the Middle District of Louisiana granted the Company's motion for Summary
Judgment dismissing GSU's claims. In November 1993, the Fifth Circuit Court
of Appeals reversed and remanded the case for trial. The ruling eliminated
<PAGE> 13
the Company's statute of limitations defense, but preserved all other
defenses. The Company has recently learned that the District Court will set
this matter for trial in early 1995.
The Company also has one other lawsuit pending against it relating to
equipment sold by its former diesel engine division and a lawsuit relating to
performance shortfalls in products delivered by its Delaval Turbine Division
in a prior year.
With respect to the litigation and claims described in the preceding
paragraphs, it is management's opinion that the Company either expects to
prevail, has adequate insurance coverage or has established appropriate
reserves to cover potential liabilities; however, the ultimate outcome of any
of these matters is indeterminable at this time.
In addition, the Company is involved in various other pending legal
proceedings arising out of the Company's business. The adverse outcome of any
of these legal proceedings is not expected to have a material adverse effect
on the financial condition of the Company. However, if all or substantially
all of these legal proceedings were to be determined adversely to the Company,
which is viewed by the Company as only a remote possibility, there could be a
material adverse effect on the financial condition of the Company.
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations.
The following paragraphs provide Management's discussion and analysis of the
significant factors which have affected the Company's financial condition and
results of operations during the three and nine month periods ended September
30, 1994.
Restructuring Plan
The Company has completed a significant portion of the asset divestiture
program adopted in October 1992. The Company sold its Heim Bearings,
Aerospace and Barksdale Controls operations for aggregate proceeds of
approximately $91 million in 1993 and its CEC Instruments Division, Corporate
headquarters building and other previously identified assets for $13.1 million
in the first nine months of 1994. Net proceeds from these sales have been
used to reduce senior debt. Results of these operations to their date of sale
as well as operations remaining to be sold, other than the Electro-Optical and
Turbomachinery businesses, are included in continuing operations reported in
the consolidated financial statements.
In January 1994, pursuant to a plan approved by the Board of Directors, the
Company announced its intention to dispose of its Electro-Optical Systems
operations. On September 28, 1994, the Company announced that it had entered
into a letter of intent for the acquisition of its Baird Analytical
Instruments Division by a subsidiary of Thermo Instruments Systems Inc. for
approximately $13.5 million, and on October 17, 1994, the Company announced
that it had entered into a definitive agreement to sell the Varo Inc. and
<PAGE> 14
Baird Optical Systems operations of its Electro-Optical Systems business to a
subsidiary of Texas Pacific Group for approximately $70 million in cash. These
two sales will substantially complete the Company's planned divestiture of its
Electro-Optical Systems operations. The closings of the sales of these
operations are expected to occur by the end of 1994. The sale of the Varo Inc.
and Baird Optical Systems operations is subject to the fulfillment of various
conditions, including receipt of certain government approvals.
On July 28, 1994, the Company announced that it had reached an agreement in
principle to sell its Delaval Turbine and TurboCare divisions, which are
substantially all of the Company's Turbomachinery business segment, and its
50% interest in Delaval-Stork, a Dutch joint venture, to Mannesmann Demag of
Dusseldorf, Germany, for $124 million in cash. The parties entered into a
letter of intent in August 1994 and the sale has been approved by the
Company's Board of Directors. On November 4, 1994, the parties entered into a
definitive agreement. Closing of the sale, which is expected to occur in the
first quarter of 1995, is subject to receipt of certain government approvals.
Management estimates that the sale of its Turbomachinery business and its 50%
interest in Delaval-Stork will result in a significant net gain to the
Company.
The results of operations and net assets of the Electro-Optical and
Turbomachinery businesses are each being accounted for as discontinued
operations in the accompanying consolidated financial statements.
Accordingly, the discussion which follows concerns only the results of
continuing operations. The 1993 and 1994 amounts have been reclassified to
conform to this presentation.
The Company has implemented cost-cutting measures at its core operations to
reduce its expense structure and to eliminate duplicative functions. The
Company has consolidated certain operations in the European mechanical
controls and automotive components divisions and is revising operating
processes and reducing employment levels at the pumps and other operations.
The number of employees in continuing operations company-wide declined by
approximately 370, or 10% between mid-1993 and mid-1994. These organizational
restructuring measures have been providing net cash benefits, which for
continuing operations, will approximate $2 million in 1994 and $6 million
annually thereafter based largely on reduced employment costs. The majority of
the restructuring has been completed, with the remaining portion expected to
be completed over the next three to six months.
The Company has realigned its core businesses into two new groupings for
segment reporting purposes. The Mechanical Controls Group, which previously
contained three of the Aerospace divisions (sold September 1993), is now
called the Morse Controls segment. The Power Transmission Group lost two
Aerospace divisions through divestiture but gained Gems Sensors, Fincor
Electronics and TransInstruments through realignment. This Group is now
reported as Pumps, Power Transmission and Controls segment.
<PAGE> 15
Results of Operations
Three months ended September 30, 1994 vs. 1993
Net sales in the third quarter of 1994 were $113.4 million, compared with
$117.5 million for the same period a year ago. Sales from core operations
(excluding operations divested since the beginning of 1993 or pending
divestiture) were $111.5 million for the third quarter of 1994, compared with
$95.4 million for the third quarter of 1993, a 16.9% increase.
Income from continuing operations before extraordinary item for the third
quarter of 1994 was $2.1 million ($0.12 per share). This compared with income
from continuing operations before extraordinary items of $0.3 million ($0.02
per share) in the third quarter of 1993. The 1993 quarter includes unusual
income of $6 million as a result of a change in estimate related to legal
costs associated with pending litigation.
After giving effect to an extraordinary charge of $5.3 million ($0.31 per
share) related to the early extinguishment of debt in connection with the
restructuring of the Company's senior credit facilities and income from
discontinued operations of $0.7 million after tax ($0.04 per share), a net
loss for the third quarter of 1994 of $2.5 million, ($0.15 per share) was
recorded. There was a net loss for the third quarter of 1993 of $13.1 million
($0.78 per share). This included an extraordinary charge of $6.9 million
after-tax ($0.41 per share) provided against the related tax benefit recorded
in the second quarter of 1993, and a loss from discontinued operations of $6.6
million after tax ($0.39 per share).
Average borrowings in the third quarter of 1994 were $52 million lower than
for the same period in 1993 because of debt pay-downs from proceeds of asset
sales. As a result, total interest expense (before allocation to discontinued
operations) of $12.7 million in 1994 was $1.9 million less than in 1993. The
interest expense for continuing operations shown in the Consolidated
Statements of Income excludes interest expense allocated to the discontinued
operations of $4.2 million in 1994 and $4.3 million in 1993.
Morse Controls segment sales were up 29.0% in the third quarter of 1994,
compared with the third quarter a year ago, lead by a 47% increase at Roltra-
Morse. Worldwide sales elsewhere in the segment were up 16.4%. Segment
operating margins improved across the board, with the result that segment
operating income more than tripled compared with last year's level.
The improvement in sales at Roltra-Morse, the segment's automotive components
operation, resulted from participation in an increase in Fiat car production
as well as a higher market share on certain Fiat models, and the successful
entry into operations in Poland earlier this year. Segment operating margin,
and income, benefited from the increase in sales volume and a more favorable
product mix.
Continued recovery in the marine market and in key industrial areas served--
notably construction, agriculture and truck markets--bolstered the U.S.
portion of the segment's operations. Agricultural and construction markets
have been strong for Morse's European controls operations as well, although
<PAGE> 16
sales to the marine market remained flat. Profitability improved across-the-
board primarily as the result of increased sales and of earlier cost-cutting
and reorganization initiatives.
Pumps, Power Transmission and Controls segment sales and operating income
were up 9.4% and 39.4%, respectively, in the most recent third quarter
compared with the third quarter of 1993.
Sales of the pump operations were up modestly year-over-year, as growth in
commercial sales more than offset a continued decline in Navy business.
Commercial bookings and sales in the quarter were particularly strong in the
pulp and paper, chemical and hydrocarbon processing, crude oil and machinery
markets. Profitability, and segment operating profit, declined slightly as a
result of the change in commercial/marine product mix.
The segment's power transmission operations registered strong improvements in
sales, profitability and segment operating profit in the third quarter
compared with last year. Virtually all of the sales increase for the period
came from the industrial distribution sector, the largest direct market for
the Group's products. The Group's gearing and motor-drive components are then
channeled to a wide variety of industrial end-user industries, such as
automotive, steel, refrigeration and printing. Profitability improved as the
result of the increased sales and restructuring activities taken during the
last few years.
Sales and operating profit for the segment's controls operations posted
favorable comparisons for the period compared with last year's third quarter,
largely reflecting a stronger general economic environment. Environmental,
marine and petrochemical processing were among some of the specific markets
showing improvement.
The Company's overall gross profit margin for core operations in the third
quarter of 1994 declined slightly to 28.8%, compared with 29.5% in the third
quarter of 1993, largely due to the larger percentage of sales for the Morse
Controls operations, which generally have a lower margin than the Company's
Pumps, Power Transmission and Controls operations.
Selling, general and administrative expenses declined $7.4 million in the
third quarter of 1994 compared with the same period a year ago. Total
selling, general and administrative expenses decreased as a percent of sales
to 17.3% in the third quarter of 1994 compared with 22.9% in the third quarter
of 1993.
Income tax expense from continuing operations ($.9 million) for the three
months ended September 30, 1994, represents a provision for foreign and state
taxes. Income tax expense from continuing operations ($2.5 million) for the
three months ended September 30, 1993, represents the reversal of tax benefits
previously recorded on 1993 losses. The extraordinary item ($6.9 million)
recorded for the three months ended September 30, 1993, represents a full
valuation reserve against tax benefits recorded on the extinguishment of
senior debt in the second quarter of 1993. The tax benefits recognized in the
first two quarters of 1993 were recorded based on the expectation of net
<PAGE> 17
income in 1993. The Company continues to believe that these tax benefits will
be realized in the future.
Results of Operations
Nine months ended September 30, 1994 vs. 1993
Net sales from continuing operations in the first nine months of 1994 were
$347.4 million compared with $382.1 million for the same period last year.
Sales from core operations (excluding operations divested since the beginning
of 1993 or pending divestiture) were $338.2 million in the first nine months
of 1994 compared with $310.4 million last year, an increase of 8.9%.
For the first nine months of 1994, income from continuing operations before
extraordinary items was $2.6 million ($0.15 per share), compared with $0.4
million ($0.02 per share) in the same period of 1993. Net income for the
current nine months was $146,000 ($0.01 per share). This included an
extraordinary charge of $5.3 million after tax ($0.31 per share) related to
the early extinguishment of debt in connection with the restructuring of the
Company's senior credit facilities and income from discontinued operations of
$2.9 million after tax ($0.17 per share). The net loss for the nine months in
1993 was $25.0 million ($1.48 per share). This included unusual income of $6
million as a result of a change in estimate related to legal costs associated
with pending litigation. It also included an extraordinary charge of $18.1
million after tax ($1.07 per share) representing fees and charges related to
the restructuring of the Company's senior credit facilities and a net loss
from discontinued operations of $7.3 million ($0.43 per share).
Morse Controls segment sales in the first nine months of 1994 were up 19.5%
over the first nine months of 1993, primarily as the result of a 32% gain in
sales by Roltra-Morse. Worldwide sales elsewhere in the segment were up 8.3%.
Segment operating income was up 56.3% over last year, reflecting a sharp
improvement at Roltra-Morse and good improvement at Morse's other operations.
Segment operating income increased as the result of increased sales, a more
favorable product mix, and earlier profit improvement initiatives.
Pumps, Power Transmission and Controls segment sales in the first nine months
of 1994 were up 1.9% from the first nine months of 1993. Segment operating
income was up 25.9%, largely as the result of improved volume in the power
transmission sector, the phase out of certain postretirement benefit
subsidies, and reduced overhead expenses.
Pump operations sales and operating profit were adversely affected by the
continued fall-off in defense business. Controls sales declined in the nine
month period, mainly due to weakness in European markets. Operating income
was up slightly. Power Transmission sales and operating profit both improved
for the nine month period compared with last year, benefiting from the upturn
in general industrial activity in the U.S.
Selling, general and administrative expenses declined $18.3 million compared
with the first nine months of 1993, with most of the decline attributable to
businesses sold subsequent to June 30, 1993 and to the phase out of certain
postretirement benefit subsidies. Selling, general and administrative
<PAGE> 18
expenses for continuing operations as a percent of sales decreased to 18.2% in
the first nine months of 1994 compared with 21.3% in the first nine months a
year ago. Research and development expenditures for continuing operations
decreased $2.5 million and were 1.3% of net sales compared with 1.8% of net
sales in the first nine months of 1993.
In March 1994, the Company amended its policy regarding retiree medical and
life insurance plans. This amendment, which affects some current retirees and
all future retirees, phases out the Company subsidy for retiree medical and
life insurance over a three year period ending December 31, 1996. The Company
is amortizing associated reserves to income from continuing operations over
the phase out period at approximately $4 million per year on a pretax basis
($3.1 million for the nine months ended September 30, 1994). The Company does
not anticipate a significant increase or decrease in cash requirements related
to this change in policy.
Average borrowings in the first nine months of 1994 were $65 million lower
than for the same period in 1993 because of debt pay-downs from proceeds of
asset sales. As a result, total interest expense (before allocation to
discontinued operations) of $38.3 million in 1994 was $5.8 million less than
in 1993. The interest expense for continuing operations shown in the
Consolidated Statements of Income excludes interest expense allocated to the
discontinued operations of $12.5 million in 1994 and $12.8 million in 1993.
Income tax expense from continuing operations ($1.8 million) for the nine
months ended September 30, 1994, represents a provision for foreign and state
taxes.
Taxes have not been provided on the unremitted earnings of foreign
subsidiaries, since it is the Company's intention to indefinitely reinvest
these earnings. This policy has no impact on the Company's liquidity since
the Company does not anticipate paying any U.S. tax on these unremitted
earnings. The amount of foreign withholding taxes that would be payable on
remittance of these earnings is approximately $1 million.
Liquidity and Capital Resources
The Company's domestic liquidity requirements are served by a revolving credit
facility, while its needs outside the U.S. are covered by short and
intermediate term credit facilities from foreign banks.
Effective August 5, 1994, the Company obtained credit facilities for
borrowings up to $150 million from a group of lenders under the New Credit
Agreement, secured by the assets of the Company's domestic operations and all
or a portion of the stock of certain of the Company's subsidiaries. The New
Credit Agreement provides for a $65 million revolving credit facility through
July 31, 1997, a $40 million term loan amortizing to July 1997, and a $45
million bridge loan maturing January 1996. Both the revolving credit facility
and the term loan are extendible to July 1999 under certain conditions. The
New Credit Agreement gives the Company increased financial flexibility and is
intended to ensure that the Company will have adequate funding to meet
anticipated working capital needs over the next several years. Proceeds from
<PAGE> 19
the New Credit Agreement were used to repay the Company's working capital
loans under the former domestic senior credit facilities, its $30 million
12.75% Senior Note and its $12.4 million Make-Whole Note.
As a result of the extinguishment of the prior facilities and the
establishment of the new credit facilities, under the New Credit Agreement,
the Company incurred a $5.3 million (pre tax) extraordinary charge in the
third quarter, of which $3.7 million was cash related to the prepayment
premium for the $30 million 12.75% Senior Note.
The Company's operating activities provided cash of $26.4 million in the first
nine months of 1994, compared with providing cash of $20.2 million in the
first nine months of 1993. Net cash provided by investing activities was $5.2
million in the nine months of 1994, compared with cash provided of $49.5
million in the 1993 period. The change in net cash provided by investing
activities is principally a result of $12.7 million of cash generated from the
sale of assets in the 1994 period versus $60.0 million in the 1993 period.
Cash and cash equivalents were $45.8 million at September 30, 1994, compared
with $22.4 million at December 31, 1993.
Working capital at September 30, 1994 was $144.1 million, an increase of $37.0
million from the end of 1993. The ratio of current assets to current
liabilities was 1.9 at September 30, 1994, compared with 1.6 at December 31,
1993. Principally as a result of the 1993 loss of $270 million, the Company's
total debt as a percent of its total capitalization was 108.1% at September
30, 1994, and 109.2% at December 31, 1993.
The Company presently has outstanding $150 million of 12.25% senior
subordinated debentures maturing in 1997 and $150 million of 12% senior
subordinated debentures maturing in amounts of $37.5 million in 1999, $37.5
million in 2000 and $75.0 million in 2001. In addition, the Company has a $40
million term loan amortizing to July 1997, and a $45 million bridge loan due
January 1996, both of which are expected to be repaid by proceeds from its
divestiture program. The Company expects to use the remaining proceeds from
its divestiture program to repay approximately $110 million of the 12.25%
senior subordinated debentures thereby reducing the Company's interest expense
by approximately $14 million annually. As of September 30, 1994, there were
no borrowings under the $65 million revolving credit facility, but
approximately $35 million of standby letters of credit were outstanding. The
Company also has approximately $35 million in foreign short-term credit
facilities with approximately $10.6 million outstanding thereunder.
<PAGE> 20
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits:
The following exhibits are being filed as part of this Report:
Exhibit No. Description
10.38 Credit Agreement dated as of August 5, 1994 among the
Company, as Borrower, Baird Corporation, as
Guarantor, Warren Pumps Inc., as Guarantor, the
Institutions from time to time party thereto as
Lenders and as Issuing Banks, and Citibank, N.A., as
Agent
10.39(A) Asset Purchase Agreement dated as of October 14, 1994
by and among the Company, Varo Inc., Baird
Corporation, Optic Electronic International, Inc.,
TPG Partners, L.P. and Varo Acquisition Corp.
(B) Amendment dated as of October 28, 1994 to the Asset
Purchase Agreement dated as of October 14, 1994 by
and among the Company, Varo Inc., Baird Corporation,
Optic Electronic International, Inc., TPG Partners,
L.P. and Varo Acquisition Corp.
10.40 Asset Purchase Agreement dated as of November 4, 1994
by and among the Company, Imo Industries
International Inc. and Mannesmann Capital Corporation
27 Financial Data Schedule as of September 30, 1994
(b) Reports on Form 8-K: None
<PAGE> 21
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.
Imo Industries Inc.
(Registrant)
Date November 11, 1994 /s/ DONALD K. FARRAR
Donald K. Farrar
Chairman, Chief Executive Officer,
President and Director
(principal executive officer)
Date November 11, 1994 /s/ WILLIAM M. BROWN
William M. Brown
Executive Vice President and
Chief Financial Officer
(principal financial officer)
Date November 11, 1994 /s/ ROBERT A. DERR II
Robert A. Derr II
Vice President and
Corporate Controller
(principal accounting officer)
CREDIT AGREEMENT
This Credit Agreement dated as of August 5, 1994 (as amended,
supplemented or otherwise modified from time to time, this "Agreement")
is entered into among Imo Industries Inc., a Delaware corporation (with
its successors and permitted assigns, the "Borrower"), Baird
Corporation, a Massachusetts corporation and a direct wholly owned
subsidiary of the Borrower (with its successors and permitted assigns,
"Baird"), Varo Inc., a Texas corporation and a direct wholly owned
subsidiary of the Borrower (with its successors and permitted assigns,
"Varo"), Warren Pumps Inc., a Delaware corporation and a direct wholly
owned subsidiary of the Borrower (with its successors and permitted
assigns, "Warren Pumps" and, collectively with Baird and Varo, the
"Guarantors", and each a "Guarantor"), the institutions from time to
time party hereto as Lenders (whether by execution of this Agreement or
an Assignment and Acceptance), the institutions from time to time party
hereto as Issuing Banks (whether by execution of this Agreement or an
Assignment and Acceptance), and Citibank, N.A., a national banking
association, in its capacity as agent and collateral agent for the
Lenders and the Issuing Banks (with its successors in such capacity, the
"Agent").
ARTICLE I
DEFINITIONS
Certain Defined Terms In addition to the terms defined above, the
following terms used herein shall have the following meanings,
applicable both to the singular and the plural forms of the terms
defined:
"A Term Loan" is defined in Section 2.01(a).
"A Term Loan Commitment" means, with respect to any Lender, the
obligation of such Lender to make A Term Loans pursuant to the terms and
conditions hereof, and which shall not exceed the principal amount set
forth opposite such Lender's name under the heading "A Term Loan
Commitment" on Schedule 1.01.1 or the signature page of the Assignment
and Acceptance by which it became a Lender, as modified from time to
time pursuant to the terms hereof or to give effect to any applicable
Assignment and Acceptance, and "A Term Loan Commitments" means the
aggregate principal amount of the A Term Loan Commitments of all the A
Term Loan Lenders, the maximum aggregate principal amount of which shall
not exceed $40,000,000, as reduced from time to time pursuant to the
terms hereof.
"A Term Loan Lender" is defined in Section 2.01(a).
"A Term Loan Notes" means notes evidencing the Borrower's obligation to
repay the A Term Loans.
"A Term Loan Pro Rata Share" means, with respect to any Lender, (i)
prior to the Closing Date, the percentage obtained by dividing (A) such
Lender's A Term Loan Commitment at such time by (B) the aggregate amount
of all A Term Loan Commitments at such time; and (ii) on and after the
Closing Date, the percentage obtained by dividing (x) the outstanding
principal amount of such Lender's A Term Loans by (y) the aggregate
outstanding principal amount of all
A Term Loans.
"Accommodation Obligation", means any Contractual Obligation, contingent
or otherwise, of one Person with respect to any Indebtedness, obligation
or liability of another, if the primary purpose or intent thereof by the
Person incurring the Accommodation Obligation is to provide assurance to
the obligee of such Indebtedness, obligation or liability of another
that such Indebtedness, obligation or liability shall be paid or
discharged, or that any agreements relating thereto shall be complied
with, or that the holders thereof shall be protected (in whole or in
part) against loss in respect thereof including, without limitation,
direct and indirect guarantees, endorsements (except for collection or
deposit in the ordinary course of business), notes co-made or
discounted, recourse agreements, take-or-pay agreements, keep-well
agreements, agreements to purchase security therefor (other than such
agreements to purchase in the ordinary course of business) or to provide
funds for the payment or discharge thereof, agreements to maintain
solvency, assets, level of income, or other financial condition, and
agreements to make payment other than for value received.
"Affiliate" of any specified Person means any other Person (i) which
directly or indirectly through one or more intermediaries controls, or
is controlled by, or is under common control with, such specified
Person, (ii) which beneficially owns or holds 5% or more of any class of
the Voting Stock or other equity interest of such specified Person or
(iii) of which 5% or more of the Voting Stock or other equity interest
is beneficially owned or held by such specified Person or a Subsidiary
of such specified Person. For the purposes of this definition,
"control" when used with respect to any specified Person means the power
to direct the management and policies of such Person directly or
indirectly, whether through the ownership of Voting Stock, by contract
or otherwise; and the terms "controlling" and "controlled" have meanings
correlative to the foregoing.
"Agent" is defined in the preamble hereto and shall include any
successor Agent appointed pursuant to Section 13.07.
"Agent's Account" means the Agent's account number 3885 8061 (re:
Citibank Concentration Account) maintained at the office of Citibank at
399 Park Avenue, New York, New York 10043, or such other deposit account
as the Agent may from time to time specify in writing to the Borrower
and the Lenders.
"Amended BT Agreements" means (x) the Amended and Restated Credit
Agreement dated as of August 19, 1994 among the Borrower, the lenders
from time to time party thereto and Bankers Trust Company, as agent, and
(y) the Amended and Restated Combined Restated Credit Agreement dated as
of August 19, 1994 among the Borrower, the lenders from time to time
party thereto and Bankers Trust Company, as agent, as each such
agreement may be further amended, supplemented or modified from time to
time in accordance with Section 9.17.
"Alternative Currency" means lawful currency other than Dollars which is
freely convertible into Dollars.
"Applicable Base Rate Margin" means (i) as of any date with respect to
the Revolving Credit Obligations and the A Term Loans, three-quarters
percent (0.75%) per annum and (ii) with respect to the B Term Loans,
(A) as of any date from the Closing Date to the sixth monthly
anniversary thereof, two and one-half percent (2.5%) per annum,
(B) as of any date from such sixth monthly anniversary to the ninth
monthly anniversary of the Closing Date, two and three-quarters percent
(2.75%) per annum,
(C) as of any date from such ninth monthly anniversary to the twelfth
monthly anniversary of the Closing Date, three percent (3.0%) per annum,
(D) as of any date from such twelfth monthly anniversary to the
fifteenth monthly anniversary of the Closing Date, three and one-quarter
percent (3.25%) per annum and
(E) as of any date from such fifteenth monthly anniversary to the
eighteenth monthly anniversary of the Closing Date, three and one-half
percent (3.5%) per annum;
provided that with respect to each of clauses (i) and (ii) the
Applicable Base Rate Margin for any date shall be reduced by one-half
percent (0.5%) per annum if Pricing Decrease Status exists on such date.
"Applicable Eurodollar Rate Margin" means (i) as of any date with
respect to the Revolving Credit Obligations and the A Term Loans, two
and three-quarters percent (2.75%) per annum and (ii) with respect to
the B Term Loans,
(A) as of any date from the Closing Date to the sixth monthly
anniversary thereof, four and one-half percent (4.5%) per annum,
(B) as of any date from such sixth monthly anniversary to the ninth
monthly anniversary of the Closing Date, four and three-quarters percent
(4.75%) per annum,
(C) as of any date from such ninth monthly anniversary to the twelfth
monthly anniversary of the Closing Date, five percent (5.0%) per annum,
(D) as of any date from such twelfth monthly anniversary to the
fifteenth monthly anniversary of the Closing Date, five and one-quarter
percent (5.25%) per annum and
(E) as of any date from such fifteenth monthly anniversary to the
eighteenth monthly anniversary of the Closing Date, five and one-half
percent (5.5%) per annum;
provided that with respect to each of clauses (i) and (ii) the
Applicable Eurodollar Rate Margin for any date shall be reduced by one-
half percent (0.5%) per annum if Pricing Decrease Status exists on such
date.
"Applicable Lending Office" means, with respect to a particular Lender,
its Eurodollar Lending Office in respect of provisions relating to
Eurodollar Rate Loans and its Domestic Lending Office in respect of
provisions relating to Base Rate Loans.
"Assignment and Acceptance" means an Assignment and Acceptance in
substantially the form of Exhibit A attached hereto and made a part
hereof (with blanks appropriately completed) delivered to the Agent in
connection with an assignment of a Lender's interest hereunder in
accordance with the provisions of Section 14.01.
"Assignment of Claims Act" has the meaning ascribed to such term in
Section 8.15.
"Availability Reserves" means, at any time, (x) an amount equal to
twenty-five percent (25%) of the aggregate amount of all Unsupported
Surety Bonds then outstanding, plus (y) as of ten (10) days after the
date of written notice of any determination thereof to the Borrower by
the Agent, such amounts as the Agent, in the exercise of its sole
discretion exercised in a commercially reasonable manner, may from time
to time establish against the Revolving Credit Availability in order
either (i) to preserve the value of, or the Agent's Lien on, the
Collateral or (ii) to ensure the availability of cash sufficient to meet
future liabilities of the Borrower.
"B Term Loan" is defined in Section 2.01(b).
"B Term Loan Commitment" means, with respect to any Lender, the
obligation of such Lender to make B Term Loans pursuant to the terms and
conditions hereof, and which shall not exceed the principal amount set
forth opposite such Lender's name under the heading "B Term Loan
Commitment" on Schedule 1.01.1 or the signature page of the Assignment
and Acceptance by which it became a Lender, as modified from time to
time pursuant to the terms hereof or to give effect to any applicable
Assignment and Acceptance, and "B Term Loan Commitments" means the
aggregate principal amount of the B Term Loan Commitments of all the B
Term Loan Lenders, the maximum aggregate principal amount of which shall
not exceed $45,000,000, as reduced from time to time pursuant to the
terms hereof.
"B Term Loan Lender" is defined in Section 2.01(b).
"B Term Loan Maturity Date" means January 31, 1996.
"B Term Loan Notes" means notes evidencing the Borrower's Obligation to
repay the B Term Loans.
"B Term Loan Pro Rata Share" means, with respect to any Lender, (i)
prior to the Closing Date, the percentage obtained by dividing (A) such
Lender's B Term Loan Commitment at such time by (B) the aggregate amount
of all B Term Loan Commitments at such time; and (ii) on and after the
Closing Date, the percentage obtained by dividing (x) the outstanding
principal amount of such Lender's B Term Loans by (y) the aggregate
outstanding principal amount of all
B Term Loans.
"Baird" is defined in the preamble hereto.
"Baird Guaranty" is defined in Section 12.01(a).
"Bankruptcy Code" means Title 11 of the United States Code (11 U.S.C.
101 et seq.), as amended from time to time, and any successor statute.
"Base Rate" means, for any period, a fluctuating interest rate per annum
as shall be in effect from time to time, which rate per annum shall at
all times be equal to the highest of:
(i)the rate of interest announced publicly by Citibank in New York, New
York from time to time, as Citibank's base rate; and
(ii)the sum (adjusted to the nearest one quarter of one percent (0.25%)
or, if there is no nearest one quarter of one percent (0.25%), to the
next higher one quarter of one percent (0.25%)) of (A) one half of one
percent (0.50%) per annum plus (B) the rate per annum obtained by
dividing (I) the latest three-week moving average of secondary market
morning offering rates in the United States for three-month certificates
of deposit of major United States money market banks, such three-week
moving average (adjusted to the basis of a year of 360 days) being
determined weekly on each Monday (or, if such day is not a Business Day,
on the next succeeding Business Day) for the three-week period ending on
the previous Friday (or, if such day is not a Business Day, on the next
preceding Business Day) by Citibank on the basis of such rates reported
by certificate of deposit dealers to, and published by, the Federal
Reserve Bank of New York, or, if such publication shall be suspended or
terminated, on the basis of quotations for such rates received by
Citibank from three (3) New York certificate of deposit dealers of
recognized standing selected by Citibank, by (II) a percentage equal to
100% minus the average of the daily percentages specified during such
three-week period by the Federal Reserve Board (or any successor) for
determining the maximum reserve requirement (including, but not limited
to, any emergency, supplemental or other marginal reserve requirement)
for Citibank in respect of liabilities which consist of or which include
(among other liabilities) three-month Dollar nonpersonal time deposits
in the United States plus (C) the average during such three-week period
of the annual assessment rates estimated by Citibank for determining the
then current annual assessment payable by Citibank to the Federal
Deposit Insurance Corporation (or any successor) for insuring Dollar
deposits of Citibank in the United States; and
(iii) the sum of (A) one half of one percent (0.50%) per annum plus (B)
the Federal Funds Rate in effect from time to time during such period.
"Base Rate Loans" means all Loans which bear interest at a rate
determined by reference to the Base Rate as provided in Section 4.01(a).
"Benefit Plan" means a defined benefit plan as defined in Section 3(35)
of ERISA (other than a Multiemployer Plan) in respect of which the
Borrower or any ERISA Affiliate is, or within the immediately preceding
six (6) years was, an "employer" as defined in Section 3(5) of ERISA.
"Blockage Notice" is defined in Section 11.03(c).
"Borrower's Projections" means the financial projections prepared by the
management of the Borrower with respect to the Borrower and its
Subsidiaries on a consolidated basis and on a monthly basis for Fiscal
Year 1994 and an annual basis for Fiscal Years 1995 through 1996,
delivered by the Borrower to the Lenders on or prior to the Closing
Date.
"Borrowing" means a borrowing consisting of Loans of the same type made
on the same day.
"Borrowing Base" means, as of any date of determination, an amount equal
to (i) eighty-five percent (85%) of the face amount of (x) Eligible
Receivables (net of maximum discounts, allowances, retainage and any
other amounts deferred with respect thereto) of the Borrower at such
time plus (y) Eligible Receivables (net of maximum discounts,
allowances, retainage and any other amounts deferred with respect
thereto) of Warren Pumps at such time, plus (ii) the applicable
percentage(s) set forth in Schedule 1.01.8 of (x) Eligible Raw Materials
of the Borrower at such time plus (y) Eligible Raw Materials of Warren
Pumps at such time, plus (iii) the applicable percentage(s) set forth in
Schedule 1.01.8 of (x) Eligible Work In Process of the Borrower at such
time plus (y) Eligible Work In Process of Warren Pumps at such time,
plus (iv) the applicable percentage(s) set forth in Schedule 1.01.8 of
(x) Eligible Finished Goods of the Borrower at such time plus (y)
Eligible Finished Goods of Warren Pumps at such time, plus (v) one
hundred percent (100%) of (x) the face amount of Eligible Letters of
Credit of the Borrower at such time plus (y) the face amount of Eligible
Letters of Credit of Warren Pumps at such time, plus (vi) one hundred
percent (100%) of the aggregate amount of cash proceeds of Collateral on
deposit in the Concentration Account and the Investment Account at such
time. For purposes of this definition, Eligible Receivables, Eligible
Raw Materials, Eligible Work in Process, Eligible Finished Goods,
Eligible Work In Process and Eligible Letters of Credit, as of any date
of determination, shall be determined after deduction of all Eligibility
Reserves then effective with respect to such items.
"Borrowing Base Certificate" means a certificate, in substantially the
form of Exhibit C attached hereto and made a part hereof, setting forth
Eligible Receivables, Eligible Raw Materials, Eligible Work In Process,
Eligible Finished Goods and Eligible Letters of Credit.
"Business Day" means a day, in the applicable local time, which is not a
Saturday or Sunday or a legal holiday and on which banks are not
required or permitted by law or other governmental action to close (i)
in New York, New York or (ii) in the case of Eurodollar Rate Loans, in
London, England or (iii) in the case of Letter of Credit transactions
for a particular Issuing Bank, in the place where its office for
issuance or administration of the pertinent Letter of Credit is located.
"Capital Expenditures" means, for any period, the aggregate of all
expenditures (whether payable in cash or other Property or accrued as a
liability (but without duplication)) during such period that, in
conformity with GAAP, are required to be included in or reflected by the
Borrower's or any of its Subsidiaries' fixed asset accounts as reflected
in any of their respective balance sheets; provided, however, (i)
Capital Expenditures shall include, whether or not such a designation
would be in conformity with GAAP, (A) that portion of Capital Leases
which is incurred and capitalized during such period on the consolidated
balance sheet of the Borrower and its Subsidiaries and (B) expenditures
for Equipment which is purchased simultaneously with the trade-in of
existing Equipment owned by the Borrower or any of its Subsidiaries, to
the extent the gross purchase price of the purchased Equipment exceeds
the actual trade-in value of the Equipment being traded in at such time;
and (ii) Capital Expenditures shall exclude, whether or not such a
designation would be in conformity with GAAP, expenditures made in
connection with the replacement or restoration of Property, to the
extent reimbursed or financed from insurance or condemnation proceeds
and permitted pursuant to Section 8.07.
"Capital Lease", as applied to any Person, means any lease of any
property (whether real, personal or mixed) by that Person as lessee
which, in conformity with GAAP, is accounted for as a capital lease on
the balance sheet of that Person.
"Capital Stock", with respect to any Person, means any capital stock of
such Person, regardless of class or designation, and all warrants,
options, purchase rights, conversion or exchange rights, voting rights,
calls or claims of any character with respect thereto.
"Cash Collateral" means cash or Cash Equivalents held by the Agent, any
of the Issuing Banks or any of the Lenders as security for the
Obligations.
"Cash Equivalents" means (i) marketable direct obligations issued or
unconditionally guaranteed by the United States government and backed by
the full faith and credit of the United States government; (ii) domestic
and Eurodollar certificates of deposit and time deposits, bankers'
acceptances and floating rate certificates of deposit issued by any
commercial bank organized under the laws of the United States, any state
thereof, the District of Columbia, any foreign bank, or its branches or
agencies (fully protected against currency fluctuations), which, at the
time of acquisition, are rated A-1 (or better) by Standard & Poor's
Corporation (or its successors) or P-1 (or better) by Moody's Investors
Service, Inc. (or its successors); (iii) commercial paper of United
States and foreign banks and bank holding companies and their
subsidiaries and United States and foreign finance, commercial
industrial or utility companies which, at the time of acquisition, are
rated A-1 (or better) by Standard & Poor's Corporation (or its
successors) or P-1 (or better) by Moody's Investors Service, Inc. (or
its successors); (iv) marketable direct obligations of any State of the
United States of America or any political subdivision of any such State
given on the date of such investment the highest credit rating by
Moody's Investor Service, Inc. (or its successors) or Standard & Poor's
Corporation (or its successors); and (v) reverse purchase agreements
covering obligations of the type specified in clause (i); provided, that
the maturities of any such Cash Equivalents referred to in clauses (i)
through (v) shall not exceed one hundred eighty (180) days.
"Cash Flow Period" means the period from July 31, 1994 through the end
of Fiscal Year 1994 and, thereafter, as separate periods, each
subsequent Fiscal Year of the Borrower.
"CERCLA" means the Comprehensive Environmental Response, Compensation
and Liability Act of 1980, 42 U.S.C. 9601 et seq., any amendments
thereto, any successor statutes, and any regulations or legally
enforceable guidance promulgated thereunder."CERCLIS" is defined in
Section 6.01(o)."Change of Control" means (i) any person or group of
persons (within the meaning of Section 13 or 14 of the Securities
Exchange Act) shall have acquired beneficial ownership (within the
meaning of Rule 13d-3 promulgated by the Securities and Exchange
Commission under the Exchange Act) of 20% or more of the outstanding
Capital Stock of the Borrower; (ii) during any period of twelve
consecutive calendar months, individuals who were directors of the
Borrower on the first day of such period shall cease to constitute a
majority of the board of directors of the Borrower for any reason other
than death or disability; (iii) the Borrower shall cease to own and
control all of the Capital Stock of Warren Pumps; or (iv) the Borrower
shall cease to own and control all of the Capital Stock of each of Varo
and Baird, other than as a result of a sale or sales made in accordance
with clause (vii) of Section 9.02.
"Citibank" means Citibank, N.A., a national banking association, and its
successors.
"Claim" means any claim or demand, by any Person, of whatsoever kind or
nature for any alleged Liabilities and Costs, whether based in contract,
tort, implied or express warranty, strict liability, criminal or civil
statute, Permit, ordinance or regulation, common law or otherwise.
"Class A Requisite Lenders" means, at any time (a "Time of
Determination"), A Term Loan Lenders and Revolving Credit Lenders
holding, in the aggregate, more than fifty-one percent (51%) of the sum
of (i) the then aggregate principal amount of the A Term Loans
outstanding at such time and (ii) the then aggregate amount of the
Revolving Credit Commitments in effect at such time; provided, however,
that, in the event any of the A Term Loan Lenders or Revolving Credit
Lenders, as the case may be, shall have failed to fund its A Term Loan
Pro Rata Share or Revolving Credit Pro Rata Share, as the case may be,
of any A Term Loan or Revolving Credit Loan requested by the Borrower
which such A Term Lenders or Revolving Credit Lenders, as the case may
be, are obligated to fund under the terms hereof and any such failure
has not been cured, then for so long as such failure continues, "Class A
Requisite Lenders" means A Term Loan Lenders and Revolving Credit
Lenders (excluding all A Term Loan Lenders or Revolving Credit Lenders
whose failure to fund their respective A Term Loan Pro Rata share or
Revolving Credit Pro Rata Share of such Loans have not been so cured)
whose A Term Loan Pro Rata Shares and Revolving Credit Pro Rata Shares
represent more than fifty-one percent (51%) of the aggregate A Term Loan
Pro Rata Shares and Revolving Credit Pro Rata Shares of such Lenders;
provided, further, however, that, in the event that the Commitments have
been terminated pursuant to the terms hereof, "Class A Requisite
Lenders" means A Term Loan Lenders and Revolving Credit Lenders (without
regard to such A Term Loan Lenders' or Revolving Credit Lenders'
performance of their respective obligations hereunder) whose aggregate
ratable shares (stated as a percentage) of the aggregate outstanding
principal balance of all A Term Loans and Revolving Credit Obligations
are greater than fifty-one percent (51%); provided, further, however,
that if there are more than three A Term Loan Lenders and Revolving
Credit Lenders at any Time of Determination, "Class A Requisite Lenders"
shall include at least three A Term Loan Lenders and Revolving Credit
Lenders.
"Class B Requisite Lenders" means, at any time (a "Time of
Determination"), B Term Loan Lenders holding, in the aggregate, more
than fifty-one percent (51%) of the sum of the then aggregate principal
amount of the B Term Loans outstanding at such time; provided, however,
that, in the event any of the B Term Loan Lenders shall have failed to
fund its B Term Loan Pro Rata Share, as the case may be, of any B Term
Loan requested by the Borrower which such B Term Loan Lenders are
obligated to fund under the terms hereof and any such failure has not
been cured, then for so long as such failure continues, "Class B
Requisite Lenders" means B Term Loan Lenders (excluding all B Term Loan
Lenders whose failure to fund their respective B Term Loan Pro Rata
Share of such B Term Loans have not been so cured) whose B Term Loan Pro
Rata Shares represent more than fifty-one percent (51%) of the aggregate
B Term Loan Pro Rata Shares of such B Term Loan Lenders; provided,
further, however, that, in the event that the Commitments have been
terminated pursuant to the terms hereof, "Class B Requisite Lenders"
means B Term Loan Lenders (without regard to such B Term Loan Lenders'
performance of their respective obligations hereunder) whose aggregate
ratable shares (stated as a percentage) of the aggregate outstanding
principal balance of all B Term Loans are greater than fifty-one percent
(51%); provided, further, however, that if there are more than three B
Term Loan Lenders at any Time of Determination, "Class B Requisite
Lenders" shall include at least three B Term Loan Lenders.
"Closing Date" means the date on which the A Term Loans and the B Term
Loans are advanced hereunder.
"Collateral" means all Property and interests in Property now owned or
hereafter acquired by the Borrower or any of its Subsidiaries upon which
a Lien is granted under any of the Loan Documents.
"Commercial Letter of Credit" means any documentary letter of credit
issued by an Issuing Bank pursuant to Section 2.04 for the account of
the Borrower, which is drawable upon presentation of documents
evidencing the sale or shipment of goods purchased by the Borrower in
the ordinary course of its business.
"Commitment" means, with respect to any Lender, the obligation of such
Lender, as the case may be, to make A Term Loans, B Term Loans or
Revolving Loans and to participate in Letters of Credit and Swing Loans
pursuant to the terms and conditions hereof, which obligation shall not
exceed the principal amount set forth opposite such Lender's name under
the heading "Aggregate Commitment" on Schedule 1.01.1 or the signature
page of the Assignment and Acceptance by which it became a Lender, as
modified from time to time pursuant to the terms hereof or to give
effect to any applicable Assignment and Acceptance, and "Commitments"
means the aggregate principal amount of the Commitments of all the
Lenders, the maximum amount of which shall not exceed a principal amount
of $150,000,000, as reduced from time to time pursuant to the terms
hereof.
"Compliance Certificate" is defined in Section 7.01(c).
"Concentration Account" means account number 4065 1094 of the Borrower
at Citibank's offices in New York, New York into which certain cash
proceeds of Collateral may be transferred in accordance with Section
3.02(b). The Concentration Account shall be under the sole dominion and
control of the Agent; provided that all amounts deposited therein shall
be held by the Agent as Cash Collateral for the benefit of the Agent,
the Lenders, the Issuing Banks and the other Holders and shall be
subject to the terms of this Agreement.
"Consolidated Cash Interest Expense" means, for any period on a
consolidated basis for any Person and its Subsidiaries, all of the
following as determined in conformity with GAAP, (i) total interest
expense, whether paid or accrued (without duplication) (including the
interest component of Capital Lease obligations for such period),
including, without limitation, all bank fees, commissions, discounts and
other fees and charges owed with respect to letters of credit and net
costs under Interest Rate Contracts, but excluding, however,
(x) amortization of discount, (y) interest paid in property other than
cash and (z) any other interest expense not payable in cash, minus (ii)
any net payments received during such period under Interest Rate
Contracts and any interest income received in cash and Cash Equivalents
in respect of its Investments.
"Consolidated Fixed Charges" means, for any period on a consolidated
basis for any Person and its Subsidiaries, the sum of the amounts for
such period of (i) Consolidated Cash Interest Expense of such Person and
its Subsidiaries and (ii) scheduled payments of principal on
Indebtedness of such Person and its Subsidiaries (including, without
limitation, the principal component of Capital Lease obligations and, in
the case of the Borrower, the Term Loans).
"Consolidated Net Income" means, for any period on a consolidated basis
for any Person and its Subsidiaries, the net income (or loss) after
taxes for such period taken as a single accounting period, determined in
conformity with GAAP.
"Consolidated Net Worth" means, with respect to any Person, at any time,
(i) consolidated stockholders' equity of such Person and its
consolidated Subsidiaries, determined in accordance with GAAP, plus (ii)
any minimum pension liability adjustment applicable to such Person in
accordance with GAAP plus (iii) any negative (or minus any positive)
cumulative foreign currency translation adjustments applicable to such
Person in accordance with GAAP.
"Constituent Document" means, with respect to any entity, (i) the
articles/certificate of incorporation (or the equivalent organizational
documents) of such entity, (ii) the by-laws (or the equivalent governing
documents) of such entity and (iii) any document setting forth the
designation, amount and/or relative rights, limitations and preferences
of any class or series of such entity's Capital Stock.
"Contaminant" means any pollutant, hazardous substance, radioactive
substance, toxic substance, hazardous waste, radioactive waste, special
waste, petroleum or petroleum-derived substance or waste, asbestos in
any form or condition, polychlorinated biphenyls (PCBs), or any
hazardous or toxic constituent thereof, as these terms are defined under
Environmental, Health or Safety Requirements of Law.
"Contractual Obligation", as applied to any Person, means any provision
of any Securities issued by that Person or any indenture, mortgage, deed
of trust, security agreement, pledge agreement, guaranty, contract,
undertaking, agreement or instrument to which that Person is a party or
by which it or any of its properties is bound, or to which it or any of
its properties is subject.
"Credit Obligations" means, at any particular time, the sum of (i) the
Revolving Credit Obligations at such time, plus (ii) the outstanding
principal amount of the A Term Loans at such time, plus (iii) the
outstanding principal amount of the B Term Loans at such time.
"Cure Loans" is defined in Section 3.02(b)(v)(C).
"Currency Agreement" means any foreign exchange contract, currency swap
agreement or other similar agreement or arrangement.
"Currency Agreement Exposure" means, at any time and from time to time,
an aggregate amount equal to one hundred and ten percent (110%) of the
then current market value (determined by Citibank in accordance with
Citibank's customary practices) of each Currency Agreement to which the
Borrower is a party for the remaining term and volume of such Currency
Agreement, disregarding (subject to the immediately succeeding sentence)
any Currency Agreement with respect to which such then current market
value to the Borrower is positive. If (i) the Borrower is a party to
(x) a Currency Agreement providing for the Borrower's purchase of a
particular currency and (y) a similar Currency Agreement with the same
counterparty providing for the sale of such currency and (ii) the
Borrower and such counterparty have entered into a netting agreement in
form and substance satisfactory to the Agent with respect to such
Currency Agreements, then the then current market values (determined by
Citibank in accordance with Citibank's customary practices) of such
Currency Agreements shall be netted against one another in determining
the Borrower's aggregate Currency Agreement Exposure (it being
understood and agreed that if any such netting of Currency Agreements
results in a positive net current market value to the Borrower, such net
current market value shall be disregarded in the calculation of the
Borrower's aggregate Currency Agreement Exposure).
"Customary Permitted Liens" means Liens (other than Environmental Liens
and Liens in favor of the PBGC)
(i)with respect to the payment of taxes, assessments or governmental
charges in all cases which are not yet due or which are being contested
in good faith by appropriate proceedings and with respect to which
adequate reserves or other appropriate provisions are being maintained
in accordance with GAAP;
(ii)of landlords arising by statute and Liens of suppliers, mechanics,
carriers, materialmen, warehousemen or workmen and other Liens imposed
by law created in the ordinary course of business for amounts not yet
due or which are being contested in good faith by appropriate
proceedings and with respect to which adequate reserves or other
appropriate provisions are being maintained in accordance with GAAP;
(iii)incurred or deposits made in the ordinary course of business in
connection with worker's compensation, unemployment insurance or other
types of social security benefits or to secure the performance of bids,
tenders, sales, contracts (other than for the repayment of borrowed
money), surety, appeal, customs and performance bonds; provided that all
such Liens do not in the aggregate materially detract from the value of
the Borrower's or such Subsidiary's assets or Property or materially
impair the use thereof in the operation of the Borrower's and its
Subsidiaries' businesses;
(iv) arising as a result of progress payments or otherwise under
Government Contracts;
(v)arising with respect to zoning restrictions, easements, licenses,
reservations, covenants, rights-of-way, utility easements, building
restrictions and other similar charges or encumbrances on the use of
Real Property which do not materially interfere with the ordinary
conduct of the business of the Borrower or any of its Subsidiaries;
(vi)leases or subleases of Real Property approved by the Agent or
otherwise permitted under this Agreement; and
(vii)constituting the filing of notice financing statements of a
lessor's rights in and to personal property leased to the Borrower in
the ordinary course of the Borrower's business.
"Decision Period" is defined in Section 8.07.
"Default" means an event which, with the giving of notice or the lapse
of time, or both, would constitute an Event of Default.
"Disbursement Account" means account number 4065 1107 of the Borrower at
Citibank, N.A., or such other bank account as shall subsequently be
designated as the Disbursement Account by the Borrower by notice to the
Agent.
"Discontinued Operations" means the Borrower's businesses specified on
Schedule 1.01.2.
"DOL" means the United States Department of Labor and any successor
department or agency.
"Dollars" and "$" mean the lawful money of the United States.
"Dollar Equivalent" means, with respect to any Alternative Currency at
the time of determination thereof, the equivalent of such currency in
Dollars determined at the rate of exchange quoted by the Agent in New
York, New York at 11:00 a.m. (New York time) on the date of
determination, to prime banks in New York for the spot purchase in the
New York foreign exchange market of such amount of Dollars with such
Alternative Currency.
"Domestic Lending Office" means, with respect to any Lender, such
Lender's office, located in the United States, specified as the
"Domestic Lending Office" under its name on the signature pages hereof
or on the Assignment and Acceptance by which it became a Lender or such
other United States office of such Lender as it may from time to time
specify by written notice to the Borrower and the Agent.
"EBITDA" means, for any period on a consolidated basis for any Person
and its Subsidiaries, (i) the sum of the amounts for such period for
such Person and its Subsidiaries on a consolidated basis of (A)
Consolidated Net Income, (B) depreciation, amortization expense and
other non-cash charges, (C) Consolidated Cash Interest Expense, (D)
charges for federal, state, local and foreign income taxes, (E)
extraordinary losses which have been deducted in the determination of
Consolidated Net Income and (F) net income (if any) of less than wholly-
owned Subsidiaries which has been attributed to minority interests in
accordance with GAAP, minus (ii) extraordinary gains not already
excluded from the determination of Consolidated Net Income, minus (iii)
net loss (if any) of less than wholly-owned Subsidiaries which has been
attributed to minority interests in accordance with GAAP.
"Eligibility Reserves" means, as of five (5) days after the date of
written notice of any determination thereof to the Borrower by the
Agent, or to the Borrower and the Agent by the Class A Requisite
Lenders, such amounts as the Agent, or the Class A Requisite Lenders, as
the case may be, in the exercise of its or their reasonable credit
judgment and in accordance with its or their customary criteria, may
from time to time establish against the gross amounts of Eligible
Receivables, Eligible Raw Materials, Eligible Work In Process, Eligible
Finished Goods and Eligible Letters of Credit to reflect risks or
contingencies arising after the Closing Date which may affect such items
and which have not already been taken into account in the determination
of Eligible Receivables, Eligible Raw Materials, Eligible Work In
Process, Eligible Finished Goods or Eligible Letters of Credit, as the
case may be.
"Eligible Assignee" means (i) a Lender or any Affiliate thereof; (ii) a
commercial bank having total assets in excess of $500,000,000; (iii) a
finance company, insurance company, other financial institution or fund,
reasonably acceptable to the Agent, which is regularly engaged in
making, purchasing or investing in loans and having total assets in
excess of $500,000,000; (iv) a savings and loan association or savings
bank organized under the laws of the United States or any state thereof
which has a net worth, determined in accordance with GAAP, in excess of
$250,000,000; or (v) a finance company, insurance company, bank, other
financial institution or fund reasonably acceptable to the Agent and the
Borrower.
"Eligible Finished Goods" means Inventory (net of known losses) of the
Borrower or Warren Pumps which is classified, consistent with past
practice, on the Borrower's accounting system as Finished Goods, which
is otherwise Eligible Inventory.
"Eligible Inventory" means Inventory of the Borrower or Warren Pumps
(other than any Inventory which has been consigned to the Borrower or
Warren Pumps) (i) with respect to which the Agent has a valid and
perfected first priority Lien, (ii) with respect to which no warranty
contained in any of the Loan Documents has been breached, (iii) which is
not in the reasonable opinion of the Agent, obsolete or unmerchantable
and (iv) which the Agent, in its reasonable credit judgment, deems to be
Eligible Inventory, based on such credit and collateral considerations
as the Agent may deem appropriate. Eligible Inventory shall be valued
at the lower of cost on a first-in, first-out basis or market value. No
Inventory of the Borrower or Warren Pumps shall be Eligible Inventory if
such Inventory is located, stored, used or held at the premises of a
third party unless (A) the Agent shall have received a landlord, bailee
or similar letter from such third party in form and substance
satisfactory to the Agent or, if the premises are leased by the Borrower
or Warren Pumps from a third party, the Agent shall have reserved
against the Borrowing Base an amount equal to four times the monthly
rental payment with respect to such premises, and (B) an appropriate
UCC-1 financing statement shall have been executed with respect to such
location. The Agent reserves the right, in its reasonable credit
judgment exercised in accordance with its customary practices, to
create, from time to time, additional categories of ineligible
Inventory.
"Eligible Letter of Credit" means a letter of credit in form and
substance satisfactory to the Agent which (i) is issued as credit
support for one or more specified Letter(s) of Credit, (ii) is delivered
and pledged to the Agent as part of the Collateral, (iii) names the
Agent as sole beneficiary for the benefit of the Agent, the Lenders, the
Issuing Banks and the other Holders, (iv) is issued by a bank whose
short-term unsecured debt securities have at the time of issuance of
such letter of credit the highest available credit rating from either
Moody's Investors Service, Inc. (or its successors) or Standard & Poor's
Corporation (or its successors) and (v) does not expire prior to the
expiration of all Letters of Credit which it supports (it being
understood and agreed that any Eligible Letter of Credit may be subject
to partial reductions from time to time, provided that at no time shall
the aggregate amount available to be drawn under all Letters of Credit
supported by any such Eligible Letter of Credit exceed the amount then
available to be drawn under such Eligible Letter of Credit).
"Eligible Raw Materials" means Inventory (net of known losses) of the
Borrower or Warren Pumps which is classified, consistent with past
practice, on the Borrower's accounting system as Raw Materials, which is
otherwise Eligible Inventory.
"Eligible Receivable" means each Receivable of the Borrower or Warren
Pumps which, when scheduled to the Agent and at all times thereafter, is
not, except as otherwise agreed by the Agent in its reasonable
discretion, of any of the following types:
(i)(A) it arises out of a sale the original terms of which provide for
payment more than 60 days after the date of the original invoice issued
by the Borrower or Warren Pumps, as the case may be, in connection with
such sale or (B) it is more than 60 days past due, according to the
original terms of sale; or
(ii)it arises out of a sale not made in the ordinary course of the
Borrower's or Warren Pumps' business or a sale to a Person which is an
Affiliate of the Borrower or Warren Pumps or controlled by an Affiliate
of the Borrower or Warren Pumps; or
(iii)it fails to meet or violates any warranty, representation or
covenant contained in this Agreement or any of the other Loan Documents;
or
(iv)the account debtor is also the Borrower's or Warren Pumps' supplier
or creditor and (A) the Receivable is or may become subject to any right
of setoff by the account debtor, if such account debtor has not entered
into an agreement, in form and substance satisfactory to the Agent, with
the Agent with respect to the waiver of rights of setoff or (B) the
account debtor has disputed liability with respect to such Receivable,
or made any claim with respect to any other Receivable due from such
account debtor to the Borrower or to Warren Pumps, as the case may be,
in which case the Receivable shall be ineligible to the extent of such
dispute, claim or setoff; or
(v)the account debtor has filed a petition for bankruptcy or any other
petition for relief under the Bankruptcy Code or any similar statute,
made an assignment for the benefit of creditors, or if any petition or
other application for relief under the Bankruptcy Code or any similar
statute has been filed against the account debtor, or if the account
debtor has failed, suspended its business operations, become insolvent,
suffered a receiver or a trustee to be appointed for any of its assets
or affairs, or is generally failing to pay its debts as they become due;
provided that the Agent may, in its sole discretion, deem any such
Receivable to be an Eligible Receivable if the relevant account debtor
has entered into postpetition financing arrangements satisfactory to the
Agent; or
(vi)it arises in respect of a sale to an account debtor outside the
United States, unless the account debtor's obligations (or that portion
of such obligations which is acceptable to the Agent) with respect to
such sale are secured by a letter of credit, guaranty or eligible
bankers' acceptance having terms, and from such issuers and confirming
banks, as are reasonably acceptable to the Agent; or
(vii) the sale is on a bill-and-hold, guaranteed sale, sale-and-return,
sale on approval, consignment, or any other repurchase or return basis;
or
(viii) the Agent determines and advises the Borrower in writing that, in
the exercise of the Agent's reasonable credit judgment, collection of
such Receivable is insecure or such Receivable may not be paid by reason
of the account debtor's financial inability to pay; or
(ix) the account debtor is the United States of America or any
department, agency or instrumentality thereof, unless the Borrower or
its applicable Subsidiary assigns its right to payment of such
Receivable to the Agent pursuant to the Assignment of Claims Act; or
(x) the goods, the delivery of which has given rise to such Receivable,
have not been delivered to and accepted by the account debtor, or the
services, the performance of which has given rise to such Receivable,
have not been performed by the Borrower and accepted by the account
debtor; or
(xi) the Receivable(s) of the respective account debtor exceed(s) a
credit limit determined by the Agent, in the exercise of its reasonable
credit judgment, at any time or times hereafter, in which case such
Receivable(s) shall be ineligible to the extent such Receivable(s)
exceed(s) such limit; or
(xii) the Agent does not have a senior, perfected security interest in
such Receivable or such Receivable is subject to a Lien which is not
permitted under Section 9.03; or
(xiii) the account debtor is located in either of the states of New
Jersey or Minnesota and the Borrower has not filed and maintained
effective a current Business Activity Report with the appropriate
Governmental Authority in the state of New Jersey or Minnesota, as
applicable; or
(xiv) the sale is to an account debtor with respect to which fifty
percent (50%) or more of all Receivables owing by such account debtor
are unpaid for more than sixty (60) days after the due date(s) indicated
in the original invoice(s) with respect to the sale(s) giving rise
thereto; or
(xv)it arises out of or in connection with a retainage or similar
arrangement; or
(xvi)it is deemed ineligible by the Agent in accordance with the Agent's
customary criteria;
provided that, notwithstanding anything to the contrary contained in
this Agreement, at no time after the Borrower's achievement of Release
Status shall the aggregate face amount of Eligible Receivables which
consist of amounts payable in respect of progress payment or similar
arrangements exceed $5,000,000.
"Eligible Work In Process" means Inventory (net of (x) known losses and
(y) any progress payments received from customers of the Borrower or
Warren Pumps, as the case may be, where such progress payments are
deducted from the calculation of inventory on the financial statements
of the Borrower and its consolidated Subsidiaries) of the Borrower or
Warren Pumps which is classified, consistent with past practice, on the
Borrower's accounting system as Work in Process or Goods in Process,
which is otherwise Eligible Inventory.
"Environmental, Health or Safety Requirements of Law" means all
Requirements of Law derived from or relating to federal, state and local
laws or regulations relating to or addressing the environment, health or
safety, including but not limited to any law, regulation, or order
relating to the use, handling, or disposal of any Contaminant, any law,
regulation, or order relating to Remedial Action and any law,
regulation, or order relating to workplace or worker safety and health,
and such Requirements as are promulgated by the specifically authorized
Governmental Authority responsible for administering such Requirements,
each as from time to time hereafter in effect.
"Environmental Lien" means a Lien in favor of any Governmental Authority
for any (i) liabilities under any Environmental, Health or Safety
Requirements of Law, or (ii) damages arising from, or costs incurred by
such Governmental Authority in response to, a Release or threatened
Release of a Contaminant into the environment.
"Environmental Property Transfer Acts" means any applicable Requirement
of Law that conditions, restricts, prohibits or requires any
notification or disclosure triggered by the closure of any Property or
the transfer, sale or lease of any Property or deed or title for any
Property for environmental reasons, including, but not limited to, any
so-called "Environmental Cleanup Responsibility Acts" or "Responsible
Transfer Acts".
"Equipment" means all of the Borrower's and its Subsidiaries' present
and future (i) equipment, including, without limitation, machinery,
manufacturing, distribution, selling, data processing and office
equipment, assembly systems, tools, molds, dies, fixtures, appliances,
furniture, furnishings, vehicles, vessels, aircraft, aircraft engines,
and trade fixtures, (ii) other tangible personal Property (other than
the Borrower's and its Subsidiaries' Inventory), and (iii) any and all
accessions, parts and appurtenances attached to any of the foregoing or
used in connection therewith, and any substitutions therefor and
replacements, products and proceeds thereof.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and any successor statute.
"ERISA Affiliate" means any (i) corporation which is a member of the
same controlled group of corporations (within the meaning of Section
414(b) of the Internal Revenue Code) as the Borrower, (ii) partnership
or other trade or business (whether or not incorporated) under common
control (within the meaning of Section 414(c) of the Internal Revenue
Code) with the Borrower, and (iii) member of the same affiliated service
group (within the meaning of section 414(m) of the Internal Revenue
Code) as the Borrower, any corporation described in clause (i) above or
any partnership or trade or business described in clause (ii) above.
"Eurodollar Affiliate" means, with respect to each Lender, the Affiliate
of such Lender (if any) set forth below such Lender's name under the
heading "Eurodollar Affiliate" on the signature pages hereof or on the
Assignment and Acceptance by which it became a Lender or such Affiliate
of a Lender as it may from time to time specify by written notice to the
Borrower and the Agent.
"Eurodollar Interest Payment Date" means (i) with respect to any
Eurodollar Rate Loan, the last day of each Eurodollar Interest Period
applicable to such Loan and (ii) with respect to any Eurodollar Rate
Loan having a Eurodollar Interest Period in excess of three (3) calendar
months, the last day of each three (3) calendar month interval during
such Eurodollar Interest Period.
"Eurodollar Interest Period" is defined in Section 4.02(b).
"Eurodollar Interest Rate Determination Date" is defined in Section
4.02(c).
"Eurodollar Lending Office" means, with respect to any Lender, the
office or offices of such Lender (if any) set forth below such Lender's
name under the heading "Eurodollar Lending Office" on the signature
pages hereof or on the Assignment and Acceptance by which it became a
Lender or such office or offices of such Lender as it may from time to
time specify by written notice to the Borrower and the Agent.
"Eurodollar Rate" shall mean, with respect to any Eurodollar Interest
Period applicable to a Borrowing of Eurodollar Rate Loans, an interest
rate per annum obtained by dividing (i) the interest rate per annum
determined by the Agent to be the average (rounded upward to the nearest
whole multiple of one-sixteenth of one percent (0.0625%) per annum if
such average is not such a multiple) of the rates per annum specified by
notice to the Agent by Citibank as the rates per annum at which deposits
in Dollars are offered by the principal office of Citibank in London,
England to major banks in the London interbank market at approximately
11:00 a.m. (London time) on the Eurodollar Interest Rate Determination
Date for such Eurodollar Interest Period for a period equal to such
Eurodollar Interest Period and in an amount substantially equal to the
amount of the Eurodollar Rate Loan to be outstanding to Citibank for
such Eurodollar Interest Period, by (ii) a percentage equal to 100%
minus the Eurodollar Reserve Percentage. The Eurodollar Rate shall be
adjusted automatically on and as of the effective date of any change in
the Eurodollar Reserve Percentage.
"Eurodollar Rate Loans" means those Loans outstanding which bear
interest at a rate determined by reference to the Eurodollar Rate and
the Applicable Eurodollar Rate Margin as provided in Section 4.01(a).
"Eurodollar Reserve Percentage" means, for any day, that percentage
which is in effect on such day, as prescribed by the Federal Reserve
Board for determining the maximum reserve requirement (including,
without limitation, any emergency, supplemental or other marginal
reserve requirement) for a member bank of the Federal Reserve System in
New York, New York with deposits exceeding five billion Dollars in
respect of "Eurocurrency Liabilities" (or in respect of any other
category of liabilities which includes deposits by reference to which
the interest rate on Eurodollar Rate Loans is determined or any category
of extensions of credit or other assets which includes loans by a non-
United States office of any bank to United States residents).
"Event of Default" means any of the occurrences set forth in Section
11.01 after the expiration of any applicable grace period and the giving
of any applicable notice, in each case as expressly provided in Section
11.01.
"Excess Cash Flow" means, for any Cash Flow Period, an amount equal to
the Borrower's and its Subsidiaries' consolidated (i) EBITDA
(calculated, for this purpose only, excluding the gains or losses from
sales of assets (and any related tax effects)), plus (ii) the net
reduction, if any, in Working Capital during such period, minus (iii)
the net increase, if any, in Working Capital during such period, minus
(iv) income taxes actually paid in cash during such period, minus (v)
Capital Expenditures actually paid in cash during such period, to the
extent permitted to be paid hereunder, minus (vi) Consolidated Cash
Interest Expense of the Borrower for such period, minus (vii) the
aggregate amount of Investments made by the Borrower and the Restricted
Subsidiaries during such period in accordance with Section 9.04, minus
(viii) to the extent permitted in accordance with this Agreement, all
repayments and prepayments of any Indebtedness of the Borrower and/or
its Subsidiaries during such period (other than such repayments or
prepayments of the Term Loans paid in respect of Excess Cash Flow), (ix)
plus increases (and minus decreases) in non-contingent Revolving Credit
Obligations during such period, plus (x) the aggregate amount of Net
Cash Proceeds received by the Borrower and/or any of its Subsidiaries
during such period on account of the sale, assignment or other
disposition of any Property (including, without limitation, all or any
portion of the Discontinued Operations), minus (xi) the aggregate amount
of cash dividends accrued or paid during such period with respect to
Borrower's Capital Stock, to the extent permitted to be paid hereunder.
"Extension Date" means the date on or prior to March 31, 1995 on which
the each of the conditions set forth in Section 5.02 (including, without
limitation, the consummation of the New Bond Offering or the New
Subordinated Financing) shall have been satisfied.
"Fair Market Value" means, with respect to any asset or group of assets,
the value of the consideration obtainable in a sale of such asset in the
open market, assuming a sale by a willing seller to a willing purchaser
dealing at arm's length and arranged in an orderly manner over a
reasonable period of time, each having reasonable knowledge of the
nature and characteristics of such asset, neither being under any
compulsion to act, determined (a) in good faith by the board of
directors of the Borrower or (b) in an appraisal of such asset, provided
that such appraisal was performed relatively contemporaneously with such
determination of the fair market value by an independent third party
appraiser and the basic assumptions underlying such appraisal have not
materially changed since the date thereof.
"Federal Funds Rate" means, for any period, a fluctuating interest rate
per annum equal for each day during such period to the weighted average
of the rates on overnight federal funds transactions with members of the
Federal Reserve System arranged by federal funds brokers, as published
for such day (or, if such day is not a Business Day in New York, New
York, for the next preceding Business Day) in New York, New York by the
Federal Reserve Bank of New York, or if such rate is not so published
for any day which is a Business Day in New York, New York, the average
of the quotations for such day on such transactions received by Citibank
from three federal funds brokers of recognized standing selected by the
Agent.
"Federal Reserve Board" means the Board of Governors of the Federal
Reserve System or any Governmental Authority succeeding to its
functions.
"Fiscal Year" means the fiscal year of the Borrower, which shall be the
12-month period ending on December 31 of each calendar year.
"Fixed Charge Coverage Ratio" means, with respect to any period, the
ratio of (i) EBITDA of the Borrower and its Subsidiaries (other than
Varo, Baird and their respective Subsidiaries) on a consolidated basis
for such period, minus Capital Expenditures paid by the Borrower and its
Subsidiaries (other than Varo, Baird and their respective Subsidiaries)
during such period, minus charges for federal, state, local and foreign
income taxes actually paid by the Borrower and its Subsidiaries (other
than Varo, Baird and their respective Subsidiaries) during such period,
minus any net increase in Working Capital for such period, plus any net
decrease in Working Capital for such period to (ii) Consolidated Fixed
Charges of the Borrower and its Subsidiaries (other than scheduled
payments of principal on Indebtedness of Varo, Baird and/or their
respective Subsidiaries) on a consolidated basis for such period.
"Foreign Employee Benefit Plan" means any employee benefit plan as
defined in Section 3(3) of ERISA which is maintained or contributed to
for the benefit of the employees of the Borrower, any of its
Subsidiaries or any of its ERISA Affiliates, but which is not covered by
ERISA pursuant to ERISA Section 4(b)(4).
"Foreign Pension Plan" means any employee benefit plan as defined in
Section 3(3) of ERISA which (i) is maintained or contributed to for the
benefit of employees of the Borrower, any of its Subsidiaries or any of
its ERISA Affiliates, (ii) is not covered by ERISA pursuant to Section
4(b)(4) of ERISA, and (iii) under applicable local law, is required to
be funded through a trust or other funding vehicle.
"Funding Date" means, with respect to any Loan, the date of the funding
of such Loan.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board, the
American Institute of Certified Public Accountants and the Financial
Accounting Standards Board or in such other statements by such other
entity as may be in general use by significant segments of the
accounting profession as in effect on the date hereof (unless otherwise
specified pursuant to Section 14.04).
"General Intangibles" means all of the Borrower's and its Subsidiaries'
present and future choses in action, causes of action, and all other
intangible personal property of every kind and nature (other than (i)
Receivables and (ii) accounts (as defined in Article 9 of the Uniform
Commercial Code) of the Borrower's Subsidiaries), including, without
limitation, corporate, partnership and other business records,
inventions, designs, patents, patent applications, trademarks, service
marks, trademark and service mark applications and registrations, trade
names, trade secrets, goodwill, copyrights and copyright applications
and registrations, licenses, franchises, customer lists, tax refunds,
tax refund claims, rights and claims against carriers, shippers,
franchisees, lessors, and lessees, and rights to indemnification.
"Governmental Authority" means any nation or government, any federal,
state, local or other political subdivision thereof and any entity
exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to government.
"Government Contract" means any bid, quotation, proposal, contract,
agreement, work authorization, lease, commitment or sale or purchase
order of Borrower or its Subsidiaries that is with the United States
Government, or any state, local or foreign government, including,
without limitation, all contracts and work authorizations to supply
goods and services to the United States Government.
"Guaranteed Obligations" is defined in Section 12.01(a).
"Guarantor" is defined in the preamble hereto.
"Guarantor Subordinated Debt" is defined in Section 12.07.
"Guaranty" is defined in Section 12.01(a).
"Holder" means any Person entitled to enforce any of the Obligations,
whether or not such Person holds any evidence of Indebtedness,
including, without limitation, the Agent, each Lender and each Issuing
Bank.
"Indebtedness", as applied to any Person, means, at any time, without
duplication, (a) all indebtedness, obligations or other liabilities of
such Person (i) for borrowed money or evidenced by debt securities,
debentures, acceptances, notes or other similar instruments, and any
accrued interest, fees and charges relating thereto, (ii) under profit
payment agreements or in respect of obligations to redeem, repurchase or
exchange any Securities of such Person or to pay dividends in respect of
any stock, (iii) with respect to letters of credit issued for such
Person's account, (iv) to pay the deferred purchase price of property or
services, except accounts payable and accrued expenses arising in the
ordinary course of business, (v) in respect of Capital Leases, or (vi)
which are Accommodation Obligations (other than to the extent any such
Accommodation Obligations support the payment of indebtedness,
obligations or other liabilities which themselves constitute
Indebtedness of such Person); (b) all indebtedness, obligations or other
liabilities of such Person or others secured by a Lien on any property
of such Person, whether or not such indebtedness, obligations or
liabilities are assumed by such Person, all as of such time; (c) all
indebtedness, obligations or other liabilities of such Person in respect
of Interest Rate Contracts and Currency Agreements, net of liabilities
owed to such Person by the counterparties thereon; and (d) all
contingent Contractual Obligations with respect to any of the foregoing.
"Indemnitee" is defined in Section 14.03.
"Indemnified Matter" is defined in Section 14.03.
"Interest Coverage Ratio" means, with respect to any period, the ratio
of (i) EBITDA of the Borrower and its Subsidiaries (other than Varo,
Baird and their respective Subsidiaries) on a consolidated basis for
such period to
(ii) Consolidated Cash Interest Expense of the Borrower and its
Subsidiaries on a consolidated basis for such period.
"Interest Rate Contract Exposure" means, at any time and from time to
time, an aggregate amount equal to one hundred and ten percent (110%) of
the then current market value (determined by Citibank in accordance with
Citibank's customary practices) of each Interest Rate Contract to which
the Borrower is a party for the remaining term and volume of such
Interest Rate Contract, disregarding (subject to the immediately
succeeding sentence) any Interest Rate Contract with respect to which
such then current market value to the Borrower is positive. If (i) the
Borrower is a party to more than one Interest Rate Contract with the
same counterparty and (ii) the Borrower and such counterparty have
entered into a netting agreement in form and substance satisfactory to
the Agent with respect to such Interest Rate Contracts, then the then
current market values (determined by Citibank in accordance with
Citibank's customary practices) of such Interest Rate Contracts shall be
netted against one another in determining the Borrower's aggregate
Interest Rate Contract Exposure (it being understood and agreed that if
any such netting of Interest Rate Contracts results in a positive net
current market value to the Borrower, such net current market value
shall be disregarded in the calculation of the Borrower's aggregate
Interest Rate Contract Exposure).
"Interest Rate Contracts" means interest rate exchange, swap, collar or
cap or similar agreements providing interest rate protection.
"Internal Revenue Code" means the Internal Revenue Code of 1986, as
amended to the date hereof and from time to time hereafter, any
successor statute and any regulations or guidance promulgated
thereunder.
"Inventory" means all of the Borrower's and Warren Pumps present and
future (i) inventory (including unbilled accounts receivable), (ii)
goods, merchandise and other personal Property furnished or to be
furnished under any contract of service or intended for sale or lease,
and all goods consigned by the Borrower or Warren Pumps and all other
items which have previously constituted Equipment but are then currently
being held for sale or lease in the ordinary course of the Borrower's or
Warren Pumps' business, (iii) raw materials, work-in-process and
finished goods, (iv) materials and supplies of any kind, nature or
description used or consumed in the Borrower's or Warren Pumps' business
or in connection with the manufacture, production, packing, shipping,
advertising, finishing or sale of any of the Property described in
clauses (i) through (iii) above, (v) goods in which the Borrower or
Warren Pumps has a joint or other interest to the extent of the
Borrower's or Warren Pumps' interest therein or right of any kind
(including, without limitation, goods in which the Borrower or Warren
Pumps has an interest or right as consignee), and (vi) goods which are
returned to or repossessed by the Borrower or Warren Pumps; in each case
whether in the possession of the Borrower, Warren Pumps, a bailee, a
consignee, or any other Person for sale, storage, transit, processing,
use or otherwise, and any and all documents for or relating to any of
the foregoing.
"Investment" means, with respect to any Person, (i) any purchase or
other acquisition by that Person of Securities, or of a beneficial
interest in Securities issued by or other equity ownership interest in
any other Person, (ii) any purchase by that Person of all or a
significant part of the assets of a business conducted by another
Person, and (iii) any loan, advance (other than prepaid expenses,
accounts receivable, advances to employees and similar items made or
incurred in the ordinary course of business as presently conducted), or
capital contribution by that Person to any other Person, including all
Indebtedness to such Person arising from a sale of property by such
Person other than in the ordinary course of its business.
"Investment Account" means account number 4065 1115 of the Borrower at
Citibank's offices in New York, New York into which certain cash
proceeds of Collateral may be transferred in accordance with Section
3.02(b). The Investment Account shall be under the sole dominion and
control of the Agent; provided that all amounts deposited therein shall
be held by the Agent as Cash Collateral for the benefit of the Agent,
the Lenders, the Issuing Banks and the other Holders and shall be
subject to the terms of Section 11.03.
"IRS" means the Internal Revenue Service and any Person succeeding to
the functions thereof.
"Issue" means, with respect to any Letter of Credit, either issue, or
extend the expiry of, or renew, or increase the amount of, such Letter
of Credit, and the terms "Issued" and "Issuance" shall have
corresponding meanings.
"Issuing Banks" means Citibank and each other Lender (or Affiliate of a
Lender) approved by the Agent and the Borrower who has agreed to become
an Issuing Bank for the purpose of issuing Letters of Credit pursuant to
Section 2.04.
"Leases" means those Real Property leases, tenancies or occupancies
entered into by the Borrower or one of its Subsidiaries, as tenant,
sublessor or sublessee either directly or as the successor in interest
to the Borrower or any of the Restricted Subsidiaries.
"Lender" means, as of the Closing Date, Citibank and each other
institution (other than the Borrower and the Guarantors) which is a
signatory hereto and, at any other given time, each institution which is
a party hereto as a Lender, whether as a signatory hereto or pursuant to
an Assignment and Acceptance.
"Letter Agreements" means (x) the engagement letter dated April 1, 1994
from Citibank and accepted and agreed to by the Borrower, (y) the fee
letter dated April 1, 1994 from Citibank and accepted and agreed to by
the Borrower and
(z) the fee letter dated June 21, 1994 from Citibank and accepted and
agreed to by the Borrower.
"Letter of Credit" means any Commercial Letter of Credit or Standby
Letter of Credit.
"Letter of Credit Obligations" means, at any particular time, the sum of
(i) all outstanding Reimbursement Obligations, plus (ii) the aggregate
undrawn face amount of all outstanding Letters of Credit, plus (iii) the
aggregate face amount of all Letters of Credit requested by the Borrower
but not yet issued (unless the request for an unissued Letter of Credit
has been denied pursuant to Section 2.04(c)(i)). For purposes of
determining the amount of Letter of Credit Obligations (or any component
thereof) in respect of any Letter of Credit which is denominated in an
Alternative Currency, such amount shall equal the Dollar Equivalent of
the amount of such Alternative Currency at the time of determination
thereof.
"Letter of Credit Reimbursement Agreement" means, with respect to a
Letter of Credit, such form of application therefor and form of
reimbursement agreement therefor (whether in a single or several
documents, taken together) as the Issuing Bank from which the Letter of
Credit is requested may employ in the ordinary course of business for
its own account, with such modifications thereto as may be agreed upon
by the Issuing Bank and the Borrower and as are not materially adverse
(in the judgment of the Issuing Bank) to the interests of the Lenders;
provided, however, in the event of any conflict between the terms hereof
and of any Letter of Credit Reimbursement Agreement, the terms hereof
shall control.
"Liabilities and Costs" means all liabilities, obligations,
responsibilities, losses and damages with respect to or arising out of
any of the following: personal injury, death, punitive damages,
economic damages, consequential damages, treble damages, intentional,
willful or wanton injury, damage or threat to the environment or public
health or welfare, costs and expenses (including, without limitation,
attorney, expert and consulting fees and costs of investigation,
feasibility or Remedial Action studies), fines, penalties and monetary
sanctions, voluntary disclosures made to, or settlements with, the
United States Government, direct or indirect, known or unknown, absolute
or contingent, past, present or future, including interest, if any,
thereon.
"Lien" means any mortgage, deed of trust, pledge, hypothecation,
assignment, conditional sale agreement, deposit arrangement, security
interest, encumbrance, lien (statutory or other), preference, priority
or other security agreement or preferential arrangement (including,
without limitation, any negative pledge arrangement and any agreement to
provide equal and ratable security) of any kind or nature whatsoever in
respect of any property of a Person, whether granted voluntarily or
imposed by law, and includes the interest of a lessor under a Capital
Lease or under any financing lease having substantially the same
economic effect as any of the foregoing and the filing of any financing
statement or similar notice (other than a financing statement filed by a
"true" lessor pursuant to 9-408 of the Uniform Commercial Code),
naming the owner of such property as debtor, under the Uniform
Commercial Code or other comparable law of any jurisdiction.
"Loan Account" is defined in Section 2.05(b).
"Loan Documents" means this Agreement, the Notes, the Letter Agreements,
the Letter of Credit Reimbursement Agreements, the Lockbox Agreements,
the documents executed or delivered pursuant to Sections 5.01(a) and (b)
by the Borrower, any Guarantor or any other Subsidiary of the Borrower,
any Currency Agreements to which any Lender or any Affiliate of a Lender
is a party, any Interest Rate Contracts to which any Lender or any
Affiliate of a Lender is a party, and all other instruments, agreements
and written Contractual Obligations between the Borrower or any
Subsidiary of the Borrower, on the one hand, and any of the Agent, the
Lenders or the Issuing Banks, on the other hand, in each case delivered
to either the Agent, such Lender or such Issuing Bank pursuant to or in
connection with the transactions contemplated hereby.
"Loans" means all the Term Loans, the Revolving Loans, the Swing Loans
and all Base Rate Loans and Eurodollar Rate Loans.
"Lockbox Agreement" means a lockbox agreement executed by each Lockbox
Bank, the Borrower and the Agent substantially in the form of Exhibit B
(with such changes thereto requested by the Lockbox Bank as may be
acceptable to the Agent and the Borrower), as such agreement may be
amended, supplemented or otherwise modified from time to time.
"Lockbox Bank" means each bank identified as such on Schedule 6.01-AA
that has executed a Lockbox Agreement and has been confirmed by the
Agent not to be in uncertain financial condition, at which the Borrower
deposits proceeds of Collateral.
"Lockbox Accounts" means, collectively, the lockbox accounts established
at the Lockbox Banks; and "Lockbox Account" means any one of the Lockbox
Accounts.
"Lockboxes" means, collectively, the lockboxes established at the
Lockbox Banks for collection of payments in respect of Receivables or
other Collateral; and "Lockbox" means any one of the Lockboxes.
"Margin Stock" means "margin stock" as such term is defined in
Regulation U and Regulation G.
"Material Adverse Effect" means a material adverse effect upon the
business, condition (financial or otherwise), operations, performance,
assets or prospects of the Borrower or any Guarantor (other than Warren
Pumps), individually, or the Borrower and its Subsidiaries, taken as a
whole.
"Material Government Contract" means (i) for as long as Varo is a
Guarantor, (A) Contract No. DAAB07-88-C-F400 between Varo Inc. and the
United States Department of the Army (CECOM) and (B) Contract No.
N00164-93-D-0213 between Varo Inc. and the United States Department of
the Navy and (ii) any other Government Contract (or group of present or
future related Government Contracts) with respect to which the estimated
Receivables generated or to be generated pursuant thereto equals or
exceeds $5,000,000.
"Maximum Revolving Credit Amount" means, at any particular time, an
amount equal to (i) the lesser of (A) the Revolving Credit Commitments
at such time and (B) the Borrowing Base at such time minus (ii) the
amount of any Availability Reserves in effect at such time, minus (iii)
the amount of the Currency Agreement Exposure at such time, minus (iv)
the amount of the Interest Rate Contract Exposure at such time.
"Maximum Subsidiary Investment Amount" means (i) the sum of (A) all cash
Investments made by the Borrower, or which the Borrower is under a
Contractual Obligation to make, since the Closing Date in, (B) the
amount of outstanding Accommodation Obligations incurred by the Borrower
in respect of obligations of, and (C) the Fair Market Value of all
assets of the Borrower contributed and/or sold since the Closing Date
to, any Wholly Owned Subsidiary, less (ii) any cash dividends or other
cash distributions (but not intercompany loans) or proceeds of asset
sales received by the Borrower in respect of the Capital Stock of or
assets transferred to any such Wholly Owned Subsidiary since the Closing
Date.
"Multiemployer Plan" means a "multiemployer plan" as defined in Section
4001(a)(3) of ERISA which is, or within the immediately preceding six
(6) years was, contributed to by either the Borrower or any ERISA
Affiliate.
"Net Cash Proceeds" means (i) proceeds received by the Borrower or any
of the Restricted Subsidiaries in cash or Cash Equivalents from the sale
(including, without limitation, any Sale and Leaseback Transaction),
assignment or other disposition of any Property, other than sales,
assignments and other dispositions of Property between the Borrower and
Wholly Owned Subsidiaries and sales, assignments and other dispositions
permitted under clauses (i) through (vi) of Section 9.02, net of (A) the
reasonable cash costs of sale, assignment or other disposition and (B)
taxes paid or payable as a result thereof; provided that evidence of
each of (A) and (B) are provided to the Agent; (ii) proceeds of
insurance on account of the loss of or damage to any such Property or
Properties, and payments of compensation for any such Property or
Properties taken by condemnation or eminent domain, to the extent such
proceeds or payments are required pursuant to Section 8.07 to be applied
to prepay the Loans, and (iii) proceeds received after the Closing Date
by the Borrower or any of the Restricted Subsidiaries in cash or Cash
Equivalents from (A) the issuance of any Capital Stock by the Borrower
(other than any such issuance occurring
(1) as a result of the exercise of any Permitted Stock Options or (2) in
the ordinary course of business to any member of the management or board
of directors of the Borrower in connection with such member's employment
with or service to the Borrower), or any other additions to the equity
of the Borrower (other than retained earnings) or any contributions to
capital of the Borrower or (B) issuance of any Indebtedness by the
Borrower or any Restricted Subsidiary (except for such Indebtedness
permitted under Section 9.01 and any such Indebtedness incurred in
connection with Currency Agreements or Interest Rate Contracts to the
extent the Borrower is permitted to enter into such contracts pursuant
to the terms hereof), in each case net of reasonable costs incurred in
connection with such transaction; provided that evidence of such costs
is provided to the Agent.
"New Bond Documents" means the New Bond Indenture and the New Bonds
issued pursuant thereto, and the all other instruments, agreements and
written Contractual Obligations executed in connection with the New Bond
Offering.
"New Bond Offering" means the issuance by the Borrower of not more than
$240,000,000 aggregate principal amount of New Bonds pursuant to the New
Bond Indenture.
"New Bond Indenture" means an indenture of trust to be entered into
between (i) the Borrower and (ii) a trustee reasonably acceptable to the
Agent and the Lenders, in form and substance satisfactory to the
Lenders.
"New Bond Transaction Costs" means the fees, costs and expenses payable
by the Borrower in connection with the consummation of the New Bond
Offering and the execution, delivery and performance of the New Bond
Documents.
"New Bonds" means the notes issued in the New Bond Offering and governed
by the terms of the New Bond Indenture.
"New Subordinated Financing" means the issuance by the Borrower in a
single transaction or a series of contemporaneous related transactions
of (x) not more than $240,000,000 aggregate principal amount of
subordinated Indebtedness on terms satisfactory to the Lenders, (y) not
more than $240,000,000 aggregate liquidation value of preferred stock of
the Borrower on terms satisfactory to the Lenders or (z) common stock of
the Borrower in an amount sufficient to satisfy the requirements of
Section 5.02(b).
"New Subordinated Financing Documents" means all instruments, agreements
and written Contractual Obligations executed in connection with the New
Subordinated Financing.
"New Subordinated Financing Transaction Costs" means the fees, costs and
expenses payable by the Borrower in connection with the consummation of
the New Subordinated Financing and the execution, delivery and
performance of the New Subordinated Financing Documents.
"Non-Material Default" means any Default arising solely under or as a
result of Section 11.01(d).
"Non Pro Rata Loan" is defined in Section 3.02(b)(v).
"Note" is defined in Section 2.05(a).
"Notice of Borrowing" means a notice substantially in the form of
Exhibit D.
"Notice of Continuation/Conversion" means a notice substantially in the
form of Exhibit E.
"NPL" is defined in Section 6.01(o).
"Obligations" means, to the extent arising hereunder, under the Notes or
under any other Loan Document, all Loans, advances, debts, liabilities,
obligations, covenants and duties owing by the Borrower to the Agent,
any Lender, any Issuing Bank, any Affiliate of the Agent, any Lender or
any Issuing Bank, or any Person entitled to indemnification pursuant to
Section 14.03, of any kind or nature, present or future, whether or not
evidenced by any note, guaranty or other instrument, whether or not for
the payment of money, whether arising under or in connection with (x) a
Currency Agreement with any Lender or any Affiliate of a Lender or (y)
an Interest Rate Contract with any Lender or any Affiliate of a Lender,
or by reason of extension of credit, opening or amendment of a Letter of
Credit or payment of any draft drawn thereunder, loan, guaranty,
indemnification or in any other manner, whether direct or indirect
(including those acquired by assignment), absolute or contingent, due or
to become due, now existing or hereafter arising and however acquired.
The term includes, without limitation, all interest, charges, expenses,
fees, reasonable attorneys' fees and disbursements and any other sum
chargeable to the Borrower hereunder or under any other Loan Document.
"Officer's Certificate" means, as to a corporation, a certificate
executed on behalf of such corporation by an officer or director of such
corporation.
"Operating Lease" means, as applied to any Person, any lease of any
property (whether real, personal or mixed) by that Person as lessee
which is not a Capital Lease.
"PBGC" means the Pension Benefit Guaranty Corporation and any Person
succeeding to the functions thereof.
"Permits" means any permit, approval, authorization license, variance,
or permission required from a Governmental Authority under an applicable
Requirement of Law.
"Permitted Existing Accommodation Obligations" means those Accommodation
Obligations of the Borrower and its Subsidiaries identified as such on
Schedule 1.01.3.
"Permitted Existing Indebtedness" means the Indebtedness of the Borrower
and its Subsidiaries (other than Permitted Subordinated Indebtedness)
identified as such on Schedule 1.01.4.
"Permitted Existing Investments" means those Investments identified as
such on Schedule 1.01.5.
"Permitted Existing Liens" means the Liens on assets of the Borrower or
any of its Subsidiaries identified as such on Schedule 1.01.6.
"Permitted Existing Surety Bonds" means the surety bonds and similar
arrangements identified as such on
Schedule 1.01.10.
"Permitted Stock Options" means all options, warrants and/or other
rights to acquire shares of the Borrower's Capital Stock which the
Borrower issues from time to time to its employees, officers and/or
directors.
"Permitted Subordinated Indebtedness" means Indebtedness evidenced by,
or in respect of, principal and interest on
(i) the 12% Debentures in a principal amount not exceeding (x)
$150,000,000 minus (y) an amount equal to the aggregate principal
amount, if any, of 12% Debentures repaid upon the closing of the New
Bond Offering or the New Subordinated Financing as contemplated by this
Agreement, and
(ii) the 12.25% Debentures in a principal amount not exceeding (x)
$150,000,000 minus (y) an amount equal to the aggregate principal
amount, if any, of 12.25% Debentures repaid upon the closing of the New
Bond Offering or the New Subordinated Financing as contemplated by this
Agreement.
"Person" means any natural person, corporation, limited partnership,
limited liability company, general partnership, joint stock company,
joint venture, association, company, trust, bank, trust company, land
trust, business trust or other organization, whether or not a legal
entity, and any Governmental Authority.
"Plan" means an employee benefit plan defined in Section 3(3) of ERISA
in respect of which the Borrower or any ERISA Affiliate is, or (except
with respect to any employee welfare benefit plans as defined in Section
3(1) of ERISA) within the immediately preceding six years was, an
"employer" as defined in Section 3(5) of ERISA.
"Pricing Decrease Status" exists at any date if, at such date, the
Permitted Subordinated Indebtedness (or any other unsecured Indebtedness
of the Borrower satisfactory to the Agent) is rated at least B1 by
Moody's Investors Service, Inc. (or its successors) or at least B+ by
Standard & Poor's Corporation (or its successors).
"Process Agent" is defined in Section 14.17.
"Property" means any Real Property or personal property, plant,
building, facility, structure, underground storage tank or unit,
Equipment, inventory, general intangible, Receivable, or other asset
owned, leased or operated by the Borrower or its Subsidiaries, as
applicable (including any surface water thereon or adjacent thereto, and
soil and groundwater thereunder).
"Pro Rata Share" means, with respect to any Lender, the percentage
obtained by dividing the sum of (a) (i) such Lender's Revolving Credit
Commitment at such time, (ii) the outstanding principal amount of such
Lender's A Term Loans at such time and (iii) the outstanding principal
amount of such Lender's B Term Loans at such time by (b) the sum of (i)
the aggregate amount of all Revolving Credit Commitments at such time,
(ii) the aggregate principal amount of all A Term Loans outstanding at
such time and (iii) the aggregate principal amount of all B Term Loans
outstanding at such time; provided, however, if all of the Commitments
are terminated pursuant to the terms hereof, then "Pro Rata Share" means
the percentage obtained by dividing (x) such Lender's Credit Obligations
by (y) the aggregate amount of all Credit Obligations.
"Protective Advance" is defined in Section 13.09.
"Real Property" means all of the Borrower's and each of its
Subsidiaries' respective present and future right, title and interest
(including, without limitation, any leasehold estate) in (i) any plots,
pieces or parcels of land, (ii) any improvements, buildings, structures
and fixtures now or hereafter located or erected thereon or attached
thereto of every nature whatsoever (the rights and interests described
in clauses (i) and (ii) above being the "Premises"), (iii) all
easements, rights of way, gores of land or any lands occupied by
streets, ways, alleys, passages, sewer rights, water courses, water
rights and powers, and public places adjoining such land, and any other
interests in property constituting appurtenances to the Premises, or
which hereafter shall in any way belong, relate or be appurtenant
thereto, (iv) all hereditaments, gas, oil, minerals (with the right to
extract, sever and remove such gas, oil and minerals), and easements, of
every nature whatsoever, located in or on the Premises and (v) all other
rights and privileges thereunto belonging or appertaining and all
extensions, additions, improvements, betterments, renewals,
substitutions and replacements to or of any of the rights and interests
described in clauses (iii) and (iv) above.
"Receivables" means all of the Borrower's and Warren Pumps' present and
future (i) accounts, (ii) accounts receivable, (iii) rights to payment
for goods sold or leased or for services rendered (except those
evidenced by instruments or chattel paper), whether or not earned by
performance, (iv) all rights in any merchandise or goods which any of
the same may represent, and (v) all rights, title, security and
guaranties with respect to each of the foregoing, including, without
limitation, any right of stoppage in transit.
"Register" is defined in Section 14.01(c).
"Regulation A" means Regulation A of the Federal Reserve Board as in
effect from time to time.
"Regulation D" means Regulation D of the Federal Reserve Board as in
effect from time to time.
"Regulation G" means Regulation G of the Federal Reserve Board as in
effect from time to time.
"Regulation U" means Regulation U of the Federal Reserve Board as in
effect from time to time.
"Regulation X" means Regulation X of the Federal Reserve Board as in
effect from time to time.
"Reimbursement Date" is defined in Section 2.04(d)(i)(A).
"Reimbursement Obligations" means, as to the Borrower, the aggregate
non-contingent reimbursement or repayment obligations of the Borrower
with respect to amounts drawn under Letters of Credit.
"Release" means release, spill, emission, leaking, pumping, injection,
deposit, disposal, discharge, dispersal, leaching or migration into the
indoor or outdoor environment or into or out of any Property, including
the movement of Contaminants through or in the air, soil, surface water,
groundwater or Property.
"Release Status" exists if no Default or Event of Default shall have
occurred and be continuing and (x) Consolidated Net Income of the
Borrower and its Subsidiaries (other than Varo, Baird and their
respective Subsidiaries) for Fiscal Year 1994 shall exceed $2,000,000 or
(y) the sum of (1) Consolidated Net Income of the Borrower and its
Subsidiaries (other than Varo, Baird and their respective Subsidiaries)
for Fiscal Year 1994 plus (2) Consolidated Net Income of the Borrower
and its Subsidiaries (other than Varo, Baird and their respective
Subsidiaries) for Fiscal Year 1995 shall exceed $15,000,000.
"Remedial Action" means actions required to (i) clean up, remove, treat
or in any other way address Contaminants in the indoor or outdoor
environment; (ii) prevent the Release or threat of Release or minimize
the further Release of Contaminants; or (iii) investigate and determine
if a remedial response is needed and to design such a response and post-
remedial investigation, monitoring, operation and maintenance and care.
"Reportable Event" means any of the events described in Section 4043 of
ERISA.
"Requirements of Law" means, as to any Person, the charter and by-laws
or other organizational or governing documents of such Person, and any
law, rule or regulation, or determination of an arbitrator or a court or
other Governmental Authority, in each case applicable to or binding upon
such Person or any of its property or to which such Person or any of its
property is subject including, without limitation, the Securities Act,
the Securities Exchange Act, Regulations G, U and X, ERISA, the Fair
Labor Standards Act and any certificate of occupancy, zoning ordinance,
building, or land use requirement or Permit or labor or employment rule
or regulation, including Environmental, Health or Safety Requirements of
Law.
"Requisite Lenders" means, at any time (a "Time of Determination"),
Lenders holding, in the aggregate, more than fifty-one percent (51%) of
the sum of (i) the then aggregate principal amount of the A Term Loans
outstanding at such time, (ii) the then aggregate principal amount of
the B Term Loans outstanding at such time, and (iii) the then aggregate
amount of the Revolving Credit Commitments in effect at such time;
provided, however, that, in the event any of the Lenders shall have
failed to fund its A Term Loan Pro Rata Share, B Term Loan Pro Rata
Share or Revolving Credit Pro Rata Share, as the case may be, of any
Loan requested by the Borrower which such Lenders are obligated to fund
under the terms hereof and any such failure has not been cured, then for
so long as such failure continues, "Requisite Lenders" means Lenders
(excluding all Lenders whose failure to fund their respective Revolving
Credit Pro Rata Share of such Loans have not been so cured) whose Pro
Rata Shares represent more than fifty-one percent (51%) of the aggregate
Pro Rata Shares of such Lenders; provided, further, however, that, in
the event that the Commitments have been terminated pursuant to the
terms hereof, "Requisite Lenders" means Lenders (without regard to such
Lenders' performance of their respective obligations hereunder) whose
aggregate ratable shares (stated as a percentage) of the aggregate
outstanding principal balance of all Loans are greater than fifty-one
percent (51%); provided, further, however, that if there are more than
three Lenders at any Time of Determination, "Requisite Lenders" shall
include at least three Lenders.
"Restricted Junior Payment" means (i) any dividend or other
distribution, direct or indirect, on account of any shares of any class
of Capital Stock of the Borrower or any now or hereafter outstanding,
except a dividend payable solely in
(x) shares of such class of stock, (y) shares of any class of stock of
the Borrower which is junior to such class of stock and/or (z) shares of
any class of preferred stock of the Borrower which is not subject to
redemption in whole or part at the option of the holder thereof prior to
July 31, 2001, (ii) any redemption, retirement, sinking fund or similar
payment, purchase or other acquisition for value, direct or indirect, of
any shares of any class of Capital Stock of the Borrower or any of the
Borrower's Subsidiaries now or hereafter outstanding, (iii) any payment
or prepayment of principal of, premium, if any, or interest, fees or
other charges on or with respect to, and any redemption, purchase,
retirement, defeasance, sinking fund or similar payment and any claim
for rescission with respect to, any Permitted Subordinated Indebtedness
and (iv) any payment made to redeem, purchase, repurchase or retire, or
to obtain the surrender of, any outstanding warrants, options or other
rights to acquire shares of any class of Capital Stock of the Borrower
or any of its Subsidiaries now or hereafter outstanding.
"Restricted Subsidiary" means a Subsidiary of the Borrower which is
organized and existing under the laws of the United States of America,
any State thereof, the District of Columbia or the United States Virgin
Islands.
"Revolving Credit Availability" means, at any particular time, the
amount by which the Maximum Revolving Credit Amount exceeds the sum of
(x) the Revolving Credit Obligations outstanding at such time plus (y)
the aggregate principal amount of Protective Advances outstanding at
such time.
"Revolving Credit Commitment" means, with respect to any Lender, the
obligation of such Lender to make Revolving Loans and to participate in
Letters of Credit and Swing Loans pursuant to the terms and conditions
hereof, which obligation shall not exceed the principal amount set forth
opposite such Lender's name under the heading "Revolving Credit
Commitment" on Schedule 1.01.1 or the signature page of the Assignment
and Acceptance by which it became a Lender, as modified from time to
time pursuant to the terms hereof or to give effect to any applicable
Assignment and Acceptance, and "Revolving Credit Commitments" means the
aggregate principal amount of the Revolving Credit Commitments of all
the Lenders, the maximum aggregate principal amount of which shall not
exceed $65,000,000, as reduced from time to time pursuant to the terms
hereof.
"Revolving Credit Lender" is defined in Section 2.02(a).
"Revolving Credit Notes" means notes evidencing the Borrower's
Obligation to repay the Revolving Loans.
"Revolving Credit Obligations" means, at any particular time, the sum of
(i) the outstanding principal amount of the Swing Loans at such time,
plus (ii) the outstanding principal amount of the Revolving Loans at
such time, plus (iii) the Letter of Credit Obligations outstanding at
such time.
"Revolving Credit Pro Rata Share" means, with respect to any Revolving
Credit Lender, the percentage obtained by dividing (i) such Revolving
Credit Lender's Revolving Credit Commitment at such time (in each case,
as adjusted from time to time in accordance with the provisions hereof)
by (ii) the aggregate amount of all Revolving Credit Commitments at such
time.
"Revolving Credit Termination Date" means the earlier to occur of (i)
the date of termination of the Revolving Credit Commitments pursuant to
the terms hereof and
(ii) (A) July 31, 1997 or (B) if the Extension Date shall have occurred,
July 31, 1999.
"Revolving Loan" is defined in Section 2.02(a).
"Sale and Leaseback Transaction" means, with respect to any Person, any
direct or indirect arrangement pursuant to which Property is sold or
transferred by such Person or a Subsidiary of such Person and is
thereafter leased back from the purchaser thereof by such Person or one
of its Subsidiaries.
"Securities" means any stock, shares, voting trust certificates, bonds,
debentures, notes or other evidences of indebtedness, secured or
unsecured, convertible, subordinated or otherwise, or any certificates
of interest, shares, or participation in temporary or interim
certificates for the purchase or acquisition of, or any right to
subscribe to, purchase or acquire any of the foregoing, but shall not
include any evidence of the Obligations.
"Securities Act" means the Securities Act of 1933, as amended from time
to time, and any successor statute.
"Securities Exchange Act" means the Securities Exchange Act of 1934, as
amended from time to time, and any successor statute.
"Solvent", when used with respect to any Person, means that at the time
of determination:
(i)the fair market value of its assets is in excess of the total amount
of its liabilities (including, without limitation, contingent
liabilities); and
(ii)the present fair saleable value of its assets is greater than its
probable liability on its existing debts as such debts become absolute
and matured; and
(iii)it is then able and expects to be able to pay its debts (including,
without limitation, contingent debts and other commitments) as they
mature; and
(iv)it has capital sufficient to carry on its business as conducted and
as proposed to be conducted.
For purposes of determining whether a Person is Solvent, the amount of
any contingent liability shall be computed as the amount that, in light
of all the facts and circumstances existing at such time, represents the
amount that can reasonably be expected to become an actual or matured
liability.
"Sources and Uses" means Schedule 1.01.7, which specifies the
anticipated sources and uses of funds on the Closing Date.
"Standby Letter of Credit" means any letter of credit issued by an
Issuing Bank pursuant to Section 2.04 for the account of the Borrower,
which is not a Commercial Letter of Credit.
"Subsidiary" of a Person means any corporation or other entity of which
securities or other ownership interests having ordinary voting power to
elect a majority of the board of directors or other persons performing
similar functions are at the time directly or indirectly owned or
controlled by such Person, one or more of the other Subsidiaries of such
Person or any combination thereof.
"Survey" means a survey of any Real Property owned by the Borrower and
the Borrower's Subsidiaries, dated (i) with respect to the Real Property
with respect to which mortgages are to be delivered on the Closing Date,
such date as is acceptable to (x) the Title Company for purposes of
issuing appropriate endorsements to the Title Policies and (y) the
Agent, but in no case later than ninety (90) days after the Closing Date
or (ii) with respect to any Real Property acquired in the future, such
date as is acceptable to the Agent, showing, in either case, lot lines
and monuments, building lines, easements (both burdening and/or
benefitting such Real Property), all Liens permitted by Section 9.03
herein (to the extent that such items can be located by the surveyor),
access locations, the buildings and improvements thereon (including, but
not limited to, roads, streets, driveways and sidewalks), loading docks
and parking lots, acreage of such Real Property, and encroachments, if
any, onto such Real Property and over onto adjoining properties. The
Survey shall contain flood plain designation, if appropriate.
"Swing Loan" is defined in Section 2.03(a).
"Swing Loan Availability" is defined in Section 2.03(a).
"Swing Loan Bank" means Citibank, in its individual capacity or, in the
event Citibank is not the Agent, the Agent (or any Affiliate of the
Agent designated by the Agent), in its individual capacity.
"Swing Loan Note" means one or more notes evidencing the Borrower's
Obligation to repay the Swing Loans.
"Taxes" is defined in Section 3.03(a).
"Term Loans" means all of the A Term Loans and all of the B Term Loans.
"Termination Event" means (i) a Reportable Event with respect to any
Benefit Plan; (ii) the withdrawal of the Borrower or any ERISA Affiliate
from a Benefit Plan during a plan year in which the Borrower or such
ERISA Affiliate was a "substantial employer" as defined in Section
4001(a)(2) of ERISA or the cessation of operations which results in the
termination of employment of 20% of Benefit Plan participants who are
employees of the Borrower or any ERISA Affiliate; (iii) the imposition
of an obligation on the Borrower or any ERISA Affiliate under Section
4041 of ERISA to provide affected parties written notice of intent to
terminate a Benefit Plan in a distress termination described in Section
4041(c) of ERISA; (iv) the institution by the PBGC or any similar
foreign Governmental Authority of proceedings to terminate a Benefit
Plan or a Foreign Pension Plan; (v) any event or condition which is
reasonably likely to constitute grounds under Section 4042 of ERISA for
the termination of, or the appointment of a trustee to administer, any
Benefit Plan; (vi) a foreign Governmental Authority shall appoint or
institute proceedings to appoint a trustee to administer any Foreign
Pension Plan; or (vii) the partial or complete withdrawal of the
Borrower or any ERISA Affiliate from a Multiemployer Plan or a Foreign
Pension Plan.
"Title Company" means Chicago Title Insurance Company.
"Title Policy" means an Alta Mortgagee Policy of title insurance with
extended coverage over the standard or general exceptions and such
endorsements reasonably required by the Agent, issued by the Title
Company, covering the Real Property, showing title vested in either the
Borrower or the Borrower's Subsidiaries subject only to the Liens set
forth in Section 9.03 herein, which Title Policy shall show the Agent as
the proposed insured and an insurance amount equal to the lesser of the
Loans or the Fair Market Value of the Real Property covered by the Title
Policy.
"Transaction Costs" means the fees, costs and expenses payable by the
Borrower in connection with the execution, delivery and performance of
the Loan Documents.
"Transaction Documents" means the Loan Documents and, after the
Extension Date, the New Bond Documents or (unless the New Subordinated
Financing is of the type specified in clause (z) of the definition of
New Subordinated Financing) the New Subordinated Financing Documents, as
the case may be.
"Turbomachinery Businesses" means the Borrower's businesses specified on
Schedule 1.01.11.
"12% Debentures" means the 12% Senior Subordinated Debentures Due 2001
issued by the Borrower in the aggregate principal amount of up to
$150,000,000 and governed by the terms of the 12% Debenture Indenture.
"12% Debenture Indenture" means the Indenture dated as of November 1,
1989 between the Borrower and IBJ Schroder Bank & Trust Company, as
Trustee, as such agreement may be amended, supplemented or otherwise
modified from time to time.
"12.25% Debentures" means the 12.25% Senior Subordinated Debentures Due
1997 issued by the Borrower in the aggregate principal amount of up to
$150,000,000 and governed by the terms of the 12.25% Debenture
Indenture.
"12.25% Debenture Indenture" means the Indenture dated as of August 15,
1987 between the Borrower and IBJ Schroder
Bank & Trust Company, as Trustee, as amended by the First Supplemental
Indenture thereto dated as of February 14, 1994, and as such agreement
may be further amended, supplemented or otherwise modified from time to
time.
"Uniform Commercial Code" means the Uniform Commercial Code as enacted
in the State of New York, as it may be amended from time to time.
"Unrestricted Subsidiary" means any Subsidiary of the Borrower other
than a Restricted Subsidiary.
"Unused Commitment Fee" is defined in Section 4.03(b).
"Unused Commitment Fee Rate" means, as of any date, one half of one
percent (0.5%) per annum.
"Unsupported Surety Bond" means any surety bond or other similar
arrangement (including, without limitation, any Permitted Existing
Surety Bond), other than any such surety bond or arrangement with
respect to which (x) the credit exposure of the issuer thereof is fully
covered by a Letter of Credit or
(y) applicable law would not create a Lien (other than a Lien junior in
all respects to the Agent's Liens on the Collateral under the Loan
Documents) on any Property of the Borrower or any of its Subsidiaries
(including, without limitation, any Collateral) for amounts owing to the
issuer thereof.
"Varo" is defined in the preamble hereto.
"Varo Guaranty" is defined in Section 12.01(a).
"Voting Stock" means, with respect to any Person, securities with
respect to any class or classes of Capital Stock of such Person
entitling the holders thereof (whether at all times or only so long as
no senior class of stock has voting power by reason of any contingency)
to vote in the election of members of the board of directors of such
Person.
"Warren Pumps" is defined in the preamble hereto.
"Warren Pumps Guaranty" is defined in Section 12.01(a).
"Wholly Owned Subsidiary" means any direct, wholly owned Restricted
Subsidiary (other than any Guarantor).
"Working Capital" means, as at any date of determination, the excess, if
any, of (i) the Borrower's and its Subsidiaries' consolidated current
assets (excluding cash and Cash Equivalents) for such period over (ii)
the Borrower's and its Subsidiaries' consolidated current liabilities
for such period, except for the following: Indebtedness (including,
without limitation, Revolving Credit Obligations) to the extent such
Indebtedness would otherwise increase such consolidated current
liabilities, and all long-term pension, post-retiree medical benefits
and deferred tax assets and liabilities.
1.02. Computation of Time Periods. In this Agreement, in the
computation of periods of time from a specified date to a later
specified date, the word "from" means "from and including" and the words
"to" and "until" each mean "to but excluding". Periods of days referred
to in this Agreement shall be counted in calendar days unless Business
Days are expressly prescribed. Any period determined hereunder by
reference to a month or months or year or years shall end on the day in
the relevant calendar month in the relevant year, if applicable,
immediately preceding the date numerically corresponding to the first
day of such period, provided that if such period commences on the last
day of a calendar month (or on a day for which there is no numerically
corresponding day in the calendar month during which such period is to
end), such period shall, unless otherwise expressly required by the
other provisions of this Agreement, end on the last day of the calendar
month. For purposes of this Agreement, if any "monthly anniversary" of
a date (the "Earlier Date") falls in a month (the "Later Month") in
which there is no day which numerically corresponds to the Earlier Date,
such monthly anniversary shall, unless otherwise expressly required by
the other provisions of this Agreement, be deemed to be the last day of
the Later Month.
1.03. Accounting Terms. Subject to Section 14.04, for purposes of this
Agreement, all accounting terms not otherwise defined herein shall have
the meanings assigned to them in conformity with GAAP.
1.04. Other Definitional Provisions. References to "Articles",
"Sections", "subsections", "Schedules" and "Exhibits" shall be to
Articles, Sections, subsections, Schedules and Exhibits, respectively,
of this Agreement unless otherwise specifically provided. The words
"hereof", "herein", and "hereunder" and words of similar import when
used in this Agreement shall refer to this Agreement as a whole and not
to any particular provision of this Agreement.
1.05. Other Terms. All other terms contained herein shall, unless the
context indicates otherwise, have the meanings assigned to such terms by
the Uniform Commercial Code to the extent the same are defined therein.
ARTICLE II
AMOUNTS AND TERMS OF LOANS
2.01. The Term Loans. (a) Amount of A Term Loans. Subject to the
terms and conditions set forth herein, each Lender with an A Term Loan
Commitment (an "A Term Loan Lender") hereby severally and not jointly
agrees to make on the Closing Date, a term loan, in Dollars, to the
Borrower in an amount equal to such Lender's A Term Loan Commitment
(each individually, an "A Term Loan" and, collectively, the "A Term
Loans"). All A Term Loans shall be made by the A Term Loan Lenders on
the Closing Date simultaneously and proportionately to their respective
A Term Loan Pro Rata Shares.
(b) Amount of B Term Loans. Subject to the terms and conditions set
forth herein, each Lender with a B Term Loan Commitment (a "B Term Loan
Lender") hereby severally and not jointly agrees to make on the Closing
Date, a term loan, in Dollars, to the Borrower in an amount equal to
such Lender's B Term Loan Commitment (each individually, a "B Term Loan"
and, collectively, the "B Term Loans"). All B Term Loans shall be made
by the B Term Loan Lenders on the Closing Date simultaneously and
proportionately to their respective B Term Loan Pro Rata Shares.
(c)Notice of Borrowing in respect of A Term Loans and B Term Loans. The
Borrower shall deliver to the Agent a Notice of Borrowing, signed by it,
on the Closing Date. Such Notice of Borrowing shall specify (i) the
aggregate amount of the A Term Loans, (ii) the aggregate amount of the B
Term Loans and (ii) instructions for the disbursement of the proceeds of
the A Term Loans and the B Term Loans. The Term Loans shall initially
be Base Rate Loans and thereafter may be continued as Base Rate Loans or
converted into Eurodollar Rate Loans in the manner provided in Section
4.01(c) and subject to the conditions and limitations therein set forth
and set forth in Section 4.02. Any Notice of Borrowing given pursuant
to this Section 2.01(c) shall be irrevocable.
(d)Making of Term Loans. Promptly after receipt of the Notice of
Borrowing under Section 2.01(c) in respect of the Term Loans to be made
on the Closing Date, the Agent shall notify each Lender by telex or
telecopy, or other similar form of transmission, of each of the proposed
Borrowings. Each A Term Loan Lender shall deposit an amount equal to
its A Term Loan Pro Rata Share of the A Term Loans, and each B Term Loan
Lender shall deposit an amount equal to its B Term Loan Pro Rata Share
of the B Term Loans, with the Agent at its office in New York, New York,
in immediately available funds, on the Closing Date specified in the
Notice of Borrowing. Subject to the fulfillment of the conditions
precedent set forth in Section 5.01, the Agent shall make the proceeds
of such amounts received by it available to the Borrower at the Agent's
office in New York, New York on the Closing Date and shall disburse such
proceeds in accordance with the Borrower's disbursement instructions set
forth in such Notice of Borrowing. The failure of any Lender to deposit
the amount described above with the Agent on the Closing Date shall not
relieve any other Lender of its obligations hereunder to make its A Term
Loan or B Term Loan, as the case may be, on the Closing Date. No Lender
shall be responsible for any failure by any other Lender to perform its
obligation to make any Term Loan hereunder nor shall the A Term Loan
Commitment or B Term Loan Commitment of any Lender be increased or
decreased as a result of any such failure.
(e)Repayment of the Term Loans. (i) A Term Loans. Subject to the
immediately succeeding sentence, (x) the A Term Loans shall be repayable
in twelve (12) consecutive quarterly installments beginning on October
31, 1994 and continuing on the last day of each third month thereafter
(each such date (including, without limitation, July 31, 1997), a
"Payment Date") until July 31, 1997 and (y) each of the first eleven
(11) installments shall be in the aggregate amount of $3,333,333.33 and
the final installment shall be in the amount of the then outstanding
principal balance of the A Term Loans. Notwithstanding the immediately
preceding sentence, upon the occurrence of the Extension Date, the
amortization of the A Term Loans shall be adjusted automatically so that
the aggregate principal amount of the A Term Loans outstanding on the
Extension Date shall be repayable in substantially equal quarterly
installments beginning on the first Payment Date after the Extension
Date and continuing on each Payment Date thereafter until the repayment
in full of the then outstanding aggregate principal balance of the A
Term Loans on July 31, 1999. It is understood and agreed that (x) the
exact amount of each such substantially equal installment shall be
determined by the Agent on the Extension Date, (y) the Agent shall
promptly notify the Borrower and each Lender of each such amount and (z)
such determinations by the Agent shall be binding on all parties hereto
in the absence of manifest error.
(ii) B Term Loans. The B Term Loans shall be repayable in full on the B
Term Loan Maturity Date.
(iii) In addition to the scheduled payments on the Term Loans, the
Borrower may make the voluntary prepayments described in Section
3.01(a)(i) and shall make the mandatory prepayments prescribed in
Section 3.01(b), for credit against such scheduled payments on the Term
Loans pursuant to Section 3.01(a)(i) or Section 3.01(b)(v), as
applicable. Any amount paid in respect of the Term Loans may not be
reborrowed.
(f)Use of Proceeds of Term Loans. The proceeds of the Term Loans may be
used to refinance existing Indebtedness of the Borrower and to pay
Transaction Costs and to provide working capital for the Borrower and
its Subsidiaries, all as more specifically provided in the Sources and
Uses.
2.02. Revolving Credit Facility. (a) Subject to the terms and
conditions set forth herein, each Lender with a Revolving Credit
Commitment ("Revolving Credit Lender") hereby severally and not jointly
agrees to make revolving loans, in Dollars (each individually, a
"Revolving Loan" and, collectively, the "Revolving Loans") to the
Borrower from time to time during the period from the Closing Date to
the Business Day next preceding the Revolving Credit Termination Date,
in an amount not to exceed at any time such Lender's Revolving Credit
Pro Rata Share of the Revolving Credit Availability at such time. All
Revolving Loans comprising the same Borrowing hereunder shall be made by
such Lenders simultaneously and proportionately to their then respective
Revolving Credit Commitments. Subject to the provisions hereof
(including, without limitation, Section 5.02), the Borrower may repay
any outstanding Revolving Loan on any day which is a Business Day and
any amounts so repaid may be reborrowed, up to the amount available
under this Section 2.02(a) at the time of such Borrowing, until the
Business Day next preceding the Revolving Credit Termination Date.
(b) Notice of Borrowing. When the Borrower desires to borrow under
this Section 2.02, it shall deliver to the Agent an irrevocable Notice
of Borrowing, signed by it, (x) on the Closing Date, in the case of a
Borrowing of Revolving Loans on the Closing Date and (y) no later than
1:00 p.m. (New York time) (I) on the Business Day immediately preceding
the proposed Funding Date, in the case of a Borrowing of Base Rate Loans
after the Closing Date and (II) at least three (3) Business Days in
advance of the proposed Funding Date, in the case of a Borrowing of
Eurodollar Rate Loans after the Closing Date. Such Notice of Borrowing
shall specify (i) the proposed Funding Date (which shall be a Business
Day), (ii) the amount of the proposed Borrowing, (iii) the Revolving
Credit Availability as of the date of such Notice of Borrowing, (iv)
whether the proposed Borrowing will be of Base Rate Loans or Eurodollar
Rate Loans and (v) in the case of Eurodollar Rate Loans, the requested
Eurodollar Interest Period. In lieu of delivering such a Notice of
Borrowing (except with respect to a Borrowing on the Closing Date), the
Borrower shall give the Agent irrevocable telephonic notice of any
proposed Borrowing by 1:00 p.m. (I) on the Business Day immediately
preceding the proposed Funding Date, in the case of a Borrowing of Base
Rate Loans after the Closing Date and (II) on the third Business Day
immediately preceding the proposed Funding Date, in the case of a
Borrowing of Eurodollar Rate Loans after the Closing Date, and shall
confirm such notice by delivery of the Notice of Borrowing by telecopy
to the Agent promptly, but in no event later than 3:00 p.m. (New York
time) on the same day.
(c) Making of Revolving Loans and Certain Withdrawals from the
Investment Account. (i) Promptly after receipt of a Notice of
Borrowing under Section 2.02(b) (or telephonic notice in lieu thereof),
the Agent shall notify each Revolving Credit Lender by telex or
telecopy, or other similar form of transmission, of the proposed
Borrowing and of any amount to be released from the Investment Account
in accordance with the immediately succeeding sentence. Notwithstanding
anything contained in this Agreement to the contrary, it is understood
and agreed that, to the extent funds are then available in the
Investment Account, each Notice of Borrowing under Section 2.02(b) (or
telephonic notice in lieu thereof) shall be deemed to be a request to
withdraw funds from the Investment Account for deposit in the
Disbursement Account on the relevant Funding Date in accordance with
Section 11.03(c) in an aggregate amount equal to the lesser of (1) the
amount indicated in such Notice of Borrowing and (2) the aggregate
amount of funds then available in the Investment Account. Each
Revolving Credit Lender shall deposit an amount equal to its Revolving
Credit Pro Rata Share of an amount equal to (x) the amount requested by
the Borrower to be made as Revolving Loans minus (y) the amount (if any)
specified by the Agent as the amount to be withdrawn from the Investment
Account with the Agent at its office in New York, New York, in
immediately available funds, (A) on the Closing Date specified in the
initial Notice of Borrowing and (B) not later than 3:00 p.m. (New York
time) on any other proposed Funding Date. Subject (in the case of
clause (y) below only) to the fulfillment of the conditions precedent
set forth in Section 5.01 or Section 5.03, as applicable, the Agent
shall make the proceeds of (x) such amounts on deposit in the Investment
Account (unless a Blockage Notice shall have been delivered by the Agent
to the Borrower) and (y) such amounts received by the Agent from the
Revolving Credit Lenders available to the Borrower at the Agent's office
in New York, New York on such Funding Date (or on the date received if
later than such Funding Date) and shall disburse such proceeds to the
Disbursement Account. The failure of any Revolving Credit Lender to
deposit the amount described above with the Agent on the applicable
Funding Date shall not relieve any other Revolving Credit Lender of its
obligations hereunder to make its Revolving Loan on such Funding Date.
No Lender shall be responsible for any failure by any other Lender to
perform its obligation to make a Revolving Loan hereunder nor shall the
Revolving Credit Commitment of any Lender be increased or decreased as a
result of any such failure.
(ii) Unless the Agent shall have been notified by any Revolving Credit
Lender on the Business Day immediately preceding the applicable Funding
Date in respect of any Borrowing of Revolving Loans that such Lender
does not intend to fund its Revolving Loan requested to be made on such
Funding Date, the Agent may assume that such Lender has funded its
Revolving Loan and is depositing the proceeds thereof with the Agent on
the Funding Date, and the Agent in its sole discretion may, but shall
not be obligated to, disburse a corresponding amount to the Borrower on
the Funding Date. If the Revolving Loan proceeds corresponding to that
amount are advanced to the Borrower by the Agent but are not in fact
deposited with the Agent by such Lender on or prior to the applicable
Funding Date, such Lender agrees to pay, and in addition the Borrower
agrees to repay, to the Agent forthwith on demand such corresponding
amount, together with interest thereon, for each day from the date such
amount is disbursed to or for the benefit of the Borrower until the date
such amount is paid or repaid to the Agent, (A) in the case of the
Borrower, at the interest rate applicable to such Borrowing and (B) in
the case of such Lender, at the Federal Funds Rate for the first
Business Day, and thereafter at the interest rate applicable to such
Borrowing. If such Lender shall pay to the Agent the corresponding
amount, the amount so paid shall constitute such Lender's Revolving
Loan, and if both such Lender and the Borrower shall pay and repay such
corresponding amount, the Agent shall promptly pay to the Borrower such
corresponding amount. This Section 2.02(c)(ii) does not relieve any
Revolving Credit Lender of its obligation to make its Revolving Loan on
any Funding Date.
(d)Use of Proceeds of Revolving Loans. The proceeds of the Revolving
Loans may be used to fund working capital in the ordinary course of the
business of the Borrower and its Subsidiaries and for other lawful
general corporate purposes not prohibited hereunder; provided that none
of such proceeds shall be used (x) to repay, redeem, retire, purchase or
otherwise acquire for value, or to fund any sinking fund or similar
payment in respect of, any Indebtedness of the Borrower or any of its
Subsidiaries (other than the Obligations), (y) to pay or provide for the
payment of all or any portion of (1) the Transaction Costs, (2) the New
Bond Transaction Costs or (3) the New Subordinated Financing Transaction
Costs, or (z) to purchase or otherwise acquire any Investment, except as
expressly permitted in accordance with Section 9.04.
(e)Revolving Credit Termination Date. The Revolving Credit Commitments
shall terminate, and all outstanding Revolving Credit Obligations shall
be paid in full (or, in the case of unmatured Letter of Credit
Obligations, provision for payment in cash shall be made to the
satisfaction of the Issuing Banks and the Class A Requisite Lenders), on
the Revolving Credit Termination Date. Each Lender's obligation to make
Revolving Loans shall terminate at the close of business in New York
City on the Business Day next preceding the Revolving Credit Termination
Date.
2.03. Swing Loans. (a) Availability. Subject to the terms and
conditions set forth herein, the Swing Loan Bank may, in its sole
discretion, make loans (the "Swing Loans") to the Borrower, from time to
time after the Closing Date and prior to the Revolving Credit
Termination Date, up to an aggregate principal amount at any one time
outstanding which shall not exceed an amount ("Swing Loan Availability")
equal to the lesser of (i) $5,000,000 and (ii) the Swing Loan Bank's
Revolving Credit Pro Rata Share of the Revolving Credit Availability at
such time. The Swing Loan Bank shall have no duty to make or to
continue to make Swing Loans. All Swing Loans shall be payable on
demand with accrued interest thereon in accordance with the third
sentence of Section 2.03(d) and shall be secured as part of the
Obligations by the Collateral and shall otherwise be subject to all the
terms and conditions applicable to Revolving Loans, except that (x)
Swing Loans shall not have a minimum amount requirement and (y) all
interest on the Swing Loans made by the Swing Loan Bank shall be payable
to the Swing Loan Bank solely for its own account.
(b) Notice of Borrowing. When the Borrower desires to borrow under this
Section 2.03, it shall deliver to the Agent an irrevocable Notice of
Borrowing, signed by it, no later than 3:00 p.m. (New York time) on the
day of the proposed Borrowing of a Swing Loan. Such Notice of Borrowing
shall specify (i) the date of the proposed Borrowing (which shall be a
Business Day), (ii) the amount of the proposed Borrowing and (iii)
instructions for the disbursement of the proceeds of the proposed
Borrowing. In lieu of delivering such a Notice of Borrowing, the
Borrower shall give the Agent irrevocable telephonic notice of any
proposed Borrowing by 3:00 p.m. on the day of the proposed Borrowing,
and shall confirm such notice by delivery of the Notice of Borrowing by
telecopy to the Agent promptly, but in no event later than 4:00 p.m.
(New York time) on the same day. All Swing Loans shall be Base Rate
Loans.
(c) Making of Swing Loans and Certain Withdrawals from the Investment
Account. The Swing Loan Bank shall deposit the amount it intends to
fund, if any, in respect of the Swing Loans requested by the Borrower
with the Agent at its office in New York, New York not later than 3:00
p.m. (New York time) in immediately available funds on the date of the
proposed Borrowing applicable thereto. Notwithstanding anything
contained in this Agreement to the contrary, it is understood and agreed
that, to the extent funds are then available in the Investment Account,
each Notice of Borrowing under Section 2.03(b) (or telephonic notice in
lieu thereof) shall be deemed to be a request to withdraw funds from the
Investment Account for deposit in the Disbursement Account on the
relevant Funding Date in an aggregate amount equal to the lesser of (1)
the amount indicated in such Notice of Borrowing and (2) the aggregate
amount of funds then available in the Investment Account (with a
corresponding deemed reduction in the amount of the Swing Loan requested
pursuant to such Notice of Borrowing). The Swing Loan Bank shall not
make any Swing Loan in the period commencing on the first Business Day
after it receives written notice from any Lender that one or more of the
conditions precedent contained in Section 5.03 is not on such date
satisfied, and ending when such conditions are satisfied, and the Swing
Loan Bank shall not otherwise be required to determine that, or take
notice whether, the conditions precedent set forth in Section 5.03
hereof have been satisfied in connection with the making of any Swing
Loan. Subject (with respect to clause (y) only) to the preceding
sentence, the Agent shall make the proceeds of (x) such amounts on
deposit in the Investment Account (unless a Blockage Notice shall have
been delivered by the Agent to the Borrower) and
(y) each funding of a Swing Loan available to the Borrower at the
Agent's office in New York, New York on the date of the proposed
Borrowing and shall disburse such proceeds to the Disbursement Account.
(d)Repayment of Swing Loans. The Borrower shall repay the outstanding
Swing Loans owing to the Swing Loan Bank (i) in accordance with Section
3.01(c)(ii), on a daily basis, to the extent funds are on deposit in the
Concentration Account and, if applicable, the Investment Account, (ii)
upon demand by the Swing Loan Bank in accordance with the third sentence
of this Section 2.03(d) and (iii) on the Revolving Credit Termination
Date. In connection with the repayment of Swing Loans pursuant to the
preceding clause (i), the Borrower hereby irrevocably authorizes the
Agent to apply the withdrawn funds in accordance with such clause. In
the event that the Borrower fails to repay any Swing Loans, together
with interest thereon, as set forth in the first sentence of this
paragraph, then, upon the request of the Swing Loan Bank, each Revolving
Credit Lender shall make Revolving Loans to the Borrower (irrespective
of the satisfaction of the conditions in Section 5.03 or the requirement
to deliver a Notice of Borrowing in Section 2.02(b), which conditions
and requirement such Lenders irrevocably waive) in an amount equal to
such Lender's Revolving Credit Pro Rata Share of the aggregate amount of
the Swing Loans then outstanding (net of that portion of such Swing
Loan, if any, owing to such Lender in its capacity as a Swing Loan Bank)
after giving effect to any prepayments and repayments made by the
Borrower, and the Borrower hereby authorizes the Agent to apply the
proceeds of such Revolving Loans to the repayment of such Swing Loans.
The failure of any Revolving Credit Lender to make available to the
Agent its Revolving Credit Pro Rata Share of such Revolving Loans shall
not relieve any other Revolving Credit Lender of its obligation
hereunder to make available to the Agent such other Revolving Credit
Lender's Revolving Credit Pro Rata Share of such Revolving Loans on the
date of such request. No Lender shall be responsible for any failure by
any other Lender to perform its obligation to make such a Revolving Loan
hereunder nor shall the Revolving Credit Commitment of any Lender be
increased or decreased as a result of any such failure.
(e)Use of Proceeds of Swing Loans. The proceeds of the Swing Loans may
be used for working capital in the ordinary course of the Borrower's
business and for lawful corporate purposes of the Borrower not
prohibited hereunder.
2.04. Letters of Credit. Subject to the terms and conditions set forth
herein, each Issuing Bank hereby severally agrees to Issue for the
account of the Borrower one or more Letters of Credit, subject to the
following provisions:
(a)Types and Amounts. An Issuing Bank shall not have any obligation to
Issue, and shall not Issue, any Letter of Credit at any time:
(i)if the aggregate Letter of Credit Obligations with respect to such
Issuing Bank, after giving effect to the Issuance of the Letter of
Credit requested hereunder, shall exceed any limit imposed by law or
regulation upon such Issuing Bank;
(ii)if the Issuing Bank receives written notice (A) from the Agent at or
before 11:00 a.m. (New York time) on the date of the proposed Issuance
of such Letter of Credit that immediately after giving effect to the
Issuance of such Letter of Credit, the Revolving Credit Obligations at
such time would exceed the Maximum Revolving Credit Amount at such time,
or (B) from any of the Lenders at or before 11:00 a.m. (New York time)
on the date of the proposed Issuance of such Letter of Credit that one
or more of the conditions precedent contained in Sections 5.01 or 5.03,
as applicable, would not on such date be satisfied (or waived pursuant
to Section 14.07), unless such conditions are thereafter satisfied or
waived and written notice of such satisfaction or waiver is given to the
Issuing Bank by the Agent (and an Issuing Bank shall not otherwise be
required to determine that, or take notice whether, the conditions
precedent set forth in Sections 5.01 or 5.03, as applicable, have been
satisfied or waived);
(iii)which has an expiration date later than the earlier of (A) the date
two (2) years after the date of issuance (without regard to any
automatic renewal provisions thereof) or (B) the Business Day next
preceding the Revolving Credit Termination Date;
(iv)with respect to such proposed Letters of Credit denominated in an
Alternative Currency if the Issuing Bank receives written notice from
the Agent at or before 11:00 a.m. (New York time) on the date of the
proposed Issuance of such Letters of Credit that immediately after
giving effect to the Issuance of such Letter of Credit the Letter of
Credit Obligations at such time in respect of outstanding Letters of
Credit denominated in Alternative Currency would exceed $1,000,000; or
(v)which is in a currency other than Dollars or an Alternative Currency.
(b)Conditions. In addition to being subject to the satisfaction of the
conditions precedent contained in Sections 5.01 and 5.03, as applicable,
the obligation of an Issuing Bank to Issue any Letter of Credit is
subject to the satisfaction in full of the following conditions:
(i)if the Issuing Bank so requests, the Borrower shall have executed and
delivered to such Issuing Bank and the Agent a Letter of Credit
Reimbursement Agreement and such other documents and materials as may be
required pursuant to the terms thereof;
(ii)the terms of the proposed Letter of Credit shall not be contrary to
the Issuing Bank's customary letter of credit practices (as determined
by the Issuing Bank in its sole discretion, exercised in a commercially
reasonable manner); and
(iii) if the beneficiary of the Letter of Credit is a foreign
Governmental Authority and the proposed Letter of Credit is intended to
be Issued in connection with such foreign Governmental Authority's
purchase of arms or armaments from the Borrower or its Subsidiaries, the
Borrower or its Subsidiaries, as the case may be, shall have complied
with all Requirements of Law with respect to such transaction including,
without limitation, the application for and receipt of all Permits from
the United States Government in connection therewith.
(c)Issuance of Letters of Credit. (i) The Borrower shall give an
Issuing Bank and the Agent written notice that it has selected such
Issuing Bank to Issue a Letter of Credit not later than 11:00 a.m. (New
York time) on the third (3rd) Business Day preceding the requested date
for Issuance thereof hereunder, or such shorter notice as may be
acceptable to such Issuing Bank and the Agent. Such notice shall be
irrevocable unless and until (x) the applicable Issuing Bank, in its
sole discretion, permits the revocation thereof or (y) such request is
denied by the applicable Issuing Bank and shall specify (A) that the
requested Letter of Credit is either a Commercial Letter of Credit or a
Standby Letter of Credit, (B) the stated amount of the Letter of Credit
requested, (C) the effective date (which shall be a Business Day) of
Issuance of such Letter of Credit, (D) the date on which such Letter of
Credit is to expire, (E) the Person for whose benefit such Letter of
Credit is to be Issued, (F) other relevant terms of such Letter of
Credit and (G) the amount of the then outstanding Letter of Credit
Obligations. Such Issuing Bank shall notify the Agent immediately upon
receipt of a written notice from the Borrower requesting that a Letter
of Credit be Issued and, upon the Agent's request therefor, send a copy
of such notice to the Agent.
(ii) The Issuing Bank shall give the Agent written notice, or
telephonic notice confirmed promptly thereafter in writing, of the
Issuance of a Letter of Credit (which notice the Agent shall promptly
transmit by telegram, telex, telecopy, telephone or similar transmission
to each Lender).
(d)Reimbursement Obligations; Duties of Issuing Banks. (i)
Notwithstanding any provisions to the contrary in any Letter of Credit
Reimbursement Agreement:
(A)the Borrower shall reimburse the Issuing Bank for amounts drawn under
such Letter of Credit pursuant to subsection (e)(ii) below, in Dollars,
no later than the date (the "Reimbursement Date") which is one (1)
Business Day after the Borrower receives written notice from the Issuing
Bank that payment has been made under such Letter of Credit by the
Issuing Bank; and
(B)all Reimbursement Obligations with respect to any Letter of Credit
shall bear interest at the rate applicable in accordance with Section
4.01(a) from the date of the relevant drawing under such Letter of
Credit until the Reimbursement Date and thereafter at the rate
applicable in accordance with Section 4.01(d).
(ii)The Issuing Bank shall give the Agent written notice, or telephonic
notice confirmed promptly thereafter in writing, of all drawings under a
Letter of Credit and the payment (or the failure to pay when due) by the
Borrower on account of a Reimbursement Obligation (which notice the
Agent shall promptly transmit by telegram, telex, telecopy or similar
transmission to each Revolving Credit Lender).
(iii)No action taken or omitted in good faith by an Issuing Bank under
or in connection with any Letter of Credit shall put such Issuing Bank
under any resulting liability to any Lender, the Borrower or, so long as
such Letter of Credit is not Issued in violation of Section 2.04(a),
relieve any Revolving Credit Lender of its obligations hereunder to such
Issuing Bank. Solely as between the Issuing Banks and such Lenders, in
determining whether to pay under any Letter of Credit, the respective
Issuing Bank shall have no obligation to the Revolving Credit Lenders
other than to confirm that any documents required to be delivered under
a respective Letter of Credit appear to have been delivered and that
they appear on their face to comply with the requirements of such Letter
of Credit.
(e)Participations. (i) Immediately upon Issuance by an Issuing Bank of
any Letter of Credit in accordance with the procedures set forth in this
Section 2.04, each Revolving Credit Lender shall be deemed to have
irrevocably and unconditionally purchased and received from that Issuing
Bank, without recourse or warranty, an undivided interest and
participation in such Letter of Credit to the extent of such Lender's
Revolving Credit Pro Rata Share, including, without limitation, all
obligations of the Borrower with respect thereto (other than amounts
owing to the Issuing Bank under Section 2.04(g)) and any security
therefor and guaranty pertaining thereto.
(ii)If any Issuing Bank makes any payment under any Letter of Credit and
the Borrower does not repay such amount to the Issuing Bank on the
Reimbursement Date, the Issuing Bank shall promptly notify the Agent,
which shall promptly notify each Revolving Credit Lender, and each such
Lender shall promptly and unconditionally pay to the Agent for the
account of such Issuing Bank, in immediately available funds, the amount
of such Lender's Revolving Credit Pro Rata Share of such payment (net of
that portion of such payment, if any, made by such Lender in its
capacity as an Issuing Bank), and the Agent shall promptly pay to the
Issuing Bank such amounts received by it, and any other amounts received
by the Agent for the Issuing Bank's account, pursuant to this Section
2.04(e). All such payments shall constitute Revolving Loans made to the
Borrower pursuant to Section 2.02 (irrespective of the satisfaction of
the conditions in Section 5.02 or the requirement in Section 2.04(b) to
deliver a Notice of Borrowing which conditions and requirement, for the
purpose of refunding any Reimbursement Obligation owing to any Issuing
Bank, the Revolving Credit Lenders irrevocably waive) and shall
thereupon cease to be unpaid Reimbursement Obligations. If a Revolving
Credit Lender does not make its Revolving Credit Pro Rata Share of the
amount of such payment available to the Agent, such Lender agrees to pay
to the Agent for the account of the Issuing Bank, forthwith on demand,
such amount together with interest thereon, for the first Business Day
after the date such payment was first due at the Federal Funds Rate, and
thereafter at the interest rate then applicable in accordance with
Section 4.01(a). The failure of any such Lender to make available to
the Agent for the account of an Issuing Bank its Revolving Credit Pro
Rata Share of any such payment shall neither relieve any other Revolving
Credit Lender of its obligation hereunder to make available to the Agent
for the account of such Issuing Bank such other Lender's Revolving
Credit Pro Rata Share of any payment on the date such payment is to be
made nor increase the obligation of any other Revolving Credit Lender to
make such payment to the Agent. This Section does not relieve any
Lender of its obligation to purchase Revolving Credit Pro Rata Share
participations in Letters of Credit; nor does this Section relieve the
Borrower of its obligation to pay or repay any Issuing Bank funding its
Revolving Credit Pro Rata Share of such payment pursuant to this Section
interest on the amount of such payment from such date such payment is to
be made until the date on which payment is repaid in full.
(iii)Whenever an Issuing Bank receives a payment on account of a
Reimbursement Obligation, including any interest thereon, as to which
any Revolving Credit Lender has made a Revolving Loan pursuant to clause
(ii) of this Section, such Issuing Bank shall pay to the Agent such
payment in accordance with Section 3.02. Whenever the Agent receives
(pursuant to the immediately preceding sentence or otherwise) a payment
on account of a Reimbursement Obligation, including any interest
thereon, as to which any Revolving Credit Lender has made a Revolving
Loan pursuant to clause (ii) of this Section, the Agent shall distribute
such payment in accordance with Section 3.02. Each such payment shall
be made by such Issuing Bank or the Agent, as the case may be, on the
Business Day on which such Person receives the funds paid to such Person
pursuant to the preceding sentence, if received prior to 11:00 a.m. (New
York time) on such Business Day, and otherwise on the next succeeding
Business Day.
(iv)Upon the request of any Revolving Credit Lender, an Issuing Bank
shall furnish such Lender copies of any Letter of Credit or Letter of
Credit Reimbursement Agreement to which such Issuing Bank is party and
such other documentation as reasonably may be requested by such Lender.
(v)The obligations of a Revolving Credit Lender to make payments to the
Agent for the account of any Issuing Bank with respect to a Letter of
Credit shall be irrevocable, shall not be subject to any qualification
or exception whatsoever except willful misconduct or gross negligence of
such Issuing Bank, and shall be honored in accordance with this Article
II (irrespective of the satisfaction of the conditions described in
Sections 5.01 and 5.02, as applicable which conditions, for the purposes
of the repayment of Letters of Credit to the Issuing Bank, such Lenders
irrevocably waive) under all circumstances, including, without
limitation, any of the following circumstances:
(A)any lack of validity or enforceability hereof or of any of the other
Loan Documents;
(B)the existence of any claim, setoff, defense or other right which the
Borrower may have at any time against a beneficiary named in a Letter of
Credit or any transferee of a beneficiary named in a Letter of Credit
(or any Person for whom any such transferee may be acting), the Agent,
any Agent, any Issuing Bank, any Lender, or any other Person, whether in
connection herewith, with any Letter of Credit, the transactions
contemplated herein or any unrelated transactions (including any
underlying transactions between the account party and beneficiary named
in any Letter of Credit);
(C)any draft, certificate or any other document presented under the
Letter of Credit having been determined to be forged, fraudulent,
invalid or insufficient in any respect or any statement therein being
untrue or inaccurate in any respect;
(D)the surrender or impairment of any security for the performance or
observance of any of the terms of any of the Loan Documents;
(E)any failure by such Issuing Bank to make any reports required
pursuant to Section 2.04(h) or the inaccuracy of any such report; or
(F)the occurrence of any Event of Default or Default.
(f)Payment of Reimbursement Obligations. (i) The Borrower
unconditionally agrees to pay to each Issuing Bank, in Dollars, the
amount of all Reimbursement Obligations, interest and other amounts
payable to such Issuing Bank under or in connection with the Letters of
Credit when such amounts are due and payable, irrespective of any claim,
setoff, defense or other right which the Borrower may have at any time
against any Issuing Bank or any other Person.
(ii)In the event any payment by the Borrower received by an Issuing Bank
with respect to a Letter of Credit and distributed by the Agent to the
Revolving Credit Lenders on account of their participation is thereafter
set aside, avoided or recovered from such Issuing Bank in connection
with any receivership, liquidation or bankruptcy proceeding, each such
Lender which received such distribution shall, upon demand by such
Issuing Bank, contribute such Lender's Revolving Credit Pro Rata Share
of the amount set aside, avoided or recovered together with interest at
the rate required to be paid by such Issuing Bank upon the amount
required to be repaid by it.
(g)Issuing Bank Charges. The Borrower shall pay to each Issuing Bank,
solely for its own account, the standard charges assessed by such
Issuing Bank in connection with the issuance, administration, amendment
and payment or cancellation of Letters of Credit and such compensation
in respect of such Letters of Credit for the Borrower's account as may
be agreed upon by the Borrower and such Issuing Bank from time to time.
(h)Issuing Bank Reporting Requirements. Each Issuing Bank shall, no
later than the fifth (5th) Business Day following the last day of each
calendar month, provide to the Agent and the Borrower separate schedules
for Commercial Letters of Credit and Standby Letters of Credit issued by
it, in form and substance reasonably satisfactory to the Agent, setting
forth the aggregate Letter of Credit Obligations outstanding to it at
the end of each month and any information requested by the Agent or the
Borrower relating to the date of issue, account party, amount,
expiration date and reference number of each Letter of Credit issued by
it.
(i)Indemnification; Exoneration. (A) In addition to all other amounts
payable to an Issuing Bank, the Borrower hereby agrees to defend,
indemnify, and save the Agent, each Issuing Bank and each Lender
harmless from and against any and all claims, demands, liabilities,
penalties, damages, losses (other than loss of profits), costs, charges
and expenses (including reasonable attorneys' fees but excluding taxes)
which the Agent, such Issuing Bank or such Lender may incur or be
subject to as a consequence, direct or indirect, of (i) the Issuance of
any Letter of Credit other than as a result of the gross negligence or
willful misconduct of the Issuing Bank, as determined by a court of
competent jurisdiction, or (ii) the failure of the Issuing Bank issuing
a Letter of Credit to honor a drawing under such Letter of Credit as a
result of any act or omission, whether rightful or wrongful, of any
present or future de jure or de facto government or Governmental
Authority.
(B)As between the Borrower on the one hand and the Agent, the Lenders
and the Issuing Banks on the other hand, the Borrower assumes all risks
of the acts and omissions of, or misuse of Letters of Credit by, the
respective beneficiaries of the Letters of Credit. In furtherance and
not in limitation of the foregoing, subject to the provisions of the
Letter of Credit Reimbursement Agreements, the Agent, the Issuing Banks
and the Lenders shall not be responsible for: (i) the form, validity,
legality, sufficiency, accuracy, genuineness or legal effect of any
document submitted by any party in connection with the application for
and Issuance of the Letters of Credit, even if it should in fact prove
to be in any or all respects invalid, insufficient, inaccurate,
fraudulent or forged; (ii) the validity, legality or sufficiency of any
instrument transferring or assigning or purporting to transfer or assign
a Letter of Credit or the rights or benefits thereunder or proceeds
thereof, in whole or in part, which may prove to be invalid or
ineffective for any reason; (iii) failure of the beneficiary of a Letter
of Credit to comply duly with conditions required in order to draw upon
such Letter of Credit; (iv) errors, omissions, interruptions or delays
in transmission or delivery of any messages, by mail, cable, telegraph,
telex or otherwise, whether or not they be in cipher; (v) errors in
interpretation of technical terms; (vi) any loss or delay in the
transmission or otherwise of any document required in order to make a
drawing under any Letter of Credit or of the proceeds thereof; (vii) the
misapplication by the beneficiary of a Letter of Credit of the proceeds
of any drawing under such Letter of Credit; (viii) any litigation,
proceeding or charges with respect to such Letter of Credit; and (ix)
any consequences arising from causes beyond the control of the Agent,
the Issuing Banks or the Lenders; provided that, notwithstanding
anything contained in this Agreement to the contrary, the Borrower shall
have a claim against the Agent, each Issuing Bank and each Lender, and
each such Person shall be liable to the Borrower, to the extent, but
only to the extent, of any direct, as opposed to consequential, punitive
or special, damages suffered by the Borrower which the Borrower proves
(pursuant to a non-appealable judgment of a court of competent
jurisdiction) were caused by (i) such Person's willful misconduct or
gross negligence in determining whether documents presented under a
Letter of Credit comply with the terms thereof or (ii) such Person's
willful failure to pay, or gross negligence resulting in a failure to
pay, any drawing under a Letter of Credit after the presentation to it
by the beneficiary of a draft and any other applicable drawing
documents, all strictly complying with the terms and conditions of such
Letter of Credit. In furtherance and not in limitation of the
foregoing, the Agent, each Issuing Bank and each Lender may accept
documents that appear on their face to be in order, without
responsibility for further investigation.
(j)Obligations Several. The obligations of each Issuing Bank and each
Lender under this Section 2.04 are several and not joint, and no Issuing
Bank or Lender shall be responsible for the obligation to issue Letters
of Credit or participation obligation hereunder, respectively, of any
other Issuing Bank or Lender.
2.05. Promise to Repay; Evidence of Indebtedness.
(a) Promise to Repay. The Borrower hereby agrees to pay
when due the principal amount of each Loan which is made to it, and
further agrees to pay when due all unpaid interest accrued thereon, in
accordance with the terms hereof and of the Notes. The Borrower shall
execute and deliver to each Lender, as applicable on the Closing Date, A
Term Loan Notes, B Term Loan Notes, Swing Loan Notes and Revolving
Credit Notes, each in form and substance acceptable to the Agent and
such Lender, evidencing the Loans and thereafter shall execute and
deliver such other promissory notes as are necessary to evidence the
Loans owing to the Lenders after giving effect to any assignment thereof
pursuant to Section 14.01, all in form and substance acceptable to the
Agent and the parties to such assignment (all such promissory notes and
all amendments thereto, replacements thereof and substitutions therefor
being collectively referred to as the "Notes"; and "Note" means any one
of the Notes).
(b)Loan Account. Each Lender shall maintain in accordance with its
usual practice an account or accounts (a "Loan Account") evidencing the
Indebtedness of the Borrower to such Lender resulting from each Loan
owing to such Lender from time to time, including the amount of
principal and interest payable and paid to such Lender from time to time
hereunder and under each of the Notes.
2.06. Authorized Officers and Agents. On the Closing Date
and from time to time thereafter, the Borrower shall deliver to the
Agent an Officer's Certificate setting forth the names of the officers,
employees and agents authorized to request Revolving Loans, Swing Loans
and Letters of Credit and containing a specimen signature of each such
officer, employee or agent. The officers, employees and agents so
authorized shall also be authorized to act for the Borrower in respect
of all other matters relating to the Loan Documents. The Agent shall be
entitled to rely conclusively on such officer's or employee's authority
to request such Loan or Letter of Credit until the Agent receives
written notice to the contrary. The Agent shall have no duty to verify
the authenticity of the signature appearing on any written Notice of
Borrowing or any other document, and, with respect to an oral request
for such a Loan or Letter of Credit, the Agent shall have no duty to
verify the identity of any person representing himself or herself as one
of the officers, employees or agents authorized to make such request or
otherwise to act on behalf of the Borrower. None of the Agent, any
Lender or any Issuing Bank shall incur any liability to the Borrower or
any other Person in acting upon any telephonic notice referred to above
which the Agent reasonably believes to have been given by a duly
authorized officer or other person authorized to borrow on behalf of the
Borrower.
ARTICLE III
PAYMENTS AND PREPAYMENTS
3.01. Prepayments; Reductions in Commitments.
(a) Voluntary Prepayments/Reductions. (i) Term Loans. Upon at least
five (5) Business Days' notice to the Agent (which the Agent shall
promptly transmit to each Lender as applicable), the Borrower may prepay
any Base Rate Loan which is a Term Loan, in whole or in part.
Eurodollar Rate Loans may be prepaid (A) in whole or in part on the
expiration date of the then applicable Eurodollar Interest Period and
(B) upon payment of the amounts described in Section 4.02(f), on any
other Business Day upon at least five (5) Business Days' prior written
notice to the Agent (which the Agent shall promptly transmit to each
Lender as applicable). Unless the aggregate outstanding principal
balance of the Term Loans is to be prepaid in full, voluntary
prepayments of the Term Loans shall be in an aggregate minimum amount of
$5,000,000 and integral multiples of $250,000 in excess of that amount.
Each voluntary prepayment of the Term Loans shall be applied first, to
the pro rata repayment of the B Term Loans; and then, to the pro rata
repayment of the A Term Loans. Each voluntary prepayment of the A Term
Loans shall reduce pro rata each of the remaining installments of the A
Term Loans. Any notice of prepayment given to the Agent under this
Section 3.01(a)(i) shall specify, in accordance with the terms hereof,
the date (which shall be a Business Day) of prepayment, the aggregate
principal amount of the prepayment and (subject to the fourth sentence
of this Section 3.01(a)(i)) any allocation of such amount among Base
Rate Loans, Eurodollar Rate Loans, A Term Loans and B Term Loans. When
notice of prepayment is delivered as provided herein, the principal
amount of the Term Loans specified in the notice shall become due and
payable on the prepayment date specified in such notice.
(ii)Revolving Credit Commitment. The Borrower, upon at least five (5)
Business Days' prior written notice to the Agent (which the Agent shall
promptly transmit to each Lender), shall have the right, from time to
time, to terminate in whole or permanently reduce in part the Revolving
Credit Commitments, provided that the Borrower shall have made whatever
payment may be required to reduce the Revolving Credit Obligations to an
amount less than or equal to the Revolving Credit Commitments as reduced
or terminated. Any partial reduction of the Revolving Credit
Commitments shall be in an aggregate minimum amount of $5,000,000 and
integral multiples of $1,000,000 in excess of that amount, and shall
reduce the Revolving Credit Commitment of each Revolving Credit Lender
proportionately in accordance with its Revolving Credit Pro Rata Share.
Any notice of termination or reduction given to the Agent under this
Section 3.01(a)(ii) shall specify the date (which shall be a Business
Day) of such termination or reduction and, with respect to a partial
reduction, the aggregate principal amount thereof. When notice of
termination or reduction is delivered as provided herein, the principal
amount of the Revolving Loans specified in the notice shall become due
and payable on the date specified in such notice.
(iii)The prepayments and payments in respect of reductions and
terminations described in clauses (i) and (ii) of this Section 3.01(a)
may be made without premium or penalty (except as provided in Section
4.02(f)).
(b)Mandatory Prepayments of Loans.
(i)Immediately after the Borrower's or any of the Restricted
Subsidiaries' receipt of any Net Cash Proceeds (x) on account of the
sale, assignment or other disposition of, loss or taking by condemnation
or eminent domain of, or damage to, all or any portion of the
Discontinued Operations or (y) from the issuance of Indebtedness (other
than the New Bonds or any Indebtedness in respect of the New
Subordinated Financing, the proceeds of which shall be applied in
accordance with clause (ii) of Section 9.01), the Borrower shall make or
cause to be made a mandatory prepayment of the Loans. Each such
prepayment shall be allocated and applied first, to the pro rata
repayment of the B Term Loans (based upon each B Term Loan Lender's B
Term Loan Pro Rata Share); second, to the pro rata repayment of the A
Term Loans (based upon each A Term Loan Lender's A Term Loan Pro Rata
Share); and then, to any outstanding non-contingent Revolving Credit
Obligations. Thereafter, to the extent that there are any Net Cash
Proceeds remaining, such funds shall be deposited in the Investment
Account to be held as Cash Collateral in accordance with this Agreement.
Prepayments of the A Term Loans pursuant to this Section 3.01(b)(i)
shall be applied to installments of the A Term Loans specified in
Section 2.01(e) in inverse order of their maturity.
(ii)Immediately after the Borrower's or any of its Subsidiaries' receipt
of any Net Cash Proceeds from the issuance of Capital Stock, or from any
other additions to the equity of the Borrower (other than the New
Subordinated Financing, if applicable) or any contributions to capital
of the Borrower (other than, in either case, as a result of the exercise
of any Permitted Stock Options), the Borrower shall make or cause to be
made a mandatory prepayment of the Term Loans. Each such prepayment
shall be allocated and applied first, to the pro rata repayment on a
Dollar for Dollar basis of the B Term Loans (based upon the outstanding
principal amount of each B Term Loan Lender's B Term Loans); and then,
to the pro rata repayment on a $.50 to the Dollar basis of the A Term
Loans (based upon each A Term Loan Lender's A Term Loan Pro Rata Share)
(it being understood that, notwithstanding anything contained to the
contrary in this Agreement, the other $.50 of each such Dollar may be
used by the Borrower promptly to repay Permitted Subordinated
Indebtedness (it being understood and agreed that the 12.25% Debentures
shall be repaid in full prior to or simultaneously with any repayment of
the 12% Debentures) (unless a Default or an Event of Default shall have
occurred and be continuing), or otherwise shall be forthwith deposited
into the Investment Account as Cash Collateral in accordance with this
Agreement). Prepayments of the A Term Loans pursuant to this Section
3.01(b)(ii) shall reduce the repayments required pursuant to Section
2.01(e) in inverse order of their maturity.
(iii) As soon as practicable, and in any event within 90 days after the
end of each Cash Flow Period, unless the A Term Loans and the B Term
Loans shall have been paid in full, (A) the Borrower shall calculate the
Excess Cash Flow for such Cash Flow Period and (B) the Borrower shall
make a mandatory prepayment of the Term Loans equal to seventy-five
percent (75%) of such Excess Cash Flow. Immediately after the
Borrower's or any of the Restricted Subsidiaries' receipt of any Net
Cash Proceeds (other than Net Cash Proceeds of the types described in
Sections 3.01(b)(i) and (ii)), including, without limitation, Net Cash
Proceeds of the type contemplated by clause (ix) of
Section 9.02), the Borrower shall make or cause to be made a mandatory
prepayment of the Loans. Each such prepayment referred to in either of
the two immediately preceding sentences shall be allocated and applied
first, to the pro rata repayment of the A Term Loans (based upon each A
Term Loan Lender's A Term Loan Pro Rata Share); second, to any remaining
non-contingent Revolving Credit Obligations; third, subject to the prior
written consent of the Class A Requisite Lenders, to the pro rata
repayment of the B Term Loans (based upon each B Term Loan Lender's B
Term Loan Pro Rata Share); and then, to the Investment Account to be
held as Cash Collateral in accordance with this Agreement; provided that
the Borrower may at its option upon notice to the Agent apply up to
$1,000,000 per Fiscal Year of Net Cash Proceeds of the type referred to
in the second sentence of this Section 3.01(b)(iii) and resulting from
asset sales or other dispositions which give rise to Net Cash Proceeds
of no more than $250,000 individually to the prepayment of any remaining
non-contingent Revolving Credit Obligations, with the Borrower
depositing as Cash Collateral in the Investment Account any portion of
such Net Cash Proceeds which remains after all such non-contingent
Revolving Credit Obligations shall have been prepaid in full.
(iv)Nothing in this Section 3.01(b) shall be construed to constitute the
Lenders' consent to any transaction which is not expressly permitted by
Article IX.
(v)On the date any mandatory prepayment is received by the Agent
pursuant to clause (i), (ii) or (iii) above, such prepayment shall (to
the extent possible while still following the order of application set
forth in the relevant clause) be applied first to Base Rate Loans and
then to any Eurodollar Rate Loans with those Eurodollar Rate Loans which
have earlier expiring Eurodollar Interest Periods being repaid prior to
those which have later expiring Eurodollar Interest Periods.
(vi) Prepayments of Revolving Credit Obligations in accordance with this
Section 3.01(b) shall not result in any reductions of the Revolving
Credit Commitments.
(c) Mandatory Prepayments of Revolving Loans. (i) Immediately, if the
Revolving Credit Obligations are greater than the Maximum Revolving
Credit Amount, the Borrower shall make a mandatory repayment of the
Revolving Credit Obligations in an amount equal to such excess, such
amount to be applied in accordance with Section 3.02. In addition, to
the extent the Maximum Revolving Credit Amount is at any time less than
the amount of contingent Letter of Credit Obligations outstanding at any
time (disregarding for this purpose only the aggregate face amount of
all Letters of Credit requested by the Borrower but not yet issued), the
Borrower shall deposit Cash Collateral with the Agent in an amount equal
to the amount by which such contingent Letter of Credit Obligations
exceed such Maximum Revolving Credit Amount.
(ii) On a daily basis from funds on deposit in (x) the Concentration
Account and (y) if necessary to repay in full all such Revolving Credit
Obligations, the Investment Account, in each case prior to 1:00 p.m. on
any Business Day, the Agent shall transfer funds in accordance with
Section 3.05 and thereby cause the Borrower to make a mandatory
repayment of the Revolving Credit Obligations on such Business Day in an
amount equal to first, any and all Non Pro Rata Loans on a pro rata
basis, second, any and all outstanding Swing Loans, and third, to the
repayment of the Revolving Credit Obligations then outstanding in
accordance with the provisions of Section 3.02.
3.02. Payments. (a) Manner and Time of Payment. All payments of
principal of and interest on the Loans and Reimbursement Obligations and
other Obligations (including, without limitation, fees and expenses)
which are payable to the Agent, the Lenders or any Issuing Bank shall be
made without condition or reservation of right, in immediately available
funds, delivered to the Agent (or, in the case of Reimbursement
Obligations, to the pertinent Issuing Bank) not later than 1:00 p.m.
(New York time) on the date and at the place due, to the Agent's Account
(or such account of the Issuing Bank as it may designate, if
applicable). Payments in respect of any Swing Loans received by the
Agent shall be distributed to the Swing Loan Bank in accordance with
Section 3.01(c)(ii), payments in respect of any Revolving Loan received
by the Agent shall be distributed to each Lender in accordance with its
Revolving Credit Pro Rata Share in accordance with the provisions of
Section 3.02(b), and payments in respect of all A Term Loans or B Term
Loans, as the case may be, received by the Agent, shall be distributed
to each Lender in accordance with its A Term Loan Pro Rata Share or B
Term Loan Pro Rata Share, as the case may be, in accordance with the
provisions of Section 2.01(e) on the date received, if received prior to
1:00 p.m., and (except in the case of repayment of Swing Loans) on the
next succeeding Business Day, if received thereafter, by the Agent.
(b) Apportionment of Payments. (i) Subject to the provisions of
Section 3.02(b)(ii) and (v), except as otherwise provided herein (A) all
payments of principal and interest (I) in respect of outstanding A Term
Loans shall be allocated among such of the A Term Loan Lenders as are
entitled thereto, in proportion to their respective A Term Loan Pro Rata
Shares, (II) in respect of outstanding B Term Loans shall be allocated
among such of the B Term Loan Lenders as are entitled thereto, in
proportion to their respective B Term Loan Pro Rata Shares and (III) in
respect of outstanding Revolving Loans, and all payments in respect of
Reimbursement Obligations, shall be allocated among such of the
Revolving Credit Lenders and Issuing Banks as are entitled thereto, in
proportion to their respective Revolving Credit Pro Rata Shares and (B)
all payments of fees and all other payments in respect of any other
Obligations shall be allocated among such of the Lenders and Issuing
Banks as are entitled thereto, in proportion to their respective Pro
Rata Shares. All such payments and any other amounts received by the
Agent from or for the benefit of the Borrower shall be applied first, to
pay principal of and interest on any portion of the Loans which the
Agent may have advanced pursuant to the express provisions of this
Agreement on behalf of any Lender other than the Lender then acting as
Agent, for which the Agent has not then been reimbursed by such Lender
or the Borrower, second, to pay principal of and interest on any
Protective Advance for which the Agent has not then been paid by the
Borrower or reimbursed by the Lenders, third, to pay all other
Obligations then due and payable and fourth, to the Investment Account
to be held as Cash Collateral in accordance with this Agreement;
provided that, notwithstanding anything contained in this Agreement to
the contrary, if no Revolving Credit Obligations are then outstanding
and no Default shall have occurred and be continuing, all funds
remaining in the Concentration Account shall be transferred to the
Investment Account and invested in accordance with account instructions
applicable thereto agreed to by the Borrower and the Agent. The
Borrower hereby grants to the Agent a security interest for the benefit
of the Agent, the Lenders and the Issuing Banks in all funds deposited
in the Investment Account. Except as set forth in Sections 3.01(a), (b)
and (c) and unless otherwise designated by the Borrower, all principal
payments in respect of outstanding Swing Loans, Revolving Loans or Term
Loans, as the case may be, shall be applied first, to repay outstanding
Base Rate Loans, and then to repay outstanding Eurodollar Rate Loans
with those Eurodollar Rate Loans which have earlier expiring Eurodollar
Interest Periods being repaid prior to those which have later expiring
Eurodollar Interest Periods (it being understood and agreed that,
notwithstanding anything contained in this Agreement to the contrary,
unless the Borrower otherwise elects, the repayments contemplated by
clause (ii) of Section 3.01(c) shall not be applied to Revolving Credit
Obligations which constitute Eurodollar Rate Loans (other than any such
Eurodollar Rate Loan which by its terms matures on the day of the
relevant repayment)).
(ii)After the occurrence and during the continuance of an Event of
Default, the Agent may, and shall upon the acceleration of the
Obligations pursuant to Section 11.02(a), apply all payments in respect
of any Obligations and all proceeds of Collateral in the following
order:
(A)first, to pay interest on, and then principal of, any portion of the
Revolving Loans which the Agent may have advanced on behalf of any
Lender for which the Agent has not then been reimbursed by such Lender
or the Borrower;
(B)second, to pay interest on and then principal of first any
outstanding Protective Advance and then any Swing Loan;
(C)third, to pay Obligations in respect of any expense reimbursements or
indemnities then due to the Agent;
(D)fourth, to pay Obligations in respect of any expense reimbursements
or indemnities then due to the Lenders and the Issuing Banks;
(E)fifth, to pay Obligations in respect of any fees then due to the
Agent, the Lenders and the Issuing Banks;
(F)sixth, to pay interest due in respect of the Loans and Reimbursement
Obligations;
(G)seventh, to pay or prepay (or, to the extent such Obligations are
contingent, provide Cash Collateral pursuant to Section 11.02(b) in
respect of) principal outstanding on Loans and all outstanding Letter of
Credit Obligations, and to the ratable payment of Interest Rate
Contracts and Currency Agreements to which any of the Lenders or any
Affiliate of any of the Lenders is a party and which do not contravene
clauses (xi) and (xii) of Section 9.01;
(H)eighth, subject to clause ninth below, to the ratable payment of all
other Obligations; and
(I)ninth, to the ratable payment of Interest Rate Contracts and Currency
Agreements to which any of the Lenders or any Affiliate of the Lenders
is a party (other than the Interest Rate Contracts and Currency
Agreements referred to in clause seventh above);
provided, however, if sufficient funds are not available to fund all
payments to be made in respect of any of the Obligations described in
any of the foregoing clauses (A) through (H), the available funds being
applied with respect to any such Obligations referred to in any one of
such clauses (unless otherwise specified in such clause) shall be
allocated to the payment of such Obligations ratably, based on the
proportion of the Agent's and each Lender's or Issuing Bank's interest
in the aggregate outstanding Obligations described in such clauses.
Notwithstanding anything contained in this Agreement or any other Loan
Document to the contrary, it is understood and agreed that (x) any
proceeds of Collateral which constitute all or any part of the
Discontinued Operations shall be used to pay or prepay in full the
outstanding principal amount of, and accrued interest on, the B Term
Loans before any portion of such proceeds is used to pay or prepay the
Revolving Credit Obligations or the A Term Loans and (y) any proceeds of
any other Collateral shall be used to pay, prepay and/or cash
collateralize in full the outstanding Revolving Credit Obligations and
the outstanding principal amount of, and accrued interest on, the A Term
Loans before any portion of such proceeds is used to pay or prepay the B
Term Loans.
The order of priority set forth in this Section 3.02(b)(ii) and the
related provisions hereof are set forth solely to determine the rights
and priorities of the Agent, the Lenders, the Issuing Banks and other
Holders as among themselves. The order of priority set forth in clauses
(A) through (I) of this Section 3.02(b)(ii) may at any time and from
time to time be changed by the agreement of each of the Lenders without
necessity of notice to or consent of or approval by the Borrower, any
Holder which is not a Lender or Issuing Bank, or any other Person;
provided, however, the order of priority set forth in clauses (A)
through (E) of this Section 3.02(b)(ii) may not be changed without the
prior written consent of the Agent.
(iii) All payments of principal on the Swing Loans, Protective Advances,
Reimbursement Obligations, interest, fees and other sums payable in
respect of the Revolving Loans may, at the option of the Agent, be paid
from the proceeds of the Revolving Loans. The Borrower hereby
authorizes the Swing Loan Bank to make pursuant to Section 2.02(a) and
the Revolving Credit Lenders to make pursuant to Section 2.02(a), from
time to time in such Swing Loan Bank's or Lender's discretion, Revolving
Loans which are in the amounts of any and all principal on the Swing
Loans, interest, fees and other sums payable in respect of the Revolving
Loans, and further authorizes the Agent (A) to give the Revolving Credit
Lenders notice of any Borrowing with respect to such Revolving Loans and
(B) to distribute the proceeds of such Revolving Loans to pay such
amounts. The Borrower agrees that all such Revolving Loans so made
shall be deemed to have been requested by it and directs that all
proceeds thereof shall be used to pay such amounts.
(iv)Subject to Section 3.01(b)(iv), the Agent shall promptly distribute
to each Lender and Issuing Bank at its primary address set forth on the
appropriate signature page hereof or the signature page to the
Assignment and Acceptance by which it became a Lender or Issuing Bank,
or to each Lender, Issuing Bank or other Holder at such other address as
such Lender, Issuing Bank or other Holder may request in writing, such
funds as such Person may be entitled to receive, subject to the
provisions of Article XIII; provided that, as between the Holders and
the Agent, the Agent shall under no circumstances be bound to inquire
into or determine the validity, scope or priority of any interest or
entitlement of any Holder and may suspend all payments or seek
appropriate relief (including, without limitation, instructions from the
Requisite Lenders or an action in the nature of interpleader) in the
event of any doubt or dispute as to any apportionment or distribution
contemplated hereby.
(v)If any Revolving Credit Lender fails to fund its Revolving Credit Pro
Rata Share of any Revolving Loan Borrowing requested by the Borrower
which such Lender is obligated to fund under the terms hereof (the
funded portion of such Revolving Loan Borrowing being hereinafter
referred to as a "Non Pro Rata Loan"), excluding any such Lender who has
delivered to the Agent written notice that one or more of the conditions
precedent contained in Section 5.02 shall not on the date of such
request be satisfied and until such conditions are satisfied, then until
the earlier of such Lender's cure of such failure and the termination of
the Commitments, the proceeds of all amounts thereafter repaid to the
Agent by the Borrower and otherwise required to be applied to such
Lender's share of all other Obligations pursuant to the terms hereof
shall be advanced to the Borrower by the Agent on behalf of such Lender
to cure, in full or in part, such failure by such Lender, but shall
nevertheless be deemed to have been paid to such Lender in satisfaction
of such other Obligations. Notwithstanding anything contained herein to
the contrary:
(A) the foregoing provisions of this Section 3.02(b)(v) shall apply
only with respect to the proceeds of payments of Obligations;
(B) a Revolving Credit Lender shall be deemed to have cured its failure
to fund its Revolving Credit Pro Rata Share of any Revolving Loan at
such time as an amount equal to such Lender's original Revolving Credit
Pro Rata Share of the requested principal portion of such Revolving Loan
is fully funded to the Borrower, whether made by such Lender itself or
by operation of the terms of this Section 3.02(b)(v), and whether or not
the Non Pro Rata Loan with respect thereto has been repaid;
(C) amounts advanced to the Borrower to cure, in full or in part, any
such Lender's failure to fund its Revolving Credit Pro Rata Share of any
Revolving Loan Borrowing ("Cure Loans") shall bear interest at the rate
applicable to the other Revolving Loans comprising such Borrowing and
shall be treated as Revolving Loans comprising such Borrowing for all
purposes herein;
(D) regardless of whether or not an Event of Default has occurred or is
continuing, and notwithstanding the instructions of the Borrower as to
its desired application, all repayments of principal which, in
accordance with the other terms of this Section 3.02, would be applied
to the outstanding Revolving Loans shall be applied first, ratably to
all Revolving Loans constituting Non Pro Rata Loans, second, ratably to
Revolving Loans other than those constituting Non Pro Rata Loans or Cure
Loans and, third, ratably to Revolving Loans constituting Cure Loans;
and
(E)No Lender shall be relieved of any obligation such Lender may have to
the Borrower under the terms of this Agreement as a result of the
provisions of this Section 3.02(b)(v).
(c)Payments on Non-Business Days. Whenever any payment to be made by
the Borrower hereunder or under the Notes is stated to be due on a day
which is not a Business Day, the payment shall instead be due on the
next succeeding Business Day (or, as set forth in Section 4.02(b)(iii),
the next preceding Business Day), and any such extension of time shall
be included in the computation of the payment of interest and fees
hereunder.
3.03.Taxes. (a) Payments Free and Clear of Taxes. Except as otherwise
provided in Section 3.03(d) hereof, any and all payments by the Borrower
hereunder or under any Note or other document evidencing any Obligations
shall be made free and clear of and without reduction for any and all
present or future taxes, levies, imposts, deductions, charges and
withholdings, and all stamp or documentary taxes, excise taxes, ad
valorem taxes and other taxes imposed on the value of the Property,
charges or levies which arise from the execution, delivery or
registration, or from payment or performance under, or otherwise with
respect to, any of the Loan Documents or the Commitments and all other
liabilities with respect thereto, excluding, in the case of each Lender,
each Issuing Bank and the Agent, taxes imposed on or measured by net or
gross income or receipts and capital and franchise taxes imposed on it
by (i) the United States, (ii) the Governmental Authority of the
jurisdiction in which such Lender's Applicable Lending Office is located
or any political subdivision thereof, (iii) the Governmental Authority
in which such Person is organized, managed and controlled or any
political subdivision thereof or (iv) the Governmental Authority of any
other jurisdiction in which such Person engages in business or any
political subdivision thereof, whether or not imposed in respect of
payments by the Borrower under the terms of this Agreement or any other
Loan Documents or the Commitments (all such non-excluded taxes, levies,
imposts, deductions, charges and withholdings being hereinafter referred
to as "Taxes"). If the Borrower shall be required by law to withhold or
deduct any Taxes from or in respect of any sum payable hereunder or
under any such Note or document to any Lender, any Issuing Bank or the
Agent, (x) the sum payable to such Lender, such Issuing Bank or the
Agent shall be increased as may be necessary so that after making all
required withholding or deductions of Taxes (including withholding or
deductions applicable to additional sums payable under this sentence)
such Lender, such Issuing Bank or the Agent (as the case may be)
receives an amount equal to the sum it would have received had no such
withholding or deductions of Taxes been made, (y) the Borrower shall
make such withholding or deductions and (z) the Borrower shall pay the
full amount withheld or deducted to the relevant taxation authority or
other authority in accordance with applicable law. If any Taxes
described in the preceding sentence shall be or become applicable after
the date hereof to payments by Borrower made to a Lender, an Issuing
Bank or the Agent, such Person shall use its best efforts (consistent
with legal and regulatory restrictions) to file any certificate or
document requested by the Borrower (including the certificates and
documents referred to in Section 3.03(d)(i) hereof) or to make, fund and
maintain its Loans, and to make, fund and maintain its obligations under
the Letters of Credit, through another Applicable Lending Office of such
Person in another jurisdiction so as to eliminate (or if not eliminate,
reduce) such Borrower's liability hereunder, if the making, funding or
maintenance of such Loans or obligations under the Letters of Credit
through such other Applicable Lending Office of such Person does not, in
the judgment of such Person, otherwise materially adversely affect such
Loans, obligations under the Letters of Credit or such Person.
(b) Indemnification. (i) The Borrower shall indemnify each Lender,
each Issuing Bank and the Agent against, and reimburse each promptly
after demand therefor, the full amount of all Taxes (including, without
limitation, any Taxes imposed by any Governmental Authority on amounts
payable under Section 3.03(a) and any additional income or franchise
taxes incurred as a result of such additional amounts) by such Lender,
such Issuing Bank or the Agent (as the case may be) or any of their
respective Affiliates and any liability (including penalties, interest,
and out-of-pocket expenses paid to third parties but excluding any
penalties paid to a taxing Governmental Authority for late payment of
Taxes, which penalty resulted solely from the action or inaction of such
Person seeking indemnification under this Section 3.03(b)) arising
therefrom or with respect thereto. Each applicable Lender, Issuing Bank
or the Agent, as the case may be, shall submit to the Borrower a
certificate, as to any additional amount payable to any such Person
under this Section 3.03(b), and the Borrower shall pay such additional
amount promptly after receipt of such certificate. In determining such
additional amount, such Person shall take into account and reduce the
amount otherwise payable by the Borrower pursuant to this subsection
(b), by an amount equal to any tax credits and other tax benefits
associated with the circumstances giving rise to the payment of such
additional amount as well as the payment thereof. Each Lender, the
Agent and each Issuing Bank agrees, within a reasonable time after
receiving a written request from the Borrower, to provide the Borrower
and each Lender and each Lender agrees to so provide the Agent with such
certificates as are reasonably required, and take such other actions as
are reasonably necessary to claim such exemptions as such Lender, the
Agent or such Issuing Bank may be entitled to claim in respect of all or
a portion of any Taxes which are otherwise required to be paid or
deducted or withheld pursuant to this Section 3.03 in respect of any
payments hereunder or under the Notes.
(ii) If a Lender, Issuing Bank or the Agent shall become aware that it
is entitled to receive a refund in respect of Taxes, it shall promptly
notify the Borrower of the availability of such refund and shall, within
30 days after receipt of a written request by the Borrower, apply for
such refund at the Borrower's expense. If any Lender, Issuing Bank or
the Agent receives a refund in respect of any Taxes for which it has
received payment from the Borrower under this Section, it shall promptly
notify the Borrower of such refund and shall, within 30 days after
receipt of a request by the Borrower (or promptly upon receipt, if the
Borrower has requested application for such refund pursuant hereto),
repay such refund (including any interest thereon) to the Borrower net
of all out-of-pocket expenses of such Lender, Issuing Bank or the Agent,
provided that the Borrower, upon the request of such Person, agrees to
return such refund (plus penalties, interest or other charges) to such
Person in the event such Person is required to repay such refund.
(c) Receipts. If requested by the Agent, in its sole discretion,
within ten (10) days after such request, the Borrower shall furnish to
the Agent, at its address referred to in Section 14.08, the original or
a certified copy of a receipt or other documentation reasonably
satisfactory to the Agent, evidencing payment of any Taxes by the
Borrower or any of its Subsidiaries.
(d) Foreign Bank Certifications. (i) Each Lender or Issuing Bank that
is not created or organized under the laws of the United States or a
political subdivision thereof shall deliver to the Borrower and the
Agent on the Closing Date or the date on which such Lender or Issuing
Bank becomes a Lender or Issuing Bank pursuant to Section 14.01 hereof a
true and accurate certificate, document or statement, as required by the
Code or Treasury regulations, properly executed in duplicate by a duly
authorized officer of such Lender or Issuing Bank to the effect that
such Lender or Issuing Bank is eligible to receive payments hereunder
and under the Notes or other document evidencing any Obligations without
deduction or withholding of United States federal income tax (A) under
the provisions of an applicable tax treaty concluded by the United
States (in which case the certificate shall be accompanied by two duly
completed copies of IRS Form 1001 (or any successor or substitute form
or forms)) or (B) under Sections 1442(c) and 1442(a) of the Internal
Revenue Code (in which case the certificate shall be accompanied by two
duly completed copies of IRS Form 4224 (or any successor or substitute
form or forms)). Unless the Borrower and the Agent have received forms
or other documents reasonably satisfactory to them indicating that
payments hereunder or under any Note or other document evidencing any
Obligations are not subject to United States withholding tax, the
Borrower or the Agent shall withhold taxes from such payments at the
applicable statutory rate in the case of payments to or for any Lender
or Issuing Bank created or organized under the laws of a jurisdiction
outside of the United States.
(ii)The Borrower shall not be required to pay any additional amounts to
any Lender, Issuing Bank or Agent in respect of United States
withholding tax pursuant to Section 3.03(d)(i) above if the obligation
to pay such additional amounts would not have arisen but for a failure
by such Person to comply with the provisions of Section 3.03(d)(i) above
for any reason (including the failure of such Person to deliver the
documents referred to in Section 3.03(d)(i) by reason of its inability
to qualify for total exemption from United States withholding tax or a
change in circumstances that renders such Person unable to so qualify)
other than (A) a change in applicable law, regulation or official
interpretation thereof or (B) an amendment, modification or revocation
of any applicable tax treaty or a change in official position regarding
the application or interpretation thereof, in each case after the later
of the Closing Date or the date on which such Lender or Issuing Bank
becomes a Lender or Issuing Bank pursuant to Section 14.01 hereof.
(iii) If, solely as a result of an event described in clauses (A) or (B)
of Section 3.03(d)(ii) after the Closing Date or the date on which such
Lender or Issuing Bank becomes a Lender or Issuing Bank pursuant to
Section 14.01 hereof, such Person (A) is unable to provide to the
Borrower a form otherwise required to be delivered by it pursuant to
Section 3.03(d)(i) above, or (B) makes any payment or becomes liable to
make any payment on account of any Taxes with respect to payments by the
Borrower hereunder, the Borrower may, at its option, either (1) prepay
the portion of the Loans or obligations under the Letters of Credit held
by such Lender or Issuing Bank in the manner set forth in Section
3.01(a)(i) or (ii) hereof or (2) continue to make payments to such
Person under the terms of this Agreement, any Note or other document
evidencing any Obligation, which payments shall be made in accordance
with Section 3.03(a) above. If the Borrower exercises its option under
clause (2) in the preceding sentence to continue making payments, the
Lender or Issuing Bank agrees to take such steps as reasonably may be
available to it under applicable tax laws and any applicable tax treaty
or convention (including, if legally available, furnishing such
certificate) to obtain an exemption from, or reduction (to the lowest
applicable rate) of, such Taxes, except to the extent that taking such a
step would, in the judgment of the Lender or Issuing Bank, materially
adversely affect such Loans, obligations under the Letters of Credit or
such Person.
(iv) Each Lender and Issuing Bank further agrees to deliver to the
Borrower and the Agent from time to time, a true and accurate
certificate executed in duplicate by a duly authorized officer of such
Lender or Issuing Bank before or promptly upon the occurrence of any
event requiring a change in the most recent certificate previously
delivered by it to the Borrower and the Agent pursuant to this Section
3.03(d). Each certificate required to be delivered pursuant to this
Section 3.03(d)(iv) shall certify as to one of the following:
(A)that such Lender or Issuing Bank can continue to receive payments
hereunder and under the Notes without deduction or withholding of United
States federal income tax;
(B)that such Lender or Issuing Bank cannot continue to receive payments
hereunder and under the Notes without deduction or withholding of United
States federal income tax as specified therein but does not require
additional payments pursuant to Section 3.03(a) because it is entitled
to recover the full amount of any such deduction or withholding from a
source other than the Borrower;
(C)that such Lender or Issuing Bank is no longer capable of receiving
payments hereunder and under the Notes without deduction or withholding
of United States federal income tax as specified therein by reason of a
change in law (including the Internal Revenue Code or applicable tax
treaty) after the later of the Closing Date or the date on which a
Lender or Issuing Bank became a Lender or Issuing Bank pursuant to
Section 14.01 and that it is not capable of recovering the full amount
of the same from a source other than the Borrower; or
(D)that such Lender or Issuing Bank is no longer capable of receiving
payments hereunder without deduction or withholding of United States
federal income tax as specified therein other than by reason of a change
described in the preceding clause (C).
3.04. Increased Capital. If after the date hereof any Lender or Issuing
Bank determines that (i) the adoption or implementation of or any change
in or in the interpretation or administration of any law or regulation
or any guideline or request from any central bank or other Governmental
Authority or quasi-governmental authority exercising jurisdiction, power
or control over any Lender, Issuing Bank or banks or financial
institutions generally (whether or not having the force of law),
compliance with which affects or would affect the amount of capital
required or expected to be maintained by such Lender or Issuing Bank or
any corporation controlling such Lender or Issuing Bank and (ii) the
amount of such capital is increased by or based upon (A) the making or
maintenance by any Lender of its Loans, any Lender's participation in or
obligation to participate in the Loans, Letters of Credit or other
advances made hereunder or the existence of any Lender's obligation to
make Loans or (B) the issuance or maintenance by any Issuing Bank of, or
the existence of any Issuing Bank's obligation to issue, Letters of
Credit, then, in any such case, upon written demand by such Lender or
Issuing Bank (with a copy of such demand to the Agent), the Borrower
shall immediately pay to the Agent for the account of such Lender or
Issuing Bank, from time to time as specified by such Lender or Issuing
Bank, additional amounts sufficient to compensate such Lender or Issuing
Bank or such corporation therefor. Such demand shall be accompanied by
a statement as to the amount of such compensation and include a summary
of the basis for such demand with detailed calculations. Such statement
shall be conclusive and binding for all purposes, absent manifest error.
3.05. Cash Management. The Borrower has established the Lockboxes
listed on Schedule 6.01-AA and the Lockbox Accounts listed on Schedule
6.01-AA. The Borrower has directed all account debtors of the Borrower
to remit all payments in respect of the Receivables or other Collateral
directly to a Lockbox. The contents of each Lockbox shall automatically
be deposited into a Lockbox Account or be emptied and deposited into a
Lockbox Account by a representative of the Lockbox Bank at which the
applicable Lockbox Account has been established. Only the Agent and the
applicable Lockbox Bank, if any, shall have power of withdrawal from
each Lockbox and the related Lockbox Account and the Borrower
acknowledges that the Borrower shall not have any right, title or
interest in such Lockbox or Lockbox Account or any items deposited
therein. The Borrower agrees to cause all collections of Receivables,
all proceeds of Collateral and all Net Cash Proceeds now or hereafter
received directly or indirectly by the Borrower or any Subsidiary of the
Borrower or in the possession of the Borrower or any such Subsidiary to
be held in trust for the Agent for the benefit of the Lenders and,
promptly upon receipt thereof, to be deposited into a Lockbox Account or
the Concentration Account. All of the funds in the Lockbox Accounts
shall be automatically transferred into the Concentration Account. The
Agent alone shall have power of withdrawal from the Concentration
Account and the Borrower acknowledges that, except as expressly provided
in this Agreement, the Borrower shall not have any right, title or
interest in the Concentration Account or the amounts at any time
appearing to the credit of the Concentration Account. Funds on deposit
in the Concentration Account first, shall be applied to the outstanding
Obligations in accordance with Section 3.01(c)(ii) (subject to the
applicable provisions of Section 3.02 (including, without limitation,
the parenthetical clause contained in the final sentence of Section
3.02(b)(i)); second, if the Borrower shall have provided the Agent with
electronic or telephonic notice of the amount to be so withdrawn (and no
Blockage Notice shall have been delivered by the Agent to the Borrower),
shall be withdrawn and deposited in the Disbursement Account in an
amount equal to the lesser of (1) the amount indicated in such notice
and (2) the aggregate amount of funds then available in the
Concentration Account (it being understood and agreed that such funds
may be used for such purposes as proceeds of Revolving Loans may be used
in accordance with Section 2.02(d)); and then, to the extent any such
funds remain after such application, shall be transferred to the
Investment Account in accordance with Section 3.02(b)(i).
ARTICLE IV
INTEREST AND FEES
4.01. Interest on the Loans and Other Obligations. (a) Rate of
Interest. All Loans and the outstanding principal balance of all other
Obligations shall bear interest on the unpaid principal amount thereof
from the date such Loans are made and such other Obligations are due and
payable until paid in full, except as otherwise provided in Section
4.01(d), as follows:
(i)If a Base Rate Loan or such other Obligation, at a rate per annum
equal to the sum of (A) the Base Rate as in effect from time to time as
interest accrues, plus (B) the Applicable Base Rate Margin; or
(ii)If a Eurodollar Rate Loan, at a rate per annum equal to the sum of
(A) the Eurodollar Rate determined for the applicable Eurodollar
Interest Period, plus (B) the Applicable Eurodollar Rate Margin in
effect on the first day of such Eurodollar Interest Period.
The applicable basis for determining the rate of interest on the Loans
shall be selected by the Borrower at the time a Notice of Borrowing or a
Notice of Conversion/Continuation is delivered by the Borrower to the
Agent; provided, however, the Borrower may not select the Eurodollar
Rate as the applicable basis for determining the rate of interest on
such a Loan if (x) such Loan is to be made on the Closing Date or (y) at
the time of such selection an Event of Default or Default would occur or
has occurred and is continuing. If on any day any Loan is outstanding
with respect to which notice has not been timely delivered to the Agent
in accordance with the terms hereof specifying the basis for determining
the rate of interest on that day, then for that day interest on that
Loan shall be determined by reference to the Base Rate.
(b) Interest Payments. (i) Interest accrued on each Base Rate Loan
(other than Swing Loans) shall be payable in arrears (A) on the first
Business Day of the immediately succeeding calendar month, commencing on
the first such Business Day following the making of such Base Rate Loan,
(B) upon the payment or prepayment thereof in full or in part, with
respect to the principal amount prepaid, (C) upon conversion thereof to
a Eurodollar Rate Loan, and (D) if not theretofore paid in full, at
maturity (whether by acceleration or otherwise) of such Base Rate Loan,
and interest accrued on Swing Loans shall be payable in arrears on the
first Business Day of the immediately succeeding calendar month.
(ii)Interest accrued on each Eurodollar Rate Loan shall be payable in
arrears (A) on each Eurodollar Interest Payment Date applicable to such
Loan, (B) upon the payment or prepayment thereof in full or in part,
with respect to the principal amount prepaid, and (C) if not theretofore
paid in full, at maturity (whether by acceleration or otherwise) of such
Eurodollar Rate Loan.
(iii)Interest accrued on the principal balance of all other Obligations
shall be payable in arrears (A) on first Business Day of each calendar
month, commencing on the first such Business Day following the
incurrence of such Obligation, (B) upon repayment thereof in full or in
part, with respect to the principal amount prepaid, and (C) if not
theretofore paid in full, at the time such other Obligation becomes due
and payable (whether by acceleration or otherwise).
(c) Conversion or Continuation. (i) The Borrower shall have the option
(A) to convert at any time all or any part of outstanding Base Rate
Loans (other than Swing Loans) to Eurodollar Rate Loans; (B) to convert
all or any part of outstanding Eurodollar Rate Loans having Eurodollar
Interest Periods which expire on the same date to Base Rate Loans on
such expiration date; or (C) to continue all or any part of outstanding
Eurodollar Rate Loans having Eurodollar Interest Periods which expire on
the same date as Eurodollar Rate Loans, and the succeeding Eurodollar
Interest Period of such continued Loans shall commence on such
expiration date; provided, however, no such outstanding Loan may be
continued as, or be converted into, a Eurodollar Rate Loan (i) if the
continuation of, or the conversion into, would violate any of the
provisions of Section 4.02 or (ii) if an Event of Default or Default
would occur as a result of such continuation or conversion, or has
occurred and is continuing. Any conversion into or continuation of
Eurodollar Rate Loans under this Section 4.01(c) shall be in a minimum
amount of $5,000,000 and in integral multiples of $1,000,000 in excess
of that amount.
(ii)To convert or continue a Loan under Section 4.01(c)(i), the Borrower
shall deliver a Notice of Conversion/Continuation to the Agent no later
than 11:00 a.m. (New York time) at least three (3) Business Days in
advance of the proposed conversion/continuation date. A Notice of
Conversion/Continuation shall specify (A) the proposed
conversion/continuation date (which shall be a Business Day), (B) the
principal amount of the Loan to be converted/continued, (C) whether such
Loan shall be converted and/or continued, and (D) in the case of a
conversion to, or continuation of, a Eurodollar Rate Loan, the requested
Eurodollar Interest Period. In lieu of delivering a Notice of
Conversion/Continuation, the Borrower may give the Agent telephonic
notice of any proposed conversion/continuation by the time required
under this Section 4.01(c)(ii), and such notice shall be confirmed in
writing delivered to the Agent promptly (but in no event later than 5:00
p.m. (New York time) on the same day). Promptly after receipt of a
Notice of Conversion/Continuation under this Section 4.01(c)(ii) (or
telephonic notice in lieu thereof), the Agent shall notify each Lender
by telex or telecopy, or other similar form of transmission, of the
proposed conversion/continuation. Any Notice of Conversion/Continuation
for conversion to, or continuation of, a Loan (or telephonic notice in
lieu thereof) shall be irrevocable, and the Borrower shall be bound to
convert or continue in accordance therewith.
(d) Default Interest. Notwithstanding the rates of interest specified
in Section 4.01(a) or elsewhere herein, effective (i) immediately upon
the occurrence of any Default (other than a Non-Material Default), and
for as long thereafter as such Default shall be continuing, the
principal balance of all Loans and of all other Obligations, shall bear
interest at a rate which is two percent (2.0%) per annum in excess of
the rate of interest applicable to such Obligations from time to time.
(e) Computation of Interest. Interest on all Obligations shall be
computed on the basis of the actual number of days elapsed in the period
during which interest accrues and a year of 360 days. In computing
interest on any Loan, the date of the making of the Loan shall be
included and the date of payment shall be excluded; provided, however,
if a Loan is repaid on the same day on which it is made, one (1) day's
interest shall be paid on such Loan.
(f) Changes; Legal Restrictions. If after the date hereof any Lender
or Issuing Bank determines that the adoption or implementation of or any
change in or in the interpretation or administration of any law or
regulation or any guideline or request from any central bank or other
Governmental Authority or quasi-governmental authority exercising
jurisdiction, power or control over any Lender, Issuing Bank or over
banks or financial institutions generally (whether or not having the
force of law), compliance with which, in each case after the date
hereof:
(i) subjects a Lender or an Issuing Bank (or its Applicable Lending
Office) to charges (other than Taxes) of any kind which is applicable to
the Commitments of the Lenders and/or the Issuing Banks to make
Eurodollar Rate Loans or to issue and/or participate in Letters of
Credit or changes the basis of taxation of payments to that Lender or
Issuing Bank of principal, fees, interest, or any other amount payable
hereunder with respect to Eurodollar Rate Loans or Letters of Credit; or
(ii)imposes, modifies, or holds applicable, any reserve (other than
reserves taken into account in calculating the Eurodollar Rate), special
deposit, compulsory loan, FDIC insurance or similar requirement against
assets held by, or deposits or other liabilities (including those
pertaining to Letters of Credit) in or for the account of, advances or
loans by, commitments made, or other credit extended by, or any other
acquisition of funds by, a Lender or an Issuing Bank or any Applicable
Lending Office or Eurodollar Affiliate of that Lender or Issuing Bank;
and the result of any of the foregoing is to increase the cost to that
Lender or Issuing Bank of making, renewing or maintaining the Loans or
its Commitments or issuing or participating in the Letters of Credit or
to reduce any amount receivable thereunder; then, in any such case, upon
written demand by such Lender or Issuing Bank (with a copy of such
demand to the Agent), the Borrower shall immediately pay to the Agent
for the account of such Lender or Issuing Bank, from time to time as
specified by such Lender or Issuing Bank, such amount or amounts as may
be necessary to compensate such Lender or Issuing Bank or its Eurodollar
Affiliate for any such additional cost incurred or reduced amount
received. Such demand shall be accompanied by a statement as to the
amount of such compensation and include a summary of the basis for such
demand. Such statement shall be conclusive and binding for all
purposes, absent manifest error.
(g) Confirmation of Eurodollar Rate. Upon the reasonable request of the
Borrower from time to time, the Agent shall promptly provide to the
Borrower such information with respect to the applicable Eurodollar Rate
as may be so requested.
4.02. Special Provisions Governing Eurodollar Rate Loans. With respect
to Eurodollar Rate Loans:
(a) Amount of Eurodollar Rate Loans. Each Eurodollar Rate Loan shall
be for a minimum amount of $5,000,000 and in integral multiples of
$1,000,000 in excess of that amount.
(b) Determination of Eurodollar Interest Period. By giving notice as
set forth in Section 2.02(b) (with respect to a Borrowing of Eurodollar
Rate Loans) or Section 4.01(c) (with respect to a conversion into or
continuation of Eurodollar Rate Loans), the Borrower shall have the
option, subject to the other provisions of this Section 4.02, to select
an interest period (each, a "Eurodollar Interest Period") to apply to
the Loans described in such notice, subject to the following provisions:
(i)The Borrower may only select, as to a particular Borrowing of
Eurodollar Rate Loans, a Eurodollar Interest Period of either one, two,
three or six months in duration;
(ii)In the case of immediately successive Eurodollar Interest Periods
applicable to a Borrowing of Eurodollar Rate Loans, each successive
Eurodollar Interest Period shall commence on the day on which the next
preceding Eurodollar Interest Period expires;
(iii)If any Eurodollar Interest Period would otherwise expire on a day
which is not a Business Day, such Eurodollar Interest Period shall be
extended to expire on the next succeeding Business Day if the next
succeeding Business Day occurs in the same calendar month, and if there
shall be no succeeding Business Day in such calendar month, the
Eurodollar Interest Period shall expire on the immediately preceding
Business Day;
(iv)The Borrower may not select a Eurodollar Interest Period as to any
Loan if such Eurodollar Interest Period terminates later than the
Revolving Credit Termination Date;
(v)The Borrower may not select a Eurodollar Interest Period with respect
to any portion of principal of a Loan which extends beyond a date on
which the Borrower is required to make a scheduled payment of such
portion of principal; and
(vi)There shall be no more than five (5) Eurodollar Interest Periods in
effect at any one time.
(c) Determination of Interest Rate. As soon as practicable on the
second Business Day prior to the first day of each Eurodollar Interest
Period (the "Eurodollar Interest Rate Determination Date"), the Agent
shall determine (pursuant to the procedures set forth in the definition
of "Eurodollar Rate") the interest rate which shall apply to the
Eurodollar Rate Loans for which an interest rate is then being
determined for the applicable Eurodollar Interest Period and shall
promptly give notice thereof (in writing or by telephone confirmed in
writing) to the Borrower and to each Lender. The Agent's determination
shall be presumed to be correct, absent manifest error, and shall be
binding upon the Borrower.
(d)Interest Rate Unascertainable, Inadequate or Unfair. In the event
that at least one (1) Business Day before the Eurodollar Interest Rate
Determination Date:
(i)the Agent determines that adequate and fair means do not exist for
ascertaining the applicable interest rates by reference to which the
Eurodollar Rate then being determined is to be fixed;
(ii)the Class A Requisite Lenders or the Class B Requisite Lenders, as
the case may be, advise the Agent that Dollar deposits in the principal
amounts of the Eurodollar Rate Loans comprising such Borrowing are not
generally available in the London interbank market for a period equal to
such Eurodollar Interest Period; or
(iii) the Class A Requisite Lenders or the Class B Requisite Lenders, as
the case may be, advise the Agent that the Eurodollar Rate as determined
by the Agent, after taking into account the adjustments for reserves and
increased costs provided for in Section 4.01(f), will not adequately and
fairly reflect the cost to such Lenders of funding their Eurodollar Rate
Loans;
then the Agent shall forthwith give notice thereof to the Borrower,
whereupon (until the Agent notifies the Borrower that the circumstances
giving rise to such suspension no longer exist) the right of the
Borrower to elect to have Loans bear interest based upon the Eurodollar
Rate shall be suspended and each outstanding Eurodollar Rate Loan which
is (x) a Revolving Loan or an A Term Loan or (y) a B Term Loan, as the
case may be, shall be converted into a Base Rate Loan on the last day of
the then current Eurodollar Interest Period therefor, and any Notice of
Borrowing for which Revolving Loans have not then been made shall be
deemed to be a request for Base Rate Loans, notwithstanding any prior
election by the Borrower to the contrary.
(e) Illegality. (i) If at any time any Lender determines (which
determination shall, absent manifest error, be final and conclusive and
binding upon all parties) that the making or continuation of any
Eurodollar Rate Loan has become unlawful or impermissible by compliance
by that Lender with any law, governmental rule, regulation or order of
any Governmental Authority (whether or not having the force of law and
whether or not failure to comply therewith would be unlawful or would
result in costs or penalties), then, and in any such event, such Lender
may give notice of that determination, in writing, to the Borrower and
the Agent, and the Agent shall promptly transmit the notice to each
other Lender.
(ii)When notice is given by a Lender under Section 4.02(e)(i), (A) the
Borrower's right to request from such Lender and such Lender's
obligation, if any, to make Eurodollar Rate Loans shall be immediately
suspended, and such Lender shall make a Base Rate Loan as part of any
requested Borrowing of Eurodollar Rate Loans and (B) if the affected
Eurodollar Rate Loan or Loans are then outstanding, the Borrower shall
immediately, or if permitted by applicable law, no later than the date
permitted thereby, upon at least one (1) Business Day's prior written
notice to the Agent and the affected Lender, convert each such Loan into
a Base Rate Loan.
(iii)If at any time after a Lender gives notice under Section 4.02(e)(i)
such Lender determines that it may lawfully make Eurodollar Rate Loans,
such Lender shall promptly give notice of that determination, in
writing, to the Borrower and the Agent, and the Agent shall promptly
transmit the notice to each other Lender. The Borrower's right to
request, and such Lender's obligation, if any, to make Eurodollar Rate
Loans shall thereupon be restored.
(f) Compensation. In addition to all amounts required to be paid by
the Borrower pursuant to Section 4.01, the Borrower shall compensate
each Lender, upon demand, for all losses, expenses and liabilities
(including, without limitation, any loss or expense incurred by reason
of the liquidation or reemployment of deposits or other funds acquired
by such Lender to fund or maintain such Lender's Eurodollar Rate Loans
to the Borrower but excluding any loss of the Applicable Eurodollar Rate
Margin on the relevant Loans) which that Lender may sustain (i) if for
any reason a Borrowing, conversion into or continuation of Eurodollar
Rate Loans does not occur on a date specified therefor in a Notice of
Borrowing or a Notice of Conversion/Continuation given by the Borrower
or in a telephonic request by it for borrowing or
conversion/continuation or a successive Eurodollar Interest Period does
not commence after notice therefor is given pursuant to Section 4.01(c),
including, without limitation, pursuant to Section 4.02(d), (ii) if for
any reason any Eurodollar Rate Loan is prepaid (including, without
limitation, mandatorily pursuant to Section 3.01) on a date which is not
the last day of the applicable Eurodollar Interest Period, (iii) as a
consequence of a required conversion of a Eurodollar Rate Loan to a Base
Rate Loan as a result of any of the events indicated in Section 4.02(d)
or (e) or (iv) as a consequence of any failure by the Borrower to repay
Eurodollar Rate Loans when required by the terms hereof. The Lender
making demand for such compensation shall deliver to the Borrower
concurrently with such demand a written statement in reasonable detail
as to such losses, expenses and liabilities, and this statement shall be
conclusive as to the amount of compensation due to that Lender, absent
manifest error.
(g) Booking of Eurodollar Rate Loans. Any Lender may make, carry or
transfer Eurodollar Rate Loans at, to, or for the account of, its
Eurodollar Lending Office or Eurodollar Affiliate or its other offices
or Affiliates. No Lender shall be entitled, however, to receive any
greater amount under Sections 3.03, 3.04, 4.01(f) or 4.02(f) as a result
of the transfer of any such Eurodollar Rate Loan to any office (other
than such Eurodollar Lending Office) or any Affiliate (other than such
Eurodollar Affiliate) than such Lender would have been entitled to
receive immediately prior thereto, unless (i) the transfer occurred at a
time when circumstances giving rise to the claim for such greater amount
did not exist and (ii) such claim would have arisen even if such
transfer had not occurred.
(h)Affiliates Not Obligated. No Eurodollar Affiliate or other Affiliate
of any Lender shall be deemed a party hereto or shall have any liability
or obligation hereunder.
4.03. Fees. (a) Letter of Credit Fee. In addition to any charges
paid pursuant to Section 2.04(g), the Borrower shall pay to the Agent
for the account of the Revolving Credit Lenders in accordance with their
respective Revolving Credit Pro Rata Shares:
(i)with respect to any Letter of Credit issued by any Issuing Bank
(other than a Letter of Credit described in clause (ii) below), a fee at
a per annum rate equal to the Applicable Eurodollar Rate Margin as of
the date of each such payment on the undrawn face amount of such Letter
of Credit, payable in arrears on the first Business Day of each calendar
quarter and on the date on which such Letter of Credit expires in
accordance with its terms,
(ii) with respect to any Letter of Credit issued by any Issuing Bank
which is fully supported by an Eligible Letter of Credit or Eligible
Letters of Credit in a manner satisfactory to the Agent and the relevant
Issuing Bank, a fee in an amount equal to one percent (1%) per annum on
the undrawn face amount of such Letter of Credit, payable in arrears on
the first Business Day of each calendar quarter and on the date on which
such Letter of Credit expires in accordance with its terms and
(iii) with respect to each Letter of Credit issued by such Issuing Bank,
during the occurrence and continuation of a Default (other than a Non-
Material Default), an additional fee in an amount equal to two percent
(2%) per annum on the undrawn face amount of such Letter of Credit,
payable monthly in arrears (on the Business Day closest to each calendar
month-end during the continuation of such Default) and on the date, if
any, on which such Default terminates.
It is understood and agreed that, in connection with the extension of,
or increase in the amount of, a Letter of Credit, the Revolving Credit
Lenders and the Agent may in their sole discretion credit certain fees
previously paid under clause (i) or (ii) above against the fees payable
as set forth above in respect of such extension or increase.
Notwithstanding anything contained in this Agreement to the contrary, it
is understood and agreed that the Agent shall pay to the Issuing Bank
for its own account from each fee payment made in accordance with clause
(i) or (ii) above a fee in an amount equal to one-quarter percent
(0.25%) per annum on the undrawn face amount of the relevant Letter of
Credit, and that the Agent shall pay the remainder of each such fee
payment to the Revolving Credit Lenders in accordance with their
respective Revolving Credit Pro Rata Shares.
(b) Unused Commitment Fee. The Borrower shall pay to the Agent, for
the account of (i) with respect to the period referred to in clause (A)
below, the Lenders in accordance with their Pro Rata Shares, and (ii)
with respect to the period referred to in clause (B) below, the
Revolving Credit Lenders in accordance with their respective Revolving
Credit Pro Rata Shares, a fee (the "Unused Commitment Fee"), accruing
from June 28, 1994 at the Unused Commitment Fee Rate on (A) an amount
equal to $150,000,000 for the period commencing on June 28, 1994 and
ending on the Closing Date and (B) the average amount by which the
Revolving Credit Commitments exceed the Revolving Credit Obligations for
the period commencing on the Closing Date and ending on the Revolving
Credit Termination Date, the accrued portion of such fee being payable
(I) on the Closing Date,
(II) monthly, in arrears, on the first Business Day of the immediately
succeeding calendar month, commencing on the first such Business Day
after the Closing Date and (III) on the Revolving Credit Termination
Date (whether or not such date occurs on, before or after the Closing
Date). Notwithstanding the foregoing, in the event that any Lender
fails to fund its Revolving Credit Pro Rata Share of any Loan requested
by the Borrower which such Lender is obligated to fund under the terms
hereof, such Lender shall not be entitled to any Unused Commitment Fees
with respect to its Commitment until such failure has been cured in
accordance with Section 3.02(b)(v)(B) and the Borrower shall not be
required to pay any Unused Commitment Fees to such Lender for such
period.
(d) Closing Fee. On the Closing Date, the Borrower shall pay to the
Agent, for the account of the Lenders ratably in accordance with their
Pro Rata Shares (calculated after giving effect to the Borrowing of the
Term Loans to be made on the Closing Date), a closing fee in an amount
equal to $1,875,000.
(e)Other Fees. The Borrower shall pay to Citibank such other fees as
are set forth in the Letter Agreements.
(f) Calculation and Payment of Fees. All of the above fees shall be
calculated on the basis of the actual number of days elapsed in a 360-
day year. All such fees shall be payable in addition to, and not in
lieu of, interest, expense reimbursements, indemnification and other
Obligations. Fees shall be payable to the Agent's Account in accordance
with Section 3.02. All fees shall be fully earned and nonrefundable
when paid. All fees specified or referred to herein due to the Agent,
any Issuing Bank or any Lender, including, without limitation, those
referred to in this Section 4.03, shall bear interest, if not paid when
due, at the interest rate for Loans in accordance with Section 4.01(d),
shall constitute Obligations and shall be secured by the Collateral.
ARTICLE V
CONDITIONS TO LOANS AND LETTERS OF CREDIT
5.01. Conditions Precedent to the Initial Loans and Letters of Credit.
The obligation of each Lender on the Closing Date to make its A Term
Loan, B Term Loan and Revolving Loan requested to be made by it and the
agreement of each Issuing Bank on the Closing Date to issue Letters of
Credit, shall be subject to the satisfaction of all of the following
conditions precedent:
(a) Documents. The Agent (on behalf of itself and the Lenders) shall
have received on or before the Closing Date all of the following:
(i)this Agreement, the Notes and all other agreements, documents and
instruments described in Part 1 of the List of Closing Documents
attached hereto and made a part hereof as Exhibit F, each duly executed
where appropriate and in form and substance satisfactory to the Lenders;
without limiting the foregoing, the Borrower hereby directs its counsel,
Weil, Gotshal & Manges, to prepare and deliver to the Agent, the
Lenders, the Issuing Banks and Sidley & Austin, the opinions referred to
in such List of Closing Documents with respect to such counsel;
(ii)each of the Borrower's Projections, the Borrower's business plan (as
each is referred to in Section 6.01(h)) and the Borrower's interim year-
to-date consolidated and consolidating financial statements for Fiscal
Year 1994 up to and including June, each in form and substance
satisfactory to the Lenders, and a pro forma estimated balance sheet of
the Borrower and its Subsidiaries as of the Closing Date, as referred to
in Section 6.01(i) giving effect to the transactions contemplated in the
Loan Documents, which balance sheet shall not be materially less
favorable, as determined by the Agent and the Lenders, than the balance
sheet as of December 31, 1993 of the Borrower and its Subsidiaries; and
(iii) such additional documentation as the Agent may reasonably request.
(b) Collateral Information; Perfection of Liens. The Agent shall have
received complete and accurate information from the Borrower with
respect to the name and the location of the principal place of business
and chief executive office for the Borrower and each of the Restricted
Subsidiaries; all Uniform Commercial Code and other filing and recording
fees and taxes shall have been paid or duly provided for; and the Agent
shall have received evidence to the satisfaction of the Lenders that all
Liens granted to the Agent with respect to all Collateral are valid and
effective and, upon the filing of the duly executed Uniform Commercial
Code financing statements which shall have been delivered to the Agent,
will be perfected and of first priority, except as otherwise permitted
under this Agreement. All certificates representing Capital Stock
included in the Collateral (other than the certificates representing
Capital Stock of certain Unrestricted Subsidiaries, if and to the extent
that such delivery is neither necessary nor appropriate under applicable
law for the perfection of a first priority security interest in such
Capital Stock) shall have been delivered to the Agent (with duly
executed stock powers, as appropriate) and all instruments included in
the Collateral shall have been delivered to the Agent (duly endorsed to
the Agent, as appropriate).
(c) No Legal Impediments. No law, regulation, order, judgment or
decree of any Governmental Authority shall, and the Agent shall not have
received any notice that any action, suit, investigation, litigation or
proceeding is pending or threatened in any court or before any
arbitrator or Governmental Authority which (i) purports to enjoin,
prohibit, restrain or otherwise affect (A) the making of the Loans on
the Closing Date or (B) the consummation of the transactions
contemplated pursuant to the Transaction Documents or (ii) which is
reasonably likely to result in the imposition of a Material Adverse
Effect.
(d)No Change in Condition. No change in the condition (financial or
otherwise), business, performance, assets, operations or prospects of
the Borrower or any of its Subsidiaries shall have occurred since
December 31, 1993, which change has or is reasonably likely to have a
Material Adverse Effect.
(e) No Default. No Event of Default or Default shall have occurred and
be continuing or would result from the making of the Loans.
(f) Representations and Warranties. All of the representations and
warranties contained in Section 6.01 and in any of the other Loan
Documents shall be true and correct on and as of the Closing Date, both
before and after giving effect to the making of the Loans.
(g) Fees and Expenses Paid. There shall have been paid to the Agent,
for the account of the Lenders and the Agent, for their respective
individual accounts, all fees (including, without limitation, the
Agent's legal fees) due and payable on or before the Closing Date
(including, without limitation, all such fees described in the Letter
Agreements), and all expenses (including, without limitation, legal
expenses) due and payable on or before the Closing Date.
(h)Closing Date. The Closing Date shall have occurred on or before
September 26, 1994.
(i)Consents, Etc. Except as set forth on Schedule 6.01-E, each of the
Borrower and the Borrower's Subsidiaries shall have received all
consents and authorizations required pursuant to any material
Contractual Obligation with any other Person and shall have obtained all
consents and authorizations of, and effected all notices to and filings
with, any Governmental Authority as may be necessary to allow each of
the Borrower and the Borrower's Subsidiaries lawfully (A) to execute,
deliver and perform, in all material respects, their respective
obligations hereunder, under the other Loan Documents to which each of
them is, or shall be, a party and each other agreement or instrument to
be executed and delivered by each of them pursuant thereto or in
connection therewith and (B) to create and perfect the Liens on the
Collateral to be owned by each of them in the manner and for the purpose
contemplated by the Loan Documents. No such consent or authorization
shall impose any conditions that are not acceptable to the Lenders.
5.02. Conditions Precedent to the Extension Date. The occurrence of
the Extension Date shall be subject to the repayment in full of the B
Term Loans and to the satisfaction of all of the following additional
conditions precedent:
(a) Documents. The Agent (on behalf of itself and the Lenders) shall
have received on or before the Extension Date all of the following:
(i)the New Bond Indenture and each other agreement, document,
instrument, certificate and opinion delivered in connection with the New
Bond Offering, each duly executed where appropriate and in form and
substance satisfactory to the Lenders; without limiting the foregoing,
the Borrower hereby directs its counsel, Weil, Gotshal & Manges, to
prepare and deliver to the Agent, the Lenders, the Issuing Banks and
Sidley & Austin, an opinion in form and substance reasonably
satisfactory to the Lenders with respect to the New Bond Offering; or
(ii)unless the New Subordinated Financing is of the type specified in
clause (z) of the definition of New Subordinated Financing, each
agreement, document, instrument, certificate and opinion delivered in
connection with the New Subordinated Financing, each duly executed where
appropriate and in form and substance satisfactory to the Lenders;
without limiting the foregoing (and subject to the first clause
thereof), the Borrower hereby directs its counsel, Weil, Gotshal &
Manges, to prepare and deliver to the Agent, the Lenders, the Issuing
Banks and Sidley & Austin, an opinion in form and substance reasonably
satisfactory to the Lenders with respect to the New Subordinated
Financing; and
(ii) in either case, such additional documentation as the Agent may
reasonably request.
(b) New Bond Offering or New Subordinated Financing Proceeds. The
Agent and the Lenders shall be satisfied that the Borrower shall have
received gross proceeds from the New Bond Offering or the New
Subordinated Financing, as the case may be, in an amount not less than
the sum of (x) the then aggregate outstanding principal amount of the
12.25% Debentures plus (y) the aggregate amount of the New Bond
Transaction Costs or the New Subordinated Financing Transaction Costs,
as the case may be (as such aggregate amount referred to in clause (y)
shall be estimated in good faith by the Borrower), and that the proceeds
of the New Bond Offering or the New Subordinated Financing shall be
applied solely to repay Permitted Subordinated Indebtedness (with the
12.25% Debentures being repaid in full prior to or simultaneously with
any repayment of the 12% Debentures), and to pay the New Bond
Transaction Costs or the New Subordinated Financing Transaction Costs,
as applicable.
(c) No Legal Impediments. No law, regulation, order, judgment or
decree of any Governmental Authority shall, and the Agent shall not have
received any notice that any action, suit, investigation, litigation or
proceeding is pending or threatened in any court or before any
arbitrator or Governmental Authority which (i) purports to enjoin,
prohibit, restrain or otherwise affect the consummation of the
transactions contemplated pursuant to the Transaction Documents or (ii)
could impose or result in the imposition of a Material Adverse Effect.
(d)No Change in Condition. No change in the condition (financial or
otherwise), business, performance, assets, operations or prospects of
the Borrower or any of its Subsidiaries shall have occurred since
December 31, 1993, which change has or is reasonably likely to have a
Material Adverse Effect.
(e) No Default. No Event of Default or Default shall have occurred and
be continuing or would result from the New Bond Offering or the New
Subordinated Financing, as applicable.
(f) Representations and Warranties. All of the representations and
warranties contained in Section 6.01 and in any of he other Loan
Documents shall be true and correct on and as of the Extension Date,
both before and after giving effect to the New Bond Offering or the New
Subordinated Financing, as the case may be.
(g) Fees and Expenses Paid. There shall have been paid to the Agent,
for the account of the Lenders and the Agent, for their respective
individual account, all fees (including, without limitation, legal fees)
due and payable on or before the Extension Date (including, without
limitation, all such fees described in the Letter Agreements), and all
expenses (including, without limitation, legal expenses) due and payable
on or before the Extension Date.
(h)Extension Date. The Extension Date shall have occurred on or before
March 31, 1995.
(i)Consents, Etc. Except as set forth on Schedule 6.01-E or as is
otherwise reasonably acceptable to the Agent, each of the Borrower and
the Borrower's Subsidiaries shall have received all consents and
authorizations required pursuant to any material Contractual Obligation
with any other Person and shall have obtained all consents and
authorizations of, and effected all notices to and filings with, any
Governmental Authority as may be necessary to allow each of the Borrower
and the Borrower's Subsidiaries to execute, deliver and perform, in all
material respects, their respective obligations under the New Bond
Documents or the New Subordinated Financing Documents, as the case may
be, to which each of them is, or shall be, a party and each other
agreement or instrument to be executed and delivered by each of them
pursuant thereto or in connection therewith. No such consent or
authorization shall impose any conditions that are not reasonably
acceptable to the Lenders.
(j) Covenant Levels. On or prior to the Extension Date, the Borrower
and the Requisite Lenders shall have amended Article X of this Agreement
in accordance with Section 14.07 to provide mutually satisfactory
covenant levels for the period from the Extension Date through the third
fiscal quarter of Fiscal Year 1999.
5.03. Conditions Precedent to All Subsequent Revolving Loans, Swing
Loans and Letters of Credit. The obligation of each Revolving Credit
Lender to make any Revolving Loan and of the Swing Loan Bank to make any
Swing Loan, requested to be made by it on any date after the Closing
Date, and the agreement of each Issuing Bank to Issue any Letter of
Credit on any date after the Closing Date is subject to the following
conditions precedent as of each such date:
(a) Representations and Warranties. As of such date, both before and
after giving effect to the Loans to be made or the Letter of Credit to
be Issued on such date, all of the representations and warranties of the
Borrower and the Borrower's Subsidiaries contained in Section 6.01 and
in any other Loan Document (other than representations and warranties
which expressly speak as of a different date) shall be true and correct
in all material respects.
(b) No Default. No Event of Default or Default shall have occurred and
be continuing or would result from the making of the requested Loan or
the issuance of the requested Letter of Credit.
(c) No Legal Impediments. No law, regulation, order, judgment or
decree of any Governmental Authority shall, and the Agent shall not have
received from such Lender, the Swing Loan Bank or such Issuing Bank, as
the case may be, notice that, in the judgment of such Person, litigation
is pending or threatened which is likely to enjoin, prohibit or
restrain, or impose or result in the imposition of any material adverse
condition upon, (i) such Lender's making of the requested Loan or
participation in the requested Letter of Credit, (ii) the Swing Loan
Bank's making of the requested Swing Loan or (iii) such Issuing Bank's
issuance of the requested Letter of Credit.
(d) No Material Adverse Change. No change in the condition (financial
or otherwise), business, performance, properties, assets, operations or
prospects of the Borrower or any of its Subsidiaries since December 31,
1993 which has or is reasonably likely to have a Material Adverse
Effect.
Each submission by the Borrower to the Agent of a Notice of Borrowing
with respect to a Revolving Loan or Swing Loan, each acceptance by the
Borrower of the proceeds of each such Loan so made, each submission by
the Borrower to an Issuing Bank of a request for issuance of a Letter of
Credit and the issuance of such Letter of Credit, shall constitute a
representation and warranty by the Borrower as of the Funding Date in
respect of such Revolving Loan, as of the Swing Loan Funding Date in
respect of such Swing Loan, and as of the date of issuance of such
Letter of Credit, that all the conditions contained in this Section 5.03
have been satisfied or waived in accordance with Section 14.07.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES
6.01. Representations and Warranties of the Borrower. In order to
induce the Lenders and the Issuing Banks to enter into this Agreement
and to make the Loans and the other financial accommodations to the
Borrower and to issue the Letters of Credit described herein, each of
the Guarantors and the Borrower jointly and severally represents and
warrants to each Lender, each Issuing Bank and the Agent as of the
Closing Date and thereafter on each date as required by Section 5.03(a)
that the following statements are true, correct and complete:
(a) Organization; Corporate Powers. Each of the Borrower and the
Borrower's Subsidiaries (i) is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
organization, (ii) is duly qualified to do business as a foreign
corporation and is in good standing under the laws of each jurisdiction
in which failure to be so qualified and in good standing has or is
reasonably likely to have a Material Adverse Effect and (iii) has all
requisite corporate power and authority to own, operate and encumber its
Property and to conduct its business as presently conducted.
(b) Authority. (i) Each of the Borrower and the Borrower's
Subsidiaries has the requisite corporate power and authority to execute,
deliver and perform each of the Transaction Documents to which it is a
party.
(ii)The execution, delivery and performance, as the case may be, of each
of the Transaction Documents which have been executed and to which any
of the Borrower or the Borrower's Subsidiaries is a party and the
consummation of the transactions contemplated thereby, have been duly
approved by each of the boards of directors and (to the extent required
by law) the shareholders of the Borrower and the Borrower's
Subsidiaries, respectively, and such approvals have not been rescinded,
revoked or modified in any manner. No other corporate action or
proceedings on the part of the Borrower or the Borrower's Subsidiaries
is necessary to consummate such transactions.
(iii)Each of the Transaction Documents to which the Borrower or the
Borrower's Subsidiaries is a party has been duly executed, or delivered
on behalf of the Borrower or the Borrower's Subsidiaries, as the case
may be, and constitutes its legal, valid and binding obligation,
enforceable against such Person in accordance with its terms, is in full
force and effect and no term or condition thereof has been amended,
modified or waived from the terms and conditions contained in the
Transaction Documents delivered to the Agent pursuant to Sections
5.01(a) and, on the Extension Date, 5.02(a) without the prior written
consent of the Requisite Lenders. No default, event of default or
breach of any covenant by any of the Borrower or the Borrower's
Subsidiaries that is a party to the Transaction Documents exists
thereunder, which default, event of default or breach, as the case may
be, has or is reasonably likely to have a Material Adverse Effect.
(c) Subsidiaries; Ownership of Capital Stock. Schedule 6.01-C (i)
contains a diagram indicating the corporate structure of the Borrower,
the Borrower's Subsidiaries and any other Person in which the Borrower
or any of the Borrower's Subsidiaries holds an equity interest as of
each of the Closing Date and the Extension Date (it being understood and
agreed that, if necessary, the Borrower shall provide the Lenders with
an updated version of Schedule 6.01-C on or prior to the Extension
Date); and (ii) accurately sets forth as of each of the Closing Date and
the Extension Date, (A) the correct legal name, the jurisdiction of
incorporation, and Employer Identification Number (if any) of each of
the Borrower and the Borrower's Subsidiaries, and the jurisdictions in
which each of the Borrower and the Borrower's Subsidiaries is qualified
to transact business as a foreign corporation, (B) the authorized,
issued and outstanding shares of each class of Capital Stock of (1) each
of the Guarantors and (2) Imo Industries International Inc., Imo
Industries (UK) Limited, Imo Industries Limited, Morse Controls Limited,
Imo Industries GmbH, Imo AB, Componentistica Europea SRL, Delsalesco,
Inc., Imosure Assurance, Inc. and Imovest Inc., and the owners of such
shares, and a summary statement of the Borrower's direct and indirect
percentage ownership of each of the Borrower's other Subsidiaries, and
(C) a summary of the direct and indirect partnership, joint venture, or
other equity interests, if any, of the Borrower and each Subsidiary of
the Borrower in any Person that is not a corporation. None of the
issued and outstanding Capital Stock of the Borrower or the Borrower's
Subsidiaries is subject to any vesting, redemption, or repurchase
agreement, and there are no warrants or options other than the Permitted
Stock Options outstanding with respect to such Capital Stock. The
outstanding Capital Stock of each of the Borrower's Subsidiaries is duly
authorized, validly issued, fully paid and nonassessable and is not
Margin Stock. No Restricted Subsidiary which is not a Guarantor (other
than Imo Industries International Inc.) has assets with a net book value
in excess of $10,000,000.
(d) No Conflict. The execution, delivery and performance of each of
the Transaction Documents to which the Borrower or any of the Borrower's
Subsidiaries is a party do not and shall not (i) conflict with the
Constituent Documents of the Borrower or any such Subsidiary, (ii)
constitute a tortious interference with any Contractual Obligation of
any Person, (iii) except as set forth on Schedule 6.01-D conflict with,
result in a breach of or constitute (with or without notice or lapse of
time or both) a default under any material Requirement of Law or under
the 12% Debentures, the 12% Debenture Indenture, the 12.25% Debentures,
the 12.25% Debenture Indenture or any other material Contractual
Obligation of the Borrower or any such Subsidiary, or require the
termination of any material Contractual Obligation, (iv) result in or
require the creation or imposition of any Lien whatsoever upon any of
the Property or assets of the Borrower or any such Subsidiary, other
than Liens contemplated by the Loan Documents, or (v) require any
approval of the Borrower's or any such Subsidiary's shareholders that
has not been obtained.
(e) Governmental Consents, etc. Except as set forth on Schedule 6.01-
E, the execution, delivery and performance of each of the Transaction
Documents to which the Borrower or any of the Borrower's Subsidiaries is
a party do not and shall not require any registration with, consent or
approval of, or notice to, or other action to, with or by any
Governmental Authority, except (i) filings, consents or notices which
have been made, obtained or given, or, in a timely manner, shall be
made, obtained, or given and (ii) filings necessary to perfect security
interests in the Collateral. None of the Borrower or any of the
Borrower's Subsidiaries is subject to regulation under the Public
Utility Holding Company Act of 1935, the Federal Power Act, the
Interstate Commerce Act, or the Investment Company Act of 1940, or any
other federal or state statute or regulation which limits its ability to
incur indebtedness or its ability to consummate the transactions
contemplated in the Transaction Documents.
(f)Accommodation Obligations; Contingencies. Except as set forth on
Schedule 1.01.3, none of the Borrower or any of the Borrower's
Subsidiaries has any Accommodation Obligation, contingent liability or
liability for any Taxes, long-term lease or commitment, not reflected in
its financial statements delivered to the Agent on or prior to the
Closing Date or otherwise disclosed to the Agent and the Lenders in the
other Schedules hereto, which has or is reasonably likely to have a
Material Adverse Effect, except as permitted pursuant to
Section 9.05 hereof.
(g) Restricted Junior Payments. None of the Borrower or any of the
Borrower's Subsidiaries has directly or indirectly declared, ordered,
paid or made or set apart any sum or Property for any Restricted Junior
Payment or agreed to do so, except as permitted pursuant to Section 9.06
hereof.
(h) Financial Position. Borrower's Projections, the pro forma
estimated balance sheet referred to in Section 5.01(a)(ii) and each of
Borrower's business plans and all other financial projections and
related materials and documents delivered to the Lenders pursuant hereto
were prepared in good faith based upon facts and assumptions that were
reasonable in light of the then current and foreseeable business
conditions and prospects of the Borrower and represented management's
opinion of the Borrower's projected financial performance based on the
information available to the Borrower at the time so furnished.
(i)Litigation; Adverse Effects. Except as set forth in Schedule 6.01-I,
and other than any such investigation, or series of related
investigations, of which none of the Borrower or the Guarantors, after
due inquiry, has any knowledge, there is no action, suit, audit,
proceeding, investigation or arbitration (or series of related actions,
suits, proceedings, investigations or arbitrations) before or by any
Governmental Authority or private arbitrator pending or, to the
knowledge of the Borrower or any of the Guarantors, threatened against
the Borrower or any of the Borrower's Subsidiaries or any Property of
any of them (i) challenging the validity or the enforceability of any of
the Transaction Documents, (ii) which has a reasonable possibility of
resulting in or, if instituted after the Closing Date, is reasonably
likely to result in the suspension or debarment of the Borrower from any
federal government contracting program or (iii) which has or is
reasonably likely to have a Material Adverse Effect. None of the
Borrower or any of the Borrower's Subsidiaries is (A) in violation of
any applicable Requirements of Law which violation has or is reasonably
likely to result in a Material Adverse Effect, or (B) subject to or in
default with respect to any final judgment, writ, injunction,
restraining order or order of any nature, decree, rule or regulation of
any court or Governmental Authority, in each case which has or is
reasonably likely to have a Material Adverse Effect.
(j) No Material Adverse Change. Since December 31, 1993 there has
occurred no event which has or is reasonably likely to have a Material
Adverse Effect.
(k) Payment of Taxes. All tax returns and reports of each of the
Borrower and the Borrower's Subsidiaries required to be filed have been
timely filed (other than tax returns or reports for taxes, assessments,
fees or other governmental charges which are not material in amount),
and all taxes, assessments, fees and other governmental charges
thereupon and upon their respective Property, assets, income and
franchises which are shown in such returns or reports to be due and
payable have been paid other than such taxes, assessments, fees and
other governmental charges (i) which are being contested in good faith
by the Borrower or such Subsidiary, as the case may be, by appropriate
proceedings diligently instituted and conducted and without danger of
any material risk to the Collateral and
(ii) with respect to which a reserve or other appropriate provision, if
any, as is required in conformity with GAAP shall have been made. The
Borrower has no knowledge of any proposed tax assessment against the
Borrower or any of the Borrower's Subsidiaries that has or is reasonably
likely to have a Material Adverse Effect.
(l) Performance. None of the Borrower or any of the Borrower's
Subsidiaries has received notice or has actual knowledge that (i) it is
in default in the performance, observance or fulfillment of any of the
obligations, covenants or conditions contained in any Contractual
Obligation applicable to it or (ii) any condition exists which, with the
giving of notice or the lapse of time or both, would constitute a
default with respect to any such Contractual Obligation, in each case,
except where such default or defaults, if any, shall not have or are not
reasonably likely to have a Material Adverse Effect.
(m) Disclosure. The representations and warranties of each of the
Borrower and the Borrower's Subsidiaries contained in the Transaction
Documents, and all certificates and documents delivered to the Agent and
the Lenders pursuant to the terms hereof and the other Transaction
Documents, and, after the Extension Date, any registration statement or
offering memorandum relating to the New Bond Offering or the New
Subordinated Financing, do not contain any untrue statement of a
material fact or, to the Borrower's knowledge, omit to state a material
fact necessary in order to make the statements contained herein or
therein, in light of the circumstances under which they were made, not
misleading at the date made. The Borrower has not intentionally
withheld any fact from the Agent, any Issuing Bank or any Lender in
regard to any matter which has or is reasonably likely to have a
Material Adverse Effect.
(n) Requirements of Law. Each of the Borrower and the Borrower's
Subsidiaries is in compliance with all Requirements of Law applicable to
it and its business, in each case where the failure to so comply
individually or in the aggregate has or is reasonably likely to have a
Material Adverse Effect.
(o)Environmental Matters. Except as disclosed on Schedule 6.01-O and
except for matters, conditions, operations and noncompliance which would
not reasonably be expected to result in a liability to the Borrower or
any of its Subsidiaries in excess of $500,000 for any individual matter,
condition, operation or instance of noncompliance or for all such
matters in excess of $2,000,000 in the aggregate in any Fiscal Year:
(A)the operations of the Borrower and the Borrower's Subsidiaries comply
in all material respects with all applicable Environmental, Health or
Safety Requirements of Law;
(B)the Borrower and each of the Borrower's Subsidiaries have obtained or
have taken appropriate steps, as required by Environmental, Health or
Safety Requirements of Law, to obtain all environmental, health and
safety Permits necessary for their respective operations, and all such
Permits are in good standing and each of the Borrower and each of the
Borrower's Subsidiaries are currently in compliance in all material
respects with all terms and conditions of such Permits;
(C)none of the Borrower or the Borrower's Subsidiaries or any of their
respective operations or present or, to the knowledge of the Borrower,
past Property are subject to any investigation, judicial or
administrative proceeding, order, judgment, decree, settlement or other
agreement alleging or addressing (i) a material violation of any
Environmental, Health or Safety Requirement of Law; (ii) any Remedial
Action; or (iii) any material Claims arising from the Release or
threatened Release of a Contaminant into the environment nor has the
Borrower or the Borrower's Subsidiaries received any written notice of
the foregoing;
(D)none of the Borrower or the Borrower's Subsidiaries is the owner or
operator of any Property which has any of the following which could
result in a material liability:
(i)any present or, to the knowledge of the Borrower, any past on-site
treatment, recycling, storage or disposal of any hazardous waste, as
that term is defined under 40 C.F.R. Part 261 or any state or local
equivalent;
(ii)any present or, to the knowledge of the Borrower, any past landfill,
waste pile, underground storage tank or surface impoundment;
(iii) any friable asbestos-containing material; or
(iv)any polychlorinated biphenyls (PCBs) used in hydraulic oils,
electrical transformers or other Equipment;
(E)no Environmental Lien has attached to any Property of the Borrower or
any of the Borrower's Restricted Subsidiaries;
(F)none of the Borrower or the Borrower's Subsidiaries have filed any
notice under applicable Environmental, Health or Safety requirements of
law reporting any Releases of any Contaminants into the environment in
reportable quantities;
(G)to the knowledge of the Borrower, the Borrower and the Borrower's
Subsidiaries have not sent or directly arranged for the transport of any
waste to any site listed or proposed for listing on the National
Priorities List ("NPL") pursuant to CERCLA or any similar state list of
sites requiring Remedial Action;
(H)none of the Borrower's or the Borrower's Subsidiaries' present
Property or, to Borrower's knowledge, past Property is listed or
proposed for listing on the NPL pursuant to CERCLA or on the
Comprehensive Environmental Response Compensation Liability Information
System List ("CERCLIS") or any similar state list of sites requiring
Remedial Action; and
(I)none of the Borrower's or the Borrower's Restricted Subsidiaries
is subject to any Environmental Property Transfer Act or to the extent
such acts are applicable to any such property, the Borrower has fully
complied with the requirements of such acts as a result of the
transactions covered by this Agreement.
(p)ERISA Matters. Neither the Borrower nor any ERISA Affiliate
maintains or contributes to any Plan other than those listed on Schedule
6.01-P hereto. Each Plan which is subject to Section 3(2) of ERISA and
which is intended to be qualified under Section 401(a) of the Internal
Revenue Code as currently in effect has been determined by the IRS to be
so qualified, and each trust related to any such Plan has been
determined to be exempt from federal income tax under Section 501(a) of
the Internal Revenue Code as in effect on the date specified in Schedule
6.01-P with respect to each such Plan. Neither Borrower nor any ERISA
Affiliate knows of any reason why such Plans or trusts are no longer
qualified or exempt following such determination by the IRS. Except as
disclosed in Schedule 6.01-P, neither the Borrower nor any of its
Subsidiaries maintains or contributes to any employee welfare benefit
plan within the meaning of Section 3(l) of ERISA which provides benefits
to employees after termination of employment other than as required by
Section 601 of ERISA. The Borrower and all of its ERISA Affiliates are
in compliance in all material respects with the obligations or duties
imposed on them by ERISA, the Internal Revenue Code and regulations
promulgated thereunder with respect to all Plans. No Benefit Plan has
incurred any accumulated funding deficiency (as defined in Sections
302(a)(2) of ERISA and 412(a) of the Internal Revenue Code) whether or
not waived. Neither the Borrower nor any ERISA Affiliate nor any
fiduciary of any Plan which is not a Multiemployer Plan (i) has engaged
in a nonexempt prohibited transaction described in Sections 406 of ERISA
or 4975 of the Internal Revenue Code or (ii) has taken or failed to take
any action which would reasonably be expected to constitute or result in
a Termination Event. To the best knowledge of Borrower, neither the
Borrower nor any ERISA Affiliate reasonably expects any potential
liability under Sections 4063, 4064, 4069, 4204 or 4212(c) of ERISA.
Neither the Borrower nor any ERISA Affiliate has incurred any liability
to the PBGC which remains outstanding, and there are no premium payments
which have become due which are delinquent. Schedule B to the most
recent annual report filed with the IRS with respect to each Benefit
Plan and furnished to the Agent is complete and accurate. Since the
date of each such Schedule B, there has been no material adverse change
in the funding status or financial condition of the Benefit Plan
relating to such Schedule B. Neither the Borrower nor any ERISA
Affiliate has (i) failed to make a required contribution or payment to a
Multiemployer Plan or (ii) made a complete or partial withdrawal under
Sections 4203 or 4205 of ERISA from a Multiemployer Plan. Neither the
Borrower nor any ERISA Affiliate has failed to make a required
installment or any other required payment under Section 412 of the
Internal Revenue Code on or before the due date for such installment or
other payment. Neither the Borrower nor any ERISA Affiliate is required
to provide security to a Benefit Plan under Section 401(a)(29) of the
Internal Revenue Code due to a Plan amendment that results in an
increase in current liability for the plan year. Except as disclosed on
Schedule 6.01-P the Borrower does not have, by reason of the
transactions contemplated hereby any obligation to make any payment to
any employee pursuant to any Plan or existing contract or arrangement.
The Borrower has given to the Agent copies of all of the following:
each Benefit Plan and related trust agreement (including all amendments
to such Plan and trust) in existence, or for which the Borrower or any
ERISA Affiliate has taken any corporate action to authorize the adoption
thereof, as of the Closing Date and in respect of which the Borrower or
any ERISA Affiliate is currently an "employer" as defined in section
3(5) of ERISA, and the most recent summary plan description, actuarial
report, determination letter issued by the IRS and Form 5500 filed in
respect of each such Benefit Plan in existence; a listing of all of the
Multiemployer Plans currently contributed to by the Borrower or any
ERISA Affiliate with the aggregate amount of the most recent annual
contributions required to be made by the Borrower and all ERISA
Affiliates to each such Multiemployer Plan, any information which has
been provided to the Borrower or an ERISA Affiliate regarding withdrawal
liability under any Multiemployer Plan and the collective bargaining
agreement pursuant to which such contribution is required to be made;
each employee welfare benefit plan within the meaning of Section 3(l) of
ERISA which provides benefits to employees of the Borrower or any of its
Subsidiaries after termination of employment other than as required by
Section 601 of ERISA, the most recent summary plan description for such
plan and the aggregate amount of the most recent annual payments made to
terminated employees under each such plan.
(q)Foreign Employee Benefit Matters. Each Foreign Employee Benefit Plan
is in compliance in all material respects with all laws, regulations and
rules applicable thereto and the respective requirements of the
governing documents for such Plan. The aggregate of the liabilities to
provide all of the accrued benefits under any Foreign Pension Plan does
not exceed the current fair market value of the assets held in the trust
or other funding vehicle for such Plan. With respect to any Foreign
Employee Benefit Plan maintained by the Borrower, any of its
subsidiaries or any ERISA Affiliate (other than a Foreign Pension Plan),
reasonable reserves have been established in accordance with prudent
business practice or where required by ordinary accounting practices in
the jurisdiction in which such Plan is maintained. The aggregate
unfunded liabilities, after giving effect to any reserves for such
liabilities, with respect to such Plans is not reasonably expected to
result in a material liability. There are no actions, suits or claims
(other than routine claims for benefits) pending or threatened against
the Borrower, any of its subsidiaries or any ERISA Affiliate with
respect to any Foreign Employee Benefit Plan.
(r) Labor Matters. (i) Except as set forth in Schedule 6.01-R, as of
the Closing Date there is no collective bargaining agreement covering
any of the employees of the Borrower or any Subsidiary of the Borrower.
To the knowledge of the Borrower and each of the Guarantors, except as
set forth on Schedule 6.01-R, as of the Closing Date no attempt to
organize the employees of Borrower or any such Subsidiary is pending,
threatened or planned.
(ii)Set forth in Schedule 6.01-R or Schedule 6.01-P, as the case may be,
is a list, as of the Closing Date, of all consulting agreements,
executive employment agreements, executive compensation plans, deferred
compensation agreements, employee stock purchase and stock option plans,
severance plans, group life insurance, hospitalization insurance or
other employee benefit plans, of Borrower and its Subsidiaries providing
for benefits for employees of Borrower and its Subsidiaries, and which
impose material obligations on the Borrower and/or its Subsidiaries.
(s) Securities Activities. None of the Borrower or any of the
Borrower's Subsidiaries is engaged in the business of extending credit
for the purpose of purchasing or carrying Margin Stock.
(t) Solvency. After giving effect to the transactions contemplated in
the Transaction Documents and the Loans to be made on the Closing Date,
the Extension Date or such other date as Loans requested hereunder are
made and the disbursement of the proceeds of such Loans pursuant to the
Borrower's instructions, each of the Borrower and the Borrower's
Subsidiaries is Solvent.
(u)Patents, Trademarks, Permits, Etc.; Government Approvals. (i) The
Borrower and each of the Borrower's Subsidiaries own, are licensed or
otherwise have the lawful right to use, or have all permits and other
governmental approvals, patents, trademarks, service marks, trade names,
copyrights, technology, know-how and processes used in or necessary for
the conduct of their businesses as currently conducted except where the
failure to do so would not have or be reasonably likely to have a
Material Adverse Effect. Except as set forth on Schedule 6.01-U, no
claims are pending or, to the best of Borrower's knowledge following
diligent inquiry, threatened that the Borrower or any of its
Subsidiaries is infringing upon the rights of any Person with respect to
such permits and other governmental approvals, patents, trademarks,
service marks, trade names, copyrights, technology, know-how and
processes which infringement would have or would be reasonably likely to
have a Material Adverse Effect. Except as set forth on Schedule 6.01-U,
the Borrower has no knowledge after diligent inquiry of any use by any
Person that infringes upon the rights of the Borrower in such patents,
trademarks, service marks, trade names, copyrights, technology, know-how
and processes which infringement would have or would be reasonably
likely to have a Material Adverse Effect.
(ii)Except for Liens granted to the Agent for the benefit of the Agent,
the Issuing Banks, the Lenders and the other Holders, the transactions
contemplated by the Transaction Documents shall not impair the ownership
of or rights under (or the license or other right to use, as the case
may be) any permits and governmental approvals, patents, trademarks,
service marks, trade names, copyrights, technology, know-how or
processes by the Borrower or any of the Borrower's Subsidiaries in any
manner which has or is reasonably likely to have a Material Adverse
Effect.
(v) Assets and Properties. (i) Each of the Borrower and the
Borrower's Subsidiaries has good and, in the case of Real Property,
marketable title to all of its assets and Property (tangible and
intangible) owned by it or a valid leasehold interest in all of its
leased assets (except insofar as marketability may be limited by any
laws or regulations of any Governmental Authority affecting such
assets), and all such assets and Property are free and clear of all
Liens, except Liens securing the Obligations and Liens permitted under
Section 9.03. Schedule 6.01-V contains a true and complete list of all
of the Real Property owned in fee simple by each of the Borrower and the
Restricted Subsidiaries as of the Closing Date, and a true and complete
list of all Leases in effect on the Closing Date and indicates whether
such Real Property or Lease has a book value in excess of $250,000.
Substantially all of the assets and Property owned by or leased to the
Borrower and/or each such Subsidiary are in adequate operating condition
and repair, reasonable and ordinary wear and tear excepted, and are free
and clear of any known defects except such defects that do not
substantially interfere with the continued use thereof in the conduct of
normal operations. Except for Liens granted to the Agent for the
benefit of the Agent, the Issuing Banks, the Lenders and the other
Holders, neither this Agreement nor any other Transaction Document, nor
any transaction contemplated herein or therein, shall affect any right,
title or interest of the Borrower or any such Subsidiary in and to any
of such assets in a manner that has or is reasonably likely to have a
Material Adverse Effect.
(ii) As to the parcels of Real Property with respect to which mortgages
are being delivered on the Closing Date, except as set forth on Schedule
6.01-V, (A) the legal descriptions set forth on Schedule A of the
current commitments for title insurance insuring such mortgages fully
and accurately describe the boundaries of each such parcel; (B) there is
full and lawful access to each such parcel; (C) all of the mortgagor's
improvements utilized with respect to each such parcel are located
within the boundaries of the relevant parcel; (D) the improvements
located on each such parcel do not encroach upon, and are in full
compliance with, boundary lines and setback requirements; and (E) no
easements, restrictions or encumbrances exist which underlie or
interfere with the improvements on any such parcel or the use or
operation thereof, provided, however, that any violation of items (A),
(C), (D), or (E) above shall not be considered a breach hereunder to the
extent that such violation does not adversely affect the marketability
of the relevant parcel or the mortgagor's continued operation of the
relevant parcel in the manner in which it is currently operated.
(w) Insurance. Schedule 6.01-W accurately sets forth as of the Closing
Date all insurance policies and programs (including self-insurance
programs) currently in effect with respect to the respective assets and
business of the Borrower and its Subsidiaries, specifying for each such
policy and program, (i) the amount thereof, (ii) the risks insured
against thereby, (iii) the name of the insurer, if any, and each insured
party thereunder, (iv) the policy or other identification number
thereof, (v) the expiration date thereof and (vi) the annual premium, if
any, with respect thereto. Such insurance policies and programs are,
except as disclosed on Schedule 6.01-W, in amounts sufficient to cover
the replacement value of the respective assets of the Borrower and its
Subsidiaries.
(x)Pledge of Collateral. The grant and perfection of the security
interests in the Capital Stock of each of the Borrower's Subsidiaries
constituting a portion of the Collateral for the benefit of the Agent,
the Issuing Banks, the Lenders and the other Holders, as contemplated by
the terms of the Loan Documents, is not made in violation of the
registration provisions of the Securities Act, any applicable provisions
of other federal securities laws, state securities or "Blue Sky" law,
foreign securities law, or applicable general corporation law or in
violation of any other Requirement of Law.
(y)Transactions with Affiliates. Schedule 6.01-Y lists as of the
Closing Date each and every existing agreement and arrangement that any
of the Borrower or the Borrower's Subsidiaries has entered into with any
of their respective Affiliates (other than the Borrower and the
Borrower's Subsidiaries).
(z)New Bond Offering or New Subordinated Financing. As of the Extension
Date, all conditions precedent to, and all consents necessary to permit,
the consummation of the transactions contemplated by the New Bond
Documents or the New Subordinated Financing Documents, as applicable,
have been satisfied or delivered, or waived with the prior written
consent of the Lenders, and no action has been taken, or to the best of
the Borrower's knowledge, shall be taken by any competent authority
which restrains, prevents or imposes material adverse conditions upon,
or seeks to restrain, prevent or impose material adverse conditions
upon, the consummation of such transactions or the funding of any Loans
hereunder.
(aa)Bank Accounts. Schedule 6.01-AA sets forth
(i) all of the Borrower's and the Restricted Subsidiaries' Lockbox Banks
and (ii) as of the Closing Date all other banks where an average daily
balance of $10,000 or more in funds is from time to time deposited,
including the Lockboxes, their addresses and the relevant account
numbers, and with respect to the banks referred to in clause (ii) the
Borrower has disclosed all additions, subtractions and modifications to
such Schedule to the Agent and the Lenders.
(bb) Government Contracts. (i) None of the Borrower or any of the
Restricted Subsidiaries or any of their respective Affiliates is party
to any Contractual Obligation or subject to any Requirement of Law as a
result of any conflict of interest by, between or among the Borrower,
such Restricted Subsidiaries or such Affiliates or otherwise that would
result in the termination of any Material Government Contract or that
would impose any material limitation on the Borrower's or such
Restricted Subsidiary's ability to perform such contract or to continue
its business as presently conducted and proposed to be conducted.
(ii) No payment has been made by the Borrower or any of the Restricted
Subsidiaries, or by any Person authorized to act on their behalf, to any
Person in connection with any Government Contract of the Borrower or any
such Restricted Subsidiary, which payment would be a material violation
of applicable procurement laws or regulations or of the Foreign Corrupt
Practices Act or of any other material Requirement of Law.
(iii) With respect to each Government Contract to which the Borrower or
any of the Restricted Subsidiaries is a party: (A) all representations
and certifications executed, acknowledged or set forth in or pertaining
to such Government Contract were complete and correct in all material
respects as of their effective date, and the Borrower and each such
Restricted Subsidiary have complied in all material respects with all
such representations and certifications; (B) except as set forth on
Schedule 6.01-BB, neither the United States Government nor any prime
contractor, subcontractor or other Person has notified Borrower or any
such Restricted Subsidiary, either orally or in writing, that Borrower
or such Restricted Subsidiary has breached or violated any material
Requirement of Law, or any material certificate, representation, clause,
provision or requirement pertaining to such Government Contract; and (C)
solely with respect to Material Government Contracts, no termination for
convenience, termination for default, cure notice or show cause notice
is currently in effect pertaining to any such Material Government
Contract.
(iv)Except as set forth on Schedule 6.01-BB, (A) none of the Borrower or
any of the Restricted Subsidiaries or any of their respective directors,
officers or employees is (or during the last three (3) years has been)
under administrative, civil or criminal investigation or indictment by
any Governmental Authority, with respect to any alleged irregularity,
misstatement or omission arising under or relating to any Government
Contract; and (B) during the last three (3) years, none of the Borrower
or any of the Restricted Subsidiaries has conducted or initiated any
internal investigation or made a voluntary disclosure to the United
States Government, with respect to any alleged irregularity,
misstatement or omission arising under or relating to a Government
Contract, in each case except (with respect to such matters occurring
after the Closing Date) as disclosed to the Lenders.
(v)Except as set forth on Schedule 6.01-BB, there exist (A) no
outstanding material claims against the Borrower or any of the
Restricted Subsidiaries, either by the United States Government or by
any prime contractor, subcontractor, vendor or other third party,
arising under or relating to any Government Contract; and (B) no
material disputes between the Borrower or any of the Restricted
Subsidiaries and the United States Government under the Contract
Disputes Act or any other Federal statute or between the Borrower or any
of the Restricted Subsidiaries and any prime contractor, subcontractor
or vendor arising under or relating to any such Government Contract.
(vi)None of the Borrower or any of the Restricted Subsidiaries or any of
their respective directors, officers or employees is (or during the last
three (3) years has been) suspended or debarred from doing business with
the United States Government or is (or during such period was) the
subject of a finding of nonresponsibility or ineligibility for United
States Government contracting.
ARTICLE VII
REPORTING COVENANTS
Each of the Guarantors and the Borrower jointly and severally covenants
and agrees that so long as any Commitment is outstanding and thereafter
until payment in full of all of the Loans and Letter of Credit
Obligations, unless the Requisite Lenders shall otherwise give prior
written consent thereto:
7.01. Financial Statements. The Borrower shall maintain, and shall
cause each of the Borrower's Restricted Subsidiaries to maintain, a
system of accounting established and administered in accordance with
sound business practices to permit preparation of consolidated and
consolidating financial statements in conformity with GAAP, and each of
the financial statements described below shall be prepared from such
system and records. The Borrower shall deliver or cause to be delivered
to the Agent and the Lenders:
(a) Monthly Reports. Within forty-five (45) days after the end of each
fiscal month in each Fiscal Year, the consolidated and consolidating
balance sheets of the Borrower and its Subsidiaries as at the end of
such period and the related consolidated and consolidating statements of
income and cash flow of the Borrower and its Subsidiaries for such
fiscal month and for the period from the beginning of the then current
Fiscal Year to the end of such fiscal month, and for the corresponding
period during the previous Fiscal Year, and (i) a comparison of the
statements of the year to date earnings and cash flow so delivered to
the corresponding statements for the corresponding period from the
previous Fiscal Year and (ii) a comparison of the balance sheets and the
statements of the year to date earnings and cash flow so delivered to
the business plan most recently delivered in accordance with subsection
(d) below, and a comparison of the statements of year to date earnings
and cash flow so delivered to the annual operating plan, all certified
by the chief financial officer of the Borrower as fairly presenting the
consolidated and consolidating financial position of the Borrower and
its Subsidiaries as at the dates indicated and the results of their
operations and cash flow for the periods indicated in accordance with
GAAP, subject to normal year end adjustments.
(b) Annual Reports. Within ninety (90) days after the end of each
Fiscal Year, (i) audited financial statements of the Borrower and its
Subsidiaries and (ii) annual consolidating financial statements of the
Borrower and its Subsidiaries reported on (in the case of the financial
statements referred to in clause (i)) by independent certified public
accountants of recognized national standing acceptable to the Lenders,
which report shall be unqualified and shall state that such financial
statements fairly present the consolidated financial position of the
Borrower and its Subsidiaries as at the dates indicated and the results
of their operations and cash flow for the periods indicated in
conformity with GAAP applied on a basis consistent with prior years
(except for changes with which such independent certified public
accountants shall concur and which shall have been disclosed in the
notes to the financial statements) and that the examination by such
accountants in connection with such consolidated financial statements
has been made in accordance with generally accepted auditing standards.
(c) Officer's Certificate. Together with each delivery of any
financial statement pursuant to paragraph (a) and (b) of this Section
7.01, an Officer's Certificate of the Borrower substantially in the form
of Exhibit G attached hereto and made a part hereof (the "Compliance
Certificate"), signed by the Borrower's chief financial officer and
setting forth calculations for the period then ended for Section 3.01(b)
(including, without limitation, calculations of Excess Cash Flow, Net
Cash Proceeds and mandatory prepayments) and which demonstrate
compliance, when applicable, with the provisions of Article X.
(d) Business Plans; Financial Projections. Not later than thirty (30)
days after the beginning of each Fiscal Year, and containing
substantially the same types of financial information contained in the
Borrower's Projections and otherwise in form and detail satisfactory to
the Lenders, (i) the annual business plan of the Borrower for such
Fiscal Year and (ii) forecasts prepared by management of the Borrower
for each fiscal month in such Fiscal Year, and on an annual basis for
each succeeding Fiscal Year, up to and including the Fiscal Year during
which it is anticipated that the Obligations shall be paid in full
(assuming for this purpose only that the Extension Date shall occur),
containing a consolidated balance sheet, an income statement and a
consolidated statement of cash flow.
(e)Accountant's Statement and Privity Letter. Together with each
delivery of the financial statements referred to in Section 7.01(b), a
written statement of the firm of independent certified public
accountants of recognized national standing acceptable to the Lenders
giving the report stating (i) that their audit examination has included
a review of the terms hereof as it relates to accounting matters and
(ii) whether, in connection with their audit examination, any condition
or event which constitutes an Event of Default or Default has come to
their attention, and if such condition or event has come to their
attention, specifying the nature and period of existence thereof. The
statement referred to above shall be accompanied by (x) a copy of the
management letter or any similar report delivered to the Borrower or to
any officer or employee thereof by such accountants in connection with
such financial statements and (y) a reliance letter in form and
substance reasonably satisfactory to the Agent from the Borrower to such
accountants. The Agent and each Lender may communicate directly with
such accountants.
7.02. Borrowing Base Certificate. Promptly and in any event within
fifteen (15) days (or an additional five (5) days with the consent of
the Agent) after the close of each fiscal month (or such more frequent
period as the Agent shall determine in its sole discretion, but not more
often than weekly) the Borrower shall provide the Agent and the Lenders
with a Borrowing Base Certificate, together with such supporting
documents as the Agent requests (including monthly updated information
concerning Receivables and Inventory of the Borrower), all certified as
being true, accurate and complete by the chief financial officer,
treasurer or controller of the Borrower.
7.03. Events of Default; Changes in Credit Ratings. Promptly upon
(and, in any event, within five (5) Business Days of) any of the chief
executive officer, chief operating officer, chief financial officer,
treasurer or controller of the Borrower obtaining knowledge (i) of any
condition or event which constitutes an Event of Default or Default, or
becoming aware that any Lender, any Issuing Bank or the Agent has given
any written notice with respect to a claimed Event of Default or
Default, (ii) that any Person has given any written notice to the
Borrower or any Subsidiary of the Borrower or taken any other action
with respect to a claimed default or event or condition of the type
referred to in Section 11.01(e), (iii) of any condition or event which
has or is reasonably likely to have a Material Adverse Effect or
materially and adversely affect the value of, or the Agent's interest
in, the Collateral or (iv) of any change of the credit rating of any of
the Permitted Subordinated Indebtedness, the Borrower shall deliver to
the Agent and the Lenders an Officer's Certificate specifying (A) the
nature and period of existence of any such claimed default, Event of
Default, Default, condition, event or change, (B) the notice given or
action taken by such Person in connection therewith, and (C) other than
in the case of clause (iv), the remedial action the Borrower has taken,
is taking and proposes to take with respect thereto.
7.04. Lawsuits. (i) Promptly upon (and, in any event, within five (5)
Business Days of) the Borrower obtaining knowledge of the institution
of, or written threat of, any action, suit, proceeding, governmental
investigation or arbitration against or affecting the Borrower or any of
the Borrower's Subsidiaries or any Property of the Borrower or any of
the Borrower's Subsidiaries not previously disclosed pursuant to Section
6.01(j), which action, suit, proceeding, governmental investigation or
arbitration exposes, or in the case of multiple actions, suits,
proceedings, governmental investigations or arbitrations arising out of
the same general allegations or circumstances which expose, in the
Borrower's reasonable judgment, the Borrower or any of the Borrower's
Subsidiaries to liability in an amount aggregating $1,000,000 or more,
the Borrower shall give written notice thereof to the Agent and the
Lenders and provide such other information as may be reasonably
available to enable each Lender and the Agent and its counsel to
evaluate such matters; and (ii) in addition to the requirements set
forth in clause (i) of this Section 7.04, the Borrower upon request of
the Agent or the Requisite Lenders shall promptly give written notice of
the status of any action, suit, proceeding, governmental investigation
or arbitration covered by a report delivered pursuant to clause (i)
above and provide such other information as may be reasonably available
to it to enable each Lender and the Agent and its counsel to evaluate
such matters.
7.05. Insurance. As soon as practicable and in any event within ninety
(90) days of April 19 of each Fiscal Year ending after the Closing Date,
the Borrower shall deliver to the Agent and the Lenders (i) a report in
form and substance satisfactory to the Agents and the Lenders outlining
all material insurance coverage (including any self-insurance provided
by the Borrower) maintained as of the date of such report by the
Borrower and its Subsidiaries and the duration of such coverage and (ii)
to the extent such insurance coverage is not provided by the Borrower,
an insurance broker's statement that all premiums then due and payable
with respect to such coverage have been paid.
7.06. ERISA Notices. The Borrower shall deliver or cause to be
delivered to the Agent, at the Borrower's expense, the following
information and notices as soon as reasonably possible, and in any
event:
(i)within ten (10) Business Days after the Borrower or any ERISA
Affiliate knows or has reason to know that a Termination Event has
occurred, a written statement of the chief financial officer of the
Borrower describing such Termination Event and the action, if any, which
the Borrower or any ERISA Affiliate has taken, is taking or proposes to
take with respect thereto, and when known, any action taken or
threatened by the IRS, DOL or PBGC with respect thereto;
(ii)within fifteen (15) Business Days after the Borrower or any ERISA
Affiliate knows or has reason to know that a prohibited transaction (as
defined in Sections 406 of ERISA and 4975 of the Internal Revenue Code)
has occurred, a statement of the chief financial officer of the Borrower
describing such transaction and the action which the Borrower or any
ERISA Affiliate has taken, is taking or proposes to take with respect
thereto;
(iii)within ten (10) Business Days after the filing thereof with the
DOL, IRS or PBGC, copies of each annual report (form 5500 series),
including Schedule B thereto, filed with respect to each Benefit Plan;
(iv)within ten (10) Business Days after receipt by the Borrower or any
ERISA Affiliate of each actuarial report for any Benefit Plan or
Multiemployer Plan and each annual report for any Multiemployer Plan,
copies of each such report;
(v)within three (3) Business Days after the filing thereof with the IRS,
a copy of each funding waiver request filed with respect to any Benefit
Plan and all communications received by the Borrower or any ERISA
Affiliate with respect to such request;
(vi)within five (5) Business Days upon the occurrence thereof,
notification of any material increase in the benefits of any existing
Plan or the establishment of any new Plan or the commencement of
contributions to any Plan to which the Borrower or any ERISA Affiliate
was not previously contributing;
(vii)within three (3) Business Days after receipt by the Borrower or any
ERISA Affiliate of the PBGC's intention to terminate a Benefit Plan or
to have a trustee appointed to administer a Benefit Plan, copies of each
such notice;
(viii)within three (3) Business Days after receipt by the Borrower or
any ERISA Affiliate of any unfavorable determination letter from the IRS
regarding the qualification of a Plan under Section 401(a) of the
Internal Revenue Code, copies of each such letter;
(ix)within three (3) Business Days after receipt by the Borrower or any
ERISA Affiliate of a notice from a Multiemployer Plan regarding the
imposition of withdrawal liability, copies of each such notice;
(x)within five (5) Business Days after the Borrower or any ERISA
Affiliate fails to make a required installment or any other required
payment under Section 412 of the Internal Revenue Code on or before the
due date for such installment or payment, a notification of such
failure;
(xi)within three (3) Business Days after the Borrower or any ERISA
Affiliate knows or has reason to know (a) a Multiemployer Plan has been
terminated, (b) the administrator or plan sponsor of a Multiemployer
Plan intends to terminate a Multiemployer Plan, or (c) the PBGC has
instituted or will institute proceedings under Section 4042 of ERISA to
terminate a Multiemployer Plan; and
(xii)within ten (10) Business Days after receipt by the Borrower of a
written notice from the Agent, copies of any Foreign Employee Benefit
Plan and related documents, reports and correspondence as requested by
the Lenders in such notice.
For purposes of this Section 7.06, the Borrower and any ERISA Affiliate
shall be deemed to know all facts known by the administrator of any Plan
of which the Borrower or any ERISA Affiliate is the plan sponsor.
7.07. Environmental Notices. (a) The Borrower shall notify the Agent
and the Lenders in writing promptly, and in any event within 20 Business
Days, after the Borrower's receipt of any:
(i)written notice or claim by a Governmental Authority or any third
party to the effect that the Borrower or any of the Restricted
Subsidiaries is or may be liable to any Person, or is subject to an
investigation by a Governmental Authority, relating to a material
Release or threatened Release of any Contaminant into the environment;
(ii)written notice that any Property of the Borrower or any of the
Restricted Subsidiaries is subject to an Environmental Lien;
(iii)notice of violation or commencement or written threat of any
judicial or administrative proceeding alleging a material violation by
the Borrower or any of the Restricted Subsidiaries of any Environmental,
Health or Safety Requirement of Law;
(iv)new and material changes to any existing Environmental, Health or
Safety Requirement of Law that would or could reasonably be expected to
have a Material Adverse Effect; or
(v)any intent to execute an agreement, letter of intent or commitment to
acquire stock, assets or real estate, or to lease property, or to take
any other action by the Borrower or any of the Restricted Subsidiaries
that would subject the Borrower or any of the Restricted Subsidiaries to
environmental, health or safety Liabilities and Costs that would or
could reasonably be expected to have a Material Adverse Effect.
(b)The Borrower shall notify the Agent and the Lenders in writing,
promptly and in any event within 20 Business Days upon any filing or
report made by the Borrower or any of its Subsidiaries with any
Governmental Authority with respect to (i) the material violation of any
Environmental, Health or Safety Requirement of Law or (ii) any material
unpermitted Release or threatened Release of a Contaminant;
(c)On March 31, 1995 and thereafter on December 31 of each calendar
year, commencing on December 31, 1995, the Borrower shall submit to the
Agent and the Lenders a report prepared by the appropriate officers of
the Borrower summarizing the status of any environmental, health or
safety non-compliance, hazard or liability issues identified in notices
required pursuant to Section 7.07(a), disclosed on Schedule 6.01-O or
identified in any notice or report required herein.
7.08. Labor Matters. The Borrower shall notify the Agent and the
Lenders in writing, promptly after the Borrower knows thereof, of (i)
any material labor dispute to which the Borrower or any of its
Subsidiaries is or is reasonably likely to be a party, including,
without limitation, any strikes, lockouts or other disputes relating to
such Persons' plants and other facilities and (ii) any Worker Adjustment
and Retraining Notification Act or related liability incurred with
respect to the closing of any plant or other facility of such Persons.
7.09. Government Contracts. (i) The Borrower shall notify the Agent
and the Lenders in writing promptly after the Borrower knows thereof, of
any loss or threatened loss of the security clearances referenced in
Section 8.15(b) unless disclosure thereof is prohibited by any
Requirement of Law; and (ii) the Borrower shall notify the Agent in
writing promptly upon (and, in any event, within five (5) Business Days
of) the Borrower obtaining knowledge of any material change in the
status of any action, suit, proceeding, governmental investigation or
other matter disclosed on or arising out of the matters disclosed on
Schedule 6.01-BB and shall provide such other information as may be
reasonably available to it to enable each Lender and the Agent and its
counsel to evaluate such matters.
7.10. Public Filings and Reports. Promptly upon the filing thereof
with any Governmental Authority (including, without limitation, the
Securities and Exchange Commission) or the mailing thereof to the public
shareholders or debtholders of the Borrower generally, copies of all
filings or reports made in connection with outstanding Indebtedness and
Capital Stock of the Borrower.
7.11. Permitted Subordinated Indebtedness; New Bond Indenture. Upon
its receipt of any of the following, the Borrower shall deliver promptly
thereafter a copy thereof to the Agent and the Lenders: (a) any notice
or other communication delivered by or on behalf of the Borrower to any
Person in connection with the Permitted Subordinated Indebtedness, the
New Bond Indenture or the New Subordinated Financing Documents; and (b)
any material notice or other material communication received by such
Borrower from any Person in connection with any agreement or other
document relating to Permitted Subordinated Indebtedness, the New Bond
Indenture or the New Subordinated Financing Documents promptly after
such notice or other communication is received by such Borrower.
7.12. Other Information. Promptly upon receipt of a request therefor
from the Agent, the Borrower shall prepare and deliver to the Agent and
the Lenders such other information with respect to the Borrower, any of
the Borrower's Subsidiaries or the Collateral including, without
limitation, schedules identifying and describing the collateral and any
dispositions thereof, as from time to time may be reasonably requested
by the Agent.
ARTICLE VIII
AFFIRMATIVE COVENANTS
Each of the Guarantors and the Borrower jointly and severally covenants
and agrees that so long as any Commitment is outstanding and thereafter
until payment in full of all of the Loans and Letter of Credit
Obligations, unless the Requisite Lenders shall otherwise give prior
written consent:
8.01. Corporate Existence, Etc. Subject to
Section 9.09, each of the Borrower and each Guarantor shall, and shall
cause each of its respective Subsidiaries to, at all times maintain
their respective corporate existence and preserve and keep, or cause to
be preserved and kept, in full force and effect their respective rights
and franchises material to their respective businesses except for
actions in the ordinary course of business where the Board of Directors
of such Person or such Subsidiary (as applicable) determines that the
maintenance or preservation of such rights and franchises is not in the
best interest of such Person or such Subsidiary (as applicable) and the
failure to so maintain or preserve would not be reasonably likely to
have a Material Adverse Effect.
8.02. Corporate Powers; Conduct of Business, Etc. Each of the Borrower
and each Guarantor shall, and shall cause each of its respective
Subsidiaries to, qualify and remain qualified to do business in each
jurisdiction in which the nature of its business requires it to be so
qualified, except where the failure to be so qualified would not be
reasonably likely to have a Material Adverse Effect.
8.03. Compliance with Laws, Etc. Each of the Borrower and each
Guarantor shall, and shall cause each of its respective Subsidiaries to,
(a) comply with all Requirements of Law and all restrictive covenants
affecting such Person or the business, Property, assets or operations of
such Person, and (b) obtain as needed all Permits necessary for such
Person's operations and maintain such Permits in good standing, except,
in each case, where the failure to do so would not have or be reasonably
likely to have a Material Adverse Effect.
8.04. Payment of Taxes and Claims; Tax Consolidation. Each of the
Borrower and each Guarantor shall, and shall cause each of its
respective Subsidiaries to, pay (a) all taxes, assessments and other
governmental charges imposed upon it or on any of its Property or assets
or in respect of any of its franchises, business, income or Property
before the same shall become delinquent or in default, and (b) all
claims (including, without limitation, claims for labor, services,
materials and supplies) for sums which have become due and payable and
which by law have or may become a Lien (other than a Lien permitted by
Section 9.03) upon any of the Borrower's or such Subsidiary's Property
or assets, prior to the time when any penalty or fine shall be incurred
with respect thereto; provided, however, that no such taxes, assessments
and governmental charges referred to in clause (a) above or claims
referred to in clause (b) above are required to be paid if being
contested in good faith by the Borrower or such Subsidiary, as the case
may be, by appropriate proceedings diligently instituted and conducted
and without danger of any material risk to the Collateral and if such
reserve or other appropriate provision, if any, as shall be required in
conformity with GAAP shall have been made therefor. Neither the
Borrower nor any Guarantor shall, nor shall permit any of its respective
Subsidiaries to, file or consent to the filing of any consolidated
income tax return with any Person (other than the Borrower and its
Subsidiaries).
8.05. Insurance. The Borrower shall maintain for itself and its
Subsidiaries, or shall cause each of its Subsidiaries to maintain, in
full force and effect the insurance policies and programs listed on
Schedule 6.01-W or substantially similar policies and programs or other
policies and programs as are acceptable to the Agent; provided, however,
the Borrower shall not be required to maintain such policies identified
on Schedule 6.01-W that were required to be maintained by the Borrower
solely pursuant to a Requirement of Law that has been legally waived or
eliminated. Each certificate and policy relating to Property damage,
boiler and machinery and/or business interruption coverage shall contain
an endorsement, in form and substance acceptable to the Agent, showing
loss payable to the Agent, for the benefit of the Agent, the Issuing
Banks and the Lenders and naming the Agent as an additional insured
under such policy and providing that no act, whether willful or
negligent, or default of the Borrower, any of its Subsidiaries or any
other Person shall affect the right of the Agent to recover under such
policy or policies of insurance in case of loss or damage. Each
certificate and policy relating to coverages other than the foregoing
shall contain an endorsement naming the Agent as an additional insured
under such policy. Such endorsement or an independent instrument
furnished to the Agent shall provide that the insurance companies shall
give the Agent at least thirty (30) days' written notice before any such
policy or policies of insurance shall be cancelled or altered adversely
to the interests of the Agent, the Issuing Banks and the Lenders. In
the event that the Borrower or any of its Subsidiaries, at any time or
times hereafter, shall fail to obtain or maintain any of the policies or
insurance required herein or to pay any premium in whole or in part
relating thereto, then the Agent, without waiving or releasing any
obligations or resulting Event of Default hereunder, may at any time or
times thereafter (but shall be under no obligation to do so) obtain and
maintain such policies of insurance and pay such premiums and take any
other action with respect thereto which the Agent deems advisable. All
sums so disbursed by the Agent shall constitute Protective Advances and
be part of the Obligations, payable as provided herein.
8.06. Inspection of Property; Books and Records; Discussions. (a)
Each of the Borrower and each Guarantor shall permit, and shall cause
each of their respective Subsidiaries to permit, any authorized
representative(s) designated by the Agent or any Lender to visit and
inspect any of the Properties of such Person or such Subsidiary, to
examine, audit, check and make copies of their respective financial and
accounting records, books, journals, orders, receipts and any
correspondence and other data relating to their respective businesses or
the transactions contemplated hereby and by the Transaction Documents
(including, in connection with environmental compliance, hazard or
liability), and to discuss their affairs, finances and accounts with
their officers and independent certified public accountants, upon
reasonable notice and at such times during normal business hours, as
often as may be reasonably requested. All reasonable costs and expenses
incurred by the Agent or, after the occurrence and during the
continuance of any Default or Event of Default, all costs and expenses
incurred by the Agent or any Lender, in each case as a result of such
inspection, audit or examination conducted pursuant to this Section 8.06
shall be paid by the Borrower.
(b) Each of the Borrower and each Guarantor shall keep and maintain,
and shall cause their respective Subsidiaries to keep and maintain, in
all material respects proper books of record and account in which
entries in conformity with GAAP (it being understood that the books of
record and account for any Unrestricted Subsidiary may be kept in
accordance with generally accepted accounting principles in the relevant
jurisdiction) shall be made of all dealings and transactions in relation
to their respective businesses and activities, including, without
limitation, transactions and other dealings with respect to the
Collateral. If an Event of Default has occurred and is continuing, the
Borrower, upon the Agent's request, shall promptly turn over true,
correct and complete copies of all such records to the Agent or any of
its representatives.
8.07. Insurance and Condemnation Proceeds. The Borrower hereby directs
(and, if applicable, shall cause the Restricted Subsidiaries to direct)
all insurers under policies of property damage, boiler and machinery and
business interruption insurance and payors of any condemnation claim or
award relating to the Property to pay all proceeds payable under such
policies or with respect to such claim or award for any loss directly to
the Agent, for the benefit of the Agent, the Issuing Banks, the Lenders
and the other Holders, and in no case to the Borrower or one or more of
its Subsidiaries. So long as any A Term Loans or B Term Loans remain
outstanding, the Agent shall, upon receipt of such proceeds hold such
proceeds in the Investment Account as Collateral for the Obligations.
For up to 180 days from the date of any loss (the "Decision Period"),
the Borrower may notify the Agent that it intends to restore, rebuild or
replace the Property subject to the receipt of any insurance payment or
condemnation award and shall, as soon as practicable thereafter, provide
the Agent detailed information, including a construction schedule and
cost estimates. Should the Borrower notify the Agent that it has
decided not to rebuild or replace such Property during the Decision
Period, or should the Borrower fail to notify the Agent of the
Borrower's decision during the Decision Period, then the amounts held as
Collateral shall automatically be applied as a mandatory prepayment of
the Loans pursuant to Section 3.01(b)(i) or (iii), as applicable.
Proceeds held as Collateral shall be disbursed as construction payments
become due; provided, however, should a Default or an Event of Default
occur after the Borrower has notified the Agent that it intends to
rebuild or replace the Property, the Collateral may, at the Agent's
discretion, or shall, upon the direction of (x) the Class B Requisite
Lenders, with respect to Collateral received on account of Property
constituting all or any portion of the Discontinued Operations or (y)
the Class A Requisite Lenders, with respect to any other such proceeds
held as Cash Collateral, be applied as a mandatory prepayment of the
Loans pursuant to Section 3.01(b)(i) or (iii), as applicable. Upon
completion of the restoration, rebuilding or replacement of such
Property, the unused proceeds held as Collateral shall constitute Net
Cash Proceeds and shall be applied as a mandatory prepayment of the
Loans pursuant to Section 3.01(b)(i) or (iii), as applicable.
8.08. ERISA Compliance. The Borrower shall, and shall cause each of
its Subsidiaries and ERISA Affiliates to, establish, maintain and
operate all Plans to comply in all material respects with the provisions
of ERISA, the Internal Revenue Code, all other applicable laws, and the
regulations and interpretations thereunder and the respective
requirements of the governing documents for such Plans.
8.09. Foreign Employee Benefit Plan Compliance. The Borrower shall,
and shall cause each of its Subsidiaries and ERISA Affiliates to
establish, maintain and operate all Foreign Employee Benefit Plans to
comply in all material respects with all laws, regulations and rules
applicable thereto and the respective requirements of the governing
documents for such Plans.
8.10. Establishment of Lockbox Accounts; Maintenance of Property. The
Borrower shall establish Lockbox Accounts with each of the Lockbox Banks
listed on Schedule 6.01-AA. The Borrower shall cause all Property used
or useful in the conduct of its business or the business of any
Subsidiary of the Borrower to be maintained and kept in the same
condition as currently maintained, reasonable and ordinary wear and tear
excepted, and supplied with all necessary equipment and shall cause to
be made all necessary repairs, renewals, replacements, betterments and
improvements thereof; provided, however, that nothing in this Section
shall prevent the Borrower from discontinuing the operation or
maintenance of any of such Property if such discontinuance is, in the
judgment of the Borrower, necessary or appropriate in the conduct of its
business or the business of any Subsidiary and not disadvantageous to
the Agent, the Issuing Banks or the Lenders.
8.11. Condemnation. So long as the A Term Loans or B Term Loans are
outstanding, immediately upon learning of the institution of any
proceeding for the condemnation or other taking of any of the owned or
leased Real Property of the Borrower or any of its Restricted
Subsidiaries, the Borrower shall notify the Agent (who shall in turn
forward such notice to the Lenders) of the pendency of such proceeding,
and permit the Agent to participate in any such proceeding, and from
time to time shall deliver to the Agent all instruments reasonably
requested by the Agent to permit such participation.
8.12. Future Liens on Real Property. So long as the A Term Loans or B
Term Loans are outstanding, at least fifteen (15) Business Days prior to
the entering into of any Lease with respect to which the annual rental
payments thereunder are anticipated to equal or exceed $1,000,000 or the
acquisition of any material Real Property, the Borrower shall, and shall
cause its Restricted Subsidiaries to, provide the Agent written notice
thereof (which notice the Agent shall forward to each Lender). Upon
written request of the Agent, the Borrower shall, and shall cause its
Subsidiaries to, execute and deliver to the Agent, for the benefit of
the Agent, the Issuing Banks, the Lenders and the other Holders,
immediately upon the acquisition of any Real Property (other than Real
Property acquired with the proceeds of Indebtedness permitted by Section
9.01(viii) and subject to a Lien permitted by Section 9.03(iv)) a
mortgage, deed of trust, assignment or other appropriate instrument
evidencing a Lien upon any such Real Property, together with such Title
Policies, certified Surveys, and local counsel opinions with respect
thereto and such other agreements, documents and instruments which the
Agent deems necessary or desirable, the same to be in form and substance
substantially the same as the mortgages and other Loan Documents
relating to Real Property executed and delivered hereunder on the
Closing Date, and to be subject only to (i) Liens permitted under
Section 9.03 and (ii) such other Liens as the Agent may reasonably
approve, it being understood that the granting of such additional
security for the Obligations is a material inducement to the execution
and delivery of this Agreement by each Lender.
8.13. Landlord Waivers. On or prior to the Closing Date, the Borrower
has obtained and delivered to the Agent landlord waivers (with copies of
the relevant Leases attached) in form and substance satisfactory to the
Agent relating to the Borrower's Leases which are located in the
locations set forth on Schedule 6.01-V (other than any such locations
marked with asterisks on such Schedule). The Borrower shall use its
best efforts to obtain and deliver to the Agent landlord waivers (with
copies of the relevant Lease attached) with respect to (x) any Lease
marked with an asterisk on Schedule 6.01-V and (y) any Lease entered
into after the Closing Date which relates to a location in which there
is, or is reasonably expected to be, Collateral with a Fair Market Value
of $250,000 or more (it being understood and agreed that, if possible,
the landlord waivers referred to in clause (x) shall be obtained within
ten (10) days after the Closing Date, and that the Borrower shall not be
required to make any material payment to, or to make any material lease
concessions for the benefit of, any landlord in order to obtain any such
landlord waiver referred to in either clauses (x) or (y)).
8.14. Environmental Compliance. The Borrower and the Borrower's
Subsidiaries shall comply in all material respects with all applicable
Environmental, Health or Safety Requirements of Law.
8.15 Government Contracts. (a) Within sixty (60) days after the
Closing Date, the Borrower shall have executed and delivered to the
Agent all documents, in form and substance reasonably satisfactory to
the Agent, and taken all such other action (other than the transmittal
of the notice of assignment to the United States Government) reasonably
required by the Agent to request an assignment of all Receivables
(created on or prior to such date) arising under any Material Government
Contract to the Agent pursuant to the Assignment of Claims Act of 1940,
as amended (the "Assignment of Claims Act"). Within thirty (30) days of
the creation of a Material Government Contract or, upon the occurrence
and during the continuance of a Default or an Event of Default, of the
creation of any Government Contract (other than in either case a
Government Contract subject to the foregoing sentence and Government
Contracts which by their express terms are not assignable) the Borrower
shall execute and deliver to the Agent all documents, in form and
substance reasonably satisfactory to the Agent, and take all such other
action (other than the transmittal of the notice of assignment to the
United States Government) reasonably required by the Agent to request an
assignment of the Receivables arising under such Material Government
Contract, to the Agent pursuant to the Assignment of Claims Act. Upon
the occurrence and during the continuance of a Default or Event of
Default, the Agent may, and shall at the direction of the Requisite
Lenders, transmit any such notice of assignment received by it from the
Borrower to the United States Government.
(b) The Borrower shall apply for and maintain all facility security
clearances and personnel security clearances required of the Borrower or
any of its Subsidiaries under all Requirements of Law to perform and
deliver under any and all Government Contracts and as otherwise may be
necessary to continue to perform the Borrower's business.
8.16. Deltex Service Inc. If, on January 1, 1995, the Borrower or any
of its Subsidiaries owns the Capital Stock of Deltex Service Inc.
("Deltex"), a Texas corporation and currently a wholly owned Subsidiary
of the Borrower, the Borrower shall forthwith (i) provide the Agent with
a first priority Lien on the Capital Stock of Deltex as security for the
Obligations and
(ii) cause Deltex to provide the Agent with a guaranty by Deltex of the
Obligations in form and substance satisfactory to the Agent, for the
benefit of the Agent, the Lenders and the Issuing Banks, a valid and
perfected Lien on the assets of Deltex as security for such guaranty
pursuant to a security agreement in form and substance satisfactory to
the Agent.
8.17. Postclosing Matters. The Borrower shall, or shall cause its
Subsidiaries to, deliver to the Agent such items as are indicated under
the heading "Postclosing Matters" on the List of Closing Documents
within the time periods indicated therein (it being understood and
agreed that if no such time period is indicated with respect to a
particular item, such item shall be delivered to the Agent within thirty
(30) days after the Closing Date).
ARTICLE IX
NEGATIVE COVENANTS
Each of the Guarantors and the Borrower jointly and severally covenants
and agrees that each shall comply with the following covenants so long
as any Commitment is outstanding and thereafter until payment in full of
all of the Loans and Letter of Credit Obligations, unless (except as
otherwise provided below) the Requisite Lenders shall otherwise give
prior written consent thereto:
9.01. Indebtedness. None of the Borrower, the Guarantors or any of
their respective Subsidiaries shall directly or indirectly create,
incur, assume or otherwise become or remain directly or indirectly
liable with respect to any Indebtedness, except:
(i)the Obligations;
(ii) from and after the Extension Date, (x) the New Bonds or (y)
Indebtedness in respect of the New Subordinated Financing, to the extent
the proceeds of the Indebtedness referred to in clause (x) or (y) are
used to repay Permitted Subordinated Indebtedness and to pay all or any
portion of (1) the New Bond Transaction Costs or (2) the New
Subordinated Financing Transaction Costs, as the case may be;
(iii)Indebtedness in respect of (x) the Transaction Costs and (y) the
New Bond Transaction Costs or the New Subordinated Financing Transaction
Costs, as the case may be;
(iv)Permitted Existing Indebtedness, and any extensions, renewals,
refundings or replacements of Permitted Existing Indebtedness, provided
that any such extension, renewal, refunding or replacement is in an
aggregate principal amount not greater than the principal amount of, and
is on terms no less favorable to the Borrower or such Subsidiary than
the terms of, the Permitted Existing Indebtedness so extended, renewed,
refunded or replaced;
(v) Permitted Subordinated Indebtedness;
(vi)Indebtedness in respect of taxes, assessments, governmental charges
and claims for labor, materials or supplies, to the extent that payment
thereof is not required pursuant to Section 8.04;
(vii)Indebtedness constituting either Accommodation Obligations
permitted by Section 9.05 or Restricted Junior Payments pursuant to
Section 9.06;
(viii)to the extent permitted by Article X and in any event in an
aggregate amount not to exceed $5,000,000 at any time, Capital Leases
and purchase money Indebtedness incurred by the Borrower and/or any
Guarantor to finance the acquisition of fixed assets, and Indebtedness
incurred by the Borrower and/or any Guarantor to refinance such Capital
Leases and purchase money Indebtedness;
(ix)Indebtedness under appeal bonds in connection with judgments which
do not result in an Event of Default or Default or any other breach
hereunder;
(x) Indebtedness arising from intercompany loans
(A) from the Borrower to any Wholly Owned Subsidiary which Indebtedness
shall not cause the Maximum Subsidiary Investment Amount to exceed
$500,000 in the aggregate at any time; (B) from any Wholly Owned
Subsidiary to the Borrower or any other Wholly Owned Subsidiary; or (C)
from the Borrower to Warren Pumps and/or Varo and/or Baird in connection
with Investments permitted pursuant to Section 9.04; provided that the
loans referred to in clause (C) shall be evidenced by promissory notes
payable to the Borrower, in form and substance satisfactory to the
Agent, which promissory notes shall be delivered and pledged to the
Agent as part of the Collateral;
(xi) Indebtedness of the Borrower arising pursuant to Interest Rate
Contracts to which a Lender or an Affiliate of a Lender is a party
having Interest Rate Contract Exposure in an amount not to exceed an
amount equal to
(x) $10,000,000 minus (y) the aggregate Currency Agreement Exposure at
such time;
(xii) Indebtedness of the Borrower arising pursuant to Currency
Agreements to which a Lender or an Affiliate of a Lender is a party
having Currency Agreement Exposure in an amount not to exceed an amount
equal to (x) $10,000,000 minus (y) the aggregate Interest Rate Contract
Exposure at such time;
(xiii) Indebtedness incurred by an Unrestricted Subsidiary; provided
that such Indebtedness (i) is not guaranteed or otherwise supported in
whole or part (other than pursuant to one or more Permitted Existing
Accommodation Obligations) by the Borrower or any Restricted Subsidiary
and (without limiting the generality of the foregoing) neither the
Borrower nor any Restricted Subsidiary has any liability (contractual or
otherwise) in respect of such Indebtedness and (ii) is not secured in
whole or in part by any asset of the Borrower or any Restricted
Subsidiary;
(xiv) Indebtedness under surety bonds and similar arrangements
(including, without limitation, Permitted Existing Surety Bonds), not to
exceed $10,000,000 in the aggregate at any one time outstanding; and
(xv) additional Indebtedness of the Borrower incurred after the date
hereof in an aggregate amount not to exceed $1,000,000 at any one time
outstanding.
9.02. Sales of Assets. None of the Borrower or any of the Restricted
Subsidiaries shall sell, assign, transfer, lease, convey or otherwise
dispose of any Property, whether now owned or hereafter acquired, or any
income or profits therefrom, or enter into any agreement to do so,
except:
(i)the sale of Inventory (and inventory of the Restricted Subsidiaries)
in the ordinary course of business;
(ii) sales of assets outside of the ordinary course of business not in
excess of $500,000 in a single transaction or series of related
transactions or aggregating less than $1,000,000 in any Fiscal Year;
(iii)in addition to dispositions permitted under clauses (i) and (ii) of
this Section 9.02, the disposition of Equipment if such Equipment is
obsolete or no longer useful in the ordinary course of the Borrower's or
such Restricted Subsidiary's business; provided that the aggregate Fair
Market Value of all such Equipment disposed of in any Fiscal Year shall
not exceed $1,000,000;
(iv) assignments and licenses of intellectual property of the Borrower
in the ordinary course of business;
(v) the sale or transfer of assets of the Borrower or any Wholly Owned
Subsidiary to any Wholly Owned Subsidiary or to the Borrower, which
sales or transfers shall not cause the Maximum Subsidiary Investment
Amount to exceed $500,000 in the aggregate at any time;
(vi) subleases of leases or leases of owned Real Property, to the
extent such leases and subleases have anticipated annual rentals of less
than $500,000 each;
(vii) the Borrower may from time to time sell any or all of the
Properties specified in Schedule 9.02; provided that no such sale shall
be made for less than Fair Market Value (as determined in good faith by
the Borrower);
(viii) the Borrower may from time to time sell in a single
transaction or in a series of related transactions, pursuant to
documentation which shall be delivered to the Agent promptly upon its
becoming available, all or any part of the Discontinued Operations;
provided that (i) if the Borrower's electro-optical systems business is
so sold, the Borrower shall receive Net Cash Proceeds of at least
$45,000,000 in respect thereof, (ii) if the Baird Analytical Instruments
Division is so sold, the Borrower shall receive Net Cash Proceeds of at
least $10,000,000 in respect thereof and (iii) if Varo's electronic
systems division is so sold, the Borrower shall receive Net Cash
Proceeds of at least $15,000,000 in respect thereof; and
(ix) the Borrower may from time to time sell in a single transaction or
in a series of related transactions, pursuant to documentation which
shall be delivered to the Agent promptly upon its becoming available,
all or substantially all of the Turbomachinery Businesses; provided that
no such sale shall be made unless the Borrower shall have received Net
Cash Proceeds of at least $110,000,000 in respect of such sale.
9.03. Liens. None of the Borrower or any of the Restricted
Subsidiaries shall directly or indirectly create, incur, assume or
permit to exist any Lien on or with respect to any of their respective
Property or assets except:
(i)Liens created by the Loan Documents;
(ii)Permitted Existing Liens;
(iii)Customary Permitted Liens;
(iv)purchase money Liens granted by the Borrower or any Guarantor
(including the interest of a lessor under a Capital Lease) and Liens to
which any Property is subject at the time of the Borrower's or any
Guarantor's acquisition thereof) securing Indebtedness permitted under
Section 9.01(viii) and limited in each case to the property purchased or
subject to such lease;
(v)any attachment or judgment Lien the existence of which does not
constitute an Event of Default under Section 11.01(h);
(vi) to the extent Indebtedness secured thereby is permitted to be
extended, renewed, refunded or refinanced pursuant to clause (iv) of
Section 9.01, a future Lien on any Property which is subject to a Lien
described in clauses (ii) and (iv) above, if such future Lien attaches
only to the same Property and secures only such permitted extensions,
renewals, replacements or refinancings;
(vii) Liens securing reimbursement obligations with respect to trade
letters of credit which constitute Permitted Existing Indebtedness;
provided that such Liens only attach to the assets being acquired with
the proceeds of such letters of credit;
(viii) any negative pledge arrangement contained in the New Bond
Indenture;
(ix) Liens not otherwise permitted by the foregoing clauses of this
Section securing Indebtedness in an amount no greater than $1,000,000 at
any time outstanding; and
(x)upon the occurrence of an event contemplated by section 7.2 of either
of the Amended BT Agreements, Liens on the cash on deposit in the "Cash
Collateral Account" (as defined in the relevant Amended BT Agreement);
provided that such cash constitutes proceeds of the applicable Letter of
Credit.
9.04. Investments. None of the Borrower or any of the Restricted
Subsidiaries shall directly or indirectly make or own any Investment
except:
(i)Investments in Cash Collateral pledged to the Agent or deposited in
the Concentration Account in accordance with the terms hereof;
(ii) Investments in the Investment Account (including any Investments
in Cash Equivalents through such account);
(iii)Permitted Existing Investments in an amount not greater than the
amount thereof on the Closing Date;
(iv)Investments received in connection with the bankruptcy or
reorganization of suppliers and customers and in settlement of
delinquent obligations of, and other disputes with, customers and
suppliers arising in the ordinary course of business;
(v)Investments by the Borrower in any Wholly Owned Subsidiaries which
Investments shall not cause the Maximum Subsidiary Investment Amount to
exceed $500,000 in the aggregate at any time;
(vi)cash Investments in intercompany loans permitted pursuant to
subclauses (A) and (B) Section 9.01(x);
(vii) Investments in the bank accounts listed on Schedule 9.18 made in
the ordinary course of business not at any time exceeding in the
aggregate $500,000;
(viii)Investments by the Borrower in Warren Pumps;
(ix) Investments by the Borrower in the form of intercompany loans to
Varo and/or Baird; provided that such loans shall be in an aggregate
amount not to exceed $5,000,000 at any one time outstanding; and
provided, further, that the proceeds of such loans shall not be used by
Varo or Baird to make discretionary Capital Expenditures;
(x) Investments by the Borrower and/or any of the Restricted
Subsidiaries in one or more Unrestricted Subsidiaries; provided that the
aggregate book value of such Investments, determined with respect to
each such Investment at the time such Investment is made, shall not
exceed
(x) $5,000,000 prior to the repayment in full of the Term Loans or (y)
$10,000,000 from and after such repayment.
(xi) upon the occurrence of an event contemplated by Section 7.2 of
either of the Amended BT Agreements, cash Investments made by the
Borrower with proceeds of the applicable Letter of Credit in the "Cash
Collateral Account" (as defined in the relevant Amended BT Agreement).
9.05. Accommodation Obligations. None of the Borrower or any of the
Restricted Subsidiaries shall directly or indirectly create or become or
be liable with respect to any Accommodation Obligation, except:
(i) Permitted Existing Accommodation Obligations, and surety bonds and
similar arrangements permitted in accordance with clause (xiv) of
Section 9.01;
(ii) Accommodation Obligations arising under the Transaction Documents;
(iii) obligations, warranties and indemnities, not with respect to
Indebtedness of any Person, which have been or are undertaken or made in
the ordinary course of business and not for the benefit of or in favor
of an Affiliate of the Borrower or any of the Borrower's Subsidiaries;
(iv) Accommodation Obligations of the Borrower in respect of any Wholly
Owned Subsidiary, which Accommodation Obligations shall not cause the
Maximum Subsidiary Investment Amount to exceed $500,000 at any time; and
(v)Accommodation Obligations of any Restricted Subsidiary in respect of
obligations of the Borrower.
9.06. Restricted Junior Payments. Subject to Section 9.17, none of the
Borrower or any of the Restricted Subsidiaries shall declare or make any
Restricted Junior Payment, except
regularly scheduled payments of interest on the 12.25% Debentures and
the 12% Debentures, in each case if such payments are permitted to be
made pursuant to the terms of the 12.25% Debenture Indenture or the 12%
Debenture Indenture, as applicable.
9.07. Conduct of Business; Subsidiaries; Acquisitions. None of the
Borrower or any of its Subsidiaries (other than any Subsidiaries sold in
accordance with Section 9.02) shall engage in any business other than
the businesses engaged in by the Borrower or such Subsidiary, as
applicable, on the date hereof and any business or activities which are
substantially similar, related or incidental thereto. Except as
expressly permitted pursuant to Section 9.02 or Section 9.09, the
Borrower shall not sell or otherwise dispose of, or permit the sale or
disposition of, any shares of Capital Stock of any of its Subsidiaries.
Except as permitted in accordance with Section 9.04, the Borrower shall
not enter into or permit any transaction or series of transactions in
which the Borrower and/or any of the Restricted Subsidiaries acquire all
or any significant portion of the Capital Stock and/or assets of another
Person.
9.08. Transactions with Shareholders and Affiliates. None of the
Borrower or any of the Borrower's Subsidiaries shall directly or
indirectly enter into or permit to exist any transaction (including,
without limitation, the purchase, sale, lease or exchange of any
Property or the rendering of any service) with any holder or holders of
more than five percent (5%) of any class of equity Securities of the
Borrower, or with any Affiliate of the Borrower which is not its
Subsidiary, on terms that are less favorable to the Borrower or any such
Subsidiary, as applicable, than those that could be obtained in an arm's
length transaction at the time from Persons who are not such a holder or
Affiliate.
9.09. Restriction on Fundamental Changes. Except with respect to the
Subsidiaries and Affiliates set forth on Schedule 9.09, none of the
Borrower or any of the Restricted Subsidiaries shall (a) enter into any
merger or consolidation, or liquidate, wind-up or dissolve (or suffer
any liquidation or dissolution), except for (1) a merger of a Wholly
Owned Subsidiary into the Borrower (with the Borrower as the surviving
corporation) or another Wholly Owned Subsidiary or (2) the dissolution
or merger of a Subsidiary (other than a Guarantor or a Subsidiary whose
Capital Stock has been pledged to the Agent for the benefit of the
Agent, Lenders, Issuing Banks and the Other Holders) (provided that, in
the case of any such dissolution or merger of such a Subsidiary, the
board of directors of the Borrower shall have determined that such
dissolution is not reasonably likely to result in a Material Adverse
Effect), or convey, lease, sell, transfer or otherwise dispose of, in
one transaction or series of transactions, all or substantially all of
the Borrower's or any such Subsidiary's business or Property, whether
now or hereafter acquired, except transactions permitted under Section
9.02 or (b) enter into any partnership or joint venture.
9.10. Sales and Leasebacks. None of the Borrower or any of the
Restricted Subsidiaries shall become liable, directly, by assumption or
by Accommodation Obligation, with respect to any lease, whether an
Operating Lease or a Capital Lease (except to the extent otherwise
permitted by Article X and Section 9.01(viii)), of any Property (whether
real or personal or mixed) (i) which it or one of its Subsidiaries sold
or transferred or is to sell or transfer to any other Person, or (ii)
which it or one of its Subsidiaries intends to use for substantially the
same purposes as any other Property which has been or is to be sold or
transferred by it or one of its Subsidiaries to any other Person in
connection with such lease.
9.11. Margin Regulations; Securities Laws. None of the Borrower or any
of the Borrower's Subsidiaries, shall use all or any portion of the
proceeds of any credit extended hereunder to purchase or carry Margin
Stock.
9.12. ERISA. The Borrower shall not:
(i)engage, or permit any ERISA Affiliate to engage, in any prohibited
transaction described in Sections 406 of ERISA or 4975 of the Internal
Revenue Code for which a statutory or class exemption is not available
or a private exemption has not been previously obtained from the DOL;
(ii)permit to exist any accumulated funding deficiency (as defined in
sections 302 of ERISA and 412 of the Internal Revenue Code), with
respect to any Benefit Plan, whether or not waived;
(iii)fail, or permit any ERISA Affiliate to fail, to pay timely required
contributions or annual installments due with respect to any waived
funding deficiency to any Benefit Plan;
(iv)terminate, or permit any ERISA Affiliate to terminate, any Benefit
Plan which would result in any material liability of Borrower or any
ERISA Affiliate under Title IV of ERISA;
(v)fail to make any contribution or payment to any Multiemployer Plan
which Borrower or any ERISA Affiliate may be required to make under any
agreement relating to such Multiemployer Plan, or any law pertaining
thereto;
(vi)fail, or permit any ERISA Affiliate to fail, to pay any required
installment or any other payment required under Section 412 of the
Internal Revenue Code on or before the due date for such installment or
other payment;
(vii)amend, or permit any ERISA Affiliate to amend, a Plan resulting in
an increase in current liability for the plan year such that the
Borrower or any ERISA Affiliate is required to provide security to such
Plan under Section 401(a)(29) of the Internal Revenue Code;
(viii)permit any unfunded liabilities with respect to any Foreign
Pension Plan, except to the extent permitted by local law; or
(ix)fail, or permit any Subsidiary or ERISA Affiliate to fail, to pay
any required contributions or payments to a Foreign Pension Plan on or
before the due date for such required installment or payment.
9.13. Issuance of Capital Stock. None of the Borrower's Subsidiaries
shall issue any Capital Stock, except the Capital Stock of any such
Subsidiary to the extent the creation thereof is permitted pursuant to
Sections 9.04 and 9.07.
9.14. Constituent Documents. None of the Borrower or any of the
Borrower's Subsidiaries shall amend, modify or otherwise change any of
the terms or provisions in any of their respective Constituent Documents
as in effect on the Closing Date (except for amendments, modifications
or other changes to such Constituent Documents that, in the judgment of
the Agent, do not materially affect the rights and privileges of the
Borrower under the Loan Documents, or the interests of the Lenders and
Issuing Banks under the Loan Documents or in the Collateral) without the
prior written consent of the Requisite Lenders, which consent shall not
be unreasonably withheld.
9.15. Amendments of Loan Documents. The Borrower shall not, and shall
not permit any of its Subsidiaries to, amend, supplement or otherwise
modify any of the Loan Documents (other than pursuant to Section 14.07),
except for amendments, supplements or other modifications to such Loan
Documents that, in the judgment of the Agent, do not materially affect
the rights and privileges of the Borrower under the Loan Documents, or
the interests of the Lenders and Issuing Banks under the Loan Documents
or in the Collateral.
9.16. Fiscal Year. None of the Borrower or any of the Borrower's
consolidated Subsidiaries shall change its Fiscal Year for accounting or
tax purposes from a period consisting of the 12-month period ending on
December 31 of each calendar year.
9.17. Cancellation of Debt; Prepayment; Certain Amendments. Neither
the Borrower nor any of the Restricted Subsidiaries shall (i) cancel any
material claim or debt, except in the ordinary course of its business,
(ii) prepay, redeem, purchase, repurchase, defease or retire any long-
term Indebtedness (including, without limitation, the Indebtedness
evidenced by the New Bonds or, if applicable, the New Subordinated
Financing, but excluding the Obligations), other than (x) on or about
the Closing Date, such Indebtedness indicated on the Sources and Uses to
be repaid and, thereafter, repayments of Permitted Subordinated
Indebtedness (it being understood and agreed that the 12.25% Debentures
shall be repaid in full prior to or simultaneously with any repayment of
the 12% Debentures) with the proceeds of the New Bond Offering or the
New Subordinated Financing, as the case may be, and (y) Restricted
Junior Payments permitted to be made in accordance with Section 9.06, or
(iii) amend, supplement or otherwise modify the terms of the 12%
Debenture Indenture, the 12.25% Debenture Indenture, the New Bond
Documents, the New Subordinated Financing Documents (unless the New
Subordinated Financing is of the type specified in clause (z) of Section
9.01), either of the Amended BT Agreements or any long-term Indebtedness
(including, without limitation, the Permitted Subordinated Indebtedness,
the New Bonds and, if applicable, the New Subordinated Financing)
(except for amendments, supplements or other modifications to such
agreements, instruments or documents that, in the judgment of the Agent,
do not materially affect the rights and privileges of the Borrower under
the Transaction Documents, or the interests of the Lenders and Issuing
Banks under the Transaction Documents or in the Collateral); provided
that, notwithstanding anything contained in this Agreement to the
contrary, upon (a) the final payment in full of the A Term Loans and the
B Term Loans, (b) the Borrower's reduction of the Revolving Credit
Commitments to an aggregate amount not to exceed $50,000,000 in
accordance with Section 3.01(a)(ii) and (c) the repayment in full of all
non-contingent Revolving Credit Obligations, the Borrower may from time
to time withdraw funds from the Investment Account in accordance with
Section 11.03(c) in an aggregate amount not to exceed an amount equal to
(x) the aggregate amount of Net Cash Proceeds received by the Borrower
on or prior to the date of such withdrawal on account of the sale of (1)
all or any portion of the Discontinued Operations and/or (2) all or
substantially all of the Turbomachinery Businesses as contemplated by
clauses (viii) and (ix) of Section 9.02 minus (y) the aggregate amount
of such Net Cash Proceeds required to be applied to prepay Loans in
accordance with Section 3.01(b), provided, further, that the Borrower
shall use all such funds so withdrawn to prepay, redeem, purchase on the
open market, repurchase, defease and/or retire (each, a "Purchase")
12.25% Debentures (or, if no 12.25% Debentures then remain outstanding,
12% Debentures), provided, further, that on the date of each Purchase,
both before and after giving effect to such Purchase, (A) all of the
representations and warranties of the Borrower and the Borrower's
Subsidiaries contained in Section 6.01 and in any other Loan Document
(other than representations and warranties which expressly speak as of a
different date) shall be true and correct in all material respects and
(B) no Event of Default or Default shall have occurred and be
continuing, and provided, further, that if all or substantially all of
the Turbomachinery Businesses shall have been sold in accordance with
clause (ix) of Section 9.02 at or prior to the time of any Purchase,
then no Purchase shall be made unless the Borrower and the Requisite
Lenders shall have amended Article X of this Agreement in accordance
with Section 14.07 to provide mutually satisfactory covenant levels
after giving effect to the transactions contemplated by such clause
(ix).
9.18. Cash Management. Subject to Section 9.04, neither the Borrower
nor any of the Restricted Subsidiaries shall open any deposit or payroll
account with any Person except in accordance with Section 3.05 and
deposit or payable accounts listed on Schedule 9.18. Subject to Section
9.04, the Borrower or any Restricted Subsidiary may open deposit or
payroll accounts with other financial institutions in the ordinary
course of business and shall deliver to the Agent a substitute Schedule
9.18 specifying the name of such financial institutions and the intended
use for such account. The Borrower shall not authorize or direct any
Person to take any action with respect to amounts deposited in the
Lockboxes, the Lockbox Accounts, the Investment Account or the
Concentration Account in contravention of the provisions hereof.
9.19. Environmental Matters. None of the Borrowers nor any of
Borrowers' Subsidiaries shall:
(i) become subject to any Liabilities and Costs which would have a
Material Adverse Effect arising out of or related to (a) the Release or
threatened Release at any location of any Contaminant into the
environment, or any Remedial Action in response thereto, or (b) any
violation of any Environmental, Health and Safety Requirements of Law;
or
(ii) either directly or indirectly, create, incur, assume or permit to
exist any Environmental Lien on or with respect to any of the mortgaged
Property.
9.20. Unrestricted Subsidiary. No Unrestricted Subsidiary shall enter
into any Accommodation Obligation with respect to any Indebtedness of
the Borrower or any Restricted Subsidiary other than the Obligations or
grant or permit to exist any Lien on its Property to secure any such
Indebtedness.
9.21. No New Restrictions on Subsidiary Dividends. Except as may be
required by any applicable Requirements of Law, the Borrower will not
agree, or permit any of the Restricted Subsidiaries to agree, to create
or otherwise become effective any consensual encumbrance or restriction
of any kind on the ability of any Restricted Subsidiary to pay dividends
or make any other distribution or transfer of funds or assets or make
loans or advances to or other Investments in, or pay any Indebtedness
owing to, the Borrower.
ARTICLE X
FINANCIAL COVENANTS
Each of the Guarantors and the Borrower jointly and severally covenants
and agrees that so long as any Commitment is outstanding and thereafter
until payment in full of all of the Loans and Letter of Credit
Obligations, unless the Requisite Lenders shall otherwise give prior
written consent thereto:
10.01. Minimum Consolidated Net Worth. The Consolidated Net Worth of
the Borrower and its Subsidiaries at all times during any period from
the last day of the fiscal quarter preceding each fiscal quarter in each
Fiscal Year set forth below to the last day of such fiscal quarter set
forth below shall not be less than the minimum amount set forth opposite
such fiscal quarter:
Fiscal Quarter Minimum Amount
Third fiscal quarter of 1994 -$36,000,000
Fourth fiscal quarter of 1994 -$36,000,000
First fiscal quarter of 1995 -$33,000,000
Second fiscal quarter of 1995 -$31,000,000
Third fiscal quarter of 1995 -$29,000,000
Fourth fiscal quarter of 1995 -$27,000,000
First fiscal quarter of 1996 -$25,000,000
Second fiscal quarter of 1996 -$20,000,000
Third fiscal quarter of 1996 -$15,000,000
Fourth fiscal quarter of 1996 -$10,000,000
First fiscal quarter of 1997 -$ 6,000,000
Second fiscal quarter of 199 0
Third fiscal quarter of 1997 0
10.02. Minimum Fixed Charge Coverage Ratio. The Fixed Charge Coverage
Ratio of the Borrower and its Subsidiaries (other than Varo, Baird and
their respective Subsidiaries) on a consolidated basis, as determined as
of the last day of each fiscal quarter of the Borrower set forth below
for the twelve month period ending on such date (or, if less than twelve
months has occurred since January 1, 1994, for the period from
January 1, 1994 to such date), shall not be less than the minimum ratio
set forth opposite such fiscal quarter:
Fiscal Quarter Minimum Ratio
Third fiscal quarter of 1994 0.70 to 1
Fourth fiscal quarter of 1994 0.80 to 1
First fiscal quarter of 1995 0.85 to 1
Second fiscal quarter of 1995 0.90 to 1
Third fiscal quarter of 1995 0.95 to 1
Fourth fiscal quarter of 1995 1.00 to 1
First fiscal quarter of 1996 1.00 to 1
Second fiscal quarter of 1996 1.00 to 1
Third fiscal quarter of 1996 1.00 to 1
Fourth fiscal quarter of 1996 1.00 to 1
First fiscal quarter of 1997 1.00 to 1
Second fiscal quarter of 1997 1.00 to 1
10.03. Minimum Interest Coverage Ratio. The Interest Coverage Ratio of
the Borrower and its Subsidiaries (other than Varo, Baird and their
respective Subsidiaries) on a consolidated basis, as determined as of
the last day of each fiscal quarter of the Borrower set forth below for
the twelve month period ending on such date (or, if less than twelve
months has occurred since January 1, 1994, for the period from January
1, 1994 to such date), shall not be less than the minimum ratio set
forth opposite such fiscal quarter:
Fiscal Quarter Minimum Ratio
Third fiscal quarter of 1994 1.55 to 1
Fourth fiscal quarter of 1994 1.65 to 1
First fiscal quarter of 1995 1.70 to 1
Second fiscal quarter of 1995 1.75 to 1
Third fiscal quarter of 1995 1.80 to 1
Fourth fiscal quarter of 1995 1.85 to 1
First fiscal quarter of 1996 1.90 to 1
Second fiscal quarter of 1996 2.00 to 1
Third fiscal quarter of 1996 2.10 to 1
Fourth fiscal quarter of 1996 2.20 to 1
First fiscal quarter of 1997 2.20 to 1
Second fiscal quarter of 1997 2.20 to 1
10.04. Maximum Capital Expenditures. Capital Expenditures made or
incurred by the Borrower and the Borrower's Subsidiaries (other than
Varo, Baird and their respective Subsidiaries which are Restricted
Subsidiaries) on a consolidated basis during each Fiscal Year set forth
below shall not exceed in the aggregate the amount set forth opposite
such Fiscal Year:
Fiscal Year Maximum Amount
Fiscal Year 1994 $20,000,000
Fiscal Year 1995 $28,000,000
Fiscal Year 1996 $26,000,000
Fiscal Year 1997 $13,000,000
ARTICLE XI
EVENTS OF DEFAULT; RIGHTS AND REMEDIES
11.01. Events of Default. Each of the following occurrences shall
constitute an Event of Default hereunder:
(a)Failure to Make Payments When Due. The Borrower shall fail to pay
(i) when due any principal or interest on the Loans (including the
Reimbursement Obligations) or (ii) any other Obligation, and if such
non-payment relates (x) to interest, such non-payment continues for a
period of three (3) days after the due date thereof or (y) to
Obligations other than interest or principal, such non-payment continues
for a period of five (5) Business Days after the due date thereof.
(b) Breach of Certain Covenants. The Borrower or any Guarantor shall
fail to perform or observe duly and punctually any agreement, covenant
or obligation binding on such Person under (i) Sections 7.03 (and such
failure continues for five (5) Business Days), 7.04 (and such failure
continues for five (5) Business Days), 8.01, 8.02 (and such failure
continues for five (5) Business Days), 8.06 (and such failure continues
for five (5) Business Days), 8.07 (and such failure continues for five
(5) Business Days), 8.17 (and such failure continues for five (5)
Business Days); or (ii) Article IX or Article X.
(c) Breach of Representation or Warranty. Any representation or
warranty made or deemed made by the Borrower, any Guarantor or any other
Subsidiary of the Borrower to the Agent, any Lender or any Issuing Bank
herein or in any other Loan Document or in any statement or certificate
at any time given by any such Person pursuant to any Loan Document shall
be false or misleading in any material respect on the date made (or
deemed made).
(d) Other Defaults. The Borrower shall default in the performance of
or compliance with any term contained herein (other than as covered by
paragraphs (a), (b) or (c) of this Section 11.01), or the Borrower or
any of its Subsidiaries shall default in the performance of or
compliance with any term contained in any other Loan Document, and such
default shall continue for (i) ten (10) Business Days after the
occurrence thereof with respect to any term contained in Sections 7.01,
7.02, 7.06, 7.07 and 7.08; and (ii) thirty (30) days after the
occurrence thereof with respect to any other term.
(e) Default as to Other Indebtedness; Operating Leases. The Borrower
or any of its Subsidiaries shall fail to make any payment when due
(whether by scheduled maturity, required prepayment, acceleration,
demand or otherwise) with respect to Permitted Subordinated Indebtedness
or any other Indebtedness (other than an Obligation) in excess of
$5,000,000; or any breach, default or event of default shall occur, or
any other condition shall exist under any instrument, agreement or
indenture pertaining to any such Indebtedness, in each case after the
passage of any applicable notice or grace period, if the effect thereof
is to cause an acceleration, mandatory redemption or other required
repurchase of such Indebtedness, or permit the holder(s) of such
Indebtedness to accelerate the maturity of such Indebtedness or require
the redemption or other repurchase of such Indebtedness; or any such
Indebtedness shall be otherwise declared to be due and payable (by
acceleration or otherwise) or required to be prepaid, redeemed or
otherwise repurchased by the Borrower or any of its Subsidiaries (other
than by a regularly scheduled required prepayment) prior to the stated
maturity thereof; or any breach, default or event of default remaining
uncured for a period of sixty (60) days on the part of the Borrower or
any of its Subsidiaries shall occur under any Operating Lease to which
the Borrower or any of its Subsidiaries is a party pursuant to which
rental payments thereunder equal or exceed $5,000,000 per annum.
(f) Involuntary Bankruptcy; Appointment of Receiver, Etc.
(i) An involuntary case shall be commenced against the Borrower or any
of the Borrower's Subsidiaries and the petition shall not be dismissed,
stayed, bonded or discharged within sixty (60) days after commencement
of the case; or a court having jurisdiction in the premises shall enter
a decree or order for relief in respect of the Borrower or any of its
Subsidiaries in an involuntary case, under any applicable bankruptcy,
insolvency or other similar law now or hereinafter in effect; or any
other similar relief shall be granted under any applicable federal,
state, local or foreign law.
(ii) A decree or order of a court having jurisdiction in the premises
for the appointment of a receiver, liquidator, sequestrator, trustee,
custodian or other officer having similar powers over the Borrower or
any of its Subsidiaries or over all or a substantial part of the
Property of the Borrower or any of its Subsidiaries shall be entered; or
an interim receiver, trustee or other custodian of the Borrower or any
of its Subsidiaries or of all or a substantial part of the property of
the Borrower or any of its Subsidiaries shall be appointed or a warrant
of attachment, execution or similar process against any substantial part
of the Property of the Borrower or any of its Subsidiaries shall be
issued and any such event shall not be stayed, dismissed, bonded or
discharged within sixty (60) days after entry, appointment or issuance.
(g) Voluntary Bankruptcy; Appointment of Receiver, Etc. The Borrower
or any of its Subsidiaries shall commence a voluntary case under any
applicable bankruptcy, insolvency or other similar law now or hereafter
in effect, or shall consent to the entry of an order for relief in an
involuntary case, or to the conversion of an involuntary case to a
voluntary case, under any such law, or shall consent to the appointment
of or taking possession by a receiver, trustee or other custodian for
all or a substantial part of its property; or the Borrower or any of its
Subsidiaries shall make any assignment for the benefit of creditors.
(h)Judgments. Any judgment, writ, order or warrant of attachment, or
other similar process shall be rendered against the Borrower or any of
its Subsidiaries or any of their respective assets involving in any
single case or in the aggregate an amount in excess of $5,000,000 is
(are) entered and remains undischarged, unvacated and unstayed for a
period of sixty (60) days.
(i) Dissolution. Any order, judgment or decree shall be entered
against the Borrower or any of its Subsidiaries, decreeing its
involuntary dissolution or other similar proceeding, and such order
shall remain undischarged and unstayed for a period in excess of sixty
(60) days; or the Borrower or any of its Subsidiaries shall otherwise
dissolve or cease to exist except as specifically permitted hereby.
(j)Loan Documents; Failure of Security. At any time, for any reason,
(i) any Loan Document ceases to be in full force and effect or the
Borrower or any of the Borrower's Subsidiaries party thereto seeks to
repudiate its obligations thereunder and the Liens intended to be
created thereby are, or the Borrower or any such Subsidiary seeks to
render such Liens, invalid or unperfected, or (ii) Liens in favor of the
Agent, the Issuing Banks and/or the Lenders contemplated by the Loan
Documents shall, at any time, for any reason, be invalidated or
otherwise cease to be in full force and effect, or such Liens shall be
subordinated or shall not have the priority contemplated hereby or by
the other Loan Documents, unless the Agent shall determine (in writing,
with a copy to each Lender) in its sole discretion that any occurrences
referred to in this Section 11.01(j) are not, in the aggregate,
material.
(k)Termination Event. Any Termination Event occurs which the Agent
believes could subject either the Borrower or any ERISA Affiliate to a
material liability.
(l)Waiver of Minimum Funding Standard. If the plan administrator of any
Plan applies under Section 412(d) of the Internal Revenue Code for a
waiver of the minimum funding standards of Section 412(a) of the
Internal Revenue Code and the Agent believes the substantial business
hardship upon which the application for the waiver is based could
subject either the Borrower or any ERISA Affiliate to a material
liability.
(m)Change of Control. A Change of Control shall occur with respect to
the Borrower.
(n)Material Adverse Change. An event shall exist or occur which has (x)
a Material Adverse Effect or (y) a material adverse effect upon (1) the
ability of the Borrower or any of the Borrower's Subsidiaries to perform
any of their material obligations under the Loan Documents or (2) the
ability of the Lenders, the Issuing Banks or the Agent to enforce the
Loan Documents.
An Event of Default shall be deemed "continuing" until cured or waived
in accordance with Section 14.07.
11.02. Rights and Remedies.
(a)Acceleration and Termination. Upon the occurrence of any Event of
Default described in Sections 11.01(f) or 11.01(g), the Commitments
shall automatically and immediately terminate and the unpaid principal
amount of, and any and all accrued interest on, the Obligations and all
accrued fees shall automatically become immediately due and payable,
without presentment, demand, or protest or other requirements of any
kind (including, without limitation, valuation and appraisement,
diligence, presentment, notice of intent to demand or accelerate and of
acceleration), all of which are hereby expressly waived by the Borrower;
and upon the occurrence and during the continuance of any other Event of
Default, the Agent shall at the request, or may with the consent, of the
Requisite Lenders, by written notice to the Borrower, (i) declare that
all or any portion of the Commitments are terminated, whereupon the
Commitments and the obligation of each Lender to make any Loan hereunder
and of each Lender or Issuing Bank to issue or participate in any Letter
of Credit not then issued shall immediately terminate, and/or (ii)
declare the unpaid principal amount of and any and all accrued and
unpaid interest on the Obligations to be, and the same shall thereupon
be, immediately due and payable, without presentment, demand, or protest
or other requirements of any kind (including, without limitation,
valuation and appraisement, diligence, presentment, notice of intent to
demand or accelerate and of acceleration), all of which are hereby
expressly waived by the Borrower.
(b) Deposit for Letters of Credit. In addition, after the occurrence
and during the continuance of an Event of Default, the Borrower shall,
promptly upon demand by the Agent (given upon the written instructions
of the Class A Requisite Lenders or, in the absence of such
instructions, in its sole discretion), deliver to the Agent, Cash
Collateral in such form as requested by the Agent, together with such
endorsements, and execution and delivery of such documents and
instruments, as the Agent may request in order to perfect or protect the
Agent's Lien with respect thereto, in an aggregate principal amount
equal to the then outstanding Letter of Credit Obligations.
(c) Rescission. If at any time after termination of the Commitments
and/or acceleration of the maturity of the Loans, the Borrower shall pay
all arrears of interest and all payments on account of principal of the
Loans and Reimbursement Obligations which shall have become due
otherwise than by acceleration (with interest on principal and, to the
extent permitted by law, on overdue interest, at the rates specified
herein) and all Events of Default and Defaults (other than nonpayment of
principal of and accrued interest on the Loans due and payable solely by
virtue of acceleration) shall be remedied or waived pursuant to Section
14.07, then upon the written consent of the Class A Requisite Lenders
and the Class B Requisite Lenders and written notice to the Borrower,
the termination of the Commitments and/or the acceleration and the
consequences of such termination and/or acceleration may be rescinded
and annulled; but such action shall not affect any subsequent Event of
Default or Default or impair any right or remedy consequent thereon.
The provisions of the preceding sentence are intended merely to bind the
Lenders and the Issuing Banks to a decision which may be made at the
election of the Class A Requisite Lenders and the Class B Requisite
Lenders; they are not intended to benefit the Borrower and do not give
the Borrower the right to require the Lenders to rescind or annul any
acceleration hereunder, even if the conditions set forth herein are met.
(d) Enforcement. The Borrower acknowledges that in the event the
Borrower or any of the Borrower's Subsidiaries fails to perform, observe
or discharge any of its respective obligations or liabilities hereunder
or under any other Loan Document, any remedy of law may prove to be
inadequate relief to the Agent, the Issuing Banks and the Lenders;
therefore, the Borrower agrees that the Agent, the Issuing Banks and the
Lenders shall be entitled after the occurrence and during the
continuance of an Event of Default to temporary and permanent injunctive
relief in any such case without the necessity of proving actual damages.
11.03. The Investment Account. (a) If requested by the Borrower and
subject to the right of the Agent to withdraw funds from the Investment
Account as provided below, the Agent shall, so long as no Event of
Default shall have occurred and be continuing, from time to time invest
funds on deposit in the Investment Account and accrued interest thereon,
reinvest proceeds of any such investments which may mature or be sold,
and invest interest or other income received from any such investments,
in each case in such Cash Equivalents as the Borrower may select (it
being understood and agreed that the Agent shall have at all times a
perfected first-priority security interest in all such Cash Equivalents,
for the benefit of the Agent, the Issuing Banks, the Lenders and the
other Holders). Such funds, interest, proceeds or income which are not
so invested or reinvested in Cash Equivalents shall, except as otherwise
provided in this Section 11.03, be deposited and held by the Agent in
the Investment Account. None of the Agent, any Lender or any Issuing
Bank shall be liable to the Borrower for, or with respect to, any
decline in value of amounts on deposit in the Investment Account which
shall have been invested pursuant to this Section 11.03(a) at the
direction of the Borrower. Cash Equivalents from time to time purchased
and held pursuant to this Section 11.03(a) shall constitute Cash
Collateral and shall, for purposes of this Agreement, be deemed to be
part of the funds held in the Investment Account in amounts equal to
their respective outstanding principal amounts.
(b)The Agent may, at any time after an Event of Default has occurred and
is continuing, sell or cause to be sold any Cash Equivalents being held
by the Agent as Cash Collateral at any broker's board or at public or
private sale, in one or more sales or lots, at such price as the Agent
may deem best, without assumption of any credit risk, and the purchaser
of any or all such Cash Equivalents so sold shall thereafter own the
same, absolutely free from any claim, encumbrance or right of any kind
whatsoever. The Agent, any of the Lenders and any of the Issuing Banks
may, in its own name or in the name of a designee or nominee, buy such
Cash Equivalents at any public sale and, if permitted by applicable law,
buy such Cash Equivalents at any private sale. The Agent shall apply
the proceeds of any such sale, net of any expenses incurred in
connection therewith, and any other funds deposited in the Investment
Account, to the payment of the Obligations in accordance with this
Agreement. The Borrower agrees that (i) any sale of Cash Equivalents
conducted in conformity with reasonable commercial practices of banks,
commercial finance companies, insurance companies or other financial
institutions disposing of property similar to such Cash Equivalents
shall be deemed to be commercially reasonable and (ii) any requirements
of reasonable notice shall be met if such notice is received by the
Borrower at its notice address on the signature pages hereto at least
ten (10) Business Days before the time of the sale or disposition. Any
other requirement of notice, demand or advertisement for sale is waived
to the extent permitted by law. The Agent may adjourn any public or
private sale from time to time by announcement at the time and place
fixed therefor, and such sale may, without further notice, be made at
the time and place to which it was so adjourned.
(c)Notwithstanding anything to the contrary contained in this Agreement,
none of the Borrower or any Person or entity claiming on behalf of or
through the Borrower shall have any right to withdraw any of the funds
held in the Investment Account, except that, (i) promptly following the
Borrower's electronic or telephonic notification to the Agent of the
amount to be so withdrawn, the Agent (unless (x) prior to the repayment
in full of the Term Loans, a Default (other than a Non-Material Default)
or an Event of Default shall have occurred and be continuing and the
Agent (at the direction of the Requisite Lenders or, in the absence of
such direction, in its sole discretion) shall have delivered a written
notice to the Borrower to the effect that the Borrower may no longer
withdraw amounts from the Investment Account or the Concentration
Account, or (y) at or following the repayment in full of the Term Loans,
an Event of Default shall have occurred and be continuing and the Agent
(at the direction of the Requisite Lenders or, in the absence of such
direction, in its sole discretion) shall have delivered a written notice
to the Borrower to the effect that the Borrower may no longer withdraw
amounts from the Investment Account or the Concentration Account (either
such notice, a "Blockage Notice")) shall (to the extent such funds are
then immediately available in the Investment Account) transfer to the
Disbursement Account funds in an amount equal to the lesser of (1) the
amount indicated in such electronic or telephonic notification and (2)
the aggregate amount of funds then available in the Investment Account
(it being understood and agreed that such funds may be used (A) in the
case of any withdrawal in accordance with the provisos to Section 9.17,
as contemplated by such provisos, or (B) in the case of any other
withdrawal, for such purposes as proceeds of Revolving Loans may be used
in accordance with Section 2.02(d)) and (ii) upon the payment in full in
cash of the Obligations and termination of the Commitments, any funds
remaining in the Investment Account shall be returned by the Agent to
the Borrower or paid by the Agent to whomever may be legally entitled
thereto.
(d)If at any time the Agent determines that any funds held in the
Investment Account are subject to any interest, right, claim or Lien of
any Person other than the Agent, the Borrower will, forthwith upon
demand by the Agent, pay to the Agent, as additional funds to be
deposited and held in the Investment Account, an amount equal to the
amount of funds subject to such interest, right, claim or Lien.
(e)The Agent shall exercise reasonable care in the custody and
preservation of any funds held in the Investment Account and shall be
deemed to have exercised such care if such funds are accorded treatment
substantially equivalent to that which the Agent accords its own like
property, it being understood that the Agent shall not have any
responsibility for taking any necessary steps to preserve rights against
any parties with respect to any such funds but may do so at its option.
All expenses incurred in connection therewith shall be for the sole
account of the Borrower and shall constitute Obligations hereunder.
ARTICLE XII
GUARANTIES
12.01. Guaranties. (a) In order to induce the Agent, the Lenders and
the Issuing Banks to enter into this Agreement, each of the Guarantors
hereby jointly and severally absolutely, unconditionally and irrevocably
guarantees (the undertaking of Baird contained in this Article XII, the
"Baird Guaranty"; the undertaking of Varo contained in this Article XII,
the "Varo Guaranty"; the undertaking of Warren Pumps contained in this
Article XII, the "Warren Pumps Guaranty"; and each of the Baird
Guaranty, the Varo Guaranty and the Warren Pumps Guaranty, a "Guaranty")
as primary obligor and not merely as surety, the full and punctual
payment when due, whether at stated maturity or earlier, by reason of
acceleration, mandatory prepayment or otherwise in accordance herewith
or any other Loan Document, of all of the Obligations, whether or not
from time to time reduced or extinguished or hereafter increased or
incurred, whether or not recovery may be or hereafter may become barred
by any statute of limitations, and whether enforceable or unenforceable
as against Borrower, now or hereafter existing, or due or to become due
including (without limitation) principal, interest (including interest
at the contract rate applicable upon default) accrued or accruing after
the commencement of any bankruptcy proceeding whether or not such
interest is an allowed claim in such proceeding), fees, and any and all
expenses (including reasonable counsel fees and expenses) incurred by
the Agent, the Lenders or the Issuing Banks in enforcing any of their
rights hereunder (all amounts so guaranteed the "Guaranteed
Obligations").
(b) Each of the Guarantors further jointly and severally agrees that,
if any payment made by Borrower or any other Person and applied to the
Guaranteed Obligations is at any time annulled, avoided, set aside,
rescinded, invalidated, declared to be fraudulent or preferential or
otherwise required to be refunded or repaid, or the proceeds of
Collateral are required to be returned by the Agent, any of the Lenders,
any of the Issuing Banks or any other Holders to the Borrower, its
estate, trustee, receiver or any other party, including, without
limitation, any Guarantor, under any bankruptcy law, state or federal
law, common law or equitable cause, then, to the extent of such payment
or repayment, such Guarantor's liability hereunder (and any Lien or
other Collateral securing such liability) shall be and remain in full
force and effect, as fully as if such payment had never been made, or,
if prior thereto the relevant Guaranty shall have been cancelled or
surrendered (and if any Lien or other Collateral securing such
Guarantor's liability hereunder shall have been released or terminated
by virtue of such cancellation or surrender), such Guaranty (and such
Lien or other Collateral) shall be reinstated in full force and effect,
and such prior cancellation or surrender shall not diminish, release,
discharge, impair or otherwise affect the obligations of such Guarantor
in respect of the amount of such payment (or any Lien or other
Collateral securing such obligation).
12.02. Authorization; Other Agreements. Subject to Section 14.07, the
Agent is hereby authorized by each Guarantor, without notice to or
demand upon any Guarantor, which notice or demand is expressly waived
hereby, and without discharging or otherwise affecting the obligations
of the Guarantors hereunder (which shall remain absolute and
unconditional notwithstanding any such action or omission to act), from
time to time, to:
(a)supplement, renew, extend, accelerate or otherwise change the time
for payment of, or other terms relating to, the Guaranteed Obligations,
or otherwise modify, amend or change the terms of any promissory note or
other agreement, document or instrument (including, without limitation,
the other Loan Documents) now or hereafter executed by the Borrower and
delivered to the Agent, including, without limitation, any increase or
decrease of principal or the rate of interest thereon;
(b)waive or otherwise consent to noncompliance with any provision of any
instrument evidencing the Guaranteed Obligations, or any part thereof,
or any other instrument or agreement in respect of the Guaranteed
Obligations (including, without limitation, the other Loan Documents)
now or hereafter executed by the Borrower and delivered to the Agent;
(c)accept partial payments on the Guaranteed Obligations;
(d)receive, take and hold additional security or collateral for the
payment of the Guaranteed Obligations and exchange, enforce, waive,
substitute, liquidate, terminate, abandon, fail to perfect, subordinate,
transfer, otherwise alter and release any such additional security or
collateral;
(e)settle, release, compromise, collect or otherwise liquidate the
Guaranteed Obligations or accept, substitute, release, exchange or
otherwise alter, affect or impair any security or collateral for the
Guaranteed Obligations or any other guaranty therefor, in any manner;
(f)add, release or substitute any one or more other guarantors, makers
or endorsers of the Guaranteed Obligations and otherwise deal with the
Borrower, any Guarantor, or any other guarantor, maker or endorser;
(g)apply any and all payments or recoveries from the Borrower, from any
other Guarantor, or from any other guarantor, maker or endorser of the
Guaranteed Obligations to the Guaranteed Obligations in such order as
provided herein (as if such payments were from the Borrower) whether
such Guaranteed Obligations are secured or unsecured or guaranteed or
not guaranteed by others;
(h)apply any and all payments or recoveries from any Guarantor of the
Guaranteed Obligations or sums realized from security furnished by any
Guarantor upon its indebtedness or obligations to the Agent, the Lenders
or the Issuing Banks, whether or not such indebtedness or obligations
relate to the Guaranteed Obligations; and
(i)refund at any time any payment received by the Agent in respect of
any Guaranteed Obligation, and payment to the Agent of the amount so
refunded shall be fully guaranteed hereby even though prior thereto the
relevant Guaranty shall have been cancelled or surrendered (or any
release or termination of any Collateral by virtue thereof) by the
Agent, and such prior cancellation or surrender shall not diminish,
release, discharge, impair or otherwise affect the obligations of any
Guarantor hereunder in respect of the amount so refunded (and any
Collateral so released or terminated shall be reinstated with respect to
such obligations);
even if any right of reimbursement or subrogation or other right or
remedy of any Guarantor is extinguished, affected or impaired by any of
the foregoing (including, without limitation, any election of remedies
by reason of any judicial, non-judicial or other proceeding in respect
of the Guaranteed Obligations which impairs any subrogation,
reimbursement or other right of such Guarantor).
12.03. Guaranty Absolute and Unconditional. Each Guarantor hereby
agrees that its obligations under the relevant Guaranty are absolute and
unconditional and shall not be discharged or otherwise affected as a
result of:
(a)the invalidity or unenforceability of any of the Borrower's
obligations hereunder or of any other Loan Document or any other
agreement or instrument relating thereto, or any security for, or other
guaranty of the Guaranteed Obligations, or the lack of perfection or
continuing perfection or failure of priority of any security for the
Guaranteed Obligations;
(b)the absence of any attempt to collect the Guaranteed Obligations from
the Borrower or other action to enforce the same;
(c)failure by the Agent to take any steps to perfect and maintain any
Lien on, or to preserve any rights to, any Collateral;
(d)the Agent's election, in any proceeding instituted under Chapter 11
of the Bankruptcy Code, of the application of Section 1111(b)(2) of the
Bankruptcy Code;
(e)any borrowing or grant of a Lien by Borrower, as debtor-in-
possession, or extension of credit, under Section 364 of the Bankruptcy
Code;
(f)the disallowance, under Section 502 of the Bankruptcy Code, of all or
any portion of the Agent's or any Lender's claim(s) for repayment of the
Guaranteed Obligations;
(g)any use of cash collateral under Section 363 of the Bankruptcy Code;
(h)any agreement or stipulation as to the provision of adequate
protection in any bankruptcy proceeding;
(i)the avoidance of any Lien in favor of the Agent, the Lenders, the
Issuing Banks or the other Holders for any reason;
(j)any bankruptcy, insolvency, reorganization, arrangement, readjustment
of debt, liquidation or dissolution proceeding commenced by or against
the Borrower or any of the Borrower's Subsidiaries, including without
limitation, any discharge of, or bar or stay against collecting, all or
any of the Guaranteed Obligations (or any interest thereon) in or as a
result of any such proceeding;
(k)failure by the Agent, any Lender or any Issuing Bank to file or
enforce a claim against the Borrower or its estate in any bankruptcy or
insolvency case or proceeding;
(l)any action taken by the Agent, any Lender or any Issuing Bank that is
authorized hereby;
(m)any election by the Agent, any Lender or any Issuing Bank under
Section 9-501(4) of the Uniform Commercial Code as to the Collateral; or
(n)any other circumstance which might otherwise constitute a legal or
equitable discharge or defense of a surety or guarantor or any other
obligor on any obligations, other than the payment in full of the
Guaranteed Obligations.
12.04. Waivers. Each Guarantor hereby waives diligence, promptness,
presentment, demand for payment or performance and protest and notice of
protest, notice of acceptance and any other notice in respect of the
Guaranteed Obligations, and any defense arising by reason of any
disability or other defense of the Borrower. No Guarantor shall, until
the Guaranteed Obligations are irrevocably paid in full and the
Commitments have been terminated, assert any claim or counterclaim it
may have against the Borrower or set off any of its obligations to the
Borrower against any obligations of the Borrower to it. In connection
with the foregoing, each Guarantor jointly and severally covenants that
its obligations hereunder shall not be discharged, except by complete
performance.
12.05. Reliance. Each Guarantor hereby assumes responsibility for
keeping itself informed of the financial condition of the Borrower, and
of all other circumstances bearing upon the risk of nonpayment of the
Guaranteed Obligations or any part thereof that diligent inquiry would
reveal and each Guarantor hereby agrees that the Agent shall not have
any duty whatsoever to advise such Guarantor of information known to the
Agent regarding such condition or any such circumstances.
12.06. Waiver of Subrogation and Contribution Rights. No Guarantor
shall enforce or otherwise exercise any right of subrogation to any of
the rights of the Agent, the Lenders or the Issuing Banks against the
Borrower or any right of reimbursement or contribution or similar right
against the Borrower and, notwithstanding anything to the contrary
contained herein, each Guarantor hereby waives all rights of subrogation
(whether contractual, under Section 509 of the Bankruptcy Code, at law
or in equity or otherwise) to the claims of the Holders against the
Borrower and all contractual, statutory or legal or equitable rights of
contribution, reimbursement, indemnification and similar rights and
"claims" (as such term is defined in the Bankruptcy Code) against the
Borrower, any other Guarantor, or any other Person now or hereafter
primarily or secondarily liable for any Obligations, which arise in
connection with, or as a result of, any Guaranty and the benefit of, and
any right to participate in, any Collateral.
12.07. Subordination. Each Guarantor hereby agrees that any
Indebtedness of the Borrower now or hereafter owing to such Guarantor,
is hereby subordinated to all of the Guaranteed Obligations, whether
heretofore, now or hereafter created (the "Guarantor Subordinated
Debt"), and that the Guarantor Subordinated Debt shall not be paid in
whole or in part except as otherwise permitted under this Agreement
until the Guaranteed Obligations have been paid in full and this
Agreement has been terminated and is of no further force or effect. No
Guarantor shall accept any payment of or on account of any Guarantor
Subordinated Debt at any time in contravention of the foregoing. Upon
the occurrence and during the continuance of an Event of Default, the
Borrower shall pay to the Agent any payment of all or any part of the
Guarantor Subordinated Debt and any amount so paid to the Agent shall be
applied to payment of the Guaranteed Obligations. Each payment on the
Guarantor Subordinated Debt received in violation of any of the
provisions hereof shall be deemed to have been received by the relevant
Guarantor as trustee for the Holders and shall be paid over to the Agent
immediately on account of the Guaranteed Obligations, but without
otherwise affecting in any manner such Guarantors' liability hereunder.
Each Guarantor agrees to file all claims against the Borrower in any
bankruptcy or other proceeding in which the filing of claims is required
by law in respect of any Guarantor Subordinated Debt, and the Agent
shall be entitled to all of such Guarantor's rights thereunder. If for
any reason any Guarantor fails to file such claim at least thirty (30)
days prior to the last date on which such claim should be filed, such
Guarantor hereby irrevocably appoints the Agent as its true and lawful
attorney-in-fact and the Agent is hereby authorized to act as attorney-
in-fact in such Guarantor's name to file such claim, or, in the Agent's
discretion, to assign such claim to and cause proof of claim to be filed
in the name of the Agent or its nominee. In all such cases, whether in
administration, bankruptcy or otherwise, the Person or Persons
authorized to pay such claim shall pay to the Agent the full amount
payable on the claim in the proceeding, and, to the full extent
necessary for that purpose, each Guarantor hereby assigns to the Agent
all of such Guarantor's rights to any payments or distributions to which
such Guarantor otherwise would be entitled. If the amount so paid is
greater than such Guarantors' liability hereunder, the Agent shall pay
the excess amount to the party otherwise entitled thereto. In addition,
each Guarantor hereby appoints the Agent as its attorney-in-fact to
exercise all of such Guarantor's voting rights in connection with any
bankruptcy proceeding or any plan for the reorganization of the
Borrower.
12.08. Default; Remedies. The obligations of each Guarantor hereunder
are independent of and separate from the Guaranteed Obligations. If any
of the Guaranteed Obligations are not paid when due, or upon any Event
of Default hereunder or under any default by the Borrower as provided in
any other instrument or document evidencing all or any part of the
Guaranteed Obligations, the Agent may, at its sole election, proceed
directly and at once, without notice, against any or all of the
Guarantors to collect and recover the full amount or any portion of the
Guaranteed Obligations then due, without first proceeding against the
Borrower, any other Guarantor(s), or any other guarantor of the
Guaranteed Obligations, or against any Collateral under the Loan
Documents or joining the Borrower, any other Guarantor(s), or any other
guarantor in any proceeding against one or more of the Guarantors. At
any time after maturity of the Guaranteed Obligations, the Agent may
(unless the Guaranteed Obligations have been paid in full in cash or
other immediately available funds), without notice to any Guarantor and
regardless of the acceptance of any Collateral for the payment hereof,
appropriate and apply toward the payment of the Guaranteed Obligations
(i) any indebtedness due or to become due from the Agent, any Lender or
any Issuing Bank to such Guarantor and (ii) any moneys, credits or other
property belonging to such Guarantor at any time held by or coming into
the possession of the Agent, any Lender or any of their respective
Affiliates.
12.09. Irrevocability. Each Guaranty shall be irrevocable as to any
and all of the Guaranteed Obligations until this Agreement has been
terminated and all monetary Guaranteed Obligations then outstanding have
been irrevocably repaid in cash, at which time each Guaranty shall
automatically be cancelled; provided that, notwithstanding anything
contained in this Agreement to the contrary, (x) the Baird Guaranty and
all obligations of Baird under this Agreement shall automatically be
cancelled upon the sale of all or substantially all of the Capital Stock
or assets of Baird in accordance with clause (viii) of Section 9.02 and
the application of the Net Cash Proceeds thereof in accordance with
Section 3.01(b)(i) and (y) the Varo Guaranty and all obligations of Varo
under this Agreement shall automatically be cancelled upon the sale of
all or substantially all of the Capital Stock or assets of Varo in
accordance with clause (viii) of Section 9.02 and the application of the
Net Cash Proceeds thereof in accordance with Section 3.01(b)(i). Upon
any such cancellation and at the written request of the relevant
Guarantor or its successors or assigns, and at the cost and expense of
such Guarantor or its successors or assigns, such Person shall cease to
be a party to this Agreement and the Agent shall execute in a timely
manner a satisfaction of the relevant Guaranty and such instruments,
documents or agreements as are necessary or desirable in connection with
the termination of such Guaranty and the cancellation of such
obligations.
12.10. Limitation on Guaranteed Amounts. Notwithstanding anything
contained in this Agreement to the contrary, the amount guaranteed by
each Guarantor hereunder shall be limited to an aggregate amount which
is equal to the largest amount that would not be subject to avoidance
under Section 548 of the Bankruptcy Code or any applicable provisions of
any comparable state law.
12.11. Certain California Law Matters. Each Guarantor understands that
such Guarantor shall be liable for the full amount of its liability
under its Guaranty, notwithstanding the foreclosure of any Real Property
securing all or any part of the Guaranteed Obligations by trustee sale
or any other reason impairing the right of such Guarantor, the Agent,
any of the Lenders, any of the Issuing Banks, or any other Holders to
proceed against the Borrower or the Property of the Borrower or any of
the Borrower's Subsidiaries. Each Guarantor hereby agrees that all of
its obligations under its Guaranty (including its obligation to pay in
full all Indebtedness evidenced by or arising under this Agreement)
shall remain in full force and effect, without defense, offset or
counterclaim of any kind, notwithstanding that such Guarantor's rights
against the Borrower may be impaired, destroyed, or otherwise affected
by reason of any action or inaction on the part of the Agent or any
other Holder. By way of example and without limitation of the
foregoing, if the Agent or any other Holder shall release or foreclose
by private power of sale any Real Property which is security for the
Guaranteed Obligations, then notwithstanding that the Borrower may be
entitled thereby to assert a defense against such Guaranteed Obligations
(and thus also against its obligations to the Guarantors to the extent
that the Guarantors may be subrogated to the rights of the Lender) based
upon the applicability of California Code of Civil Procedure Section
580d or other antideficiency laws, each Guarantor waives any defense to
its obligations hereunder it may have thereby, and each Guarantor shall
remain fully obligated under its Guaranty. Each Guarantor hereby waives
all defenses, protections, and benefits of Sections 580a, 580b, 580d,
and 726 of the California Code of Civil Procedure, and all judicial
decisions construing or pertaining to the same, and all rules and
principles of like kind or similar effect (including without limitation
the so-called one-action rule, the one-form-of-action rule, and the
security-first rule), in each case as applicable to or in favor of any
Guarantor, the Borrower, or otherwise. Each Guarantor represents and
warrants that it has consulted with its legal counsel regarding all
waivers under its Guaranty, that it believes that it fully understands
all rights that it is waiving and the effect of such waivers, that it
assumes the risk of any misunderstanding that it may have regarding any
of the foregoing, and that it intends that such waivers shall be a
material inducement to the Agent, the Lenders and the Issuing Banks to
enter into this Agreement and to extend the Loans and issue the Letters
of Credit. In addition, each Guarantor hereby waives, to the fullest
extent permitted by law, without limiting the generality of the
foregoing or any other provision hereof, all rights and benefits under
California Civil Code Sections 2810, 2819, 2839, 2845, 2849, 2850, 2899,
and 3433 (and any similar law in any other jurisdiction).
ARTICLE XIII
THE AGENT
13.01. Appointment. (a) Each Lender and each Issuing Bank hereby
designates and appoints Citibank as the Agent hereunder, and each
Lender and each Issuing Bank hereby irrevocably authorizes the Agent to
execute such documents (including, without limitation, the Transaction
Documents to which the Agent is a party) and to take such other action
on such Person's behalf under the provisions hereof and of the Loan
Documents and to exercise such powers as are set forth herein or therein
together with such other powers as are reasonably incidental thereto.
As to any matters not expressly provided for hereby (including, without
limitation, enforcement or collection of the Notes or any amount payable
under any provision of Article III when due) or the other Loan
Documents, the Agent shall not be required to exercise any discretion or
take any action. Notwithstanding the foregoing, the Agent shall be
required to act or refrain from acting (and shall be fully protected in
so acting or refraining from acting) upon the instructions of the
Requisite Lenders (unless the instructions or consent of the Class A
Requisite Lenders, the Class B Requisite Lenders or all of the Lenders
is required hereunder or thereunder) and such instructions shall be
binding upon all Lenders, Issuing Banks and Holders; provided, however,
the Agent shall not be required to take any action which (i) the Agent
reasonably believes shall expose it to personal liability unless the
Agent receives an indemnification satisfactory to it from the Lenders
with respect to such action or (ii) is contrary hereto, to the other
Loan Documents or applicable law. The Agent agrees to act as such on
the express conditions contained in this Article XIII.
(b) The provisions of this Article XIII are solely for the benefit of
the Agent, the Lenders and Issuing Banks, and none of the Borrower or
any Subsidiary of the Borrower shall have any rights to rely on or
enforce any of the provisions hereof (other than as expressly set forth
in Sections 13.07 and 13.09). In performing its functions and duties
hereunder, the Agent shall act solely as agent of the Lenders and the
Issuing Banks and does not assume and shall not be deemed to have
assumed any obligation or relationship of agency, trustee or fiduciary
with or for the Borrower or any Subsidiary of the Borrower. The Agent
may perform any of its duties hereunder, or under the Loan Documents, by
or through its agents or employees.
13.02. Nature of Duties. The Agent shall not have any duties or
responsibilities except those expressly set forth herein or in the Loan
Documents. The duties of the Agent shall be mechanical and
administrative in nature. The Agent shall not have by reason hereof a
fiduciary relationship in respect of any Holder. Nothing herein or in
any of the Loan Documents, expressed or implied, is intended to or shall
be construed to impose upon the Agent any obligations in respect hereof
or any of the Loan Documents except as expressly set forth herein or
therein. Each Lender and each Issuing Bank shall make its own
independent investigation of the financial condition and affairs of the
Borrower and its Subsidiaries in connection with the making and the
continuance of the Loans hereunder and with the issuance of the Letters
of Credit and shall make its own appraisal of the creditworthiness of
the Borrower and its Subsidiaries initially and on a continuing basis,
and the Agent shall not have any duty or responsibility, either
initially or on a continuing basis, to provide any Holder with any
credit or other information with respect thereto (except for reports
required to be delivered by the Agent under the terms hereof). If the
Agent seeks the consent or approval of any of the Lenders to the taking
or refraining from taking of any action hereunder, the Agent shall send
notice thereof to each Lender. The Agent shall promptly notify each
Lender at any time that the Lenders so required hereunder have
instructed the Agent to act or refrain from acting pursuant hereto.
13.03. Rights, Exculpation, Etc. (a) Liabilities; Responsibilities.
None of the Agent or any Affiliate of the Agent, nor any of their
respective officers, directors, employees or agents shall be liable to
any Holder for any action taken or omitted by them hereunder or under
any of the Loan Documents, or in connection therewith, except that no
Person shall be relieved of any liability imposed by law for gross
negligence or willful misconduct. The Agent shall not be liable for any
apportionment or distribution of payments made by it in good faith
pursuant to Section 3.02(b), and if any such apportionment or
distribution is subsequently determined to have been made in error the
sole recourse of any Holder to whom payment was due, but not made, shall
be to recover from other Holders any payment in excess of the amount to
which they are determined to have been entitled. The Agent shall not be
responsible to any Holder for any recitals, statements, representations
or warranties herein or for the execution, effectiveness, genuineness,
validity, legality, enforceability, collectibility, or sufficiency
hereof or of any of the other Loan Documents or the transactions
contemplated thereby, or for the financial condition of the Borrower or
any of its Subsidiaries. Except as provided in the third sentence of
Section 13.01(a), the Agent shall not be required to make any inquiry
concerning either the performance or observance of any of the terms,
provisions or conditions hereof or of any of the Loan Documents or the
financial condition of the Borrower or any of its Subsidiaries, or the
existence or possible existence of any Default or Event of Default.
(b) Right to Request Instructions. The Agent may at any time request
instructions from the Lenders with respect to any actions or approvals
which by the terms of any of the Loan Documents the Agent is permitted
or required to take or to grant, and the Agent shall be absolutely
entitled to refrain from taking any action or to withhold any approval
and shall not be under any liability whatsoever to any Person for
refraining from any action or withholding any approval under any of the
Loan Documents until it shall have received such instructions from those
Lenders from whom the Agent is required to obtain such instructions for
the pertinent matter in accordance with the Loan Documents. Without
limiting the generality of the foregoing, no Holder shall have any right
of action whatsoever against the Agent as a result of the Agent acting
(unless the relevant action by the Agent results solely from the gross
negligence or willful misconduct of the Agent, as determined in a final,
non-appealable judgment by a court of competent jurisdiction) or
refraining from acting under the Loan Documents in accordance with the
instructions of the Requisite Lenders or, where required by the express
terms hereof, (i) a greater proportion of the Lenders, (ii) the Class A
Requisite Lenders or (iii) the Class B Requisite Lenders.
13.04. Reliance. The Agent shall be entitled to rely upon any written
notices, statements, certificates, orders or other documents or any
telephone message believed by it in good faith to be genuine and correct
and to have been signed, sent or made by the proper Person, and with
respect to all matters pertaining hereto or to any of the Loan Documents
and its duties hereunder or thereunder, upon advice of legal counsel
(including counsel for the Borrower), independent public accountants and
other experts selected by it.
13.05. Indemnification. To the extent that the Agent is not reimbursed
and indemnified by the Borrower, the Lenders shall reimburse and
indemnify the Agent for and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements of any kind or nature whatsoever which
may be imposed on, incurred by, or asserted against the Agent in any way
relating to or arising out of the Loan Documents or any action taken or
omitted by the Agent under the Loan Documents, in proportion to each
Lender's Pro Rata Share; provided, however, the Lenders shall have no
obligation to the Agent with respect to the matters indemnified pursuant
to this Section resulting from the willful misconduct or gross
negligence of the Agent, as determined in a final, non-appealable
judgment by a court of competent jurisdiction. The obligations of the
Lenders under this Section 13.05 shall survive the payment in full of
the Loans, the Reimbursement Obligations and all other Obligations and
the termination hereof.
13.06. Citibank Individually. With respect to its Pro Rata Shares of
the Commitments hereunder, if any, and the Loans made by it, if any,
Citibank shall have and may exercise the same rights and powers
hereunder and is subject to the same obligations and liabilities as and
to the extent set forth herein for any other Lender. The terms
"Lenders" or "Requisite Lenders" or any similar terms shall, unless the
context clearly otherwise indicates, include Citibank in its individual
capacity as a Lender or as one of the Requisite Lenders. Citibank and
its Affiliates may accept deposits from, lend money to, and generally
engage in any kind of banking, trust or other business with the Borrower
or any of its Subsidiaries as if Citibank were not acting as Agent
pursuant hereto.
13.07. Successor Agent; Resignation of Agent. (a) Resignation. The
Agent may resign from the performance of its functions and duties
hereunder at any time by giving at least forty-five (45) Business Days'
prior written notice to the Borrower and the Lenders. The resignation
of the Agent shall take effect upon the acceptance by a successor Agent
of appointment pursuant to this Section 13.07.
(b)Appointment by Requisite Lenders. Upon any such notice of
resignation by the Agent, the Requisite Lenders shall have the right to
appoint a successor Agent selected from among the Lenders which
appointment shall be subject to the prior written approval of the
Borrower (which may not be unreasonably withheld, and shall not be
required upon the occurrence and during the continuance of an Event of
Default).
(c) Appointment by Retiring Agent. If a successor Agent shall not have
been appointed within the forty-five (45) Business Day period provided
in paragraph (a) of this Section 13.07, the retiring Agent, with the
consent of the Borrower (which may not be unreasonably withheld, and
shall not be required upon the occurrence and during the continuance of
an Event of Default), shall then appoint a successor Agent who shall
serve as Agent until such time, if any, as the Requisite Lenders appoint
a successor Agent as provided above.
(d) Rights of the Successor and Retiring Agents. Upon the acceptance
of any appointment as Agent hereunder by a successor Agent, such
successor Agent shall thereupon succeed to and become vested with all
the rights, powers, privileges and duties of the retiring Agent, and the
retiring Agent shall be discharged from its duties and obligations
hereunder thereafter to be performed. After any retiring Agent's
resignation hereunder as Agent, the provisions of this Article XIII
shall inure to its benefit as to any actions taken or omitted to be
taken by it while it was the Agent hereunder.
13.08. Relations Among Lenders. Each Lender and each Issuing Bank
agrees that it shall not take any legal action, nor institute any
actions or proceedings, against the Borrower or any other obligor
hereunder or with respect to (i) any Collateral constituting all or any
portion of the Discontinued Operations, without the prior written
consent of the Class B Requisite Lenders or (ii) any other Collateral,
without the prior written consent of the Class A Requisite Lenders.
Without limiting the generality of the foregoing, no Lender may
accelerate or otherwise enforce its portion of the Obligations, or
terminate its Commitments except in accordance with Section 11.02(a) or
a setoff permitted under Section 14.05.
13.09. Concerning the Collateral and the Loan Documents. (a)
Protective Advances. The Agent may from time to time, after the
occurrence and during the continuance of an Event of Default, make such
disbursements and advances pursuant to the Loan Documents which the
Agent, in its sole discretion (subject to the third sentence of Section
13.01(a)), deems necessary or desirable to preserve or protect the
Collateral or any portion thereof or to enhance the likelihood or
maximize the amount of repayment of the Loans and other Obligations up
to an amount not in excess of the lesser of the Revolving Credit
Availability at such time and $5,000,000 ("Protective Advances"). The
Agent shall notify the Borrower and each Lender in writing of each such
Protective Advance, which notice shall include a description of the
purpose of such Protective Advance. The Borrower agrees to pay the
Agent, upon demand, the principal amount of all outstanding Protective
Advances, together with interest thereon at the rate from time to time
applicable to the Loans from the date of such Protective Advance until
the outstanding principal balance thereof is paid in full. If the
Borrower fails to make payment in respect of any Protective Advance
within one (1) Business Day after the date the Borrower receives written
demand therefor from the Agent, the Agent shall promptly notify each
Lender and each Lender agrees that it shall thereupon make available to
the Agent, in Dollars in immediately available funds, the amount equal
to such Lender's Pro Rata Share of such Protective Advance. If such
funds are not made available to the Agent by such Lender within one (1)
Business Day after the Agent's demand therefor, the Agent shall be
entitled to recover any such amount from such Lender together with
interest thereon at the Federal Funds Rate for each day during the
period commencing on the date of such demand and ending on the date such
amount is received. The failure of any Lender to make available to the
Agent its Pro Rata Share of any such Protective Advance shall neither
relieve any other Lender of its obligation hereunder to make available
to the Agent such other Lender's Pro Rata Share of such Protective
Advance on the date such payment is to be made nor increase the
obligation of any other Lender to make such payment to the Agent. All
outstanding principal of, and interest on, Protective Advances shall
constitute Obligations secured by the Collateral until paid in full by
the Borrower.
(b) Authority. Each Lender and each Issuing Bank authorizes and
directs the Agent to enter into the Loan Documents relating to the
Collateral for the benefit of the Lenders and the Issuing Banks. Each
Lender and each Issuing Bank agrees that any action taken by the Agent
or the Requisite Lenders (or, where required by the express terms
hereof, a different proportion of the Lenders) in accordance with the
provisions hereof or of the other Loan Documents, and the exercise by
the Agent or the Requisite Lenders (or, where so required, such
different proportion) of the powers set forth herein or therein,
together with such other powers as are reasonably incidental thereto,
shall be authorized and binding upon all of the Lenders and Issuing
Banks. Without limiting the generality of the foregoing, the Agent
shall have the sole and exclusive right and authority to (i) act as the
disbursing and collecting agent for the Lenders and the Issuing Banks
with respect to all payments and collections arising in connection
herewith and with the Loan Documents relating to the Collateral; (ii)
execute and deliver each Loan Document relating to the Collateral and
accept delivery of each such agreement delivered by the Borrower or any
of its Subsidiaries; (iii) act as collateral agent for the Lenders and
the Issuing Banks for purposes of the perfection of all security
interests and Liens created by such agreements and all other purposes
stated therein, provided, however, the Agent hereby appoints, authorizes
and directs each Lender and each Issuing Bank to act as collateral sub-
agent for the Agent, the Lenders and the Issuing Banks for purposes of
the perfection of all security interests and Liens with respect to the
Borrower's and its Subsidiaries' respective deposit accounts maintained
with, and cash and Cash Equivalents held by, such Lender or such Issuing
Bank; (iv) manage, supervise and otherwise deal with the Collateral; (v)
take such action as is necessary or desirable to maintain the perfection
and priority of the security interests and liens created or purported to
be created by the Loan Documents; and (vi) except as may be otherwise
specifically restricted by the terms hereof or of any other Loan
Document, exercise all remedies given to the Agent, the Lenders or the
Issuing Banks with respect to the Collateral under the Loan Documents
relating thereto, applicable law or otherwise.
(c)Release of Collateral. (i) Each of the Agent, the Lenders and the
Issuing Banks hereby directs the Agent to release, in accordance with
the terms hereof, any Lien held by the Agent for the benefit of the
Agents, the Lenders, the Issuing Banks and the other Holders:
(A)against all of the Collateral, upon final payment in full of the
Obligations (other than indemnities not then due) and termination
hereof;
(B)against the Collateral consisting of Equipment, Real Property,
instruments (as defined in Article 9 of the Uniform Commercial Code)
(other than any Eligible Letters of Credit or other letters of credit
which constitute instruments), Capital Stock (other than the Capital
Stock of Warren Pumps) or General Intangibles (other than Currency
Agreements and Interest Rate Contracts to which a Lender or an Affiliate
of a Lender is a party, and any General Intangibles which relate to
Inventory or other inventory (as defined in Article 9 of the Uniform
Commercial Code), Receivables or other accounts (as defined in Article 9
of the Uniform Commercial Code), or Eligible Letters of Credit or other
letters of credit), upon final payment in full of the A Term Loans and
the B Term Loans and the receipt by the Agent and the Lenders of audited
financial statements with respect to Fiscal Year 1994 and, if
applicable, Fiscal Year 1995 confirming the Borrower's achievement of
Release Status; and
(C)against any part of the Collateral sold or disposed of by the
Borrower or any of its Subsidiaries, if such sale or disposition is
permitted by Section 9.02 (or permitted pursuant to a waiver or consent
of a transaction otherwise prohibited by such Section) and, if
applicable, the Net Cash Proceeds of such sale or disposition are
applied in accordance with Section 3.01(b)(i) or Section 3.01(b)(iii),
as applicable, or, if not pursuant to such sale or disposition, (x)
against any part of the Collateral constituting all or any portion of
the Discontinued Operations if such release is consented to by Lenders
whose B Term Loan Pro Rata Shares, in the aggregate, are equal to 100%
as certified to the Agent by the Borrower in an Officer's Certificate or
(y) against any other part of the Collateral if such release is
consented to by (1) Lenders whose A Term Loan Pro Rata Shares, in the
aggregate, are equal to 100% and (2) Lenders whose Revolving Credit Pro
Rata Shares, in the aggregate, are equal to 100%, as the facts set forth
in each of subclauses (1) and (2) are certified to the Agent by the
Borrower in an Officer's Certificate.
(ii) Each of the Lenders and the Issuing Banks hereby directs the Agent
to execute and deliver or file such termination and partial release
statements and do such other things as are necessary to release Liens to
be released pursuant to this Section 13.09(c) promptly upon the
effectiveness of any such release.
(d)Confirmation by Lenders. Without in any manner limiting the Agent's
authority to act without any specific or further authorization or
consent by the Lenders (as set forth in subsection (c) above), each
Lender agrees to confirm in writing, upon request by the Borrower, the
authority to release Collateral conferred upon the Agent under clauses
(A) through (C) of subsection (c) above. So long as no Event of Default
is then continuing, upon receipt by the Agent of any such written
confirmation from the Lenders of the Agent's authority to release any
particular items or types of Collateral, and in any event upon any sale
and transfer of Collateral which is expressly permitted pursuant to the
terms of this Agreement, and upon at least five (5) Business Days' prior
written request by the Borrower, the Agent shall (and is hereby
irrevocably authorized by the Lenders to) execute such documents as may
be necessary to evidence the release of the Liens upon such Collateral
granted to the Agent for the benefit of Agent, the Lenders, the Issuing
Banks and the other Holders; provided, however, that (i) the Agent shall
not be required to execute any such document on terms which, in the
Agent's opinion, would expose the Agent to liability or create any
obligation or entail any consequence other than the release of such
Liens without recourse or warranty, and (ii) such release shall not in
any manner discharge, affect or impair the Obligations or any Liens upon
(or obligations of the Borrower or any of its Subsidiaries in respect
of) all interests retained by the Borrower and/or any of its
Subsidiaries, including (without limitation) the proceeds of any sale,
all of which shall continue to constitute part of the Collateral.
(e)No Obligation. The Agent shall not have any obligation whatsoever to
any Lender or to any other Person to assure that the Collateral exists
or is owned by the Borrower or any of its Subsidiaries or is cared for,
protected or insured or has been encumbered or that the Liens granted to
the Agent herein or pursuant to the Loan Documents have been properly or
sufficiently or lawfully created, perfected, protected or enforced or
are entitled to any particular priority, or, subject to the third
sentence of Section 13.01(a), to exercise at all or in any particular
manner or under any duty of care, disclosure or fidelity, or to continue
exercising, any of the rights, authorities and powers granted or
available to the Agent in this Section 13.09 or in any of the Loan
Documents, it being understood and agreed that in respect of the
Collateral, or any act, omission or event related thereto, the Agent may
act in any manner it may deem appropriate, in its sole discretion, given
the Agent's own interests in the Collateral as one of the Lenders and
that the Agent shall not have any duty or liability whatsoever to any
Lender.
(f) Certain Withdrawals from the Investment Account. The Agent may
from time to time, after the delivery of a Blockage Notice, withdraw, or
permit the Borrower to withdraw, such amounts from the Investment
Account as the Agent, in its sole discretion, deems necessary or
desirable to preserve or protect the Collateral or any portion thereof
or to enhance the likelihood or maximize the amount of repayment of the
Loans and other Obligations up to an amount not in excess of the greater
of $5,000,000 or the amount (if any) by which the aggregate amount of
available funds on deposit in the Investment Account exceeds the
aggregate amount of the contingent and non-contingent Obligations at
such time (excluding indemnities not then due). The Agent shall notify
the Borrower and each Lender in writing of each such withdrawal, which
notice shall include a description of the purpose of such withdrawal.
ARTICLE XIV
MISCELLANEOUS
14.01. Assignments. (a) Assignments. No assignments or
participations of any Lender's rights or obligations hereunder shall be
made except in accordance with this Section 14.01. Each Lender may
assign to one or more Eligible Assignees all or a portion of its rights
and obligations hereunder (including all of its rights and obligations
with respect to the A Term Loans, B Term Loans, the Revolving Loans and
the Letters of Credit) in accordance with the provisions of this Section
14.01.
(b)Limitations on Assignments. Each assignment by a Lender shall be
subject to the following conditions: (i) each assignment other than to
a Lender or an Affiliate of a Lender shall be approved by the Agent,
which approval shall not be unreasonably withheld; (ii) each such
assignment shall be to an Eligible Assignee; (iii) each such assignment
shall be in an amount at least equal to $5,000,000, except if the
Eligible Assignee is a Lender or an Affiliate of Lender or if such
assignment shall constitute all the assigning Lender's interest
hereunder; (iv) any such assignment (other than any such assignment by a
B Term Loan Lender which is not also an A Term Loan Lender and a
Revolving Credit Lender, or any such assignment to an Affiliate of the
assigning Lender) shall consist of the simultaneous assignment of
corresponding pro rata portions of the assigning Lender's A Term Loans,
B Term Loans, Revolving Credit Commitment and Revolving Credit Loans,
and (v) the parties to each such assignment shall execute and deliver to
the Agent, for its acceptance and recording in the Register, an
Assignment and Acceptance. Upon such execution, delivery, acceptance
and recording in the Register, from and after the effective date
specified in each Assignment and Acceptance and agreed to by the Agent,
(x) the assignee thereunder shall, in addition to any rights and
obligations hereunder held by it immediately prior to such effective
date, if any, have the rights and obligations hereunder that have been
assigned to it pursuant to such Assignment and Acceptance and shall, to
the fullest extent permitted by law, have the same rights and benefits
hereunder as if it were an original Lender hereunder and (y) the
assigning Lender shall, to the extent that rights and obligations
hereunder have been assigned by it pursuant to such Assignment and
Acceptance, relinquish its rights and be released from its obligations
hereunder (and, in the case of an Assignment and Acceptance covering all
or the remaining portion of such assigning Lender's rights and
obligations hereunder, the assigning Lender shall cease to be a party
hereto).
(c) The Register. The Agent shall maintain at its address referred to
in Section 14.08 a copy of each Assignment and Acceptance delivered to
and accepted by it and a register (the "Register") for the recordation
of the names and addresses of the Lenders and the Commitment under each
Loan of, and principal amount of the Loans under each facility owing to,
each Lender from time to time and whether such Lender is an original
Lender or the assignee of another Lender pursuant to an Assignment and
Acceptance. The Register shall include a control account, and a
subsidiary account for each Lender, in which accounts (taken together)
shall be recorded (i) the date and amount of each Borrowing made
hereunder, (ii) the effective date and amount of each Assignment and
Acceptance delivered to and accepted by it and the parties thereto,
(iii) the amount of any principal or interest due and payable or to
become due and payable from the Borrower to each Lender hereunder or
under the Notes, and (iv) the amount of any sum received by the Agent
from the Borrower or any Guarantor hereunder and each Lender's share
thereof. The Agent shall deliver a statement of such account to the
Borrower whenever an Assignment and Acceptance is accepted by it and the
parties hereto; provided, however, the Agent shall not be obligated to
deliver such statement more frequently than once a month. Each such
statement shall be deemed final, binding and conclusive upon the
Borrower in all respects as to all matters reflected therein (absent
manifest error) unless the Borrower, within thirty (30) days after the
date such statement is delivered to the Borrower, delivers to the Agent
written notice of any objections which the Borrower may have to any such
statement. In that event, only those items expressly objected to in
such notice shall be deemed to be disputed by the Borrower. The entries
in the Register shall be conclusive and binding for all purposes, absent
manifest error, and the Borrower and each of its Subsidiaries, the Agent
and the Lenders may treat each Person whose name is recorded in the
Register as a Lender hereunder for all purposes hereof. The Register
shall be available for inspection by the Borrower or any Lender at any
reasonable time and from time to time upon reasonable prior notice.
(d)Fee. Upon its receipt of an Assignment and Acceptance executed by
the assigning Lender and an Eligible Assignee and a processing and
recordation fee of $2,500 (payable by the assigning Lender or the
assignee, as shall be agreed between them), the Agent shall, if such
Assignment and Acceptance has been completed and is in compliance
herewith and in substantially the form of Exhibit A hereto, (i) accept
such Assignment and Acceptance, (ii) record the information contained
therein in the Register and (iii) give prompt notice thereof to the
Borrower and the other Lenders.
(e) Information Regarding the Borrower. Any Lender may, in connection
with any assignment or proposed assignment pursuant to this Section
14.01, disclose to the assignee or proposed assignee any information
relating to the Borrower or its Subsidiaries furnished to such Lender by
the Agent or by or on behalf of the Borrower; provided that, prior to
any such disclosure, such assignee or proposed assignee shall agree (for
the Borrower's benefit) to preserve in accordance with Section 14.20 the
confidentiality of any confidential information described therein.
(f) Lenders' Creation of Security Interests. Notwithstanding any other
provision set forth herein, any Lender may at any time create a security
interest in all or any portion of its rights hereunder (including,
without limitation, Obligations owing to it and Notes held by it) in
favor of any Federal Reserve bank in accordance with Regulation A.
(g) Assignments by an Issuing Bank. If any Issuing Bank ceases to be a
Lender hereunder by virtue of any assignment made pursuant to this
Section 14.01, then, as of the effective date of such cessation, such
Issuing Bank's obligations to issue Letters of Credit pursuant to
Section 2.04 shall terminate and such Issuing Bank shall be an Issuing
Bank hereunder only with respect to outstanding Letters of Credit issued
prior to such date.
(h)Participations. Each Lender may sell participations to one or more
other financial institutions in or to all or a portion of its rights and
obligations under and in respect of any and all facilities hereunder
(including, without limitation, all or a portion of any or all of its
Commitments hereunder and the Loans owing to it and its undivided
interest in the Letters of Credit); provided, however, that (i) such
Lender's obligations hereunder (including, without limitation, its
Commitments hereunder) shall remain unchanged, (ii) such Lender shall
remain solely responsible to the other parties hereto for the
performance of such obligations, (iii) the Borrower, the Agent and the
other Lenders shall continue to deal solely and directly with such
Lender in connection with such Lender's rights and obligations hereunder
and (iv) such participant's rights to agree or to restrict such Lender's
ability to agree to the modification, waiver or release of any of the
terms of the Loan Documents or to the release of any Collateral covered
by the Loan Documents, to consent to any action or failure to act by any
party to any of the Loan Documents or any of their respective
Affiliates, or to exercise or refrain from exercising any powers or
rights which any Lender may have under or in respect of the Loan
Documents or any Collateral, shall be limited to the right to consent to
(A) reduction of the principal of, or rate or amount of interest on the
Loans(s) subject to such participation (other than by the payment or
prepayment thereof),(B) postponement of any scheduled date for any
payment of principal of, or interest on, the Loan(s) subject to such
participation (except with respect to any modifications of the
application provisions relating to the prepayments of Loans and other
Obligations) and (C) release of any guarantor (other than in accordance
with the proviso to the first sentence of Section 12.09) of the
Obligations or all or any portion of the Collateral except as provided
in Section 13.09(c). No holder of a participation in all or any part of
the Loans shall be a "Lender" or a "Holder" for any purposes hereunder
by reason of such participation; provided, however, that each holder of
a participation shall have the rights of a Lender (including any right
to receive payment) under Sections 3.03, 3.04, 4.01(f), 4.02(d),
4.02(f), 13.05, 14.02 and 14.05; provided, however, that all requests
for any such payments shall be made by a participant through the Lender
granting such participation. The right of each holder of a
participation to receive payment under Sections 3.03, 3.04, 4.01(f),
4.02(d), 4.02(f), 13.05, 14.02 and 14.05 shall be limited to the lesser
of (i) the amounts actually incurred by such holder for which payment is
provided under said Sections and (ii) the amounts that would have been
payable under said Sections by the applicable Borrower to the Lender
granting the participation in respect of the participated interest to
such holder had such participation not been granted.
(i) Payment to Participants. Anything herein to the contrary
notwithstanding, in the case of any participation, all amounts payable
by the Borrower under the Loan Documents shall be calculated and made in
the manner and to the parties required hereby as if no such
participation had been sold.
14.02. Expenses.
(a) Generally. Subject to the limitations with respect to amounts
payable to Citibank set forth in Section 2(b) of the engagement letter
dated April 1, 1994 from Citibank and accepted and agreed to by the
Borrower, the Borrower agrees upon demand to pay, or reimburse the Agent
for, all of the Agent's out-of-pocket internal and external audit,
legal, appraisal, valuation, filing, document duplication and
reproduction and investigation expenses and for all other out-of-pocket
costs and expenses of every type and nature (including, without
limitation, the reasonable fees, expenses and disbursements of the
Agent's counsel, Sidley & Austin, local legal counsel, auditors,
accountants, appraisers, printers, insurance and environmental advisers,
and other consultants and agents) incurred by the Agent in connection
with (A) the Agent's audit and investigation of the Borrower and the
Borrower's Subsidiaries in connection with the preparation, negotiation,
and execution of the Loan Documents and the Agent's periodic audits of
the Borrower or the Borrower's Subsidiaries; (B) the preparation,
negotiation, execution and interpretation hereof (including, without
limitation, the satisfaction or attempted satisfaction of any of the
conditions set forth in Article V), the other Loan Documents and any
proposal letter or commitment letter issued in connection therewith and
the making of the Loans hereunder; (C) the creation, perfection or
protection of the Liens under the Loan Documents (including, without
limitation, any reasonable fees and expenses for local counsel in
various jurisdictions); (D) the ongoing administration hereof and of the
Loans, including consultation with attorneys in connection therewith and
with respect to the Agent's rights and responsibilities hereunder and
under the other Loan Documents; (E) the protection, collection or
enforcement of any of the Obligations or the enforcement of any of the
Loan Documents; (F) the commencement, defense or intervention in any
court proceeding relating in any way to the Obligations, the Property,
the Borrower, any of the Borrower's Subsidiaries, this Agreement or any
of the other Loan Documents; (G) the response to, and preparation for,
any subpoena or request for document production with which the Agent is
served or deposition or other proceeding in which the Agent is called to
testify, in each case, relating in any way to the Obligations, the
Property, the Borrower, any of the Borrower's Subsidiaries, this
Agreement or any of the other Loan Documents; and (H) any amendments,
consents, waivers, assignments, restatements, or supplements to any of
the Loan Documents and the preparation, negotiation, and execution of
the same.
(b) Other Expenses. The Borrower further agrees to pay or reimburse
the Agent, the Issuing Banks and the Lenders upon demand for all out-of-
pocket costs and expenses, including, without limitation, reasonable
attorneys' fees (including allocated costs of internal counsel and costs
of settlement), incurred by the Agent, any Issuing Bank or any Lender
(i) in enforcing any Loan Document or Obligation or any security
therefor or exercising or enforcing any other right or remedy available
by reason of any Event of Default; (ii) in connection with any
refinancing or restructuring of the credit arrangements provided
hereunder in the nature of a "work-out" or in any insolvency or
bankruptcy proceeding; (iii) in commencing, defending or intervening in
any litigation or in filing a petition, complaint, answer, motion or
other pleadings in any legal proceeding relating to the Obligations, the
Property, the Borrower or any of the Borrower's Subsidiaries and related
to or arising out of the transactions contemplated hereby or by any of
the other Transaction Documents; and (iv) in taking any other action in
or with respect to any suit or proceeding (bankruptcy or otherwise)
described in clauses (i) through (iii) above.
14.03. Indemnity. The Borrower further agrees to defend, protect,
indemnify, and hold harmless the Agent and each and all of the Lenders
and Issuing Banks and each of their respective Affiliates, and each of
such Agent's, Lender's, Issuing Bank's or Affiliate's respective
officers, directors, employees, attorneys and agents (including, without
limitation, those retained in connection with the satisfaction or
attempted satisfaction of any of the conditions set forth in Article V)
(collectively, the "Indemnitees") from and against any and all
liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, claims, costs, expenses and disbursements of any kind
or nature whatsoever (including, without limitation, the reasonable fees
and disbursements of counsel for such Indemnitees in connection with any
investigative, administrative or judicial proceeding, whether or not
such Indemnitees shall be designated a party thereto), imposed on,
incurred by, or asserted against such Indemnitees in any manner relating
to or arising out of or in connection with (a) this Agreement, the other
Loan Documents or any of the Transaction Documents or any act, event or
transaction related or attendant thereto, whether or not such Indemnitee
is a party thereto and whether or not such transactions are consummated,
the making of the Loans, the issuance of and participation in Letters of
Credit hereunder, the management of such Loans or Letters of Credit, the
use or intended use of the proceeds of the Loans or Letters of Credit
hereunder, the execution, delivery and/or performance of Currency
Agreements or Interest Rate Contracts, or any of the other transactions
contemplated by the Transaction Documents, or (b) any Liabilities and
Costs under Environmental, Health or Safety Requirements of Law arising
from or in connection with the past, present or future operations of the
Borrower, the Borrower's Subsidiaries or any of their respective
predecessors in interest, or, the past, present or future environmental,
health or safety condition of any respective Property of the Borrower or
the Borrower's Subsidiaries, the presence of asbestos-containing
materials at any respective Property of the Borrower or such
Subsidiaries or the Release or threatened Release of any Contaminant
into the environment (collectively, the "Indemnified Matters");
provided, however, the Borrower shall have no obligation to an
Indemnitee hereunder with respect to Indemnified Matters resulting from
the willful misconduct or gross negligence of such Indemnitee, as
determined in a final, non-appealable judgment by a court of competent
jurisdiction. Notwithstanding anything herein to the contrary, the
Borrower understands and hereby agrees that its obligation to indemnify
pursuant to this Section 14.03 shall apply in the event of the sole,
concurrent or contributory negligence of any Indemnitee. To the extent
that the undertaking to indemnify, pay and hold harmless set forth in
the preceding sentence may be unenforceable because it is violative of
any law or public policy, the Borrower shall contribute the maximum
portion which it is permitted to pay and satisfy under applicable law,
to the payment and satisfaction of all Indemnified Matters incurred by
the Indemnitees.
14.04. Change in Accounting Principles. If any change in the
accounting principles used in the preparation of the most recent
financial statements referred to in Section 7.01 is hereafter required
or permitted by the rules, regulations, pronouncements and opinions of
the Financial Accounting Standards Board or the American Institute of
Certified Public Accountants (or successors thereto or agencies with
similar functions) and are adopted by the Borrower with the agreement of
its independent certified public accountants and such change results in
a change in the method of calculation of any of the covenants, standards
or terms found in Article IX and Article X, the parties hereto agree to
enter into negotiations in order to amend such provisions so as to
equitably reflect such change with the desired result that the criteria
for evaluating compliance with such covenants, standards and terms by
the Borrower shall be the same after such change as if such change had
not been made; provided, however, no change in GAAP that would affect
the method of calculation of any of the covenants, standards or terms
shall be given effect in such calculations until such provisions are
amended, in a manner satisfactory to the Requisite Lenders and the
Borrower, to so reflect such change in accounting principles.
14.05. Setoff. In addition to any Liens granted under the Loan
Documents and any rights now or hereafter granted under applicable law,
upon the occurrence and during the continuance of any Event of Default,
each Lender, each Issuing Bank and any Affiliate of any Lender or
Issuing Bank is hereby authorized by the Borrower at any time or from
time to time, without notice to any Person (any such notice being hereby
expressly waived) to set off and to appropriate and to apply any and all
deposits (general or special, including, but not limited to,
indebtedness evidenced by certificates of deposit, whether matured or
unmatured (but not including trust accounts)) and any other Indebtedness
at any time held or owing by such Lender, Issuing Bank or any of their
Affiliates to or for the credit or the account of the Borrower against
and on account of the Obligations of the Borrower to such Lender,
Issuing Bank or any of their Affiliates, including, but not limited to,
all Loans and Letters of Credit and all claims of any nature or
description arising out of or in connection herewith, irrespective of
whether or not (i) such Lender or Issuing Bank shall have made any
demand hereunder or (ii) the Agent, at the request or with the consent
of the Requisite Lenders, shall have declared the principal of and
interest on the Loans and other amounts due hereunder to be due and
payable as permitted by Article XI and even though such Obligations may
be contingent or unmatured.
14.06. Ratable Sharing. The Lenders and the Issuing Banks agree among
themselves that, except as otherwise expressly provided in any Loan
Document, (i) with respect to all amounts received by them which are
applicable to the payment of the Obligations (excluding (x) the fees
described in Sections 2.04(g), 3.03, 3.04, 4.01(f) and 4.02 and (y) and
amounts so received in respect of Currency Agreements and/or Interest
Rate Contracts) equitable adjustment shall be made so that, in effect,
all such amounts shall be shared among them ratably in accordance with
their Pro Rata Shares, whether received by voluntary payment, by the
exercise of the right of setoff or banker's lien, by counterclaim or
cross-action or by the enforcement of any or all of such Obligations or
the Collateral, (ii) if any of them shall by voluntary payment or by the
exercise of any right of counterclaim, setoff, banker's lien or
otherwise, receive payment of a proportion of the aggregate amount of
such Obligations held by it which is greater than the amount which such
Lender is entitled to receive hereunder, the Lender receiving such
excess payment shall purchase, without recourse or warranty, an
undivided interest and participation (which it shall be deemed to have
done simultaneously upon the receipt of such payment) in such
Obligations owed to the others so that all such recoveries with respect
to such Obligations shall be applied ratably in accordance with their
Pro Rata Shares; provided, however, that if all or part of such excess
payment received by the purchasing party is thereafter recovered from
it, those purchases shall be rescinded and the purchase prices paid for
such participation shall be returned to such party to the extent
necessary to adjust for such recovery, but without interest except to
the extent the purchasing party is required to pay interest in
connection with such recovery. The Borrower agrees that any Lender so
purchasing a participation from another Lender pursuant to this Section
14.06 may, to the fullest extent permitted by law, exercise all its
rights of payment (including, subject to Section 14.05, the right of
setoff) with respect to such participation as fully as if such Lender
were the direct creditor of the Borrower in the amount of such
participation.
14.07. Amendments and Waivers. (a) General Provisions. Unless
otherwise provided herein, no amendment or modification of any provision
hereof shall be effective without the written agreement of the Requisite
Lenders and the Borrower (and, in the case of an amendment or
modification of Article XII, each of the Guarantors), and no termination
or waiver of any provision hereof, or consent to any departure by the
Borrower therefrom, shall be effective without the written concurrence
of the Requisite Lenders, which the Requisite Lenders shall have the
right to grant or withhold in their sole discretion.
(b) Amendments, Consents and Waivers by Affected Lenders. Any
amendment, modification, termination, waiver or consent hereunder which
has the effect of
(i) waiving any of the conditions with respect to the making or the
extension of the maturities of A Term Loans, B Term Loans or Revolving
Loans specified in Section 5.01 or 5.02 (except with respect to a
condition based upon another provision hereof, the waiver of which
requires only the concurrence of the Requisite Lenders),
(ii) increasing the amount of any of the A Term Commitments, B Term
Commitments or (except with respect to an increase in the amount, or
other modification to the terms or components, of the Borrowing Base)
the Revolving Credit Commitments of any Lender, provided that,
notwithstanding anything to the contrary contained in this Agreement,
any change in the advance rates shall be effective only by a written
agreement signed by the Borrower and each Revolving Credit Lender,
(iii) reducing the principal of, rate or amount of interest on the A
Term Loans, B Term Loans, Revolving Credit Loans or Reimbursement
Obligations or any fees or other amounts payable to any Lender
(including, without limitation, amounts so payable pursuant to Sections
3.01(b) and (c)), or
(iv) extending the Revolving Credit Termination Date, or otherwise
postponing any date on which any payment of principal of, or interest
on, the A Term Loans, B Term Loans, Revolving Credit Loans or
Reimbursement Obligations or any fees or other amounts payable to any
Lender (including, without limitation, amounts so payable pursuant to
Sections 3.01(b) and (c)) would otherwise be due
shall be effective only by a written agreement, signed by the Borrower
and each A Term Lender, in respect of any of the foregoing in respect of
A Term Loans, by the Borrower and each B Term Lender, in respect of any
of the foregoing in respect of B Term Loans, and by the Borrower and
each Revolving Credit Lender, in respect of any of the foregoing in
respect of Revolving Loans or Reimbursement Obligations.
(c) Amendment, Consents and Waivers by all Lenders. Notwithstanding
the foregoing, any amendment, modification, termination, waiver or
consent with respect to any of the following shall be effective only by
a written agreement, signed by each Lender: (a) release of any
guarantor of the Obligations (except in accordance with the proviso to
the first sentence of Section 12.09) or all or any portion of the
Collateral (except as provided in Section 13.09(c)), (b) change in the
aggregate Pro Rata Share of the Lenders which shall be required for the
Lenders or any of them to take action hereunder, (c) change in the
definition of Requisite Lenders, Class A Requisite Lenders or Class B
Requisite Lenders or (d) amendment of Sections 13.09(c) or 14.06 or this
Section 14.07. The Agent may, but shall have no obligation to, with the
written concurrence of any Lender, execute amendments, modifications,
waivers or consents on behalf of that Lender. Any waiver or consent
shall be effective only in the specific instance and for the specific
purpose for which it was given. No notice to or demand on the Borrower
in any case shall entitle the Borrower to any other or further notice or
demand in similar or other circumstances. Notwithstanding anything to
the contrary contained in this Section 14.07, no amendment,
modification, waiver or consent shall affect the rights or duties of the
Agent hereunder or under the other Loan Documents, including this
Article XIV, unless made in writing and signed by the Agent in addition
to the Lenders required above to take such action. Notwithstanding
anything herein to the contrary, in the event that the Borrower shall
have requested, in writing, that any Lender agree to an amendment,
modification, waiver or consent with respect to any particular provision
or provisions hereof, and such Lender shall have failed to state, in
writing, that it either agrees or disagrees (in full or in part) with
all such requests (it being understood that any such statement of
agreement may be subject to satisfactory documentation and other
conditions specified in such statement) within thirty (30) days of such
request, then such Lender hereby irrevocably authorizes the Agent to
agree or disagree, in full or in part, and in the Agent's sole
discretion, to such requests on behalf of such Lender as such Lender's
attorney-in-fact and to execute and deliver any writing approved by the
Agent which evidences such agreement as such Lender's duly authorized
agent for such purposes.
14.08. Notices. Unless otherwise specifically provided herein, any
notice, consent or other communication herein required or permitted to
be given shall be in writing and may be personally served, telecopied,
or sent by courier service and shall be deemed to have been given when
delivered in person or by courier service, or upon receipt of a
telecopy. Notices to the Agent pursuant to Articles II, III or XII
shall not be effective until received by the Agent. For the purposes
hereof, the addresses of the parties hereto (until notice of a change
thereof is delivered as provided in this Section 14.08) shall be as set
forth below each party's name on the signature pages hereof or the
signature page of any applicable Assignment and Acceptance, or, as to
each party, at such other address as may be designated by such party in
a written notice to all of the other parties hereto.
14.09. Survival of Warranties and Agreements. All representations and
warranties made herein and all obligations of the Borrower in respect of
taxes, indemnification and expense reimbursement shall survive the
execution and delivery hereof and of the other Loan Documents, the
making and repayment of the Loans, the issuance and discharge of Letters
of Credit hereunder and the termination hereof and shall not be limited
in any way by the passage of time or occurrence of any event and shall
expressly cover time periods when the Agent, any of the Issuing Banks or
any of the Lenders may have come into possession or control of any of
the Borrower's or the Borrower's Subsidiaries' Property.
14.10. Failure or Indulgence Not Waiver; Remedies Cumulative. No
failure or delay on the part of the Agent, any Lender or any Issuing
Bank in the exercise of any power, right or privilege under any of the
Loan Documents shall impair such power, right or privilege or be
construed to be a waiver of any default or acquiescence therein, nor
shall any single or partial exercise of any such power, right or
privilege preclude other or further exercise thereof or of any other
right, power or privilege. All rights and remedies existing under the
Loan Documents are cumulative to and not exclusive of any rights or
remedies otherwise available.
14.11. Marshalling; Payments Set Aside. None of the Agent, any Lender
or any Issuing Bank shall be under any obligation to marshall any assets
in favor of the Borrower or any other party or against or in payment of
any or all of the Obligations. To the extent that the Borrower makes a
payment or payments to the Agent, the Lenders or the Issuing Banks or
any of such Persons receives payment from the proceeds of the Collateral
or exercise their rights of setoff, and such payment or payments or the
proceeds of such enforcement or setoff or any part thereof are
subsequently invalidated, declared to be fraudulent or preferential, set
aside or required to be repaid to a trustee, receiver or any other
party, then to the extent of such recovery, the obligation or part
thereof originally intended to be satisfied, and all Liens, right and
remedies therefor, shall be revived and continued in full force and
effect as if such payment had not been made or such enforcement or
setoff had not occurred.
14.12. Severability. In case any provision in or obligation hereunder
or under the other Loan Documents shall be invalid, illegal or
unenforceable in any jurisdiction, the validity, legality and
enforceability of the remaining provisions or obligations, or of such
provision or obligation in any other jurisdiction, shall not in any way
be affected or impaired thereby.
14.13. Headings. Section headings herein are included herein for
convenience of reference only and shall not constitute a part hereof or
be given any substantive effect.
14.14. Governing Law. THIS AGREEMENT SHALL BE INTERPRETED, AND THE
RIGHTS AND LIABILITIES OF THE PARTIES HERETO DETERMINED, IN ACCORDANCE
WITH INTERNAL LAW OF THE STATE OF NEW YORK.
14.15. Limitation of Liability. No claim may be made by the Borrower,
any Lender, any Issuing Bank, the Agent or any other Person against the
Agent, any other Issuing Bank or any other Lender or the Affiliates,
directors, officers, employees, attorneys or agents of any of them for
any special, consequential or punitive damages in respect of any claim
for breach of contract or any other theory of liability arising out of
or related to the transactions contemplated hereby, or any act, omission
or event occurring in connection therewith; and the Borrower, each
Lender, each Issuing Bank and the Agent hereby waives, releases and
agrees not to sue upon any such claim for any such damages, whether or
not accrued and whether or not known or suspected to exist in its favor.
14.16. Successors and Assigns. This Agreement and the other Loan
Documents shall be binding upon the parties hereto and their respective
successors and assigns and shall inure to the benefit of the parties
hereto and the successors and permitted assigns of the Lenders and the
Issuing Banks. The rights hereunder and the interest herein of any
Guarantor or the Borrower may not be assigned without the written
consent of all Lenders. Any attempted assignment without such written
consent shall be void.
14.17. Certain Consents and Waivers.
(a) Personal Jurisdiction. (i) EACH OF THE AGENT, THE LENDERS, THE
ISSUING BANKS, EACH GUARANTOR AND THE BORROWER IRREVOCABLY AND
UNCONDITIONALLY SUBMITS, FOR ITSELF AND ITS PROPERTY, TO THE
NONEXCLUSIVE JURISDICTION OF ANY NEW YORK STATE COURT OR FEDERAL COURT
SITTING IN NEW YORK, NEW YORK, AND ANY COURT HAVING JURISDICTION OVER
APPEALS OF MATTERS HEARD IN SUCH COURTS, IN ANY ACTION OR PROCEEDING
ARISING OUT OF, CONNECTED WITH, RELATED TO OR INCIDENTAL TO THE
RELATIONSHIP ESTABLISHED AMONG THEM IN CONNECTION WITH THIS AGREEMENT,
WHETHER ARISING IN CONTRACT, TORT, EQUITY OR OTHERWISE, OR FOR
RECOGNITION OR ENFORCEMENT OF ANY JUDGMENT, AND EACH OF THE PARTIES
HERETO IRREVOCABLY AND UNCONDITIONALLY AGREES THAT ALL CLAIMS IN RESPECT
OF ANY SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN SUCH
STATE COURT OR, TO THE EXTENT PERMITTED BY LAW, IN SUCH FEDERAL COURT.
EACH OF THE GUARANTORS AND THE BORROWER IRREVOCABLY DESIGNATES AND
APPOINTS CT CORPORATION SYSTEM AT 1633 BROADWAY, NEW YORK, NEW YORK
10019, AS ITS RESPECTIVE PROCESS AGENT (THE "PROCESS AGENT") FOR SERVICE
OF ALL PROCESS IN ANY SUCH PROCEEDING IN ANY SUCH COURT, SUCH SERVICE
BEING HEREBY ACKNOWLEDGED TO BE EFFECTIVE AND BINDING SERVICE IN EVERY
RESPECT. EACH OF THE AGENT, THE LENDERS, THE ISSUING BANKS, THE
GUARANTORS AND THE BORROWER AGREES THAT A FINAL JUDGMENT IN ANY SUCH
ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER
JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY
LAW. EACH OF THE GUARANTORS AND THE BORROWER WAIVES IN ALL DISPUTES ANY
OBJECTION THAT IT MAY HAVE TO THE LOCATION OF THE COURT CONSIDERING THE
DISPUTE.
(ii) EACH OF THE GUARANTORS AND THE BORROWER AGREES THAT THE AGENT
SHALL HAVE THE RIGHT TO PROCEED AGAINST SUCH GUARANTOR, THE BORROWER OR
THEIR RESPECTIVE PROPERTY IN A COURT IN ANY LOCATION TO ENABLE THE
AGENT, THE ISSUING BANKS AND THE LENDERS TO REALIZE ON THE COLLATERAL OR
ANY OTHER SECURITY FOR THE OBLIGATIONS, OR TO ENFORCE A JUDGMENT OR
OTHER COURT ORDER ENTERED IN FAVOR OF THE AGENT, ANY ISSUING BANK OR ANY
LENDER. EACH OF THE GUARANTORS AND THE BORROWER WAIVES ANY OBJECTION
THAT IT MAY HAVE TO THE LOCATION OF THE COURT IN WHICH THE AGENT, ANY
ISSUING BANK OR ANY LENDER MAY COMMENCE A PROCEEDING DESCRIBED IN THIS
SECTION.
(b) Service of Process. EACH OF THE GUARANTORS AND THE BORROWER
IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OF ANY OF THE
AFOREMENTIONED COURTS IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF
COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO THE
PROCESS AGENT OR THE BORROWER'S AND/OR SUCH GUARANTOR'S NOTICE ADDRESS
SPECIFIED PURSUANT TO SECTION 14.08, SUCH SERVICE TO BECOME EFFECTIVE
FIVE (5) DAYS AFTER SUCH MAILING. EACH OF THE GUARANTORS AND THE
BORROWER IRREVOCABLY WAIVES ANY OBJECTION (INCLUDING, WITHOUT
LIMITATION, ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS
OF FORUM NON CONVENIENS) WHICH IT MAY NOW OR HEREAFTER HAVE TO THE
BRINGING OF ANY SUCH ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT
OR ANY OTHER LOAN DOCUMENT IN ANY JURISDICTION SET FORTH ABOVE. NOTHING
HEREIN SHALL AFFECT THE RIGHT TO SERVE PROCESS IN ANY OTHER MANNER
PERMITTED BY LAW OR SHALL LIMIT THE RIGHT OF THE AGENT TO BRING
PROCEEDINGS AGAINST THE BORROWER AND/OR ANY GUARANTOR IN THE COURTS OF
ANY OTHER JURISDICTION.
(c) Waiver of Jury Trial. EACH OF THE AGENT, THE ISSUING BANKS, THE
LENDERS, THE GUARANTORS AND THE BORROWER IRREVOCABLY WAIVES TRIAL BY
JURY IN ANY ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR ANY
OTHER LOAN DOCUMENT.
14.18. Counterparts; Effectiveness; Inconsistencies. This Agreement
and any amendments, waivers, consents, or supplements hereto may be
executed in counterparts, each of which when so executed and delivered
shall be deemed an original, but all such counterparts together shall
constitute but one and the same instrument. This Agreement shall become
effective against the Borrower, each Lender, each Issuing Bank and the
Agent on the date hereof. This Agreement and each of the other Loan
Documents shall be construed to the extent reasonable to be consistent
one with the other, but to the extent that the terms and conditions
hereof are actually inconsistent with the terms and conditions of any
other Loan Document, this Agreement shall govern.
14.19. Limitation on Agreements. All agreements between the Borrower,
the Agent, each Lender and each Issuing Bank in the Loan Documents are
hereby expressly limited so that in no event shall any of the Loans or
other amounts payable by the Borrower under any of the Loan Documents be
directly or indirectly secured (within the meaning of Regulation U) by
Margin Stock.
14.20. Confidentiality. Subject to Section 14.01(e), the Lenders and
the Issuing Banks shall hold all nonpublic information obtained pursuant
to the requirements hereof and identified as such by the Borrower in
accordance with such Lender's or such Issuing Bank's customary
procedures for handling confidential information of this nature and in
accordance with safe and sound banking practices and in any event may
make disclosure reasonably required by a bona fide offeree or assignee
(or participant) in connection with the contemplated transfer (or
participation), or as required or requested by any Governmental
Authority or representative thereof, or pursuant to legal process, or to
its accountants, lawyers and other advisors, and shall require any such
offeree or assignee (or participant) to agree (and require any of its
offerees, assignees or participants to agree) to comply with this
Section 14.20. In no event shall any Lender or any Issuing Bank be
obligated or required to return any materials furnished by the Borrower;
provided, however, each offeree shall be required to agree that if it
does not become a assignee (or participant) it shall return all
materials furnished to it by the Borrower in connection herewith.
14.21. Entire Agreement. This Agreement, taken together with all of
the other Loan Documents (other than the engagement letter referred to
below (except for provisions therein specifically referred to herein)),
embodies the entire agreement and understanding among the parties hereto
and supersedes the engagement letter dated April 1, 1994 from Citibank
and accepted and agreed to by the Borrower (except for provisions
therein specifically referred to herein) and all prior agreements and
understandings, written and oral, relating to the subject matter hereof.
IN WITNESS WHEREOF, this Agreement has been duly executed as of the date
first above written.
$150,000,000
SECURED CREDIT FACILITY
to
IMO INDUSTRIES INC.
August 19, 1994
LIST OF CLOSING DOCUMENTS1 I. Closing Documents A.Loan Documents
Credit Agreement, dated as of August 5, 1994 (the "Agreement") among Imo
Industries Inc. (the "Borrower"), Baird Corporation ("Baird"), Varo Inc.
("Varo"), Warren Pumps Inc. ("Warren Pumps", and, collectively with
Baird and Varo, the "Guarantors"), the institutions from time to time
party thereto as lenders (the "Lenders"), the institutions from time to
time party thereto as issuing banks (the "Issuing Banks"), Citibank,
N.A., in its capacity as agent and collateral agent for the Lenders and
the Issuing Banks (in such capacity, the "Agent"), evidencing (i) a
secured term loan and revolving credit facility to be made available to
the Borrower of up to $150,000,000 and (ii) a joint and several guaranty
of all of the Borrower's obligations under the Agreement to be made by
each of the Guarantors, with the Exhibits and Schedules listed below
attached thereto:
EXHIBITS
Exhibit A -- Form of Assignment and Acceptance
Exhibit B -- Form of Lockbox Agreement
Exhibit C -- Form of Borrowing Base Certificate
Exhibit D -- Form of Notice of Borrowing
Exhibit E -- Form of Notice of Continuation/Conversion
Exhibit F -- List of Closing Documents
Exhibit G -- Form of Officer's Certificate to Accompany Reports
SCHEDULES
Schedule 1.01.1 -- Lenders' Commitments as of the Closing Date
Schedule 1.01.2 -- Discontinued Operations
Schedule 1.01.3 -- Permitted Existing Accommodation
Obligations
Schedule 1.01.4 -- Permitted Existing Indebtedness
Schedule 1.01.5 -- Permitted Existing Investments
Schedule 1.01.6 -- Permitted Existing Liens
Schedule 1.01.7 -- Sources and Uses
Schedule 1.01.8 -- Inventory Advance Rates
Schedule 1.01.10 -- Permitted Existing Surety Bonds
Schedule 1.01.11 -- Turbomachinery Businesses
Schedule 6.01-C -- Authorized, Issued and Outstanding Capital
Stock; Subsidiaries
Schedule 6.01-D -- Conflicts with Contractual Obligations and
Requirements of Laws
Schedule 6.01-E -- Governmental Consents
Schedule 6.01-I -- Litigation; Adverse Effects
Schedule 6.01-O -- Environmental Matters
Schedule 6.01-P -- ERISA Matters
Schedule 6.01-R -- Labor Matters
Schedule 6.01-U -- Patents, Trademarks & Permits; Government
Approvals
Schedule 6.01-V -- Assets and Properties
Schedule 6.01-W -- Insurance
Schedule 6.01-Y -- Transactions with Affiliates
Schedule 6.01-AA -- Lockbox Banks; Bank Accounts
Schedule 6.01-BB -- Government Contracts
Schedule 9.02 -- Property Held for Sale
Schedule 9.09 -- Fundamental Changes
Schedule 9.18 -- Bank Accounts
A Term Loan Notes made by the Borrower in favor of the A Term Loan
Lenders in the aggregate principal amount of $40,000,000 evidencing the
obligation to repay the A Term Loans.
B Term Loan Notes made by the Borrower in favor of the B Term Loan
Lenders in the aggregate principal amount of $45,000,000 evidencing the
obligation to repay the B Term Loans.
Revolving Credit Notes made by the Borrower in favor of the Revolving
Credit Lenders in the aggregate principal amount of $65,000,000
evidencing the obligation to repay the Revolving Loans.
Swing Loan Note made by the Borrower in favor of the Swing Loan Bank, in
the principal amount of $5,000,000 evidencing the obligation to repay
the Swing Loans.
Letters of Credit issued on the Closing Date for the account of the
Borrower in favor of each beneficiary set forth in the face amount set
forth opposite such beneficiary:
a.Bankers Trust Company -- $11,483,617.14
b.Bankers Trust Company -- $20,373,087.74
B.Personal Property Security Documents
Borrower Security Agreement executed by the Borrower in favor of the
Agent (the "Borrower Security Agreement"), pursuant to which the
Borrower grants to the Agent a security interest in all of the
Borrower's personal Property.
Baird Security Agreement executed by Baird in favor of the Agent (the
"Baird Security Agreement"), pursuant to which Baird grants to the Agent
a security interest in all of Baird's personal Property.
Varo Security Agreement executed by Varo in favor of the Agent (the
"Varo Security Agreement"), pursuant to which Varo grants to the Agent a
security interest in all of Varo's personal Property.
Warren Pumps Security Agreement executed by Warren Pumps in favor of the
Agent (the "Warren Pumps Security Agreement"), pursuant to which Warren
Pumps grants to the Agent a security interest in all of Warren Pumps
personal property.
Borrower Trademark Security Agreement executed by the Borrower in favor
of the Agent (the "Borrower Trademark Security Agreement"), pursuant to
which the Borrower grants to the Agent a security interest in all of the
Borrower's trademarks, trade names and goodwill.
Baird Trademark Security Agreement executed by Baird in favor of the
Agent (the "Baird Trademark Security Agreement"), pursuant to which
Baird grants to the Agent a security interest in all of Baird's
trademarks, trade names and goodwill.
Varo Trademark Security Agreement executed by Varo in favor of the Agent
(the "Varo Trademark Security Agreement"), pursuant to which Varo grants
to the Agent a security interest in all of Varo's trademarks, trade
names and goodwill.
Warren Pumps Trademark Security Agreement executed by Warren Pumps in
favor of the Agent (the "Warren Pumps Trademark Security Agreement"),
pursuant to which Warren Pumps grants to the Agent a security interest
in all of Warren Pumps' trademarks, trade names and goodwill.
Borrower Patent Security Agreement executed by the Borrower in favor of
the Agent (the "Borrower Patent Security Agreement"), pursuant to which
the Borrower grants to the Agent a security interest in all of the
Borrower's patents and patent licenses.
Baird Patent Security Agreement executed by Baird in favor of the Agent
(the "Baird Patent Security Agreement"), pursuant to which Baird grants
to the Agent a security interest in all of Baird's patents and patent
licenses.
Varo Patent Security Agreement executed by Varo in favor of the Agent
(the "Varo Patent Security Agreement"), pursuant to which Varo grants to
the Agent a security interest in all of Varo's patents and patent
licenses.
Warren Pumps Patent Security Agreement executed by Warren Pumps in favor
of the Agent (the "Warren Pumps Patent Security Agreement"), pursuant to
which Warren Pumps grants to the Agent a security interest in all of
Warren Pumps' patents and patent licenses.
Borrower Copyright Security Agreement executed by the Borrower in favor
of the Agent (the "Borrower Copyright Security Agreement"), pursuant to
which the Borrower grants to the Agent a security interest in all of the
Borrower's copyrights and copyright licenses.
Baird Copyright Security Agreement executed by Baird in favor of the
Agent (the "Baird Copyright Security Agreement"), pursuant to which
Baird grants to the Agent a security interest in all of Baird's
copyrights and copyright licenses.
1 Varo Copyright Security Agreement executed by Varo in favor of the
Agent (the "Varo Copyright Security Agreement"), pursuant to which Varo
grants to the Agent a security interest in all of Varo's copyrights and
copyright licenses.
Borrower Pledge Agreement executed by the Borrower in favor of the Agent
(the "Borrower Pledge Agreement"), evidencing the pledge of (i) all the
issued and outstanding capital stock of (A) Baird, (B) Varo, (C) Warren
Pumps, (D) Delsalesco, Inc., (E) Imosure Assurance Inc., (F) Imovest
Inc., and (G) Imo Industries Inc. together with the stock certificates
and appropriate stock powers undated and endorsed in blank and (ii) all
promissory notes payable to Borrower issued by each Guarantor endorsed
in favor of the Agent.
Lockbox Agreement among the Borrower, the Agent and Wachovia Bank as
Lockbox Bank.
Lockbox Agreement among the Borrower, the Agent and PNC Bank N.A. as
Lockbox Bank.
Lockbox Agreement among Varo, the Agent and Texas Commerce Bank N.A. as
Lockbox Bank.
UCC Lien Search Reports* of filings against the Borrower, Baird, Varo
and Warren Pumps in the offices set forth with respect to the Borrower,
Baird, Varo and Warren Pumps on Schedule I hereto.
Tax Lien and Judgment Search Reports* relating to the Borrower, Baird,
Varo and Warren Pumps in the offices set forth with respect to the
Borrower, Baird, Varo and Warren Pumps on Schedule I hereto.
UCC-1 Financing Statements (the "UCC-1 Financing Statements") filed
against the Borrower, Baird, Varo and Warren Pumps with the offices set
forth on Schedule II hereto.
Loss Payable Endorsement(s) relating to insurance policies covering the
Collateral (with copies of policies attached).
Landlord Waivers relating to the Collateral held on the leased
properties of the Borrower and Warren Pumps located in the following
locations:
Florence, KY
Los Angeles, CA
Chicago, IL
St. Louis, MO
New Orleans, LA
Columbia, KY
Garland, TX
1 Release of Short Term Debt, 10.35% Senior Note, 12.75% Senior Note and
Make Whole Notes evidencing their repayment in full and the termination
of any liens securing such indebtedness.
C. Real Property Security Documents
Mortgage, Security Agreement, Fixture Filing Financing Statement and
Assignment of Rents and Leases, executed by the Borrower in favor of the
Agent in respect of the Charlotte, North Carolina property.
a.Title Commitment/Policy
b.UCC-1 Fixture Filings filed against the Borrower with the Register of
Deeds of Mecklenberg County and the Secretary of State of North
Carolina.
Mortgage, Security Agreement, Fixture Filing Financing Statement and
Assignment of Rents and Leases, executed by the Borrower in favor of the
Agent in respect of the Louisburg, North Carolina property.
a.Title Commitment/Policy
b.UCC-1 Fixture Filings filed against the Borrower with the Register of
Deeds of Franklin County and the Secretary of State of North Carolina.
Mortgage, Security Agreement, Fixture Filing Financing Statement and
Assignment of Rents and Leases, executed by the Borrower in favor of the
Agent in respect of the Trenton, New Jersey property.
a.Title Commitment/Policy
b.UCC-1 Fixture Filings filed against the Borrower with the County Clerk
of Mercer County and the Secretary of State of New Jersey.
Mortgage, Security Agreement, Fixture Filing Financing Statement and
Assignment of Rents and Leases, executed by the Borrower in favor of the
Agent in respect of the Monroe, North Carolina property.
a.Title Commitment/Policy
b.UCC-1 Fixture Filings filed against the Borrower with the County Clerk
of Union County and the Secretary of State of New Jersey.
Mortgage, Security Agreement, Fixture Filing Financing Statement and
Assignment of Rents and Leases, executed by the Borrower in favor of the
Agent in respect of the Hudson, Ohio property.
a.Title Commitment/Policy
b.UCC-1 Fixture Filings filed against the Borrower with the County Clerk
of Summit County and the Secretary of State of Ohio.
Mortgage, Security Agreement, Fixture Filing Financing Statement and
Assignment of Rents and Leases, executed by the Borrower in favor of the
Agent in respect of the Warren, Massachusetts property.
a.Title Commitment/Policy
b.UCC-1 Fixture Filings filed against the Borrower with the County Clerk
of Worcester County and the Secretary of the Commonwealth of
Massachusetts.
Mortgage, Security Agreement, Fixture Filing Financing Statement and
Assignment of Rents and Leases, executed by the Borrower in favor of the
Agent in respect of the Oakland, California property.
a.Title Commitment/Policy
b.UCC-1 Fixture Filings filed against the Borrower with the County Clerk
of Alameda County and the Secretary of State of California.
Mortgage, Security Agreement, Fixture Filing Financing Statement and
Assignment of Rents and Leases, executed by the Borrower in favor of the
Agent in respect of the San Dimas, California property.
a.Title Commitment/Policy
b.UCC-1 Fixture Filings filed against the Borrower with the County Clerk
of Los Angeles County and the Secretary of State of California.
D.Corporate Documents
Certificate of Incorporation of the Borrower together with all
amendments thereto certified by the Secretary of State of Delaware and
Good Standing Certificates for the Borrower from the appropriate offices
of the states set forth on Schedule III hereto under the heading
"Borrower Good Standing Certificates".
Certificate of Incorporation of IIII together with all amendments
thereto certified by the Secretary of State of Delaware and Good
Standing Certificates for IIII from the appropriate offices of the
states set forth on Schedule III hereto under the heading "IIII Good
Standing Certificates".
Articles of Organization of Baird together with all amendments thereto
certified by the Secretary of the Commonwealth of Massachusetts and Good
Standing Certificates for Baird from the appropriate offices of the
states set forth on Schedule III hereto under the heading "Baird Good
Standing Certificates".
Articles of Incorporation of Varo together with all amendments thereto
certified by the Secretary of State of Texas and Good Standing
Certificates for Varo from the appropriate offices of the states set
forth on Schedule III hereto under the heading "Varo Good Standing
Certificates".
Certificate of Incorporation of Warren Pumps together with all
amendments thereto certified by the Secretary of State of Delaware and
Good Standing Certificates for Warren Pumps from the appropriate offices
of the states set forth on Schedule III hereto under the heading "Warren
Pumps Good Standing Certificates".
Certificate of the Assistant Secretary of the Borrower, certifying,
among other things, (i) resolutions of the Board of Directors of the
Borrower authorizing, among other things, the Agreement, the Notes and
the other Loan Documents to which it is a party and the Transaction
Documents to which it is a party, (ii) the names and signatures of the
officers of the Borrower authorized, on behalf of the Borrower, to
execute the Agreement, the Notes, the other Loan Documents and
Transaction Documents to which it is a party and the other instruments
and documents to be executed and delivered on behalf of the Borrower
during the term of the Agreement, (iii) that the copies of the
Transaction Documents to which it is party delivered to the Agent and
the Lenders pursuant to the Agreement are true and correct copies of
such documents and such documents have not been amended from the form of
such documents delivered pursuant thereto, (iv) that attached thereto is
a true and correct copy of the By-laws of the Borrower as in effect on
the date of such certification and (v) that there have been no changes
in the Certificate of Incorporation of the Borrower since the date of
the most recent certification thereof by the Secretary of the State of
Delaware.
Certificate of the Assistant Secretary of Baird, certifying, among other
things, (i) resolutions of the Board of Directors of Baird authorizing,
among other things, the Agreement and the other Loan Documents to which
it is a party and the Transaction Documents to which it is a party, (ii)
the names and signatures of the officers of Baird authorized to execute
the Agreement and the other Loan Documents and Transaction Documents to
which it is a party and the other instruments and documents to be
executed and delivered by Baird during the term of the Agreement, (iii)
that the copies of the Transaction Documents to which it is a party
delivered to the Agent and the Lenders pursuant to the Agreement are
true and correct copies of such documents and such documents have not
been amended from the form of such documents delivered pursuant thereto,
(iv) that attached thereto is a true and correct copy of the By-laws of
Baird as in effect on the date of such certification and (v) that there
have been no changes in the Articles of Organization of Baird since the
date of the most recent certification thereof by the Secretary of the
Commonwealth of Massachusetts.
Certificate of the Assistant Secretary of Varo, certifying, among other
things, (i) resolutions of the Board of Directors of Varo authorizing,
among other things, the Agreement and the other Loan Documents to which
it is a party and the Transaction Documents to which it is a party, (ii)
the names and signatures of the officers of Varo authorized to execute
the Agreement and the other Loan Documents and Transaction Documents to
which it is a party and the other instruments and documents to be
executed and delivered by Varo during the term of the Agreement, (iii)
that the copies of the Transaction Documents to which it is a party
delivered to the Agent and the Lenders pursuant to the Agreement are
true and correct copies of such documents and such documents have not
been amended from the form of such documents delivered pursuant thereto,
(iv) that attached thereto is a true and correct copy of the By-laws of
Varo as in effect on the date of such certification and (v) that there
have been no changes in the Articles of Incorporation of Varo since the
date of the most recent certification thereof by the Secretary of State
of Texas.
Certificate of the Assistant Secretary of Warren Pumps, certifying,
among other things, (i) resolutions of the Board of Directors of Warren
Pumps authorizing, among other things, the Agreement and the other Loan
Documents to which it is a party and the Transaction Documents to which
it is a party, (ii) the names and signatures of the officers of Warren
Pumps authorized to execute the Agreement and the other Loan Documents
and Transaction Documents to which it is a party and the other
instruments and documents to be executed and delivered by Warren Pumps
during the term of the Agreement, (iii) that the copies of the
Transaction Documents to which it is a party delivered to the Agent and
the Lenders pursuant to the Agreement are true and correct copies of
such documents and such documents have not been amended from the form of
such documents delivered pursuant thereto, (iv) that attached thereto is
a true and correct copy of the By-laws of Warren Pumps as in effect on
the date of such certification and (v) that there have been no changes
in the Certificate of Incorporation of Warren Pumps since the date of
the most recent certification thereof by the Secretary of State of
Delaware.
E.Opinions
Opinion of counsel for the Borrower and the Guarantors, appropriate
foreign counsel, addressed to the Agent, the Lenders and the Issuing
Banks together with a certification of compliance with the Indentures
dated as of August 15, 1987 and November 1, 1989, respectively, each
between the Borrower and IBJ Schroder Bank and Trust Company.
Opinion of general counsel of the Borrower and the Guarantors, Thomas J.
Bird addressed to the Agent, the Lenders and the Issuing Banks.
Opinion of counsel of the Borrower, Hopgood, Calimafde, Kalil & Judlowe,
addressed to the Agent, the Lenders and the Issuing Banks concerning the
security interest in intellectual property.
Opinion of California counsel of the Agent, Sidley & Austin, addressed
to the Agent, the Lenders and the Issuing Banks.
Opinion of Massachusetts counsel of the Borrower, Garrahan, Barbieri and
Garrahan, P.C., addressed to the Agent, the Lenders and the Issuing
Banks.
Opinion of New Jersey counsel of the Borrower, Friedman and Siegelbaum,
addressed to the Agent, the Lenders and the Issuing Banks.
Opinion of North Carolina counsel of the Borrower, Womble, Carlyle,
Sandridge & Rice, addressed to the Agent, the Lenders and the Issuing
Banks.
Opinion of Ohio counsel of the Borrower, Kaufman & Cumberland Co.
L.P.A., addressed to the Agent, the Lenders and the Issuing Banks.
Opinion of Texas counsel of the Borrower, Weil, Gotshal & Manges, to the
Agent, the Lenders and the Issuing Banks.
Opinion of Murray, Devine & Co., addressed to the Agent, the Lenders and
the Issuing Banks concerning the solvency of the Borrower and its
Subsidiaries after giving effect to the transactions contemplated in the
Transaction Documents.
F.Miscellaneous
Publication Consent executed by the Borrower and addressed to the
Lenders and the Agent.
Notice of Borrowing executed by the Borrower for the Term Loans to be
advanced to the Borrower on the Closing Date, substantially in the form
of Exhibit D.
Notice of Letter of Credit Issuance executed by the Borrower pursuant to
Section 2.04 of the Agreement.
Borrowing Base Certificate executed by the Borrower for the Revolving
Loans to be advanced to the Borrower on the Closing Date, substantially
in the form of Exhibit C.
Letter from Process Agent accepting the appointment as the Borrower's
and Guarantors' agent in New York, indicating such Process Agent's fees
for the longest contemplated term of the Agreement have been paid in
full in advance.
Privity Letter signed by the Borrower addressed to its independent
accounting firm.
Officer's Certificate of the Borrower setting forth the names of persons
authorized to request Loans and Letters of Credit.
Officer's Certificate of the Borrower certifying the accuracy and
completeness as of the Closing Date of the attached financial statements
of the Borrower and the Borrower's Projections, business plan and pro
forma balance sheet giving effect to the transactions contemplated in
the Loan Documents.
Certificate of the Borrower's chief financial officer certifying the
solvency of the Borrower and its Subsidiaries after giving effect to the
transaction
Report(s) of Dames & Moore, environmental review relating to any
environmental hazards or liabilities to which the Borrower or its
Subsidiaries may be subject.
Appraisals of the mortgaged real estate, in form, scope and substance
satisfactory to the Agent, from a nationally recognized appraisal firm
approved by the Agent.
G.Postclosing Matters
Within 90 days after the Closing Date, an English Pledge Agreement in
form and substance satisfactory to the Agent executed by Imo Industries
(UK) Limited in favor of the Agent evidencing the pledge of 65% of all
the issued and outstanding capital stock of (i) Imo Industries Limited
and (ii) Morse Controls Limited (the "English Pledge Agreement") and
evidence satisfactory to the Agent that the pledge created pursuant to
the English Pledge Agreement is effective against third parties under
English law.
Within 90 days after the Closing Date, a Swedish Pledge Agreement
executed by Imo Industries International Inc. in favor of the Agent
evidencing the pledge of 65% of all the issued and outstanding capital
stock of Imo AB (the "Swedish Pledge Agreement") and evidence
satisfactory to the Agent that the pledge created pursuant to the
Swedish Pledge Agreement is effective against third parties under
Swedish law.
Within 90 days after the Closing Date, a German Pledge Agreement
executed by IIII in favor of the Agent evidencing the pledge of 65% of
all the issued and outstanding capital stock of Imo GmbH (the "German
Pledge Agreement") and evidence satisfactory to the Agent that the
pledge created pursuant to the German Pledge Agreement is effective
against third parties under German law.
Within 120 days after the Closing Date, an Italian Pledge Agreement
executed by IIII in favor of the Agent evidencing the pledge of 65% of
all the issued and outstanding capital stock of Componentistica Europea
SRL (the "Italian Pledge Agreement", and together with the English
Pledge Agreement, the Swedish Pledge Agreement, and the German Pledge
Agreement, collectively the "Foreign Pledge Agreements") and evidence
satisfactory to the Agent that the pledge created pursuant to the
Italian Pledge Agreement is effective against third parties under
Italian law; provided that if the Agent shall determine that a
substantial tax would be payable in connection with the registration of
the pledge under Italian law, the Agent may, in its sole discretion,
waive the requirement that such pledge be effective against third
parties.
Within 90 days of the Closing Date, Certificate of the Secretary of
IIII, certifying, among other things, (i) resolutions of the Board of
Directors of IIII authorizing, among other things, the Loan Documents
and Transaction Documents to which it is a party, (ii) the names and
signatures of the officers of IIII authorized to execute the Loan
Documents and Transaction Documents to which it is a party and the other
instruments and documents to be executed and delivered by IIII during
the term of the Agreement, (iii) that attached thereto is a true and
correct copy of the By-laws of IIII as in effect on the date of such
certification and (iv) that there have been no changes in the
Certificate of Incorporation of IIII since the date of the most recent
certification thereof by the Secretary of State of Delaware.
Within 90 days of the Closing Date, Opinion of counsel for IIII,
appropriate foreign counsel, addressed to the Agent, the Lenders and the
Issuing Banks, addressing the due authorization, execution, and delivery
of the Foreign Pledge Agreements and such other matters as may be
requested by the Agent.
Within 60 days after the Closing Date, requests for Notices of
Assignment of all Material Government Contracts pursuant to Section 8.15
of the Agreement.
Postclosing Lien Search Reports of filings against the Borrower, Baird,
Varo and Warren Pumps in the offices set forth with respect to the
Borrower, Baird, Varo and Warren Pumps on Schedule II hereto.
Within 90 days after the Closing Date, Surveys with respect to each of
the Real Property subject to a Lien in favor of the Agent.
Within 5 Business Days after the Closing Date, Schedules to the Patent
and Trademark Security Agreements for each of the Borrower, Baird, Varo
and Warren Pumps and the Copyright Security Agreements for each of the
Borrower, Baird, and Varo.
Within 5 Business Days after the Closing Date, Stock Certificate No. __
for 100 shares of Imosure Assurance, Inc. issued in the name of the
Borrower.
Within 5 Business Days after the Closing Date, mortgage releases
relating to the following properties located in Garland, Texas:
a.900-932 Shiloh;
b.3609 Marquis Street;
c.2 Shiloh; and
d.1010 Shiloh.
ASSET PURCHASE AGREEMENT
by and among
IMO INDUSTRIES INC.,
VARO INC.,
BAIRD CORPORATION,
OPTIC ELECTRONIC INTERNATIONAL, INC.
and
TPG PARTNERS, L.P.
VARO ACQUISITION CORP.
Dated as of October 14, 1994
TABLE OF CONTENTS
ARTICLE I 2
DEFINITIONS 2
ARTICLE II 12
PURCHASE AND SALE 12
2.01 Purchase and Sale of Assets 12
2.02 Purchase Price; Payment 12
2.03 Adjustments to Purchase Price 13
2.04 Allocation of Purchase Price 15
2.05 Assumption of Liabilities 15
2.06 Taxes 18
ARTICLE III 18
REPRESENTATIONS AND WARRANTIES OF SELLERS AND IMO 18
3.01 Organization and Authority of Sellers and IMO 19
3.02 Legal Capacity; Approvals and Consents 19
3.03 Financial Statements 21
3.04 Absence of Certain Changes or Events 22
3.05 Tax Returns; Other Reports 23
3.06 Real Property 24
3.07 Equipment 26
3.08 Intellectual Property 27
3.10 Cooperative Business Agreements 33
3.11 Insurance 34
3.12 Certain Employment Matters 34
3.13 Legal and Governmental Proceedings and Judgments 35
3.14 Finders and Brokers 36
3.15 Export Control and Related Matters 36
3.16 Books and Records 37
3.17 Transactions with Affiliates 37
3.18 Accounts Receivable; Reserves 37
3.19 Environmental Matters 38
3.20 Backlog 40
3.21 Inventory 40
3.22 Title; Liens 40
3.23 Unimpaired Operation 41
3.24 Imo 41
3.25 Letters of Credit. 42
ARTICLE IV 42
REPRESENTATIONS AND WARRANTIES OF BUYER AND TPG 42
4.01 Organization and Authority of Buyer and TPG 42
4.02 Legal Capacity; Approvals and Consents. 42
4.03 Legal and Governmental Proceedings and Judgments 44
4.04 Finders and Brokers 44
4.05 Availability of Funds 44
4.06 TPG and Holdings. 44
ARTICLE V 45
COVENANTS, CONDUCT PENDING THE CLOSING; 45
ACCESS TO INFORMATION 45
5.01 Sellers' and Imo's Covenants 45
5.02 Buyer's Covenants 48
5.03 Joint Covenants 49
ARTICLE VI 50
DELIVERIES BY SELLERS 50
6.01Closing Documents 50
ARTICLE VII 51
DELIVERIES BY BUYER 51
7.01Closing Documents 51
ARTICLE VIII 53
CONDITIONS OF BUYER'S OBLIGATIONS 53
8.01 Receipt of Consents 53
8.02 Solvency 54
8.03 Subcontracts 54
8.04 Short-Term Leases 54
8.05 Performance by Sellers and Imo 55
8.06 Truth of Representations and Warranties 55
8.07 Deliveries 55
8.08 Absence of Proceedings 55
8.09 No Material Changes 55
8.10 Closing Documents 56
8.11 Review of Financial Statements 56
8.12 Debarment 56
8.13 Purchase of TEJ Stock 57
ARTICLE IX 57
CONDITIONS OF SELLERS' OBLIGATIONS 57
9.01 Receipt of Consents 57
9.02 Performance by Buyer and TPG 57
9.03 Truth of Representations and Warranties 58
9.04 Deliveries 58
9.05 Absence of Proceedings 58
9.06 Closing Documents 58
9.07 Sale of TEJ Stock 58
ARTICLE X 58
MUTUAL COVENANTS 58
10.01 Compliance with Conditions 58
10.02 Compliance with HSR Act 59
10.03 Assignments; Novations 60
10.04 Provisions Relating to Certain Assets. 63
ARTICLE XI 65
CONTINUING OBLIGATIONS OF SELLERS AND IMO 65
11.01 Sellers' and Imo's Indemnity 65
11.02 Notification by Buyer; Defense of Claims 69
11.03 [Intentionally omitted] 70
11.04 Determination of Damages and Related Matters 70
11.05 Non-Competition 72
11.06 Employee Terminations; Incentive Payments 72
11.07 Use of Transferred Employees 75
11.08 Letters of Credit 76
11.09 Further Assurances 76
11.10 Right to Subcontract 76
ARTICLE XII 77
CONTINUING OBLIGATIONS OF BUYER AND TPG 77
12.01 Buyer's Indemnity 77
12.02 Notification by Sellers; Defense of Claims 79
12.03 Determination of Damages and Related Matters 79
12.04 Various Employee Matters 80
12.05 AIM-9 Claim Settlement 80
12.06 Reimbursement for Certain Environmental Costs 81
ARTICLE XIII 81
SURVIVAL OF REPRESENTATIONS AND WARRANTIES; 81
CONFIDENTIALITY 81
13.01 Survival of Representations and Warranties 81
13.02 Confidential Information 81
13.03 Injunctive Relief 82
ARTICLE XIV 83
CLOSING 83
14.01 Closing 83
14.02 Occurrence of Events 83
14.03 Termination 83
14.04 Liability; Remedies Upon Default 84
ARTICLE XV 85
MISCELLANEOUS 85
15.01 Legal Costs 85
15.02 Amendments; Waivers 85
15.03 Entire Agreement 85
15.04 Binding Effect; Assignment 86
15.05 Construction; Counterparts 86
15.06 Notices 86
15.07 GOVERNING LAW 87
15.08 Merger of Documents 87
15.09 Incorporation of Exhibits and Schedules 87
15.10 Severability 87
SCHEDULES
1A Excluded Assets
2.05(a) Assumed Liabilities
3.01 Subsidiaries and Equity Interests of Sellers
3.02(b) No Violation by Sellers
3.02(c) Consents
3.03 Financial Statements
3.04 Certain Changes or Events
3.05 Tax Matters
3.06 Real Property
3.07(a) Equipment
3.07(c) Government-Owned Property
3.08 Intellectual Property
3.09(a) Material Contracts
3.09(b) Defaults
3.09(c) Other Contracts
3.09(e) Bids
3.09(f) Contract Matters
3.10 Cooperative Business Agreements
3.11 Insurance Policies
3.12(a) Labor Matters
3.12(b) Employee Benefit Plans
3.12(c) Benefit Arrangements
3.12(d) Salaried Employees
3.13 Legal Proceedings
3.17 Transactions with Affiliates
3.19 Environmental Matters
3.19(a) Environmental Permits
3.20 Backlog
3.22 Title; Liens
3.25 Letters of Credit
4.02(b) No Violation by Buyer
4.02(c) Buyer Consents
8.01 Required Sellers' Consents
8.12 Key Employees
9.01 Required Buyer's Consents
11.06 Nontransferred Employees
EXHIBITS
A [Intentionally Omitted]
B Example Initial Balance Sheet
C Example Interim Balance Sheet
D Bill of Sale and Assignment
E Agreement of Assignment and Assumption
F Imo Solvency Certificate
G Accountant's Certification
ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement (the "Agreement") is made and entered into
as of October 14, 1994, by and among Varo Inc., a Texas corporation
("Varo"), Baird Corporation, a Massachusetts corporation ("Baird"), and
Optic Electronic International, Inc., a Texas close corporation ("OEII")
(Varo, Baird and OEII are referred to hereinafter collectively as the
"Sellers" and individually as a "Seller"), and Varo Acquisition Corp., a
Delaware corporation ("Buyer"). Imo Industries Inc., a Delaware
corporation ("Imo") and sole shareholder of Varo and Baird, joins in
this Agreement for the purposes specified herein and for the purpose of
guaranteeing each and every obligation of Sellers or any of them that is
to be performed hereunder. TPG Partners, L.P., a Delaware limited
partnership ("TPG") and indirect majority shareholder of Buyer, hereby
joins in this Agreement for the purposes specified herein and for the
purpose of guaranteeing each and every obligation of Buyer that is to be
performed hereunder at or prior to Closing.
W I T N E S S E T H :
WHEREAS, Sellers, directly and indirectly, principally through the
Electro-Optical Systems Division of Varo, the Optical Systems Division
of Baird and the Electronic Systems Division of Varo, are engaged in the
business of design, development, production, processing and sale of
image intensifier night vision components and systems, laser products
and other optical systems, guided missile launcher systems and electric
power conversion systems for military applications, commercial
customers, the United States government and certain foreign governments
(collectively, the "Businesses"), and Sellers own, directly and
indirectly, certain assets and properties utilized in the Businesses;
and
WHEREAS, Sellers desire to sell and Buyer desires to purchase
substantially all of the assets and properties owned by Sellers and
employed exclusively in the Businesses pursuant to the terms and
conditions contained in this Agreement;
NOW, THEREFORE, for and in consideration of the mutual covenants
contained herein and other good and valuable consideration, the receipt
and sufficiency of which hereby are acknowledged, the parties do hereby
mutually agree as follows:
ARTICLE I
DEFINITIONS
Unless otherwise stated in this Agreement, the following terms used
herein shall have the following meanings (such meanings to be equally
applicable to both the singular and plural forms of the terms defined):
Acquired Assets: All assets (tangible or intangible, real, personal or
mixed) owned or leased or otherwise possessed by Sellers that are
employed exclusively in the business and operations of the Businesses,
now in existence or hereafter acquired by Sellers prior to Closing,
including, without limitation, the Real Property, the Equipment, the
Contracts, the Intellectual Property, cash and cash equivalents, raw
materials, supplies, work-in-progress inventory, inventory, interests in
government-furnished equipment, fixtures, accounts receivable, permits
or licenses to conduct the Businesses, and any and all derivations and
combinations thereof; such Acquired Assets to include, without
limitation, (i) Varo's currently pending claims against Hughes Aircraft
Company relating to termination of the TOSH contract and against Delco
Electronics relating to work performed by Varo for Delco Electronics;
(ii) Varo's rights under the loan agreements and related documents with
Orlil Ltd. and Eitam Israel Advanced Industries, Ltd.; (iii) the
constructive change claim filed by Varo pursuant to the AIM-9 launcher
contract No. F09603-86-C-2278 and currently pending against the United
States Department of the Air Force (the "AIM-9 Claim"); (iv) Sellers'
interest in the joint venture between ITT and Varo; (v) all of OEII's
operating assets, including, without limitation, all of OEII's inventory
and accounts receivable; (vi) a fee interest in the facility located at
3414 Herrmann Drive, Garland, Texas; (vii) assignments of Sellers'
leasehold interests in the Long-Term Lease Facilities; and (viii) the
assets used in connection with Imo's office located in Alexandria,
Virginia; provided, however, that the Acquired Assets shall not include
the Excluded Assets or any assets employed exclusively in the Businesses
that are disposed of by Sellers prior to the Closing in the usual and
ordinary course of business and not in violation of this Agreement.
Agreement: This Agreement and the Schedules and Exhibits attached
hereto.
Assumed Environmental Liabilities: As defined in Section 2.05(a).
Assumed Liabilities: As defined in Section 2.05(a).
Balance Sheet: As defined in Section 3.03.
Benefit Arrangement: As defined in Section 3.12(c).
Business Day: Any day of the year on which national banking
institutions in Dallas, Texas are open to the public for conducting all
regular business and are not required or authorized to close.
Businesses: As defined in the preamble to this Agreement.
Buyer: As defined in the preamble to this Agreement.
Buyer's Counsel: The law firms of Kelly, Hart & Hallman, a professional
corporation, located at 201 Main Street, Suite 2500, Fort Worth, Texas
76102, and Hogan & Hartson, L.L.P., located at 555 13th Street, N.W.,
Washington, D.C. 20006, which represent Buyer and TPG in the
transactions contemplated hereby.
Buyer Documents: As defined in Section 4.02(a).
Buyer Indemnitees: As defined in Section 11.01(b).
Buyer Material Adverse Effect: Any material adverse change in, or any
matter that is reasonably likely to result in a material adverse change
in, the business, condition (financial or otherwise) or results of
operations of Buyer or TPG, in each case taken as a whole.
Cash Infusion: As defined in Section 5.01(f).
Charter Documents: With respect to a corporation, the articles or
certificate of incorporation or similar incorporation document, and the
bylaws or similar corporate governing document, as in effect on the date
hereof, and with respect to any partnership, the partnership agreement
or limited partnership agreement, as in effect on the date hereof.
Closing: The consummation of the transactions contemplated by this
Agreement, upon the terms and subject to the conditions set forth
herein, held at the place and on the date fixed in accordance with
Section 14.01.
Closing Date: The date fixed for the Closing in accordance with Section
14.01.
Closing Balance Sheet: As defined in Section 2.03(b).
Contract: Any contract, subcontract, purchase order, mortgage, deed of
trust, conditional sale contract, bond, indenture, lease, sublease,
franchise, license, sublicense, note, certificate, option, warrant,
right, or other instrument, document, commitment or other binding
arrangement or agreement, whether written or oral, including, without
limitation, Government Contracts.
Code: The Internal Revenue Code of 1986, as amended.
Covered Contract: As defined in Section 11.04.
Damages: As defined in Section 11.01(b).
Deductible: As defined in Section 11.01(c).
DOJ: The United States Department of Justice.
Egyptian Investigation: The investigation currently being conducted by
the DOJ with respect to certain Contracts between one or more Sellers
and the Arab Republic of Egypt and certain alleged Foreign Corrupt
Practices Act violations and other violations by one or more Sellers, as
initiated by the subpoena dated April 7, 1994.
Employee Benefit Plan: As defined in Section 3.12(b).
Environmental Laws: As defined in Section 3.19.
EPA: As defined in Section 3.19(d).
Equipment: All machinery, business machines, test equipment, tools,
dies, subassemblies, computer systems and software, electronic devices,
hardware, tools, inventory, spare parts, engineering data, vehicles,
furniture and furnishings, documents, data, books and records, all other
fixed assets and rights appurtenant to any of the foregoing, and all
other tangible personal property used or held for use in the Businesses.
ERISA: As defined in Section 3.12(b).
Estimated Equity Deficit: As defined in Section 2.03(a).
Estimated Equity Excess: As defined in Section 2.03(a).
Excluded Assets: The assets and properties owned or leased by Sellers
listed on Schedule 1A.
Export Control Laws: All Laws, now or hereafter in effect, and in each
case as amended or supplemented from time to time, and any judicial or
administrative interpretations thereof, relating to the export or
reexport of commodities and technologies. Export Control Laws include,
without limitation, the Export Administration Act of 1979 (24 U.S.C.
Sections 2401-2420); the International Emergency Economic Powers Act (50
U.S.C. Sections 1701-1706); the Trading with the Enemy Act (50 U.S.C.
Sections 1 et seq); the Arms Export Control Act (22 U.S.C. Sections
2278, 2279); and the International Boycott Provisions of Section 999 of
the Code.
FAR: The Federal Acquisition Regulation.
FTC: The United States Federal Trade Commission.
Final Equity Deficit: As defined in Section 2.03(b).
Final Equity Excess: As defined in Section 2.03(b).
Financial Statements: As defined in Section 3.03.
Government Contracts: All bids, quotations and proposals prepared for,
and all contracts, options, agreements, commitments or sales or purchase
orders with, the United States government or a department or agency
thereof, including, without limitation, all contracts to supply goods
and services.
Governmental Authority: The federal government of the United States, or
any state, county, municipal or local governmental unit or political
subdivision located within the United States in which the Businesses are
conducted, any foreign government or other governmental unit or
political subdivision of a jurisdiction in which the Businesses are
conducted, and any governmental agency, bureau, department, commission,
authority or body of any of the foregoing.
Hazardous Material: As defined in Section 3.19.
HSR Act: The Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended, and the rules and regulations promulgated thereunder.
HSR Report: The Notification and Report Form for Certain Mergers and
Acquisitions mandated by the HSR Act.
Initial Balance Sheet: As defined in Section 2.03(a).
Intellectual Property: All United States and foreign (i) patents and
patent applications (including reissues, divisions, continuations-in-
part and extensions thereof), invention disclosures, inventions and
improvements thereto, (ii) trademarks, trade names, service marks, trade
dress and logos and registrations and applications for registration
thereof, (iii) copyrights and registrations thereof, (iv) research,
developments, processes, trade secrets, know-how, formulae,
compositions, designs, parts routings and manufacturing, engineering and
other technical information, (v) computer software, data and
documentation (in whatever form or medium, including electronic media),
(vi) mask work and other semiconductor chip rights and registrations
thereof and (vii) licenses of any of the foregoing, which are employed
or held for employment exclusively in the Businesses and which are
included in the Acquired Assets, and all rights to sue for, and remedies
against, past, present and future infringements thereof and rights of
priority and protection of interests therein under the Laws of any
jurisdiction.
Interests: As defined in Section 10.04.
Interim Balance Sheet: As defined in Section 2.03(a).
Investigations: The Ni-Tec Investigation and the Egyptian
Investigation, collectively.
Judgment: Any judgment, writ, order, injunction, award or decree of or
by any court, judge, justice or magistrate, including any bankruptcy
court or judge, and any order of or by any Governmental Authority.
Law: Applicable common law and any statute, ordinance, code, treaty, or
other law, rule, regulation, order, technical or other standard,
requirement or procedure enacted, adopted, promulgated, applied or
followed by any Governmental Authority or court; provided, however, that
Law shall not include any Environmental Law.
Letters of Credit: As defined in Section 3.25.
Lien: Any security agreement, financing statement filed with an
appropriate Governmental Authority, conditional sale or other title
retention agreement, any lease, consignment or bailment given for
security purposes, any lien, mortgage, pledge, option, encumbrance,
adverse interest, constructive trust or other trust, claim, attachment,
exception to or defect in title or other ownership interest (including,
without limitation, reservations, rights of entry, possibilities of
reverter, encroachments, easements, rights of way, restrictive
covenants, leases and licenses) of any kind, which (i) creates or
confers an interest in property to secure payment or performance of a
liability, obligation or claim, or which retains or reserves such an
interest for such purpose; (ii) grants to any Person the right to
purchase or otherwise acquire, or obligates any Person to sell or
otherwise dispose of, or otherwise results or may result in any Person
acquiring, any property or interest therein; (iii) restricts the
transfer of, or the exercise of any rights or the enjoyment of any
benefits arising by reason of ownership of, any property; or (iv)
otherwise constitutes an interest in or claim against property whether
arising pursuant to any Law, Contract or Judgment.
Long-Term Lease Facilities: The following facilities, collectively: (A)
2800 West Kingsley Road, Garland, Texas; (B) 9839 Chartwell Drive,
Dallas, Texas; (C) Shepard Industrial Park; and (D) 2201-2203 West
Walnut Street, Garland, Texas.
Loral: Loral Electro-Optical Systems.
Material Adverse Effect: Any material adverse change in, or any matter
that is reasonably likely to result in a material adverse change in, the
Acquired Assets as a whole or the business, condition (financial or
otherwise), results of operations or liabilities of the Businesses,
taken as a whole.
Material Contracts: As defined in Section 3.09(a).
Ni-Tec Investigation: The grand jury investigation into prior testing
and quality control reporting procedures of the Ni-Tec Division of Varo
currently being conducted by the United States Attorneys' Office for the
Northern District of Texas, as initiated by the subpoena dated July 16,
1992.
Novation Agreements: As defined in Section 10.03(b).
Permitted Liens: As defined in Section 3.22.
Person: Any natural person, corporation, general or limited
partnership, limited liability company, limited liability partnership,
joint venture, trust, association, or unincorporated entity of any kind.
Pro Forma Balance Sheet: The Balance Sheet adjusted by Sellers and
Buyer so as to exclude the Excluded Assets and the Retained Liabilities.
Purchase Price: As defined in Section 2.02.
Real Property: The realty, Real Property Interests, buildings and
improvements used or held for use in the Businesses listed on Schedule
3.06 hereto, except to the extent the same constitute Excluded Assets.
Real Property Interests: As defined in Section 3.06.
Required Buyer's Consents: As defined in Section 9.01.
Required Sellers' Consents: As defined in Section 8.01.
Retained Environmental Liabilities: Any liability or obligation (other
than Assumed Environmental Liabilities) relating to any environmental
condition in existence as of the Closing Date, including, without
limitation, any liability or obligation resulting from any act or
omission of any Seller (including, without limitation, any noncompliance
with any Environmental Law) prior to the Closing Date.
Retained Liabilities. As defined in Section 2.05(b).
Sellers: As defined in the preamble to this Agreement.
Sellers' Counsel: The law firm of Baker & Botts, L.L.P., located at
2001 Ross Avenue, Dallas, Texas 75201-2980, and Thomas J. Bird, Senior
Vice President and General Counsel of Imo, each representing Sellers and
Imo in the transactions contemplated hereby.
Sellers' Knowledge: The knowledge of the following officers and/or
employees, and their respective successors, of Imo or Sellers, as
applicable: J. Dwayne Attaway, Ann M. Barney, Thomas J. Bird, William
M. Brown, Donald K. Farrar, Ricahrd Franchetti, G. Duane Hall, Edwin L.
Jackson, Steven A. Lambert, Michael R. Malone, Jeremy M. Quick, Thomas
S. Raley and Pat N. Thurman.
Seller Documents: As defined in Section 3.02.
Seller Indemnitees: As defined in Section 12.01(a)
Short-Term Lease Facilities: As defined in Section 8.04.
Special Damages: As defined in Section 11.01(b).
Subsidiary: With respect to any Person, a corporation, partnership or
other entity in which such Person, a Subsidiary of such Person or such
Person and one or more Subsidiaries of such Person, directly or
indirectly, has or have (i) a majority ownership in the equity thereof,
(ii) the power, under ordinary circumstances, to elect, or to direct the
election of, a majority of the board of directors or other governing
body of such entity, (iii) the title or function of general partner or
the right to designate the Person having such title or function or (iv)
control thereof.
Taxes: All taxes, charges, fees, levies or other similar assessments or
liabilities (including, without limitation, income, receipts, ad
valorem, value added, excise, property (whether real property or
personal property), sales, transfer, occupation, service, stamp, use,
licensing, withholding, employment or unemployment, payroll, share,
capital, surplus, profits, franchise, occupational, net worth or other
taxes) imposed by any tax authority, whether computed on a separate,
consolidated, unitary or combined basis or in any other manner, and
includes any interest, fines, penalties, assessments, deficiencies or
additions to tax.
TEJ: Tecnologia Electronica de Juarez, S.A. de C.V., a corporation
organized under the laws of Mexico and a Subsidiary of Varo.
TEJ Stock Purchase Agreement: As defined in Section 5.03(d).
WARN Act: As defined in Section 11.06(b).
ARTICLE II
PURCHASE AND SALE
2.01 Purchase and Sale of Assets. At the Closing, upon the terms and
conditions set forth in this Agreement, Sellers shall sell, convey,
transfer, assign and deliver to Buyer, and Buyer shall purchase, accept
and receive, all of Sellers' right, title and interest in and to the
Acquired Assets.
2.02 Purchase Price; Payment. The aggregate purchase price (the
"Purchase Price") for the Acquired Assets shall be SEVENTY ONE MILLION
EIGHT HUNDRED FORTY THOUSAND AND NO/100 DOLLARS ($71,840,000.00),
subject to adjustment pursuant to Section 2.03. In addition, Buyer will
assume and perform the Assumed Liabilities as provided in Section
2.05(a) hereof. The Purchase Price, as adjusted herein, shall be
payable by Buyer to Sellers in cash at the Closing by wire transfer of
immediately available funds to such bank accounts as designated by
Sellers in writing to Buyer at least twenty-four hours prior to the
Closing Date.
It is understood and agreed by Sellers (and all persons claiming by,
through or under them) that upon delivery of the Purchase Price (as
adjusted as provided herein) payable by Buyer to Sellers hereunder in
accordance with Sellers' instructions, Buyer shall have no
responsibility or liability for the application of the proceeds by
Sellers and shall be deemed to have satisfied its obligations hereunder
with respect to the payment of the Purchase Price and shall have no
further liability to Sellers or any other Person with respect to the
making of such payment.
2.03 Adjustments to Purchase Price. (a) Promptly following the
execution hereof, Sellers shall cause the independent accounting firm of
Ernst & Young to perform an audit in accordance with generally accepted
accounting principles with respect to the Pro Forma Balance Sheet (the
audited balance sheet resulting therefrom is hereinafter referred to as
the "Initial Balance Sheet"), and to deliver copies of the Initial
Balance Sheet to Buyer and Sellers no later than ten Business Days prior
to the Closing Date. In addition, no later than ten Business Days prior
to the Closing Date, Sellers shall have prepared and delivered to Buyer
an unaudited pro forma combined balance sheet for the Businesses as of
the end of the most recent calendar month for which information is
available (but in no event as of the end of a month that precedes the
month in which the Closing occurs by more than two months) (the "Interim
Balance Sheet"), which shall be prepared in good faith and on a basis
consistent with the Initial Balance Sheet, except that any amounts
theretofore contributed by Imo in accordance with Section 5.01(f) hereof
shall be disregarded for purposes of preparing the Interim Balance
Sheet. To the extent that total equity as reflected on the Interim
Balance Sheet exceeds total equity as reflected on the Initial Balance
Sheet (the amount of such excess being referred to herein as the
"Estimated Equity Excess"), the Purchase Price payable by Buyer at
Closing pursuant to Section 2.02 shall be increased by the Estimated
Equity Excess, and, to the extent that total equity as reflected on the
Interim Balance Sheet is less than total equity as reflected on the
Initial Balance Sheet (the amount of such deficit being referred to
herein as the "Estimated Equity Deficit"), the Purchase Price payable by
Buyer at Closing pursuant to Section 2.02 shall be decreased by the
Estimated Equity Deficit. Solely by way of example, the parties
acknowledge and agree that if the Initial Balance Sheet were in the form
attached hereto as Exhibit B and if the Interim Balance Sheet were as
indicated in the column styled "Nov 1994" on Exhibit C attached hereto,
the Estimated Equity Deficit would be $3,694,000.
(b) As soon as practicable (but in no event later than 90 days)
following the Closing Date, Sellers shall cause Ernst & Young to prepare
and deliver to Buyer and Sellers an audited pro forma combined balance
sheet for the Businesses as of the Closing Date (the "Closing Balance
Sheet"), which shall be prepared in accordance with generally accepted
accounting principles and on a basis consistent with the Initial Balance
Sheet, except that the Cash Infusion will be disregarded for purposes of
preparing the Closing Balance Sheet. The amount by which total equity
as reflected on the Closing Balance Sheet exceeds total equity as
reflected on the Initial Balance Sheet is referred to herein as the
"Final Equity Excess," and the amount by which total equity as reflected
on the Closing Balance Sheet is less than total equity as reflected on
the Initial Balance Sheet is referred to herein as the "Final Equity
Deficit." If (a) the Final Equity Excess is greater than the Estimated
Equity Excess, or (b) the Final Equity Deficit is less than the
Estimated Equity Deficit or (c) there is a Final Equity Excess and an
Estimated Equity Deficit, then Buyer shall promptly pay to Sellers an
amount in cash equal to the difference between such amounts (which, in
the case of clause (c), shall be the sum of such amounts, each stated as
a positive number), together with interest thereon from the Closing Date
computed at the prime rate of Bankers Trust Company in effect on the
Closing Date. If (a) the Final Equity Excess is less than the Estimated
Equity Excess, or (b) the Final Equity Deficit is greater than the
Estimated Equity Deficit or (c) there is a Final Equity Deficit and an
Estimated Equity Excess, then Sellers shall promptly pay to Buyer an
amount in cash equal to the difference between such amounts (which, in
the case of clause (c), shall be the sum of such amounts, each stated as
a positive number), together with interest thereon from the Closing Date
computed at the prime rate of Bankers Trust Company in effect on the
Closing Date.
(c) All fees and expenses of Ernst & Young for performing the audits
required by this Section 2.03 shall be paid one-half by Sellers and one-
half by Buyer.
2.04 Allocation of Purchase Price. The Purchase Price shall be
allocated, for federal income tax purposes, among the Acquired Assets in
accordance with Section 1060 of the Code, and the Treasury Regulations
promulgated thereunder. Buyer and Sellers shall negotiate in good faith
to reach an agreement, as soon as practicable following the execution
hereof, as to the proper allocation of the Purchase Price among the
Acquired Assets. The parties further agree to file all tax returns and
reports (including IRS Form 8594) in a manner consistent with such
agreed allocation. Any disputes among Sellers and Buyer as to such
allocation shall be resolved by the independent public accounting firm
of KPMG Peat Marwick, which resolution shall be final and binding on the
parties.
2.05 Assumption of Liabilities.
(a) On the Closing Date, Buyer shall assume and agree to pay, perform
and discharge (i) those debts, claims, liabilities, obligations, damages
and expenses of Sellers described on Schedule 2.05(a); (ii) those debts,
claims, liabilities, obligations, damages and expenses that are to be
reflected or reserved for on the Closing Balance Sheet except as
otherwise provided herein; (iii) those debts, claims, liabilities,
obligations, damages and expenses (but excluding fines and penalties)
that arise in connection with those matters disclosed on Schedule 3.19
hereto in an amount up to (but not exceeding) $500,000, reduced by the
amount of any reimbursements by Buyer to Sellers pursuant to Section
12.06 hereof (collectively, the "Assumed Environmental Liabilities");
and (iv) those debts, claims, liabilities, obligations, damages and
expenses of Sellers that arise under the terms of any Contract included
among the Acquired Assets (x) that is disclosed in Schedules 3.06,
3.09(a), 3.09(c) or 3.10 hereto and that is marked with a single
asterisk to indicate that it is being assumed by Buyer, or (y) that as
provided in Sections 3.09(a) or 3.09(c) is of the type that is not
required to be disclosed to Buyer under the provisions of this
Agreement; provided, however, that, in the case of any Contract to be
assumed by Buyer hereunder, the debts, claims, liabilities, obligations,
damages and expenses associated therewith shall be assumed by Buyer only
to the extent that such debts, claims, liabilities, obligations, damages
and expenses arise out of and relate solely to acts or omissions of
Buyer after the Closing Date (all of the foregoing being referred to
hereinafter collectively as the "Assumed Liabilities").
(b) Except for the Assumed Liabilities, Buyer agrees to assume no
liability or obligation of Sellers whatsoever, Sellers remaining solely
responsible therefor (the "Retained Liabilities"). Without limiting the
generality of the foregoing statement, it specifically is agreed that
the Retained Liabilities shall include (i) inter-company debt between
and among Sellers, and any company controlling, controlled by or under
common control with any of them; (ii) liabilities for or obligations of
Sellers for wrongful termination or under workers' compensation,
severance plans or arrangements (except as set forth in clause (v) of
Section 11.06(c)), general liability insurance or any employee benefit
plan or benefit arrangements of Sellers accrued as of the Closing,
including, without limitation, liabilities relating to any pension,
profit sharing or other employee benefit plan maintained or contributed
to by Sellers or Imo or any corporation, trade, business or entity under
common control with any Seller or Imo within the meaning of Section
414(b), (c) or (m) of the Code or Section 4001(b) of ERISA (including,
without limitation, liabilities relating to the consolidation or
deconsolidation of any Varo or Baird benefit plan with or from any Imo
benefit plan); (iii) any obligations or liabilities for borrowed money
by Sellers or any of their affiliates, and any guaranties of any nature
whatsoever by any such Persons of any obligations or liability of any
third parties; (iv) any liability or obligation, or associated cost,
including, without limitation, premiums for and payments under Sellers'
medical and disability insurance programs, for death, personal injury,
property damage or other injury, damage or loss to, by or of any Person
(including, without limitation, any employee of Sellers who has been
employed by Sellers on or at any time prior to the Closing Date), or any
right resulting from, caused by or arising out of, or attributable to,
directly or indirectly, the conduct of the Businesses prior to the
Closing Date, regardless of when the action, claim or demand relating
thereto is actually commenced or asserted, including, without
limitation, any tort, breach of contract or violation of any statute,
regulation or other Law or requirements of any Governmental Authority;
provided, however, that the foregoing shall not include any liability or
obligation in respect of any Assumed Environmental Liabilities; (v)
liabilities in respect of Excluded Assets; (vi) liabilities arising out
of or otherwise relating to the Investigations; (vii) any liability or
obligation relating to any Retained Environmental Liabilities; (viii)
any liability in respect of any claim, suit or proceeding pending or
threatened prior to Closing relating to the Businesses; (ix) liabilities
in respect of employees of Sellers identified by Buyer on Schedule 11.06
as employees not to be offered employment by Buyer at Closing; (x)
liabilities for continued health care of employees of Sellers who have
retired prior to Closing and of family members of employees of Sellers
who are deceased at Closing; (xi) any liabilities arising prior to the
Closing under those Contracts marked with a single asterisk on Schedules
3.06, 3.09(a), 3.09(c) or 3.10 and those Contracts that are being
assumed by Buyer and that, as provided in Sections 3.09(a) or 3.09(c),
are of the type that are not required to be disclosed on a Schedule
pursuant to the terms of this Agreement; (xii) all liabilities arising
at any time under those Contracts not marked with a single asterisk on
Schedules 3.06, 3.09(a), 3.09(c) or 3.10; (xiii) except as provided in
Section 2.06, Sellers' federal, state and local income, franchise and
sales and use tax liabilities; and (xiv) product liability claims and
other liabilities under warranties for products delivered prior to the
Closing Date.
2.06 Taxes. All state and local real and personal property Taxes
payable with respect to the Acquired Assets shall be prorated between
Sellers and Buyer as of the Closing Date, with Sellers being responsible
for all such taxes through the day immediately preceding the Closing
Date and Buyer being responsible for all such taxes thereafter. Each of
Buyer and Sellers shall pay 50% of all sales, use, recordation,
documentary and other similar transfer taxes and fees, if any, arising
out of the sale of the Acquired Assets by Sellers to Buyer; provided,
however, that in no event shall Buyer be liable or responsible for any
other Taxes of Sellers or Imo arising out of the transactions
contemplated by this Agreement, including, without limitation, income,
capital gains or other similar Taxes.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLERS AND IMO
To induce Buyer to enter into this Agreement, Sellers and Imo jointly
and severally represent and warrant to Buyer as follows, each of which
shall be deemed to be independently relied upon by Buyer regardless of
any investigation made or information obtained by Buyer:
3.01 Organization and Authority of Sellers and IMO. Varo is a
corporation existing and in good standing under the laws of the State of
Texas. Baird is a corporation existing and in good standing under the
laws of the Commonwealth of Massachusetts. OEII is a close corporation
existing and in good standing under the laws of the State of Texas. Imo
is a corporation existing and in good standing under the laws of the
State of Delaware. Each of the Sellers and Imo is duly qualified to do
business in all states in which the conduct of its business requires
such qualification, except to the extent a failure to be so qualified
would not have a Material Adverse Effect. Except as set forth in
Schedule 3.01, none of the Sellers has any Subsidiary or any other
direct or indirect equity interests by way of stock ownership,
partnership interest or otherwise in any entity. Sellers and Imo have
all requisite corporate power and authority to conduct their respective
business and operations as presently conducted.
3.02 Legal Capacity; Approvals and Consents. (a) Each of the Sellers
and Imo has all requisite corporate power and authority to execute and
deliver, and to perform its obligations under, this Agreement and any
related agreements and documents executed and delivered by it, or to be
executed and delivered by it under or in connection with this Agreement
(all such related agreements and documents being hereinafter referred to
collectively as the "Seller Documents"). The execution, delivery and
performance by Sellers of this Agreement and each of the Seller
Documents have been duly authorized by all requisite corporate action on
the part of Sellers and Imo. This Agreement has been, and each of the
Seller Documents to be executed by it will be at or prior to the
Closing, duly executed and delivered by each Seller and/or Imo, as
applicable, and (assuming the due authorization, execution and delivery
by Buyer, TPG and related parties hereto and thereto) this Agreement
constitutes, and each of the Seller Documents when so executed and
delivered will constitute, a legal, valid and binding obligation of
Sellers and/or Imo, as applicable, enforceable against each Seller
and/or Imo, as applicable, in accordance with its terms, subject to
applicable bankruptcy, insolvency, reorganization, moratorium and
similar laws affecting creditors' rights and remedies generally and
subject, as to enforceability, to general principles of equity
(regardless of whether enforcement is sought in a proceeding at law or
in equity).
(b) Except as set forth on Schedule 3.02(b), neither the execution and
delivery of this Agreement and each of the Seller Documents nor the
consummation of the transactions contemplated hereby and thereby will
(i) contravene the Charter Documents of any Seller or Imo, (ii) (with
the passage of time or the giving of notice or both), conflict with or
result in a breach or violation of, or constitute a default by any
Seller or Imo under, any Material Contract, (iii) constitute a violation
of any Law or Judgment applicable to any Seller or Imo, or (iv) result
in the creation of any Lien (other than a Lien in favor of Buyer or a
Permitted Lien) upon any of the Acquired Assets, except, with respect to
the matters described in clause (iii) above, for such violations that,
individually or in the aggregate, would not materially hinder or impair
the transactions contemplated hereby or have a Material Adverse Effect
and except with respect to the matters described in clause (iv) above,
for such violations that, individually or in the aggregate, would not
materially hinder or impair the transactions contemplated hereby.
(c) Except (i) as set forth on Schedule 3.02(c), (ii) for compliance
with the applicable requirements of the HSR Act and (iii) for consents,
approvals or authorizations with respect to any Contract involving the
payment to or from Sellers of amounts not in excess of $1,000,000, no
consents, approvals, licenses, permits, orders or authorizations of, or
registrations, declarations, notices or filings with, any Person legally
or contractually is required or otherwise is necessary in connection
with the execution, delivery or performance of this Agreement or any of
the Seller Documents by any Seller or Imo or in order to preclude any
termination, suspension, modification or impairment of any Contract or
any legal or contractual right, privilege or license which is included
in the Acquired Assets.
3.03 Financial Statements. Attached as Schedule 3.03 hereto are (a) the
audited consolidated balance sheet of Imo at December 31, 1993, and the
audited consolidated statement of income for Imo for the period ended
December 31, 1993; (b) the unaudited combined balance sheet of the
Businesses at June 30, 1994, and the unaudited combined statement of
income for the Businesses for the period ended June 30, 1994; and (c)
the notes and schedules and certain supplementary information to all of
the financial statements specified in clauses (a) and (b) (all of such
financial statements and notes thereto being hereinafter referred to as
the "Financial Statements"). The Financial Statements (i) are in
accordance with the books and records of Imo and the Businesses,
respectively; (ii) present fairly the financial condition of the
Businesses at the dates shown and for the periods therein indicated; and
(iii) have been prepared in accordance with generally accepted
accounting principles, applied on a consistent basis, except as may be
described therein. The June 30, 1994 unaudited combined balance sheet
of the Businesses is herein called the "Balance Sheet".
3.04 Absence of Certain Changes or Events. Except as set forth on
Schedule 3.04 hereto and except for changes or events that have not had
or would not have, individually or in the aggregate, a Material Adverse
Effect, since the date of the Balance Sheet through the date of this
Agreement, none of the Sellers nor Imo has, in connection with the
Businesses:
(a) incurred any obligation or liability (contingent or otherwise)
except (i) normal trade or business obligations incurred in the ordinary
course of business and (ii) obligations under Contracts described or
cross-referenced in Schedules 3.06, 3.09(a), 3.09(c), 3.09(e), 3.10,
3.12(a), 3.12(b) and 3.12(c) hereto;
(b) subjected any of the Acquired Assets to any Lien, except for
Permitted Liens;
(c) sold, assigned, transferred, leased or otherwise disposed of any of
its properties or assets relating to the Businesses, except in the
ordinary course of business and on usual terms and conditions;
(d) suffered any Material Adverse Effect in the Acquired Assets or the
Businesses;
(e) entered into any transactions other than in the ordinary course of
business;
(f) made any change in its fiscal year or in any method of accounting or
accounting practice or any change in depreciation or amortization
policies or rates theretofore adopted, other than a change in its tax
method of accounting mandated by changes in federal Law;
(g) made any write-downs or write-ups of the value of any inventory, or
any write-offs as uncollectible of any notes or accounts receivable or
increased its allowance for uncollectible accounts receivable, which
would be material in the aggregate to the Businesses or the Acquired
Assets, and Sellers and Imo do not know of any event or condition which
could require any such write-down, write-up, write-off or increase;
(h) given any material refunds, discounts or other similar adjustments
except refunds, discounts or other similar adjustments given in the
ordinary course of business consistent with past practices, or made any
change in the manner in which it extends credit to its customers or
otherwise deals with customers; or
(I) received any notices that any supplier or customer of any Seller
under any existing Contract has taken or contemplated any steps which
could disrupt the business relationship of such Seller with said
supplier or customer and which could have a Material Adverse Effect or
could result in the material diminution in the value of the Businesses
as a going concern.
3.05 Tax Returns; Other Reports. Sellers have as of the date hereof,
and will have as of the Closing Date, timely filed in proper form (a)
all material federal, state, local or foreign income, franchise, sales,
use, property, excise, payroll, withholding and other tax returns that
are required to be filed as of the date hereof, or which are required to
be filed as of the Closing Date, and (b) all other material reports
(whether or not relating to Taxes) required to be filed by Law with any
Governmental Authority. All Taxes, fees and assessments of whatsoever
nature due or payable by Sellers on or before the date hereof or the
Closing Date, as the case may be, pursuant to said returns or reports or
otherwise have been or will be paid. Except as set forth on Schedule
3.05 hereto, there is no unpaid interest, penalty or addition to tax due
or claimed to be due from Sellers, nor any unpaid tax deficiency,
determination or assessment outstanding against Sellers. Except as set
forth on Schedule 3.05 hereto, no audits of Sellers' returns or reports
by any Governmental Authority are pending or, to the knowledge of
Sellers, threatened, nor are any waivers of any statute of limitations
or extensions of time for the determination or assessment of tax
deficiencies in effect for Sellers. Other than the Investigations and
except as set forth on Schedule 3.05 hereto, none of the Sellers is a
party to any pending or, to the best of Sellers' Knowledge, threatened
action, claim, suit, proceeding or investigation against any Seller for
the purpose of assessment or collection of Taxes, fees or charges by any
Governmental Authority. None of the Sellers is a party to any written
consent with any tax authority to extend the period for assessment or
collection of any Taxes, or to any written agreement with any tax
authority concerning liability for Taxes, which relate to the Acquired
Assets or the Businesses. None of the Sellers is a party to any tax
sharing or tax benefit agreement which relates to taxes with respect to
the Acquired Assets or the Businesses. No Seller is a foreign person
within the meaning of Section 1445 of the Code. Sellers have as of the
date hereof, and will have as of the Closing Date, (i) complied in all
material respects with all applicable legal requirements relating to the
withholding of income taxes, social security and unemployment insurance
taxes and (ii) paid over to the appropriate taxing authorities any such
withholding taxes that are required to be paid as of the date hereof, or
which are required to be paid as of the Closing Date.
3.06 Real Property. (a) Schedule 3.06 sets forth a list and description
of all real property owned by each Seller relating to the Businesses and
of any Lien related thereto, which list is true and complete in all
material respects. Such Schedule also contains a substantially accurate
description identifying all real property forming part of the Acquired
Assets in which Sellers have a leasehold, or material easement, license
or right-of-way interest (individually, a "Real Property Interest" and
collectively, the "Real Property Interests") and the significant terms
(including rents, termination dates and renewal conditions) relating to
the Real Property Interests. Sellers have delivered to Buyer true and
correct copies of deeds for each parcel of owned Real Property and of
each lease that is a Real Property Interest listed on Schedule 3.06.
(b) Except as described in Schedule 3.06: (i) to Seller's Knowledge,
there is no fact or condition that could result in a significant
reduction or termination of Sellers' access to any of the Real Property
owned by Sellers listed on Schedule 3.06; (ii) each of the Real Property
Interests is valid and binding on each applicable Seller and, to the
best of Sellers' Knowledge, the other parties thereto, enforceable in
accordance with its terms, subject to applicable bankruptcy, insolvency,
reorganization, moratorium and similar laws affecting creditors' rights
and remedies generally and subject, as to enforceability, to general
principles of equity (regardless of whether enforcement is sought in a
proceeding at law or in equity); (iii) with respect to each leasehold
interest included in the Real Property Interests, the applicable Seller
has (subject to such Seller's fulfillment of its future obligations
under the lease therefor) enforceable rights to quiet enjoyment thereof;
(iv) the improvements located on the Real Property used by Sellers in
the operation of the Businesses are in good operating condition and
repair, ordinary wear and tear excepted; (v) all buildings and other
improvements on the Real Property owned by Sellers are located entirely
on such Real Property; (vi) the Real Property constitutes all of the
real property currently owned or leased by Sellers for use in the
Business; (vii) there are not presently pending or, to the best of
Sellers' Knowledge, threatened, any condemnation actions or special
assessments or, to the best of Sellers' Knowledge, any pending
proceedings for changes in the zoning with respect to such Real
Property; (viii) there are no existing material defaults by any Seller
under any Real Property Interest or, to the best of Sellers' Knowledge,
events that with notice or lapse of time or both would constitute
material defaults thereunder; (ix) all rents and charges due and payable
for current or prior periods under each Real Property Interest have been
fully paid; (x) Sellers have not received any notice that there is any
material governmental regulation, Law or order that restricts the
operation of the business activities on the Real Property as currently
being conducted by Sellers; (xi) all ad valorem tax statements
applicable to the Real Property owned by Sellers for the years 1991,
1992 and 1993 have been or will be delivered to Buyer at or prior to
Closing; and (xii) no Seller has received any notice or order to correct
violations of Law issued by any Governmental Authority with respect to
the Real Property.
3.07 Equipment. (a) Schedule 3.07(a) contains a list of all material
Equipment (other than government-owned property) owned or leased by any
Seller and employed exclusively in the Businesses. Except as noted on
Schedule 3.07(a), the applicable Seller now has, and on the Closing Date
will have, good and valid title to all such Equipment owned by it, free
and clear of all Liens except for Permitted Liens. The Equipment listed
on Schedule 3.07(a) is in operating condition and repair (normal wear
and tear excepted), is free from material defects of workmanship or
material and is usable and adequate in all material respects for the
current operations of the Businesses.
(b) The Equipment to be conveyed to Buyer hereunder constitutes all
Equipment and fixtures (other than government-owned property) necessary
for the operation by Sellers of the Businesses as now conducted by them
in all material respects. As to any leasehold interest in any material
Equipment which is leased by any Seller and which is included in the
Acquired Assets, (i) copies of such leases have been delivered to Buyer,
(ii) assuming that consents to the transfer of such leases to Buyer are
obtained from the respective lessors as contemplated by Section 3.02(c),
such leases are or will be at Closing fully assignable to Buyer without
such assignment causing any change in the terms (including compensation)
of such leases, and (iii) there exist no defaults under such leases by
Sellers, or, to the best of Sellers' Knowledge, by any other party
thereto or any state of facts that would, with notice or passage of
time, or both, constitute a default by Sellers, or, to the best of
Sellers' Knowledge, by any other party thereto, thereunder.
(c) Schedule 3.07(c) contains a complete and correct list of all
government-owned property, including, without limitation, tooling and
test equipment, provided under, necessary to perform the obligations of
any Seller under, or for which Buyer could be held accountable under,
the Government Contracts relating to the Businesses, and such
government-owned property is maintained by Sellers in accordance with a
government-approved property management system.
3.08 Intellectual Property. Schedule 3.08 sets forth a list of the
Intellectual Property as well as a list of all registrations thereof and
pending applications therefor in which any Seller has an interest and
which is included in the Acquired Assets, including, without limitation,
license agreements concerning Intellectual Property under which any
Seller is either grantee or licensee or grantor or licensor. Except as
set forth on Schedule 3.08, each item of Intellectual Property listed on
such Schedule is held by the applicable Seller free and clear of any and
all Liens (other than Permitted Liens) and no other Person has any valid
claim of ownership with respect thereto. Except as set forth on
Schedule 3.08, to the best of Sellers' Knowledge, Sellers have adequate
licenses or other valid rights to use each item of Intellectual Property
which they do not own and which is material to the conduct of the
Businesses as presently conducted. To the best of Sellers' Knowledge,
Sellers' use of the Intellectual Property does not conflict with,
infringe upon, violate or interfere with any intellectual property
rights of any other Person.
3.09 Contracts.
(a) Schedule 3.09(a) sets forth a list of each written Contract (other
than purchase orders in the ordinary course of business) relating to the
Businesses and included among the Acquired Assets to which any of the
Sellers is a party, involving the payment to or from such Seller of an
amount in excess of $1,000,000 and having a remaining term in excess of
one year and those having a remaining term of less than one year and
pursuant to which the remaining payments to or from Seller exceed
$1,000,000 (collectively, the "Material Contracts"). All Material
Contracts are in full force and effect and are valid, binding and
enforceable in accordance with their terms against each Seller that is a
party thereto and, to the best of Sellers' Knowledge, the other parties
thereto, subject to applicable bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium and similar laws affecting
creditors' rights and remedies generally and subject, as to
enforceability, to general principles of equity (regardless of whether
enforcement is sought in a proceeding at law or in equity).
(b) Except as set forth in Schedule 3.09(b), there are no defaults or
threatened defaults by any Seller under any Contract relating to the
Businesses and included among the Acquired Assets or, to the best of
Sellers' Knowledge, by any other party thereto, except, in each case,
for such defaults that would not, individually or in the aggregate, have
a Material Adverse Effect.
(c) Except as set forth in Schedule 3.09(c) and excluding Contracts
entered into in the ordinary course of business relating to products and
services provided or to be provided to customers of the Businesses
(certain of which Contracts are covered by Section 3.09(a)), no Seller
has participated in, nor is bound by or subject to: (i) any employment,
consulting, sales representative or similar Contract relating to the
Businesses and included in the Acquired Assets that is not terminable
without penalty or further obligation on the part of Sellers within 30
days or that contains an obligation to pay more than $100,000 per year;
(ii) any Contract relating to the Businesses and included in the
Acquired Assets that could result in the imposition on any Person of an
excise tax under Section 4999 of the Code; (iii) any Contract relating
to the Businesses and included in the Acquired Assets containing any
covenant limiting the freedom of Sellers to engage in any line of
business or compete with any Person or in any geographic area in
connection with the business or operations of the Businesses; or (iv)
any other Contract that relates to the Businesses and is included in the
Acquired Assets and that involves aggregate payments by the Sellers of
$100,000 or more per year.
(d) Sellers have made available or delivered to Buyer true and complete
copies of all of the Material Contracts, together with all amendments
thereto.
(e) Schedule 3.09(e) sets forth all written bids, proposals or
quotations that have been made by, and which are binding upon, Sellers
relating to the Businesses and included among the Acquired Assets
involving a dollar amount in excess of $1,000,000 and that were
outstanding as of September 30, 1994 (which Schedule shall be updated as
of the Closing Date). Such Schedule identifies each such bid, proposal
or quotation by number and the party to which such bid, proposal or
quotation was made, the proposed price and the assessment of profit or
loss at completion for each such bid, proposal or quotation in effect at
the time the bid, proposal or quotation was submitted. Except as set
forth on Schedule 3.09(e) as of the date hereof there are no outstanding
written bids, proposals or quotations that have been made by, and which
are binding upon, Sellers with respect to the Businesses calling for
aggregate payments to, or aggregate expenditures by, Sellers over the
life of the applicable Contract of a dollar amount in excess of
$1,000,000 for which the total cost estimated at the time of such bid,
proposal or quotation, including allocable overhead and general and
administrative expenses, as estimated in good faith by Sellers, would
result in a net loss on such Contract.
(f) Except as set forth on Schedule 3.09(f):
(i)To the best of Sellers' Knowledge, the Sellers, in the operation of
the Businesses, have complied in all material respects with applicable
federal procurement laws and regulations including, without limitation,
the Truth in Negotiations Act, the FAR, the Defense Federal Acquisition
Regulation Supplement, the Department of Energy Acquisition Regulation
and the Procurement Integrity Act.
(ii) All of the Contracts set forth on Schedules 3.09(a) and (c) are
valid and are binding on each Seller that is a party thereto and, to the
best of Sellers' Knowledge, the other parties thereto, and are
enforceable in accordance with their respective terms, subject to
applicable bankruptcy, insolvency, reorganization, moratorium and
similar laws affecting creditors' rights and remedies generally and
subject, as to enforceability, to general principles of equity
(regardless of whether enforcement is sought in a proceeding at law or
in equity); and such Sellers are in compliance in all material respects
with all terms and conditions of such Contracts.
(iii) The cost accounting, estimating, property and procurement systems
relating to the Businesses have been disclosed to the extent required by
law or regulation to the United States government and such disclosures
are in compliance in all material respects with applicable United States
federal procurement laws and regulations.
(iv) No Seller, nor any other Person acting at the direction of any
Seller, has made, with respect to the Businesses (A) any illegal
political contribution, (B) payments from corporate funds not recorded
on the books and records of such Seller, (C) payments from corporate
funds that were falsely recorded on the books and records of such
Seller, or (D) any payments from corporate funds, promises to pay, or
authorization of payment, or offer, gift or promise to give, to any
government officials or any foreign political party, official thereof or
candidate for foreign political office for the purpose of influencing
the action of such official, party official, or candidate for political
office or the action of the government, or foreign political party, in
order to obtain or retain business or licenses for, or to direct
business or licenses to, the Businesses, or to obtain, retain or direct
special treatment for the Businesses.
(v) Sellers, with respect to the Businesses, have never been debarred or
suspended from participation in the award of Government Contracts or
subcontracts or from otherwise conducting business with the United
States government or any agency thereof, nor, to the best of Sellers'
Knowledge, are there any facts or circumstances which may form the basis
of a debarment or suspension proceeding, other than possibly with
respect to the Investigations.
(vi) No Seller has received any written notice of a performance
deficiency, any stop work orders, terminations, cure notices or notices
of default under any Contract relating to the Businesses and included
among the Acquired Assets within the past two years, and, to the best of
Sellers' Knowledge, there are no asserted or threatened performance
deficiencies under any such Contract.
(vii) The Sellers and their respective employees hold such security
clearances as are required to perform all Contracts related to the
Businesses and included among the Acquired Assets. To the best of
Sellers' Knowledge, except possibly with respect to the Investigations,
there are no facts or circumstances currently existing or which have
occurred that have a reasonable probability of resulting in the
suspension or termination of such clearances or that could render any
Seller or its respective employees ineligible for such security
clearances in the future. Sellers have implemented and maintained in
all material respects all security measures related to the Businesses
required by the Department of Defense Industrial Security Manual.
(viii) There are no Contracts relating to the Businesses and included
among the Acquired Assets for the sale of products or services by any
Seller for which, at the time of the most recent scheduled contract
milestone, the work schedule was over 60 days late or, in the absence of
scheduled contract milestones, is currently estimated to be over 60 days
late and, in each case, where such delinquency could reasonably be
expected to have a Material Adverse Effect.
(ix) There are no Material Contracts for the sale of products or
services by any Seller which require such Seller to be an account party
to a letter of credit or bank guarantee which allows the beneficiary to
draw funds without the specific consent of the account party, in the
absence of an arbitration or judicial ruling in favor of the
beneficiary.
(x) There are no claims or requests for downward equitable adjustments
pending or, to the best of Sellers' Knowledge, threatened under any
Contract relating to the Businesses and included among the Acquired
Assets.
3.10 Cooperative Business Agreements. Schedule 3.10 sets forth a
complete and correct list of all teaming arrangements, memoranda of
understanding and memoranda of agreement to which any of the Sellers is
a party and which relate to the Businesses and are included among the
Acquired Assets. Sellers do not own any joint venture interests that
relate to the Businesses and are included among the Acquired Assets
except as noted on Schedule 3.01. Each such teaming arrangement or
memorandum is the valid, binding, and enforceable obligation of the
applicable Seller and, to the best of Sellers' Knowledge, the other
party or parties thereto, and is in full force and effect, subject to
applicable bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium, and other similar laws now or hereafter in
effect affecting creditors' rights and remedies generally and subject,
as to enforceability, to general principles of equity (regardless of
whether enforcement is sought in a proceeding at law or in equity). No
Seller, nor to the best of Sellers' Knowledge, the other party or
parties thereto, is in breach of any material terms of any such teaming
arrangement or memorandum.
3.11 Insurance. Schedule 3.11 sets forth a list of all policies of
insurance and surety bonds in force with respect to the Businesses or
the Acquired Assets, which list is true and complete in all material
respects. Such insurance policies and surety bonds are outstanding and
in full force and effect on the date hereof, are with financially sound
and reputable insurance companies and insure all of the business risks
relating to the Acquired Assets or the Businesses that are of an
insurable character against loss or damage to the extent and in the
manner customary and prudent for Persons engaged in similar businesses
or required by any other Contract or any applicable Law. Within the 12
months immediately preceding the date of this Agreement, no insurance
carrier has refused any application for insurance by any Seller with
respect to the Businesses.
3.12 Certain Employment Matters.
(a) Except as disclosed on Schedule 3.12(a): (i) none of the Sellers is
a party to any Contract with any labor organization, nor has any Seller
agreed to recognize any union or other collective bargaining unit nor
has any union or other collective bargaining unit been certified as
representing any of Sellers' employees with respect to the operation of
the Businesses, and (ii) no Seller has experienced any strikes, work
stoppages, grievance proceedings or claims of unfair labor practices
filed or, to the best of Sellers' Knowledge, threatened to be filed with
respect to the operation of the Businesses. To the best of Sellers'
Knowledge, no Seller nor any agent, representative or employee of any
Seller has committed any unfair labor practice as defined in the
National Labor Relations Act of 1974, as amended, and there is not now
pending or, to the best of Sellers' Knowledge, threatened, any charge or
complaint against any Seller by the National Labor Relations Board or
any representative thereof. To the best of Sellers' Knowledge, there is
no representation or organizing effort pending against or threatened
against or affecting or involving any Seller relating to the Businesses.
(b)Schedule 3.12(b) hereto lists each "employee benefit plan," as
defined in Section 3(3) of the Employment Retirement Income Security Act
of 1974, as amended ("ERISA"), of the Sellers covering any employee or
former employee of the Businesses (an "Employee Benefit Plan")
(including, without limitation, plans, such as foreign plans, which are
not subject to the provisions of ERISA).
(c) Schedule 3.12(c) hereto lists each employment or severance Contract,
each plan or arrangement providing for insurance coverage, severance,
incentive award, stock options, deferred compensation, executive
compensation or supplemental income, fringe benefits, vacation,
termination or similar coverage and all written compensation policies
and practices maintained by Sellers covering any employee or former
employee of the Businesses and that is not an Employee Benefit Plan (a
"Benefit Arrangement").
(d) Sellers have provided Buyer with a list of all employees of the
Businesses and the salary for each such employee. Except as set forth
on Schedule 3.12(d), no employee of Sellers involved in the Businesses
earns a salary in excess of $99,000.00 per year.
3.13 Legal and Governmental Proceedings and Judgments. Except as set
forth on Schedule 3.13 and except for environmental matters (which are
addressed in Section 3.19), there is no legal or governmental action,
suit or proceeding pending or, to the best of Sellers' Knowledge,
threatened against any Seller, the Businesses or the Acquired Assets
that (i) relates to or involves a claim in the amount of, or series of
related claims in the aggregate amount of, $100,000 or more or (ii) does
or might adversely affect any Sellers' performance under this Agreement
or any Seller Document or the consummation of the transactions
contemplated hereby or thereby, nor are there any Judgments outstanding
against any Seller, or to or by which any Seller, any of the Acquired
Assets or the Businesses is subject or bound.
3.14 Finders and Brokers. No Seller has entered into any Contract with
any Person that will result in the obligation of Buyer to pay any
finder's fees, brokerage or agent's commissions or other like payments
in connection with the negotiations leading to this Agreement or the
consummation of the transactions contemplated hereby; and Sellers are
not aware of any claim or basis for any claim for payment of any
finder's fees, brokerage or agent's commissions or other like payments
in connection with the negotiations leading to this Agreement or the
consummation of the transactions contemplated hereby, except for the
fees of CS First Boston Corporation, which will be paid by Sellers.
3.15 Export Control and Related Matters. Except as disclosed on
Schedule 3.09(f), Sellers, with respect to the Businesses, are in
compliance with all United States Export Control Laws and, to the best
of Sellers' Knowledge, all foreign Export Control Laws in all material
respects. Sellers have all necessary authority under the Export Control
Laws to conduct operations of the Businesses including, without
limitation, (a) all necessary licenses for any pending export
transactions, (b) all necessary licenses and clearances for the
disclosure of information to foreign persons and (c) all necessary
registrations with government agencies with authority to implement the
Export Control Laws. No Seller has participated directly or indirectly
in any boycotts or other similar practices in violation of the
regulations of the United States Department of Commerce or Section 999
of the Code.
3.16 Books and Records. All books and records pertaining to the
Businesses have been, or prior to the Closing shall have been, made
available for review by Buyer and its representatives, have been
maintained in accordance with good business practice and accurately
reflect the basis for the financial condition and results of operations
of the Businesses set forth in the Financial Statements.
3.17 Transactions with Affiliates. Except as set forth on Schedule 3.17
or Schedules 3.12(a)-(c), there is no Contract of any kind whatsoever
relating to the Businesses and included among the Acquired Assets
entered into by any Seller with any "affiliate" or "associate" of any of
them (as such terms are defined in the rules and regulations of the
Securities and Exchange Commission under the Securities Exchange Act of
1934, as amended), except for such Contracts providing for (i) the
payment of management fees, (ii) inter-company debt (iii) the payment of
compensation to directors, officers and employees of any Seller
consistent with previously established rates, (iv) reimbursements of
ordinary and necessary expenses incurred by directors, officers or
employees of any Seller in connection with the performance of their
duties in connection with the Businesses, and (v) amounts paid by any
Seller or Imo pursuant to Employee Benefit Plans or Benefit Arrangements
disclosed pursuant to Schedules 3.17 and 3.12(b) and (c) or in Section
3.12.
3.18 Accounts Receivable; Reserves. The accounts receivable of the
Businesses, including, without limitation, those shown on the Balance
Sheet and all accounts receivable arising after the date thereof up to
and including the Closing Date (to the extent not heretofore or
theretofore collected) arose and will arise from bona fide transactions
in the ordinary course of the Businesses. The reserve for doubtful
accounts receivable carried on the books of Sellers is reasonably
adequate to cover expected losses.
3.19 Environmental Matters. Except as set forth on Schedule 3.19
hereto, with respect to the Businesses:
(a) Except with respect to the Short-Term Lease Facilities, Sellers
have obtained all material licenses, permits, exemptions, registrations
and other authorizations and provided any material notices to any
Governmental Authority that are currently required under any
Environmental Law (as such term is hereinafter defined); Schedule
3.19(a) contains a listing of all such environmental permits, licenses,
and standard exemptions relating to air emissions, including, without
limitation, solid waste registration and identification numbers;
(b)Sellers are currently in compliance in all material respects with all
Environmental Laws, including, without limitation, all licenses,
permits, exemptions, registrations and authorizations;
(c) none of the Businesses' operations is or has been, within the past
three years, subject to any judicial or administrative proceeding
brought by any Person or agency alleging the violation of any
Environmental Law;
(d) none of the Businesses' operations is on the "CERCLIS" list of
hazardous waste sites or the "National Priorities List" of the United
States Environmental Protection Agency ("EPA"), or the subject of any
federal, state or local investigation evaluating whether any remedial
action is needed to respond to a release or threat of release of any
Hazardous Material (as such term is hereinafter defined);
(e) Sellers have not received or filed or otherwise provided any notice
under any federal, state or local law indicating past or present
treatment, storage or disposal of a Hazardous Material that would
require a permit under the federal Resource Conservation and Recovery
Act or any similar state Law for such treatment, storage or disposal;
(f) there has been no release within the past three years of any
Hazardous Material on, into, or from the Real Property included among
the Acquired Assets that has resulted in or that the presence of which
could result in a material violation of any Environmental Law or in the
creation of material liabilities or material obligations under any
Environmental Law;
(g) the Real Property included among the Acquired Assets does not
contain any "PCBs" or "PCB items," as those terms are defined in 40
C.F.R. 761.3, and does not contain asbestos that would require
abatement or remedial activity under any Environmental Law;
(h) Sellers do not own or operate, nor within the past three years have
they owned or operated, an underground storage tank, nor is any such
tank located on or in any of the Real Property included among the
Acquired Assets.
As used herein, the term "Environmental Laws" shall mean all applicable
laws (federal, state, or local), relating to pollution or the
environment or public health, welfare or safety in effect as of the
Closing Date, including, without limitation, (i) all laws, regulations,
orders, and other requirements established by any Governmental Authority
relating to the storage, handling and use of chemicals and other
hazardous materials, those relating to the generation, processing,
storage, treatment, transport, disposal or other management of waste
materials of any kind, and those relating to the protection of
environmentally sensitive areas, of any federal, state, county,
municipal, quasi-governmental entity or agency or political subdivision
thereof (and any entity created by any of the foregoing), and (ii)
duties or requirements relating to pollution or the environment arising
out of common law.
As used herein, the term "Hazardous Material" shall mean (i) any
chemicals, materials, wastes or substances that are defined, regulated,
determined or identified as toxic or hazardous in any Environmental Law,
including, without limitation, substances defined as "hazardous
substances," "pollutants or contaminants," "hazardous materials," or
"hazardous waste" in the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, the Hazardous Materials
Transportation Act, the Resource Conservation and Recovery Act, or
comparable state and local statutes or in the regulations adopted and
publications promulgated pursuant to said statutes, and (ii) any
asbestos, urea formaldehyde, lead-based paint, petroleum products,
natural gas liquids, solid waste, and other pollutants and contaminants
regulated under any Environmental Law.
3.20 Backlog. (a) Schedule 3.20 sets forth the backlog of Sellers as it
relates to the Businesses as of September 30, 1994, for products and
services to be provided by Sellers. Schedule 3.20 includes the name of
each customer and a brief description of the products and services to be
provided.
3.21 Inventory. The material that is designated as inventory on the
Balance Sheet meets or is capable of being made to meet, in all material
respects, all of the contractual and other specifications applicable to
such material, and the raw material and supplies contained in Sellers'
inventories are fit and sufficient for the purposes for which they were
procured.
3.22 Title; Liens. Except as set forth in Schedule 3.22, the applicable
Sellers have, or will have at Closing, good and, in the case of owned
Real Property, indefeasible fee simple title to all of the Acquired
Assets, free and clear of any Lien except (a) landlord's Liens and Liens
for property Taxes not yet delinquent or the amount and validity of
which is being contested in good faith by appropriate proceedings, (b)
statutory Liens that do not materially detract from the value of such
properties or impair the use thereof in the operation of the Businesses,
(c) the Liens described on other Schedules hereto, (d) zoning
restrictions, Laws, easements, rights-of-way or other restrictions on
the use of Real Property, (e) Liens for Taxes not yet due and payable,
(f) Liens arising out of a failure to comply with the provisions of any
bulk transfer laws of any jurisdiction, (g) title to or any other
interest in work-in-progress or Equipment held by any Governmental
Authority under FAR Sections 52.232-16, 52.245-2(c), 52.245-5(c),
52.245-17, 52.245-18 or any clause of similar import, (h) the interest
of any Governmental Authority in technical data, computer software, and
patents under the clauses pertaining thereto in any Government Contract
relating to the Businesses and included in the Acquired Assets, and (i)
such other imperfections in title, charges, easements, restrictions and
encumbrances that do not, individually or in the aggregate, have a
Material Adverse Effect (collectively, the "Permitted Liens"); provided,
however, that none of the Liens listed on Schedule 3.22 that are marked
with a double asterisk shall constitute Permitted Liens.
3.23 Unimpaired Operation. Assuming the receipt of all consents and
approvals required for the transfer of the Acquired Assets, upon
consummation of the transactions contemplated under this Agreement,
Sellers will have sold, assigned, transferred and conveyed to Buyer all
of the assets necessary for the conduct of the Businesses as presently
conducted, except for the Excluded Assets.
3.24 Imo. Imo owns all of the outstanding capital stock of each of Varo
and Baird. As sole shareholder of Varo and Baird, Imo has taken all
corporate action necessary to authorize the transactions contemplated
hereby to be performed by Sellers hereunder.
3.25 Letters of Credit. Schedule 3.25 lists all letters of credit
currently maintained by Sellers or Imo pursuant to Contracts relating to
the Businesses and included among the Acquired Assets, indicating the
Contracts to which such letters of credit relate and the amount of such
letters of credit (collectively, the "Letters of Credit").
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER AND TPG
To induce Sellers to enter into this Agreement, Buyer and TPG jointly
and severally represent and warrant to Sellers as follows, each of which
shall be deemed to be independently relied upon by Sellers regardless of
any investigation made or information obtained by Sellers:
4.01 Organization and Authority of Buyer and TPG. Buyer is a
corporation existing and in good standing under the laws of the State of
Delaware with all requisite corporate power and authority to conduct its
business and operations as presently conducted. TPG is a limited
partnership existing and in good standing under the laws of the State of
Delaware, with all requisite partnership power and authority to conduct
its business and operations as presently conducted.
4.02 Legal Capacity; Approvals and Consents. (a) Each of Buyer and TPG
has all requisite corporate or partnership, as the case may be, power
and authority to execute and deliver, and to perform its obligations
under, this Agreement and any related agreements or documents executed
and delivered by it, or to be executed or delivered by it, under or in
connection with this Agreement (all such related agreements and
documents being hereinafter referred to collectively as the "Buyer
Documents"). The execution, delivery and performance by Buyer and TPG
of this Agreement and each of the Buyer Documents have been duly
authorized by all requisite corporate action on the part of Buyer and
the ultimate corporate general partner of TPG, as the case may be. This
Agreement has been, and each of the Buyer Documents to be executed by it
will be at or prior to the Closing, duly executed and delivered by Buyer
and/or TPG, as applicable, and (assuming the due authorization,
execution and delivery by Sellers, Imo and related parties hereto and
thereto) this Agreement constitutes, and each of the Buyer Documents
when so executed and delivered will constitute, a legal, valid and
binding obligation of Buyer and/or TPG, as applicable, enforceable
against Buyer and/or TPG, as applicable, in accordance with its terms,
subject to applicable bankruptcy, insolvency, reorganization, moratorium
and similar laws affecting creditors' rights and remedies generally and
subject, as to enforceability, to general principles of equity
(regardless of whether enforcement is sought in a proceeding at law or
in equity).
(b) Except as set forth on Schedule 4.02(b), neither the execution and
delivery of this Agreement and each of the Buyer Documents nor the
consummation of the transactions contemplated hereby and thereby will
(i) contravene the Charter Documents of Buyer or TPG, (ii) (with the
passage of time or the giving of notice or both), conflict with or
result in a breach or violation of, or constitute a default by Buyer or
TPG under, any material contract to which it is a party, or (iii)
constitute a violation of any Law or Judgment applicable to Buyer or
TPG, except, with respect to the matters described in clause (iii)
above, for such violations that, individually or in the aggregate, would
not materially hinder or impair the transactions contemplated hereby or
have a Buyer Material Adverse Effect.
(c) Except (i) as set forth on Schedule 4.02(c) or (ii) for compliance
with the applicable requirements of the HSR Act, no consents, approvals,
licenses, permits, orders or authorizations of, or registrations,
declarations, notices or filings with, any Person legally or
contractually is required or otherwise is necessary in connection with
the execution, delivery or performance of this Agreement or any of the
Buyer Documents by Buyer or TPG.
4.03 Legal and Governmental Proceedings and Judgments. There is no legal
or governmental action, suit or proceeding pending or, to the knowledge
of Buyer or TPG, threatened against Buyer or TPG that does or might
adversely affect Buyer's or TPG's performance under this Agreement or
any Buyer Document or the consummation of the transactions contemplated
hereby or thereby, nor are there any Judgments outstanding against Buyer
or TPG or to or by which Buyer or TPG is subject or bound.
4.04 Finders and Brokers. Neither Buyer nor TPG has entered into any
Contract with any Person that will result in the obligation of Sellers
or Imo to pay any finder's fees, brokerage or agent's commissions or
other like payments in connection with the negotiations leading to this
Agreement or the consummation of the transactions contemplated hereby;
and neither Buyer nor TPG is aware of any claim or basis for any claim
for payment of any finder's fees, brokerage or agent's commissions or
other like payments in connection with the negotiations leading to this
Agreement or the consummation of the transactions contemplated hereby.
4.05 Availability of Funds. Buyer has available sufficient funds to
enable it to consummate the transactions contemplated by this Agreement.
4.06 TPG and Holdings. TPG owns 100% of the outstanding Common Stock of
Varo Holdings Corp., a Delaware corporation ("Holdings"), which, in
turn, owns 100% of the outstanding capital stock of Buyer. As direct or
indirect owners of Buyer, TPG and Holdings each have taken all
partnership and corporate action, as the case may be, necessary to
authorize the transactions contemplated hereby to be performed by Buyer.
ARTICLE V
COVENANTS, CONDUCT PENDING THE CLOSING;
ACCESS TO INFORMATION
5.01 Sellers' and Imo's Covenants. Pending the Closing, and except as
otherwise consented to or approved by Buyer in writing, Sellers covenant
and agree, and Imo covenants and agrees to cause Sellers to comply, as
follows:
(a) Business in Ordinary Course. (i) Sellers shall conduct the
Businesses diligently, in good faith and in the ordinary course,
consistent with past practices, and will not engage in any transaction
other than in the ordinary course of business. Sellers shall use their
best efforts to preserve the Businesses intact, retain for Buyer the
services of Sellers' present employees (other than the Persons listed in
Schedule 11.06) and agents of the Businesses, and preserve the business
relationships with and the goodwill of the customers and suppliers of
the Businesses.
(ii) Except as otherwise contemplated by this Agreement or required by
any of the documents listed in the Schedules hereto, Sellers, without
Buyer's prior written consent, which shall not be unreasonably withheld
or delayed:
(A) will not, with respect to the Businesses, enter into or issue any
written bids, proposals or quotations, including best and final offers,
which are binding upon Sellers, respecting any of the following: (x)
Contracts relating to products or services provided or to be provided to
customers of the Businesses involving aggregate payments to Sellers over
the life of the Contract of $3,000,000 or more, (y) Contracts for the
production of Generation III tubes, (z) Contracts for which the total
cost estimate at the time of the bid, including allocable overhead and
general and administrative expenses, as estimated in good faith by
Sellers, would result in a net loss on the applicable Contract related
thereto; (xx) fixed price Contracts to provide products or services
that, on the date of such Contracts, are not fully developed products or
services of the Businesses; or (yy) any other Contracts having a term in
excess of one year and involving aggregate payments by Sellers over the
life of the contract of $3,000,000 or more;
(B) (x) will not, with respect to the Businesses, sell, assign, transfer
or otherwise dispose of any assets except (1) in connection with the
acquisition of equivalent replacement property, (2) transactions not
exceeding $100,000 in the aggregate, or (3) sales of inventory in the
ordinary course of business; (y) will not permit a sale, exchange,
transfer or other disposition of the stock (or any portion thereof,
other than transfers among existing holders) of Sellers; and (z) will
not solicit or entertain any discussions with respect to the foregoing;
(C) will not create or assume any Lien with respect to the Acquired
Assets, whether now owned or hereafter acquired that will not be
discharged on or prior to the Closing Date other than Permitted Liens;
(D) will not, with respect to the Businesses, increase the compensation
payable, or to become payable to, the employees of the Businesses,
except as required by existing written agreements that have been
disclosed to Buyer in writing, and except for normal scheduled
adjustments in the ordinary course of business not to exceed an increase
of 10% of the compensation paid to any given employee;
(E)will not enter into any transaction with any affiliate of Sellers
other than such as will be completely discharged by the Closing Date
without any cost or expense to Buyer or that constitutes a Retained
Liability;
(F) will not enter into or agree to enter into any employment agreement
that would bind Buyer or the Businesses after the Closing Date, and will
not modify, amend, renew, change or terminate any employment agreement
that would bind Buyer or the Businesses after the Closing Date and call
for payments in excess of $100,000 annually;
(G) will maintain levels of inventory and spare parts consistent with
past practices;
(H) will operate the Businesses in conformity in all material respects
with all applicable Laws;
(I) will maintain all Acquired Assets (or replacements thereof) in their
present condition, ordinary wear and tear excepted; and
(J) will not revalue any of the Acquired Assets (whether tangible or
intangible), or change any of Sellers' financial accounting practices.
(b) Books and Records. Sellers will maintain their respective books,
accounts and records relating to the Businesses in the usual, regular
and ordinary manner, in accordance with generally accepted accounting
principles.
(c) Maintenance of Insurance. Through and including the Closing Date,
Sellers will maintain the insurance currently maintained by them with
respect to the Acquired Assets and the Businesses (or replacement
insurance of substantially the same type and quality) and obtain
insurance for new properties, assets or operations comparable to that
currently carried for comparable properties, assets or operations;
provided, however, that Sellers shall not have any obligation to
transfer such policies to Buyer or to maintain the coverages thereunder
after the Closing Date.
(d) Other Expenses. Other than the expenses of the independent public
accounting firms to be engaged by Buyer and Sellers pursuant to Sections
2.03 and 2.04 (which will be borne 50% by Sellers and 50% by Buyer),
Sellers and Buyer each shall have sole responsibility for all expenses
incurred by them in connection with the transactions contemplated
hereby.
(e) Review of Financial Statements. Sellers shall cause Ernst & Young
to conduct a review of (i) the unaudited combined balance sheets of the
Businesses at December 31, 1991, 1992 and 1993, (ii) the unaudited
combined statements of income for the Businesses for the periods ended
December 31, 1991, 1992 and 1993, and (iii) the notes, schedules and
supplementary information to all such financial statements.
(f) Cash Infusion. Imo will contribute or otherwise infuse an amount of
cash into Varo (the "Cash Infusion") such that upon Closing Varo will
have cash on hand in an amount equal to at least $2,000,000.
(g) Consents. Imo will cause such of its affiliates who are parties to
any Contracts that are included in the Acquired Assets to consent, prior
to the Closing Date, to the assignment of such Contracts to Buyer.
5.02 Buyer's Covenants. If Buyer desires to obtain an owner's title
policy commitment or any other type of title commitment, or any survey,
with respect to any of the Real Property to be acquired by Buyer
hereunder, Buyer shall be solely responsible for obtaining such
commitments or surveys and shall bear all costs and expenses associated
therewith; provided, however, that Sellers shall cooperate with Buyer,
at Buyer's expense, in obtaining any such commitment or survey.
5.03 Joint Covenants.
(a) Access (I) By Buyer. Between the date of this Agreement and the
Closing, Buyer and its counsel, accountants and other representatives
shall have reasonable access during normal business hours to all of the
properties, books, reports, records, and Contracts relating to the
Businesses, and Sellers shall furnish Buyer with all information it may
reasonably request, including, without limitation, monthly general
managers reports and monthly marketing reports.
(ii) By Sellers. Subsequent to the Closing, Buyer shall give to Sellers
and their respective successors or permitted assigns reasonable access
during normal business hours to all of the books, reports, records, and
Contracts relating to the Businesses from files and records transferred
to Buyer at the Closing, for the purpose of preparing tax returns, and
for the defense of any claims asserted against any of them arising out
of or related to this Agreement.
(b) Legal Opinions. As soon as practicable but in any event within two
weeks after the execution of this Agreement, Buyer shall cause Buyer's
Counsel and Sellers shall cause Sellers' Counsel to negotiate in good
faith the legal opinions to be delivered pursuant to Sections 7.01(d)
and 6.01(e), respectively.
(c) Short-Term Leases. As soon as practicable but in any event within
two weeks after the execution of this Agreement, Buyer and the
applicable Sellers shall negotiate in good faith the Short-Term Leases
to be entered into pursuant to Section 8.04.
(d) Stock Purchase Agreement. As soon as practicable but in any event
within two weeks after the execution of this Agreement, Buyer and the
applicable Sellers or affiliates thereof shall negotiate in good faith a
stock purchase agreement pursuant to which Buyer or an affiliate of
Buyer shall purchase from the applicable Sellers or affiliates thereof
all of the issued and outstanding capital stock of TEJ for $160,000 (the
"TEJ Stock Purchase Agreement").
ARTICLE VI
DELIVERIES BY SELLERS
6.01 Closing Documents. At the Closing, each Seller will deliver or
cause to be delivered to Buyer:
(a) A duly executed Bill of Sale and Assignment, substantially in the
form of Exhibit D attached hereto, and a duly executed Agreement of
Assignment and Assumption, substantially in the form of Exhibit E
attached hereto.
(b) Such other special warranty deeds, bills of sale, endorsements, and
other good and sufficient instruments of conveyance, transfer and
assignment as reasonably requested by Buyer in order to vest in Buyer
all the right, title and interest of such Seller in and to the Acquired
Assets purchased by Buyer from such Seller, subject to Permitted Liens.
(c) Evidence satisfactory to Buyer's Counsel of the payment or release
of any and all Liens (with the exception of the Permitted Liens)
asserted against the Acquired Assets.
(d) Certificates signed by a principal officer of each Seller and Imo,
acting on behalf of each such Seller and Imo, as applicable, dated as of
the Closing Date, representing and certifying to Buyer that all
representations and warranties of Sellers and Imo made in this Agreement
are true and correct in all material respects on and as of the Closing
Date with the same effect as if then made (except for representations
and warranties made as of a specified date, which must have been true
and correct in all material respects as of such date) and that all
covenants and agreements to be performed by Sellers and Imo hereunder at
or prior to the Closing have been so performed.
(e) An opinion of Sellers' Counsel, in the form to be negotiated by
Sellers' Counsel and Buyer's Counsel pursuant to Section 5.03(b).
(f) Copies of the respective resolutions adopted by the boards of
directors and by the shareholder(s) of each Seller, certified as being
correct, complete and then in full force and effect, authorizing the
execution and delivery of this Agreement, and the consummation of the
transactions contemplated by this Agreement.
(g) Copies of all Required Sellers' Consents to the extent applicable to
such Seller.
(h) Certificates of existence and good standing, as applicable, as of
the most recent practicable date of Sellers and Imo from the Secretary
of State of their respective states of incorporation.
(I) Certificates of incumbency of the officers of the Sellers and Imo
executing the certificates referred to in clause (d) above, this
Agreement and the Seller Documents.
(j) Such other evidence of the performance of all covenants and
satisfaction of all conditions required to be performed or satisfied by
Sellers and Imo under this Agreement, at or prior to Closing, as Buyer
reasonably may request.
(k) A duly executed receipt for the Purchase Price.
ARTICLE VII
DELIVERIES BY BUYER
7.01 Closing Documents. At the Closing, Buyer will deliver or cause to
be delivered to Sellers:
(a) Immediately available funds in the amount of the Purchase Price, by
wire transfer as provided in Section 2.02.
(b) A duly executed Agreement of Assignment and Assumption,
substantially in the form of Exhibit E hereto.
(c) Certificates signed by a principal officer of each of Buyer and TPG,
acting on behalf of Buyer and TPG, as applicable, dated as of the
Closing Date, representing and certifying to Sellers and Imo that all
representations and warranties of Buyer and TPG made in this Agreement
are true and correct in all material respects on and as of the Closing
Date with the same effect as if then made (except for representations
and warranties made as of a specified date, which must have been true
and correct in all material respects as of such date) and that all
covenants and agreements to be performed by Buyer and TPG hereunder at
or prior to the Closing have been so performed.
(d) An opinion of Buyer's Counsel, in the form to be negotiated by
Buyer's Counsel and Sellers' Counsel pursuant to Section 5.03(b).
(e) A copy of the resolutions adopted by the boards of directors of
Buyer and of the ultimate corporate general partner of TPG, certified as
being correct, complete, and then in full force and effect, authorizing
the execution and delivery of this Agreement on behalf of Buyer and TPG,
as applicable, and the consummation of the transactions contemplated by
this Agreement.
(f) Copies of all Required Buyer's Consents.
(g) Certificates of existence and good standing, as applicable, as of
the most recent practicable date of Buyer and TPG from the Secretary of
State of Delaware.
(h) Certificate of incumbency of the officers of Buyer and of the
corporate general partner of TPG executing the certificates referred to
in clause (c) above, this Agreement and the Buyer Documents.
(I) Such other evidence of the performance of all covenants and
satisfaction of all conditions required to be performed or satisfied by
Buyer and TPG under this Agreement, at or prior to Closing, as Sellers
reasonably may request.
ARTICLE VIII
CONDITIONS OF BUYER'S OBLIGATIONS
The obligations of Buyer to purchase the Acquired Assets are contingent
and specifically conditioned upon the satisfaction, at or before the
Closing, of all the conditions set out below in this Article VIII, which
will continue to be satisfied as of the Closing Date. Buyer may waive
any or all of these conditions in whole or in part without prior notice.
8.01 Receipt of Consents. (a) All of the filings, approvals and
consents described in Schedule 8.01 (collectively, the "Required
Sellers' Consents") shall have been obtained on terms and conditions no
less favorable than presently enjoyed by Sellers, and all filings
described in said Schedules shall have been duly and timely made prior
to Closing; (b) if the HSR Act is applicable to the transactions
contemplated hereby, the waiting period specified therein, as the same
may be extended, shall have expired without action having been taken to
prevent the consummation of the transactions contemplated hereby; and
(c) all other consents and approvals of Governmental Authorities (other
than novation requirements with respect to Government Contracts as
provided in Section 10.03) required to consummate the transactions
contemplated hereby or necessary so as to enable Buyer to enjoy the
benefits of the purchase of the Acquired Assets shall have been
obtained.
8.02 Solvency. Buyer shall have received a certificate of the Chief
Financial Officer of Imo, substantially in the form of Exhibit F
attached hereto, certifying as to the solvency of Imo both immediately
prior to Closing and after giving effect to the transactions
contemplated hereby.
8.03 Subcontracts. The applicable Sellers and Buyer shall have entered
into subcontracts with respect to all Government Contracts to which each
such Seller is a party. All such subcontracts shall confer on Buyer (i)
the responsibility for the performance of the corresponding primary
Government Contracts and (ii) all of the economic benefits of the
corresponding primary Government Contracts until all obligations under
such corresponding primary Government Contracts are satisfied. All
consents, if any, of the United States government or a department or
agency thereof to the entering into of such subcontracts as may be
required shall have been obtained.
8.04 Short-Term Leases. The applicable Sellers and Buyer shall have
entered into short-term leases (i.e. for terms no longer than one year,
as determined in each case by Buyer) on market terms mutually acceptable
to such Sellers and Buyer with respect to the following facilities
("Short-Term Lease Facilities") so as to enable Buyer to relocate the
Equipment and selected personnel utilized at such facilities to other
locations:
(i)12750 Perimeter Drive, Dallas, Texas;
(ii)3609 Marquis, Garland, Texas;
(iii) 555 N. Fifth Street, Garland, Texas;
(iv) 125 Middlesex Turnpike, Bedford, Massachusetts; and
(v) 900 and 932 N. Shiloh Road, Garland, Texas.
8.05 Performance by Sellers and Imo. Sellers and Imo shall have
performed in all material respects all covenants and agreements to be
performed by them hereunder to the extent such are required to be
performed at or prior to the Closing, including, without limitation, the
making by Imo of the Cash Infusion required by Section 5.01(f).
8.06 Truth of Representations and Warranties. All representations and
warranties of Sellers and Imo contained herein shall be true and
complete in all material respects on and as of the date hereof and as of
the Closing Date with the same effect as if then made, except for any
representations made as of a specified date, which only must be true and
complete in all material respects as of such date.
8.07 Deliveries. Sellers shall have delivered the items and documents
required to be delivered by them pursuant to this Agreement.
8.08 Absence of Proceedings. No Judgment shall have been issued, and no
action or proceeding shall have been instituted (by any person other
than Buyer or any affiliate of Buyer) on or prior to the Closing, to set
aside or modify any authorization of the transactions contemplated
hereby or any approvals or consents required hereunder, or to enjoin or
prevent the consummation of the transactions contemplated hereby, or any
of them, in the manner provided herein.
8.09 No Material Changes. During the period from the date hereof to the
Closing Date, there shall not have been any Material Adverse Effect, and
Sellers shall not have sustained any material loss or damage to the
Acquired Assets, taken as a whole, for which there is inadequate
insurance coverage.
8.10 Closing Documents. Buyer shall be reasonably satisfied with the
form and substance of all documents required by Article VI hereof.
8.11 Review of Financial Statements. Ernst & Young shall have completed
the review contemplated by Section 5.01(e) and delivered a certification
substantially in the form of Exhibit G hereto.
8.12 Debarment. The applicable Sellers shall have received from the
cognizant debarment officials (including, without limitation, the United
States Department of State) having jurisdiction over such matters,
written assurances, in a form reasonably acceptable to Buyer, that such
officials will not suspend, revoke or otherwise render ineffective or
invalid Sellers' current export licenses or restrict or prohibit Buyer
from obtaining new export licenses consistent with applicable United
States government policies and requirements or debar or suspend Buyer
from bidding for or entering into Government Contracts with any United
States Governmental Authority or debar or suspend any of the employees
of the Businesses to be offered employment by Buyer and identified by
Buyer to Sellers as key employees in Schedule 8.12, as a result of acts
or omissions of the Sellers prior to the Closing Date in connection with
the matters that are the subject of the Investigations. In addition,
Sellers and Buyer shall have mutually agreed upon such additional
matters, if any, that should be disclosed to United States Governmental
Authorities and following dissemination to all appropriate United States
Governmental Authorities of information with respect to such matters,
Buyer shall have a reasonable level of comfort with respect to
proceeding to Closing.
8.13 Purchase of TEJ Stock. A closing under the TEJ Stock Purchase
Agreement shall have occurred simultaneously with the Closing hereunder.
ARTICLE IX
CONDITIONS OF SELLERS' OBLIGATIONS
The obligations of Sellers to sell the Acquired Assets are subject to
the satisfaction, at or before the Closing, of all the conditions set
out below in this Article IX, which will continue to be satisfied as of
the Closing Date. Sellers may waive any or all of these conditions in
whole or in part without prior notice.
9.01 Receipt of Consents. (a) All of the filings, approvals and
consents described in Schedule 9.01 (collectively, the "Required Buyer's
Consents") shall have been obtained on terms and conditions no less
favorable than presently enjoyed by Buyer, if applicable, and all
filings described in said Schedules shall have been duly and timely made
prior to the Closing; (b) if the HSR Act is applicable to the
transactions contemplated hereby, the waiting period specified therein,
as the same may be extended, shall have expired without action taken to
prevent the consummation of the transactions contemplated hereby; and
(c) all other consents and approvals of Governmental Authorities (other
than novation requirements with respect to Government Contracts as
provided in Section 10.03) required to consummate the transactions
contemplated hereby shall have been obtained.
9.02 Performance by Buyer and TPG. Buyer and TPG shall have performed
in all material respects all covenants and agreements to be performed by
them hereunder to the extent such are required to be performed at or
prior to the Closing.
9.03 Truth of Representations and Warranties. All representations and
warranties of Buyer and TPG contained herein shall be true and complete
in all material respects on and as of the date hereof and as of the
Closing Date with the same effect as if then made, except for any
representations made as of a specified date, which only must be true and
complete in all material respects as of such date.
9.04 Deliveries. Buyer shall have delivered the items and documents
required to be delivered by it pursuant to this Agreement.
9.05 Absence of Proceedings. No Judgment shall have been issued, and no
action or proceeding shall have been instituted (by any Person other
than Sellers or any affiliate of any Seller), on or prior to the
Closing, to set aside or modify any authorization of the transactions
contemplated hereby or any approvals or consents required hereunder, or
to enjoin or prevent the consummation of the transactions contemplated
hereby, or any of them, in the manner provided herein.
9.06 Closing Documents. Sellers shall be reasonably satisfied with the
form and substance of all documents required by Article VII hereof.
9.07 Sale of TEJ Stock. A closing under the TEJ Stock Purchase
Agreement shall have occurred simultaneously with the Closing hereunder.
ARTICLE X
MUTUAL COVENANTS
10.01 Compliance with Conditions. Each of the parties hereto covenants
and agrees with the other to exercise its best efforts and the utmost
good faith to: (a) perform, comply with and otherwise satisfy each and
every condition to be satisfied by such party hereunder; and (b) to
obtain all consents and approvals required or contemplated to be
obtained by such party hereunder.
10.02 Compliance with HSR Act. (a) Each of the parties hereto
will, within 15 Business Days following the date of execution of this
Agreement, if the HSR Act is applicable to the transactions contemplated
hereby, file the HSR Report required to be filed by them or by any
Person which is part of the same "person" (as defined in the HSR Act) as
any of them, and will file as promptly as practicable after receipt
thereof, a response to any further request for information made by the
FTC or the Antitrust Division of the DOJ as is reasonably or customarily
requested, and will use its best efforts to comply as promptly as is
reasonably practicable with any and all other applicable reasonable or
customary requirements under the HSR Act relating to filing and
furnishing of information to the FTC and the Antitrust Division of the
DOJ, the parties' actions to include, without limitation: (i) taking all
other reasonable or customary action required by the HSR Act; (ii)
coordinating the filing of such HSR Reports (and exchanging drafts
thereof) so as to present both HSR Reports to the FTC and the DOJ at the
time mutually selected by Sellers and Buyer, provided that such HSR
Reports shall be so delivered no later than October 31, 1994, unless
such date is extended by the mutual written agreement of Buyer and
Sellers, and to avoid substantial errors or inconsistencies between the
two in the description of the transaction; (iii) using their respective
best efforts to comply with any additional request for documents or
information made by the FTC or the DOJ or by a court and assisting the
other parties to so comply as is reasonably or as is customarily
requested; and (iv) causing all such other Persons to cooperate and
assist in such compliance.
(b) Notwithstanding anything herein to the contrary, in the event that
the consummation of the transactions contemplated hereby is challenged
by the FTC or the DOJ or any agency or instrumentality of the federal
government by an action to stay or enjoin such consummation, then either
Buyer or Sellers shall have the right to terminate this Agreement unless
the other of such parties, at their sole cost and expense, elects to
contest such action, in which case the noncontesting party shall
cooperate with the contesting party and assist the contesting party, as
reasonably requested, to contest such action until such time as either
party terminates this Agreement under Article XIV. In the event that
such a stay or injunction is granted (preliminary or otherwise), then
either Buyer or Sellers may terminate this Agreement by prompt written
notice to the other. If any other form of equitable relief affecting
any party is granted to the FTC, the DOJ or other such agency or
instrumentality, then such party may terminate this Agreement by prompt
written notice to the other party. To effectuate the intent of the
foregoing provisions of this Section, the parties agree to exchange
requested or required information in making the filings and in complying
as above provided, and the parties agree to take all necessary steps to
preserve the confidentiality of the information set forth in any filings
including, without limitation, limiting disclosure of exchanged
information to counsel for the nondisclosing party.
10.03 Assignments; Novations.
(a) Sellers will cooperate fully in effecting, if necessary, the
transfer or assignment of all licenses, registrations or other documents
pertaining to the Businesses that were issued by a Governmental
Authority under the authority of the Export Control Laws.
(b) Sellers and Buyer will cooperate fully with each other and will use
all reasonable efforts to obtain the novation of all Government
Contracts that relate to the Businesses and are included among the
Acquired Assets in accordance with FAR Section 42.1204 pursuant to a
novation agreement or agreements with the United States Government
("Novation Agreements"), and Sellers hereby agree expeditiously to take
all reasonable steps to obtain approval of all required Novation
Agreements. Nothing in this Agreement, however, shall require (i)
Sellers or Buyer to offer or pay any consideration or concession for any
such Novation Agreement not contained in the model form set forth in FAR
Section 42.1204(e), or (ii) Buyer to accept any conditions,
requirements, amendments or limitations (other than those contained in
the underlying Contract or in the model form set forth in FAR Section
42.1204(e)) which Buyer determines, in its sole discretion, to be
unacceptable.
(c) With respect to each Government Contract that relates to the
Businesses and is included among the Acquired Assets, as set forth in
Section 8.03, the performance obligations of the applicable Seller
thereunder shall be subcontracted to Buyer until such Government
Contract has been novated. Buyer or any of its Subsidiaries, as a
subcontractor or delegate, shall perform such Government Contract and
the applicable Seller shall promptly pay over to Buyer in full any
amounts received by such Seller as a result of performance by Buyer of
such Government Contract. Prior to the novation of each such Government
Contract to Buyer, the applicable Seller, as the contracting party,
shall take such timely action as is reasonably necessary to allow Buyer
or any of its Subsidiaries to perform such Government Contract and to
protect any rights that may exist or accrue under such Government
Contract until it is novated. In connection therewith, Buyer or its
designee is authorized to act as agent on behalf of each such Seller for
purposes of performing and administering each such Government Contract
and subcontract during the period after the Closing until such
Government Contract is novated to Buyer; provided, however, such
authority to act as agent shall not authorize Buyer to settle or
compromise claims under such Contract or subcontract where such claims
are not Assumed Liabilities. Buyer shall indemnify and hold Sellers and
their respective directors, officers, employees, affiliates, agents and
assigns harmless from any loss that directly results from any action or
omission of Buyer in connection with the performance or administration
by Buyer, as contemplated by this Section 10.03, of any Government
Contract during the period after the Closing until such Government
Contract is novated.
(d) Effective upon the novation of a Government Contract to Buyer, the
Government Contract shall be assumed by Buyer provided that Sellers
shall reimburse Buyer for any monetary benefit received by Sellers (net
of any actual out-of-pocket costs of Sellers in connection with such
Government Contract and any payments made by Sellers under Section
10.03(c)) that would have accrued to Buyer had the Government Contract
been novated as of the Closing Date. Any subcontract or other
delegation which Sellers and Buyer have theretofore entered into or
agreed upon in respect of such Government Contract shall be terminated
as of the effective date of such Novation Agreement.
(e) Sellers and Buyer shall cooperate with each other to preserve all
bids, quotations and proposals made in the ordinary course of the
Businesses by Sellers and to facilitate the award of the Contract
related thereto consistent with applicable legal requirements. Any
contracts awarded to Sellers pursuant to such bids, quotations and
proposals shall be deemed to be assumed by Buyer and, in the case of
Contracts with the United States Government, shall be governed by this
Section 10.03.
10.04 Provisions Relating to Certain Assets.
(a) To the extent that a Contract (including, without limitation, a
Government Contract) or other asset that is included within the
definition of "Acquired Assets", or any claim, right or benefit arising
thereunder or resulting therefrom (each an "Interest" and collectively
the "Interests"), is not capable of being sold, assigned, transferred or
conveyed without the approval, consent or waiver of the issuer thereof
or the other party thereto, or any third Person (including a
Governmental Authority), and such approval, consent or waiver has not
been obtained prior to the Closing, or if such sale, assignment,
transfer or conveyance or attempted sale, assignment, transfer or
conveyance would constitute a breach thereof or a violation of any Law,
this Agreement shall not constitute a sale, assignment, transfer or
conveyance thereof, or an attempted sale, assignment, transfer or
conveyance thereof.
(b) Anything in this Agreement to the contrary notwithstanding, Sellers
are not obligated to sell, assign, transfer or convey to Buyer any of
their rights and obligations in and to any of the Interests without
first obtaining all necessary approvals, consents or waivers. Sellers
shall cooperate with Buyer to obtain all approvals, consents or waivers
necessary to convey to Buyer each such Interest other than Government
Contracts requiring novation, which are governed by Section 10.03, as
soon as practicable; provided, however, that (i) neither Sellers nor
Buyer shall be obligated to offer or pay any consideration or concession
therefor to the third party from whom such approval, consent or waiver
is requested, and (ii) Buyer shall not be obligated to accept any
conditions, requirements, amendments or limitations (other than those
contained in the underlying Interest) which Buyer determines, in its
sole discretion, to be unacceptable. The failure by Sellers to obtain
any such approval, consent or waiver necessary to convey any Interest to
Buyer, except with respect to those approvals and consents listed on
Schedule 8.01, shall not affect the obligations of the parties to close
hereunder.
(c) To the extent any of the approvals, consents or waivers necessary to
convey any Interest other than Government Contracts requiring novation,
which are governed by Section 10.03, to Buyer (other than the approvals
and consents listed on Schedule 8.01) have not been obtained by Sellers
as of the Closing or to the extent any Interest cannot be transferred to
Buyer by the Closing, Sellers shall, during the remaining term of such
Interest, use all reasonable efforts, to (1) at the request of Buyer,
cooperate with Buyer to obtain the consent of any such third party;
provided, however, that (i) neither Sellers nor Buyer shall be obligated
to offer or pay any consideration, and (ii) Buyer shall not be obligated
to accept any conditions, requirements, amendments or limitations (other
than those contained in the underlying Interest) which Buyer determines,
in its sole discretion, to be unacceptable, (2) at the request of Buyer,
cooperate with Buyer in any reasonable and lawful arrangements designed
to provide the benefits of such Interest to Buyer including, with
respect to any Long-Term Lease Facility as to which the respective
Seller has been unable to obtain the lessor's consent to the assignment
thereof to Buyer, to sublease such Long-Term Lease Facility (to the
extent permitted under the pertinent lease) to Buyer, upon substantially
the same terms and conditions as are set forth in such lease with
respect to Seller, so long as Buyer cooperates with Sellers in such
arrangements and promptly reimburses Sellers for any and all payments
required to be made by Sellers after the Closing Date by the terms of
the document governing such Interest (as the same shall be in effect on
the date hereof) and any fees, costs and expenses of any nature incurred
by Sellers in connection with any such arrangements, and (3) enforce, at
the request of Buyer and at the expense and for the account of Buyer,
any rights of Sellers arising from such Interest against the issuer
thereof or the other party or parties thereto (including the rights to
elect to terminate any such Interest in accordance with the terms
thereof upon the request of Buyer). To the extent that Sellers enter
into lawful arrangements reasonably satisfactory to Buyer designed to
provide the benefits of any such Interest to Buyer as set forth in
clauses (1) and (2) above, such Interest shall be deemed to have been
conveyed to Buyer for the purposes of this Agreement; provided, however,
that the approvals and consents listed on Schedule 8.01 shall be
obtained as a condition to Closing, unless waived by Buyer.
ARTICLE XI
CONTINUING OBLIGATIONS OF SELLERS AND IMO
11.01 Sellers' and Imo's Indemnity.
(a) Buyer is not and is not to be deemed to be a successor of Sellers,
it being understood that Buyer is acquiring the Acquired Assets only
pursuant to the terms of this Agreement, and it is expressly understood
and agreed that Buyer has not and does not hereby assume or agree to
assume any liability whatsoever of Sellers except the Assumed
Liabilities, nor does Buyer assume or agree to assume any obligation of
Sellers under any Contract or other document to which any Seller is a
party or by which any Seller is or may be bound or which in any manner
affects the Businesses or the Acquired Assets or any part thereof except
the Assumed Liabilities.
(b) Subject to the limitations, conditions and provisions set forth
herein, from and after the Closing Date, Sellers and Imo agree to
indemnify, defend, and hold harmless Buyer, TPG and their respective
officers, directors, shareholders, employees, agents and affiliates
(such Persons, TPG and Buyer, collectively the "Buyer Indemnitees" and
individually a "Buyer Indemnitee") from and in respect of any and all
claims, demands, actions, losses, costs, expenses, obligations,
liabilities, actual damages, recoveries, and deficiencies, including,
without limitation, interest, penalties and reasonable attorneys' fees
(collectively "Damages"), actually incurred by a Buyer Indemnitee and
that arise from, result from, or relate to, directly or indirectly, in
whole or in part: (i) any breach of, or failure by Sellers or Imo to
perform, any of the representations and warranties of Sellers or Imo
contained in this Agreement, or any of the covenants and agreements
contained in this Agreement that are required to be performed by Sellers
or Imo; (ii) any liability or obligation of any kind or nature accrued
as of the Closing Date, whether fixed or contingent, known or unknown,
proximate or remote, including, without limitation, Retained
Environmental Liabilities, excepting only the Assumed Liabilities, that
relates in any way to Sellers, the Businesses or the Acquired Assets;
(iii) any liability or obligation of any kind or nature respecting any
pension, profit sharing or other employee benefit plan maintained or
contributed to by Sellers or Imo or any corporation, trade, business or
entity under common control with any Seller or Imo within the meaning of
Section 414(b), (c) or (m) of the Code or Section 4001(b) or ERISA,
whether the same occurs before or after the Closing Date; (iv) the
amount of reimbursements attempted to be collected from the United
States Government after the Closing Date by Buyer attributable to
pension costs of Buyer, which are denied by the United States Government
on the basis that Imo's pension plan covering certain employees of the
Businesses is overfunded as of the date hereof; and (v) any liability or
obligation of any kind or nature respecting the matters that are the
subject of the Investigations (all such liabilities or obligations
referred to in this clause (v) being hereinafter referred to as
"Special Damages"). For purposes of determining the right of the Buyer
Indemnitees hereunder with respect to any representation and warranty of
Sellers or Imo that is qualified as to materiality or by reference to
Material Adverse Effect, the Buyer Indemnitees shall be entitled to
indemnification hereunder if, without giving effect to the materiality
or Material Adverse Effect qualification contained in such
representation and warranty, such representation and warranty has been
breached.
(c) The right of the Buyer Indemnitees to indemnity for Damages
hereunder shall be subject to the following general limitations:
(I) No indemnification shall be required to be made under this Section
11.01 until the aggregate amount of Damages incurred by the Buyer
Indemnitees pursuant to all Qualifying Events (as hereinafter defined)
exceeds $1,500,000 (the "Deductible"), and then the Buyer Indemnitees
shall only be entitled to indemnification for the amount of such Damages
above the Deductible; as used herein, the term "Qualifying Event" shall
mean a single event or circumstance, or series of related events or
circumstances, with respect to which the amount of Damages incurred by a
Buyer Indemnitee equals or exceeds $50,000;
(ii) The Buyer Indemnitees shall be entitled to indemnity only for those
matters as to which Buyer has given notice to Sellers and Imo as
provided in Section 11.02 within one year after the Closing Date; and
(iii) The Buyer Indemnitees' right to indemnity under this Section 11.01
shall in no event exceed $18,000,000 in the aggregate.
provided, however, that the foregoing limitations shall not apply to any
post-Closing payment obligations of Sellers or Imo pursuant to this
Agreement (except the indemnity obligations set forth in this Section
11.01), including, without limitation, the payment of any amounts
pursuant to Sections 2.03, 2.04 or 2.06; and provided further, however,
that the general limitations set forth in clauses (i) and (ii) above
shall not apply to Special Damages, with the limitations with respect to
Special Damages being set forth in paragraph (d) below.
(d) The right of the Buyer Indemnitees to indemnity hereunder for
Special Damages shall be subject to the general limitation set forth in
clause (iii) of paragraph (c) above and to the following special
limitations:
(i) The Buyer Indemnitees shall be entitled to indemnity for each
dollar of Special Damages up to $1,000,000;
(ii) Once the Buyer Indemnitees have received indemnity pursuant to
clause (i) of this paragraph (d) in the amount of $1,000,000, Sellers
shall only be obligated to give Buyer additional indemnification for
Special Damages to the extent that the dollar amount of such additional
Special Damages, together with the aggregate dollar amount of all claims
for indemnification pursuant to Section 11.01(b) that have not
theretofore been paid by Sellers because the Deductible has not then
been met, exceeds $1,500,000, in which case Buyer shall be entitled to
indemnification for the excess of the aggregate of such amounts over
$1,500,000; and
(iii) The Buyer Indemnitees shall be entitled to indemnity for those
Special Damages as to which Buyer has given notice to Sellers and Imo as
provided in Section 11.02 within three years after the Closing Date.
(e) Notwithstanding any facilitating undertakings by Buyer or TPG of any
Seller's or Imo's liability to third parties to effectuate or facilitate
the Closing of the transactions contemplated hereby (including, without
limitation, pursuant to Novation Agreements, leases, contracts,
assignments or permits), whether pursuant to Sections 10.03 or 10.04
hereof, or otherwise, this Agreement shall be the sole governing
document in determining the rights and liabilities as between the
parties hereto, and no inference shall be formed that an undertaking
contained in any other agreement is an Assumed Liability with respect to
a pre-Closing act, event, omission or condition. In the absence of an
express written provision to the contrary in this Agreement setting
forth a specific third-party undertaking as an Assumed Liability under
this Agreement, any undertaking of this type shall not be deemed an
Assumed Liability for purposes of this Section 11.01 nor in any event so
as to operate to lessen or obviate the indemnity protections afforded to
the Buyer Indemnitees under this Section 11.01.
11.02 Notification by Buyer; Defense of Claims. Buyer shall, as
promptly as is reasonably possible after Buyer becomes aware thereof,
notify Sellers of the existence of any claim, demand or other matter to
which Sellers' indemnification obligations would apply. Buyer shall
give Sellers a reasonable opportunity to defend the same at their own
expense and with counsel of Sellers' own selection reasonably acceptable
to Buyer. Sellers may, in Sellers' discretion, settle any such dispute,
demand or claim defended by them hereunder; provided, however, that any
such settlement effected by Sellers without Buyer's consent shall be
solely for Sellers' account and Buyer shall not be liable for any
amounts whatsoever payable in connection with any such settlement. If
Sellers shall, within a reasonable time after notice to them, fail to so
defend, Buyer shall have the right, but not the obligation, to undertake
the defense of, and to compromise or settle (exercising reasonable
business judgment), the claim or other matter on behalf, for the
account, and at the risk, of Sellers.
11.03 [Intentionally omitted]
11.04 Determination of Damages and Related Matters. In calculating any
amount payable to Buyer pursuant to Section 11.01, the calculation of
Buyer's Damages (including Special Damages) shall take into account any
insurance recoveries received by Buyer, and no amount shall be included
for Buyer's special, consequential or punitive damages. Notwithstanding
anything to the contrary contained in this Section 11.04, Special
Damages shall include, without limitation, the following: (i) damages
incurred by Buyer because one or more products delivered by Sellers to
one or more customers prior to the Closing pursuant to applicable
Contracts are returned, in whole or in part, to Buyer by the applicable
customer after the Closing Date, or such products are required to be
serviced in the field by Buyer, for reasons relating to the subject
matter of the Investigations; (ii) damages incurred by Buyer because any
Contract (x) comprising a part of the backlog of the Businesses as of
the Closing Date, (y) in performance by Sellers as of the Closing Date,
or (z) performed, in whole or in part, by the Businesses prior to the
Closing Date (collectively, "Covered Contract") is terminated or
cancelled by the applicable customer after the Closing Date for reasons
relating to the subject matter of the Investigations including, without
limitation, as a result of any suspension, revocation or invalidation of
any export license existing as of the Closing Date or any debarment or
suspension of Buyer or any key employee of Buyer, in each case for
reasons related to the subject matter of the Investigations; provided,
however, that such damages shall not exceed the amount of net profit
contribution that Buyer would have realized upon full performance of
such Contract; (iii) damages incurred by Buyer relating to the assertion
by a United States Governmental Authority of a claim against the Buyer
that arises under, or relates to, any Covered Contract for reasons
relating to the subject matter of the Investigations; and (iv) fines and
penalties incurred by Buyer relating to the subject matter of the
Investigations. Further, notwithstanding anything to the contrary
contained in this Section 11.04, Buyer's Damages shall include, without
limitation, monetary damages incurred by Buyer and payable to a third
party arising from, resulting from or relating to the matters specified
in clauses (i) through (v) of Section 11.01(b). Sellers and Buyer agree
that, except as specifically set forth in this Agreement, no party
(including its representatives) has made or shall have liability for any
representation or warranty, express or implied, in connection with the
transactions contemplated by this Agreement, including, in the case of
Sellers and their respective representatives, any representation or
warranty, express or implied, as to the accuracy or completeness of any
information regarding the Businesses. Buyer acknowledges and agrees
that Buyer and its representatives have the experience and knowledge to
evaluate the business, financial condition, assets and liabilities of
the Businesses, that Buyer and its representatives have had access to
such of the information, documents, real property, fixtures and tangible
personal property of the Businesses as Buyer and its representatives
shall have requested to see and/or review, that Buyer and its
representatives have had a full opportunity to meet with appropriate
management and employees of Sellers to discuss the Businesses and the
Acquired Assets and that, in determining to acquire the Acquired Assets,
Buyer has made its own investigation into, and based thereon, Buyer has
formed an independent judgment concerning, the Acquired Assets and the
Businesses. It is therefore expressly understood and agreed that,
except as otherwise expressly provided herein, Buyer accepts the
condition of the Acquired Assets "AS IS, WHERE IS" AND WITHOUT ANY
REPRESENTATION, WARRANTY OR GUARANTEE, EXPRESS OR IMPLIED, AS TO
MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE OR OTHERWISE AS TO THE
CONDITION, SIZE, EXTENT, QUANTITY, TYPE OR VALUE OF THE ACQUIRED ASSETS
OR THE BUSINESSES. Nothing in this Agreement, however, shall preclude
any action by Buyer against any Seller or Imo for fraud. Except as set
forth in the next preceding sentence, the parties hereto understand and
agree that the sole and exclusive remedy available to any Buyer
Indemnitee in respect of the matters covered by Section 11.01 shall be
to proceed in the manner and subject to the limitations contained in
Sections 11.01 through 11.04, inclusive.
11.05 Non-Competition. (a) Sellers and Imo agree that they (and any
entity affiliated with Sellers) will not at any time within the five-
year period immediately following the Closing Date, directly or
indirectly: (i) cause, induce or encourage any employees of the
Businesses who are or become employees of Buyer or its affiliates to
leave such employment; or (ii) cause, induce or encourage any actual or
prospective customer, supplier or manufacturer of the Businesses, or any
other Person who has a business relationship with Sellers that is
material to the Businesses, to terminate or change any such actual or
prospective relationship in a manner that would be adverse to the
Businesses.
(b) Sellers expressly recognize and agree that (i) the remedies at law
available to Buyer for breach of this covenant not to compete are
inadequate and that injunctive relief shall be available to Buyer to
enforce this covenant, and (ii) the restraints imposed upon Seller by
this Section 11.05 are reasonable as to time.
(c) Sellers further agree not to divulge, communicate, use to the
detriment of Buyer or for the benefit of any other Person or Persons,
any confidential information or trade secrets sold to Buyer hereunder,
except as is otherwise specifically permitted in this Agreement.
11.06 Employee Terminations; Incentive Payments. (a) Buyer shall offer
employment as of the Closing Date to each employee of the Businesses as
of the Closing Date, other than the individuals listed on Schedule
11.06, in the same position and, in each case, at a rate of pay at least
equal to such employee's rate of pay in effect on the Business Day
immediately preceding the Closing Date and with benefits substantially
similar to such employees' benefits currently in effect, except that
Buyer is not planning to have a stock purchase, stock option or savings
plan and Buyer has made no determination as to whether it will offer a
pension plan and, if so, what benefits will be included in such a plan.
Except as expressly provided otherwise herein, Sellers shall be solely
responsible for the satisfaction of all severance and related
obligations, contractual or otherwise, including, without limitation,
claims for wrongful termination, if any, with respect to the employees
listed on Schedule 11.06, and Buyer shall be solely responsible for the
satisfaction of all severance and related obligations, contractual or
otherwise, including, without limitation, claims for wrongful
termination, if any, with respect to all other employees of the
Businesses to the extent the same arise after the Closing Date. Sellers
shall be solely responsible for payment to any employee or agent of
Sellers of incentive fees in connection with the consummation of the
transactions contemplated hereby.
(b) During the 60-day period from and after the Closing Date, Buyer
shall not: (i) permanently or temporarily shut down a Facility (as
hereinafter defined) if the shutdown results in an employment loss
during any 30-day period at the Facility for 50 or more employees,
excluding any part-time employees; and (ii) lay off more than 33 percent
of the active employees, and no more than 49 employees, excluding part-
time employees, at any Facility. For purposes of this subparagraph (b),
the term "Facility" shall mean a "single site of employment" and/or an
"operating unit" as those terms are defined in the Worker Adjustment and
Retraining Notification Act (the "WARN Act"). The term "employment
loss" shall have the meaning ascribed to it in the WARN Act. It is
intended by this subparagraph (b) that Buyer shall assume any and all
damages under the WARN Act arising out of this transaction.
(c) Baird and Imo understand and acknowledge that, after the Closing
Date, Buyer may require the assistance of certain of the employees of
Baird who are listed on Schedule 11.06 on a temporary basis until the
operations of the Baird facility in Massachusetts are consolidated into
Sellers' facilities in Garland, Texas that are included among the
Acquired Assets. To the extent such employees continue to be employed
by Baird or Imo after the Closing, the parties hereby agree that Buyer
may have access to such employees upon the following terms and
conditions:
(i) on or prior to the Closing Date, Buyer shall provide Baird and Imo
with a list of the employees of Baird whose services it wishes to so
utilize;
(ii) Sellers agree to use reasonable efforts to cause such employees to
continue to be employed by Baird for the period set forth in clause (iv)
below;
(iii) Buyer shall reimburse Baird or Imo, as appropriate, on a monthly
basis for all salary and benefits of such employees for the period of
time that their services are utilized by Buyer, promptly upon Buyer's
receipt of an invoice from Baird or Imo for such amounts;
(iv) Buyer shall only be entitled to utilize the services of such
employees for a period of time not to exceed six months after the
Closing;
(v) upon the conclusion of Buyer's use of any such employee, Buyer
shall reimburse Baird or Imo for 50% of any severance payments made to
such employee by Baird or Imo to the extent such severance payments are
required to be made pursuant to a severance policy in effect on the
Closing Date; and
(vi) Buyer shall indemnify and hold Sellers and Imo and their
respective directors, officers, employees, affiliates, agents and
assigns harmless from any loss that directly results from any act or
omission of any employee of Baird that occurs during the course of
providing services for Buyer as contemplated by this Section 11.06(c).
11.07 Use of Transferred Employees. Buyer understands and acknowledges
that, after the Closing Date, Sellers may require the assistance or
participation of its former employees who are employed by Buyer after
Closing in locating and obtaining records and files maintained by Buyer
and in the anticipation of, or preparation for, ongoing investigations,
including, without limitation, the Investigations, or existing or future
litigation, arbitration, administration or tax-related matters. To the
extent that such former employees of Sellers are employed by Buyer,
Sellers may, at Sellers' sole expense, have reasonable access to such
employees upon the following terms and conditions:
(a) Sellers shall give Buyer prior written notice of the necessity to
utilize specified employees at least two Business Days (unless waived in
writing by Buyer) prior to the date on which Sellers are requesting the
assistance or participation of such employees; provided, however, it is
understood and agreed that, under certain special circumstances, it may
be impractical for Sellers to comply with the requirement for prior
written notice contained in this subparagraph (a), in which event Buyer
will consider in good faith any oral or written request by Sellers for
access to such employees and will not unreasonably withhold from Sellers
access to such employees in such circumstances;
(b) Sellers shall reimburse Buyer for all out-of-pocket expenses
incurred by each such employee and shall reimburse Buyer for all wages
paid by Buyer to each such employee relating to the time period during
which Sellers have retained the assistance of such employee as provided
herein; and
(c) to the extent any such employee is utilized by Seller for more than
fifteen Business Days during any calendar year, Sellers shall, in
addition to the reimbursement called for by subparagraph (b) above, pay
to Buyer all other costs to Buyer of having such employee away from his
occupation with Buyer, as shall reasonably be determined by Buyer.
11.08 Letters of Credit. Sellers shall maintain those Letters of Credit
listed on Schedule 3.25 that are marked with a single asterisk until
such Letters of Credit expire in accordance with their terms.
11.09 Further Assurances. Sellers and Imo, at any time on or after the
Closing Date, will execute, acknowledge, and deliver any further deeds,
assignments, conveyances, and other assurances, documents, and
instruments of transfer, reasonably requested by Buyer, and will take
any other action consistent with the terms of this Agreement that may
reasonably be requested by Buyer for the purpose of assigning,
transferring, granting, conveying and confirming to Buyer, or reducing
to possession, any or all of the Acquired Assets. In the event Sellers
conduct environmental remediation activities at the Real Property after
the Closing Date, Buyer shall provide the necessary access to conduct
such activities.
11.10 Right to Subcontract. Sellers and Imo hereby covenant and agree
that, for (i) a period of one year after the Closing Date or (ii) so
long as Imo or an affiliate thereof shall continue to own the assets
currently constituting the Miller-Holzwarth division of Baird ("Miller-
Holzwarth"), whichever first occurs, Imo shall (x) grant, or cause to be
granted, to Buyer the right to submit a bid or bids to Miller-Holzwarth
to provide to it, in respect of applicable Contracts awarded to Miller-
Holzwarth after the Closing Date, various goods and services of the type
produced or performed by the Businesses for Miller-Holzwarth, in respect
of similar Contracts, prior to the date hereof, and (y) accept, or cause
to be accepted, such bid or bids if, in the reasonable judgment of Imo,
such goods and services are of a quality comparable to those that
Miller-Holzwarth could obtain from a third party and the fees to be
charged by Buyer for such goods and services are no less favorable to
Miller-Holzwarth than could be obtained from a third party. Sellers and
Imo hereby further covenant and agree that, for (i) a period of one year
after the Closing Date or (ii) so long as Imo or an affiliate thereof
shall continue to own an interest in TransVaro Electron Devices
Industrial & Commercial A.S. ("TransVaro"), whichever first occurs, Imo
shall (x) grant, or cause to be granted, to Buyer the right to submit a
bid or bids to TransVaro to provide to it, in respect of applicable
Contracts awarded to TransVaro after the Closing Date, various goods and
services of the type produced or performed by the Businesses for
TransVaro, in respect of similar Contracts, prior to the date hereof,
and (y) accept, or cause to be accepted, such bid or bids if, in the
reasonable judgment of Imo, such goods and services are of a quality
comparable to those that TransVaro could obtain from a third party and
the fees to be charged by Buyer for such goods and services are no less
favorable to TransVaro than could be obtained from a third party.
ARTICLE XII
CONTINUING OBLIGATIONS OF BUYER AND TPG
12.01 Buyer's Indemnity. (a) Subject to the limitations, conditions
and provisions set forth herein, from and after the Closing Date, Buyer
agrees to indemnify, defend, and hold harmless Sellers and Imo and their
respective officers, directors, shareholders, employees, agents and
affiliates (such Persons, Sellers and Imo, collectively the "Seller
Indemnitees" and individually a "Seller Indemnitee") from and in respect
of any and all Damages actually incurred by a Seller Indemnitee and that
arise from, result from, or relate to, directly or indirectly, in whole
or in part, (i) any breach of, or failure by Buyer or TPG to perform,
any of the representations and warranties of Buyer or TPG contained in
this Agreement, or any of the covenants and agreements contained in this
Agreement that are required to be performed by Buyer or TPG; and (ii)
any liability or obligation of any kind or nature relating in any way to
any of the Assumed Liabilities. For purposes of determining the right
of the Seller Indemnitees hereunder with respect to any representation
and warranty of Buyer or TPG that is qualified as to materiality or by
reference to Buyer Material Adverse Effect, the Seller Indemnitees shall
be entitled to indemnification hereunder if, without giving effect to
the materiality or Buyer Material Adverse Effect qualification contained
in such representation and warranty, such representation and warranty
has been breached.
(b) The right of the Seller Indemnitees to indemnity for Damages under
paragraph (a)(i) above shall be subject to the following limitations:
(I) No indemnification shall be required to be made under Section
12.01(a) until the aggregate amount of Damages incurred by the Seller
Indemnitees pursuant to all Qualifying Events exceeds $1,500,000 (the
"Deductible"), and then the Seller Indemnitees shall only be entitled to
indemnification for the amount of such Damages above the Deductible;
(ii) The Seller Indemnitees shall be entitled to indemnity only for
those matters as to which Sellers and Imo have given notice to Buyer as
provided in Section 12.02 within one year after the Closing Date; and
(iii) The Seller Indemnitees' right to indemnity under Section 12.01(a)
shall in no event exceed $18,000,000 in the aggregate;
provided, however, that the foregoing limitations shall not apply to any
post-Closing payment obligations of Buyer to Sellers or Imo pursuant to
this Agreement (except the indemnity obligations set forth in this
Section 12.01), including, without limitation, the payment of any
amounts pursuant to Sections 2.03, 2.04 or 2.06.
12.02 Notification by Sellers; Defense of Claims. Sellers shall as
promptly as is reasonably possible after Sellers become aware thereof,
notify Buyer of the existence of any claim, demand, or other matter to
which Buyer's indemnification obligations would apply. Sellers shall
give Buyer a reasonable opportunity to defend the same at its own
expense and with counsel of its own selection reasonably acceptable to
Sellers. Buyer may, in its discretion, settle any such dispute, demand,
or claim defended by it hereunder; provided, however, that any such
settlement effected by Buyer without Sellers' consent shall be solely
for Buyer's account and Sellers shall not be liable for any amounts
whatsoever payable in connection with any such settlement. If Buyer
shall, within a reasonable time after notice to it, fail to so defend,
Sellers shall have the right, but not the obligation, to undertake the
defense of, and to compromise or settle (exercising reasonable business
judgment), the claim or other matter on behalf, for the account, and at
the risk, of Buyer.
12.03 Determination of Damages and Related Matters. In calculating any
amount payable to Sellers pursuant to Section 12.01, the calculation of
Sellers' Damages shall take into account any insurance recoveries, and
no amount shall be included for Sellers' special, consequential or
punitive damages. The parties hereto understand and agree that, except
in the case of fraud, the sole and exclusive remedy available to any
Seller Indemnitee in respect of the matters covered by Section 12.01
shall be to proceed in the manner and subject to the limitations
contained in Sections 12.01 through 12.03, inclusive.
12.04 Various Employee Matters. (a) Effective as of the Closing, Imo
and Sellers will fully vest all of the employees of the Businesses as to
which Buyer offers employment, and who accept such offers of employment,
in the benefits properly allocable to such employees under the defined
benefit plan maintained by Imo for the benefit of, inter alia, such
employees.
(b) Prior to the Closing, Buyer will inform Sellers which of Sellers'
Benefit Arrangements, if any, Buyer desires to continue from and after
the Closing; in such event, Sellers agree to reasonably cooperate with
Buyer in the continuation of such Benefit Arrangements in an orderly and
cost effective manner.
(c) All employees of the Businesses who accept offers of employment
extended by Buyer pursuant to Section 11.06(a) shall be offered coverage
under a medical benefits plan of Buyer which (i) shall not exclude or
limit any preexisting conditions of such employees under such medical
plan and (ii) shall give credit for co-payments and deductibles
previously incurred by each such employee under medical plans of Sellers
or Imo for purposes of satisfying similar limitations under Buyer's
medical plan. In determining the eligibility of a given employee
pursuant to the vacation policy to be established by Buyer, Buyer shall
give credit for such employee's years of service with the applicable
Seller.
12.05 AIM-9 Claim Settlement. Buyer hereby covenants and agrees that,
upon the final settlement or other resolution of the AIM-9 Claim, Buyer
shall promptly pay to Imo an amount in cash equal to 50% of the amount
so recovered by Buyer in excess of $1,000,000, net of all reasonable
out-of-pocket fees and expenses, including, without limitation, fees and
expenses of counsel and other experts and consultants incurred by Buyer
in connection therewith.
12.06 Reimbursement for Certain Environmental Costs. From and after
the Closing Date Buyer will reimburse Sellers for out-of-pocket costs
incurred by Sellers between July 1, 1994, and the Closing Date in
designing and implementing corrective measures to address Assumed
Environmental Liabilities (including preparation of remedial action
plans) up to an aggregate of $500,000, upon presentation of appropriate
supporting documentation from Sellers to Buyer; provided, however, that
Buyer shall not be obligated to reimburse Sellers for any costs incurred
by Sellers in identifying and characterizing the nature and scope of
environmental concerns.
ARTICLE XIII
SURVIVAL OF REPRESENTATIONS AND WARRANTIES;
CONFIDENTIALITY
13.01 Survival of Representations and Warranties. Unless otherwise
provided herein, all representations, warranties, covenants and
agreements made by Buyer, TPG, Sellers or Imo in this Agreement shall
survive the Closing hereunder for a period of one year, except that
representations, warranties, covenants and agreements the breach of
which would result in the incurrence by Buyer of Special Damages shall
survive the Closing hereunder for a period of three years; in each case
regardless of any investigation that may have been or may be made at any
time by or on behalf of any party, and any representation, warranty,
covenant or agreement which is the subject of a claim or dispute
asserted in writing prior to the expiration of the above-stated period
shall survive with respect to such claim or dispute until the final
resolution thereof.
13.02 Confidential Information. Each of the parties hereto
acknowledges that prior to the Closing Sellers would be irreparably
damaged, and following the Closing Buyer would be irreparably damaged,
if confidential information concerning the business and affairs of the
Businesses were disclosed to or utilized on behalf of any Person. Each
Seller and Buyer covenants and agrees that it will not, at any time,
directly or indirectly, without the prior written consent of the others,
make use of or divulge, or permit any of its affiliates, associates,
directors, officers, employees or agents to make use of or divulge to
any Person any non-public information concerning the business or
financial or other affairs of, or any of the methods of doing business
used by, the Businesses. It is understood that the foregoing
requirements of confidentiality shall not apply to information:
(a) that is now or in the future becomes freely available to the public
through no fault of or action by Buyer or Sellers;
(b) that is in the possession of Buyer or Sellers prior to the time of
disclosure by the other party or that is independently acquired by Buyer
or Sellers without the aid, application or use of such information;
(c) that is obtained by Buyer or Sellers in good faith without knowledge
of any breach of a secrecy arrangement from a third party; or
(d) that is required to be disclosed by Law.
It is also specifically acknowledged and agreed that Buyer will need to
disclose certain information about Sellers and the Sellers' Business in
order to obtain financing to accomplish the transactions contemplated
herein.
13.03 Injunctive Relief. Each Seller and Buyer expressly agrees that,
in addition to any other right or remedy the others may have, such other
parties may seek and obtain specific performance of the covenants and
agreements set forth in or made pursuant to Section 13.02 hereof and
temporary and permanent injunctive relief to prevent any breach or
violation thereof, and that no bond or other security may be required
from such other parties in connection therewith.
ARTICLE XIV
CLOSING
14.01 Closing. The Closing shall take place at the offices of Kelly,
Hart & Hallman, a professional corporation, 201 Main Street, Suite 2500,
Fort Worth, Texas, at 10:00 a.m., local time, on the earlier of (i) the
fifth Business day following the satisfaction or waiver of all
conditions thereto set forth in Articles VIII and IX hereof or (ii)
December 15, 1994, or at such other place and at such other time as may
be mutually agreed upon by the parties hereto.
14.02 Occurrence of Events. At the Closing, all transactions shall be
conducted concurrently, and no transaction shall be deemed to be
completed until all are completed.
14.03 Termination. Except as may be expressly provided otherwise
herein, this Agreement may be terminated and the transactions
contemplated hereby may be abandoned:
(a) at any time, by the mutual agreement of Sellers and Buyer;
(b) by either party, in the event that the other party is in material
breach of its respective representations, warranties, covenants,
agreements or other obligations contained herein, and such breach is not
cured or waived prior to the Closing;
(c) by Buyer, if any of the conditions to the obligations of Buyer set
forth in Article VIII shall not have been satisfied at the time of the
Closing, unless satisfaction has been frustrated or made impossible by
an act or failure to act of Buyer;
(d) by Sellers, if any of the conditions to the obligations of Sellers
set forth in Article IX shall not have been satisfied at the time of the
Closing, unless satisfaction has been frustrated or made impossible by
an act or failure to act of Seller;
(e) by either party if Closing does not occur on or before December 15,
1994;
(f) pursuant to Section 10.02(b);
(g) by either party if Buyer's Counsel and Sellers' Counsel fail to
reasonably agree on the form of legal opinions to be delivered at
Closing within the time frame set forth in Section 5.03(b);
(h) by either party if Buyer and the applicable Sellers fail to
reasonably agree on the form of any of the Short-Term Leases within the
time frame set forth in Section 5.03(c); or
(I) by either party if Buyer and the applicable Sellers or their
affiliates fail to reasonably enter into the TEJ Stock Purchase
Agreement within the time frame set forth in Section 5.03(d).
14.04 Liability; Remedies Upon Default. (a) Upon any termination of
this Agreement pursuant to Section 14.03, no party hereto shall
thereafter have any liability or obligation hereunder other than that
arising under Section 13.02 of this Agreement, but no such termination
shall relieve either party of any liability to the other party for any
breach of this Agreement prior to the date of such termination. In the
event that Sellers are the defaulting party, Buyer shall be entitled to
require Sellers to consummate and specifically perform the sale in
accordance with the terms of this Agreement, if necessary through
injunction or other court order or process.
(b) If this Agreement is terminated pursuant to Section 14.03(e), the
parties hereto shall thereupon be relieved of any further obligation
each to the other under this Agreement, which shall be deemed null, void
and of no further force and effect.
ARTICLE XV
MISCELLANEOUS
15.01 Legal Costs. If any legal action or proceeding is brought for
the enforcement of this Agreement, or because of an alleged dispute,
breach, default, or misrepresentation in connection with any of the
provisions of this Agreement, the successful or prevailing party or
parties shall be entitled to recover reasonable attorneys' fees and
other costs incurred in that action or proceeding, in addition to any
other relief to which it or they may be entitled.
15.02 Amendments; Waivers. This Agreement cannot be modified, amended
or terminated orally and no waiver of compliance with any provision or
condition hereof and no consent provided for herein shall be effective
unless evidenced by an instrument in writing duly executed by the party
hereto sought to be charged with such waiver or consent. No waiver of
any term or provision hereof shall be construed as a further or
continuing waiver of such term or provision or any other term or
provision. Any condition to the performance of any party hereto which
may legally be waived at or prior to the Closing may be waived in
writing at any time by the party or parties entitled to the benefit
thereof.
15.03 Entire Agreement. This Agreement sets forth the entire
understanding of the parties and supersedes any and all prior
agreements, memoranda, arrangements and understandings relating to the
subject matter hereof. Effective at and as of the Closing, the
Information Sharing Agreement dated as of August 17, 1994, between
Buyer's Counsel and Sellers' Counsel will by this document be terminated
and thereafter be of no further force or effect. No representation,
warranty, promise, inducement or statement of intention has been made by
any party that is not contained in this Agreement, and no party shall be
bound by, or be liable for, any alleged representation, promise,
inducement or statement of intention not contained herein.
15.04 Binding Effect; Assignment. This Agreement shall be binding upon
and inure to the benefit of the parties and their respective successors
and permitted assigns. This Agreement may not be assigned by any party
without the prior written consent of the other parties hereto, which
consent will not unreasonably be withheld or delayed if the assignor
remains obligated hereunder.
15.05 Construction; Counterparts. The Article and Section headings of
this Agreement are for convenience of reference only and do not form a
part hereof and do not in any way modify, interpret or construe the
intentions of the parties. This Agreement may be executed in one or
more counterparts, and all such counterparts shall constitute one and
the same instrument.
15.06 Notices. All notices and communications hereunder shall be in
writing and shall be deemed to have been duly given to a party when
delivered in person to an officer of Imo with respect to Sellers, or an
officer of Buyer with respect to Buyer, or three business days after
such notice is enclosed in a properly sealed envelope, certified or
registered, and deposited (postage and certification or registration
prepaid) in a post office or collection facility regularly maintained by
the United States Postal Service and addressed as follows:
If to Sellers: Imo Industries Inc.
1009 Lenox Drive, Building 4 West
P. O. Box 6550
Lawrenceville, New Jersey 08648
Attention: Thomas J. Bird, Esq.
Senior Vice President and General Counsel
With a copy to:Baker & Botts, L.L.P.
The Warner
1299 Pennsylvania Avenue, N.W.
Washington, D.C. 20004-2400
Attention: Daniel J. Riley, Esq.
If to Buyer: Varo Acquisition Corp.
201 Main Street, Suite 2420
Fort Worth, Texas 76102
Attention: William S. Price
With copies to:Kelly, Hart & Hallman
201 Main Street, Suite 2500
Fort Worth, Texas 76102
Attention: Kevin G. Levy
Any party may change its address for the purpose of notice by giving
notice in accordance with the provisions of this Section 15.07.
15.07 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS, AND NOT THE LAW OF
CONFLICTS, OF THE STATE OF TEXAS.
15.08 Merger of Documents. This Agreement and all agreement and
documents contemplated hereby constitute one agreement and are
interdependent upon each other in all respects.
15.09 Incorporation of Exhibits and Schedules. All Exhibits and
Schedules attached hereto are by this reference incorporated herein and
made a part hereof for all purposes as if fully set forth herein.
15.10 Severability. If any provision of this Agreement or the
application thereof to any person or circumstance shall be invalid or
unenforceable to any extent, the remainder of this Agreement and the
application of such provision to other persons or circumstances shall
not be affected thereby and shall be enforced to the greatest extent
permitted by law so long as the economic or legal substance of the
transactions contemplated hereby is not affected in any manner
materially adverse to any party. Upon such determination that any term
or other provision is invalid or unenforceable, the parties hereto shall
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 greatest extent possible.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
BUYER:
VARO ACQUISITION CORP.
By:
Name:
Title:
SELLERS:
VARO INC.
By:
Name:
Title:
BAIRD CORPORATION
By:
Name:
Title:
OPTIC-ELECTRONIC INTERNATIONAL, INC.
By:
Name:
Title:
IMO:
IMO INDUSTRIES INC.
By:
Name:
Title:
TPG:
TPG PARTNERS, L.P.
By:TPG GenPar, L.P. General Partner
By: TPG Advisors, Inc., General Partner
By:
Name:
Title:
201 Main Street
Suite 2420
Fort Worth, Texas 76102
October 28, 1994
Imo Industries Inc.
Varo Inc.
Baird Corporation
Optic Electronic International, Inc.
1009 Lenox Drive, Building 4 West
Lawrenceville, New Jersey 08648
Gentlemen:
Reference is made to that certain Asset Purchase Agreement dated as of
October 14, 1994, by and among the undersigned and you (the "Purchase
Agreement"). All capitalized terms used but not otherwise defined
herein shall have the respective meanings given them in the Purchase
Agreement.
The purpose of this letter is to amend and modify certain provisions of
the Purchase Agreement and the Schedules thereto and shall be considered
as part of the Purchase Agreement and the Schedules thereto.
Sections 5.03(b), (c) and (d) of the Purchase Agreement provide for the
negotiation of legal opinions, Short-Term Leases and the Stock Purchase
Agreement within two weeks after the date of the Purchase Agreement. In
order to extend this time period two additional weeks, Sections 5.03(b),
(c) and (d) are hereby amended to read as follows:
"(b)Legal Opinions. As soon as practicable but in any event within four
weeks after the execution of this Agreement, Buyer shall cause Buyer's
Counsel and Sellers shall cause Sellers' Counsel to negotiate in good
faith the legal opinions to be delivered pursuant to Sections 7.01(d)
and 6.01(e), respectively.
(c)Short-Term Leases. As soon as practicable but in any event within
four weeks after the execution of this Agreement, Buyer and the
applicable Sellers shall negotiate in good faith the Short-Term Leases
to be entered into pursuant to Section 8.04.
(d)Stock Purchase Agreement. As soon as practicable but in any event
within four weeks after the execution of this Agreement, Buyer and the
applicable Sellers or affiliates thereof shall negotiate in good faith a
stock purchase agreement pursuant to which Buyer or an affiliate of
Buyer shall purchase from the applicable Sellers or affiliates thereof
all of the issued and outstanding capital stock of TEJ for $160,000 (the
"TEJ Stock Purchase Agreement")."
Schedule 3.19, Environmental Matters, is hereby amended to read as set
forth on Exhibit "A" hereto.
Schedule 3.22, Title; Liens, under the heading of Varo, Inc., Item 1(d),
is hereby amended to delete the double asterisks so as to read as
follows:
"d.Financing Statement #196506 filed October 5, 1992 with the Secretary
of State of the State of Texas by Varo Inc, as Debtor, for the benefit
of G.E. Capital Corp., as Secured Party."
Except as specifically amended hereby, the Purchase Agreement and each
of the Schedules and Exhibits thereto are affirmed and restated.
If this letter sets forth your agreement with respect to the subject
matter hereof, please so indicate by dating and countersigning this
letter in the space below.
Very truly yours,
VARO ACQUISITION CORP.
By:
Name:
Title:
TPG PARTNERS, L.P.
By: TPG GenPar, L.P. General Partner
By: TPG Advisors, Inc., General Partner
By:
Name:
Title:
AGREED TO AND ACCEPTED
this day of October, 1994
VARO INC.
By:
Name:
Title:
BAIRD CORPORATION
By:
Name:
Title:
OPTIC-ELECTRONIC INTERNATIONAL, INC.
By:
Name:
Title:
IMO INDUSTRIES INC.
By:
Name:
Title:
ASSET PURCHASE AGREEMENT
BY AND AMONG
IMO INDUSTRIES INC.,
IMO INDUSTRIES INTERNATIONAL INC.
AND
MANNESMANN CAPITAL CORPORATION
Dated as of November 4, 1994
TABLE OF CONTENTS
Page
ARTICLE I. ASSETS TO BE ACQUIRED 2
1.1. Sale and Purchase of the Joint Venture Interest 2
1.2. Acquisition and Transfer of Assets 2
1.3. Excluded Assets 4
1.4. Treatment of Liabilities 6
1.5. Performance Bonds and Guarantees 10
ARTICLE II. PURCHASE PRICE 11
2.1. Purchase Price and Payment 11
2.2. Purchase Price Adjustment 11
2.3. Allocation of Purchase Price 15
2.4. Deferred Purchase Price 15
ARTICLE III. THE CLOSING 18
3.1. Closing Date 18
3.2. Proceedings at Closing 18
3.3. Deliveries by the Seller to the Purchaser 19
3.4. Deliveries by the JV Seller to the JV Buyer 21
3.5. Deliveries by the Purchaser to the Seller 22
3.6. Deliveries by the JV Buyer to the JV Seller 23
ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF THE SELLER 23
4.1. Organization and Good Standing 23
4.2. Authorization of Agreement 23
4.3. No Conflicts 24
4.4. Title to Assets Other than Real Property 25
4.5. Title to Real Property 25
4.6. Joint Venture Interest 26
4.7. Consents 26
4.8. Financial Statements 26
4.9. Absence of Certain Developments 27
4.10. Material Contracts 27
4.11. Intangible Property 29
4.12. Taxes 30
4.13. Employees and Employee Benefits 30
4.14. Litigation 32
4.15. Compliance with Law 32
4.16. Receivables 32
4.17. Inventory 32
4.18. Assets Necessary to Conduct Business 33
4.19. Environmental Matters 33
4.20. Equipment 34
4.21. Backlog Contracts 34
4.22. Government Contracts 34
4.23. Brokers. 34
ARTICLE V. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER 35
5.1. Organization and Good Standing 35
5.2. Authorization of Agreement 35
5.3. No Conflicts 36
5.4. Consents 36
5.5. Availability of Funds 36
5.6. Litigation 36
5.7. Brokers 36
ARTICLE VI. COVENANTS OF THE SELLERS 37
6.1. Cooperation 37
6.2. Access to Documents; Opportunity to Ask Questions 37
6.3. Conduct of Business 38
6.4. Consents and Conditions; Assignment of Assets 39
6.5. HSR Act, Exxon-Florio Amendment and Other Filings 39
6.6. Release of Certain Liens 39
6.7. Subdivision and Construction Approvals 40
6.8. Novation Agreements. 40
6.9. Environmental Compliance 40
6.10. Subleases 41
ARTICLE VII. COVENANTS OF THE PURCHASER 42
7.1. Cooperation 42
7.2. Confidentiality 42
7.3. Consents and Conditions 42
7.4. HSR Act, Exxon-Florio Amendment and Other Filings 43
7.5. Novation Agreements. 43
ARTICLE VIII. COVENANTS RELATING TO EMPLOYMENT AND
EMPLOYEE MATTERS 43
8.1. Offer of Employment 43
8.2. Collective Bargaining and Other Agreements 44
8.3. Salaried Pension Plans 45
8.4. Welfare Plan 47
8.5. Post-retirement Welfare Benefits 47
8.6. Union Plans 47
8.7. Credited Service 50
8.8. Termination Obligations 50
8.9. Indemnification 50
8.10. Cooperation 51
ARTICLE IX. CONDITIONS PRECEDENT TO THE PURCHASER'S OBLIGATIONS 51
9.1. Representations, Warranties and Covenants 51
9.2. HSR Act 51
9.3. No Prohibition 52
9.4. Opinion of the Seller's Counsel 52
9.5. Authorizations 52
9.6. Subdivision Approvals 52
9.7. Third Party Consents 52
9.8. Title Insurance Policies 52
9.9. Exxon-Florio Amendment 53
9.10. Delivery of Documents 53
ARTICLE X. CONDITIONS PRECEDENT TO THE SELLERS' OBLIGATIONS 53
10.1. Representations, Warranties and Covenants 54
10.2. No Prohibition 54
10.3. Opinion of the Purchaser's Counsel 54
10.4. HSR Act 54
10.5. Delivery of Documents 55
10.6. Authorizations 55
ARTICLE XI. COVENANTS RELATING TO ENVIRONMENTAL MATTERS AND
ASBESTOS CLAIMS 55
11.1. ISRA Compliance 55
11.2. Access of the Seller 56
11.3. Participation of the Purchaser 56
11.4. The Seller's Failure to Comply 58
11.5. Shared Expenses 58
11.6. Connecticut Transfer Act 59
ARTICLE XII. ADDITIONAL POST-CLOSING COVENANTS 59
12.1. Further Assurances 59
12.2. Public Announcements 60
12.3. Post-Closing Covenant of the Seller, the JV Seller
and the Purchaser 61
12.4. Books and Records; Personnel 61
12.5. Non-competition 62
12.6. Review of Major Backlog Contracts 63
ARTICLE XIII. INDEMNIFICATION AND RELATED MATTERS 63
13.1. Indemnification by the Seller 63
13.2. Indemnification by the Purchaser 63
13.3. Determination of Damages and Related Matters 64
13.4. Limitation on Indemnification Liabilities 64
13.5. Survival of Representations, Warranties and Covenants 64
13.6. Notice of Indemnification 65
13.7. Indemnification Procedure for Third-Party Claims 65
13.8. Exclusive Remedy 66
13.9. Limitation of Obligations 66
13.10. Purchase Price Adjustment 66
13.11. Obligations of the JV Seller 66
ARTICLE XIV. TERMINATION 67
14.1. Termination 67
14.2. Liabilities After Termination 67
ARTICLE XV. MISCELLANEOUS 67
15.1. Certain Definitions 67
15.2. Prorations 81
15.3. Entire Agreement 81
15.4. Governing Law 81
15.5. Transfer Taxes 81
15.6. Expenses 82
15.7. Table of Contents and Headings 82
15.8. Notices 82
15.9. Severability 83
15.10. Binding Effect; No Assignment 83
15.11. Amendments 83
15.12. Waiver of Compliance with Bulk Transfer Laws 84
15.13. Counterparts 84
15.14. Third Parties 84
15.15. Arbitration; Exclusive Remedy 84
EXHIBITS AND SCHEDULES
Schedule 1.2(a) Equipment
Schedule 1.2(d)(i) Owned Real Property
Schedule 1.2(d)(ii) Leased Real Property
Schedule 1.2(e) Intangible Assets
Schedule 1.2(h) Permits
Schedule 1.3(o) Excluded Permits
Schedule 2.2 Accounting Principles
Schedule 4.5(d) Options and Other Rights
Schedule 4.7 Required Consents
Schedule 4.8(a) Financial Statements of the Divisions
Schedule 4.8(b) Joint Venture Financial Statements
Schedule 4.9 Certain Developments
Schedule 4.10 Material Contracts
Schedule 4.11(a) Infringing Intangible Assets
Schedule 4.11(a)(a) Excluded Intangible Assets
Schedule 4.11(b) Infringements of Intangible Assets
Schedule 4.11(c) Licenses of Intangible Assets
Schedule 4.13(a) Labor Practices
Schedule 4.13(b)(i) Employee Benefit Plans
Schedule 4.13(b)(ii) Benefit Arrangements
Schedule 4.13(e) Employee Benefit Claims
Schedule 4.13(f) Underfunded Pension Plans
Schedule 4.13(h) Vesting of Benefits
Schedule 4.14 Litigation
Schedule 4.15 Violations
Schedule 4.16 Receivables
Schedule 4.17 Inventory
Schedule 4.18 Assets Necessary to Conduct Business
Schedule 4.19 Environmental Matters
Schedule 4.21 Backlog Contracts
Schedule 4.22 Government Contracts Over $20,000
Schedule 8.1(b) Inactive Division Employees
Schedule 8.2 Retained Employment Agreements
Schedule 8.3(b) Salaried Pension Plan Actuarial Assumptions
Schedule 8.6(a) Assumed Union Plans
Schedule 8.8 Severance Payments
Schedule 15.1(a) Joint Venture Leased Real Property
Schedule 15.1(b)(i) North Plant Property Description
Schedule 15.1(b)(ii) Alternate North Plant Property Description
Schedule 15.1(c) Title Exceptions
Schedule 15.1(d) South Plant Property Description
Schedule 15.1(e)(i) Unimproved Parcel Property Description
Schedule 15.1(e)(ii) Alternate Unimproved Parcel Property Description
Exhibit A Form of Escrow Agreement
Exhibit B Purchase Price Allocation
Exhibit C Form of Easement
Exhibit D Intentionally omitted
Exhibit E-1 Major Subdivision Plan
Exhibit E-2 Alternate Major Subdivision Plan
Exhibit F Form of Easement to Unimproved Parcel and Parking
Easement
ASSET PURCHASE AGREEMENT
ASSET PURCHASE AGREEMENT dated as of November 4, 1994 (the "Agreement"),
by and among Imo Industries Inc., a Delaware corporation (the "Seller"),
Imo Industries International Inc., a Delaware corporation and a wholly
owned subsidiary of the Seller (the "JV Seller" and together with the
Seller, the "Sellers"), and Mannesmann Capital Corporation, a New York
corporation (the "Purchaser"), it being understood that in respect of
all matters pertaining to the Joint Venture Interest the Purchaser is
acting for and on behalf of Mannesmann Beheer B.V. (the "JV Buyer").
W I T N E S S E T H:
WHEREAS, the Seller and the JV Seller are engaged in the business of
designing, manufacturing, distributing, selling and servicing
compression equipment, turbines, boiler feed pumps and centrifugal pumps
and parts and components therefor, including parts and services for the
relevant aftermarkets (the "Business"), through the Seller's Delaval
Turbine division (the "Turbine Division") and through the Seller's
wholly-owned subsidiary Deltex Services, Inc. (the "Subsidiary") and the
Seller's TurboCare division (collectively, the "TurboCare Division," and
together with the Turbine Division, the "Divisions") and through the
Joint Venture; and
WHEREAS, the JV Seller has certain valuable rights in respect of
Delaval-Stork V.O.F., a Netherlands partnership (the "Joint Venture");
and
WHEREAS, the rights of the JV Seller in respect of the Joint Venture
consist of a fifty percent (50%) partnership interest therein and its
other rights under the Joint Venture Documents and such rights are
herein collectively referred to herein as the "Joint Venture Interest";
and
WHEREAS, the Purchaser desires to purchase, and the Seller desires to
sell, certain of the assets and properties of the Seller and the
Subsidiary employed in the Business and, as part of such purchase and
sale, the Seller and the Subsidiary desire to assign, and the Purchaser
desires to assume, certain of the obligations and liabilities of the
Seller and the Subsidiary, subject, in each case, to the exceptions,
terms and conditions set forth herein (the "Asset Sale"); and
WHEREAS, the JV Buyer desires to purchase from the JV Seller, and the JV
Seller desires to sell and assign to the JV Buyer, the Joint Venture
Interest; and
WHEREAS, certain capitalized terms used herein are defined in Section
15.1 hereof;
NOW, THEREFORE, in consideration of the premises and the mutual
representations, warranties, covenants and agreements hereinafter set
forth, and upon the terms and subject to the conditions hereinafter set
forth, the Purchaser and the Sellers hereby agree as follows:
ASSETS TO BE ACQUIRED
Sale and Purchase of the Joint Venture Interest. Upon the terms and
subject to the conditions hereinafter set forth, the JV Seller shall
assign, transfer, convey and deliver to the JV Buyer and the Purchaser
shall cause the JV Buyer to purchase, acquire and accept from the JV
Seller, all of the JV Seller's right, title and interest in the Joint
Venture Interest.
Acquisition and Transfer of Assets. Upon the terms and subject to the
conditions hereinafter set forth, the Seller shall sell, assign,
transfer, convey and deliver, or shall cause the Subsidiary to sell,
assign, transfer, convey and deliver, to the Purchaser, and the
Purchaser shall purchase, acquire and accept from the Seller or the
Subsidiary, as the case may be, all of the Seller's or the Subsidiary's
right, title and interest in and to the Business and the Assets. The
"Assets" shall mean all assets, properties and claims of the Seller and
the Subsidiary used or useful in the Business, whether tangible or
intangible, as the same exist as of the Closing, provided that the
Assets shall not include any Excluded Assets and provided further that
the Assets shall include tangible property not located on the Real
Property only to the extent it is primarily used in the Business.
Without limitation on the generality of the foregoing, the Assets shall
include all of the Seller's, or the Subsidiary's right, title and
interest in and to the assets, properties, rights, contracts and claims
described in the following paragraphs (a) through (n):
all furnishings, furniture, office supplies, vehicles, spare parts,
tools, dies, patterns, machinery, equipment, computers and other
tangible personal property, including, without limitation, those items
of equipment and machinery listed on Schedule 1.2(a) hereto
(collectively, the "Equipment");
all items of inventory, including, without limitation, raw materials,
work-in-process, finished goods, supplies, spare parts and samples
(including any of the aforementioned owned by the Seller or the
Subsidiary but in the possession of manufacturers, suppliers, dealers or
others, or in transit) (the "Inventory");
all accounts receivable and all notes receivable (whether short-term or
long-term) and all deposits with third parties (other than deferred Tax
accounts), together with any unpaid interest and fees accrued thereon
from the respective obligors and any security or collateral therefor,
including recoverable deposits (collectively, the "Accounts
Receivable");
all of the Seller's right, title and interest in the Owned Real Property
set forth on Schedule 1.2(d)(i) hereto and the Leased Real Property set
forth on Schedule 1.2(d)(ii) hereto (collectively, the "Real Property"),
including all buildings located thereon, any of the fixtures attached
thereto and any transferable Permits relating thereto;
except as otherwise provided in Section 1.3(f), all of the Seller's or
Subsidiary's right, title or interest in the name "Delaval" and in any
other Intellectual Property including, but not limited to, the
Intellectual Property listed on Schedule 1.2(e) hereto relating to any
Assets and any rights to sue for, and remedies against, past, present
and future infringements thereof, and rights of priority and protection
of interests therein under the Laws of all jurisdictions throughout the
world (collectively, the "Intangible Assets");
all marketing and promotional brochures and materials and other printed
and written materials relating to the Seller's and the Subsidiary's
ownership of or operation of the Business that the Seller or the
Subsidiary are not required by Law to retain (of which the Seller and
the Subsidiary may retain duplicates), and duplicates of any such
materials that the Seller or the Subsidiary are required by Law to
retain;
all rights under or pursuant to all warranties, representations and
guarantees made by suppliers, manufacturers, contractors and other third
parties in connection with the operation of the Divisions affecting any
of the Assets;
all Permits related to or used in connection with the Divisions or the
Assets, including, without limitation, the Permits listed on Schedule
1.2(h) hereto held by the Seller, Divisions or the Subsidiary (to the
extent permitted by applicable Law to be transferred) but excluding
Permits exclusively relating to or exclusively used in connection with
the Excluded Assets, including, but not limited to the South Plant and
the Unimproved Parcel;
all Contracts including, without limitation, those listed on Schedule
4.10 hereto;
all deferred and prepaid charges, sums and fees, other than in respect
of Taxes and insurance premiums;
all books, records, or other data relating to the Seller's ownership or
operation of the Divisions (including, without limitation, customer and
supplier lists);
any claims or causes of action relating to the Assets and any
counterclaims, set-offs or defenses the Divisions may have with respect
to any of the Assumed Liabilities (as defined below);
all goodwill relating to the Business; and
all other assets and properties reflected on the Balance Sheet of the
Divisions except assets and properties disposed of in the ordinary
course of business between the date thereof and the Closing Date.
Excluded Assets. Notwithstanding anything to the contrary contained in
Section 1.2 hereof, the Sellers and the Purchaser expressly understand
and agree that neither the Seller nor the Subsidiary is hereunder
selling, assigning, transferring, conveying or delivering to the
Purchaser the following assets, properties, rights, contracts and claims
(collectively, the "Excluded Assets"):
cash, bank accounts, certificates of deposits, treasury bills, treasury
notes and marketable securities;
all assets and properties of the Seller or any of its Affiliates used by
the Seller's Imo Pump division, Warren Pumps Inc. or Imo AB;
except as otherwise specifically provided herein, pension or other
funded employee benefit plan assets;
any insurance policy;
except as set forth in Section 6.4 hereof, any of the Seller's right,
title or interest in or to any name, mark, trade name or trademark,
including, without limitation, any incorporating "Imo" or "Transamerica"
and all corporate symbols or logos incorporating "Imo" or
"Transamerica," either alone or in combination, and any and all goodwill
represented thereby and pertaining thereto;
subject to Section 6.4, the right to use the "Delaval" name in
connection with the business currently conducted by the Seller's Delaval
Condenser division;
all Contracts that relate solely to the Excluded Assets or the Retained
Liabilities;
all prepaid insurance premiums and prepaid Taxes pertaining to the
Divisions and all prepaid Taxes, charges, sums and fees pertaining to
any of the Excluded Assets or the Retained Liabilities;
any books, records or other data relating to the Seller's or the
Subsidiary's ownership or operation of the Divisions not located on the
premises of the Divisions and which are part of the Seller's or the
Subsidiary's general corporate books and records or required by
applicable Law to be retained by the Seller or the Subsidiary; provided,
however, that copies of such books, records or other data relating to
the Divisions shall be furnished to the Purchaser upon reasonable
written request;
except as otherwise set forth in the last sentence of Section 12.1
hereof, all of the Seller's right, title and interest under any
Contracts, agreements, licenses, Permits, exemptions, franchises,
variances, waivers, consents, approvals or other authorizations or
arrangements that are not transferable without consent (unless such
consent has been obtained);
any claims for refunds or rebates of any previously paid Taxes,
including, without limitation, customs duties, real estate taxes and
insurance claims;
any capital stock owned by the Sellers or the Subsidiary (other than the
Joint Venture Interest pursuant to Section 1.1);
all of the Seller's right, title or interest in or to the South Plant,
including all buildings located thereon, any of the fixtures attached
thereto and any Permits exclusively related thereto (but excluding any
Equipment or Inventory therein that the Purchaser has elected to have
relocated to the North Plant pursuant to the terms of the Transition
Agreement dated October 5, 1994 between the Seller and Mannesmann Demag
AG (the "Transition Agreement"));
all of Seller's right, title or interest in or to the Unimproved Parcel,
including any Permits related thereto;
the Permits listed on Schedule 1.3(o);
all deferred Tax accounts;
subject to Section 6.10, the occupancy rights relating to the office
space shared with other Imo divisions at 30 Pioneer Road, Singapore and
the Grove House, Marylebone Road, London, England; and
(r) all assets and properties of the Seller located in Canada.
Treatment of Liabilities. (a) For purposes of this Agreement, the term
"Assumed Liabilities" shall mean only the following:
(i) all Liabilities of the Seller and the JV Seller under the Joint
Venture Documents and the Liabilities of the JV Seller resulting from
the operation of Dutch law or arising out of the conduct of the Business
by the Joint Venture (collectively, the "Joint Venture Obligations"),
provided that (A) in no event shall the Joint Venture Obligations
include any Liability for any corporate income taxes or any franchise
taxes based on net income imposed by any taxing jurisdiction with
respect to any taxable year or period ending on or before the day
immediately preceding the Closing Date, (B) for purposes of clause (A)
of this Section 1.4(a)(i), any taxable year or period which begins prior
to and ends on or after the Closing Date shall be deemed to end at the
close of business on the day immediately preceding the Closing Date
based on an interim closing of the books, (C) notwithstanding anything
to the contrary in this Section 1.4(a)(i), Joint Venture Obligations
shall not include any Liabilities for any Taxes incurred by the Seller,
the JV Seller or the Joint Venture on or before the Closing Date that
would not have been incurred but for the sale of the Joint Venture
Interest contemplated hereby, it being understood that any such
Liabilities shall be Retained Liabilities, except as otherwise provided
in Section 15.5, and (D) for purposes of clause (C) of this Section
1.4(a)(i), any taxable year or period which begins prior to and ends
after the Closing Date shall be deemed to end at the close of business
on the Closing Date based on an interim closing of the books.
(ii) the Liabilities which the Purchaser has agreed to assume pursuant
to Article VIII and Sections 15.2 and 15.5 hereof;
(iii) on and after the date the Purchaser receives the ISRA Clearance,
the On-Site North Plant Environmental Liabilities; and
(iv) the Liabilities of the Seller, the Divisions or the Subsidiary
which arise on and after the Closing Date under any Contracts included
in the Assets, provided that (A) the foregoing shall not be deemed to
modify the definition of the Joint Venture Obligations or the allocation
of Liabilities set forth in Article VIII, (B) in respect of products
delivered or services performed by the Divisions prior to the Closing
Date, the Assumed Liabilities shall include only the Divisions' ordinary
course of business obligations to repair or replace products or services
which were not delivered in accordance with the applicable Contract
(including because such products did not perform in accordance with
their specifications) whether such obligations arise because of breach
of contract or breach of warranty, and (C) while Assumed Liabilities
shall include amounts payable to trade creditors for goods and services
supplied to the Divisions prior to the Closing Date, Assumed Liabilities
shall not include Liabilities to banks or other parties for borrowed
money.
(b) Effective as of the Closing, (i) the Purchaser shall assume and
thereafter pay, perform and discharge the Assumed Liabilities, except
the Joint Venture Obligations and (ii) the Purchaser shall cause the JV
Buyer to assume and thereafter pay, perform and discharge the Joint
Venture Obligations. Subject to Section 1.4(g), from and after the
Closing, the Purchaser shall, to the extent required by Article XIII,
indemnify and hold the Seller and its Affiliates harmless from and
against the Assumed Liabilities.
(c) For purposes of this Agreement, the term "Retained Liabilities"
shall mean all Liabilities of the Seller, the Subsidiary and their
Affiliates relating to the operation of the Divisions prior to the
Closing Date of any kind or nature whatsoever, whether due or to become
due, absolute, contingent, direct, indirect, asserted, unasserted,
known, unknown, choate, inchoate, secured, unsecured, indeterminable or
otherwise, except only those which are Assumed Liabilities. By way of
example, and not by way of limitation, the term "Retained Liabilities"
shall include:
(I) All Liabilities relating to or arising from the Excluded Assets;
(ii) Except as otherwise provided in Sections 15.2 and 15.5, (A) all
Liabilities for Taxes of the Seller and its Affiliates, the JV Seller,
and the Subsidiary, (B) all Liabilities for Taxes of any affiliated
group, joint venture or association, of which any of the Seller, its
Affiliates, the JV Seller, or the Subsidiary has at any time been a
member and (C) all Liabilities of the Seller, its Affiliates, the JV
Seller, and the Subsidiary as a transferee or successor, by contract, or
otherwise, for the Taxes of any other Person, provided that except as
otherwise provided in the definition of Joint Venture Obligations, all
Taxes of the Joint Venture shall be Assumed Liabilities;
(iii) All Liabilities in respect of Asbestos Claims or Pending Asbestos
Claims;
(iv) All Liabilities retained by the Seller as Retained Liabilities
under Article VIII hereof;
(v) Except as otherwise provided in Section 1.4(a)(iii), all
Environmental Liabilities (including, without limitation, any which
might be imposed on the Purchaser or any of its Affiliates by operation
of Law) arising out of, resulting from, or relating to the ownership,
operations or conduct of the Divisions or the Assets, but only with
respect to such Environmental Liabilities that result from, or arise out
of, or relate to a state of facts or conditions existing prior to the
Closing Date;
(vi) Except as specifically provided in Section 11.5 hereof, all
Liabilities arising from or relating to investigating or remediating the
Environment of the North Plant pursuant to ISRA until such time as NJDEP
issues the ISRA Clearance;
(vii) All Liabilities arising from or relating to compliance with the
Connecticut Transfer Act, including, but not limited to, the costs of
investigating and remediating any of the Assets located in Connecticut
if required by the Connecticut Department of Environmental Protection,
but only to the extent such Liabilities result from, or arise out of, or
relate to a state of facts or conditions existing prior to the Closing
Date;
(viii) Legal Proceedings pending against the Seller or the Subsidiary as
of the Closing Date; and
(ix) except as otherwise provided in Section 1.4(a)(iv)(B), all
Liabilities arising out of (A) breach of contract, violation of Law, or
tortious conduct or (B) services performed or products delivered by the
Divisions prior to the Closing Date.
(d) Neither the Purchaser nor the JV Buyer is assuming nor will the
Purchaser, the JV Buyer or any of their Affiliates be in any manner
whatsoever liable to the Sellers, the Joint Venture, the Subsidiary,
their Affiliates or any Governmental Body or other third parties for any
of the Retained Liabilities. From and after the Closing, the Sellers
shall, to the extent required by Article XIII, indemnify, defend and
hold the Purchaser harmless from and against the Retained Liabilities.
Notwithstanding the foregoing, to the extent the performance by the
Sellers of their obligations in respect of the Retained Liabilities
would involve the providing of goods and services of the Business by the
Sellers to customers which the Sellers are not able to provide, the
Purchaser shall use its best efforts to provide or cause the Joint
Venture to provide such goods and services to such customers on Sellers'
behalf on a reimbursement basis, the terms of which will be agreed upon
between the Sellers and the Purchaser prior to the Closing (the
"Reimbursement Basis").
(e) For purposes of this Agreement, the term "Excess Divisional Assumed
Liabilities" shall mean 50% of all amounts in excess of the amount by
which the sum of the following exceeds $1,500,000: (i) the amount by
which the total expenses incurred by the Purchaser and its Affiliates
between the Closing Date and the third anniversary thereof to perform
the repair and replacement obligations included in Assumed Liabilities
by virtue of Section 1.4(a)(iv)(B) exceeds the reserve for such expenses
contained in the Final Balance Sheet and (ii) the amount, if any, by
which the aggregate Actual Direct Costs in respect of Major Divisional
Backlog Contracts exceeds the aggregate of the Base Costs of such
Contracts.
(f) For purposes of this Agreement, "Excess JV Assumed Liabilities"
shall mean all amounts by which 50% of the sum of "Covered JV
Liabilities" exceeds $500,000 and "Covered JV Liabilities" shall mean
the Liabilities of the Joint Venture in respect of (i) the amount, if
any, by which the aggregate Actual Direct Costs in respect of Major JV
Backlog Contracts exceeds the aggregate of the Base Costs in respect of
such Contracts, (ii) the amount by which the total expenses incurred by
the Joint Venture between the Closing Date and the third anniversary
thereof to perform its repair and replacement obligations in respect of
products delivered or services performed by the Joint Venture prior to
the Closing Date (including repair and replacement obligations for
products or services which were not delivered in accordance with the
applicable Contract) exceeds the sum of the reserve for such expenses
contained in the Final Balance Sheet and (iii) the amount by which the
Liabilities incurred by the Joint Venture between the Closing Date and
the fifth anniversary thereof in respect of Environmental Liabilities,
Taxes which are included in the Joint Venture Obligations, Legal
Proceedings pending against the Joint Venture as of the Closing Date and
claims for breach of contract (other than those repair and replacement
obligations referred to in the preceding subsection (f)(ii)), personal
injury or property damage arising out of products delivered or services
performed by the Joint Venture prior to the Closing Date exceeds the sum
of any reserves therefor contained on the Final Balance Sheet.
(g) From and after the Closing Date, the Purchaser shall maintain and
shall cause the Joint Venture to maintain such books and records as are
reasonably required to establish the existence and amount of any Excess
Divisional Assumed Liabilities and Excess JV Assumed Liabilities
(collectively, "Excess Assumed Liabilities"). From time to time after
the Closing Date (but subject to the time limits set forth in Sections
1.4(e) and (f)), the Purchaser shall notify the Seller of the nature and
amount of any Excess Assumed Liabilities by providing the Seller
reasonably detailed information as to the existence and amount thereof
promptly after such information is known to the Purchaser. Upon receipt
of any such notice, the Seller shall, upon request to the Purchaser,
have the right to review such books and records of the Purchaser, the JV
Buyer and the Joint Venture as the Seller may request in order to verify
the existence and amount of any Excess Assumed Liabilities. Provided
the Seller has been given access to review such books and records,
within thirty (30) days after the Purchaser has delivered any notice
pursuant to this Section 1.4(g), the Seller shall pay the Purchaser an
amount equal to the amount of the Excess Assumed Liabilities described
in said notice, unless there is a dispute as to the amount of the Excess
Assumed Liabilities, provided that in respect of Excess JV Assumed
Liabilities the Seller's payment obligations shall be limited to 25% of
those Covered JV Liabilities described in Sections 1.4(f)(i) and (ii)
and to 40% of those Covered JV Liabilities described in Section
1.4(f)(iii). In the event there is a dispute as to the amount of the
Excess Assumed Liabilities, the Seller and the Purchaser shall endeavor
in good faith to resolve such dispute, and, if they are unable to
resolve such dispute within ninety (90) days after the Purchaser has
delivered notice pursuant to this Section 1.4(g), the provisions of
Section 15.15 shall apply.
(h) The parties agree that subject to the Sellers' obligations in
respect of the Retained Liabilities, the risk of ownership of the Assets
and Joint Venture Interest and the operation of the Business from and
after the Closing Date and all Liabilities associated therewith ("Post-
Closing Liabilities") shall rest solely with the Purchaser or the JV
Buyer, as the case may be.
(I) Nothing contained in Sections 1.4(e) or (f) is intended to modify
the definitions of Assumed Liabilities or Retained Liabilities.
Performance Bonds and Guarantees. (a) Subject to Section 1.5(b), at the
Closing, the Purchaser will deliver to the Seller replacement (or, to
the extent the beneficiary thereof will not permit replacement, back-up)
performance bonds and/or letters of credit, in an aggregate principal
amount and with terms and from banks or other financial institutions or
surety companies, in each case reasonably satisfactory to the Seller, to
replace (or, to the extent required, as described above, to
collateralize) any performance bonds of the Seller or any of its
Affiliates, with respect to the Divisions and to replace any letters of
credit securing or in lieu of any obligations of the Seller or any of
its Affiliates, with respect to the Divisions (in each case, or portions
thereof) remaining outstanding on the Closing Date with respect to which
the Seller or any Affiliate of the Seller will have any liability after
the Closing Date. Not later than four (4) Business Days prior to the
Closing Date, the Seller shall preliminarily advise the Purchaser, and
not later than one Business Day prior to the Closing Date, the Seller
shall advise the Purchaser in writing of the performance bonds and
letters of credit to be replaced or collateralized pursuant to this
Section 1.5 and shall provide true and complete copies of all such
performance bonds and letters of credit.
To the extent any performance bonds or letters of credit required to be
replaced or collateralized in accordance with Section 1.5(a) were not
included in the preliminary advice to the Purchaser, the Purchaser shall
use its best efforts to replace or collateralize any such letters of
credit or performance bonds at the Closing, and in any event shall
replace them no later than the close of business on the fifth Business
Day following the Closing Date.
PURCHASE PRICE
Purchase Price and Payment. The aggregate cash purchase price for the
Joint Venture Interest, the agreement not to compete set forth in
Section 12.5 (the "Non-Competition Agreement") and the Assets shall be
the sum of $124,000,000, subject to adjustment as provided in Sections
2.2 and 2.4 (the "Purchase Price"). The Purchase Price shall be
allocated as provided in Section 2.3. Of the aggregate Purchase Price
(a) $109,000,000 shall be due and payable on the Closing Date by wire
transfer of immediately available funds to the account or accounts
designated by the Sellers in writing to the Purchaser not later than two
(2) Business Days prior to the Closing Date, (b) $5,000,000 will be paid
by the Purchaser into an account to be held in escrow pursuant to the
terms and conditions of an escrow agreement in the form of Exhibit A
hereto (the "Escrow Agreement"), which $5,000,000 shall be used to
satisfy any amounts payable by the Seller to the Purchaser pursuant to
Section 2.2(g), and (c) and the balance (the "Deferred Purchase Price")
shall be due and payable as provided in Section 2.4.
Purchase Price Adjustment.
As used herein, the term "Closing Net Book Value" shall mean the
aggregate of (i) the net book value of the Assets, not including the
Joint Venture Interest, less the net book value of the Assumed
Liabilities, (ii) fifty percent (50%) of the net book value of the Joint
Venture Assets less fifty percent (50%) of the Joint Venture Liabilities
and (iii) the net book value of the South Plant Assets as such net book
values are determined pursuant to Section 2.2(b) and set forth in the
Final Balance Sheet.
Within ninety (90) days after the Closing Date, the Seller shall prepare
and deliver to the Purchaser a statement of (i) the net book value of
the Assets, not including the Joint Venture Interest, and the Assumed
Liabilities, (ii) the net book value of the Joint Venture Assets and the
Joint Venture Liabilities and (iii) the net book value of the South
Plant Assets as of the close of business on the day immediately
preceding the Closing Date, together with footnotes (collectively, the
"Closing Balance Sheet"). The Closing Balance Sheet shall be prepared
by the Seller in accordance with GAAP, applied consistently with past
practices in the preparation of the Financial Statements, and in
accordance with such other accounting principles, practices and
methodologies set forth in Schedule 2.2 hereto. The Closing Balance
Sheet shall be audited in accordance with United States generally
accepted auditing standards by the Seller's independent accountants,
Ernst & Young ("Seller's Accountants") and shall be accompanied (within
the 90-day period referred to above) by a letter report of Seller's
Accountants rendering its opinion that the Closing Balance Sheet
presents fairly in all material respects, (i) the net book value of the
Assets, not including the Joint Venture Interest, and the Assumed
Liabilities, (ii) the net book value of the Joint Venture Assets and the
Joint Venture Liabilities and (iii) the net book value of the South
Plant Assets, in each case, as of the close of business on the day
immediately preceding the Closing Date on the basis of accounting set
forth in this Section 2.2(b). The Seller shall cause the Joint
Venture's independent accountants, KPMG Peat Marwick, to provide to the
Seller's Accountants the financial and auditing information concerning
the Joint Venture that is required by the Seller's Accountants to
prepare the Closing Balance Sheet and the Seller's Accountants may rely
on such financial and accounting information in the preparation of the
Closing Balance Sheet and in rendering their opinion thereon.
The Purchaser shall allow the Seller and Seller's Accountants access to
the business, books and records and personnel of the Purchaser and the
JV Buyer and the workpapers of their independent accountants, KPMG Peat
Marwick ("Purchaser's Accountants") (to the extent the Purchaser can
afford the Seller with access to such workpapers), prepared subsequent
to the date hereof which are relevant to the Closing Balance Sheet, and
shall cooperate and direct its personnel and Purchaser's Accountants to
cooperate with the Seller and Seller's Accountants, to facilitate
preparation and delivery of the Closing Balance Sheet and the
accompanying letter report, and in connection with the resolution of any
disputes with respect thereto and the determination of the Final Balance
Sheet. The Purchaser and its representatives, including Purchaser's
Accountants, shall be entitled to review all workpapers of Seller's
Accountants (to the extent the Seller can afford the Purchaser with
access to such workpapers) prepared subsequent to the date hereof
relating to such audit, and to obtain access to the books and records of
the Sellers or their Affiliates to the extent necessary for the
Purchaser to review the Closing Balance Sheet and to resolve any
disputes concerning same.
The Closing Balance Sheet delivered by the Seller to the Purchaser shall
be the Final Balance Sheet and shall be conclusive and binding on the
parties unless the Purchaser, within the 30-day period after the
delivery to the Purchaser of the Closing Balance Sheet, notifies the
Seller in writing that the Purchaser disputes any of the amounts set
forth therein, specifying the nature of each dispute and the basis
therefor (the "Dispute Notice"). Failure by the Purchaser to dispute
the amounts reflected in the Closing Balance Sheet within such 30-day
period shall be deemed an acquiescence therein by the Purchaser. The
parties shall attempt in good faith to reach agreement resolving all of
the disputes set forth in the Dispute Notice within thirty (30) days
after the Dispute Notice is given by the Purchaser to the Seller, in
which event the Closing Balance Sheet, as amended to the extent
necessary to reflect the resolution of all such disputes, shall be the
Final Balance Sheet and shall be conclusive and binding on the parties.
If the parties are unable to resolve any or all of such disputes within
the aforesaid 30-day period, the parties shall, promptly after the
expiration of such time period, submit for resolution all unresolved
disputes to Arthur Andersen & Co., New York office, as an arbiter (the
"Arbiter") for resolution; provided, however, that no unresolved
disputes shall be submitted to the Arbiter for resolution unless the
aggregate of all items in dispute would reduce the Closing Net Book
Value by more than $200,000. The parties agree that in the event the
parties are unable to resolve any or all disputes within such 30-day
period and the aggregate of all items remaining in dispute would reduce
the Closing Net Book Value by less than $200,000, then the parties shall
be deemed to have acquiesced to such disputed items as they appear on
the Closing Balance Sheet. In the event Arthur Andersen & Co., New York
office, declines to accept its appointment as Arbiter and the parties
cannot agree on the selection of another independent accounting firm to
act as Arbiter, either party may request the American Arbitration
Association to appoint such a firm, and such appointment shall be
conclusive and binding on the parties. Promptly, but no later than
thirty (30) days after its acceptance of its appointment as Arbiter, the
Arbiter shall determine, based solely on presentation by the Purchaser
and the Seller, and not by independent review, those items in dispute on
the Closing Balance Sheet and shall render a written report as to the
resolution of each dispute and the resulting calculation of the Final
Balance Sheet and the Closing Net Book Value. In resolving any disputed
item, the Arbiter may not assign a value to such item greater than the
greatest value for such item claimed by either party or less than the
smallest value for such item claimed by either party. The Arbiter shall
have exclusive jurisdiction over, and resort to the Arbiter as provided
in this paragraph (d) shall be the sole recourse and remedy of the
parties against one another or any other person (including Seller's
Accountants or Purchaser's Accountants) with respect to, any disputes
arising out of or relating to the Closing Balance Sheet and/or the Final
Balance Sheet; and the Arbiter's determination shall be conclusive and
binding on the parties and shall be enforceable in a court of law.
The fees and expenses of Seller's Accountants shall be paid by the
Seller. The fees and expenses of Purchaser's Accountants shall be paid
by the Purchaser. The fees and expenses of the Arbiter shall be borne
equally by the Purchaser and the Seller.
As used herein, the term "Final Balance Sheet" shall mean (i) the
Closing Balance Sheet if no Dispute Notice is given by the Purchaser
within the time period set forth in Section 2.2(d) or (ii) if the
Dispute Notice is timely given and all of the disputed items are
resolved by mutual agreement of the parties, the Closing Balance Sheet,
as amended, if necessary, to reflect such resolution of all disputes, or
(iii) if any or all of the disputed items are submitted to the Arbiter
for resolution, the Closing Balance Sheet, as amended, if necessary, to
reflect any resolution of any disputes by mutual agreement of the
parties and the resolution of all other disputes by the Arbiter.
If the Closing Net Book Value exceeds $52,000,000, the Purchaser shall
pay to the Seller the amount of such excess and the amount held under
the Escrow Agreement shall be disbursed to the Seller. If the Closing
Net Book Value is less than $52,000,000, the Seller shall pay the
Purchaser the amount of such difference, said amount to be paid first by
disbursement to the Purchaser of amounts held under the Escrow
Agreement, provided that if after such disbursement there are funds
still held under the Escrow Agreement such funds shall be disbursed to
the Sellers. Any payments made by the Purchaser or the Seller, as the
case may be, pursuant to this Section 2.2(g) shall be made (i) in the
case of any payments other than amounts held under the Escrow Agreement,
together with interest thereon from the Closing Date to the date of
payment at a rate of eight percent (8%) per annum and (ii) within three
(3) Business Days of the date on which the Final Balance Sheet is
determined by wire transfer of immediately available funds to the
account designated by the payee.
In the event the Purchaser performs its obligations under Section 2.2(c)
and, notwithstanding such performance, the Seller does not deliver the
letter report of Seller's Accountants referred to in Section 2.2(b)
within the 90-day period referred to in Section 2.2(b), the Purchaser
shall then prepare and deliver to the Seller within ninety (90) days
after the lapse of such initial 90-day period the Closing Balance Sheet
which shall be audited by the Purchaser's Accountants. In such event,
the Purchaser and the Seller shall comply with the provisions of Section
2.2(b) (except for the requirement that the Closing Balance Sheet be
delivered ninety (90) days after the Closing), (c), (d), (e) and (f)
hereof which, for purposes hereof, shall be deemed to have been amended
to replace in each case the word "Seller" with "Purchaser" and the word
"Purchaser" with "Seller."
(i) In addition to the other adjustments contemplated by this Section
2.2 and Section 2.4, the Purchase Price shall be reduced by $250,000 for
each 5,000 hours by which Actual Production Hours are less than 240,000,
provided that the maximum reduction to Purchase Price which may result
from this Section 2.2(i) shall be $2,000,000 (said reduction to occur if
Actual Production Hours are less than 200,000) and provided further that
there shall be no adjustment to the Purchase Price if Actual Production
Hours are or exceed 240,000. Between the date of this Agreement and the
Closing Date, the Seller shall, and from and after the Closing Date the
Purchaser shall, maintain such books and records as are reasonably
required to permit the calculation and verification of Actual Production
Hours. Not later than January 31, 1996, the Purchaser shall deliver to
the Seller a written notice setting forth the Purchaser's calculation of
Actual Production Hours and the Purchase Price reduction, if any,
required pursuant to this Section 2.2(i) as a result thereof. Upon
receipt of such notice, the Seller shall, upon request to the Purchaser,
have the right to review such books and records of the Purchaser as the
Seller may reasonably request in order to verify the calculation of
Actual Production Hours. Provided the Seller has been given such
access, within thirty (30) days after the Purchaser has delivered its
notice pursuant to this Section 2.2(i), the Seller shall pay to the
Purchaser the amount of the Purchase Price reduction set forth in the
Purchaser's notice unless there is a dispute as to the amount thereof.
In the event there is a dispute as to the amount of the Purchase Price
reduction required by this Section 2.2(i), the Seller and the Purchaser
shall endeavor in good faith to resolve such dispute and if they are
unable to resolve such dispute within ninety (90) days after the
Purchaser has delivered its notice pursuant to this Section 2.2(i), the
provisions of Section 15.15 shall apply. Any amounts payable by the
Seller pursuant to this Section 2.2(i) shall be paid with interest which
shall accrue at the rate of eight percent (8%) per annum from the date
payment is due (i.e., thirty (30) days after the Purchaser delivered its
notice pursuant to this Section 2.2(i)) until paid in full.
Allocation of Purchase Price. The Purchaser and the Sellers hereby
agree that the Purchase Price of the Business and the Assets will be
allocated as set forth on Exhibit B hereto, which shall include (a) an
allocation of the Purchase Price among the Assets, the Joint Venture
Interest and the Non-Competition Agreement, and (b) a further allocation
among the Assets of the Divisions. Subject to the requirements of any
applicable Tax Law, all Tax Returns filed by the Purchaser, the Sellers
and the Subsidiary shall be prepared consistently with such allocation.
In the event of any purchase price adjustment hereunder, the Purchaser
and the Sellers agree to adjust such allocation to reflect such purchase
price adjustment and to file consistently any Tax Returns required as a
result of such purchase price adjustment. Any payment made by the
Sellers in respect of Excess Assumed Liabilities pursuant to Section
1.4(g) shall be deemed to be a purchase price adjustment.
Deferred Purchase Price. The Deferred Purchase Price shall be paid by
the Purchaser as follows:
On the third anniversary of the Closing Date (or if such be not a
Business Day, on the next Business Day), the Purchaser shall pay to the
Seller $5,000,000 by wire transfer of immediately available funds to
such account designated by the Seller not later than two (2) Business
Days prior thereto; provided, however, that such amount shall be reduced
by the sum of (i) the aggregate amount of any funds paid by the
Purchaser or any of its Affiliates to defend any product liability
claims or other claims of personal injury or property damage that have
been asserted respecting alleged exposure to asbestos from products
manufactured, sold or distributed by the Seller or the Divisions or any
of their predecessors prior to the Closing Date (an "Asbestos Claim"),
including, without limitation, all reasonable attorneys' fees, experts'
fees, consultants' fees and any other costs and expenses incurred by the
Purchaser in connection with any such defense (collectively "Defense
Costs"), plus (ii) the aggregate amount of any funds paid by the
Purchaser or any of its Affiliates to settle any claim by, or satisfy
any judgment or award in favor of, any third party arising out of or
resulting from Asbestos Claims, plus (iii), if the Purchaser so elects,
the product obtained by multiplying the Pending Asbestos Claim Reserve
Amount by the number of then pending and unresolved against the
Purchaser or any of its Affiliates ("Pending Asbestos Claims"), provided
that upon the final resolution and disposition of all such Pending
Asbestos Claims, the Purchaser shall pay to the Seller the amount, if
any, by which the amount withheld pursuant to clause (iii) above exceeds
the aggregate amount incurred by the Purchaser or any of its Affiliates
to any third parties in respect of all such Pending Asbestos Claims and
any Defense Costs paid in connection therewith.
On the fifth anniversary of the Closing Date (or if such be not a
Business Day, on the next Business Day), the Purchaser shall pay to the
Sellers $5,000,000 by wire transfer of immediately available funds to
such account designated by the Sellers not later than two (2) Business
Days prior thereto; provided, however, that such amount shall be reduced
by the sum of (i) the aggregate amount of funds paid by the Purchaser or
any of its Affiliates to settle any claim by, or satisfy any judgment or
award in favor of, any third party in respect of any Asbestos Claim and
any Defense Costs paid in connection therewith (excluding any payments
described in Section 2.4(a)(i) or (ii) above) plus (ii), if the
Purchaser so elects, the product obtained by multiplying the Pending
Asbestos Claim Reserve Amount by the number of any Pending Asbestos
Claims (excluding any Pending Asbestos Claims for which the Purchaser
has already exercised its holdback rights described in Section
2.4(a)(iii) above) provided that if such product is less than
$1,000,000, then the Purchaser shall not be entitled to any deduction in
respect of such Pending Asbestos Claims. Upon the final resolution and
disposition of all such Pending Asbestos Claims, the Purchaser shall pay
to the Sellers the amount, if any, by which the amount withheld pursuant
to clause (ii) above exceeds the aggregate amount incurred by the
Purchaser or any of its Affiliates to any third parties in respect of
all such Pending Asbestos Claims and any Defense Costs paid in
connection therewith.
From and after the Closing Date, the Seller shall keep the Purchaser
advised concerning the status of Asbestos Claims and the insurance
coverage being provided to the Seller in respect thereto by providing
the Purchaser such information in respect thereof as the Purchaser may
reasonably request, provided, however, the Seller shall not be required
to provide any information to the Purchaser that, in the opinion of
Seller's counsel, would interfere with or limit any privilege which
attaches to such information. The information to be provided pursuant
to the foregoing shall include litigation status reports received by the
Seller from counsel defending it in the Asbestos Claims. Not later than
thirty (30) days nor sooner than sixty (60) days prior to the third and
fifth anniversary of the Closing Date, the Seller shall prepare and
deliver to the Purchaser, the Seller's calculation of the Pending
Asbestos Claim Reserve Amount as of the most recent practicable date
prior to such delivery. The Seller shall grant the Purchaser access to
such books and records as the Purchaser reasonably requests in order to
verify the accuracy of the calculation delivered by the Seller.
In the event that the Seller is on either the third or fifth anniversary
of the Closing Date the subject of proceedings under either Chapter 7 or
11 of the U.S. Bankruptcy Code or any successor statutes to the same,
then Pending Asbestos Claims shall also include any Asbestos Claim then
pending and unresolved against the Seller.
Without limiting the Purchaser's rights under Sections 2.4(a), (b) and
(d) to holdback portions of the Deferred Purchase Price in respect of
Pending Asbestos Claims, the Purchaser shall consider and negotiate in
good faith with the Seller over the terms of any reasonable alternatives
presented by the Seller designed to provide the Purchaser protection in
respect of Pending Asbestos Claims which is equivalent to the protection
afforded by the Purchaser's holdback rights under Sections 2.4(a) and
(b).
From and after the Closing Date, interest shall accrue on the amount of
the Deferred Purchase Price remaining unpaid from time to time at the
rate of 10% per annum and shall be payable by the Purchaser to the
Seller quarterly in arrears beginning ninety (90) days after the Closing
Date, provided that if the Purchaser and its Affiliates have not made
any payments of the nature described in Sections 2.4(a)(i) or (ii) or
2.4(b)(i) and the Purchaser nevertheless elects to exercise its rights
under Sections 2.4(a)(iii) or (b)(ii) to withhold a portion of the
Deferred Purchase Price in respect of Pending Asbestos Claims, then
interest shall accrue on the amounts so withheld at the rate of 12.5%
per annum for the first year during which the Purchaser is entitled to
so withhold, and thereafter at the rate of 15% per annum, and provided
further that for the purposes of calculating interest pursuant to this
Section 2.4(f), the Deferred Purchase Price shall be reduced from time
to time by the aggregate amount of any amounts of the nature described
in Section 2.4(a)(i) or (ii) or Section 2.4(b)(i) paid by the Purchaser
or any of its Affiliates.
The Purchaser shall comply with Sections 13.6 and 13.7 hereof in respect
of any Asbestos Claims asserted against it or its Affiliates and only in
the event and to the extent the Seller fails to timely perform its
obligations under Article XIII shall the Purchaser have the right to
exercise its rights of setoff set forth in Sections 2.4(a) and (b).
Notwithstanding anything in this Agreement to the contrary, Asbestos
Claims are retained by the Seller as Retained Liabilities.
Notwithstanding any other provision of this Agreement to the contrary,
the Purchaser may at any time in its sole discretion prepay to the
Seller the Deferred Purchase Price in whole or part without any penalty.
THE CLOSING
Closing Date. (a) The Closing shall take place at the offices of Weil,
Gotshal & Manges, 767 Fifth Avenue, New York, New York at 10:00 A.M., on
the fifth Business Day after the conditions set forth in Articles IX and
X hereof have been satisfied, or at such other place and at such other
time and date as may be mutually agreed upon by the Purchaser and the
Seller. The date of the Closing is referred to in this Agreement as the
"Closing Date."
On the Business Day immediately preceding the Closing Date, the parties
shall conduct a pre-closing at the New York offices of Weil, Gotshal &
Manges commencing at 9:00 a.m., or at such other place and at such other
time as may be mutually agreed upon by the Purchaser and the Seller, at
which each party shall present for review by the other parties in
execution form all documents required to be delivered by such party at
the Closing.
Proceedings at Closing. All proceedings to be taken and all documents
to be executed and delivered by the Sellers and the Subsidiary in
connection with the consummation of the transactions contemplated hereby
shall be reasonably satisfactory in form and substance to the Purchaser
and its counsel. All proceedings to be taken and all documents to be
executed and delivered by the Purchaser in connection with the
consummation of the transactions contemplated hereby shall be reasonably
satisfactory in form and substance to the Seller and its counsel. All
proceedings to be taken and all documents to be executed and delivered
by all parties at the Closing shall be deemed to have been taken,
executed and delivered simultaneously, and no proceedings shall be
deemed taken nor any documents executed or delivered until all have been
taken, executed and delivered.
Deliveries by the Seller to the Purchaser. At the Closing, the Seller
shall deliver, or shall cause to be delivered, to the Purchaser the
following:
an executed assignment and assumption agreement, dated the Closing Date,
in a form reasonably acceptable to the Purchaser and the Seller,
transferring to the Purchaser all of the Assets and pursuant to which
the Purchaser assumes all of the Assumed Liabilities except the Joint
Venture Obligations;
bills of sale, dated the Closing Date, in forms reasonably acceptable to
the Purchaser and the Seller;
approvals, certifications or other documentation from or by Governmental
Bodies necessary to evidence or signify the successful assignment or
transfer to the Purchaser of all Permits relating to the Business or the
Assets that are required by Law or this Agreement to be transferred
prior to the Closing;
in the event that consummation of the transactions contemplated hereby
shall require compliance with the Connecticut Transfer Act and the
Seller determines that a Form III is required to be filed with the
Connecticut Department of Environmental Protection pursuant thereto, a
Form III reasonably acceptable to the Purchaser, duly executed and filed
by the Seller or, in the event a Form III is not required, a Form I or
Form II, in conformity therewith.
a patent and trademark assignment agreement, in recordable form dated
the Closing Date, reasonably acceptable to the Purchaser and the Seller;
limited warranty deeds or the equivalent thereof in the applicable
jurisdiction for the Owned Real Property with covenants against
grantor's acts in each case dated the Closing Date and in a recordable
form reasonably acceptable to the Purchaser and the Seller;
assignment and assumption agreements in respect of Leased Real Property
in each case dated the Closing Date and in a form reasonably acceptable
to the Purchaser and the Seller;
the certificates signed by a duly authorized officer of the Seller
referred to in Section 9.1(c) hereof;
the opinion of counsel for the Sellers referred to in Section 9.4
hereof;
a receipt for the portion of the Purchase Price paid to the Seller at
Closing;
an affidavit, in a form reasonably satisfactory to the Purchaser, from
each of the Seller, the JV Seller, and the Subsidiary, stating under
penalties of perjury the United States taxpayer identification number of
the party in question and that such party is not a foreign person within
the meaning of Section 1445(b)(2) of the Code;
a grant of easement to the Purchaser for ingress and egress to the North
Plant through the Unimproved Parcel and adjacent property of the
Seller's Delroyd Worm Gear Division in the form of Exhibit C hereto;
the Permits, plans, surveys and documents related to the Assets (Owned
Real Property and Leased Real Property) to the extent in the Seller's
possession;
such affidavits as the Purchaser's title insurance company may
reasonably request in order to insure title in accordance with the terms
of this agreement;
a Certificate of Limited Conveyance, Negative Declaration Approval, No
Further Action Letter, Remedial Action Workplan Approval, Remediation
Agreement or Amended Administrative Consent Order or other written
approval in the form and substance customarily issued by NJDEP, provided
that any conditions contained therein which might reasonably be expected
to limit or make more costly in any material respect the present or
future use of the North Plant by the Purchaser shall be subject to
Purchaser's prior reasonable approval, and signed by the NJDEP and, with
respect to a Remediation Agreement and an Amended Administrative Consent
Order, also signed by the Seller and showing the Seller (and not the
Purchaser) as a party liable for and undertaking any and all ISRA
compliance activities and obligations, pursuant to ISRA evidencing
approval by NJDEP of the transfer of title to the Assets, (including,
but not limited to, the North Plant), except for the Excluded Assets
related thereto; provided, however, that in the event the Closing takes
place pursuant to a Remedial Action Workplan Approval, Remediation
Agreement or Amended Administrative Consent Order issued by the NJDEP,
the Seller also shall deliver documentation evidencing the establishment
of a remediation funding source or other financial assurance in an
amount acceptable to NJDEP, if required pursuant to ISRA as implemented
by NJDEP, as well as copies of all filings, letters, forms,
applications, correspondence and other materials and documentation
submitted to or received from NJDEP in the course of securing such NJDEP
approval(s), to the extent such have not been provided to the Purchaser
previously;
any other approvals, certifications or other documentation required by
Law to be issued by or from any Governmental Body evidencing or
signifying approval or consent of such Governmental Body of or to the
consummation of the transactions contemplated by this Agreement;
evidence reasonably satisfactory to the Purchaser that the Seller has
complied with its obligations under Section 6.6 and that the consents
required by Section 9.7 have been obtained;
an access and support agreement between the Seller and the Purchaser in
a form to be mutually agreed upon by the Seller and the Purchaser (the
"Access and Support Agreement");
the Escrow Agreement duly executed by the Sellers;
all required real estate tax transfer returns and affidavits required to
transfer the Real Property duly executed by the Seller;
subleases, each in a form reasonably acceptable to the Purchaser and the
Seller, pursuant to which the Seller subleases to the Purchaser office
space at 30 Pioneer Road, Singapore and Grove House, Marylebone Road,
London, England (the "Subleases") duly executed by the Seller;
a letter signed by the Seller and the Purchaser agreeing to the
Reimbursement Basis described in Section 1.4(d); and
all other agreements, certificates, documents and instruments referred
to in Article IX hereof to be executed by the Seller on or prior to the
Closing Date.
Deliveries by the JV Seller to the JV Buyer. At the Closing, the JV
Seller shall deliver to the JV Buyer the following:
an executed assignment and assumption agreement in a form reasonably
acceptable to the JV Buyer and the JV Seller (the "Joint Venture
Interest Assignment and Assumption Agreement") confirming the sale and
assignment by the JV Seller to the JV Buyer of the Joint Venture
Interest and the assumption by the JV Buyer of the Joint Venture
Obligations pursuant to the terms of this Agreement;
the consent of Stork to the JV Seller's transfer of the Joint Venture
Interest to the JV Buyer together with the confirmation of Stork's
Affiliates which are currently providing support to the Joint Venture
that they will continue to provide such support on the terms of the
Joint Venture Documents (the "Stork Consent");
assignment and assumption agreements in respect of the Joint Venture
Leased Real Property, in each case dated the Closing Date and in a form
reasonably acceptable to the JV Buyer and the JV Seller (the "Joint
Venture Leased Real Property Assignments"); and
all other agreements, certificates, documents and instruments referred
to in Article IX to be executed by the JV Seller on or prior to the
Closing Date.
Deliveries by the Purchaser to the Seller. At the Closing, the
Purchaser shall deliver to the Seller the following:
executed copies of the assignment and assumption agreement, patent and
trademark assignment agreement and assignment and assumption agreements
of leases described in Sections 3.3(a), (e) and (g) hereof, in each case
dated the Closing Date;
immediately available funds in the amount of $109,000,000 by wire
transfer as provided in Section 2.1 hereof;
evidence that the Purchaser had deposited $5,000,000 pursuant to the
Escrow Agreement;
the certificate referred to in Section 10.1(c) hereof signed by duly
authorized officers of the Purchaser;
the Asbestos Claim Access Agreement duly executed by the Purchaser;
the Escrow Agreement duly executed by the Purchaser;
the opinions of counsel for the Purchaser and the JV Buyer referred to
in Section 10.3 hereof;
all required real estate transfer tax returns and affidavits required to
transfer the Real Property duly executed by the Purchaser;
a grant of easement to the Seller for ingress and egress to the
Unimproved Parcel and through the North Plant and a grant of a parking
easement over the North Plant for the benefit of the South Plant in the
form of Exhibit F hereto;
the Subleases duly executed by the Purchaser;
a letter signed by the Seller and the Purchaser agreeing to the
Reimbursement Basis described in Section 1.4(d);
the Access and Support Agreement; and
all other agreements, certificates, documents and instruments referred
to in Article X to be executed by the Purchaser on the Closing Date.
Deliveries by the JV Buyer to the JV Seller. At the Closing, the
Purchaser shall cause the JV Buyer to deliver to the JV Seller an
executed Joint Venture Interest Assignment and Assumption Agreement and
executed Joint Venture Leased Real Property Assignments.
REPRESENTATIONS AND WARRANTIES OF THE SELLER
The Seller hereby represents and warrants to the Purchaser as follows:
Organization and Good Standing. Each of the Seller and the JV Seller is
a corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware, is qualified to do business in
all states in which it is required to be so qualified, except where the
failure to be so qualified would not have a Material Adverse Effect, and
has all requisite corporate power and authority to carry on its business
as is now being conducted.
Authorization of Agreement. (a) The Seller has full corporate power and
authority to execute and deliver this Agreement and the Seller and the
Subsidiary have full corporate power and authority to execute and
deliver each other agreement, document, instrument or certificate
contemplated by this Agreement or to be executed by them in connection
with the consummation of the transactions contemplated by this Agreement
(all such other agreements, documents, instruments and certificates
required to be executed by the Seller and the Subsidiary being
hereinafter referred to, collectively, as the "Seller Documents"), and
to perform fully their obligations hereunder and thereunder. The JV
Seller has full corporate power and authority to execute and deliver
this Agreement and each other agreement, document, instrument or
certificate contemplated by this Agreement or to be executed by the JV
Seller in connection with the consummation of the transactions
contemplated by this Agreement (all such other agreements, documents,
instruments and certificates required to be executed by the JV Seller
being hereinafter referred to, collectively, as the "JV Seller
Documents"), and to perform fully its obligations hereunder and
thereunder.
The execution, delivery and performance by the Seller and the JV Seller
of this Agreement and each of the Seller Documents, in the case of the
Seller and the Subsidiary, and the JV Seller Documents, in the case of
the JV Seller, have been duly authorized by all necessary corporate
action on the part of the Seller, the Subsidiary and the JV Seller, as
appropriate, and do not require the approval of the shareholders of the
Seller. This Agreement has been, and each of the Seller Documents and
the JV Seller Documents will be at or prior to the Closing, duly
executed and delivered by the Seller, the Subsidiary and the JV Seller,
as appropriate, and (assuming the due authorization, execution and
delivery by the other parties hereto and thereto) this Agreement
constitutes, and the Seller Documents and JV Seller Documents when so
executed and delivered will constitute, legal, valid and binding
obligations of the Seller, the Subsidiary and the JV Seller, as
appropriate, enforceable against the Seller, the Subsidiary and the JV
Seller, as appropriate, in accordance with their respective terms,
subject to applicable bankruptcy, insolvency, reorganization, moratorium
and similar Laws affecting creditors' rights and remedies generally and
subject, as to enforceability, to general principles of equity
(regardless of whether enforcement is sought in a proceeding at law or
in equity).
No Conflicts. (a) Neither the execution and delivery by the Seller of
this Agreement nor the execution and delivery of the Seller Documents,
or the consummation of the transactions contemplated hereby or thereby,
or compliance by the Seller with any of the provisions hereof or thereof
will (i) conflict with, or result in the breach of, any provision of the
certificate of incorporation or by-laws of the Seller, (ii) conflict
with, violate, result in the breach or termination of, or constitute a
default under any Contract or Order relating to the Business or by which
the Seller or the Subsidiary or any of the Assets is bound or subject,
(iii) constitute a violation of any Law, including, but not limited to,
any Environmental Law applicable to the Seller, the Subsidiary or the
Assets, or (iv) result in the creation of any Lien (other than any Lien
in favor of the Purchaser) upon any of the Assets, except, in each case,
for violations, conflicts, breaches or defaults which individually or in
the aggregate would not hinder or impair the transactions contemplated
hereby or have a Material Adverse Effect.
None of the execution and delivery by the JV Seller of this Agreement
and the JV Seller Documents, or the consummation of the transactions
contemplated hereby or thereby, or compliance by the JV Seller with any
of the provisions hereof or thereof will (i) conflict with, or result in
the breach of, any provision of the certificate of incorporation or by-
laws of the JV Seller or the Joint Venture Agreement, provided the Stork
Consent is obtained (ii) conflict with, violate, result in the breach or
termination of, or constitute a default under any Contract or Order
relating to the Joint Venture to which the JV Seller or the Joint
Venture is a party or by which it is bound, provided the Stork Consent
is obtained, (iii) constitute a violation of any Law, including, but not
limited to, Environmental Law, applicable to the JV Seller, the Assets
or the Joint Venture, or (iv) result in the creation of any Lien (other
than any Lien in favor of the Purchaser) upon any of the assets of the
Joint Venture or the JV Seller, except, in each case, for violations,
conflicts, breaches or defaults which individually or in the aggregate
would not hinder or impair the transactions contemplated hereby or have
a Material Adverse Effect on the Business, the Assets or the Assumed
Liabilities.
Title to Assets Other than Real Property. (a) The Seller or the
Subsidiary, as the case may be, owns and has good and valid title to or,
in the case of leased properties, a valid leasehold interest in, all of
the Assets other than the Real Property. The Seller or the Subsidiary,
as the case may be, holds title to each Asset other than Real Property
free and clear of all Liens other than Permitted Exceptions.
The JV Seller owns the Joint Venture Interest free and clear of all
Liens and upon transfer and assignment to the Purchase of the Joint
Venture Interest, the Purchaser will acquire title to the Joint Venture
Interest, free and clear of any Liens.
The JV Seller and/or Stork, individually or jointly, owns on behalf of
the Joint Venture and has good and valid title to or, in the case of
leased properties, a valid leasehold interest in, all of the Joint
Venture Assets other than the Joint Venture Leased Real Property. The
JV Seller and/or Stork, individually or jointly, holds on behalf of the
Joint Venture title to each Joint Venture Asset other than Joint Venture
Leased Real Property free and clear of all Liens other than Permitted
Exceptions.
Title to Real Property. (a) The Seller or the Subsidiary, as the case
may be, owns and has good and marketable, indefeasible fee simple title
to all of the Owned Real Property free and clear of all Liens other than
Permitted Exceptions. The Seller or the Subsidiary, as the case may be,
has a valid, good and marketable leasehold interest in all of the Leased
Real Property, subject to the terms and conditions of the applicable
leases relating thereto, free and clear of all Liens other than
Permitted Exceptions.
Neither the JV Seller nor Stork, individually or jointly, owns on behalf
of the Joint Venture any real property. The JV Seller and/or Stork,
individually or jointly, holds on behalf of the Joint Venture, a good
and marketable leasehold interest in all of the Joint Venture Leased
Real Property, subject to the terms and conditions of the applicable
leases relating thereto, free and clear of all Liens other than
Permitted Exceptions.
Each parcel of Real Property has rights of access to one or more public
streets either by direct access from such parcel onto adjoining public
streets or pursuant to perpetual easement rights granted under
applicable leases or easement agreements.
Except as set forth in Schedule 4.5(d) hereto, neither the Seller nor
the Subsidiary has granted, and the Real Property is not subject to, any
options to purchase or rights of first refusal or other similar rights
or options.
Joint Venture Interest. (a) The JV Seller and Stork are the only
partners of the Joint Venture. All of the rights and obligations of the
JV Seller in or respect to the Joint Venture are set forth in the Joint
Venture Documents. Apart from the Seller's ownership of the JV Seller,
neither the Seller nor any of its Affiliates have any rights or
obligations in respect of the Joint Venture.
There is no outstanding subscription, Contract, option or other right
obligating the Joint Venture or, to the Seller's knowledge, Stork to
issue, sell, exchange or otherwise dispose of, or to purchase, redeem or
otherwise acquire, any interest in the Joint Venture.
Consents. No consent, waiver, approval, or authorization of, or
declaration or filing with, or notification to, any Person or
Governmental Body is required on the part of the Seller, the Subsidiary
or the JV Seller in connection with the execution and delivery and
consummation by the Seller, the Subsidiary and the JV Seller of this
Agreement or the Seller Documents, in the case of the Seller and the
Subsidiary, or the JV Seller Documents, in the case of the JV Seller, or
the compliance by the Seller and the JV Seller with any of the
provisions hereof or thereof, except (i) as set forth on Schedule 4.7
hereto, (ii) for compliance with the applicable requirements of the
Hart-Scott-Rodino Antitrust Improvements Act of 1976 and the rules and
regulations promulgated thereunder (the "HSR Act"), (iii) the Stork
Consent, (iv) for authorization of the Commission of the European
Communities and, if necessary, the national cartel authorities of
Germany and the Netherlands, (v) for compliance with the Exxon-Florio
Amendment, (vi) for the ISRA Clearance, (vii) for the approval and
consent of all appropriate Governmental Bodies of the Subdivision,
(viii) for the consents required under the Alfa-Laval License as set
forth in Section 6.4 and (ix) consents, waivers, approvals, Orders or
Permits, if any, which the Purchaser is required to obtain.
Financial Statements. The Seller has delivered to the Purchaser (a)
unaudited adjusted balance sheets of the Divisions as of December 31,
1993, June 30, 1994 and August 31, 1994 (the "Balance Sheets of the
Divisions") and the related statements of operations for the year ended
December 31, 1993, for the month and six months ended June 30, 1994, and
for the month and eight months ended August 31, 1994 (collectively, the
"Financial Statements of the Divisions"), copies of which are attached
hereto as Schedule 4.8(a), and (b) unaudited balance sheets of the Joint
Venture as of December 31, 1993, June 30, 1994 and August 31, 1994 (the
"Joint Venture Balance Sheets") and the related statements of operations
for the year ended December 31, 1993, for the month and six months ended
June 30, 1994, and for the month and eight months ended August 31, 1994
(collectively, the "Joint Venture Financial Statements"), copies of
which are attached hereto as Schedule 4.8(b) (the Joint Venture
Financial Statements and the Financial Statements of the Divisions, are,
collectively, the "Financial Statements"). The Financial Statements
present fairly the financial position and results of operations of the
Divisions and the Joint Venture, respectively, as of June 30, 1994,
August 31, 1994, and for the year ended December 31, 1993 for the
periods indicated in accordance with GAAP, applied consistently with
past practice subject, with respect to the interim Financial Statements,
to year-end adjustments.
Absence of Certain Developments. Except as set forth on Schedule 4.9
hereto, since December 31, 1993 the Seller has operated the Business,
and the Joint Venture has been operated, in the ordinary course
consistent with past practice and neither the Joint Venture nor the
Divisions have (a) suffered any material damage, destruction or casualty
loss to its physical properties; (b) incurred or discharged any
obligation or liability or entered into any other transaction, except in
the ordinary course of business; (c) suffered any Material Adverse
Effect; (d) increased the rate or terms of compensation payable or to
become payable to their directors, officers or key employees or
increased the rate or terms of any bonus, pension or other employee
benefit plan covering any of their directors, officers or key employees,
except in each case increases occurring in the ordinary course of
business in accordance with its customary practices (including normal
periodic performance reviews and related compensation and benefit
increases) or as required by any Contract entered into prior to the date
of this Agreement; (e) except in the ordinary course of business,
permitted any Assets to be subjected to any Lien other than Permitted
Exceptions; or (f) cancelled or waived any claims or rights of value,
except in the ordinary course of business, or sold, transferred,
distributed or otherwise disposed of any material Assets, except assets
sold in the ordinary course of business.
Material Contracts. Schedule 4.10 hereto contains a true and correct
list of the following Contracts which relate to the Business and to
which the Divisions or the Joint Venture is a party or is bound
(collectively, the "Material Contracts"):
any collective bargaining agreement or labor contract;
any distributorship, agency or manufacturer's representative agreement,
pursuant to which either the Seller or the Joint Venture, as the case
may be, paid an aggregate amount in excess of $50,000 in 1992, 1993 or
heretofore in 1994;
any open sales order, contract or firm written quotation for more than
$500,000 ("Backlog Contracts");
any purchase order or requirements contract for more than $100,000
("Supply Requirement Contracts");
any equipment lease requiring annual expenditures of more than $50,000;
any real estate lease;
any bond, letter of credit, or agreement of guarantee or surety;
any license agreement (other than any so-called "execute-by-opening"
software licensing agreements);
any agreement or contract that restricts the Seller or the Subsidiary
from competing in any line of business conducted by the Business with
any other person anywhere in the world;
any management, employment, consulting or severance contract with any
officer, consultant, director, employee or other person or entity;
any written contract between the Seller and its Affiliates related to
the Business (other than purchase orders executed in the ordinary
course);
any contract or agreement that involves capital expenditures of more
than $200,000;
any joint venture, co-production or partnership contract; and
any contract which is material to the Business, the Divisions, their
business prospects or operations, the Assets or the Assumed Liabilities
and is not of a type included in any of the foregoing clauses (a)
through (m).
Except as disclosed in Schedule 4.10 hereto, neither the Divisions nor
the Joint Venture is in default in any material respect under any of the
Material Contracts to which it is party or is a party to any Backlog
Contract included in the Assets which does not purport to exclude its
Liabilities for consequential damages.
The Seller has provided to the Purchaser and its counsel access to
review, and/or copies of, all Contracts listed on Schedule 4.10 hereto
except certain Backlog Contracts of the Joint Venture, the disclosure of
which is prohibited by the terms of such Backlog Contracts.
Intangible Property. (a) The Intangible Assets set forth on Schedule
1.2(e) hereto constitute all of the United States and foreign patents,
registered trademarks, trade names, service marks and copyrights, and
all applications and registrations therefor relating to any of the
foregoing, used in connection with, or necessary for the operation of,
the Business or the Divisions (other than any so-called "execute by
opening" software license agreements), except for any name, mark, trade
name or trade mark incorporating "Imo" or "Transamerica." Schedule
1.2(e) identifies the Seller's, the Subsidiary's and the JV Seller's
right, title or interest in or to any Intangible Assets, including, but
not limited to, the identification of any Intangible Assets that are
owned by the Seller, the Subsidiary or the JV Seller and the
identification of any licenses or other arrangements by which the
Seller, the Subsidiary or the JV Seller receive any rights, excluding
any so-called "execute by opening" software license agreements. All of
the Intangible Assets identified in Schedule 1.2(e) as owned by the
Seller, the Subsidiary or the JV Seller and as being registered, have
been issued, registered, corrected, filed, maintained, renewed and/or
kept in force (as the case may be), to the extent required for the
operation of the Business as currently operated, in the United States
Patent and Trademark Office or, as to other countries, in the
corresponding foreign offices of such other countries in all material
respects in accordance with all applicable legal requirements. The
Seller, the Subsidiary or the JV Seller own or possess adequate licenses
or other valid rights to use Intangible Assets set forth on Schedule
1.2(e). Except as set forth on Schedule 4.11(a) hereto, to the Seller's
knowledge, the Seller's, the Subsidiary's or the JV Seller's use of the
foregoing Intangible Assets does not materially conflict with, infringe
upon, violate or interfere with any intellectual property rights of any
other Person. Except as set forth on Schedule 4.11(a)(a) hereto, the
Seller shall transfer, or cause to be transferred to the Purchaser at
the Closing, and immediately after the Closing, the Purchaser will own
or have the right to use, all Intangible Assets owned by or used by the
Seller or the Subsidiary set forth on Schedule 1.2(e) hereto, free from
any Liens (other than Permitted Exceptions).
To the knowledge of the Seller, none of the Intangible Assets is being
infringed, except as set forth on Schedule 4.11(b) hereto.
The Seller, the Subsidiary and the JV Seller have licensed Intangible
Assets to, or the use of Intangible Assets is otherwise permitted
(through non-assertion, settlement or similar agreements or otherwise)
by, other Persons only pursuant to the agreements or arrangements set
forth on Schedule 4.11(c) hereto.
Taxes. (a) None of the Assets is tax-exempt use property within the
meaning of Section 168(h) of the Code. None of the Assets is property
that is or will be required to be treated as being owned by another
person pursuant to the provisions of Section 168(f)(8) of the Internal
Revenue Code of 1954, as amended and in effect immediately prior to the
enactment of the Tax Reform Act of 1986.
Neither the Seller, the JV Seller, nor the Subsidiary is a foreign
person within the meaning of Section 1445(b)(2) of the Code.
Employees and Employee Benefits. (a) Except as set forth on Schedule
4.13(a) hereto, (i) to the best knowledge of the Seller and the JV
Seller, there is no union organizational activity currently underway at
the Divisions or the Joint Venture, (ii) neither the Seller nor the
Subsidiary is engaged in, or has received any written notice during the
current or preceding year of, any unfair labor practice, and no such
complaint is pending before the National Labor Relations Board or any
other agency having jurisdiction thereof; and (iii) there has not been
since January 1, 1992 any, and, to the Seller's knowledge, there is no
threatened, labor strike, work stoppage or slowdown pending against the
Seller, the Joint Venture or the Subsidiary and, to the Seller's
knowledge, no pending lockout by the Seller or the Divisions or the
Subsidiary.
Schedule 4.13(b)(i) hereto lists each employee benefit plan as defined
in Section 3(3) of ERISA covering any current or former employee of the
Divisions or the Joint Venture (an "Employee Benefit Plan"). Schedule
4.13(b)(ii) hereto lists each employment or severance contract or
arrangement, each stock option plan, stock appreciation right plan,
executive compensation practice and other executive perquisite, each
plan or arrangement providing for insurance coverage, severance,
termination or similar coverage and all written compensation policies
and practices maintained by the Seller, the Subsidiary or the Joint
Venture that covers any current or former employee, director or agent of
the Divisions or the Joint Venture and that is not an Employee Benefit
Plan (a "Benefit Arrangement").
Each Employee Benefit Plan and each Benefit Arrangement complies in all
material respects, and has been operated and administered in all
material respects in accordance with its terms and all applicable Laws,
and no "reportable event" (other than those for which the 30-day notice
to the Pension Benefit Guaranty Corporation has been waived),
"prohibited transaction" (other than those for which there is an
available exemption) (as such terms are defined in ERISA and the Code,
as applicable) has occurred with respect to any Employee Benefit Plan
during the five (5) years preceding the Closing Date. Each Employee
Benefit Plan intended to qualify under Section 401(a) of the Code has
received a determination letter concluding that such plan so qualifies,
and to the knowledge of the Seller and the JV Seller, no event has
occurred, amendment been adopted or action been taken which would cause
such plan to lose its qualified status.
The Seller has delivered or made available to the Purchaser complete and
correct copies of each Employee Benefit Plan, each Benefit Arrangement,
any trust agreements, funding agreements or insurance contracts relating
thereto and, if applicable (i) the most recent actuarial valuation
report, (ii) the last filed Form 5500 or 5500-C and Schedules A and B
thereto or equivalent documents required to be filed in foreign
jurisdictions, (iii) the summary plan description currently in effect
and all material modifications thereto, (iv) the last financial
statements, and (v) the most recent determination letter (or equivalent
document in a foreign jurisdiction) issued with respect to each such
plan or arrangement.
Except as set forth on Schedule 4.13(e) hereto, there are no actions or
claims existing or pending (other than routine claims for benefits) or,
to the knowledge of the Seller, threatened with respect to any Employee
Benefit Plan or Benefit Arrangement.
All contributions required to be made by the Seller or the Joint Venture
under applicable Law or the terms of any Employee Benefit Plan, Benefit
Arrangement or collective bargaining agreement to each Employee Benefit
Plan and each Benefit Arrangement have been made within the time
prescribed by such Law, plan, arrangement or collective bargaining
agreement. There does not exist any accumulated funding deficiency
within the meaning of either Section 412 of the Code or Section 302 of
ERISA as to any Employee Benefit Plan, nor would there exist any such
deficiency but for the application of an alternative minimum funding
standard. There has not been issued any waiver of the minimum funding
standards imposed by the Code with respect to any such Employee Benefit
Plan. Except as set forth on Schedule 4.13(f) hereto, the fair market
value of the assets of each Employee Benefit Plan that is a funded
defined benefit pension plan and each Benefit Arrangement that is a
funded foreign pension plan equals or exceeds the actuarial present
value of all accrued benefits under such plan or arrangement (whether or
not forfeitable), based on the actuarial assumptions used in the most
recent valuation performed by the actuary for such plan or arrangement.
No Employee Benefit Plan is a "multiple employer" plan within the
meaning of Section 4063 or 4064 of ERISA or a "multiemployer plan"
within the meaning of Section 4001(a)(3) of ERISA.
Except as set forth on Schedule 4.13(h) hereto, the execution and
performance of the transactions contemplated by this Agreement will not
result in an increase in the amount of compensation or benefits or
accelerate the vesting or timing of payment of any benefits payable to
or in respect of any current or former employee of the Divisions or the
Joint Venture or the beneficiary or dependent of any such current or
former employee.
Litigation. (a) Except as set forth on Schedule 4.14 hereto, there is
no Legal Proceeding pending or, to the best knowledge of the Seller,
threatened against the Seller, the Subsidiary or the Joint Venture in
connection with the Business or the Assets (i) which would, if
determined adversely, have a Material Adverse Effect; (ii) which seeks
criminal fines or penalties or an injunction of any kind; (iii) which
seeks to enjoin or obtain Damages in respect of the consummation of the
transactions contemplated by this Agreement; or (iv) which questions the
validity of this Agreement, any of the Seller Documents, any of the JV
Seller Documents or any action taken or to be taken by the Seller or the
JV Seller in connection with the consummation of the transactions
contemplated hereby or thereby.
Compliance with Law. Except as set forth on Schedule 4.15 hereto, the
Divisions and the Joint Venture are currently and, to the best knowledge
of the Seller, have been operating in compliance with all applicable
Laws and Orders of Governmental Bodies other than non-compliance which
individually or in the aggregate would not have a Material Adverse
Effect. Except as set forth on Schedule 4.15 hereto, none of the
Divisions, the Subsidiary, or the Joint Venture has received, or knows
of the actual or threatened issuance of, or any conditions that could
give rise to, any notice of such violation or alleged violation of Laws
and Orders of Governmental Bodies. This Section 4.15 does not purport
to relate to any compliance or non-compliance of the Seller with respect
to (i) Environmental Laws, which matters are covered exclusively by
Section 4.19, or (ii) Taxes, which matters are covered exclusively by
Section 4.12.
Receivables. Except as set forth on Schedule 4.16 hereto, each of the
accounts receivable of the Seller shown on the Balance Sheet of the
Divisions or arising after the date thereof, and each of the accounts
receivable shown on the Joint Venture Balance Sheet or arising after the
date thereof, have arisen or will arise, as the case may be, from bona
fide transactions in the ordinary course of business consistent with
past practice.
Inventory. Except as set forth on Schedule 4.17 hereto, the Inventory
of the Divisions shown on the Balance Sheet of the Divisions or acquired
after the date thereof, and the Inventory of the Joint Venture shown on
the Joint Venture Balance Sheet or acquired after the date thereof, are
all items of a quality saleable in the ordinary course of business of
the Divisions or the Joint Venture, as the case may be, at prevailing
market conditions, subject to appropriate adjustments for obsolete
items.
Assets Necessary to Conduct Business. Except as set forth on Schedule
4.18 hereto and the South Plant, the Assets together with the Joint
Venture Interest comprise all of the assets necessary to operate the
Business as presently being conducted in all material respects.
Environmental Matters. (a) Except as disclosed on Schedule 4.19 hereto,
other than with respect to the North Plant, to the Seller's best
knowledge, (i) neither the Divisions nor the Joint Venture has, except
in compliance with Environmental Laws, caused or allowed the generation,
manufacture, refining, transportation, treatment, storage, handling or
disposal of Hazardous Materials on any real property currently leased or
owned by the Seller, the Joint Venture or the Subsidiary and, to the
best of Seller's knowledge, no prior owner or lessee of any such real
property caused or allowed the foregoing other than in compliance with
Environmental Laws; (ii) there have been no Spills of Hazardous
Materials on any such real property during its lease or ownership by the
Seller, Subsidiary or the Joint Venture; (iii) there are not now any
underground or aboveground storage tanks or related piping, venting or
dispensing systems on any real property currently leased or owned by the
Seller, Subsidiary or the Joint Venture, and (iv) the Real Property or
leased or owned real property of the Joint Venture does not contain any
concentrations of Hazardous Materials, the investigation, remediation or
reporting of which is required by any Environmental Law; and (v) the
Seller, the Subsidiary, the Divisions and the Joint Venture have kept
all material records and made all filings required by applicable
Environmental Law with respect to the generation, manufacture, refining,
transportation, treatment, storage, handling, or disposal or Spills of
Hazardous Materials.
With respect to the North Plant, the Seller has, to its best knowledge,
(i) complied in all material respects with its obligations under ISRA,
including any reporting obligations thereunder, and (ii) disclosed to
the Purchaser through the documents identified on Schedule 4.19, all
matters, which in the Seller's reasonable opinion, are potential "areas
of concern" (as defined in ISRA).
Except as disclosed on Schedule 4.19 hereto, there are no pending, nor,
to the best of the Seller's knowledge, threatened Legal Proceedings
arising from, related to, or connected with (i) Hazardous Materials
generated, manufactured, refined, transported, treated, stored, handled
or disposed by the Divisions or the Joint Venture or (ii) any non-
compliance by the Divisions or Joint Venture with any Environmental Law
in connection with the Business, Divisions, the Joint Venture, or the
ownership, operation, condition or use of the Assets or the Joint
Venture which if determined adversely could individually or in the
aggregate have a Material Adverse Effect.
Except as disclosed on Schedule 4.19 hereto, (i) the Seller holds all
Permits required for and related to the ownership and operation of the
Divisions and the ownership, operation and use of Assets; (ii) the Joint
Venture holds all Permits required for and related to the ownership and
operation of the Joint Venture and its assets; (iii) all such Permits
are valid and in full force and effect, will not expire any sooner than
ninety (90) days after Closing; and (iv) the Seller, Joint Venture,
Divisions, the Business and Assets are now operating in compliance with
such Permits listed on Schedule 1.2(h) and Environmental Laws.
Except as disclosed on Schedule 4.19 and other than with respect to the
North Plant, there is not, to the best of the Seller's or JV Seller's
knowledge, currently any (i) asbestos-containing materials in or on the
Real Property or the other Assets or on owned or leased real property or
other assets of the Joint Venture; (ii) Polychlorinated Biphenyls in or
on the Real Property or the other Assets or in or on the currently owned
or leased real property or other assets of the Joint Venture, or (iii)
any other condition in, at, on or related to the Real Property or other
Assets or currently owned or leased real property or other assets of the
Joint Venture that could constitute a threat to the health or safety of
employees, the public or the Environment.
For purposes of this Section 4.19, knowledge shall refer to the
knowledge, after diligent inquiry, of any present employee of the
Seller, the Subsidiary or the Joint Venture having responsibility for
environmental, health and safety matters. The Purchaser acknowledges
that in respect of the Real Property other than the North Plant, the
Seller's duty of inquiry is satisfied by the Dames & Moore Reports, the
E-K Summaries and the E-K Reports (each as defined in Section 6.9).
Equipment. Schedule 1.2(a) lists all Equipment that has a net book
value or replacement cost in excess of $10,000.
Backlog Contracts. Except as set forth on Schedule 4.21 hereto, each of
the Divisions and the Joint Venture, as the case may be, has a
reasonable expectation of being able to meet its obligations under the
Backlog Contracts to which it is a party, in accordance with the terms
of such Backlog Contracts.
Government Contracts. Except as set forth on Schedule 4.22, no
Governmental Contract to which Section 6.8 will apply involves more than
$20,000.
Brokers. Other than CS First Boston Corporation ("First Boston"), no
person has acted directly or indirectly as a broker, finder or financial
advisor for the Seller in connection with the negotiations relating to
or the transactions contemplated by this Agreement and no Person other
than First Boston is entitled to any fee, commission or like payment in
respect thereof based in any way on any agreement, arrangement or
understanding made by or on behalf of the Seller. The Seller
acknowledges that it is solely responsible for the payment of the fees
of First Boston in connection with the transactions contemplated by this
Agreement.
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
The Purchaser hereby represents and warrants to the Seller and the JV
Seller that:
Organization and Good Standing. Each of the Purchaser and the JV Buyer
is a corporation duly organized, validly existing and in good standing
under the Laws of its jurisdiction of incorporation, and has all
requisite corporate power and authority to carry on its business as it
is now being conducted, and to execute, deliver and perform this
Agreement and to consummate the transactions contemplated hereby.
Authorization of Agreement. The Purchaser has full corporate power and
authority to execute and deliver this Agreement and each of the
Purchaser and the JV Buyer has full corporate power and authority to
execute and deliver each other agreement, document, instrument or
certificate contemplated by this Agreement or to be executed by the
Purchaser or the JV Buyer, as the case may be, in connection with the
consummation of the transactions contemplated by this Agreement (all
such other agreements, documents, instruments and certificates required
to be executed by the Purchaser being hereinafter referred to,
collectively, as the "Purchaser Documents") and to perform fully its
obligations hereunder and thereunder. The execution, delivery and
performance by the Purchaser of this Agreement and the execution,
delivery and performance by the Purchaser or the JV Buyer, as the case
may be, of each Purchaser Document and JV Seller Document has been duly
authorized by all necessary action on the part of the Purchaser or the
JV Buyer, as the case may be. This Agreement has been, and the
Purchaser Documents and JV Seller Documents will be at or prior to the
Closing, duly executed and delivered by the Purchaser or the JV Buyer,
as the case may be, and (assuming the due authorization, execution and
delivery by the other parties hereto and thereto) this Agreement
constitutes, and the Purchaser Documents and JV Seller Documents when so
executed and delivered will constitute, legal, valid and binding
obligations of the Purchaser or the JV Buyer, as the case may be,
enforceable against the Purchaser or the JV Buyer, as the case may be,
in accordance with their respective terms, subject to applicable
bankruptcy, insolvency, reorganization, moratorium and similar Laws
affecting creditors' rights and remedies generally and subject, as to
enforceability, to general principles of equity (regardless of whether
enforcement is sought in a proceeding at law or in equity).
No Conflicts. None of the execution and delivery by the Purchaser of
this Agreement, or the execution and delivery by the Purchaser or the JV
Buyer, as the case may be, of the Purchaser Documents or the JV Seller
Documents, or the consummation of the transactions contemplated hereby
or thereby, or compliance by the Purchaser or the JV Buyer, as the case
may be, with any of the provisions hereof or thereof, will (i) conflict
with, or result in the breach of, any provision of the certificate of
incorporation or by-laws of the Purchaser or the JV Buyer, as the case
may, (ii) conflict with, violate, result in the breach or termination
of, or constitute a default under any Contract or Order to which the
Purchaser or the JV Buyer, as the case may be, is a party or by which
either the Purchaser or the JV Buyer or any of their respective
properties or assets is bound or subject, or (iii) constitute a
violation of any Law applicable to the Purchaser or the JV Buyer, as the
case may be, except, in each case, for violations, conflicts, breaches
or defaults which individually or in the aggregate would not materially
hinder or impair the transactions contemplated hereby.
Consents. No consent, waiver, approval, Order, Permit or authorization
of, or declaration or filing with, or notification to, any Person or
Governmental Body is required on the part of the Purchaser or the JV
Buyer, as the case may be, in connection with the execution and delivery
and consummation of this Agreement, the Purchaser Documents or the JV
Seller Documents or the compliance by the Purchaser or the JV Buyer, as
the case may be, with any of the provisions hereof or thereof, except
(i) for compliance with the HSR Act, (ii) for authorization of the
Commission of the European Communities and, if necessary, the national
cartel authorities of Germany and the Netherlands, (iii) for compliance
with the Exxon-Florio Amendment and (iv) consents, waivers, approvals,
Orders or Permits, if any, which the Seller is required to obtain
pursuant to Section 4.7 hereof.
Availability of Funds. The Purchaser has the Purchase Price available
to it.
Litigation. There is no Legal Proceeding pending or, to the knowledge
of the Purchaser, threatened, that seeks to enjoin or obtain damages in
respect of the consummation of the transactions contemplated by this
Agreement or that questions the validity of this Agreement, the
Purchaser Documents, the JV Seller Documents or any action taken or to
be taken by the Purchaser in connection with the consummation of the
transactions contemplated hereby or thereby.
Brokers. Other than Arnhold and S. Bleichroeder, Inc. ("Bleichroeder"),
no Person has acted directly or indirectly as a broker, finder or
financial advisor for the Purchaser in connection with the negotiations
relating to or the transactions contemplated by this Agreement and no
Person is entitled to any fee or commission or like payment in respect
thereof based in any way on agreements, arrangements or understandings
made by or on behalf of the Purchaser or the JV Buyer. The Purchaser
and the JV Buyer each acknowledge that they are solely responsible for
the payment of the fees of Bleichroeder in connection with the
transactions contemplated by this Agreement.
COVENANTS OF THE SELLERS
From and after the date hereof and until the Closing, the Seller and the
JV Seller, as applicable, hereby covenant and agree with the Purchaser
that:
Cooperation. Each of the Seller and the JV Seller shall use its best
efforts to cause the consummation of the transactions contemplated
hereby in accordance with the terms and conditions hereof.
Access to Documents; Opportunity to Ask Questions. The Seller and the
JV Seller shall (a) fully disclose and provide to the Purchaser in a
diligent and timely fashion such information as the Purchaser from time
to time reasonably may request with respect to the Divisions and the
Joint Venture (to the extent permitted under the Joint Venture Agreement
provided that the Seller shall use its reasonable best efforts to obtain
consent for the disclosure of such information); and (b) shall permit
the Purchaser and any of its directors, officers, employees, counsel,
consultants, representatives, accountants and auditors (collectively,
the "Purchaser Representatives") reasonable access, during normal
business hours and upon reasonable prior notice, to the properties,
corporate records and books of accounts of the Divisions and the Joint
Venture (to the extent permitted under the Joint Venture Documents
provided that the Seller shall use its reasonable best efforts to obtain
consent for such access), however, that neither the Seller nor the JV
Seller shall be obligated to provide the Purchaser with any information
the provision of which may be prohibited by Law or contractual
obligation. No disclosure by the Seller or the JV Seller during any
investigation by the Purchaser shall constitute an enlargement of or
additional warranty or representation of the Seller or the JV Seller or
an amendment of any schedule to any warranty or representation of the
Seller or the JV Seller beyond those expressly set forth in this
Agreement. All information and access obtained by the Purchaser in
connection with the transactions contemplated by this Agreement shall be
subject to the terms and conditions of the letter agreement relating to
confidentiality, dated as of March 2, 1994, between the Seller and the
Purchaser (the "Confidentiality Agreement").
Conduct of Business. (a) Except as otherwise may be contemplated by
this Agreement, required by any of the documents listed in the Schedules
hereto or as the Purchaser otherwise may consent to in writing, the
Seller and the JV Seller shall cause the Business and the Joint Venture
to be operated in the ordinary course consistent with past practice and
use reasonable efforts consistent with past practice to (i) preserve the
present business operations, organization and goodwill of the Business
and the Joint Venture, (ii) pay and perform their obligations as they
become due (iii) keep available the services of the present Employees,
(iv) preserve the present relationships with persons having business
dealings with the Business and the Joint Venture, (v) maintain all of
the assets and properties of the Business and the Joint Venture in their
current condition, normal wear and tear excepted, and (vi) maintain
insurance in such amounts and of such kinds as is comparable to that in
effect on the date hereof (with insurers of substantially the same or
better financial condition). In addition, the Seller shall provide
reasonable notice to the Purchaser prior to amending in any material
respect any existing Material Contract or entering into any Contract
which would be a Material Contract if it were in existence on the date
hereof and, while the Seller shall maintain ultimate control in respect
of any such amendment or new Contract, the Seller shall consider in good
faith any reasonable suggestions made by the Purchaser with respect
thereto.
Except as otherwise may be contemplated by this Agreement, required by
any of the documents listed in the Schedules hereto or as the Purchaser
otherwise may consent to in writing, the Seller shall not, and, to the
extent possible and applicable, the JV Seller shall cause the Joint
Venture not, to do any of the following:
(A) increase the rate of compensation payable or to become payable to
any of the employees or agents of the Divisions or the Joint Venture
other than in the ordinary course of business, or (B) amend in any
material respect any Employee Benefit Plan or Benefit Arrangement to or
in respect of any such employee or agent, other than as may be required
to maintain compliance with ERISA and/or the Code;
(A) incur or become subject to, or agree to incur or become subject to,
any material obligation or liability (contingent or otherwise) relating
to the Divisions and the Joint Venture, except (x) normal trade or
business obligations (including Contracts) incurred in the ordinary
course of business and consistent with past practice and (y) obligations
under Contracts listed on any Schedule to this Agreement, (B) sell,
assign, transfer, convey, lease or otherwise dispose of any of the
Assets or the Joint Venture Assets, other than inventory of the
Divisions and the Joint Venture in the ordinary course of business and
consistent with past practice, (C) cancel or compromise any material
debt or claim, or waive or release any material right relating to the
Divisions and the Joint Venture, or the Assets or the Joint Venture
Assets, or (D) acquire any material assets relating to the Divisions or
the Joint Venture other than in the ordinary course of business;
agree to do any of the foregoing.
Consents and Conditions; Assignment of Assets. The Seller shall use its
best efforts, or shall cause its subsidiaries or Affiliates to use their
best efforts, to obtain all approvals, consents or waivers from Persons
other than Governmental Bodies necessary to assign to the Purchaser all
of the Divisions' interest in the Assets, including, without limitation,
the Alfa-Laval License with respect to the use of the trademark and/or
tradename "Delaval" solely in connection with the operations of the
Business and the Joint Venture as presently conducted, and the Brandon
Licenses or any claim, right or benefit arising thereunder or resulting
therefrom, and the JV Seller shall use its best efforts to obtain the
Stork Consent to the assignment to the JV Buyer of all the JV Seller's
interest in the Joint Venture, including any claim, right or benefit
arising thereunder or resulting therefrom (each, an "Interest") as soon
as practicable; provided, however, that (i) in no event shall the Seller
or JV Seller be obligated to pay any consideration therefor to the third
party from whom such approval, consent or waiver is requested or release
any right, benefit or claim in order to obtain such approval, consent or
waiver and (ii) the Purchaser shall be responsible for procuring the
consent required under the Alfa-Laval License in order to permit the
continued use of the "Delaval" name in connection with the Business and
the Joint Venture and the Seller shall be responsible for procuring the
consent required under the Alfa-Laval License in order to permit the
continued use of the "Delaval" name in connection with the business
currently conducted by the Seller's Delaval Condenser division. The
parties shall cooperate with each other in their efforts to obtain the
consents required under the Alfa-Laval License, but receipt of the
consent required thereunder in connection with the Seller's Delaval
Condenser division shall not be a condition to the Seller's obligation
to close the purchase of the Assets.
HSR Act, Exxon-Florio Amendment and Other Filings. As promptly as
practicable after the execution of this Agreement, the Sellers shall
file all reports and notifications that may be required to be filed
under the HSR Act, the Exxon-Florio Amendment or with the Commission of
the European Communities and the national cartel authorities of Germany
and the Netherlands and shall cooperate with the Purchaser in connection
with such filings or responses to requests for additional information.
Release of Certain Liens. The Seller shall file, or cause to be filed,
Form UCC-3 termination statements and obtain, or cause to be obtained,
any other releases, consents, waivers or similar documents necessary to
release any Liens on the Joint Venture Interest or the Assets that are
not Permitted Exceptions.
Subdivision and Construction Approvals. The Seller shall apply to the
appropriate Governmental Body for the legal subdivision approval of the
Turbine Trenton Property referred to as item 1 on Schedule 1.2(d)(i)
hereto so that said property will be subdivided in accordance with the
Major Subdivision Plan described in Exhibit E-1 hereto or the Alternate
Major Subdivision Plan described in Exhibit E-2 hereto, subject to such
conditions as may be reasonably and customarily imposed by such
Governmental Bodies and shall be reasonably acceptable to the Purchaser
(the "Subdivision"). The Purchaser shall bear one hundred percent
(100%) of the out-of-pocket costs and expenses (including any bonding
costs as may be required under applicable Law) reasonably incurred by
the Seller for any modification required to be performed on the Turbine
Trenton Property in order to obtain the Subdivision, provided that the
Purchaser's prior consent shall be required for any such work involving
costs or expenses in excess of $20,000, which consent will not be
unreasonably withheld or delayed. The Seller and the Purchaser shall
each bear fifty percent (50%) of all other out-of-pocket administrative
and professional costs and expenses incurred by the Seller to obtain the
Subdivision; provided, however, that any Affordable Housing Fee assessed
under applicable Laws of the State of New Jersey or Hamilton Township,
New Jersey as a result of the Purchaser's expansion plans shall be
entirely borne by the Purchaser. All applications, surveys and
documents required to prosecute Seller's application for the Subdivision
shall be subject to the prior approval of Purchaser, which approval
shall not be unreasonably withheld or delayed. The Seller shall give
Purchaser reasonable prior notice of all meetings (formal and informal)
and hearings before representatives of Governmental Bodies related to
the Seller's application for the Subdivision, and all opportunity to
attend such meetings and hearings. In addition to the easements
described in Exhibits C, F-1 and F-2 hereto, the Seller and the
Purchaser shall grant to each other such other easements, on such terms
as they shall mutually agree, over their respective portions of the
Turbine Trenton Property as shall be necessary to obtain any approvals
for the Subdivision.
Novation Agreements. The Seller shall use its reasonable best efforts
to satisfy all conditions to obtaining the novation agreements with
respect to Government Contracts, provided that the foregoing shall not
require the Seller to deliver to the United States Government any
document set forth in 42.1204(c) of the Federal Acquisition
Regulations that cannot be delivered prior to Closing.
Environmental Compliance. The Purchaser acknowledges that the Seller
has delivered to the Purchaser Environmental Compliance Assessment
Reports dated August 9, 1994 prepared by Dames & Moore (the "Dames &
Moore Reports"), Summaries of Environmental Issues prepared by Erler &
Kalinowski, Inc. (the "E-K Summaries") and a Cost Status Table prepared
by Erler & Kalinowski, Inc. as of October 14, 1994 (the "E-K Report")
relating to each of the four TurboCare Division facilities included in
the Real Property (the "TurboCare Facilities"). The Seller agrees that
prior to Closing it shall use all reasonable efforts to (a)
substantially complete the items of work listed in, and contemplated by,
the E-K Report (under the columns entitled "Environmental Issue" and
"Status of Environmental Issue as of 14 Oct. 94"), including remediation
required as a result of the investigations conducted and (b) obtain any
Permits, which according to the E-K Report, are required under any
Environmental Law with respect to the TurboCare Facilities and the
operations conducted thereon. Any remediation or removal work to be
performed by the Seller pursuant to this Section 6.9 after Closing shall
be performed in accordance with a workplan mutually agreeable to the
Seller and the Purchaser. The Seller shall keep the Purchaser advised
on a regular basis as to its efforts undertaken with respect to its
obligations under this Section 6.9 and also shall provide the Purchaser,
at its sole cost, a reasonable opportunity to observe and verify the
completion of any work performed pursuant to subsection (a) of the
second sentence of this Section 6.9. In the event that the Seller has
not obtained prior to the Closing any of the Permits required to be
obtained pursuant to subsection (b) of the second sentence of this
Section 6.9, then the obligation of the Seller under such subsection (b)
shall continue from and after the Closing until such Permits are
obtained, provided that after the Closing Date the Purchaser may elect
to assume the burden of obtaining such Permits at its sole cost. In the
event that the Seller has not completed all removal and remediation work
required by subsection (a) of the second sentence of this Section 6.9
prior to the Closing Date, then the obligations of the Seller under such
subsection (a) shall continue from and after the Closing Date and the
Seller shall pursue with all reasonable diligence efforts to complete
such work as promptly as possible after the Closing Date without
material interference with the conduct of the Business and use of the
Assets. The Purchaser shall grant to the Seller and the Seller
Representatives such access to the TurboCare Facilities in accordance
with Section 11.2 below as the Seller or the Seller Representatives
reasonably require in order to complete such work. The Purchaser may
exercise its rights and obligations under Section 11.4 in respect of a
failure by the Seller to perform its obligations under this Section 6.9.
Nothing contained in this Section 6.9 shall operate to modify or amend
the definition of Assumed Liabilities or Retained Liabilities under this
Agreement.
Subleases. The Seller shall enter into subleases with the Purchaser
relating to office space at 30 Pioneer Road, Singapore and Grove House,
Marylebone Road, London, England, which the Seller currently shares with
other Imo divisions, in each case upon such terms and conditions as are
mutually satisfactory to the Seller and the Purchaser, including,
without limitation, the right to terminate any sublease upon sixty (60)
days prior written notice to the Seller.
COVENANTS OF THE PURCHASER
From and after the date hereof, and until the Closing Date, the
Purchaser hereby covenants and agrees with the Sellers that:
Cooperation. The Purchaser shall use its best efforts to cause the
consummation of the transactions contemplated hereby in accordance with
the terms and conditions hereof.
Confidentiality. The Purchaser shall comply with the terms of the
Confidentiality Agreement.
Consents and Conditions. The Purchaser shall use its best efforts to
obtain all approvals, consents or waivers from Persons other than
Governmental Bodies necessary to assign to the Purchaser all of the
Divisions' interest in the Assets and all of the JV Seller's interest in
the Joint Venture Interest, including, without limitation, the Alfa-
Laval License with respect to the use of the trademark and/or tradename
"Delaval" solely in connection with the operations of the Business and
the Joint Venture as presently conducted (such best efforts to include,
without limitation, agreeing to any amendments to the Joint Venture
Documents as currently in effect that are reasonably requested by Stork
as a condition to the Stork Consent or which are necessary to obtain the
authorization of the Commission of the European Communities and, if
necessary, the national cartel authorities of Germany and the
Netherlands for the JV Buyer's participation in the Joint Venture on
terms acceptable to it or any claim, right or benefit arising thereunder
or resulting therefrom as soon as practicable); provided, however, that
(i) in no event shall the Purchaser or the JV Buyer be obligated to pay
any consideration therefor to the third party from whom such approval,
consent or waiver is requested or release any right, benefit or claim in
order to obtain such approval, consent or waiver and (ii) the Purchaser
shall be responsible for procuring the consent required under the Alfa-
Laval License in order to permit the continued use of the "Delaval" name
in connection with the Business and the Joint Venture and the Seller
shall be responsible for procuring the consent required under the Alfa-
Laval License in order to permit the continued use of the "Delaval" name
in connection with the business currently conducted by the Seller's
Delaval Condenser division.
HSR Act, Exxon-Florio Amendment and Other Filings. (a) As promptly as
practicable after the execution of this Agreement, the Purchaser shall
file all reports and notifications that may be required to be filed
under the HSR Act, the Exxon-Florio Amendment or with the Commission of
the European Communities or the national cartel authorities of Germany
and the Netherlands and shall cooperate with the Seller in connection
with such filings or responses to requests for additional information.
Notwithstanding any provision in this Agreement to the contrary, the
Purchaser shall not be required (i) to undertake any sale or other
disposition or the holding separate (through the establishment of a
trust or otherwise) of any assets or category of assets, or businesses,
of the Purchaser and any of its subsidiaries, or the holding separate
(through the establishment of a trust or otherwise) of the voting
securities of any of its subsidiaries, or (ii) in the event a permanent
or preliminary injunction or other order is issued that would prevent or
delay consummation of the transactions contemplated hereby, to post any
bond or take any actions necessary to vacate, modify or suspend any such
injunction or order so as to permit the consummation of the transactions
contemplated hereby.
Novation Agreements. The Purchaser shall use its reasonable best
efforts to satisfy all conditions to obtaining the novation agreements
with respect to Government Contracts, provided that the foregoing shall
not require the Purchaser to deliver to the United States Government any
document set forth in 42.1204(c) of the Federal Acquisition
Regulations that cannot be delivered prior to Closing.
COVENANTS RELATING TO EMPLOYMENT AND EMPLOYEE MATTERS
Offer of Employment. (a) Except as otherwise provided in this Article
VIII, (i) the Purchaser shall offer employment as of the Closing Date to
each Active Division Employee, in each case at a rate of pay and with
such benefits, including, without limitation, executive benefits,
executive compensation and perquisites, as applicable, as shall be
substantially comparable to such Active Division Employee's pay and
benefits in effect on the Business Day immediately preceding the Closing
Date, provided that the Purchaser shall not be required to provide
benefits which are comparable to those available under the Seller's
stock option or stock appreciation right programs and executive life
insurance programs and (ii) the Purchaser shall offer employment as of
the applicable Return Date in each case at a rate of pay and with such
benefits as shall be substantially comparable to such Inactive Division
Employee's pay and benefits in effect prior to such Return Date. The
Purchaser shall assume as an Assumed Liability and be solely responsible
for all compensation accruing on or after (i) the Closing Date with
respect to Transferred Employees who are not Inactive Employees on such
Closing Date, and (ii) the applicable Return Dates with respect to
Transferred Employees who are Inactive Division Employees as of the
Closing Date. The Purchaser shall also assume as an Assumed Liability
and be solely responsible for all compensation accrued but unpaid with
respect to Transferred Employees to the extent of the reserve therefor
in the Final Balance Sheet. The Seller shall retain as a Retained
Liability and be solely responsible for any compensation and any
benefits with respect to current or former Employees who do not become
Transferred Employees.
Schedule 8.1(b) hereto lists all Divisions Employees who would be
Inactive Division Employees if the Closing Date were the date hereof,
such Schedule shall also set forth each such Division Employee's current
rate of pay, position and reason for inactive status. The Seller shall
update such Schedule 8.1(b) on the Closing Date and shall provide such
updated Schedule to the Purchaser within three (3) Business Days after
the Closing Date. The Seller and the JV Seller shall provide to the
Purchaser as of the Closing Date a statement of all accrued entitlements
for Division Employees, including but not limited to vacation days,
wages and other compensation consistent with the Employee Benefit Plans
and the Benefit Arrangements.
Notwithstanding the foregoing, effective as of the Closing Date, the
Purchaser shall make available to all Transferred Employees who were
participating in the Seller's group health and medical plan, group
health and medical plan coverage under plans which are substantially
comparable to those currently enjoyed by the Transferred Employees which
coverage shall contain no preexisting condition exclusions or
limitations applicable to the Transferred Employees under the health and
medical coverage offered by the Purchaser and which coverage shall not
have a waiting period for such Transferred Employees with respect to
eligibility to enroll and participate. If the employment of a
Transferred Employee is terminated by the Purchaser on or after the
Closing Date, the Purchaser shall provide such employee with the health
and medical coverage under a "group health plan" within the meaning of
Section 5000(b)(1) of the Code which is required to be provided to such
employee by the Consolidated Omnibus Budget Reconciliation Act of 1985,
as amended ("COBRA Coverage"). The Purchaser shall not be required,
however, to provide any such COBRA Coverage to any current or former
Employees who do not become Transferred Employees.
Collective Bargaining and Other Agreements. Except as otherwise
provided in Section 8.4 and 8.5 or as set forth on Schedule 8.2 hereto,
the Purchaser shall assume as an Assumed Liability and be solely
responsible for all of the obligations of the Seller which arise from
and after the Closing Date under the collective bargaining agreements,
employment agreements or consulting agreements listed on Schedule 4.10
applicable to the Division Employees who were Transferred Employees.
Salaried Pension Plans. (a) Effective on the Closing Date, the Seller
will amend the defined benefit pension plan covering non-union
Transferred Employees (the "Salaried Pension Plan") to fully vest such
Transferred Employees in the benefits accrued thereunder and to
eliminate any further accruals by such Transferred Employees of service,
compensation or benefits under such plan. As soon as practicable after
the Closing Date, but effective as of such Closing Date, the Purchaser
shall establish and adopt for the benefit of the Transferred Employees
covered by the Salaried Pension Plan an employee benefit plan with terms
and conditions that are substantially comparable to those of the
Salaried Pension Plan (prior to being amended as described herein)
including credit for past service with the Seller for eligibility,
vesting and, contingent upon the transfer of assets set forth in Section
8.3(b), benefit accrual and credit for compensation earned with the
Seller (the "Purchaser Pension Plan"). The Purchaser Pension Plan shall
comply with Section 411(d)(6) of the Code to protect Transferred
Employees with respect to benefits earned and other protected provisions
under the Salaried Pension Plan.
As soon as practicable after the adoption of the Purchaser Pension Plan,
the Seller shall cause the trustee of the Salaried Pension Plan to
transfer to the trustee of the Purchaser Pension Plan, and the Purchaser
shall cause the trustee of the Purchaser Pension Plan to accept, assets
with a value equal to the greater of (i) 136.75% of the projected
benefit obligations (within the meaning of Statement of Financial
Accounting Standards No. 87 of the United States Financial Accounting
Standards Board) as of the Closing Date attributable to the vested and
non-vested benefits of the Transferred Employees covered by the Salaried
Pension Plan as calculated by the enrolled actuary for the Salaried
Pension Plan utilizing the actuarial assumptions currently used by the
Seller and set forth on Schedule 8.3(b) hereto and (ii) the assets equal
to the liabilities determined in accordance with ERISA Section
4001(a)(18)(A) and Treasury Regulation Section 1.414(l) using the IRS
"safe harbor" under that regulation. Such safe harbor shall be
calculated: (A) for the benefits to be paid as annuities, using the
actuarial assumptions described in PBGC Regulation Section 2619 for
valuing annuities (including, but not limited to, the applicable
interest rates, mortality tables, expense load and retirement
assumptions under PBGC Regulation Sections 2619.49 and 2619.61-65), as
of August 1, 1994; and (B) for benefits to be paid as lump sums, using
the actuarial assumptions described in PBGC Regulation Section 2619.49
for valuing lump sums, as of August 1, 1994.
If the amounts to be transferred, described above, are limited under
Code Section 414(l) for any reason, such as, but not limited to, the
Salaried Pension Plan having insufficient assets to satisfy all of the
benefit obligations for all of the affected members, the amount of such
shortfall shall, at the Seller's option, be paid to the Purchaser either
outside the Salaried Pension Plan, or by reducing the Purchase Price on
a dollar for dollar basis to compensate for such shortfall. The Seller
shall cause the enrolled actuary for the Salaried Pension Plan to
provide the enrolled actuary for the Purchaser Pension Plan with all
information necessary to verify the calculations contemplated hereunder.
If the enrolled actuary for the Purchaser Pension Plan does not concur
with the calculations made by the enrolled actuary for the Salaried
Pension Plan, the Seller and the Purchaser shall jointly engage an
impartial actuary who shall be empowered to resolve the dispute. The
assets to be transferred to the Purchaser Pension Plan shall consist
exclusively of cash. The Seller shall be solely responsible for timely
adopting any amendments to the Salaried Pension Plan and completing any
governmental filings or submissions needed in order to effectuate the
transfer of assets and liabilities to the Purchaser Pension Plan, and
the Purchaser shall be solely responsible for timely adopting any
amendments to the Purchaser Pension Plan and completing any governmental
filings or submissions needed in order to receive the transfer of assets
and liabilities from the Salaried Pension Plan. The Seller's obligation
to effectuate such transfer shall be conditioned upon its receipt of (i)
evidence reasonably satisfactory to it that the Purchaser has timely
completed any governmental filings or submissions needed in order to
receive the transfer, and (ii) an opinion of counsel in a form
reasonably satisfactory to it to the effect that the Purchaser Pension
Plan as in effect on the date of the transfer satisfies the
qualification requirements under Section 401(a) of the Code and the
requirements of Section 411(d)(6) of the Code or shall be timely amended
to satisfy such requirements. The Purchaser's obligation to receive
such transfer (and to give Transferred Employees credit under the
Purchaser Pension Plan for service with the Seller for benefit accrual
purposes in accordance with Section 8.7) shall be conditioned upon its
receipt of (i) evidence reasonably satisfactory to it that the Seller
has timely completed any governmental filings or submissions needed in
order to effectuate the transfer, and (ii) an opinion of counsel in a
form reasonably satisfactory to it to the effect that the Salaried
Pension Plan as in effect on the date of the transfer satisfies the
qualification requirements under Section 401(a) of the Code or shall be
timely amended to satisfy such requirements. If assets are transferred
after the Closing Date, the assets transferred shall be equal to the
amounts described above, plus interest at the interest rate used for
determining the minimum required contribution under Code Section 412, as
disclosed on Form 5500 Schedule B for the 1993 plan year (the "all other
calculated values" interest rate on line (12)(c)(ii)).
As soon as practicable after the date which is eighteen (18) months
after the Closing Date (the "18-month Anniversary Date"), the Seller
shall cause the trustee of the Salaried Pension Plan to transfer to the
trustee of the Purchaser Pension Plan, and the Purchaser shall cause the
trustee of the Purchaser Pension Plan to accept, assets attributable to
the vested and non-vested benefits of the Inactive Employees who become
Transferred Employees during the period which begins immediately after
the Closing Date and ends on the 18-month Anniversary Date. The amount
of such assets shall be calculated as of the 18-month Anniversary Date,
but in all other respects shall be determined and transferred in the
same manner as the initial transfer of assets under this Section 8.3(b).
As soon as practicable after the date which is thirty-six (36) months
after the Closing Date (the "36-month Anniversary Date"), the Seller
shall cause the trustee of the Salaried Pension Plan to transfer to the
trustee of the Purchaser Pension Plan, and the Purchaser shall cause the
trustee of the Purchaser Pension Plan to accept, assets attributable to
the vested and non-vested benefits of the Inactive Employees who become
Transferred Employees during the period which begins immediately after
the 18-month Anniversary Date and ends on the 36-month Anniversary Date.
The amount of such assets shall be calculated as of the 36-month
Anniversary Date, but in all other respects shall be determined and
transferred in the same manner as the initial transfer of assets under
this Section 8.3(b).
Welfare Plan. Except to the extent of reserves accrued and reflected on
the Final Balance Sheet with respect to accrued vacation, sick leave and
accrued and unpaid bonuses, the Seller shall retain as a Retained
Liability and be solely responsible for all Claims Incurred before (i)
the Closing Date by a Transferred Employee who is not an Inactive
Division Employee on such Closing Date, and (ii) the applicable Return
Date by a Transferred Employee who was an Inactive Division Employee, in
each case under any Employee Benefit Plan that is an "employee welfare
benefit plan" within the meaning of Section 3(1) of ERISA ("Welfare
Plan").
Post-retirement Welfare Benefits. The Seller shall retain as a Retained
Liability and be solely responsible for any obligations it has as of the
Closing Date to provide post-employment welfare benefits to non-union
Employees and Retirees. Except to the extent that the Purchaser assumes
any such liability with respect to Transferred Employees as a result of
assuming a collective bargaining agreement pursuant to Section 8.2, the
Purchaser shall not assume any liability with respect to post-employment
welfare benefits for Employees or Retirees and shall not be required
hereunder to provide any such post-employment welfare benefits to
Transferred Employees or Retirees.
Union Plans. (a) Except as otherwise provided in Section 8.4, effective
on the Closing Date, the Purchaser shall assume the sponsorship of each
Division Employee Benefit Plan and Benefit Arrangement provided for
under the collective bargaining agreements that the Purchaser will
assume pursuant to Section 8.2 to the extent such plans and arrangements
and each of the benefits provided thereunder are identified on Schedule
8.6(a) hereto, other than the single-employer union defined benefit
plans assigned plan numbers 016, 026 and 027 (each, a "Seller Union
Pension Plan"). Effective on the Closing Date, the Seller shall amend,
or shall cause to be amended, each Seller Union Pension Plan to fully
vest the Transferred Employees covered by such plan and to eliminate any
further accruals by such Transferred Employees of service, compensation
or benefits under such plan. As soon as practicable after the Closing
Date, but effective as of such Closing Date, the Purchaser shall
establish and adopt for the benefit of the Transferred Employees covered
by the Seller Union Pension Plans an employee benefit plan with terms
and conditions that are substantially comparable to those of the Seller
Union Pension Plans (prior to being amended as described herein)
including credit for past service with the Seller for eligibility,
vesting and, contingent upon the transfer of assets set forth in Section
8.6(b), benefit accrual and credit for compensation earned with the
Seller (the "Purchaser Union Pension Plan"). The Purchaser Union
Pension Plan shall comply with Section 411(d)(6) of the Code to protect
Transferred Employees with respect to benefits earned and other
protected provisions under the Seller Union Pension Plans.
As soon as practicable after the adoption of the Purchaser Union Pension
Plan, the Seller shall cause the trustee of each Seller Union Pension
Plan to transfer to the trustee of the Purchaser Union Pension Plan, and
the Purchaser shall cause the trustee of the Purchaser Union Pension
Plan to accept, assets and liabilities with a value equal to the present
value of the benefits that would be payable to the Transferred Employees
on a termination of the Seller Union Pension Plans as of the Closing
Date, based on priority allocations under Section 4044 of ERISA, (i)
valuing the benefits to be paid as annuities using the actuarial
assumptions described in PBGC Regulation Section 2619 for valuing
annuities (including, but not limited to, the applicable interest rates,
mortality tables, expense load and retirement assumptions under PBGC
Regulation Sections 2619.49 and 2619.61-65), as of August 1, 1994, and
(ii) valuing the benefits to be paid as lump sums using the actuarial
assumptions described in PBGC Regulation Section 2619.49 for valuing
lump sums, as of August 1, 1994.
The Seller shall cause the enrolled actuary for each Seller Union
Pension Plan to provide the enrolled actuary for the Purchaser Union
Pension Plan with all information necessary to verify the calculations
contemplated hereunder. If the enrolled actuary for the Purchaser Union
Pension Plan does not concur with the calculations made by the enrolled
actuary for any Seller Union Pension Plan, the Seller and the Purchaser
shall engage an impartial enrolled actuary who shall be empowered to
resolve the dispute. The assets to be transferred to the Purchaser
Union Pension Plan shall consist exclusively of cash. The Seller shall
be solely responsible for timely adopting any amendments to each Seller
Union Pension Plan and completing any governmental filings or
submissions needed in order to effectuate the transfer of assets and
liabilities to the Purchaser Union Pension Plan, and the Purchaser shall
be solely responsible for timely adopting any amendments to the
Purchaser Union Pension Plan and completing any governmental filings or
submissions needed in order to receive the transfer of assets and
liabilities from each Seller Union Pension Plan. The Seller's
obligation to effectuate such transfers shall be conditioned upon its
receipt of (i) evidence reasonably satisfactory to it that the Purchaser
has timely completed any governmental filings or submissions needed in
order to receive the transfer, and (ii) an opinion of counsel in a form
reasonably satisfactory to it to the effect that the Purchaser Union
Pension Plan as in effect on the date of the transfer satisfies the
qualification requirements under Section 401(a) of the Code and the
requirements of Section 411(d)(6) of the Code or shall be timely amended
to satisfy such requirements. The Purchaser's obligation to receive
such transfers (and to give Transferred Employees credit under the
Purchaser Union Pension Plan for service with the Seller for benefit
accrual purposes in accordance with Section 8.7) shall be conditioned
upon its receipt of (i) evidence reasonably satisfactory to it that the
Seller has timely completed any governmental filings or submissions
needed in order to effectuate the transfer, and (ii) an opinion of
counsel in a form reasonably satisfactory to it to the effect that each
Seller Union Pension Plan as in effect on the date of the applicable
transfer satisfies the qualification requirements under Section 401(a)
of the Code or shall be timely amended to satisfy such requirements. If
assets are transferred after the Closing Date, the assets transferred
shall be equal to the amounts described above, computed using the
interest rates (and all other assumptions) under PBGC Regulation Section
2619 described above, effective for the month of transfer.
As soon as practicable after the 18-month Anniversary Date, the Seller
shall cause the trustee of each Seller Union Pension Plan to transfer to
the trustee of the Purchaser Union Pension Plan, and the Purchaser shall
cause the trustee of the Purchaser Union Pension Plan to accept, assets
attributable to the vested and non-vested benefits of the Inactive
Employees who become Transferred Employees during the period which
begins immediately after the Closing Date and ends on the 18-month
Anniversary Date. The amount of such assets shall be calculated as of
the 18-month Anniversary Date, but in all other respects shall be
determined and transferred in the same manner as the initial transfer of
assets under this Section 8.6(b).
As soon as practicable after the 36-month Anniversary Date, the Seller
shall cause the trustee of each Seller Union Pension Plan to transfer to
the trustee of the Purchaser Union Pension Plan, and the Purchaser shall
cause the trustee of the Purchaser Union Pension Plan to accept, assets
attributable to the vested and non-vested benefits of the Inactive
Employees who become Transferred Employees during the period which
begins immediately after the 18-month Anniversary Date and ends on the
36-month Anniversary Date. The amount of such assets shall be
calculated as of the 36-month Anniversary Date, but in all other
respects shall be determined and transferred in the same manner as the
initial transfer of assets under this Section 8.6(b).
Credited Service. Except as otherwise provided in Sections 8.3 and 8.6,
from and after the Closing, the Purchaser shall credit to the
Transferred Employees, for all purposes under all benefit plans, benefit
arrangements and compensation policies and practices of the Purchaser,
all previous service recognized by the Seller for such Transferred
Employees under the Employee Benefit Plans and Benefit Arrangements (i)
immediately prior to the Closing Date with respect to a Transferred
Employee who is not an Inactive Division Employee on such Closing Date,
and (ii) immediately prior to the applicable Return Date with respect to
a Transferred Employee who was an Inactive Division Employee.
Termination Obligations. The Purchaser shall not assume as a liability
or be responsible for, and the Seller shall retain as a Retained
Liability and be solely responsible for, any payments that may be
required to be made as a result of the sale of Assets contemplated by
this Agreement under any termination, severance or similar plan, policy
or arrangement of the Seller or the Subsidiary's. Notwithstanding the
foregoing, the Purchaser shall assume as an Assumed Liability and be
responsible for 50% of any severance payments required to be made under
those certain Severance Agreements dated May 19, 1994 between the Seller
and each of the persons set forth on Schedule 8.8 hereto (the "Severance
Agreements"), and the Seller shall retain as a Retained Liability and be
responsible for 50% of any severance payments required to be made under
such Severance Agreements.
Indemnification. (a) Except as provided in Section 8.8, the Purchaser
shall indemnify, defend and hold the Seller harmless from and against
any liability, loss, damage or expense the Seller may incur (including
reasonable attorneys' fees) with respect to any claims of Transferred
Employees (i) arising out of their employment with the Purchaser, (ii)
under any Law relating to the termination of such Transferred Employee's
employment arising on or after the Closing Date and (iii) in connection
with Liabilities assumed and obligations undertaken by the Purchaser
under this Article VIII. The Purchaser shall comply with Sections 13.6
and 13.7 hereof.
Except as provided in Section 8.8, the Seller shall indemnify, defend
and hold the Purchaser harmless from and against any liability, loss,
damage or expense it may incur (including reasonable attorneys' fees)
with respect to any claims of (i) Transferred Employees arising out of
their employment with the Seller, (ii) Division Employees who do not
become Transferred Employees and (iii) in connection with Liabilities
retained by the Seller under this Article VIII. The Seller shall comply
with Sections 13.6 and 13.7 hereof.
8.10. Cooperation. Except for the Transferred Employees and Inactive
Employees, the Purchaser shall not employ or retain as a consultant any
Employee of the Seller for a period of 12 months following the Closing
Date.
CONDITIONS PRECEDENT TO THE PURCHASER'S OBLIGATIONS
cause the JV Buyer to purchase the Joint Venture Interest from the JV
Seller and (ii) purchase the Assets on the Closing Date are, at the
option of the Purchaser, subject to the satisfaction of the following
conditions:
Representations, Warranties and Covenants. (a) Each of the
representations and warranties of the Seller contained herein shall be
true and correct in all material respects on and as of the Closing Date
with the same force and effect as though the same had been made on and
as of the Closing Date.
The Sellers shall have performed and complied, in all material respects,
with the covenants and provisions of this Agreement required to be
performed or complied with by them at or prior to the Closing Date.
The Purchaser shall have received a certificate of the Seller and the JV
Seller, dated as of the Closing Date and signed by officers of the
Seller and the JV Seller, as the case may be, certifying as to the
fulfillment of the conditions set forth in this Section 9.1.
HSR Act. Any waiting period applicable to the purchase of the Assets
under the HSR Act shall have expired or been terminated, and no action
or proceeding shall be pending by the Department of Justice or Federal
Trade Commission challenging or seeking to enjoin the consummation of
the transactions contemplated herein, and neither the Purchaser nor the
Seller shall have been notified of a present intention by the Assistant
Attorney General in charge of the Antitrust Division of the Department
of Justice, or the Federal Trade Commission (or their respective
designees) to commence such an action or proceeding, and neither the
Purchaser nor the Seller shall have been notified by the Assistant
Attorney General in charge of the Antitrust Division of the Department
of Justice or the Federal Trade Commission (or their respective
designees) that an investigation of the transaction is continuing
notwithstanding the expiration or termination of the waiting period
applicable to the purchase of the Assets under the HSR Act; and there
shall not be pending any Legal Proceeding commenced by any Governmental
Body which there is sought any order, injunction, ruling or decree by a
court or administrative agency of competent jurisdiction, which would
prohibit the consummation of the transactions contemplated by this
Agreement or require the Purchaser to divest or hold separate any
portion of the Business or any portion of the business of the Purchaser
or its Affiliates.
No Prohibition. No Law or Order of any court or administrative agency
shall be in effect which prohibits the Purchaser from consummating the
transactions contemplated hereby.
Opinion of the Seller's Counsel. The Purchaser shall have received an
opinion or opinions of counsel for the Sellers, dated the Closing Date,
to the effect that (a) this Agreement and each of the Seller Documents
and the JV Seller Documents required to be delivered on or prior to the
Closing has been duly authorized, executed and delivered by the Seller,
the Subsidiary or the JV Seller, as the case may be, and (b) that the
Seller Documents and the JV Seller Documents are valid, binding and
enforceable in accordance with their terms.
Authorizations. The JV Buyer shall have received authorization from the
Commission of European Communities and, if necessary, the national
cartel authorities of Germany and the Netherlands for the JV Buyer's
acquisition from the JV Seller of the Joint Venture Interest.
Subdivision Approvals. The Seller shall have obtained the final
approval from the appropriate Governmental Body necessary for the legal
Subdivision of the Turbine Trenton Property in accordance with Section
6.7 and such Subdivision shall not be subject to any appeal or contest.
Third Party Consents. The following consents shall have been obtained
on terms reasonably satisfactory to the Purchaser: (a) the Stork
Consent, (b) consent for the assignment of the Brandon Licenses, (c)
consent for the assignment of the Alfa-Delaval License, (d) all consents
listed on Schedule 4.7 and (e) consents for the assignment of any of the
Material Contracts identified on Schedule 4.10 as requiring consent as a
condition to Closing.
Title Insurance Policies. The Purchaser shall, at the Purchaser's
expense, have received from a reputable national title insurance company
selected by the Purchaser (the "Title Company"), commitments for ALTA
owner's policies of title insurance (the "Title Policies"), covering the
Owned Real Property and insuring (in the amounts mutually agreed to by
Sellers and Purchaser) that upon Closing valid fee simple title to such
property shall be indefeasibly vested in the Purchaser subject to no
Liens (other than Permitted Exceptions). Notwithstanding the foregoing,
in the event that the Title Company refuses to issue a title insurance
policy as described above, but Chicago Title Insurance Company is
prepared to insure such title at no extra cost to the Purchaser, the
Purchaser shall obtain such title insurance from Chicago Title Insurance
Company.
Exxon-Florio Amendment. The review period under the Exxon-Florio
Amendment, during which the President of the United States or his
designee may commence an investigation of the transactions contemplated
by this Agreement (i) shall have expired without such investigation
having been commenced or (ii) such investigation shall have been
commenced and (x) the period under the Exxon-Florio Amendment during
which such investigation must be completed shall have expired or the
Purchaser shall have received notice that such investigation has been
completed and (y) (A) the period under the Exxon-Florio Amendment during
which the President may announce his decision to take action to suspend,
prohibit or place any limitations on the transactions contemplated by
this Agreement shall have expired without any such action being
threatened, announced or taken or (B) the President shall have announced
a decision not to take any such action, in each case, prior to the
Closing Date.
Delivery of Documents. The Purchaser shall have received all of the
documents required to be delivered to the Purchaser on or prior to the
Closing pursuant to this Agreement and such additional documents,
instruments or items of information reasonably requested by it in
respect of any aspect or consequence of the transactions contemplated
hereby. All corporate and other proceedings, and all documents,
instruments and other legal matters in connection with the transactions
contemplated by this Agreement or by the other agreements referred to
herein shall be reasonably satisfactory in form and substance to the
Purchaser.
CONDITIONS PRECEDENT TO THE SELLERS' OBLIGATIONS
The obligation of the Seller to consummate the sale, transfer and
assignment to the Purchaser of the Assets and the assignment of the
Assumed Liabilities on the Closing Date, and the obligation of the JV
Seller to consummate the sale, transfer and assignment to the JV Buyer
of the Joint Venture Interest on the Closing Date, are, at the option of
the Seller and the JV Seller, as applicable, subject to the satisfaction
of the following conditions.
Representations, Warranties and Covenants. (a) Each of the
representations and warranties of the Purchaser contained herein shall
be true and correct in all material respects as of the Closing Date with
the same force and effect as though the same had been made on and as of
the Closing Date.
The Purchaser shall have performed and complied in all material respects
with the covenants and provisions in this Agreement required herein to
be performed or complied with by it at or prior to the Closing Date.
The Seller shall have received a certificate of the Purchaser, dated as
of the Closing Date and signed by an officer of the Purchaser,
certifying as to the fulfillment of the conditions set forth in this
Section 10.1.
No Prohibition. No Law or Order of any court or administrative agency
shall be in effect which prohibits the Sellers from consummating the
transactions contemplated hereby.
Opinion of the Purchaser's Counsel. The Seller shall have received an
opinion or opinions of counsel for the Purchaser and the JV Buyer, dated
the Closing Date, to the effect that (a) this Agreement and each of the
Purchaser Documents and the JV Seller Documents required to be delivered
on or prior to the Closing has been duly authorized, executed and
delivered by the Purchaser or the JV Buyer, as the case may be, and (b)
the Agreement and each of the Purchaser Documents and the JV Seller
Documents are valid, binding and enforceable in accordance with their
terms.
HSR Act. Any waiting period applicable to the purchase under the HSR
Act shall have expired or been terminated, and no action or proceeding
shall be pending by the Department of Justice or Federal Trade
Commission challenging or seeking to enjoin the consummation of the
transactions contemplated herein, and neither the Purchaser nor the
Seller shall have been notified of a present intention by the Assistant
Attorney General in charge of the Antitrust Division of the Department
of Justice, or the Federal Trade Commission (or their respective
designees) to commence such an action or proceeding, and neither the
Purchaser nor the Seller shall have been notified by the Assistant
Attorney General in charge of the Antitrust Division of the Department
of Justice or the Federal Trade Commission (or their respective
designees) that an investigation of the transaction is continuing
notwithstanding the expiration or termination of the waiting period
applicable to the purchase under the HSR Act; and there shall not be
pending any Legal Proceeding commenced by any Governmental Body which
there is sought any order, injunction, ruling or decree by a court or
administrative agency of competent jurisdiction, which would prohibit
the consummation of the transactions contemplated by this Agreement or
require the Purchaser to divest or hold separate any portion of the
Business or any portion of the business of the Purchaser or its
Affiliates.
Delivery of Documents. The Seller shall have received all of the
documents required to be delivered to the Seller on or prior to the
Closing pursuant to this Agreement and such additional documents,
instruments or items of information reasonably requested by it in
respect of any aspect or consequence of the transactions contemplated
hereby. All corporate and other proceedings, and all documents,
instruments and other legal matters in connection with the transactions
contemplated by this Agreement or by the other agreements referred to
herein shall be reasonably satisfactory in form and substance to the
Seller.
Authorizations. The JV Buyer shall have received authorization from the
Commission of European Communities and, if necessary, the national
cartel authorities of Germany and the Netherlands for the JV Buyer's
acquisition from the JV Seller of the Joint Venture Interest.
COVENANTS RELATING TO ENVIRONMENTAL
MATTERS AND ASBESTOS CLAIMS
ISRA Compliance. Subject to the provisions of this Article XI, and in
particular Section 11.5, the Seller shall be solely responsible for
taking all actions necessary to obtain the ISRA Clearance from the NJDEP
with respect to the North Plant and to comply with ISRA until such ISRA
Clearance is issued and all costs associated therewith shall be retained
by the Seller as Retained Liabilities. The Seller shall pursue with
reasonable diligence the issuance of such ISRA Clearance. Except as may
be required by Law and except in response to contacts initiated by
NJDEP, during the Initial Period the Purchaser shall not initiate
contact with NJDEP in any matter concerning or relating to the pending
ISRA case relating to the North Plant without the prior approval of the
Seller. Except as provided in the immediately preceding sentence,
during the Initial Period the Seller shall be the sole and exclusive
contact with NJDEP in any matter concerning or relating to the pending
ISRA case relating to the North Plant and, after the Initial Period, if
the Purchaser so elects, the parties shall jointly participate in such
communications. In the event the Seller has not obtained the ISRA
Clearance by the end of the Initial Period, the Purchaser shall
thereafter have the right to participate jointly with the Seller in all
contacts with NJDEP in any matter concerning or relating to the pending
ISRA case relating to the North Plant. Except as may be required by Law
and except in response to contacts from NJDEP, after the Initial Period
neither the Purchaser nor the Seller shall have independent contact or
communications with NJDEP in any matter concerning or affecting the
pending ISRA case concerning or relating to the North Plant without the
consent of the other party. The Seller shall with reasonable diligence
continuously perform its obligations under this Article XI. Upon
receipt by the Purchaser of the ISRA Clearance, the Purchaser shall
assume, and release the Seller from, the On-Site North Plant
Environmental Liabilities existing on or after the date of the ISRA
Clearance; provided, however, that such release shall not limit the
Purchaser's remedies for breach of Section 4.19(b). Effective as of the
delivery of the ISRA Clearance, the Purchaser waives any rights it may
have to void this transaction pursuant to ISRA as a result of any
alleged violation of ISRA by the Seller.
Access of the Seller. Upon reasonable notice to the Purchaser, the
Purchaser shall provide the Seller and any of its directors, officers,
employees, counsel, agents, consultants and representatives
(collectively, the "Seller Representatives") and, with respect to the
North Plant, the NJDEP and the Seller Representatives, reasonable
physical access to the Real Property and all improvements thereon for
the purpose of conducting any environmental assessment, investigation or
cleanup; provided, however, that, except for reasonable access granted
to NJDEP, any access granted to the Seller may be conditioned or
restricted as necessary to protect the Assets, operations, business
prospects or other property or rights of the Purchaser, to ensure the
safety of Personnel and facilities, to protect confidential or
privileged information, or to facilitate or secure attendance during and
observation of the Seller's activities by the Purchaser's
Representatives to be determined or selected in the sole discretion of
the Purchaser. For purposes of this Section 11.2, "environmental
assessment, investigation and cleanup" includes, but is not limited to,
soil and/or groundwater sampling, installation of soil borings and
monitoring wells, sampling for asbestos-containing materials, excavation
of soils, any and all off-site disposal of Hazardous Materials,
installation of environmental cleanup equipment, including, but not
limited to, water or air pollution control equipment, removal and/or
encapsulation of asbestos-containing materials, and air quality
monitoring.
Participation of the Purchaser. (a) With respect to the Seller's
obligations and Liabilities relating to environmental matters pursuant
to this Agreement, including, but not limited to, compliance with ISRA
and the Connecticut Transfer Act, with respect to the Divisions or
Assets, the Seller shall: (i) (A) promptly deliver to the Purchaser
reasonably in advance of any intended or required deadline, filing or
submission date, true and complete copies of all drafts of documents,
submissions, reports, findings, letters, analyses, correspondence and
any other documentation relevant, pertaining or related to or arising
from the Seller's obligations under this Agreement ("Draft Documents")
and (B) except with regard to ISRA prior to filing such Draft Documents,
obtain the Purchaser's approval, which will not be unreasonably withheld
or delayed; (ii) promptly deliver to the Purchaser true and complete
copies of all documents, submissions, reports, findings, letters,
analyses, correspondence and any other documentation produced,
exchanged, filed, submitted or received to or from the Seller or the
Seller Representatives and any Governmental Body or Person; (iii)
promptly notify the Purchaser reasonably in advance of all site
inspections, visits, conference calls, and meetings or other discussions
scheduled between the Seller or the Seller's Representatives and any
Governmental Body, and the Purchaser subject to Section 11.1 with regard
to ISRA, in its sole discretion, may attend or have its attorney,
consultant or other Representative of its choice, attend all such site
inspections, visits, meetings or discussions; (iv) with reasonable
diligence perform such obligations with a view to securing and
implementing compliance and remediation of the Assets, including but not
limited to Real Property, on a timely basis, and with no material
cessation, restriction, alteration or disruption of the Purchaser's
operations during such remediation, to standards that will not (A)
materially adversely interfere with the lawful use of the Real Property
as it is being used on the date hereof or may in the future be used for
commercial or industrial purposes, (B) limit or make more costly in any
material respect the present or future use of the North Plant; (C)
affect any lawful use on the surface of the Real Property as it is being
used on the date hereof or may in the future be used for commercial or
industrial purposes, and/or (D) render title unmarketable to the Real
Property; and (v) comply with all Laws, including, but not limited to,
Environmental Laws. Subject to the provisions of Sections 11.1 and
11.4, the Seller shall be the sole and exclusive contact with
appropriate Governmental Bodies in any matter that involves a Legal
Proceeding to which the Seller is a party before such Governmental Body
and concerns or relates to the Seller's obligations or Liabilities in
respect of environmental matters which constitute Environmental
Liabilities. Except as may be required by Law and except in response to
contacts from such Governmental Bodies, the Purchaser shall not have
independent contact or communications with any such Governmental Body in
any matter concerning or affecting such Legal Proceeding without the
prior written consent of the Seller, which consent shall not be
unreasonably withheld or delayed.
(b) Notwithstanding Section 11.3(a) above, during the Initial Period,
the Purchaser may comment on the Draft Documents, but the Seller shall
not be obligated to make changes requested by the Purchaser, and after
the Initial Period such Draft Documents shall be subject to the
Purchaser's approval which shall not be unreasonably withheld or
delayed. If the NJDEP, as a condition for issuing the ISRA Clearance,
requires the Seller to provide a Declaration of Environmental
Restrictions, the Purchaser agrees either to take title to the Real
Property, if necessary, subject to a Declaration of Environmental
Restrictions or, following the Closing, to record a Declaration of
Environmental Restrictions to the extent required by the NJDEP, in
either case subject to the Purchaser's prior approval, to the extent
that the Declaration of Environmental Restrictions includes provisions
that might reasonably be expected to (i) materially adversely interfere
with the lawful use of the Real Property as it is being used on the date
hereof or may in the future be used for commercial or industrial
purposes, (ii) limit or make more costly in any material respect the
present or future use of the North Plant; (iii) affect any lawful use on
the surface of the Real Property as it is being used on the date hereof
or may in the future be used for commercial or industrial purposes,
and/or (iv) render title unmarketable to the Real Property.
The Seller's Failure to Comply. If, in connection with the Retained
Liabilities relating to environmental matters or Section 11.1, a
Governmental Body claims or asserts that the Seller has failed to comply
with applicable Law, including, but not limited to, Environmental Law,
with respect to the Assets or in the event the Seller is in default of
its obligations under Section 6.9 (in which event, Section 11.4(a) below
shall not apply), then, in such event: (a) the Seller shall immediately
notify the Purchaser; and (b) the Purchaser in its sole discretion shall
have the right, but not the obligation, upon written notice to the
Seller to proceed on the Seller's behalf with such compliance, and (c)
in the event the Purchaser undertakes such compliance, all expenses
(except as otherwise provided in Section 11.5) incurred by the Purchaser
in connection therewith shall be treated as Retained Liabilities for
purposes of Article XIII. If the Purchaser elects to proceed pursuant
to this Section 11.4, it shall so notify the Seller and upon delivery of
said notice the Seller shall have forty-five (45) days to commence and
thereafter diligently pursue such actions as shall be necessary in good
faith to cure, resolve, respond to or otherwise cause the withdrawal of
such claim or assertion of non-compliance, provided that if such alleged
non-compliance exposes the Purchaser in a material respect to penalties
or fines or exposes the Purchaser to other enforcement action or causes
or results in interruption, disruption or other detriment to the
Purchaser's operations, and then, the Purchaser in its sole discretion
shall have the right, but not the obligation, to undertake such
compliance immediately upon the notification in this Section 11.4.
Shared Expenses. The Purchaser shall reimburse the Seller for fifty
percent (50%) of the Seller's reasonable out-of-pocket expenses
("Expenses") incurred by the Seller after the Closing Date in connection
with (a) the investigations and (b) remediations at the North Plant
conducted pursuant to ISRA to obtain approval of a Negative Declaration
affidavit and issuance of the ISRA Clearance, which reimbursement shall
be made within thirty (30) days after receipt from the Seller of
evidence reasonably satisfactory to the Purchaser of the amount of such
Expenses and the fact that the Seller has paid same. The Seller agrees
to only submit receipts to the Purchaser that relate to costs incurred
solely with respect to the North Plant and, in the event the Seller
retains any Person to perform work or services on the North Plant and on
any other sites, including, without limitation, the South Plant or the
Unimproved Parcel, the Seller agrees to coordinate in advance with such
Person so that such Person submits separate cost estimates and proposals
relating solely to the North Plant and submits separate invoices or
bills for their services relating solely to the North Plant. In the
event an invoice is submitted to the Seller for work or services
performed on the North Plant and on any other sites, the Seller agrees
to coordinate with such Person who submitted the invoice the appropriate
breakdown of the costs so that the receipt that is presented to the
Purchaser reflects only those costs and expenses relating solely to work
or services performed on the North Plant. The costs of any
environmental investigation or remediation conducted by or on behalf of
the Purchaser at the North Plant shall be borne one hundred percent
(100%) by the Purchaser.
Connecticut Transfer Act. In the event that consummation of the
transactions contemplated hereby shall require compliance with the
Connecticut Transfer Act and the Seller determines that a Form III is
required to be filed with the Connecticut Department of Environmental
Protection pursuant thereto, with the cooperation of the Purchaser, the
Seller agrees to prepare, duly execute and file such Form III in a form
reasonably acceptable to the Purchaser with said Governmental Body in
conformity with such Law or, in the event a Form III is not required, a
Form I or II in conformity therewith. The Seller further agrees to
allow the Purchaser an opportunity to review such Form III prior to its
execution and filing by the Seller. The Seller, and not the Purchaser,
shall be solely responsible for taking all actions required by the
Connecticut Department of Environmental Protection as a result of, or
relating to the filing of a Form III. The Purchaser shall cooperate
with all such required actions, including, but not limited to, providing
the Seller with reasonable access to the Assets in accordance with
Section 11.2 hereof.
ADDITIONAL POST-CLOSING COVENANTS
Further Assurances. (a) From time to time after the Closing Date, each
of the Seller, the JV Seller, and the Subsidiary shall, unless otherwise
specified herein, at its sole cost and expense, at the reasonable
request of the Purchaser or the JV Buyer, execute and deliver such other
and further instruments of sale, assignment, assumption, transfer and
conveyance and take such other and further action as the Purchaser or
the JV Buyer may reasonably request in order to vest in the Purchaser
and put the Purchaser in possession of the Assets and put the JV Buyer
in possession of the Joint Venture Interest and to transfer to the
Purchaser any Contracts and rights of the Seller, the JV Seller and the
Subsidiary relating to the Assets and the Business and assure to the
Purchaser the benefits thereof. At the reasonable request of the
Seller, each of the Purchaser and the JV Buyer shall, at its sole cost
and expense, execute and deliver such other and further documents and
take such other and further action to give effect to the Purchaser's
assumption of the Assumed Liabilities and the JV Buyer's assumption of
the Joint Venture Obligations.
In the event any of the approvals, consents or waivers referred to in
Section 6.4 hereof have not been obtained by the Seller or the JV Seller
as of the Closing and, notwithstanding such event, the Purchaser
consents to the consummation of the transactions contemplated by this
Agreement, the Seller or the JV Seller, as appropriate, shall, at the
Purchaser's request and expense, use its best efforts to do the
following:
cooperate with the Purchaser in any reasonable and lawful arrangements
designed to provide the benefits of such Interest to the Purchaser as
long as the Purchaser fully cooperates with the Seller or the JV Seller,
as appropriate, in such arrangements and promptly reimburses the Seller
or the JV Seller, as appropriate, for all payments, charges or other
Liabilities made or suffered by the Seller or the JV Seller, as
appropriate, in connection therewith; and
enforce, at the request of the Purchaser and at the expense and for the
account of the Purchaser, any and all rights of the Seller or the JV
Seller, as appropriate, arising from such Interest against such issuer
or grantor thereof or the other party or parties thereto (including the
right to elect to terminate such Interest in accordance with the terms
thereof upon the written advice of the Purchaser).
To the extent that the Seller or the JV Seller, as appropriate, enters
into lawful arrangements designed to provide the benefits of any
Interest as set forth in clause (b)(i) above, such Interest shall be
deemed to have been assigned to the Purchaser for purposes of Section
1.1 hereof (if such Interest relates to the Joint Venture) or Section
1.2 hereof (if such Interest relates to either Division).
Public Announcements. None of the Seller, the JV Seller (nor any of
their Affiliates) nor the Purchaser (nor any of its Affiliates) shall
make any public statement, including, without limitation, any press
release, with respect to this Agreement and the transactions
contemplated hereby, without the prior written consent of the other
parties hereto (which consent may not be unreasonably withheld), except
as may be required by Law or applicable stock exchange rules; provided,
however, that the parties required to make such disclosure shall give
prompt prior notice to the other parties hereto of the nature of the
requirement, the identity of the person or persons to whom disclosure is
required to be made and the information to be so disclosed.
Post-Closing Covenant of the Seller, the JV Seller and the Purchaser.
The Seller, the JV Seller and the Purchaser covenant and agree that,
from and after the Closing Date, the Seller, the JV Seller and the
Purchaser will, and will cause their respective Affiliates to, cooperate
with each other in providing all information necessary (to the extent
available) for the preparation of Tax Returns of the Seller, the JV
Seller, the Purchaser and the JV Buyer, and in defending or prosecuting
any action, suit, proceeding, investigation or audit of the other
relating to (a) the preparation and audit of the Seller's, the Joint
Venture's, the JV Buyer's or the Purchaser's Tax Returns for all periods
up to and including the Closing Date, and (b) any audit of the
Purchaser, the JV Buyer, the Seller and/or the JV Seller with respect to
the sales, transfer and similar taxes imposed by the Laws of any
jurisdiction, relating to the transactions contemplated by this
Agreement. In furtherance hereof, the Purchaser, the Seller and the JV
Seller further covenant and agree to respond, and to cause their
respective Affiliates to respond, to all reasonable inquiries related to
such matters and to provide, to the extent possible, substantiation of
transactions and to make available and furnish appropriate documents and
personnel in connection therewith.
Books and Records; Personnel. For a period of seven years (7) after the
Closing Date (or such longer period as may be required by any
Governmental Body or ongoing Legal Proceeding):
The Purchaser shall not dispose of or destroy any of the currently
existing business records and files of the Divisions or the Joint
Venture without first giving thirty (30) days' prior written notice to
the Seller whereupon the Seller shall have the right, at its option and
expense, upon prior written notice to the Purchaser within such 30-day
period, to take possession of the records and files within sixty (60)
days after the date of the Seller's notice to the Purchaser.
The Purchaser shall allow the Seller and the Seller's Representatives
access to all business records and files of the Divisions and the Joint
Venture (to the extent permitted) which are transferred to the Purchaser
in connection herewith, during regular business hours and upon
reasonable notice at the Purchaser's principal place of business or at
any location where such records are stored, and the Seller shall have
the right, at its own expense, to make copies of any such records and
files; provided, however, that any such access or copying shall be had
or done in such a manner so as not to materially interfere with the
normal conduct of the Purchaser's business or operations.
The Purchaser shall make available to the Seller, upon written request
and at the Seller's expense (i) the Purchaser's personnel to assist the
Seller in locating and obtaining records and files maintained by the
Purchaser and (ii) any Transferred Employee who continues to be employed
by the Purchaser whose assistance or participation is reasonably
required by the Seller in anticipation of, or preparation for, existing
or future litigation (including, without limitation, the defense of any
Asbestos Claim or Pending Asbestos Claim), arbitration, administrative
proceeding or other matters in which the Seller or any of its Affiliates
is involved and which is related to the Business (other than Tax Return
preparation, which shall be governed by Section 12.3 hereof).
Non-competition. (a) The Seller agrees that for a period of five (5)
years following the Closing Date, neither the Seller nor any of its
Affiliates will directly or indirectly manage, operate, control or
participate in the ownership, management, operation or control of, or be
connected in any manner, anywhere in the world, with any business which
manufactures or sells products which are the same or similar to and
competitive with the products manufactured or sold by the Business as of
the Closing Date; provided, however, that the Seller may continue to
manufacture and sell any products or product lines which it currently
manufactures or sells (including as any such products may be improved or
updated) through its Delaval Condenser and Imo Pump divisions and its
Imo AB and Warren Pumps, Inc. subsidiaries and that, with respect to
pump products, the foregoing limitations shall be limited to pumps or
parts used directly or indirectly in the utility generation market. For
these purposes, ownership of securities of a company whose securities
are registered under the Securities Exchange Act of 1934, as amended,
not in excess of 10% of any class of such securities shall not be
considered to be competition with the Business.
(b)It is the desire and intent of the parties to this Agreement that the
provisions of this Section 12.5 shall be enforced to the fullest extent
permissible under the Laws and public policies applied in each
jurisdiction in which enforcement is sought. If any particular
provision or portion of this Section 12.5 shall be adjudicated to be
invalid or unenforceable, this Section 12.5 shall be deemed amended to
delete therefrom such provision or portion adjudicated to be invalid or
unenforceable, such amendment to apply only with respect to the
operation of such provision in the particular jurisdiction with respect
to which such adjudication is made.
(c)The parties acknowledge that damages and remedies at law for any
breach of this Section 12.5 will be inadequate and that the Purchaser
and the JV Buyer shall be entitled to specific performance and other
equitable remedies (including any injunction) and such other relief as a
court may deem appropriate in addition to any other remedies the
Purchaser or the JV Buyer may have.
Review of Major Backlog Contracts. As soon as practicable after the
Closing Date, the Seller shall deliver to the Purchaser the Seller's
best and good faith estimate of the Base Costs in respect of each Major
Backlog Contract and following such delivery the Purchaser and the
Seller shall meet to review each Major Backlog Contract and the Base
Costs relating thereto as set forth in said estimate. The Seller and
the Purchaser will review such estimate and agree upon the Base Costs.
INDEMNIFICATION AND RELATED MATTERS
Indemnification by the Seller. Subject to the provisions of this
Article XIII, the Seller agrees to indemnify and hold the Purchaser
harmless, from and against all Damages resulting from or arising out of:
the failure of any of the representations and warranties contained in
Article IV of this Agreement to have been true in all material respects
when made and as of the Closing Date, it being understood that to the
extent that any of such representations and warranties were made as of a
specified date the same shall apply only to the failure of such
representations and warranties to be true as of such specified date;
the failure of the Seller or the JV Seller to comply in all material
respects with any of the covenants contained in this Agreement which are
required to be performed by the Seller or the JV Seller; and
the Retained Liabilities.
Indemnification by the Purchaser. Subject to the provisions of this
Article XIII, the Purchaser agrees to indemnify and hold the Seller
harmless from and against all Damages resulting from or arising out of:
the failure of any of the representations and warranties contained in
Article V of this Agreement to have been true in all material respects
when made and as of the Closing Date, it being understood that to the
extent that any such representations and warranties were made as of a
specified date the same shall apply only to the failure of such
representations and warranties to be true as of such specified date;
the failure of the Purchaser to comply in all material respects with any
of the covenants contained in this Agreement which are required to be
performed by the Purchaser;
the Assumed Liabilities, subject to Section 1.4(g); and
the Post-Closing Liabilities.
Determination of Damages and Related Matters. In calculating any amount
payable to the Purchaser pursuant to Section 13.1 or payable to the
Seller pursuant to Section 13.2, appropriate adjustment shall be made
for (i) any tax benefit allowable as a result of the facts giving rise
to the claim for indemnification, and (ii) any insurance recoveries, and
no amount shall be included for the Purchaser's or the Seller's, as the
case may be, special, consequential or punitive damages. The Seller and
the Purchaser agree that, except as specifically set forth in this
Agreement, neither party (including its representatives) has made or
shall have liability for any representation or warranty, express or
implied, in connection with the transactions contemplated by this
Agreement, including in the case of the Seller and its representatives
any representation or warranty, express or implied, as to the accuracy
or completeness of any information regarding the Divisions or the Joint
Venture.
Limitation on Indemnification Liabilities. (a) Indemnifications in
favor of the Purchaser contained in 13.1(a) hereof (i) shall not be
effective until the aggregate dollar amount of all Damages indemnified
against under such Section exceeds $1,000,000 (the "Threshold Amount"),
and then only to the extent such aggregate amount exceeds the Threshold
Amount and (ii) shall terminate once the dollar amount of all Damages
(including reasonable attorneys' fees) indemnified against under such
Section aggregates 10% of the Purchase Price.
Indemnifications in favor of the Seller contained in Section 13.2(a)
hereof (i) shall not be effective until the aggregate dollar amount of
all Damages indemnified against under such Section exceeds the Threshold
Amount, and then only to the extent such aggregate amount exceeds the
Threshold Amount and (ii) shall terminate once the dollar amount of all
Damages (including reasonable attorneys' fees) indemnified against under
such Section aggregates 10% of the Purchase Price.
Survival of Representations, Warranties and Covenants. The parties
hereto agree that the representations and warranties made in this
Agreement and any indemnification with respect thereto, shall survive
for eighteen months after the Closing Date; provided, however, that the
representations and warranties made in Sections 4.1, 4.2, 4.6, 4.12, 5.1
and 5.2 hereof shall survive until expiration of the applicable statutes
of limitation, and the representations and warranties made in Section
4.19 shall survive until the earlier of the fifth anniversary of the
Closing Date or the second anniversary of the date on which the
Purchaser becomes responsible for the On-Site North Plant Environmental
Liabilities. The foregoing time limitation shall be construed to apply
only to the indemnity obligations of the Seller under Section 13.1(a)
and only to the indemnity obligations of the Purchaser under Section
13.2(a) and not to any other provisions of Section 13.1 or 13.2 hereof.
For the avoidance of doubt, the parties confirm their agreement that
there shall be no time or other limits on their indemnification
obligations in respect of Assumed Liabilities and Retained Liabilities.
Notice of Indemnification. In the event any Legal Proceeding shall be
threatened or instituted or any claim or demand shall be asserted by any
person in respect of which payment may be sought by one party hereto
from the other party under the provisions of this Article XIII or for
breach of any of the representations and warranties set forth herein,
the party seeking indemnification (the "Indemnitee") shall promptly
cause written notice of the assertion of any such claim of which it has
knowledge which is covered by this indemnity to be forwarded to the
other party (the "Indemnitor"), which notice must be received by the
Indemnitor prior to the expiration of eighteen months after the Closing
Date (except for indemnification pertaining to covenants and agreements
referred to in Section 13.5 hereof, as to which such eighteen-month
limitation shall not be applicable); provided, however, that the failure
to give such notice shall not affect the indemnification provided
hereunder except to the extent the Indemnitor has actually been
prejudiced as a result of such failure; provided further, however, that
such notice must be received by the Indemnitor prior to the expiration
of eighteen months after the Closing Date (except for indemnification
pertaining to the representations and warranties set forth in Sections
4.1, 4.2, 4.6, 4.12, 4.19, 5.1 and 5.2 hereof, any matters covered by
Section 13.1(b) or (c) hereof or Section 13.2(b), (c) or (d) hereof, as
to which such eighteen month limitation shall not be applicable). Any
notice of a claim by reason of any of the representations, warranties or
covenants contained in this Agreement shall state specifically the
representation, warranty or covenant with respect to which the claim is
made, the facts giving rise to an alleged basis for the claim, and the
amount of the liability asserted against the Indemnitor by reason of the
claim.
Indemnification Procedure for Third-Party Claims. Except as otherwise
provided herein, in the event of the initiation of any Legal Proceeding
against an Indemnitee by a third party, the Indemnitor shall have the
absolute right after the receipt of notice, at its option and at its own
expense, to be represented by counsel of its choice, and to defend
against, negotiate, settle or otherwise deal with any proceeding, claim,
or demand which relates to any loss, liability or damage indemnified
against hereunder; provided, however, (i) that the Indemnitor exercises
such option in writing within thirty (30) days of receipt of notice; and
(ii) that the Indemnitee may participate in any such proceeding with
counsel of its choice and at its expense, provided, however, that no
such expenses of counsel shall be deemed to be Defense Costs. The
parties hereto agree to cooperate fully with each other in connection
with the defense, negotiation or settlement of any such legal
proceeding, claim or demand. To the extent the Indemnitor elects not to
defend such proceeding, claim or demand, and the Indemnitee defends
against or otherwise deals with any such proceeding, claim or demand,
the Indemnitee may retain counsel (reasonably satisfactory to the
Indemnitor), at the expense of the Indemnitor, the Indemnitor shall
nevertheless indemnify the Indemnitee for the full amount of the Damages
relating to such proceeding, claim or demand and the Indemnitee shall
control the defense and settlement of such proceeding; provided, that
the Indemnitee shall give the Indemnitor twenty (20) days written notice
prior to entering into any such settlement and shall not settle any such
claim without the consent of the Indemnitor, which consent shall not be
unreasonably withheld. If the Indemnitee shall settle any such
proceeding without the consent of the Indemnitor, the Indemnitee shall
thereafter have no claim against the Indemnitor under this Article XIII
with respect to any loss, liability, claim, obligation, damage and
expense occasioned by such settlement.
Exclusive Remedy. Except as specifically provided in Section 2.4(e),
Article VIII and Section 14.2 hereof, the exclusive remedy available to
a party hereto in respect of the matters covered by Section 13.1 or
Section 13.2 hereof shall be to proceed in the manner and subject to the
limitations contained in this Article XIII.
Limitation of Obligations. Notwithstanding anything to the contrary
contained herein, to the extent there is a breach of a representation or
warranty or breach or non-fulfillment of any covenant by the Seller or
the JV Seller which gives rise to Damages which are indemnifiable and
such Damages are sustained by the Joint Venture or effect partners'
interests in the Joint Venture, the Seller's indemnification obligation
to the Purchaser hereunder shall be limited to fifty percent (50%) of
the amount of such Damages.
Purchase Price Adjustment. All amounts paid pursuant to this Article
XIII shall be treated by the parties as an adjustment to the Purchase
Price.
Obligations of the JV Seller. Notwithstanding anything to the contrary
contained in this Agreement, any provision contained herein requiring
the performance of the JV Seller shall be construed as the direct
obligation of the Seller to cause such obligation to be performed and
not as an obligation of any kind of the JV Seller.
TERMINATION
Termination. This Agreement may be terminated:
by the written agreement of the Purchaser and the Sellers;
by either the Purchaser or the Seller if there shall be in effect a non-
appealable order of a court of competent jurisdiction permanently
prohibiting the consummation of the transactions contemplated hereby;
by either the Purchaser or the Seller if the Closing shall not have
occurred on or before April 30, 1995 for any reason other than a breach
by the party requesting termination of its obligations, representations
or warranties under this Agreement; or
by the Seller by written notice delivered not later than December 1,
1994 provided the Seller may deliver such notice only if as a result of
the Dames & Moore Reports and the E-K Reports the Seller reasonably
concludes the environmental costs included in Retained Liabilities will
exceed $4,000,000.
Liabilities After Termination. Upon any termination of this Agreement
pursuant to Section 14.1 above, no party hereto shall thereafter have
any further liability or obligation hereunder other than the Purchaser's
obligations pursuant to Section 7.2 hereof, but no such termination
shall relieve either party hereto of any liability to the other party
hereto for any breach of this Agreement prior to the date of such
termination.
MISCELLANEOUS
Certain Definitions. As used in this Agreement, the following terms
have the following meanings (such meanings to be equally applicable to
both the singular and plural forms of the terms defined, except with
respect to the terms the "Seller" and "Sellers"):
"Access and Support Agreement" has the meaning set forth in Section
3.3(r) hereof.
"Accounts Receivable" has the meaning set forth in Section 1.2(c)
hereof.
"Active Division Employee" means a Division Employee who is actively
employed in either Division on the day immediately prior to the Closing
Date, excluding any such employee then on disability, sick leave, layoff
or leave of absence from such Division.
"Actual Direct Costs" means with respect to each Major Backlog Contract
an amount equal to the sum of the direct material and other direct costs
(including, but not limited to, penalties, scrap and rework costs,
concessions and warranty costs) and 200% of the direct labor costs
actually incurred by the Purchaser or the Joint Venture, as the case may
be, in respect of such Contract between the Closing Date and the date of
the expiration of the warranty period for the goods to be delivered
under such Contract in order to deliver the goods and services required
to be delivered pursuant to such Contract as such costs are determined
in the ordinary course of business consistent with the current practices
of the Seller or the Joint Venture, as the case may be.
"Actual Production Hours" means the sum of all shop and office hours
charged by employees of the Turbine Division for machining and non-
machining work included in manufacturing burden hours for the period
January 1, 1995 through December 31, 1995, except for hours charged in
respect of work performed on the Malaysian GPP-10 project.
"Affiliate" has the meaning specified in Rule 12b-2 of the General
Rules and Regulations promulgated under the Securities Exchange Act of
1934, as amended, and the rules and regulations of the United States
Securities and Exchange Commission promulgated thereunder.
"Alfa-Laval License" means the license granted pursuant to that certain
license agreement dated September 4, 1987 between the Seller and Alfa-
Laval.
"Arbiter" has the meaning set forth in Section 2.2(d) hereof.
"Agreement" has the meaning set forth in the introductory paragraph
hereof.
"Asbestos Claim" has the meaning set forth in Section 2.4(a) hereof.
"Asset Sale" has the meaning set forth in the recitals hereof.
"Assets" has the meaning set forth in Section 1.2 hereof.
"Assumed Liabilities" has the meaning set forth in Section 1.4(a)
hereof.
"Backlog Contracts" has the meaning set forth in Section 4.10(c) hereof.
"Base Costs" means with respect to each Major Backlog Contract the
Seller's best and good faith estimate, made in the ordinary course of
business consistent with the current practices of the Divisions or the
Joint Venture, as the case may be, and as determined pursuant to Section
12.6, of the amount of the direct material and other direct costs
(including, but not limited to, penalties, scrap and rework costs,
concessions and warranty costs) and 200% of the direct labor costs to be
incurred by the Purchaser or the Joint Venture, as the case may be, in
respect of such Contract between the Closing Date and the date of the
customer's acceptance of the goods to be delivered under such Contract
in order to deliver the goods and services required to be delivered
pursuant to such Contract.
"Balance Sheets of the Divisions" has the meaning set forth in Section
4.8 hereof.
"Benefit Arrangement" has the meaning set forth in Section 4.13(b)
hereof.
"Bleichroeder" has the meaning set forth in Section 5.7 hereof.
"Brandon Licenses" (a) Exclusive License with Royalty of October 9, 1987
between R.L. Brandon ("Brandon") and Quabbin Industries, Inc. together
with Brandon's consent dated July 2, 1990 for the assignment thereof to
the Seller, (b) Settlement Agreement of January 13, 1994 among Brandon,
the Seller and certain other parties, (c) Exclusive License with Royalty
of January 13, 1994 between Brandon and the Seller, (d) Non-Exclusive
License with Royalty of January 13, 1994 between Brandon and the Seller,
and (e) China License Agreement of January 13, 1994 between Brandon and
the Seller.
"Business" has the meaning set forth in the recitals hereof.
"Business Day" means any weekday on which nationally chartered banks
in the City of New York are open for business.
"Claims Incurred" means a claim for a benefit provided under a Welfare
Plan, and such claim shall be deemed to be incurred under such Welfare
Plan as follows:
for a plan providing health benefits, on the date services are rendered;
provided however, that if the person receiving such services is totally
disabled or hospitalized, the incurred claim shall include services
rendered during the continuous period of disability or hospitalization,
for a plan providing disability benefits, on the date of the onset of
the disability and continuing until the completion of the disability or
such earlier date as the plan may provide; and
for a plan providing death benefits, on the date of death.
"Closing" means the consummation of the transactions contemplated by
this Agreement.
"Closing Balance Sheet" has the meaning set forth in Section 2.2(b)
hereof.
"Closing Date" has the meaning set forth in Section 3.1 hereof.
"Closing Net Book Value" has the meaning set forth in Section 2.2(a)
hereof.
"COBRA Coverage" has the meaning set forth in Section 8.1(c) hereof.
"Code" means the Internal Revenue Code of 1986, as amended.
"Confidentiality Agreement" has the meaning set forth in Section 6.2
hereof.
"Connecticut Transfer Act" means Section 22a-134 et seq. of the
Connecticut General Statutes.
"Contract" means, with respect to the Assets, the Business, the
Divisions or the Joint Venture, any contract, agreement, indenture,
note, bond, loan, instrument, lease, conditional sale contract,
mortgage, license, franchise, insurance policy, commitment or other
arrangement or agreement, whether written or oral, to which the Seller,
the Joint Venture or either Division is a party, and, in respect of
products or services of the Business, any firm written proposal or
quotation delivered to a customer of the Business even if it has not yet
been accepted by the customer.
"Covered JV Liabilities" has the meaning set forth in Section 1.4(f)
hereof.
"Damages" means all claims, suits, actions, judgements, losses,
injuries, damages, fines, penalties, costs, expenses and liabilities
(including reasonable attorneys' fees, consultants' fees, professionals
fees' and expenses incident to the foregoing), including without
limitation, environmental damages, response costs (including without
limitation, response costs under 42 U.S.C. 9601 et seq. or any
comparable state, local or international Law), remediation expenses,
disbursements and court costs whether incurred by a party to this
Agreement (or one of its Affiliates) or a third party claiming against
the Purchaser (including reasonable attorneys', consultants' and other
professionals' fees and expenses incident to the foregoing).
"Dames & Moore Reports" has the meaning set forth in Section 6.9 hereof.
"Declaration of Environmental Restrictions" means a statement of
conditions imposed by the New Jersey Department of Environmental
Protection pursuant to Section 36 of P.L. 1993, c.139.
"Defense Costs" has the meaning set forth in Section 2.4(a) hereof.
"Deferred Purchase Price" has the meaning set forth in Section 2.1
hereof.
"Dispute Notice" has the meaning set forth in Section 2.2(d) hereof.
"Division Employees" means all persons employed in the Divisions on the
day immediately prior to the Closing Date, including any persons on
disability, sick leave, layoff or leave of absence from either Division.
"Divisions" has the meaning set forth in the recitals hereof.
"Draft Documents" has the meaning set forth in Section 11.3 hereof.
"E-K Report" has the meaning set forth in Section 6.9 hereof.
"E-K Summaries" has the meaning set forth in Section 6.9 hereof.
"18-month Anniversary Date" has the meaning set forth in Section 8.3(b)
hereof.
"Employee Benefit Plan" has the meaning set forth in Section 4.13(b)
hereof.
"Employees" means, collectively, the Joint Venture Employees and the
Division Employees.
"Environment" means soil, surface water, ground water, land, stream or
other sediments, air, surface or subsurface strata, run-off, run-on or
other environmental medium.
"Environmental Laws" means all international, federal, state and local
Laws, rules, regulations, ordinances, binding guidance, policy, orders,
judgments and consent decrees relating to or governing the protection of
health, safety or the Environment, including, without limitation, the
Federal Insecticide, Fungicide and Rodenticide Act (7 U.S.C. 136 et
seq.), the Federal Water Pollution Control Act (33 U.S.C. 1251 et seq.),
the Resource Conservation and Recovery Act (42 U.S.C. 6901 et seq.), the
Comprehensive Environmental Response Compensation and Liability Act
("CERCLA") (42 U.S.C. 9601 et seq.), the Clean Air Act (42 U.S.C. 7401
et seq.), the Toxic Substances Control Act (15 U.S.C. 2601 et seq.), the
Occupational Safety and Health Act (29 U.S.C. 651 et seq.), the
Hazardous Materials Transportation Act (49 U.S.C. 1801 et seq.), and any
similar state or local Laws, including but not limited to, the
Connecticut Transfer Act (Section 22a-134 et seq. of the Connecticut
General Statutes) and the New Jersey Industrial Site Recovery Act
(N.J.S.A. 13:1K-6 et seq.), and all rules and regulations promulgated
according thereto, all as amended from time to time.
"Environmental Liabilities" means any Damages, debts or obligations
related to, arising from or connected with Environmental Laws or
Hazardous Materials, including without limitation, response costs under
42 U.S.C. 9601 et seq. or any state Law, or remediation expenses.
"Equipment" has the meaning set forth in Section 1.2(a) hereof.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Escrow Agreement" has the meaning set forth in Section 2.1 hereof.
"Excess Assumed Liabilities" has the meaning set forth in Section 1.4(g)
hereof.
"Excess Divisional Assumed Liabilities" has the meaning set forth in
Section 1.4(e) hereof.
"Excess JV Assumed Liabilities" has the meaning set forth in Section
1.4(f) hereof.
"Excluded Assets" has the meaning set forth in Section 1.3 hereof.
"Expenses" has the meaning set forth in Section 11.5 hereof.
"Exxon-Florio Amendment" means Section 721 of Title VII of the Defense
Production Act of 1950, 50 U.S.C. App. 2170.
"Final Balance Sheet" has the meaning set forth in Section 2.2(f)
hereof.
"Financial Statements" has the meaning set forth in Section 4.8 hereof.
"Financial Statements of the Divisions" has the meaning set forth in
Section 4.8 hereof.
"First Boston" has the meaning set forth in Section 4.23 hereof.
"GAAP" means generally accepted accounting principles in the United
States.
"Governmental Body" means any government or governmental or regulatory
body, authority, department, commission, board, bureau, agency, court or
instrumentality thereof, or political subdivision thereof, whether
federal, state, local or foreign, or any agency or instrumentality
thereof, or any court or arbitrator (public or private).
"Governmental Contract" shall mean any Contract with a Governmental
Body, whether foreign or domestic, that relates to the Business and by
which the Seller, the JV Seller, the Divisions or the Joint Venture is
bound, including, without limitation, a subcontract.
"Hazardous Materials" means any chemical, materials, gas, pollutant,
contaminant, asbestos, dangerous substance, petroleum, crude oil or any
fraction thereof, radon, toxic substance, solid or hazardous waste,
medical waste, hazardous material or hazardous substance as defined or
regulated by any international, Federal, state or local Law relating to
or governing protection of health, safety or the Environment.
"HSR Act" has the meaning set forth in Section 4.7 hereof.
"Inactive Division Employee" means a Division Employee who is employed
in either Division on the day immediately prior to the Closing Date but
who is then on disability, sick leave, layoff or leave of absence from
such Division.
"Indemnitee" has the meaning set forth in Section 13.6 hereof.
"Indemnitor" has the meaning set forth in Section 13.6 hereof.
"Initial Period" means the period of time from the date hereof through
the first to occur of (i) twenty-four (24) months from the Closing Date
or (ii) twelve (12) months from the date Seller receives a detailed
written response from NJDEP to its Remedial Action Plan which is to be
filed with NJDEP on or before November 8, 1994, but in any event not
sooner than the first anniversary of the Closing Date.
"Intangible Assets" has the meaning set forth in Section 1.2(e) hereof.
"Intellectual Property" means all United States and foreign (a) patents
and patent applications (including reissues, divisions, continuations-
in-part and extensions thereof), invention disclosures, inventions, and
improvements thereto, (b) trademarks, trade names, service marks, trade
dress and logos and registrations and applications for registration
thereof, (c) copyrights and registrations thereof, (d) research,
developments, processes, trade secrets, know-how, formulae,
compositions, designs, parts, routings, inventions, and manufacturing,
engineering and other technical information, (e) computer software, data
and documentation (in whatever form or medium including electronic
media), (f) mask work and other semiconductor chip rights and
registrations thereof and (g) licenses of any of the foregoing.
"Interest" has the meaning set forth in Section 6.4 hereof.
"Inventory" has the meaning set forth in Section 1.2(b) hereof.
"ISRA" (Industrial Site Recovery Act) means the Environmental Cleanup
Responsibility Act ("ECRA"), N.J.S.A. 13:1K-6 et seq., and any and all
amendments thereto, and all regulations, forms, policies and guidelines
promulgated pursuant thereto or applicable or enforced in connection
therewith.
"ISRA Clearance" means a No Further Action Letter, Negative Declaration
approval letter or other document issued by NJDEP pursuant to ISRA
establishing that no further work is required at the North Plant.
"Joint Venture" has the meaning set forth in the recitals hereof.
"Joint Venture Assets" means all of the assets, properties, rights,
contracts and claims, employed exclusively in the Joint Venture,
wherever located, whether tangible or intangible, as the same shall
exist as of the Closing.
"Joint Venture Balance Sheets" has the meaning set forth in Section 4.8
hereof.
"Joint Venture Documents" means (a) that certain Second Restated
Agreement, dated March 26, 1986, by and between the JV Seller and Stork
as amended by that certain Agreement of Amendment of January 12, 1987,
(b) that certain Compressor, Turbine and Pump Design, Technological
Know-How and Industrial Rights License, dated as of September 1, 1971 by
and between Stork Pompen N.V. and Delaval-Stork V.O.F. and (c) that
certain Compressor, Turbine and Pump Design, Technological Know-How and
Industrial Rights License, dated as of September 1, 1971 by and between
Delaval Turbine International Inc. and Delaval-Stork V.O.F., as each of
the foregoing may be amended by the mutual agreement of the JV Seller
and the Purchaser between the date hereof and the Closing Date as
necessary to obtain the Stork Consent pursuant to the terms hereof and
to obtain the authorization of the Commission of the European
Communities and, if necessary, the national cartel authorities of
Germany and the Netherlands including amendments which convert the Joint
Venture from partnership to corporate form.
"Joint Venture Employees" means all persons employed in the Joint
Venture on the date immediately prior to the Closing Date, including any
persons on disability, sick leave, layoff or leave of absence from the
Joint Venture.
"Joint Venture Financial Statements" has the meaning set forth in
Section 4.8 hereof.
"Joint Venture Interest" has the meaning set forth in the recitals
hereof.
"Joint Venture Interest Assignment and Assumption Agreement" has the
meaning set forth in Section 3.4(a) hereof.
"Joint Venture Leased Real Property" means collectively, any of the
Joint Venture's right, title and interest in the real property leased by
the Joint Venture and used exclusively by the Joint Venture as set forth
on Schedule 15.1(a) hereto.
"Joint Venture Leased Real Property Assignments" has the meaning set
forth in Section 3.4(c) hereof.
"Joint Venture Obligations" has the meaning set forth in Section
1.4(a)(i) hereof.
"JV Buyer" has the meaning set forth in the introductory paragraph
hereof.
"JV Seller" has the meaning set forth in the introductory paragraph
hereof.
"JV Seller Documents" has the meaning set forth in Section 4.2(a)
hereof.
"Law" means any federal, state, local or foreign law (including common
law), statute, code, ordinance, rule, binding guidance or policy,
regulation, orders or consent decrees or other requirement or guideline.
"Leased Real Property" means all the Real Property leased by the Seller
and used exclusively in the Divisions as specifically as set forth in
Schedule 1.2(d)(ii) hereto.
"Legal Proceeding" means any judicial, administrative or arbitral
action, suit, proceeding (public or private), claim or governmental
proceeding, investigation, inquiry, complaint, order, proceeding or
claim by any Governmental Body or private party, including, without
limitation, a condemnation, eminent domain or similar proceeding.
"Liabilities" means indebtedness, obligations or Damages.
"Lien" means any lien, pledge, mortgage, deed of trust, security
interest, claim, lease, charge, option, right of first refusal,
easement, or other real estate declaration, covenant, condition,
restriction or servitude, transfer restriction under any shareholder or
similar agreement, encumbrance or any other restriction or limitation
whatsoever.
"Major Backlog Contracts" means, collectively, the Major Divisional
Backlog Contracts and the Major JV Backlog Contracts.
"Major Divisional Backlog Contracts" means each Contract of the Turbine
Division that requires the delivery of a complete turbine or compressor
unit after the Closing Date.
"Major JV Backlog Contracts" means each Contract of the Joint Venture
that requires the delivery of a complete turbine or compressor unit
after the Closing Date.
"Material Adverse Effect" means any effect that results in a material
adverse change in the Business, the Divisions, the Joint Venture, the
Assets, the Assumed Liabilities, or in the financial condition or
results of operations or prospects of the Business, the Divisions or the
Joint Venture, taken as a whole.
"Material Contracts" has the meaning set forth in Section 4.10 hereof.
"No Further Action Letter" means the No Further Action Letter issued by
NJDEP approving a Negative Declaration affidavit concerning the North
Plant submitted by the Seller pursuant to ISRA.
"Non-Competition Agreement" has the meaning set forth in Section 2.1
hereof.
"North Plant" means the land, buildings and improvements located north
of Nottingham Way, Trenton, New Jersey exclusive of the Unimproved
Parcel (hereinafter defined), and if the Subdivision is approved
pursuant to the Major Subdivision Plan described in Exhibit E-1 hereto,
shall mean the land more specifically described in Schedule 15.1(b)(i)
hereto or, if the Subdivision is approved pursuant to the Alternate
Major Subdivision Plan described in Exhibit E-2 hereto, shall mean the
land more specifically described in Schedule 15.1(b)(ii) hereto.
"NJDEP" means the New Jersey Department of Environmental Protection and
Energy.
"On-Site North Plant Environmental Liabilities" means all Environmental
Liabilities related to or arising from environmental conditions at, on,
under or about the North Plant.
"Order" means any order, injunction, judgment, decree, ruling, writ,
assessment or arbitration award.
"Owned Real Property" means all the Real Property owned in fee or
otherwise by the Seller and used exclusively by the Divisions,
specifically as set forth in Schedule 1.2(d)(i) hereto.
"Pending Asbestos Claims" has the meaning set forth in Section 2.4(a)
hereof.
"Pending Asbestos Claim Reserve Amount" means with respect to each
Pending Asbestos Claim an amount equal to the sum of (a) the total
amounts paid by the Seller and its Affiliates and their insurers, during
the three (3) years prior to the date of determination, to settle any
claim by, or satisfy any judgment or award in favor of, any third party
arising out of or resulting from Asbestos Claims divided by the total
amount of Asbestos Claims in respect of which the Seller or its
Affiliates or their insurers have made any such payments and (b) $6,000.
"Permit" means any written approval, authorization, registration,
consent, franchise, license, permit, variance, waiver or certificate by
any Governmental Body.
"Permitted Exceptions" means (i) prior to the Closing Date, Liens in
favor of Citibank, N.A., as collateral agent (or any new or substitute
collateral agent), relating to certain indebtedness of the Seller; (ii)
statutory Liens for current taxes, assessments or other governmental
charges not yet delinquent or the amount or validity of which is being
contested in good faith by appropriate proceedings; (iii) mechanics',
carriers', workers', repairers, and similar Liens arising or incurred in
the ordinary course of business; (iv) zoning, entitlement and other land
use and environmental regulations by Governmental Bodies, including any
Declaration of Environmental Restrictions; (v) Liens arising out of a
failure to comply with the provisions of any bulk transfer Laws of any
jurisdiction; (vi) such exceptions noted in the title policies described
on Schedule 15.1(c) hereto, true and correct copies of which have been
furnished to the Purchaser; (vii) such other recorded easements,
covenants, declaration rights of way and other minor imperfections of
title which are of record and that do not materially restrict, inhibit
or limit the present use of any such Real Property; and (viii) such
state of facts as would be shown on an accurate survey of each parcel of
Real Property, provided that such state of facts do not materially
restrict, inhibit or limit the use of any such Real Property.
"Person" means any individual, corporation, partnership, firm, joint
venture, association, joint-stock company, trust, unincorporated
organization or Governmental Body.
"Post-Closing Liabilities" has the meaning set forth in Section 1.4(h)
hereof.
"Purchase Price" has the meaning set forth in Section 2.1 hereof.
"Purchaser" has the meaning set forth in the introductory paragraph
hereof.
"Purchaser Documents" has the meaning set forth in Section 5.2 hereof.
"Purchaser Pension Plan" has the meaning set forth in Section 8.3(a)
hereof.
"Purchaser Representatives" has the meaning set forth in Section 6.2
hereof.
"Purchaser Union Pension Plan" has the meaning set forth in Section
8.6(a) hereof.
"Purchaser's Accountants" has the meaning set forth in Section 2.2(c)
hereof.
"Real Property" has the meaning set forth in Section 1.2(d) hereof.
"Reimbursement Basis" has the meaning set forth in Section 1.4(d)
hereof.
"Remedial Action Workplan" means a plan for a remedial action to be
undertaken at an industrial establishment pursuant to ISRA (N.J.S.A.
13:1-K8).
"Retained Liabilities" has the meaning set forth in Section 1.4(d)
hereof.
"Retirees" means former Division Employees and their spouses and
beneficiaries with a right to receive post-retirement welfare benefits
from the Seller.
"Return Date" means the date the Inactive Division Employee ceases to be
on disability, sick leave, layoff or leave of absence, as applicable,
from the Division in which he or she is employed.
"Salaried Pension Plan" has the meaning set forth in Section 8.3(a)
hereof.
"Seller" and "Sellers" have the meanings set forth in the introductory
paragraph hereof.
"Seller Documents" has the meaning set forth in Section 4.2(a) hereof.
"Seller Representatives" has the meaning set forth in Section 11.2
hereof.
"Seller Union Pension Plan" has the meaning set forth in Section 8.6(a)
hereof.
"Seller's Accountants" has the meaning set forth in Section 2.2(b)
hereof.
"Severance Agreements" has the meaning set forth in Section 8.8 hereof.
"South Plant" means the land, buildings and improvements located south
of Nottingham Way, Trenton, New Jersey, as more specifically described
in Schedule 15.1(d) hereto.
"South Plant Assets" means the Unimproved Parcel, the South Plant and
such items of Equipment and Inventory relating to the Business which are
located at the South Plant on the Closing Date and which the Purchaser
has elected, pursuant to the Transition Agreement, not to have relocated
to the North Plant.
"Spill" means any intentional or unintentional action or omission
resulting in the leaking, releasing, spilling, leaching, pumping,
pouring, emitting, emptying or dumping of a Hazardous Material onto or
into the Environment.
"Stork" means Stork Roterende Werktuigen B.V.
"Stork Consent" has the meaning set forth in Section 3.4(b) hereof.
"Subdivision" has the meaning set forth in Section 6.7 hereof.
"Subleases" has the meaning set forth in Section 3.3(u) hereof.
"Subsidiary" has the meaning set forth in the recitals hereof.
"Supply Requirement Contracts" has the meaning set forth in Section
4.10(d) hereof.
"Taxes" means any tax, impost, assessment, levy, or other governmental
charge of any kind whatsoever, including, but not limited to, any
federal, state, local or foreign income, gross receipts, license,
payroll, employment, excise, severance, stamp, occupation, premium,
windfall profits, environmental (including taxes under Code Sec. 59A),
customs duties, capital stock, franchise, profits, withholding, social
security (or similar), unemployment, disability, real property, personal
property, sales, use, transfer, registration, value added, alternative
or add-on minimum, estimated or other tax (including any interest,
penalty, or addition thereto), whether disputed or not.
"Tax Return" means any return, declaration, report, claim for refund, or
information return or statement relating to Taxes, including any
schedule or attachment thereto, and including any amendment thereof.
"36-month Anniversary Date" has the meaning set forth in Section 8.3(b)
hereof.
"Threshold Amount" has the meaning set forth in Section 13.4(a) hereof.
"Title Company" has the meaning set forth in Section 9.8 hereof.
"Title Policies" has the meaning set forth in Section 9.8 hereof.
"Transferred Employees" means all Division Employees who accept offers
of employment from the Purchaser on or after the Closing Date.
"Transition Agreement" has the meaning set forth in Section 1.3(m)
hereof.
"Turbine Division" has the meaning set forth in the recitals hereof.
"Turbine Trenton Property" means all Real Property and other Assets
comprising the North Plant, the South Plant, and the Unimproved Parcel
in total, located at 853 Nottingham Way, Trenton, New Jersey.
"TurboCare Division" has the meaning set forth in the recitals hereof.
"TurboCare Facilities" has the meaning set forth in Section 6.9 hereof.
"Unimproved Parcel" means the vacant land off Nottingham Way, Trenton,
New Jersey, located north of the North Plant, between the fence and the
property line formed at or near the railroad, and if the Subdivision is
approved pursuant to the Major Subdivision Plan described in Exhibit E-1
hereto, shall mean the land more specifically described in Schedule
15.1(e)(i) hereto or, if the Subdivision is approved pursuant to the
Alternate Major Subdivision Plan described in Exhibit E-2 hereto, shall
mean the land more specifically described in Schedule 15.1(e)(ii)
hereto.
"Welfare Plan" has the meaning set forth in Section 8.4 hereof.
Prorations. The Purchaser, as of the Closing Date, shall pay such
amounts as may be required to replace all deposits held with the
suppliers of utilities to the Divisions, and to assist the Seller as may
be reasonably required in obtaining a return of such deposits put in
place by the Seller as of the Closing Date.
All ad valorem personal and real property taxes and special and general
assessments relating to the Assets and all prepaid expenses included in
the Assets shall be prorated between the Seller and the Purchaser as of
the Closing Date, and all such taxes applicable to periods of time prior
to the Closing Date shall be the sole obligation, responsibility and
expense of the Seller, and shall be Retained Liabilities to be paid by
the Seller. All such assessments and taxes applicable to periods
following the Closing Date shall be Assumed Liabilities.
Entire Agreement. This Agreement (with its Schedules and Exhibits)
contains, and is intended as, a complete statement of all of the terms
and the arrangements between the parties hereto with respect to the
matters provided for herein, and supersedes any and all previous
agreements and understandings between the parties hereto with respect to
those matters.
Governing Law. This Agreement shall be governed by and construed in
accordance with the Law of the State of New York without regard to the
principles of conflicts of laws.
Transfer Taxes. Notwithstanding any other provision of this Agreement
to the contrary, each of the Seller and the Purchaser shall bear fifty
percent (50%) of the costs of (a) all transfer and documentary taxes and
fees imposed with respect to instruments of conveyance in the
transaction contemplated hereby and (b) all sales, use, value added,
gains, excise and other transfer or similar taxes on the transfer of the
Assets and the Joint Venture Interest contemplated hereunder. The
Purchaser or the Seller, as the case may be, shall execute and deliver
to the other at the Closing any certificates or other documents as the
other may reasonably request to comply with any reporting, notification,
or filing requirements relating to, or to perfect any exemption from,
any transfer, documentary, sales, gains, excise or use tax, or other
similar taxes. For the purposes of the first sentence of this Section
15.5 only, the term "gains tax" shall be limited to those taxes which
are in the nature of stamp taxes and (i) are imposed only at the time of
the transfer of real estate, (ii) impose an amount due that is
determined as a percentage of the consideration for or value of the real
estate being transferred, (iii) must be paid as a prerequisite to
recording, and (iv) are imposed irrespective of whether the transferor
enjoyed a gain or suffered a loss on the underlying sale or transfer.
Expenses. Except as may be expressly contemplated herein, each of the
parties hereto shall bear its own expenses (including, without
limitation, fees and disbursements of its counsel, accountants and other
experts), incurred by it in connection with the preparation,
negotiation, execution, delivery and performance of this Agreement, each
of the other documents and instruments executed in connection with or
contemplated by this Agreement and the consummation of the transactions
contemplated hereby and thereby.
Table of Contents and Headings. The table of contents and section
headings of this Agreement are for reference purposes only and are to be
given no effect in the construction or interpretation of this Agreement.
Notices. All notices and other communications under this Agreement
shall be in writing and shall be deemed given when delivered personally
or four (4) days after being mailed by registered mail, return receipt
requested, or upon transmission and confirmation of receipt by a
facsimile operator if sent by facsimile transmission, to a party at the
following address (or to such other address as such party may have
specified by notice given to the other party pursuant to this
provision):
If to the Seller or the JV Seller, to:
Imo Industries Inc.
P.O. Box 6550
1009 Lenox Drive
Building Four West
Lawrenceville, New Jersey 08648
Telephone: (609) 896-7600
Facsimile: (609) 896-7688
Attention: Thomas J. Bird, Esq.
Senior Vice President and General Counsel
with a copy to:
Weil, Gotshal & Manges
767 Fifth Avenue
New York, New York 10153
Telephone: (212) 310-8000
Facsimile: (212) 310-8007
Attention: Stephen M. Besen, Esq.
If to the Purchaser, to:
Mannesmann Capital Corporation
450 Park Avenue, 24th Floor
New York, New York 10022
Attention: Joseph E. Innamorati, Esq.
Vice President and General Counsel
Telephone: (212) 826-0040
Facsimile: (212) 826-0074
with a copy to:
Jones, Day, Reavis & Pogue
North Point
901 Lakeside Avenue
Cleveland, Ohio 44114
Attention: John P. Dunn, Esq.
Telephone: (216) 586-3939
Facsimile: (216) 579-0212
Severability. The invalidity or unenforceability of any provision of
this Agreement shall not affect the validly or enforceability of any
other provision of this Agreement, each of which shall remain in full
force and effect.
Binding Effect; No Assignment. Except as otherwise permitted in Section
15.14 hereof, this Agreement shall be binding upon and inure to the
benefit of the parties and their respective successors and assigns. No
assignment of this Agreement or of any rights or obligations hereunder
may be made by any party (by operation of Law or otherwise) without the
prior written consent of each of the other parties hereto, which consent
may be withheld or granted by such parties in its sole discretion;
provided, however, the Purchaser may assign to one or more of its
Affiliates the right to purchase and take title to any or all of the
Assets or the Joint Venture Interest without the prior written consent
of the Seller; provided, further, that no such assignment by the
Purchaser shall release the Purchaser of any of its obligations
hereunder. Any attempted assignment without required consents shall be
void.
Amendments. This Agreement may be amended, supplemented or modified,
and any provision hereof may be waived, only pursuant to a written
instrument making specific reference to this Agreement signed by each of
the parties hereto.
Waiver of Compliance with Bulk Transfer Laws. The Purchaser hereby
waives compliance by the Seller with the provisions of the bulk transfer
Laws of any jurisdiction in connection with the transactions
contemplated by this Agreement. Notwithstanding anything to the
contrary in this Agreement, the Seller agrees to indemnify and hold the
Purchaser harmless from and against all Damages resulting from or
arising out of the failure to comply with, or to provide notice with
respect to, the bulk transfer Laws of any jurisdiction in connection
with the transactions contemplated by this Agreement.
Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
Third Parties. Except as provided in Section 13.1 or 13.2 hereof, with
respect to indemnified parties, this Agreement shall not confer upon or
give to any Person other than the parties hereto and their respective
permitted assigns, any rights or remedies under or by reason of this
Agreement.
Arbitration; Exclusive Remedy. Any and all claims, disputes, questions
or controversies involving the Sellers and the Purchaser and arising
under or in connection with this Agreement (except those arising under
Section 12.5 hereof) shall be submitted to and finally settled by
arbitration as provided in this Section 15.15. Any such arbitration
proceedings shall be conducted in English and the controlling copies of
all documents shall be printed in English. The location of any such
arbitration proceedings shall be in New York, New York, USA, and such
proceedings shall be conducted in accordance with the Rules of
Conciliation and Arbitration of the American Arbitration Association,
before three arbitrators, one appointed by the Seller, one appointed by
the Purchaser and one arbitrator appointed in accordance with the
applicable rules of the American Arbitration Association. The award
rendered by the arbitrator shall be final. An action or proceeding to
enforce such award may be brought in any court of competent
jurisdiction. The costs of the arbitration proceeding (including the
fees and expenses of the arbitrator) shall be shared equally by the
parties.
IN WITNESS WHEREOF, the parties hereto have executed this instrument as
of the date and year first above written.
IMO INDUSTRIES INC.
By:
Name:
Title:
IMO INDUSTRIES INTERNATIONAL INC.
By:
Name:
Title:
MANNESMANN CAPITAL CORPORATION
By:
Name:
Title:
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<PERIOD-END> SEP-30-1994
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0
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<SALES> 347,393
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