Form 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1993
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
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 or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)
3450 Princeton Pike
Lawrenceville, New Jersey 08648
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 609-896-7600.
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of each class which registered
Common Stock, $1.00 par value New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
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 by checkmark if disclosure of delinquent filers pursuant
to Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of Registrant's knowledge, in definitive proxy
or information statement incorporated by reference in Part III of this
Form 10-K or any amendment to the Form 10-K. ( )
Aggregate market value of the voting stock held by non-affiliates
of the Registrant computed by reference to the closing price of such
stock on the New York Stock Exchange, Inc. on
March 15, 1994 ............................................$135,290,160
Shares of Registrant's common stock, $1.00 par value, outstanding
as of March 15, 1994 ...................................... .16,911,270
DOCUMENTS INCORPORATED BY REFERENCE
Identification of Documents Part into which Incorporated
Portions of the Company's Proxy Items 10, 11, 12 of Part III
Statement for its Annual Meeting of
Stockholders to be held May 24, 1994
TABLE OF CONTENTS
PART I
Item
1. Business........................................................
General.......................................................
History.......................................................
Industry Segments.............................................
Discontinued Operation........................................
Restructuring Plan............................................
Competition...................................................
Product Distribution and Customers............................
Backlog.......................................................
Raw Materials.................................................
Patents, Licenses and Trademarks..............................
Research and Development......................................
Environmental Matters.........................................
Employees.....................................................
2. Properties......................................................
3. Legal Proceedings...............................................
4. Submission of Matters to a Vote of Security Holders.............
Executive Officers of the Registrant................................
PART II
5. Market for the Registrant's Common Equity
and Related Stockholder Matters...............................
6. Selected Financial Data.........................................
7. Management's Discussion and Analysis of
Financial Condition and Results of Operations.................
8. Financial Statements and Supplementary Data.....................
9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure........................
PART III
10. Directors and Executive Officers of the Registrant..............
11. Executive Compensation..........................................
12. Security Ownership of Certain Beneficial Owners
and Management................................................
13. Certain Relationships and Related Transactions..................
PART IV
14. Exhibits, Financial Statement Schedules and
Reports on Form 8-K...........................................
Exhibit Index.......................................................
Signatures..........................................................
PART I
Item 1. Business.
General
Imo Industries Inc. (hereinafter with its subsidiaries
referred to as the "Company") is an integrated
multinational manufacturing company that designs, produces and
markets proprietary products focused on controls and on
engineered power products and their support services. The
Company operates in the United States, Canada, several
European countries, Mexico and the Pacific Rim. In 1993, the
Company redefined its business segments and reclassified
previously reported financial information. The Company's
continuing core operations are divided into three business
segments:
The Morse Controls Business segment designs and produces
push-pull cable and control systems and automotive products
including actuators, window controls, latches and door
panels/assemblies.
The Pumps, Power Transmission & Controls Business segment designs
and produces a broad range of rotary pumps, including a
proprietary line of three-screw pumps; electronic adjustable-
speed motor drives, gears and speed reducers; and transducers and
switches for sensing, measuring and controlling pressure,
temperature and liquid level and flow.
The Turbomachinery Business segment designs and produces
steam turbines, rotary compressors, and steam condensers. The
segment also has a coordinated aftermarket parts and services
program.
In addition to the three segments comprising the Company's
continuing core operations, the Company has an Other Business
segment included in its continuing operations for financial
reporting purposes. This segment includes operations previously
sold and operations to be sold as part of the Company's asset
divestiture program.
The Company has announced that it will sell its Electro-Optical
Systems operations and is accounting for this business as a
discontinued operation and, accordingly, has not included these
operations in the Company's segments.
History
The Company, founded in 1901 in the United States by Dr. Carl
Gustaf Patrik de Laval, a Swedish scientist, was acquired by
Transamerica Corporation ("Transamerica") in 1963. In 1964,
Transamerica merged its existing wholly owned manufacturing
subsidiary, General Metals Corporation, into the Company. At the
close of business on December 18, 1986, Transamerica distributed
all of the issued and outstanding shares of the Company Common
Stock to holders of record of Transamerica Common Stock on
the basis of one share of Company Common Stock for each ten
shares of Transamerica Common Stock held ("Distribution").
Following the Distribution, the Company has operated as a
publicly traded company.
Industry Segments
A description of the principal products and services offered
by each core business segment of the Company, as well as the
principal markets for such products and services, are set
forth below. Certain information in response to this item
with respect to net sales, operating profit, and identifiable
assets of each of these segments and by geographic area is
contained in Note 10 of the Notes to Consolidated Financial
Statements included in Part IV of this Form 10-K Report as
indexed at Item 14(a)(1). On October 29, 1992, the Company
announced a restructuring plan pursuant to which it divested six
of its operating units in 1993 and is seeking to divest certain
other non-strategic businesses and underutilized real estate
holdings. In January 1994, the Company announced its intention to
dispose of its Electro-Optical Systems business, which is being
accounted for as a discontinued operation. Additional
information regarding the businesses sold and held for sale and
the discontinued operation is provided later in this section and
is contained in Note 3 and Note 2, respectively, of the Notes to
Consolidated Financial Statements.
Morse Controls
The Morse Controls Business segment operations, consisting of the
Morse Controls and Roltra-Morse businesses, manufacture precision
mechanical control products and systems that are primarily used
for automotive, marine, and industrial applications.
This segment produces, among other products, push-pull cable and
control systems used to control and actuate functions, such as
steering and valve adjustment, and as an alternative to
electrical systems. Applications include throttle control and
steering systems for both off-the-road vehicles and pleasure
boats. The segment also manufactures a manual gear shift system
that is currently used in Fiat and Lotus automobiles, and
actuators, window controls, latches and door panels/assemblies
for Fiat.
Pumps, Power Transmission & Controls
The Pumps, Power Transmission & Controls Business segment units
produce a wide range of products that control the speed, force
and direction of motion in processes and products. Major
products in this segment include speed reducers, gears,
liquid level indicators, transducers and a range of rotary
pumps, including a proprietary line of three-screw pumps. These
products are used by a diverse customer base in the marine,
elevator, oil and gas and general industrial markets. The IMO
Pump, Warren Pumps, Boston Gear, Delroyd Worm Gear, Fincor
Electronics, Gems Sensors and TransInstruments operations of the
Company comprise this Business segment.
The segment's pump operations design and manufacture screw-type
fuel, lube oil and hydraulic pumps for use primarily by the
marine, process, oil and gas and elevator industries. The
segment's three-screw pumps are the leading low-noise-level pumps
used in United States Navy vessels and in many commercial
vessels. These pumps are also used to power hydraulic elevators,
lubricate diesel engines and fuel gas turbines. The segment's
two-screw pumps are used by the pulp and paper industry and in
other high-viscosity-process applications.
The segment's power transmission operations produce speed
reducers and loose gearing which are recognized as leading
products in their market niches. The speed reducers and gear
boxes are used to reduce the output speed and increase the torque
of power trains. The operations also produce worm gear sets used
as speed reducers by original equipment manufacturers, and by oil
and gas and industrial machinery customers.
In addition, the power transmission sector manufactures AC and
DC adjustable-speed motor controls that are utilized to variably
adjust the speed of electric motors. Customized systems for
process controls used in such applications as printing, tire and
glass production and material handling make up a large portion of
the segment's motor controls sales.
The controls operations of this segment design and manufacture
products that perform a wide variety of critical sensing,
measuring, monitoring and control functions.
Tank level indicators, level switches, solid state relays and
flow meters are manufactured principally for marine and general
industrial applications. These indicators are used in ocean-
going tankers, military vessels, petrochemical facilities and
industrial and commercial products around the world. Hundreds
of varieties of liquid-level monitors, indicators and switches
are manufactured for use by more than 30,000 customers.
Pressure transducers are used to measure pressure as a continuous
function and are sold to a wide segment of the general industrial
market.
Turbomachinery
The major products of this segment are steam turbines and
compressors. Steam turbines principally are used to drive
generators, compressors and pumps. Compressors are sold
primarily to the oil and gas exploration and production
industry, and the chemical and petrochemical industries. The
segment continues to manufacture steam condensers, and is the
leading supplier of steam condensers for United States Navy
nuclear submarine propulsion systems.
A primary emphasis of this segment is to service, repair,
retrofit and upgrade, and furnish spare parts for a variety of
customers operating in the power generation and process, oil and
gas industries. The segment has a coordinated aftermarket parts
and service program designed to extend the life or increase the
efficiency of high-speed rotating machinery manufactured by the
Company and others. The aftermarket parts and services program
is consolidated in the segment's TurboCare operation. The
Turbomachinery segment includes the Delaval Turbine and Delaval
Condenser operations as well as the TurboCare operation.
Discontinued Operation
In January 1994, the Company announced its intention to dispose
of its Electro-Optical Systems operations which consists of the
Company's subsidiaries Varo Inc. and Baird Corporation. Under a
plan approved by the Board of Directors, the Company intends to
sell these operations in 1994 and has engaged an outside
investment banking firm to assist in the divestiture.
In accordance with APB Opinion No. 30, the disposal of this
business segment has been accounted for as a discontinued
operation and, accordingly, its operating results are segregated
and reported as a Discontinued Operation in the accompanying
Consolidated Statements of Income. Prior year financial
statements have been reclassified to conform to the current year
presentation.
See Note 2 to the Consolidated Financial Statements located in
Part IV of this Form 10-K Report as indexed at Item 14 (A)(1) for
additional details regarding the discontinued operation.
Restructuring Plan
Asset Divestiture Program
On October 29, 1992, the Company announced a restructuring plan
pursuant to which it was seeking the divestiture of operations
representing approximately 15% of its assets. The planned
divestitures included units of its aerospace businesses, units of
its instruments and transducer businesses, certain other non-
strategic businesses and underutilized real estate holdings. In
January 1994, the Company announced plans to include the Electro-
Optical Systems operations in the asset divestiture program as
discussed above. As of December 31, 1993, the Company has sold
its Heim Bearings, Aerospace and Barksdale Controls operations
for proceeds of approximately $91 million, and thus has completed
a significant portion of the asset divestiture program. These
proceeds, net of related expenses, were used to repay senior debt
in the amount of $81.9 million in 1993 in accordance with the
terms of the restructured credit facilities.
Excluding the Electro-Optical Systems operations, the remaining
assets to be sold in this program consist of a unit of the
Company's instruments and transducer businesses, certain other
non-strategic businesses and underutilized real estate holdings.
The Company targets completion of the divestitures over the next
9 to 12 months. Based on current conditions, management now
believes that certain of the remaining assets, both operating
units and real estate, are unlikely to net the sale prices
originally expected. Accordingly, the Company has deferred gains
of $18.0 million on assets divested during 1993 and has provided
$10.1 million for the loss now anticipated for the program as a
whole.
Restructuring Program
In January 1994, the Company announced plans to reduce the
Company's cost structure and to improve productivity on a
worldwide basis. The actions under this restructuring plan will
include reductions in the number of employees and the
consolidation of certain of the Company's operating units. The
Company plans to consolidate its four domestic turbomachinery
aftermarket maintenance operations into one operating unit and
combine certain operations of its European mechanical controls
and automotive components operating units. In the fourth quarter
of 1993, the Company recorded a charge of $8.6 million relating
to this program.
See Note 3 to the Consolidated Financial Statements located in
Part IV of this Form 10-K Report as indexed at Item 14(A)(1) for
additional details regarding the asset divestiture and
restructuring program.
Competition
The Company's products and services are marketed on a worldwide
basis. Approximately 41% of the Company's products are marketed
outside of the United States through wholly owned subsidiaries,
sales offices and several joint ventures. Most markets in which
the Company operates are highly competitive. The principal
elements of competition for the products manufactured in each of
the Company's business segments are design features, product
quality, customer service and price.
Product Distribution and Customers
The Company's products are sold primarily through the
Company's direct sales forces. During 1993, sales by the
Company's direct sales forces accounted for approximately 93%,
67%, 73% and 74% of the Morse Controls, Pumps, Power Transmission
& Controls, Turbomachinery and Other segments, respectively. The
Company's remaining sales are made through distributors,
dealers and agents.
The Morse Controls segment had sales to one commercial customer
(Fiat S.p.A. and its subsidiaries) that accounted for 47%, 57%
and 61% of segment sales, and 12%, 15% and 15% of consolidated
sales in 1993, 1992 and 1991, respectively. None of the other
business segments is dependent on any single customer or a few
customers, the loss of which would have a material adverse effect
on the respective segments, or on the Company as a whole. Sales
as prime contractor to the United States Department of Defense
represented 4.7%, 4.8%, and 5.3% of the Company's consolidated
sales in 1993, 1992 and 1991, respectively. Total sales to the
Department of Defense in the form of prime and subcontracts were
approximately 11.1% of net sales in 1993, 12.2% of sales in 1992
and 15.3% of sales in 1991. The products sold to the Department
of Defense are for military applications. The government's
desire to reduce the national budget deficit continues to exert
great pressure on all elements of the federal budget,
particularly defense. Nevertheless, the Company believes that
the type and array of programs it addresses help minimize the
effect of the termination of any one program. The majority of
such Department of Defense sales are subject to adjustment of
profits or termination at the election of the government. If the
government terminates a contract, it may be required to pay
termination costs (including a proportionate share of any
profit). In the Company's opinion, refunds to the government, if
any, resulting from renegotiation of profits or termination of
contracts or subcontracts at the election of the government will
not have a material adverse effect on the financial position or
results of operations of the Company. No customer other than
Fiat S.p.A. and its subsidiaries and the United States Department
of Defense, accounted for 10% or more of consolidated sales in
1993, 1992 or 1991.
Backlog
The Company's continuing operations' backlog of unfilled orders
at February 28, 1994 and 1993 and at December 31, 1993, 1992
and 1991 by business segment was as follows:
February 28 December 31
1994 1993 1993 1992 1991
(Dollars in millions)
Morse Controls $ 45.7 $ 43.3 $ 41.1 $ 42.8 $ 47.5
Pumps, Power 62.3 72.7 62.5 75.2 86.4
Transmission &
Controls
Turbomachinery 91.7 121.1 101.8 118.3 103.4
Other 4.7 41.8 4.6 41.4 56.4
$204.4 $278.9 $210.0 $277.7 $293.7
Backlog is considered significant only to the Warren Pumps and
Delaval Turbine operations of the Pumps, Power Transmission &
Controls and Turbomachinery Business segments, respectively,
which require long lead times for the manufacture of their
products, and to the Roltra-Morse operation of the Morse Controls
Business segment, the backlog for which is directly tied to a
major customer's production schedule. Of the total backlog from
continuing operations at December 31, 1993, the Company believes
that all but approximately $8.8 million of its orders will be
filled in 1994.
Raw Materials
The Company's operations obtain raw materials, component parts
and supplies from a variety of sources, generally from more than
one supplier. The sources are based in both the United States
and foreign countries. The Company believes that its sources of
raw materials are adequate for its needs.
Patents, Licenses and Trademarks
The Company owns numerous unexpired United States patents
(having an initial duration of 17 years and expiring at
various times in the future), United States design patents and
foreign patents (having an initial term that is governed by
the law of the country and expiring at various times in the
future), including counterparts of certain of its United
States patents, in major industrial countries of the world.
The Company's products are marketed under various trade
names and registered United States and foreign trademarks
(having an initial term that is governed by the law of the
country and expiring at various times in the future).
However, the Company does not consider any one patent or
trademark or any group thereof essential to its business as
a whole, or to any of its business segments. The Company
relies, to an extent, on proprietary product knowledge and
manufacturing processes in its operations.
Following the removal of the distinctive modifier "Transamerica"
from the corporate name prior to the Distribution, the
Company changed its name to "Imo Delaval Inc." in 1986 and to
"Imo Industries Inc." in 1989. The Company's use of the name
"Delaval" is restricted as a result of a contract by which the
Company's assets were acquired from their former Swedish owner
preceding the acquisition of the Company by Transamerica. The
Company is permitted to use the "Delaval" name in connection
with certain products of the Turbomachinery segment although
rights to the name are also retained by the former Swedish
owner.
Research and Development
The Company's ongoing research and development programs
involve the development of new technologies to enhance the
performance or lower the cost of manufacturing the Company's
products, and the redesign of existing product lines either to
increase their efficiency or to lower their manufacturing cost.
Expenditures for research and development charged against
continuing operations for 1993, 1992 and 1991 by business
segment were as follows:
Year Ended December 31
1993 1992 1991
(Dollars in millions)
Morse Controls $ 3.3 $ 3.3 $ 3.0
Pumps, Power Transmission 3.6 3.9 3.5
& Controls
Turbomachinery 2.1 2.2 2.3
Other 2.3 2.7 2.3
$11.3 $12.1 $11.1
Environmental Matters
The State of New Jersey Department of Environmental
Protection and Energy (the "DEPE") has determined that the New
Jersey Industrial Site Recovery Act ("ISRA") is applicable to the
Company's New Jersey "Industrial Establishments" by reason of
the Distribution. Under ISRA the Company's three existing
New Jersey industrial establishments will undergo a DEPE
approved clean-up. All existing adverse environmental
conditions and violations are being addressed through this ISRA
process. Although the Company will have to correct conditions
requiring clean-up under ISRA, the Company does not expect
ISRA compliance to have a material adverse effect on its
financial condition.
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") owning 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 has operations in numerous locations, some of which
require environmental remediation. However, the Company
does not know of or believe that any such matters or the cost
of any required corrective measure, either individually or in
the aggregate, will have a material adverse effect on the
financial condition of the Company. However, there can be no
guarantee that these matters or other environmental matters not
currently known to the Company will not have such a material
adverse effect.
Employees
At December 31, 1993, the Company employed approximately 6,500
persons worldwide of which 4,700 relate to continuing operations.
Approximately 4,600 persons were employed in the United States,
and approximately 1,900 persons were employed outside of the
United States. There are approximately 1,000 persons covered
by collective bargaining agreements with various unions
expiring at various dates in 1994 through 1996. The Company
considers its relations with its employees to be satisfactory.
Item 2. Properties.
The Company has 54 manufacturing facilities in 12 states in the
United States, the United Kingdom, Germany, Singapore,
Sweden, Switzerland, Mexico, Turkey (held by a joint venture),
Italy, France, Spain and Australia of which 32 are owned and 22
are leased. In addition, the Company owns two closed
manufacturing facilities (approximately 276,000 square feet
of building space on 69 acres of land) that are being offered
for sale. The properties owned by the Company consist of
approximately 4.06 million square feet of building space,
inclusive of the 276,000 square feet of the closed facilities, on
approximately 493 acres (including 204 acres of undeveloped
land). The leases expire over a period of years from 1994 to
2054 with renewal options for varying terms contained in 6 of
the leases. The Company's executive office, which is owned by
the Company, is located in Lawrenceville, New Jersey and occupies
approximately 41,000 square feet on ten acres.
The Company believes that its machinery, plants and offices
are in satisfactory operating condition and are adequate for
the uses to which they are put. The Company believes that its
properties have sufficient capacity to substantially increase
their current utilization without incurring any significant
additional capital expenditures.
The manufacturing facilities of the Company by business
segment are summarized below:
Square Feet of
Building Space
Number of Plants (In thousands)
Owned Leased Owned Leased
Morse Controls 6 11 1,178 658
Pumps, Power Transmission
& Controls 10 2 888 188
Turbomachinery 8 2 1,043 40
Other 8 7 671 458
32 22 3,780 1,344
Item 3. Legal Proceedings.
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 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
denying the complaint has 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 will be provided notice.
Tentative 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 (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 subpoena, the government subsequently
withdrew the February subpoena and the Company is in the process
of responding to the March 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.
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") owning 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 currently has pending against it, a lawsuit relating
to performance shortfalls in products delivered by its Delaval
Turbine Division in a prior year and two lawsuits pending against
it relating to breach of contract and warranty claims with
respect to its former diesel engine division. These actions seek
damage awards ranging individually from $3 million to $8 million.
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 4. Submission of Matters to a Vote of Security Holders.
No matter was submitted to a vote of the Company's security
holders during the fourth quarter of 1993.
Executive Officers of the Registrant
The following table sets forth information concerning the names,
ages and principal occupations of the executive officers of the
Company:
Name Age Principal Occupation
Donald K. Farrar * 55 Chief Executive Officer
and President
Thomas J. Bird, Jr. 50 Senior Vice President, General
Counsel and Secretary
William M. Brown 51 Executive Vice President and
Chief Financial Officer
J. Dwayne Attaway 52 Executive Vice President
John J. Carr 51 Executive Vice President
Brian Lewis 60 Executive Vice President
Gary E. Walker 56 Executive Vice President
David C. Christensen 60 Senior Vice President,
Human Resources
Robert A. Derr, II 48 Vice President and Corporate
Controller
Geoffrey M. Dobson 56 Vice President and Treasurer
*This executive officer is a director of the Company whose
current term as a director will expire in 1995.
Donald K. Farrar joined the Company in his current position in
September 1993. Prior to joining the Company, Mr. Farrar held
various positions with Textron, Inc. and Avco Corporation for 24
years. He served as President, Chief Operating Officer and
director of Avco until its 1985 acquisition by Textron.
Thereafter, he served as Senior Executive Vice President,
Operations and a director of Textron, Inc. until December 1989.
From January 1990 until joining the Company, Mr. Farrar was a
private investor.
Thomas J. Bird joined the Company as Vice President and Associate
General Counsel in July 1990, and was promoted to his current
position in June 1992. Prior to joining the Company, Mr. Bird
held various positions with General Electric Company for 18
years, most recently as Group Counsel RCA Aerospace and Defense
division from August 1987 to February 1988 and as General Counsel
to GE Aerospace of General Electric Company from February 1988
until joining the Company.
William M. Brown joined the Company in his current position in
June 1992. Prior to joining the Company, Mr. Brown held various
positions with ITT Corporation for 25 years, most recently as
Corporate Assistant Controller and General Auditor from December
1986 to April 1991 and as Corporate Vice President and Assistant
Controller from April 1991 until joining the Company.
J. Dwayne Attaway joined the Company as Executive Vice
President of the Company's Varo, Inc. operation in July 1989,
and was promoted to his current position in December 1989.
Mr. Attaway has overall responsibility for the Company's
Electro-Optical Systems business which consists of the Company's
Varo and Baird operations. Mr. Attaway served as Corporate Vice
President of Business Development at Ranco Inc. from 1987 to
1989, as Vice President and General Manager of the Ranco Inc.
Electronics Division from 1982 to 1987, and prior to that was
with Varo, Inc. for 17 years.
John J. Carr was promoted to his current position in July 1989.
From July 1985 to July 1989, Mr. Carr was a Group Vice
President of the Company. Mr. Carr is responsible for the Boston
Gear, CEC Instruments, Delroyd Worm Gear, Fincor Electronics,
Gems Sensors, IMO Pump, TransInstruments and Warren Pumps
operations of the Company.
Brian Lewis was promoted to his current position in July
1989. Mr. Lewis was President and Chief Operating Officer of
the Controls Group of Incom International Inc. (acquired by the
Company in December 1987) from 1985 until January 1988 and was
a Group Vice President of the Company from January 1988 to
July 1989. Mr. Lewis has responsibility for the Morse Controls
and Roltra-Morse operations.
Gary E. Walker was promoted to his current position in February
1993. Mr. Walker served as Group Vice President of the Company
from September 1991 to February 1993 and as Vice President and
General Manager of the Delaval Turbine operation from September
1988 to September 1991. Prior to joining the Company he served
from January 1987 to September 1988 as Vice President and General
Manager of Turbonetics Energy Incorporated, a subsidiary of
Mechanical Technology Inc. Prior to that, he had held various
positions with General Electric for 21 years. Mr. Walker has
responsibility for the Company's Delaval Turbine, Delaval
Condenser and TurboCare operations.
David C. Christensen joined the company in his current position
in August 1990. Previously, he was Senior Vice President, Human
Resources for Pneumo Abex Corporation (and its predecessor Abex
Corporation) from 1980 to September 1988. From September 1988
until joining the Company, Mr. Christensen was an independent
human resources consultant.
Robert A. Derr, II joined the Company in his current position
in 1988. Prior to joining the Company, Mr. Derr held
various positions with The Stanley Works for nine years, most
recently as Director of Corporate Accounting from 1982 to
1986 and as the Controller of the Vidmar Division of The
Stanley Works from 1986 until joining the Company.
Geoffrey M. Dobson joined the Company in his current
position in April 1990. Prior to joining the Company, Mr.
Dobson held various positions with Warner-Lambert Company for 21
years, most recently as Corporate Treasurer from August 1983
to January 1988 and as Vice President of Finance for the American
Chicle Division from January 1988 until March 1989. From
March 1989 until joining the Company Mr. Dobson served as
President of Financial Functions Management, a financial
consulting firm.
Each of these executive officers will hold office until his
successor is chosen and qualifies or until his earlier
resignation or removal. Any officer may be removed at any
time by the Board of Directors without prejudice to any
contract rights which he may have.
PART II
Item 5. Market for the Registrant's Common Equity and Related
Stockholder Matters.
The Company's common stock (the "Common Stock") is listed on
the New York Stock Exchange (stock symbol IMD). The following
table sets forth, for the quarters indicated, the high and
low closing price per share for the Common Stock as reported on
the New York Stock Exchange Composite Tape and the amount of
per share cash dividends declared by the Company during each
quarter on its Common Stock.
Dividends
Declared
High Low Per Share
1992:
1st Quarter $ 13 3/4 $ 10 5/8 $ .125
2nd Quarter 12 7/8 9 5/8 .125
3rd Quarter 12 1/2 9 5/8 .125
4th Quarter 9 7/8 4 1/8 --
1993:
1st Quarter 7 1/2 4 7/8 --
2nd Quarter 7 5 7/8 --
3rd Quarter 8 6 1/4 --
4th Quarter 9 1/4 6 5/8 --
1994:
1st Quarter 8 7/8 7 --
(through March 15, 1994)
The last sale price for the Company's Common Stock as reported
by the New York Stock Exchange on March 15, 1994, was $8 per
share. As of March 15, 1994, there were approximately
26,411 holders of record of the Company's Common Stock.
Five of the Company's long-term debt agreements contain,
among other provisions, a restriction on retained earnings
available for payment of dividends. Under the most restrictive
provisions the Company was prohibited as of December 31, 1993 and
is currently prohibited from declaring or paying cash dividends
through at least March 31, 1995.
<TABLE>
Item 6. Selected Financial Data.
(Dollars in millions except per share amounts)
Year ended December 31, (a) <F1>
<CAPTION>
1993 1992*<F2> 1991*<F2> 1990*<F2> 1989*<F2>
<S> <C> <C> <C> <C> <C>
Net sales $ 641.7 $ 733.6 $ 777.3 $ 818.2 $ 655.3
Gross profit 182.9 187.8 211.1 230.5 199.2
Selling, general and administrative
expenses 135.0 142.8 140.7 133.2 117.2
Research and development expenses 11.3 12.1 11.1 11.5 9.1
Unusual items 17.7 24.0 - - -
Income from continuing operations
before interest, income taxes,
minority interest, extraordinary
item and cumulative effect of
change in accounting principle 22.2 18.0 66.6 96.7 80.3
Interest expense 46.2 50.2 50.9 48.8 36.2
Income (loss) from continuing
operations before extraordinary
item and cumulative effect of
change in accounting principle (39.1) (22.3) 9.5 25.6 26.7
Discontinued operation,
net of taxes (213.3) (32.7) 1.9 (4.4) 7.2
Extraordinary item (18.1) - - - -
Cumulative effect of change in
accounting principle, net of taxes - (27.6) - - -
Net income (loss) (270.6) (82.6) 11.4 21.2 33.9
Earnings (loss) per share:
Continuing operations before
cumulative effect of change in
accounting principle and
extraordinary item (2.32) (1.32) .57 1.45 1.48
Discontinued operation (12.63) (1.94) .11 (.25) .40
Extraordinary item (1.07) - - - -
Cumulative effect of change in
accounting principle - (1.64) - - -
Net income (loss) (16.02) (4.90) .68 1.20 1.88
Cash dividends per share - .375 .50 .485 .41
Capital expenditures 13.9 18.1 18.4 29.4 35.9
Depreciation and amortization
expense 29.4 30.9 30.9 28.4 22.9
Working capital 107.1 111.0 226.8 239.7 302.5
Total assets:
Continuing operations 552.9 684.5 695.2 722.2 759.3
Discontinued operation 85.0 266.1 286.9 282.4 212.8
Total assets 637.9 950.6 982.1 1,004.6 972.1
Total long-term debt including
current portion 362.3 399.4 410.4 415.2 412.9
Shareholders' equity (deficit) (34.0) 241.4 336.9 333.5 332.5
<FN>
<F1> (a) The notes to the consolidated financial statements located in
Part IV of this Form 10-K Report as indexed at Item 14(a)(1)
should be read in conjunction with this summary.
<F2> * Reclassified to conform to 1993 presentation.
</TABLE>
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
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 proceeds of approximately $91 million in 1993. 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 Systems
business, are included in continuing operations reported in the
consolidated financial statements. Gains of $18.1 million on the
assets divested during 1993 have been deferred and applied to the
reserve for divestitures.
Pursuant to a plan announced in January 1994, the Company intends
to sell its Electro-Optical Systems business. The post-cold war
slowdown in defense spending has impacted the Electro-Optical
Systems operations and its recent performance. Selling the
business will help the Company reduce debt, halt further cash
drains, and concentrate the Company's focus on its core
businesses. The sale of this business segment is planned to be
consummated within the year. In accordance with APB Opinion No.
30, the disposal of this business segment has been accounted for
as a discontinued operation and accordingly, its operating
results are segregated and reported as a Discontinued Operation
in the accompanying Consolidated Statements of Income. The assets
and liabilities have been condensed into net assets of
discontinued operation on the accompanying Consolidated Balance
Sheets. The prior year amounts have been reclassified to conform
to the 1993 presentation.
The Company is implementing cost-cutting measures at its
remaining operations to reduce its expense structure and to
eliminate duplicative functions by consolidating some of its
smaller operating units. The Company is consolidating its four
domestic turbo-machinery aftermarket maintenance divisions into
one TurboCare division; is consolidating certain operations in
the European mechanical controls and automotive components
divisions; and is revising operating processes and reducing
employment levels at the turbomachinery, pumps and other
operations. The Company expects these programs to generally be
complete by mid-year and the number of employees company-wide is
forecast to decline by approximately 450, or 9% from continuing
operations, between mid-1993 and mid-1994. The restructurings
are expected to provide net cash benefits of approximately $3
million in 1994 and $13 million annually thereafter.
Also as a result of restructuring, the Company has realigned its
businesses into new groupings for management and segment
reporting purposes. The Power Products and Services Group is
basically unchanged but will now be known as the Turbomachinery
segment. 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 known as Pumps, Power
Transmission & Controls segment. The Instruments Group no longer
exists because the Electro-Optical Systems business is now
accounted for as a discontinued operation. Finally, the
operating units sold and the remaining assets to be sold as part
of the asset divestiture program, except for the Electro-Optical
Systems operations, have been grouped as a separate segment
entitled Other for segment reporting purposes.
Results of Operations
The twelve months ended December 31, 1993 include net unusual
charges of $17.7 million in loss from continuing operations.
These charges include $8.6 million related to the restructuring
and consolidation of certain of the Company's operating units
(principally comprised of severance costs), $10.1 million for an
expected net loss overall, based on current conditions, on the
Company's asset divestiture program, and $5 million in debt
related financing fees. These charges are net of a reversal of a
$6.0 million reserve during the third quarter of 1993, as a
result of a change in estimate related to legal costs associated
with pending litigation.
As a result of unanticipated losses in 1993, the Company provided
reserves of $15.0 million against previously recorded future tax
benefits. These tax benefits may be realized in future years.
The results of operations for the twelve months ended December
31, 1993 also include an extraordinary item of $18.1 million
($1.07 per share) representing fees and expenses related to
extinguishment of senior debt of which approximately $4.0 million
required immediate cash outlays, approximately $2 million relates
to the write-off of previously deferred debt expense and $11.9
million was provided as an estimate for make-whole notes ("Make-
Whole Notes") to be issued to the holders of debt being retired.
Through December 31, 1993, Make-Whole Notes of $11.5 million have
been issued and are included in long-term debt. Additionally,
approximately $4 million of fees related to the restructured
credit facilities was paid in 1993. This amount is being
amortized over the term of the facilities.
The twelve months ended December 31, 1992 include unusual charges
of $24.0 million in loss from continuing operations principally
for the estimated costs associated with pending litigation and
certain warranty and claim settlements. Of this amount, $6
million was reversed in the third quarter of 1993 as a result of
a change in estimate, approximately $1.6 million and $1.5 million
required cash outlays in 1993 and 1992, respectively.
The twelve months ended December 31, 1992 include a charge of
$27.6 million after tax ($1.64 per share) related to the adoption
of FASB Statement No. 106, "Employer's Accounting for
Postretirement Benefits Other Than Pensions." This charge has
been reported as a cumulative effect of a change in accounting
principle and was retroactively applied as of January 1, 1992.
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 expects
to amortize associated reserves to income over the phase out
period at approximately $7 million per year. The Company does
not anticipate a significant increase or decrease in cash
requirements related to this change in policy during the phase
out period. The Company reduced the discount rate actuarial
assumption in 1993 to 7.5% from 8.5% in 1992 in line with the
change in the overall economic environment. This change has an
insignificant effect on the net periodic postretirement benefit
cost.
Losses from discontinued operation amounted to $213.3 million or
$12.63 per share in 1993 and $32.7 million (net of income tax
benefit of $15.6 million) or $1.94 per share in 1992, and income
of $1.9 million (net of income tax expense of $1.7 million) or
$0.11 per share in 1991. The loss recorded in 1993 includes an
estimated loss on disposal of $168.0 million, most of which
represents a non-cash adjustment to reduce the carrying value of
assets to estimated realizable value. Of the total estimated
loss on disposal, cash outlays are not expected to exceed $11
million. The results from operations for the discontinued
operation include allocations for interest of $10.2 million, $7.7
million and $7.7 million for 1993, 1992 and 1991, respectively.
The Company had a loss from continuing operations before
extraordinary item of $39.1 million or $2.32 per share in 1993
primarily as a result of the net unusual charges of $17.7 million
and the $15.0 million reserve provided against previously
recorded future tax benefits. The Company had a loss from
continuing operations before cumulative effect of change in
accounting principle of $22.3 million or $1.32 per share in 1992
primarily as a result of unusual charges of $24.0 million. In
1991 there was income from continuing operations of $9.5 million
or $0.57 per share.
The net loss per share in 1993 was $16.02 compared with a net
loss per share of $4.90 in 1992 and net income per share of $0.68
in 1991.
1993 1992 1991
Earnings (loss) per share:
Continuing operations before
extraordinary item and
cumulative effect of change
in accounting principle $(2.32) $(1.32) $.57
Discontinued operation $(12.63) $(1.94) $.11
Extraordinary item $(1.07) - -
Cumulative effect of change
in accounting principle - $(1.64) -
Net income (loss) $(16.02) $(4.90) $.68
Net Sales
Net sales from continuing operations in 1993 were $641.7 million,
a decline of $91.9 million or 12.5% from $733.6 million for 1992.
Included in these sales are the sales of divested and soon to be
divested divisions (Other segment) amounting to $80.4 million in
1993 and $115.1 million in 1992, accounting for $34.7 million of
the decline in sales from continuing operations. Most of this
decline is because six divisions were sold in 1993, therefore
contributing for only a part of the year versus a full year for
1992. Excluding the Other segment, the Company's core businesses
had sales of $561.3 million in 1993 versus $618.5 million in
1992, a decline of $57.2 million or 9.2%. Two-thirds of this
decline, approximately $37 million, was due to unfavorable
foreign exchange rate effects. The major portion of the
remaining decline is attributable to decreases in volume
occurring in the turbomachinery and Italian automobile
businesses.
Net sales from continuing operations in 1992 were $733.6 million
compared with $777.3 million in 1991, a decrease of $43.7
million or 5.6%. A decline in defense business, reduced sales to
the Italian auto market, reduced revenues from the Turbocare
maintenance group and the sluggish economies worldwide all
contributed to the decline. The Other segment accounted for
$18.1 million of the decreased revenues.
Costs and Expenses
In 1993, gross profit margins from continuing operations improved
to 28.5% of sales compared with 25.6% for 1992. Excluding
provisions and other charges recorded in the third quarter of
1992, the gross profit margin for the year was 27.6%. The year-
to-year improvement reflects the favorable effects of cost-
reduction and other operational improvement programs implemented
over the past two years. The gross profit margin from continuing
operations for 1991 was 27.2%.
Selling, general and administrative expenses for continuing
operations decreased $7.8 million from 1992 with the Other
segment accountable for $4.6 million of the decrease as a result
of six of the divisions having been sold during the year.
Selling expenses for the core businesses increased $4.1 million
in 1993 primarily because of the consolidation of a joint venture
that became wholly-owned in late 1992 and the Company's continued
efforts in the market place. General and administrative expenses
decreased $8.8 million on a year-to-year basis with the lower
costs occurring throughout the Company, including a significant
portion at Corporate headquarters, reflecting efforts to keep
these costs in line with the level of business. However, because
of the lower sales but holding firm on the selling effort, total
selling, general and administrative expenses for continuing
operations were 21.0% of sales in 1993 compared with 19.5% for
1992.
Selling, general and administrative expenses for continuing
operations increased $2.1 million in 1992 from 1991 with a major
portion of the increase attributable to medical insurance costs,
legal fees and settlements, and severance costs. This, combined
with the lower sales, resulted in such expenses increasing to
19.5% of sales for 1992 compared with 18.1% in 1991. Research
and development expenditures for continuing operations were 1.8%
of sales in 1993, 1.6% in 1992 and 1.4% in 1991.
Average borrowings in 1993 were $21 million lower than in 1992.
As a result, total interest expense (before allocation to
discontinued operations) of $57.2 million in 1993 was $2.3
million less than in 1992. Similarly, because average borrowings
in 1992 were $18 million lower than in 1991, interest expense of
$59.5 million in 1992 (before allocation to discontinued
operations) decreased $1.3 million compared with 1991. The
interest expense for continuing operations as shown on the
Consolidated Statements of Income excludes interest expense
incurred by the discontinued operation as well as an interest
allocation to the discontinued operation of $10.2 million in
1993, $7.7 million in 1992 and $7.7 million in 1991.
Equity in income of unconsolidated companies was $2.6 million,
down from the $6.3 million recorded in 1992, primarily because of
a reduced level of business in the Company's European-based
turbomachinery affiliate, Delaval Stork. Equity in income of
unconsolidated companies was $4.9 million in 1991.
Income tax expense for 1993 was $15.0 million. This amount is
principally comprised of the provision of a reserve against
previously recorded tax benefits. The Company has not recorded a
benefit for the current year loss. A valuation allowance has
been established in accordance with the provisions of FASB
Statement No. 109, "Accounting for Income Taxes." These tax
benefits may be realized in future years.
The Company has a net operating loss carryforward of
approximately $49 million expiring in 2008 and has foreign tax
credit carryforwards of approximately $5 million expiring through
1998. These carryforwards are available to offset future taxable
income and have been reserved in accordance with FASB Statement
No. 109. The difference between the tax net operating loss
carryforward and the book loss for 1993 is principally non-
deductible goodwill and other expenses not currently deductible.
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.
Segment Operating Results
The Morse Controls segment had sales of $163.9 million for the
twelve months of 1993, compared with $192.7 million for the same
period in 1992, a 15.0% decline resulting from the reduced
level of activity in the Italian automotive industry and adverse
effects of foreign exchange rates. It is anticipated that sales
into the Italian automotive industry will improve in 1994 over
1993. Operating income for the segment was $3.5 million in 1993
compared with $6.6 million in 1992. The decline is primarily
attributable to unusual items related to restructuring and
facilities consolidations and the sharply reduced level of
activity in the Italian automotive industry. Sales in 1992 were
flat compared with 1991. Excluding charges of $2.2 million in
the third quarter of 1992 relating to reducing certain assets to
estimated net realizable values, operating income of the 1992
period was unchanged compared with 1991.
The Pumps, Power Transmission & Controls segment had sales of
$249.9 million in 1993, a 5.8% decline from the $265.3 million
recorded in 1992. Sales were down in each of the three sectors,
with the largest declines in pump and instrument sales in
European markets. This was caused largely by the weak economic
environment in Europe and by the adverse effects of foreign
exchange rates. Segment operating income for 1993 was $22.2
million, an 11.1% improvement over 1992. Profits benefited from
reduced inventory carrying costs and operational improvements
resulting in generally lower expense levels. Sales in 1992
declined 1.8% compared with 1991. Segment operating income was
down $4.1 million in 1992 compared with 1991 primarily due to
inventory and other asset valuation adjustments.
The Turbomachinery segment had revenues of $147.5 million, an
8.0% decline from the $160.4 million for 1992, due primarily to
delays in production of turbomachinery units. Offsetting
slightly the decline in turbomachinery unit revenues was an
increase in aftermarket maintenance and repair activity over the
prior year. Operating income for 1993 was $4.7 million in 1993
versus $1.9 million in 1992, including unusual items in both
years. If unusual items totaling $2.0 million for restructuring
costs in 1993 and $7.3 million for certain warranty and claim
settlements in 1992 were excluded, operating income in 1993 would
be $6.7 million and in 1992 would be $9.2 million. This decline
in operating income was due primarily to lower volume and lower
prices. Revenues declined 11.5% in 1992 compared with 1991 due
principally to the segment's defense markets and lower revenues
from the TurboCare maintenance group. Operating income of $1.9
million in 1992 was down significantly from the $23.4 million
reported in 1991 mainly as a result of the provisions for certain
warranty and claim settlements, and turbomachinery cost overruns
caused by a control mechanism component failure in a major
machining center.
The Other segment had sales of $115.1 million for the twelve
month period of 1992 as compared with $80.4 million for the same
period of 1993. This decline in sales is attributable to the
divisions sold in 1993 contributing for only a part of the
current year versus a full year in 1992. The decline in the Other
segment operations will continue as the Company expects to
complete the sale of these businesses over the next 9 to 12
months. Operating income for both 1993 and 1992 was heavily
impacted by unusual items. In 1993, unusual items included a
provision of $10.1 million for expected losses as part of
divesting the remaining assets in this segment, offset in part by
a $6.0 million credit as a result of a change in estimate related
to legal costs associated with pending litigation. In 1992,
unusual items included $16.0 million, primarily for estimated
costs associated with pending litigation. Including the unusual
items, there was operating income of $2.1 million for 1993 and an
operating loss of $7.1 million for the year 1992. Sales of the
Other segment declined 13.6% in 1992 compared with 1991 due
mainly to volume reductions in the aerospace related businesses.
In addition to unusual items in 1992, pricing pressures in the
Company's aerospace business (which was sold in September 1993)
caused the operating income in 1992 to decline compared with
1991.
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. On July 15, 1993, the Company completed a
definitive agreement with its domestic senior lenders for the
restructuring of its senior credit facilities. The agreement
provides the Company with a new credit facility ("New Facility")
through March 31, 1995, and includes provisions for letters of
credit outstanding at that time to continue through March 31,
1996. The New Facility provides approximately $60 million of
revolving credit (reduced in February 1994 from $65 million by
agreement of the Company and the lenders thereunder) of which $10
million is for working capital, $40 million is for letters of
credit to support commercial contracts and $10 million is for
either working capital or letters of credit. As of December 31,
1993, $29.7 million in working capital loans and $38.2 million in
standby letters of credit were outstanding under these facilities
of which $15 million in working capital loans and $22.5 million
in letters of credit were outstanding under the New Facility and
the remainder was outstanding under the restructured credit
facility. In January 1994, the Company borrowed the remaining $5
million of the New Facility. Both the New Facility and the
restructured credit facilities are 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 Company also has
approximately $37.5 million in foreign short-term credit
facilities with approximately $14.4 million outstanding.
As a result of the loss for the fourth quarter of 1993, the
Company was not in compliance with several of the financial
covenants under its senior credit facilities. It has
subsequently received waivers of such defaults and amendments to
these agreements from its senior lenders.
Moreover, in February, 1994 the Company obtained the consent of
its 12.25% Senior Subordinated Debenture holders to amend the
indenture governing these debentures and permit the Company to
incur up to $35 million indebtedness (including letters of credit
and foreign borrowings) above the level outstanding at year-end
1993. The foregoing waivers, amendments, and consent should give
the Company sufficient financial flexibility to meet its
financial commitments until such time as its recently announced
plans to sell the Electro-Optical Systems business are completed.
The Company's operating activities provided cash of $24.0 million
in 1993 compared with $26.2 million in 1992. Net cash provided
by investing activities was $70.8 million in 1993, compared with
net cash used of $25.2 million in 1992. The improvement in net
cash provided by investing activities is principally a result of
net cash generated from the sale of businesses. In 1993, the
Company repaid $81.9 million of existing debt from the proceeds
of asset sales. Cash and cash equivalents of $19.9 million at
December 31, 1993, were up from $15.3 million at December 31,
1992.
Working capital as of December 31, 1993 was $107.1 million, a
decrease of $3.9 million from the end of 1992. The ratio of
current assets to current liabilities was 1.5 at December 31,
1993, compared with 1.4 at December 31, 1992. Principally as a
result of the 1993 loss, the Company's total debt as a percent of
its total capitalization was 109.2% at December 31, 1993,
compared with 66.2% at December 31, 1992.
Depreciation for continuing operations decreased $1.7 million to
$23.2 million in 1993, from $24.9 million in 1992, which, in
turn, was unchanged from 1991. Amortization of intangibles for
continuing operations was $6.2 million in 1993, $6.0 million in
1992 and $6.0 million in 1991. Amortization is estimated to
decrease $3.0 million over the next five years to $3.2 million in
1998. Additions to property, plant and equipment, made
primarily to improve productivity, were $13.9 million in 1993.
The Company anticipates that capital expenditures in 1994 will
not exceed $19 million. There were no material outstanding
commitments for the acquisition of property, plant and equipment
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 had at December 31, 1993, a $30
million 12.75% Senior Note due March 31, 1995, which the Company
may, at its option, extend to at least December 31, 1996, and,
with the concurrence of the holder, through December 1, 2002, in
which event, $6 million will become due on December 1 in each of
the years 1995 and 1996, and $3 million will be due annually from
December 1, 1997 to 2002. The Company also has $4.4 million
outstanding of an original $50 million 10.35% Senior Note due in
1994 and $11.5 million of Make-Whole Notes due December 31, 1996,
which require quarterly interest payments at 2% above prime.
The Company is on schedule with its previously announced
divestiture and debt reduction programs. As of December 31,
1993, six divisions have been sold and $81.9 million of the debt
from the domestic senior lender group has been repaid from the
net proceeds. The Company is planning to sell its Electro-
Optical Systems business, certain other non-strategic businesses
and under-utilized real estate holdings. The Company does not
anticipate sales of assets other than those currently included in
the asset divestiture program; however, management is continually
evaluating its options in the interest of strengthening the
Company. Of the $125 million of debt required to be repaid to
the domestic senior lender group by the July 15, 1993 definitive
agreement, $81.9 million was repaid in 1993, $8.1 million is due
by March 31, 1994 and the final installment of $35 million is due
by September 30, 1994. The Company currently anticipates that
cash flow from operations together with cash generated by asset
sales will be sufficient to permit the required repayments.
Without the sale of a sufficient portion of its operating assets
currently held for sale or the refinancing of the senior
obligations, the Company would not have sufficient cash flow from
operations to make the repayment required in September, 1994.
The process of disposing of assets is continuing and in addition,
management is presently seeking replacement financing. Although
significant progress has been made to date, and management
believes its plans are achievable, there can be no guarantee as
to the Company's ability to sell sufficient assets or obtain
refinancing within the necessary time frame.
Under circumstances which the Company considers unlikely, failure
to meet the required repayment schedule would result in its
default of the senior lending agreements and allow for the senior
lenders' acceleration of the debt which the Company, under these
circumstances, would be unable to pay. Additionally,
acceleration by the senior lenders, if not cured, would enable
the trustee or holders of the Company's Subordinated Debentures
to require the Company by notice to cause the acceleration to be
rescinded within 30 days of such notice. If the Company is
unable to accomplish this, the trustee or holders of at least 25%
of the Subordinated Debentures could demand immediate payment of
the Subordinated Debentures. In such event, the Company would
not have sufficient funds to pay the $300 million of outstanding
Subordinated Debentures.
Fourth Quarter Results
Net sales from continuing operations of $153.1 million in the
fourth quarter of 1993 decreased $48.8 million from $201.9
million in the fourth quarter of 1992. Divested businesses
accounted for $20.8 million of the decline since five of the six
divisions sold in 1993 were sold prior to the fourth quarter.
Most of the balance of the decrease occurred in the
Turbomachinery segment and was caused by the uneven distribution
of turbomachinery unit completions over the quarters. The fourth
quarter of 1993 had a loss from continuing operations before
extraordinary item of $47.8 million ($2.82 per share) as compared
with income of $3.9 million ($0.23 per share) in the same period
of 1992. $23.7 million of unusual items and the provision of a
$15.0 million reserve against previously recorded future tax
benefits were recorded in the fourth quarter of 1993.
Fourth quarter revenue of the Morse Controls segment was down
8.0% from the prior year's level primarily due to the adverse
effect of foreign currency rate changes. The fourth quarter of
1993 had an operating loss of $3.7 million as a result of unusual
items related to restructuring and facilities consolidations.
The fourth quarter of 1992 had operating income of $0.4 million.
The Pumps, Power Transmission & Controls segment sales declined
4.4% in the fourth quarter of 1993 to $63.6 million compared with
the same period of 1992. Most of the decline is attributed to
adverse effects of foreign exchange rates. Operating income of
$3.6 million in the fourth quarter of 1993 was $2.2 million lower
than the same quarter in 1992. Profits were impacted in the
fourth quarter of 1993 by restructuring charges and asset
revaluations at an overseas location.
Revenues for the Turbomachinery segment were $40.9 million for
the fourth quarter of 1993 compared with $62.6 million for the
same period of 1992. The variance is attributable to
turbomachinery unit completions which tend not to be evenly
distributed over the quarters. Completions delayed in the third
quarter of 1992 inflated the fourth quarter 1992 revenues,
whereas delays in the fourth quarter of 1993 held that period's
revenues down. Unusual items consisting of asset revaluations
and restructuring costs along with legal settlements pushed this
segment into a loss for the fourth quarter of 1993. Compared
with the same period last year, operating profit was also
impacted by the lower volume in total as well as in high margin
products.
The Other segment includes the six divisions sold in 1993 along
with three other small divisions. In the fourth quarter of 1992
this segment had sales of $29.5 million as contrasted with $8.8
million in the same period of 1993. This segment had operating
income of $4.0 million in the fourth quarter of 1992 compared
with a $9.8 million loss in the same period of 1993. The loss
includes a provision of $10.1 million for expected losses as part
of divesting the remaining assets in this segment. There are no
additional losses expected on the asset divestiture program.
Business Environment
General economic conditions worldwide continue to create business
uncertainties for the coming year in many of the markets in which
the Company operates. Management believes that its multiple
niche market strategy helps the Company moderate effects from the
cyclical behavior of any particular market segment that it
serves.
Approximately 49% of the Company's property, plant and equipment
of continuing operations has been acquired over the past five
years and has a remaining useful life ranging from five years to
fifteen years for equipment to thirty years for buildings. In
addition, property, plant and equipment of the companies acquired
by the Company have been adjusted to their fair value at the time
of acquisition. Assets acquired in prior years are expected to
be replaced at higher costs but this will take place over many
years. The newer assets will result in higher depreciation
charges but, in many cases, due to technological improvements,
there will be operating cost savings as well. The Company
considers these matters in establishing its pricing policies.
Approximately 5% of the Company's net sales from continuing
operations were on prime contracts to the Department of Defense
(DoD) of the United States Government in 1993 and 1992. Total
sales to the DoD in the form of prime and subcontracts were
approximately 11% of net sales from continuing operations in 1993
and 12% in 1992, adjusted downward from the 22% reported in 1992
to reflect the Company's divestiture program and decision to sell
the Electro-Optical Systems business. In recent years, the DoD
has taken a more aggressive position with its contractors with
respect to contract performance and pricing issues, and has
instituted legal action, including fines and curtailment of
future defense business, against several contractors. The
Company believes its relations with the DoD are satisfactory and
currently does not have any significant disputes with the DoD,
nor is it aware of any investigations by the DoD with respect to
its contracts except for the investigation being conducted by the
Office of the Inspector General of the United States Department
of Defense at the Ni-Tec division of the Company's Varo Inc.
subsidiary. (See Note 14 of Notes to Consolidated Financial
Statements.) Revenue and earnings on certain contracts with the
DoD are accounted for based on estimated performance over the
contract term. In addition, the Company has certain fixed-price
development contracts. The Company believes that its cost
estimates, with respect to such contracts, are reasonable and
that negotiated fixed prices are sufficient to cover estimated
development costs, but there can be no assurances that future
events would not change the ultimate accuracy of those estimates.
The government's desire to reduce the national budget deficit
continues to exert great pressure on all elements of the federal
budget, particularly defense. Nevertheless, the Company believes
that the type and array of programs it addresses help minimize
the effect of the termination of any one program.
Item 8. Financial Statements and Supplementary Data.
The consolidated financial statements and supplementary data
required by Part II, Item 8 of Form 10-K are included in Part IV
of this Form 10-K Report as indexed at Item 14(a)(1).
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure.
Not Applicable.
PART III
Item 10. Directors and Executive Officers of the Registrant.
Reference is made to the information to be set forth in the
section entitled "Election of Directors" in the Company's Proxy
Statement, for the Annual Meeting of Stockholders which will be
held on May 24, 1994 (the "Proxy Statement"), which section is
incorporated herein by reference. The Proxy Statement will be
filed with the Securities and Exchange Commission not later than
120 days after December 31, 1993, pursuant to Regulation 14A of
the Securities Exchange Act of 1934, as amended.
The information under the caption "Executive Officers of the
Company," following Item 4 of Part I of this Form 10-K Report,
is incorporated herein by reference.
None of the executive officers or directors of the Company
is related to any of the other executive officers or directors of
the Company.
Item 11. Executive Compensation.
Reference is made to the information to be set forth in the
section entitled "Executive Compensation" in the Proxy Statement,
which section (except for its Compensation Committee Report and
its Performance Graph) is incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and
Management.
Reference is made to the information to be set forth in the
section entitled "Beneficial Ownership of Common Stock" in the
Proxy Statement, which section is incorporated herein by
reference.
Item 13. Certain Relationships and Related Transactions.
Not Applicable.
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on
Form 8-K.
(a) (1) Financial Statements
The Financial Statements and Supplementary Data
required by Part II, Item 8 of Form 10-K are included
in this Part IV of this Form 10-K Report as follows:
Page
Consolidated Financial Statements
Consolidated Statements of Income for the
Years Ended December 31, 1993, 1992, and
1991.....................................F-1
Consolidated Balance Sheets at December 31,
1993 and 1992............................F-2
Consolidated Statements of Cash flows for
the Years Ended December 31, 1993, 1992
and 1991.................................F-3
Consolidated Statements of Shareholders'
Equity (Deficit) for the Years Ended
December 31, 1993, 1992 and 1991.........F-4
Notes to Consolidated Financial Statements.F-5
Report of Independent Auditors..................F-6
Quarterly Financial Information.................F-7
(2) Financial Statement Schedules
The following consolidated financial statement
schedules for the year ended December 31, 1993, 1992
and 1991 are filed as part of this Report and should be
read in conjunction with the Company's Consolidated
Financial Statements.
Schedule Page
V Property, Plant and Equipment.........S-1
VI Accumulated Depreciation and
Amortization of Property, Plant
and Equipment.......................S-2
VIII Valuation and Qualifying Accounts.....S-3
IX Short-Term Borrowings.................S-4
X Supplementary Income Statement
Information.........................S-5
All other schedules for which provision is made in
the applicable regulation of the Securities and
Exchange Commission are omitted because they are not
required under the related instructions or because the
required information is given in the financial
statements or notes thereto.
(3) Exhibits
The Exhibits listed in the accompanying Index to
Exhibits are filed as part of this Report.
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the quarter ended
December 31, 1993.
EXHIBIT INDEX
Exhibit No. Note No. Description
3(i) (15) The Company's Restated Certificate of
Incorporation, as amended March 10, 1989
and November 10, 1992
3(ii) (15) The Company's Bylaws
4.1 (A) (11) Indenture agreement dated August 15,
1987 between the Company and IBJ Schroder Bank
& Trust Company, Trustee
(B) First Supplemental Indenture dated as of
February 14, 1994 between the Company and IBJ
Schroder Bank & Trust Company, Trustee
4.2 (11) Indenture agreement dated November
1, 1989 between the Company and IBJ Schroder
Bank & Trust Company, Trustee
4.3(A) (5) Rights Agreement dated as of April 22,
1987 between the Company and Philadelphia
National Bank, as Rights Agent
(B) (15) Amendment dated December 16, 1991
between the Company and First Chicago Trust
Company of New York
Management Contracts, Compensatory Plans and
Arrangements:
10.1(A) (3) The Company's Equity Incentive Plan for
Key Employees
(B) (7) Amendment to the Equity Incentive
Plan for Key Employees
10.2(A) (7) Equity Incentive Plan for Outside
Directors
(B) (12) Amendment effective as of July 2, 1990
to the Equity Incentive Plan for Outside
Directors
10.3(A) (12) Employment Agreement dated September 1,
1986 by and between the Company and William J.
Holcombe, as amended October 1, 1987, as
restated and amended May 9, 1989, and as
amended March 6, 1991
(B) (15) Amendment dated January 1, 1993 to
the Employment Agreement between the Company
and William J. Holcombe
10.4 (15) Employment Agreement dated May 15, 1992
between the Company and William M. Brown
10.5 (15) Change in Control Agreement dated
January 7, 1987 between the Company and
William J. Holcombe, as amended June 15, 1990 and
as amended January 9, 1991
10.6 (15) Change in Control Agreement dated January 9,
1987 between the Company and John J. Carr
10.7 (15) Change in Control Agreement dated April 8, 1990
between the Company and J. Dwayne Attaway
10.8 (15) Change in Control Agreement dated December 23, 1988
between the Company and Brian Lewis
10.9 (15) Change in Control Agreement dated January 7,
1987 between the Company and Stephen F. Agocs
10.10 (15) Change in Control Agreement dated August
5, 1992 between the Company and William M. Brown
10.11 (15) Change in Control Agreement dated August 13,
1992 between the Company and Thomas J. Bird
10.12 Change in Control Agreement dated April 19,
1993 between the Company and Gary E. Walker
and agreed to by him on May 10, 1993
10.13 Employment Agreement dated September 13, 1993
between the Company and Donald K. Farrar
10.14 Change in Control Agreement dated September
13, 1993 between the Company and Donald K. Farrar
Other Material Contracts:
10.15 (2) The Company's Retirement Plan for Salaried
Employees
10.16(A) (8) The Company's Salaried Employees Stock Savings Plan as
(11) amended on July 1, 1987 and as amended on June 14, 1988
(B) (8) Trust Agreement for the Imo Industries Inc. Employees
Stock Savings Plan dated April 7, 1987 between
the Company and Connecticut National Bank
(C) (14) Amendment dated March 16, 1989 to the Imo Industries
Inc. Employees Stock Savings Plan
(D) (12) Amendments dated September 6, 1990 and February 14,
1991 to the Imo Industries Inc. Employees Stock
Savings Plan
(E) (13) Amendment dated May 9, 1991 to the Imo Industries
Inc. Employees Stock Savings Plan
(F) (13) Trust Agreement for the Imo Industries Inc. Employees
Stock Savings Plan as of January 1, 1990
between the Company and Bankers Trust Company
(G) (14) Trust Agreement for the Imo Industries Inc.
Employees Stock Savings Plan as of January 1, 1992
between the Company and Merrill Lynch Trust Company
(H) (15) Amendments dated December 30, 1991 and August 3,
1992 to the Imo Industries Inc. Employees Stock
Savings Plan
10.17 (1) Distribution Agreement dated December 18, 1986
between Transamerica Corporation and the Company
10.18 (1) Tax Agreement between the Company and Transamerica
Corporation
10.19(A) (9)(10) Revolving Credit Agreement, dated September 16, 1988
by and among the Company, Banker's Trust Company,
Barclays Bank PLC, Canadian Imperial Bank of
Commerce as amended December 15, 1988, as amended
February 28, 1989, as amended May 9, 1989 and as
amended September 11, 1989
(B) (12) Amendment dated as of August 31, 1990 to the
agreement dated September 16, 1988 by and among the
Company, Banker's Trust Company, Barclays Bank PLC,
Canadian Imperial Bank of Commerce, Manufacturers
Hanover Trust Company and National City Bank
(C) (14) Amendment dated as of December 31, 1991 to the
agreement dated September 16, 1988 by and among
the Company, Banker's Trust Company, Barclays Bank
PlC, Manufacturers Hanover Trust Company and
National City Bank
(D)(i) (16) Combined Restated Credit Agreement dated July
15, 1993 among the Company, Bankers Trust Company
as lender, issuer and agent, Chemical Bank,
CIBC, Inc., Barclays Bank PLC, National
City Bank, ABN AMRO Bank N.V., New York
Branch, Commerzbank AG, New York Branch, and
Istituto Bancario San Paolo Di Torino S.p.A.
(ii) Amendment No. 1 dated as of November 22, 1993
to the Combined Restated Credit Agreement
dated as of July 15, 1993 among the
Company, Bankers Trust Company as lender,
issuer and agent, Chemical Bank, CIBC, Inc.,
Barclays Bank PLC, National City Bank,
ABN AMRO Bank N.V., New York Branch, Commerzbank AG,
New York Branch, and Istituto Bancario San Paolo Di
Torino S.p.A.
(E)(i) (16) Credit Agreement dated July 15, 1993 among the
Company, Bankers Trust Company as
lender, issuer and agent, Chemical Bank,
CIBC, Inc., Barclays Bank PLC, National City Bank,
ABN AMRO Bank N.V., New York Branch, Commerzbank
AG, New York Branch, Istituto Bancario San Paolo
Di Torino S.p.A., and The Prudential Insurance
Company of America
(ii) Amendment No. 1 dated as of November 22, 1993
to the Credit Agreement dated as of July 15, 1993
among the Company, Bankers Trust Company as lender,
issuer and agent, Chemical Bank, CIBC, Inc., Barclays
Bank PLC, National City Bank, ABN AMRO Bank N.V.,
New York Branch, Commerzbank AG, New York Branch,
Istituto Bancario San Paolo Di Torino S.p.A.,
and The Prudential Insurance Company of America
(F) Guarantee Agreement dated July 15, 1993 by
certain of the Company's Subsidiaries in favor
of Bankers Trust Company as collateral agent
(re-executed to reflect certain signatories
which are different from those on the version of
this Agreement appended as Exhibit 10.16 (F) to
the Company's Form 10K/A for the fiscal
year ended December 31, 1992
(G)(i)(16) General Security Agreement dated July 15, 1993
by the Company and certain of its Subsidiaries
in favor of Bankers Trust Company as collateral agent
(ii) Letter Agreement dated December 1, 1993 between the
Company's Varo Inc. Subsidiary and Bankers Trust
Company as collateral agent, regarding the General
Security Agreement identified herein as Exhibit
10.19 (G)(i)
(H)(i)(16) Securities Pledge Agreement dated July 15, 1993
by the Company and certain of its Subsidiaries
in favor of Bankers Trust Company as collateral agent
(ii) Letter Agreement dated December 1, 1993
between the Company's Varo Inc. Subsidiary and
Bankers Trust Company as collateral agent, regarding
the Securities Pledge Agreement identified herein
as Exhibit 10.19 (H)(i)
(I)(i)(16) Intellectual Property Pledge Agreement dated July 15,
1993 by the Company and certain of its Subsidiaries
in favor of Bankers Trust Company as collateral agent
(ii) Letter Agreement dated December 1, 1993 between the
Company's Varo Inc. Subsidiary and Bankers Trust
Company as collateral agent, regarding the
Intellectual Property Pledge Agreement identified
herein as Exhibit 10.19 (I)(i)
(J) (16) Collection Deposit and Concentration Account Pledge
Agreement dated July 15, 1993 by the Company and
certain of its Subsidiaries in favor of Bankers Trust
Company as collateral agent
(K) (16) Intercreditor and Collateral Agency Agreement dated
July 15, 1993 among the Company, Bankers Trust
Company as lender, issuer, agent and collateral agent,
Chemical Bank, CIBC, Inc., Barclays Bank PLC,
National City Bank, ABN AMRO Bank N.V. New York
Branch, Commerzbank AG New York Branch, Istituto
Bancario San Paolo Di Torino S.p.A., and The
Prudential Insurance Company of America
(L) (16) Mortgage, Assignment of Rents, Assignment
Agreement and Fixture Filing dated July 15, 1993
by the Company in favor of Bankers Trust Company
relating to premises in Mercer County, New Jersey
(M) (16) Schedule of Omitted Mortgages and Deeds of Trust
(N) Schedule of Additional Omitted Mortgages
and Deeds of Trust
10.20(A) (4) 12.75% Note Agreement dated December 29, 1982
between the Company and The Prudential Insurance
Company of America ("Prudential")
(B) (4) Agreement dated December 22, 1986 between the
Company and The Prudential amending the 12.75%
Note Agreement dated December 29, 1982 between
the Company and Prudential
(C) (11) Amendment dated as of September 16, 1988 to the
Agreement dated December 29, 1982 between the
Company and Prudential
10.20(D) (11) Amendment dated as of June 13, 1989 to the Agreement
dated December 29, 1982 between the Company and
Prudential
(E) (12) Amendment dated November 27,1990 to the agreement
dated December 29, 1982 between the Company and
Prudential
(F) (14) Amendment dated April 2, 1991, Amendment dated
May 14, 1991, Amendment dated November 5, 1991,
Amendment dated November 12, 1991 and Amendment
dated February 13, 1992 between the Company
and Prudential
(G) (15) Amendment dated August 7, 1992 between the Company
and Prudential
(H) (16) Amendment Agreement dated July 15, 1993 between
the Company and The Prudential Insurance Company
of America
(I)(i)(16) Amended and Restated 12.75% Promissory Note Agreement
dated July 15, 1993 between the Company and The
Prudential Insurance Company of America
(ii) Amendment No. 1 dated as of December 17, 1993 to the
Amended and Restated 12.75% Promissory Note Agreement
dated July 15, 1993 between the Company and the
Prudential Insurance Company of America
(J) (16) Warrant dated July 15, 1993 issued by the Company
to The Prudential Insurance Company of America
10.21(A) (4) 9.60% Note Agreement dated November 5, 1975
between the Company and Prudential
(B) (4) Agreement dated December 22, 1986 between the
Company and Prudential amending the 9.60% Note
Agreement dated November 5, 1975 between the
Company and Prudential
10.22(A) (9) 10.35% Note Agreement dated September 16, 1988
between the Company and Prudential
(B) (11) Amendment dated as of June 13, 1989 to the
Agreement dated September 16, 1988 between the
Company and Prudential
(C) (12) Amendment dated November 27, 1990 to the agreement
dated September 16, 1988, between the Company and
Prudential
(D) (14) Amendment dated April 2, 1991, Amendment dated
May 14, 1991, Amendment dated November 5, 1991,
Amendment dated November 12, 1991 and Amendment
dated February 13, 1992 between the Company and
Prudential
(E) (15) Amendment dated August 7, 1992 between the Company
and Prudential
(F) (16) Amendment Agreement dated July 15, 1993 between the
Company and The Prudential Insurance Company of
America
(G) (16) Amended and Restated 10.35% Promissory Note Agreement
dated July 15, 1993 between the Company and
Prudential Insurance Company of America
(H) Amendment No. 1 dated as of December 17, 1993 to the
Amended and Restated 10.35% Promissory Note Agreement
dated July 15, 1993 between the Company and Prudential
Insurance Company of America
10.23(A) Amendment No. 2 dated as of December 31, 1993 to the
New Credit Agreement, the Combined Restated Credit
Agreement and the Prudential Agreements among the
Company, Bankers Trust Company as lender, issuer and
agent, Chemical Bank, CIBC, Inc., Barclays Bank PLC,
National City Bank, ABN AMRO Bank N.V., New York
Branch, Commerzbank AG, New York Branch, Istituto
Bancario San Paolo Di Torino S.p.A., and The Prudential
Insurance Company of America. This Amendment No. 2
Amends: (i) the Combined Restated Credit Agreement
identified herein as Exhibit 10.19(D)(i) as amended,
(ii) the Credit Agreement identified herein as
Exhibit 10.19(E)(i) as amended, (iii) the Amended
and Restated 12.75% Promissory Note Agreement
identified herein as Exhibit 10.20(I)(i) as amended,
and (iv) the Amended and Restated 10.35% Promissory
Note Agreement identified herein as Exhibit 10.22(G)
as amended.
(B) Consent and Amendment No. 3 dated as of February 28,
1994 to the New Credit Agreement, the Combined Restated
Credit Agreement and the Prudential Agreements
among the Company, Bankers Trust Company as
lender, issuer and agent, Chemical Bank, CIBC,
Inc., Barclays Bank PLC, National City Bank,
ABN AMRO Bank N.V., New York Branch, Commerzbank AG,
New York Branch, Istituto Bancario San Paolo Di
Torino S.p.A., and The Prudential Insurance Company
of America. This Consent and Amendment No. 3 amends:
(i) the Combined Restated Credit Agreement identified
herein as Exhibit 10.19(D)(i) as amended, (ii)
the Credit Agreement identified herein as Exhibit
10.19(E)(i) amended,(iii) the Amended and Restated
12.75% Promissory Note Agreement identified herein
as Exhibit 10.20(I)(i) as amended, and (iv) the
Amended and Restated 10.35% Promissory Note
Agreement identified herein as Exhibit 10.22(G)
as amended.
10.24 (6) Agreement and Plan of Merger dated July 13, 1987
among the Company, BC Acquisition Corp. and Baird
Corporation
10.25 (4) Stock Purchase Agreement dated November 30, 1987
between the Company and TRIFIN B.V.
10.26 (9) Agreement and Plan of Merger, dated as of August 21,
1988 by and among the Company, VI Acquisition Corp.
and Varo, Inc.
10.27 (9) Stock option agreement, dated as of August 21, 1988,
between VI Acquisition Corp. and Varo, Inc.
10.28 (11) Agreement for the purchase of the stock of Warren
Pumps Inc. by the Company dated April 3, 1989 among
the Company, Warren Pumps Inc. and the holders of
all of the issued and outstanding stock of Warren
Pumps Inc.
10.29 (11) Share Purchase Agreement dated April 27, 1989,
among Aureoleena Investments Limited, Bushbranch
Investments Limited, and Canape Holdings Limited,
as vendors, and R. J. Burns, C.P. Burns and J.A.
Burns as guarantors, and Morse Controls Limited as
purchaser
10.30 (11) Stock Purchase Agreement dated July 31, 1989 between
Immobiliare Marsicana S.R.L. and Ser-Fid Italiana
S.p.A.
10.31 (11) Agreement for sale of assets dated November 30,
1989 among Ferguson Gear Company, Robert E. Lewis
and the Company
10.32 (12) Agreement for sale of assets dated June 15, 1990
among Clifford G. Brockmyre, Robert Healy, Quabbin
Industries Inc., Pro Mac Engineering Inc., BHP
Associates, Industrial Airpark Associates and the
Company
10.33 (12) Stock Purchase Agreement dated as of May 31, 1990
among United Scientific Holdings PLC, United
Scientific Inc. and the Company
10.34 Asset Sale Agreement dated as of May 10, 1993 between
the Company and Roller Bearing Company of America
10.35 Stock Sale and Asset Transfer Agreement dated as of
July 14, 1993 between the Company and Nova Digm
Acquisition, Inc.
10.36(i) Stock Purchase Agreement dated as of October 28, 1993
among the Company, Imo Industries GmbH, Mark Controls
Corporation and Mark Controls GmbH i. Gr.
(ii) Amendment No. 1 dated as of November 11, 1993 to Stock
Purchase Agreement dated as of October 28, 1993, among
the Company, Imo Industries GmbH, Mark Controls
Corporation and Mark Controls GmbH i. Gr.
(iii) Amendment No. 2 dated as of December 1, 1993 to Stock
Purchase Agreement dated as of October 28, 1993 among
the Company, Mark Controls Corporation, Imo Industries
GmbH and Mark Controls GmbH i. Gr.
10.37(i) German Asset Purchase Agreement among Imo Industries
GmbH, Mark Controls GmbH i. Gr., the Company and Mark
Controls Corporation
(ii) Amendment No. 1 dated as of November 23, 1993 to German
Asset Purchase Agreement dated as of November 18, 1993
among Imo Industries GmbH, the Company, Mark Controls
GmbH i. Gr. and Mark Controls Corporation
(iii) Amendment No. 2 dated as of December 1, 1993 to the
German Asset Purchase Agreement dated as November 23,
1993 among the Company, Mark Controls Corporation, Imo
Industries GmbH and Mark Controls GmbH i. Gr.
20 Proxy Statement for the Company's 1994 Annual Meeting
of Stockholders (incorporated by reference to the
Company's Proxy Statement to be filed separately
with the Commission pursuant to Regulation 14A of the
Securities Exchange Act of 1934, as amended)
21 Subsidiaries of the Company
23 Consent of Ernst & Young dated March 31, 1994
_______________________________________________
NOTES
(1) Incorporated by reference to the Company's Form 8 Amendment
No. 2 filed with the Commission on December 9, 1986 amending
the Company's Form 10 as filed with the Commission on October 15, 1986.
(2) Incorporated by reference to the Company's Form 10-K filed
with the Commission for the fiscal year ended December 31, 1986.
(3) Incorporated by reference to the Company's Form S-8 as filed with
the Commission on April 10, 1987.
(4) Incorporated by reference to the Company's Form 8-K filed
with the Commission on February 17, 1987.
(5) Incorporated by reference to the Company's Form 8-K filed with the
Commission on May 4, 1987.
(6) Incorporated by reference to the Company's Schedule 14D-1 as filed
with the Commission on July 14, 1987.
(7) Incorporated by reference to the Company's Form 10-K filed with the
Commission on March 28, 1988.
(8) Incorporated by reference to the Imo Industries Inc. Employees Stock
Savings Plan Form 11-K filed with the Commission on April 13, 1988.
(9) Incorporated by reference to the Company's Form 8-K filed
with the Commission on October 14, 1988.
(10) Incorporated by reference to the Company's Form S-1 filed
with the Commission on October 23, 1989.
(11) Incorporated by reference to the Company's Form 10-K filed with the
Commission on March 29, 1990.
(12) Incorporated by reference to the Company's Form 10-K filed with the
Commission on March 28, 1991.
(13) Incorporated by reference to the Company's Form S-8 filed with the
Commission on June 17, 1991.
(14) Incorporated by reference to the Company's Form 10-K filed with the
Commission on March 26, 1992.
(15) Incorporated by reference to the Company's Form 10-K filed with the
Commission on April 19, 1993.
(16) Incorporated by reference to the Company's Form 10-K/A filed with
the Commission on August 6, 1993 amending the Company's Form 10-K
as filed with the Commission on April 19, 1993.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, Imo Industries Inc. has duly
caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
Date: March 31, 1994
IMO INDUSTRIES INC.
By: /s/ DONALD K. FARRAR
Donald K. Farrar
Chief Executive Officer,
President and Director
Pursuant to the requirements of the Securities Exchange
Act of 1934, this report has been signed below by the following
persons on behalf of Imo Industries Inc. and in the capacities
and on the dates indicated.
/s/ DONALD K. FARRAR Chief Executive Officer,
Donald K. Farrar President and Director
(principal executive officer) March 31, 1994
/s/ WILLIAM M. BROWN Executive Vice President and
William M. Brown Chief Financial Officer
(principal financial officer) March 31, 1994
/s/ ROBERT A. DERR, II Vice President and Corporate
Robert A. Derr, II Controller
(principal accounting officer) March 31, 1994
/s/ WILLIAM J. HOLCOMBE Chairman and Director March 31, 1994
William J. Holcombe
/s/ STEPHEN F. AGOCS Director March 31, 1994
Stephen F. Agocs
/s/ JAMES B. EDWARDS Director March 31, 1994
James B. Edwards
/s/ J. SPENCER GOULD Director March 31, 1994
J. Spencer Gould
/s/ RICHARD J. GROSH Director March 31, 1994
Richard J. Grosh
/s/ CARTER P. THACHER Director March 31, 1994
Carter P. Thacher
/s/ ARTHUR E. VAN LEUVEN Director March 31, 1994
Arthur E. Van Leuven
<TABLE>
Imo Industries Inc. and Subsidiaries
Consolidated Statements of Income
(Dollars in thousands except per share amounts)
Year Ended December 31,
<CAPTION>
1993 1992*<F1> 1991*<F1>
<S> <C> <C> <C>
Net Sales $ 641,709 $ 733,603 $ 777,312
Cost of products sold 458,769 545,796 566,201
Gross Profit 182,940 187,807 211,111
Selling, general and administrative
expenses 135,002 142,806 140,682
Research and development expenses 11,332 12,065 11,102
Unusual items 17,726 24,000 -
Income from Operations 18,880 8,936 59,327
Interest expense 46,157 50,160 50,950
Interest income (578) (742) (1,657)
Other (income) expense--net (172) (2,017) (777)
Equity in income of unconsolidated
companies (2,550) (6,297) (4,878)
Income (Loss) From Continuing Operations
Before Income Taxes, Minority Interest,
Extraordinary Item and Cumulative
Effect of Change in Accounting
Principle (23,977) (32,168) 15,689
Income taxes (benefit):
Current - - 5,089
Deferred 15,000 (10,326) 872
Total Income Taxes (Benefit) 15,000 (10,326) 5,961
Minority interest 164 418 208
Income (Loss) From Continuing Operations
Before Extraordinary Item and
Cumulative Effect of Change in
Accounting Principle (39,141) (22,260) 9,520
Discontinued Operation:
Income (Loss) from Operations (net of
income tax benefit of $15.6 million
in 1992 and expense of $1.7 million
in 1991) (45,316) (32,740) 1,891
Estimated Loss on Disposal (168,014) - -
Total Loss from Discontinued
Operation (213,330) (32,740) 1,891
Extraordinary Item - Loss on
Extinguishment of Debt (18,095) - -
Cumulative effect of change in
accounting principle (net of income
tax benefit of $16,910) - (27,590) -
Net Income (Loss) $(270,566) $ (82,590) $ 11,411
Earnings (loss) per share:
Continuing operations before
extraordinary item and cumulative
effect of change in accounting
principle $(2.32) $(1.32) $.57
Discontinued operation $(12.63) $(1.94) $.11
Extraordinary item $(1.07) - -
Cumulative effect of change in
accounting principle - $(1.64) -
Net income (loss) $(16.02) $(4.90) $.68
Weighted average number of shares
outstanding 16,890,501 16,869,394 16,811,343
<FN>
See accompanying notes to consolidated financial statements.
<F1> * Reclassified to conform to 1993 presentation.
F-1
</TABLE>
<TABLE>
Imo Industries Inc. and Subsidiaries
Consolidated Balance Sheets
December 31, (Dollars in thousands)
<CAPTION>
1993 1992*<F1>
<S> <C> <C>
Assets
Current Assets
Cash and cash equivalents $ 19,935 $ 15,343
Trade accounts and notes receivable,
less allowance of $3,144 in 1993 and
$3,506 in 1992 102,871 145,729
Inventories-net 116,254 143,224
Recoverable income taxes 3,826 8,639
Deferred income taxes 2,680 27,955
Net assets of discontinued operation -
current 47,993 65,092
Prepaid expenses and other current assets 13,908 8,584
Total Current Assets 307,467 414,566
Property, Plant and Equipment-on the
basis of cost
Land 18,499 21,029
Buildings and improvements 105,624 113,857
Machinery and equipment 224,632 250,887
348,755 385,773
Less allowances for depreciation and
amortization (178,960) (189,345)
Net Property, Plant and Equipment 169,795 196,428
Intangible Assets, Principally Goodwill 93,123 105,044
Investments in and Advances to
Unconsolidated Companies 6,466 6,472
Net Assets of Discontinued Operation -
Noncurrent 37,007 201,000
Other Assets 24,053 27,070
Total Assets $ 637,911 $ 950,580
Liabilities and Shareholders' Equity
(Deficit)
Current Liabilities
Notes payable $ 42,759 $ 74,032
Trade accounts payable 47,479 54,340
Accrued expenses and other liabilities 88,911 90,137
Accrued costs related to discontinued
operation 12,688 -
Current portion of long-term debt 8,527 85,083
Total Current Liabilities 200,364 303,592
Long-Term Debt 353,752 314,274
Deferred Income Taxes 13,944 22,804
Accrued Postretirement Benefits -
Long-Term 40,971 40,169
Accrued Pension Expense and Other
Liabilities 61,101 26,434
Total Liabilities 670,132 707,273
Minority Interest 1,746 1,904
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 18,584,058 and
18,554,058 in 1993 and 1992, respectively 18,584 18,554
Additional paid-in capital 79,080 78,557
Retained earnings (deficit) (110,233) 160,333
Cumulative foreign currency translation
adjustments (1,610) 1,979
Minimum pension liability adjustment (1,768) -
Treasury stock at cost - 1,672,788 shares
in 1993 and 1992 (18,020) (18,020)
Total Shareholders' Equity (Deficit) (33,967) 241,403
Total Liabilities and Shareholders' Equity
(Deficit) $ 637,911 $ 950,580
<FN>
See accompanying notes to consolidated financial statements.
<F1> * Reclassified to conform to 1993 presentation.
F-2
</TABLE>
<TABLE>
Imo Industries Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(Dollars in thousands)
Year Ended December 31,
<CAPTION>
1993 1992*<F1> 1991*<F1>
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income (loss) $(270,566) $(82,590) $ 11,411
Adjustments to reconcile net income
(loss) to net cash provided by
continuing operations:
Discontinued operation 213,330 32,740 (1,891)
Depreciation 23,197 24,903 24,928
Amortization 6,187 5,970 5,967
Provision for losses on accounts
receivable 1,720 830 1,101
Provision (credit) for deferred
income taxes 15,000 (10,326) 872
Dividends received in excess of
(less than) equity in earnings of
unconsolidated companies 137 (874) 1,885
Minority interest in net income 164 418 208
Loss (gain) on sale of property,
plant and equipment 81 (1,667) (654)
Extraordinary item 18,095 - -
Cumulative effect of accounting
change (net of applicable
income taxes) - 27,590 -
Unusual items 17,726 24,000 -
Other changes in operating assets
and liabilities:
Decrease in accounts and notes
receivable 27,622 6,725 5,587
(Increase) decrease in inventories (4,389) 23,198 20,639
Decrease (increase) in recoverable
income taxes 7,270 (4,488) (2,047)
Decrease in accounts payable
and accrued expenses (12,419) (11,171) (6,941)
Other operating assets and
liabilities (8,709) 2,222 (4,619)
Net cash provided by continuing
operations 34,446 37,480 56,446
Net cash (used by) provided by
discontinued operation (10,439) (11,269) 12,974
Net Cash Provided by Operating
Activities 24,007 26,211 69,420
INVESTING ACTIVITIES
Proceeds from sale of businesses, net 86,481 - -
Purchases of property, plant and
equipment (13,885) (18,126) (18,400)
Acquisitions, net of cash acquired - (8,168) (12,195)
Proceeds from sale of property, plant
and equipment 100 5,039 980
Net cash used by discontinued operation (2,182) (4,721) (10,935)
Other 290 773 1,846
Net Cash Provided by (Used in)
Investing Activities 70,804 (25,203) (38,704)
FINANCING ACTIVITIES
(Decrease) increase in notes payable (29,915) 32,262 (13,676)
Proceeds from long-term borrowings 4,377 412 4,240
Principal payments on long-term debt (55,575) (18,422) (10,521)
Proceeds from stock options exercised - 39 469
Payment of debt financing costs (8,326) - -
Dividends paid - (8,432) (8,415)
Dividends paid to minority interests (82) (182) (2,104)
Other (236) (285) (43)
Net Cash (Used in) Provided by
Financing Activities (89,757) 5,392 (30,050)
Effect of exchange rate changes on cash (462) (530) (133)
Increase in Cash and Cash Equivalents 4,592 5,870 533
Cash and cash equivalents at
beginning of year 15,343 9,473 8,940
Cash and Cash Equivalents at
End of Year $ 19,935 $ 15,343 $ 9,473
<FN>
See Accompanying notes to consolidated financial statements.
<F1> * Reclassified to conform to 1993 presentation.
F-3
</TABLE>
<TABLE>
Imo Industries Inc. and Subsidiaries
Consolidated Statements of Shareholders' Equity (Deficit)
(Dollars in thousands)
<CAPTION>
Cumulative
Foreign Minimum
Additional Retained Currency Pension
Common Paid-In Earnings Translation Liability Treasury
Stock Capital (Deficit) Adjustments Adjustment Stock Total
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at
January 1, 1991 $18,493 $77,712 $246,251 $10,041 $ - $(18,970) $333,527
Net income - - 11,411 - - - 11,411
Cash dividends
($.50 per share) - - (8,415) - - - (8,415)
Foreign currency
translation
adjustments - - - (1,429) - - (1,429)
Shares issued under
stock option plan 47 422 - - - - 469
Treasury stock issued
to employee stock
savings plan - 398 - - - 950 1,348
Balance at
December 31, 1991 18,540 78,532 249,247 8,612 - (18,020) 336,911
Net income (loss) - - (82,590) - - - (82,590)
Cash dividends
($.375 per share) - - (6,324) - - - (6,324)
Foreign currency
translation
adjustments - - - (6,633) - - (6,633)
Shares issued under
stock option plan 14 25 - - - - 39
Balance at
December 31, 1992 18,554 78,557 160,333 1,979 - (18,020) 241,403
Net income (loss) - - (270,566) - - - (270,566)
Foreign currency
translation
adjustments - - - (3,589) - - (3,589)
Minimum pension
liability adjustment - - - - (1,768) - (1,768)
Issuance of common
stock warrants - 336 - - - - 336
Restricted shares issued
under the equity
incentive plan 30 187 - - - - 217
Balance at
December 31, 1993 $18,584 $79,080 $(110,233) $(1,610) $(1,768) $(18,020) $(33,967)
<FN>
See accompanying notes to consolidated financial statements.
F-4
</TABLE>
Imo Industries Inc. and Subsidiaries
Notes to Consolidated Financial Statements
Note 1 Significant Accounting Policies
Basis of Presentation: The accompanying financial statements have been
prepared assuming the Company will continue as a going concern. The
Company currently anticipates that cash flow from operations together
with cash generated by asset sales will be sufficient to meet the
required repayment of its senior debt by September 30, 1994 (see Note
8). Without the sale of a sufficient portion of its assets currently
held for sale or the refinancing of its senior obligations, the
Company would not have sufficient cash flow from operations to meet
this repayment requirement. The process of disposing of assets is
continuing and in addition, management is presently seeking
replacement financing. Although significant progress has been made to
date, and management believes its plans are achievable, there can be
no guarantee as to the Company's ability to sell sufficient assets or
obtain refinancing within the necessary time frame.
Under circumstances which the Company considers unlikely, failure to
meet the required repayment schedule would result in its default of
the senior lending agreements and allow the senior lenders'
acceleration of the debt which the Company would, under these
circumstances, be unable to pay. Additionally, acceleration by the
senior lenders, if not cured, would enable the trustee or holders of
the Company's Subordinated Debentures to require the Company by notice
to cause the acceleration to be rescinded within 30 days of such
notice. If the Company is unable to accomplish this, the trustee or
holders of at least 25% of the Subordinated Debentures could demand
immediate payment of the Subordinated Debentures. In such event, the
Company would not have sufficient funds to pay the $300 million of
outstanding Subordinated Debentures.
Consolidation: The consolidated financial statements include the
accounts of the Company and its majority-owned subsidiaries.
Significant intercompany transactions have been eliminated in
consolidation. The Company uses the equity method to account for
investments in a partnership and other corporations in which it does
not own a majority voting interest.
Translation of Foreign Currencies: Assets and liabilities of
international operations are translated into U.S. dollars at current
exchange rates. Income and expense accounts are translated into U.S.
dollars at average rates of exchange prevailing during the year.
Translation adjustments are reflected as a separate component of
shareholders' equity.
Cash Equivalents: Cash equivalents include investments in government
securities funds and certificates of deposit. Investment periods are
generally less than one month.
Inventories: Inventories are carried at the lower of cost or market,
cost being determined principally on the basis of standards which
approximate actual costs on the first-in, first-out method.
Revenue Recognition: Revenues, other than for long-term contracts,
are recorded generally when the Company's products are shipped.
Revenues on long-term contracts are recorded principally using the
percentage-of-completion method measured on a unit of delivery basis.
For long-term construction type contracts not on percentage-of-
completion method, revenue is recognized using the completed contract
method due to the production cycle as well as historical experience
with these products which are manufactured by the Delaval Turbine
Division.
Depreciation and Amortization: Depreciation and amortization of plant
and equipment are computed principally by the straight-line method.
Interest Expense: Interest expense incurred during the construction
of facilities and equipment is capitalized as part of the cost of
those assets. Total interest paid by the Company amounted to $58.6
million in 1993, $58.4 million in 1992 and $60.4 million in 1991.
Total interest capitalized was $.1 million in 1993, $.9 million in
1992 and $1.1 million in 1991.
Earnings Per Share: Earnings per share are based upon the weighted
average number of shares of common stock outstanding. Common stock
equivalents related to stock options are excluded because their effect
is not material.
Intangible Assets: Goodwill of companies acquired is being amortized
on the straight-line basis over 40 years. The carrying value of
goodwill is reviewed when indicators of impairment are present, by
evaluating future cash flows of the associated operations to determine
if impairment exists. Goodwill related to continuing operations at
December 31, 1993 and 1992 was $74.1 million and $83.9 million,
respectively, net of respective accumulated amortization of $13.3
million and $11.5 million. As a result of the decision to sell the
Electro-Optical Systems businesses, approximately $104.6 million of
associated goodwill was written off at year-end 1993 in connection
with the adjustment of the net investment to estimated net realizable
value. Patents are amortized over the shorter of their legal or
estimated useful lives.
Restatements: The Consolidated Financial Statements, and the notes
thereto, have been restated to reflect the Company's Electro-Optical
Systems business as a discontinued operation in accordance with
Accounting Principles Board Opinion No. 30. Certain prior year
amounts have been reclassified to conform to the current year
presentation.
Note 2 Discontinued Operation
In January 1994, the Company announced its intention to dispose of its
Electro-Optical Systems operations which consists of the Company's
subsidiaries Varo Inc. and Baird Corporation. Under a plan approved
by the Board of Directors, the Company intends to sell these
operations in 1994 and has engaged an outside investment banking firm
to assist in the divestiture.
In accordance with APB Opinion No. 30, the disposal of this business
segment has been accounted for as a discontinued operation and,
accordingly, its operating results are segregated and reported as a
Discontinued Operation in the accompanying Consolidated Statements of
Income. Prior year financial statements have been reclassified to
conform to the current year presentation.
Net assets and liabilities of the Discontinued Operation consist of
the following:
December 31 (Dollars in thousands) 1993 1992
Current Assets:
Receivables $24,544 $26,378
Inventories 53,093 63,683
Other current assets 1,845 6,172
79,482 96,233
Current Liabilities:
Trade accounts payable 13,715 17,010
Other current liabilities 17,774 14,131
31,489 31,141
Net Current Assets $47,993 $65,092
Long-term Assets:
Property $40,508 $101,737
Intangible assets - 109,612
Other long-term assets 3,548 2,537
44,056 213,886
Long-term Liabilities 7,049 12,886
Net Long-term Assets $37,007 $201,000
Net Assets $85,000 $266,092
A condensed summary of operations for the Discontinued Operation is as
follows:
Year Ended December 31
(Dollars in thousands) 1993 1992 1991
Net Sales $171,548 $194,654 $246,674
Income (loss) from operations
before income taxes and
minority interest (44,933) (48,498) 4,507
Income taxes (benefit) - (15,560) 1,713
Minority interest 383 (198) 903
Income (loss) from operations $(45,316) $(32,740) $ 1,891
Income (loss) from operations of the Discontinued Operation for 1993,
1992 and 1991 includes allocated interest expense. Interest expense
of $10.2 million, $7.7 million, and $7.7 million, respectively, 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 year end.
The 1993 loss from operations of the Discontinued Operation includes
unusual charges of $23.3 million. These charges are principally
provisions for revised estimates-to-complete on current contracts of
$13.9 million, other costs of $5.6 million related to the write-down
of assets to net realizable value, $1.9 million of estimated costs
associated with settlements of pending litigation and other costs of
$1.9 million. Unusual charges of $27.9 million are included in loss
from Discontinued Operations in 1992. These charges include provisions
for the estimated costs associated with operational disruptions and
restructuring, including revised estimates-to-complete on current
contracts, of $22 million, costs associated with pending litigation
and certain warranty and claim settlements of $4 million, and other
costs of $1.9 million related to the write-down of assets, principally
inventories, to net realizable value.
The Company also recorded charges of $155.3 million at December 31,
1993 (which includes a $104.6 million goodwill write-off. See Note 1)
to reduce the carrying amount of the Discontinued Operation to
estimated realizable value. Additionally, the Company provided for
anticipated operating losses of $12.7 million (including $7.0 million
of allocated interest) through the date of sale, which is expected to
occur in the last half of 1994.
See Note 14 for discussion of contingencies related to the Electro-
Optical Systems business.
Note 3 Restructuring Plan
Asset Divestiture Program
On October 29, 1992, the Company announced a restructuring plan
pursuant to which it was seeking the divestiture of operations
representing approximately 15% of its assets. The planned divestitures
included units of its aerospace businesses, units of its instruments
and transducer businesses, certain other non-strategic businesses and
underutilized real estate holdings. In January 1994, the Company
announced plans to include the Electro-Optical Systems operations in
the asset divestiture program (See Note 2). As of December 31, 1993,
the Company has sold its Heim Bearings, Aerospace and Barksdale
Controls operations for proceeds of approximately $91 million, and
thus has completed a significant portion of the asset divestiture
program. These proceeds, net of related expenses, were used to repay
senior debt in the amount of $81.9 million in 1993 in accordance with
the terms of the restructured credit facilities (See Note 8).
Excluding the Electro-Optical Systems operations, the remaining assets
to be sold in this program consist of a unit of the Company's
instruments and transducer businesses, certain other non-strategic
businesses and underutilized real estate holdings. The Company targets
completion of the divestitures over the next 9 to 12 months. Based on
current conditions, management now believes that certain of the
remaining assets, both operating units and real estate, are unlikely
to net the sale prices originally expected. Accordingly, the Company
has deferred gains of $18.0 million on the assets divested during 1993
and has provided $10.1 million ($.60 per share) for the net loss now
anticipated for the program as a whole. This amount was classified as
an unusual charge in loss from continuing operations (See Note 6).
The operating units sold and the remaining assets to be sold as part
of the asset divestiture program, except for the Electro-Optical
Systems operations, have been grouped as a separate segment entitled
Other for segment reporting purposes. See Note 10 for segment
operating results for the years ending December 31, 1993, 1992 and
1991. These units in total produced essentially break-even results
before unusual items and income taxes for the years 1993 and 1992 and
income of approximately $4.2 million in 1991. These results are net
of $5.9 million, $8.3 million and $8.4 million of interest expense
which has been allocated based on net assets for the years 1993, 1992
and 1991, respectively.
Restructuring Program
In January 1994, the Company announced plans to reduce the Company's
cost structure and to improve productivity on a worldwide basis. The
actions under this restructuring plan will include reductions in the
number of employees and the consolidation of certain of the Company's
operating units. The Company plans to consolidate its four domestic
turbomachinery aftermarket maintenance operations into one operating
unit and combine certain operations of its European mechanical
controls and automotive components operating units.
In the fourth quarter of 1993, the Company recorded a charge of $8.6
million ($.51 per share) relating to this program, which amount was
classified as an unusual charge in loss from continuing operations
(See Note 6). The restructuring charge was principally comprised of
severance costs and impacts both the Company's industry segments and
the Corporate office (See Note 10). At December 31, 1993, $8.4
million is included in accrued expenses and other liabilities related
to restructuring costs.
Note 4 Inventories
Inventories are summarized as follows:
December 31 (Dollars in thousands) 1993 1992
Finished products $ 39,074 $ 49,522
Work in process 65,802 69,415
Materials and supplies 45,786 58,147
150,662 177,084
Less customers' progress payments 20,848 16,567
Less valuation allowance 13,560 17,293
$116,254 $143,224
Note 5 Accrued Expenses and Other Liabilities
Accrued expenses and other liabilities consist of the following:
December 31 (Dollars in thousands) 1993 1992
Accrued contract completion costs $ 967 $ 773
Accrued product warranty costs 8,907 8,666
Accrued litigation and claim costs 14,312 18,751
Payroll and related items 15,139 18,455
Accrued interest payable 11,590 12,934
Customer advance payments 5,168 16,604
Accrued restructuring costs 8,414 -
Accrued financing fees 5,000 -
Other 19,414 13,954
$ 88,911 $ 90,137
Note 6 Unusual Items
During the twelve months ended December 31, 1993, the Company
recognized unusual charges of $17.7 million ($1.05 per share) in loss
from continuing operations. During the fourth quarter of 1993, the
Company recognized charges of $23.7 million that include provisions of
$8.6 million related to the restructuring and consolidation of certain
of the Company's operating units (See Note 3), $10.1 million expected
net loss overall, based on current conditions, related to the
Company's asset divestiture program (See Note 3) and $5.0 million in
debt related financing fees associated with obtaining consents from
holders of its 12.25% Senior Subordinated Debentures to amend the
indenture governing these debentures and obtain waivers from its
senior lenders for non-compliance with certain financial covenants as
a result of the fourth quarter net loss (See Note 8). These charges
are net of unusual income of $6.0 million recorded in the third
quarter of 1993 as a result of a change in estimate related to legal
costs associated with pending litigation.
The twelve months ended December 31, 1992 include unusual charges of
$24.0 million in loss from continuing operations. These charges are
principally provisions for the estimated costs associated with pending
litigation and certain warranty and claim settlements.
Note 7 Income Taxes
The components of income tax expense (benefit) from continuing
operations are:
Year Ended December 31
(Dollars in thousands) 1993 1992 1991
Current:
Federal $ - $ - $2,543
Foreign - - 1,652
State - - 894
- - 5,089
Deferred:
Federal 14,400 (5,813) 125
Foreign and State 600 (4,513) 747
15,000 (10,326) 872
$15,000 $(10,326) $5,961
The $15.0 million deferred income tax expense recorded in 1993 relates
to adjustments in valuation allowances on deferred tax assets recorded
in prior years due to changes in estimates of recoverability.
The Company adopted FASB Statement No. 109 "Accounting for Income
Taxes" effective January 1, 1992. This Statement supersedes Statement
No. 96 "Accounting for Income Taxes" which was adopted by the Company
in 1987. The effect of adopting Statement No. 109 on the Company's
December 31, 1992 financial statements is not material.
Under Statement No. 109, the liability method is used in accounting
for income taxes. Under this method, deferred tax assets and
liabilities are determined based on differences between financial
reporting and tax bases of assets and liabilities and are measured
using the enacted tax rates and laws that will be in effect when the
differences are expected to reverse.
Deferred income taxes reflect the net tax effects of temporary
differences between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for income tax
purposes. Significant components of the Company's deferred tax assets
and liabilities as of December 31, 1993 and 1992 are as follows:
December 31 (Dollars in thousands)
1993 1992
Current Long-term Current Long-term
Deferred tax assets:
Postretirement benefit
obligation $ 765 $ 14,340 $ - $ 17,150
Expenses not currently
deductible 21,308 32,436 27,997 -
Net operating loss carryover - 17,150 - -
Tax credit carryover - 1,755 - 1,550
Total deferred tax assets 22,073 65,681 27,997 18,700
Valuation allowance for
deferred tax assets (15,061) (45,154) - (1,500)
Net deferred tax assets 7,012 20,527 27,997 17,200
Deferred tax liabilities:
Tax over book depreciation - 17,708 - 20,251
Difference between
book and tax basis
of property - 8,455 - 16,659
Difference between book
and tax basis of income
recognition 4,332 4,332 - -
Other - 3,976 42 3,508
Total deferred tax
liabilities 4,332 34,471 42 40,418
Net deferred tax assets
(liabilities) $ 2,680 $(13,944) $27,955 $(23,218)
The components of deferred income tax expense (credit) from continuing
operations are as follows for the year ended December 31, 1991:
(Dollars in thousands)
Accelerated depreciation $ 1,422
Reserves not deductible in
year provided 1,344
Inventory valuation (1,635)
Difference between book and
tax basis of income recognition -
Other (259)
$ 872
At December 31, 1993, unremitted earnings of foreign subsidiaries were
approximately $24 million. Since it is the Company's intention to
indefinitely reinvest these earnings, no U.S. taxes have been
provided. Determination of the amount of unrecognized deferred tax
liability on these unremitted earnings is not practicable. The amount
of foreign withholding taxes that would be payable upon remittance of
those earnings is approximately $1 million.
The components of income (loss) from continuing operations before
income taxes, minority interest, extraordinary item and cumulative
effect of change in accounting principle are:
Year Ended December 31
(Dollars in thousands) 1993 1992 1991
United States $(20,310) $(34,437) $10,170
Foreign (3,667) 2,269 5,519
$(23,977) $(32,168) $15,689
U.S. income tax expense (benefit) at the statutory tax rate is
reconciled below to the overall U.S. and foreign income tax expense
(benefit).
Year Ended December 31
(Dollars in thousands) 1993 1992 1991
Tax at U.S. federal income
tax rate $ (8,392) $(10,937) $5,334
State taxes, net of federal
income tax effect 396 (1,092) 881
Impact of foreign tax rates
and credits - 141 (232)
Impact of foreign sales
corporation exempt income - (702) (994)
Net U.S. tax on distributions
of current foreign earnings - 175 (663)
Goodwill amortization 694 1,554 1,692
Other/valuation reserve 22,302 535 (57)
Income taxes (benefit) $ 15,000 $(10,326) $5,961
Net income tax refunds received during 1993 were $7 million and income
taxes paid during 1992 and 1991 were $3.7 million and $6.6 million,
respectively.
The Company has a net operating loss carryforward of approximately $49
million expiring in 2008, and has foreign tax credit carryforwards of
approximately $5 million expiring through 1998. These carryforwards
are available to offset future taxable income and have been reserved
in accordance with FASB Statement No. 109.
Note 8 Notes Payable and Long-Term Debt
As of July 15, 1993, the Company completed a definitive agreement with
its domestic senior lenders for the restructuring of its senior credit
facilities. The agreement provides the Company with a new credit
facility ("New Facility") through March 31, 1995, and includes
provisions for letters of credit outstanding at that time to continue
through March 31, 1996. The New Facility provides approximately $60
million of revolving credit (reduced in February 1994 from $65 million
by agreement of the Company and the lenders thereunder) for working
capital loans and letters of credit to support commercial contracts.
As of December 31, 1993, $29.7 million in loans and $38.2 million in
standby letters of credit were outstanding under these facilities of
which $15 million in loans and $22.5 million in letters of credit were
outstanding under the New Facility and the remainder was outstanding
under the restructured credit facility. Moreover, the Company
currently has approximately $37.5 million in foreign short-term credit
facilities with approximately $14.4 million outstanding. Due to the
short-term nature of these debt instruments, it is the Company's
opinion that the carrying amounts approximate the fair value. The
weighted average interest rate on short-term notes payable was 8.2% at
both December 31, 1993 and 1992.
In compliance with the agreement, the Company has proceeded with its
previously announced divestiture program by reducing the Company's
currently existing senior debt and outstanding letters of credit
obligations by approximately $81.9 million from the net proceeds of
businesses sold as of December 31, 1993. The program requires
additional installments of $35 million by March 31, 1994 and September
30, 1994, subject to earlier payment out of asset sale proceeds from
the divestiture program. As of December 31, 1993, payments of $26.9
million have been made toward the March 31, 1994 amount due.
Senior notes in the amount of $30 million will mature on March 31,
1995, except that the Company may, at its option, extend the notes to
at least March 31, 1996 and, with the concurrence of the holder,
through December 1, 2002. The agreement modified certain financial
covenants and provided for a waiver of defaults arising from the
charges taken in the third quarter of 1992. Both the new facility and
the current senior debt are secured by the assets of the Company's
domestic operations and the stock of certain of the Company's
subsidiaries.
Long-term debt of continuing operations consists of the following:
December 31 (Dollars in thousands) 1993 1992
Promissory note with interest at 12.75%,
due March 31, 1995 $ 30,000 $ 30,000
Promissory note with interest at 10.35%,
$5 million due annually from
1994 to 2003 4,379 50,000
Make-Whole Notes with interest at 2%
over the prime rate, due December 31, 1996 11,519 -
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 16,381 19,357
362,279 399,357
Less current portion 8,527 85,083
$353,752 $314,274
The aggregate annual maturities of long-term debt from continuing
operations, in thousands, for the four years subsequent to December
31, 1994 are: 1995 - $33,374; 1996 - $13,606; 1997 - $151,446; and
1998 - $926.
Total debt of the discontinued operation, in thousands, amounted to
$1,919 and $6,352 for 1993 and 1992, respectively. Of these amounts,
approximately $1,807 and $5,476 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 on or after August
15, 1992, at 105% of their principal amount, plus accrued interest,
declining to 100% of their principal amount, plus accrued interest, on
or after August 15, 1994. Interest is payable semi-annually on
February 15 and August 15. The fair value of these instruments at
December 31, 1993, based on market bid prices, was $151.5 million.
The 12% senior subordinated debentures are redeemable in whole or in
part at the option of the Company at any time on or after November 1,
1994, 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 fair value of these instruments
at December 31, 1993, based on market bid prices, was $152.25 million.
As part of the Company's domestic debt restructuring, the 12.75% and
10.35% senior notes will mature on March 31, 1995, except that the
Company may, at its option, extend the $30 million 12.75% senior note
to at least December 31, 1996 and, with the concurrence of the holder,
through December 1, 2002, in which event, $6 million will become due
on December 1 in each of the years 1995 and 1996, and $3 million will
be due annually from December 1, 1997 to 2002. At any time at or
after the scheduled repayment of $125 million of the Company's
currently existing senior debt and outstanding letters of credit
obligations, the Company also has the option to prepay the $30 million
12.75% senior notes in whole or in part at 112.33% of their principal
amount, plus accrued interest, in 1994, declining to 100% of their
principal amount, plus accrued interest, in 2002.
The senior 12.75% and 10.35% promissory note agreements and the
restructured credit facility require the Company, among other things,
to meet certain objectives with respect to financial ratios and they
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 and the Company is prohibited from declaring or paying cash
dividends through at least March 31, 1995.
The Make-Whole Notes were issued to the Company by one of its senior
lenders during 1993 in connection with the reduction of debt owed to
that senior lender. The notes require interest payments of 2% over
prime payable quarterly on the last day of March, June, September and
December. The principal amounts are due on December 31, 1996.
Based on borrowing rates currently available to the Company for bank
loans with similar terms and maturities, the carrying values of the
senior notes and the Make-Whole Notes are estimated to approximate the
fair values.
As a result of the loss for the fourth quarter of 1993, the Company
was not in compliance with several of the financial covenants under
its senior credit facilities. It has subsequently received waivers of
such defaults and amendments to these agreements from its senior
lenders.
Moreover, in February, 1994 the Company obtained the consent of its
12.25% Senior Subordinated Debenture holders to amend the indenture
governing these debentures and permit the Company to incur up to $35
million indebtedness (including letters of credit and foreign
borrowings) above the level outstanding at year-end 1993. The
foregoing waivers, amendments, and consent should give the Company
sufficient financial flexibility to meet its financial commitments
until such time as its recently announced plans to sell the Electro-
Optical Systems business are completed.
Bank, advisory and legal fees associated with the restructuring
amounted to approximately $8.0 million payable in 1993. In addition,
200,000 warrants for the Company's common stock, valued at
approximately $.4 million, were issued to one senior lender and, as
part of the $125 million repayment plan, the Company has recognized a
charge in 1993 of approximately $12 million on the prepayment of its
senior notes which was partially financed with Make-Whole Notes from
one of its senior lenders and the write-off of approximately $2
million of previously deferred loan costs. Approximately $18.1
million ($1.07 per share) of the above amounts relate to the
extinguishment of senior debt and were recorded as an extraordinary
item in 1993 .
The Company believes that funds generated from operations, together
with the restructured credit facilities, anticipated proceeds from the
asset divestiture program and available cash, are sufficient to meet
its liquidity requirements for the foreseeable future (See Note 1).
Note 9 Shareholders' Equity
Equity Incentive Plan
Under the Company's Equity Incentive Plan, up to 2,200,000 shares of
the Company's $1.00 par value common stock can be issued pursuant to
the granting of stock options, stock appreciation rights, restricted
stock awards and restricted unit awards to key employees. Options can
be granted at no less than 100 percent of the fair market value of the
stock on the date of grant or on the prospective date fixed by the
Board of Directors. None of these options can be exercised for at
least a one-year period from the date of grant. After this waiting
period, 25 percent of each option, on a cumulative basis, can be
exercised in each of the following four years. Additionally, each
option shall terminate no later than 10 years from the date of grant.
On August 17, 1993, the Board of Directors approved the repricing of
certain outstanding non-qualified stock options granted on previous
dates under the Plan. This resulted in the replacement of 468,000 non-
qualified stock options at various exercise prices ranging from
$10.375 to $20.375, by 272,865 non-qualified stock options at an
exercise price of $7.375, the fair market value at the date of the
replacement grant, subject to the market price of the Company's stock
exceeding $10 per share for a period of 30 days. Vested dates are
based on the original grant dates of the replaced options.
The plan permits awards of restricted stock to key employees subject
to a restricted period and a purchase price, if any, to be paid by the
employee as determined by the Committee of the Equity Incentive Plan.
In 1993, grants of 30,000 shares of restricted stock were made and on
December 31, 1993 there were 30,000 of such shares outstanding.
Vesting of such awards is subject to a defined vesting period and to
the Company's stock achieving certain performance levels during such
period.
Stock option activity under the plan was as follows:
Year Ended December 31
(Shares in thousands) 1993 1992 1991
Options:
Grante 498 197 137
Exercised - (14) (47)
Cancelled (150) (225) (63)
Repricing
Cancelled (468) - -
Issued 273 - -
Outstanding at end of year 1,307 1,154 1,196
Exercisable at end of year 652 767 622
Available for grant at end
of year 341 524 496
Option price range per share:
Granted $7.375 $11.125- $11.875-
$12.00 $14.375
Exercised - $10.375 $7.00
During 1988, the Company adopted the Equity Incentive Plan for Outside
Directors. The plan provides for the granting of non-qualified stock
options of up to 600,000 shares of the Company's common stock to
directors of the Company who are not employees of the Company or any
of its affiliates. Pursuant to this plan, options can be granted at
no less than 100 percent of the fair market value of the stock on a
date five business days after the option is granted and no option
granted may be exercised during the first year after its grant. After
this waiting period, 25 percent of each option, on a cumulative basis,
can be exercised in each of the following four years. In February
1988, 320,000 stock options were granted at $16.19 per share, all of
which were exercisable as of December 31, 1993. In December 1990,
40,000 stock options were granted at $10.375 per share, 30,000 of
which were exercisable as of December 31, 1993.
Preferred Stock Purchase Rights
On April 22, 1987, the Board of Directors declared a distribution of
one Preferred Stock Purchase Right for each share of common stock
outstanding. Each right will entitle the holder to buy from the
Company a unit consisting of 1/100 of a share of Junior Participating
Preferred Stock, Series A, at an exercise price of $70 per unit. The
rights become exercisable ten days after public announcement that a
person or group has acquired 20 percent or more of the Company's
common stock or has commenced a tender offer for 30 percent or more of
common stock. The rights may be redeemed prior to becoming
exercisable by action of the Board of Directors at a redemption price
of $0.025 per right. If more than 35 percent of the Company's common
stock becomes held by a beneficial owner, other than pursuant to an
offer deemed in the best interest of the shareholders by the Company's
independent directors, each right may be exercised for common stock,
or other property, of the Company having a value of twice the exercise
price of each right. If the Company is acquired by any person after
the rights become exercisable, each right will entitle its holder to
receive common stock of the acquiring company having a market value of
twice the exercise price of each right. The rights expire on May 4,
1997.
Employee Stock Savings Plan
Up to 600,000 shares of the Company's common stock are reserved for
issuance under the Company's Employee Stock Savings Plan. (See Note
11)
Common Stock Warrants
In July 1993, the Company issued warrants to purchase 200,000 shares
of its common stock at $9.02 per share (subject to adjustment in
certain events), to one of its senior lenders in connection with the
restructuring of its senior credit facilities. The warrants are
exercisable on or before December 31, 1998.
Note 10 Operations by Industry Segment and Geographic Area
The Company classifies its continuing operations into four business
segments: Morse Controls; Pumps, Power Transmission & Controls;
Turbomachinery, and Other. Detailed information regarding products by
segment is contained in the section entitled "Business" included in
Part I, Item 1 of this Form 10-K Report. In 1993, the Company
redefined its business segments and restated previously reported
financial information. Information about the business of the Company
by business segment, foreign operations and geographic area is
presented below:
Year Ended December 31
(Dollars in thousands) 1993 1992 1991
Net sales
Morse Controls $163,876 $192,733 $192,512
Pumps, Power Transmission
& Controls 249,896 265,336 270,309
Turbomachinery 147,526 160,420 181,267
Other 80,411 115,114 133,224
Total net sales $641,709 $733,603 $777,312
Segment operating income (loss)
Morse Controls $ 3,539 $ 6,626 $ 8,813
Pumps, Power Transmission
& Controls 22,201 19,974 24,092
Turbomachinery 4,668 1,945 23,447
Other 2,104 (7,059) 12,707
Total segment operating
income 32,512 21,486 69,059
Equity in income of
unconsolidated companies 2,550 6,297 4,878
Unallocated corporate expenses (13,460) (10,533) (8,955)
Net interest expense (45,579) (49,418) (49,293)
Income (loss) from continuing
operations before income
taxes, minority interest,
extraordinary item and
cumulative effect of change
in accounting principle $(23,977) $(32,168) $15,689
A reconciliation of segment operating income to income from operations
follows:
Year Ended December 31
(Dollars in thousands) 1993 1992 1991
Segment operating income $ 32,512 $ 21,486 $ 69,059
Unallocated corporate expense (13,460) (10,533) (8,955)
Other Income (172) (2,017) (777)
Income from operations $ 18,880 $ 8,936 $ 59,327
Segment operating income (loss) for the year ended December 31, 1993,
includes $11.5 million of unusual charges, of which $3.7 million, $1.7
million, $2.0 million and $4.1 million relates to the Morse Controls,
Pumps, Power Transmission & Controls, Turbomachinery and Other
segments, respectively. Unallocated corporate expenses include unusual
charges of $6.2 million for the year ended December 31, 1993.
Segment operating income (loss) for the year ended December 31, 1992,
includes unusual charges of $24.0 million, of which $.3 million, $.4
million, $7.3 million and $16.0 million relates to the Morse Controls,
Pumps, Power Transmission & Controls, Turbomachinery and Other
segments, respectively.
Summary financial information for unconsolidated companies (all
Foreign) follows:
Year Ended December 31
(Dollars in thousands) 1993 1992 1991
Net sales $ 91,180 $137,385 $120,652
Gross profit 23,984 36,948 33,970
Net income 4,979 12,720 9,827
Equity in income of
unconsolidated companies
(by associated segment)
Morse Controls 40 607 709
Turbomachinery 2,510 5,690 4,169
Equity in income of
unconsolidated companies $ 2,550 $ 6,297 $ 4,878
December 31 (Dollars in thousands) 1993 1992
Current assets $ 2,219 $ 33,871
Non-current assets 13,493 12,471
Current liabiliabilities 31,550 32,235
Non-current liabilities 1,557 1,191
Net assets $ 12,605 $ 12,916
Total direct sales on prime contracts to the Department of Defense of
the United States Government for continuing operations were $30.1
million in 1993 (Pumps, Power Transmission & Controls segment - $18.6
million; Turbomachinery segment - $3.4 million; and Other - $8.1
million), $35.4 million in 1992 (Pumps, Power Transmission & Controls
- - $18.7 million; Turbomachinery segment - $4.6 million; and Other -
$12.1 million), and $41.0 million in 1991 (Pumps, Power Transmission &
Controls segment - $25.4 million; Turbomachinery - $4.1 million; and
Other - $11.5 million).
The Morse Controls segment had sales to one commercial customer that
accounted for 12%, 15% and 15% of consolidated sales in 1993, 1992 and
1991, respectively. No other customer accounted for 10% or more of
consolidated sales in 1993, 1992 or 1991.
Year Ended December 31
(Dollars in thousands) 1993 1992 1991
Identifiable assets
Morse Controls $155,745 $167,717 $191,748
Pumps, Power Transmission
& Controls 196,748 194,408 215,089
Turbomachinery 86,941 99,937 98,484
Other 55,434 130,599 138,663
Corporate 58,043 91,827 51,171
Discontinued Operation 85,000 266,092 286,919
Total identifiable assets $637,911 $950,580 $982,074
Depreciation and amortization
Morse Controls $ 6,775 $ 7,737 $ 7,485
Pumps, Power Transmission
& Controls 9,449 9,388 9,501
Turbomachinery 6,209 6,627 6,446
Other 3,435 4,622 5,024
Corporate 3,516 2,499 2,439
Total depreciation and
amortization $ 29,384 $ 30,873 $ 30,895
Capital expenditures
Morse Controls $ 4,907 $ 5,638 $ 5,258
Pumps, Power Transmission
& Controls 4,065 5,055 5,526
Turbomachinery 3,492 3,169 3,766
Other 1,069 982 2,037
Corporate 352 3,282 1,813
Total capital expenditures $13,885 $ 18,126 $ 18,400
The continuing operations of the Company on a geographic basis are as
follows:
Year Ended December 31
(Dollars in thousands) 1993 1992 1991
Net sales
United States $452,455 $496,224 $528,849
Foreign (principally Europe) 189,254 237,379 248,463
Total net sales $641,709 $733,603 $777,312
Segment operating income
United States $ 31,829 $ 13,947 $ 56,425
Foreign 683 7,539 12,634
Total segment operating
income $ 32,512 $ 21,486 $ 69,059
Identifiable assets
Continuing Operations:
United States $378,739 $503,991 $479,885
Foreign 174,172 180,497 215,270
Discontinued Operation:
United States 80,252 262,178 279,834
Foreign 4,748 3,914 7,085
Total identifiable assets $637,911 $950,580 $982,074
Export sales
Asia $ 27,521 $ 27,701 $ 34,732
Latin America 12,962 6,877 4,552
Canada 10,882 8,027 9,387
Mexico 7,504 1,837 6,102
Europe 4,901 9,795 7,178
Other 7,992 8,646 8,345
Total export sales $ 71,762 $ 62,883 $ 70,296
Note 11 Pension Plans
The Company and its subsidiaries have various pension plans covering
substantially all of their employees. Benefits are based on either
years of service or years of service and average compensation during
the years immediately preceding retirement. Pension expense was $8.4
million in 1993, $8.7 million in 1992, and $8.8 million in 1991, and
includes amortization of prior service cost and transition amounts for
periods of 6 to 13 years. The Company's divestiture program resulted
in a decrease in U.S. pension plan participants during 1993. The
total curtailment and settlement gain of $1.2 million was applied to
the reserve for divestitures (see Note 3). The Company included a
$1.9 million curtailment loss in its estimated loss on disposal
related to the discontinued operation. It is the general policy of
the Company to fund its pension plans in conformity with requirements
of applicable laws and regulations. Pension expense (including $1.1
million, $1.0 million and $0.8 million charged to discontinued
operations in 1993, 1992 and 1991, respectively) is comprised of the
following:
Year Ended December 31
(Dollars in thousands) 1993 1992 1991
Service cost $ 7,678 $ 7,526 $ 7,641
Interest cost on projected
benefit obligation 13,802 14,271 13,282
Actual return on plan assets (22,646) (10,620) (26,436)
Net amortization and deferral 9,567 (2,452) 14,324
Net pension expense $ 8,401 $ 8,725 $ 8,811
Assumptions used in the accounting for the Company-sponsored defined
benefit plans:
Year Ended December 31 1993 1992 1991
Weighted average discount rate 7.5% 8.0% 8.5%
Rate of increase in
compensation levels 5.3% 5.3% 6.0%
Expected long-term rate
of return on assets 9.0% 9.0% 9.0%
The following table sets forth the funded status and amounts
recognized in the consolidated balance sheet for the defined benefit
pension plans:
Year Ended December 31
(Dollars in thousands) 1993 1992
Assets Accumulated Assets Accumulated
Exceed Benefits Exceed Benefits
Accumulated Exceed Accumulated Exceed
Benefits Assets Benefits Assets
Actuarial present value of
benefit obligations:
Vested benefit obligation $102,819 $ 62,394 $ 72,087 $ 79,985
Accumulated benefit
obligation $107,089 $ 63,428 $ 73,682 $ 81,938
Projected benefit obligation $128,485 $ 64,432 $ 85,231 $ 96,000
Plan assets at fair value 135,616 49,326 112,877 67,251
Plan assets in excess of
(less than) projected
benefit obligation 7,131 (15,106) 27,646 (28,749)
Unrecognized net (gain)
or loss (1,300) 1,752 (7,080) 4,504
Prior service cost not yet
recognized in net
periodic pension cost 4,779 3,524 6,155 3,256
Unrecognized net (asset)
obligation at transition 4,198 1,251 (1,672) 6,857
Adjustment required to recognize
minimum liability - (6,507) - (5,834)
Pension asset (liability)
recognized in the
balance sheet $ 14,808 $ (15,086) $ 25,049 $(19,966)
Plan assets at December 31, 1993, are invested in fixed dollar,
guaranteed investment contracts, United States Government obligations,
fixed income investments, guaranteed annuity contracts and equity
securities whose values are subject to fluctuations of the securities
market.
The Company maintains a defined contribution (Employee Stock Savings)
plan covering substantially all domestic, non-union employees.
Eligible employees may generally contribute from 1% to 12% of their
compensation on a pretax basis. The Company's historical matching
percentage is 50% of the first 6% of each participant's pretax
contribution. The employer matching contributions have been
temporarily suspended since July 1992. The Company's expense was $1.8
million and $3.5 million for 1992 and 1991, respectively.
Note 12 Postretirement Benefits
In addition to providing pension benefits, the Company provides
certain health care and life insurance benefits for retired employees.
Substantially all of the Company's non-union employees retiring from
active service and immediately receiving retirement benefits from one
of the Company's pension plans would be eligible to receive such
benefits. The Company's unionized retiree benefits are determined by
their individually negotiated contracts. The Company's contribution
toward the full cost of the benefits is based on the retiree's age and
continuous unbroken length of service with the Company. The Company's
policy is to pay the cost of medical benefits as claims are incurred.
Life insurance costs are paid as insured premiums are due.
In December 1990, the FASB issued Statement No. 106, "Employer's
Accounting for Postretirement Benefits Other Than Pensions," which
requires the accrual method of accounting for postretirement benefits.
The accumulated benefit obligation at transition of $44.5 million was
recognized as a cumulative effect of a change in accounting principle
net of $16.9 million of income taxes calculated in accordance with the
FASB's Statement No. 109, "Accounting for Income Taxes" (see Note 5),
and retroactively applied as of January 1, 1992. In prior years, the
cost for life insurance benefits was recognized as premiums were paid
and the cost of retiree health care was recognized when claims were
paid.
The following tables set forth the plans' combined status reconciled
with the amounts included in the consolidated balance sheet:
December 31 (Dollars in thousands) 1993
Life
Medical Insurance
Plans Plans Total
Accumulated postretirement
benefit obligation:
Retirees $28,134 $8,035 $36,169
Fully eligible active
plan participants 6,130 1,200 7,330
Other active plan participants 3,750 520 4,270
38,014 9,755 47,769
Plan assets - - -
Unrecognized net loss (3,693) (920) (4,613)
Postretirement benefit liability
recognized in the balance sheet $34,321 $8,835 $43,156
December 31 (Dollars in thousands) 1992
Life
Medical Insurance
Plans Plans Total
Accumulated postretirement
benefit obligation:
Retirees $22,089 $ 7,925 $30,014
Fully eligible active
plan participants 6,970 1,425 8,395
Other active plan participants 3,595 700 4,295
32,654 10,050 42,704
Plan assets - - -
Accrued postretirement benefit $32,654 $10,050 $42,704
The 1993 and 1992 accrued postretirement benefits amounts are
comprised of current liabilities of $2.2 million and $2.5 million, and
long-term liabilities of $41.0 million and $40.2 million,
respectively.
As a result of the divestitures in 1993, the Company recognized a $2.2
million gain related to the curtailment of its postretirement benefit
plans. This curtailment gain was applied to the reserve for
divestitures. (See Note 3)
As a result of the Company's decision to sell its Electro-Optical
Systems operations a curtailment gain of $1.3 million was recognized.
This curtailment gain is a component of the estimated loss on disposal
of discontinued operations. (See Note 2)
Net periodic postretirement benefit cost (including $.3 million
charged to discontinued operations in both 1993 and 1992) included the
following components:
Year Ended December 31
(Dollars in thousands) 1993 1992
Life Life
Medical Insurance Medical Insurance
Plans Plans Plans Plans
Service cost $ 372 $ 63 $ 407 $ 98
Interest cost 2,999 750 2,778 865
Net periodic
postretirement
benefit cost $ 3,371 $ 813 $ 3,185 $ 963
Actual negotiated health care premiums were used in calculating 1993
and 1992 health care costs. It is expected that the annual increase
in medical costs will be 9.6% from 1993 to 1994 and will be 13.5% in
1995, grading down in future years by .5% per year until it reaches a
future general medical inflation level of 6%. Inflation has been
capped at 200% for active non-union employees. The health care cost
trend rate assumption has a significant effect on the amounts
reported. For example, a 1% increase in the health care trend rate
would increase the accumulated postretirement benefit obligation by
$3.1 million at year end 1993 and the net periodic cost by $.2 million
for the year. The weighted average discount rate used in determining
the accumulated postretirement benefit obligation was 7.5% and 8.5% in
1993 and 1992, respectively.
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
January 1, 1997. The Company expects to amortize associated reserves
to income over the phase out period at approximately $7 million per
year. The Company does not anticipate a significant increase or
decrease in cash requirements related to this change in policy during
the phase out period. The Company also lowered the discount rate in
1993 to 7.5% from 8.5% in 1992 in line with the change in the overall
economic environment. This change has an insignificant effect on the
net periodic postretirement benefit cost.
Postretirement benefit costs for 1991, which were recorded on a cash
basis, totaled approximately $3.3 million, net of premiums received
from retirees.
Note 13 Leases
The Company leases certain manufacturing and office facilities,
equipment, and automobiles under long-term leases. Future minimum
rental payments required under operating leases of continuing
operations that have initial or remaining noncancelable lease terms in
excess of one year, as of December 31, 1993, are:
(Dollars in thousands)
1994 $ 5,532
1995 4,275
1996 3,031
1997 1,646
1998 1,113
Thereafter 3,440
Total minimum lease payments $19,037
Total rental expense under operating leases charged against continuing
operations was $10.1 million in 1993, $11.5 million in 1992 and $11.9
million in 1991.
Note 14 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 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 denying the complaint has 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 will be
provided notice. A tentative settlement agreement relating to
approximately 10,000 claimants has been reached. Should additional
settlements be reached at comparable levels, the settlements will not
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 (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 has responded to the
September subpoena, the government subsequently withdrew the February
subpoena, and the Company is in the process of responding to the March
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.
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"). In each instance the
Company believes that it qualifies as a de minimis or minor
contributor to each site with a large number of Potential Responsible
Parties ("PRP's") owning a greater share. Accordingly, the Company
believes that the portion of remediation costs that it will be
responsible for will therefore not be material. For additional
information see section entitled Environmental Matters in Part I, Item
1 of this Form 10-K Report.
The Company currently has pending against it, 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.
Reported profits from the sale of certain products to the U.S.
Government and its agencies are subject to adjustments. In the
opinion of management, refunds, if any, will not have a material
effect upon the consolidated financial statements.
The Company is self-insured for a portion of its product liability and
certain other liability exposures. Depending on the nature of the
liability claim, and with certain exceptions, the Company's maximum
self-insured exposure ranges from $250,000 to $500,000 per claim with
certain maximum aggregate policy limits per claim year. With respect
to the exceptions, which relate principally to diesel and turbine
units sold before 1991, the Company's maximum self-insured exposure is
$5 million per claim.
REPORT OF ERNST & YOUNG, INDEPENDENT AUDITORS
Board of Directors,
Imo Industries Inc.
We have audited the accompanying consolidated balance sheets of
Imo Industries Inc. and subsidiaries as of December 31, 1993 and
1992, and the related consolidated statements of income, cash
flows and shareholders' equity (deficit) for each of the three
years in the period ended December 31, 1993. Our audits also
included the financial statement schedules listed in the Index at
Item 14(a). These financial statements and schedules are the
responsibility of the Company's management. Our responsibility
is to express an opinion on these financial statements and
schedules based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatements. An
audit also includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the consolidated
financial position of Imo Industries Inc. and subsidiaries at
December 31, 1993 and 1992, and the consolidated results of their
operations and their cash flows for each of the three years in
the period ended December 31, 1993, in conformity with generally
accepted accounting principles. Also, in our opinion, the
related financial statement schedules, when considered in
relation to the basic financial statements as a whole, present
fairly in all material respects the information set forth herein.
As discussed in Note 12 to the financial statements, in 1992 the
Company changed its method of accounting for postretirement
benefits other than pensions.
ERNST & YOUNG
Princeton, New Jersey
March 18, 1994
F-6
<TABLE>
Imo Industries Inc. and Subsidiaries
Quarterly Financial Information (Unaudited)
Quarterly financial information for 1993 and 1992 is as follows:
<CAPTION>
1993 (Dollars in thousands
except per share amounts) (a)<F1>
1st*<F3> 2nd*<F3> 3rd*<F3> 4th
Quarter Quarter Quarter Quarter
<S> <C> <C> <C> <C>
Net sales $ 167,164 $ 167,483 $ 153,995 $ 153,067
Gross profit 47,972 50,236 44,923 39,810
Income (loss) before
extraordinary item:
Continuing operations 411 3,467 4,737 (47,755)(b)<F2>
Discontinued operation (2,837) (1,717) (10,974) (197,803)
Extraordinary item - (11,219) (6,876) -
Net income (loss) (2,426) (9,469) (13,113) (245,558)
Earnings (loss) per share:
Before extraordinary item:
Continuing operations .03 .20 .28 (2.82)
Discontinued operation (.17) (.10) (.65) (11.70)
Extraordinary item - (.66) (.41) -
Net income (loss) (.14) (.56) (.78) (14.52)
1992 (Dollars in thousands
except per share amounts) (a)<F1>
1st*<F3> 2nd*<F3> 3rd*<F3> 4th*<F3>
Quarter Quarter Quarter Quarter
Net sales $ 177,251 $ 190,404 $ 164,077 $ 201,871
Gross profit 48,871 51,423 31,008 56,505
Income (loss) before
cumulative effect of change
in accounting principle:
Continuing Operations 1,259 1,028 (28,439) 3,892
Discontinued Operation 72 (238) (29,015) (3,559)
Cumulative effect of change in
accounting principle (27,590) - - -
Net income (loss) (26,259) 790 (57,454) 333
Earnings (loss) per share:
Before cumulative effect
of change in accounting
principle:
Continuing Operations .07 .06 (1.69) .23
Discontinued Operation .01 (.01) (1.72) (.21)
Cumulative effect of change in
accounting principle (1.64) - - -
Net income (loss) (1.56) .05 (3.41) .02
Cash dividends per share .125 .125 .125 -
<FN>
<F1> (a) The notes to the consolidated financial statements located in
Part IV of this Form 10-K Report as indexed at Item 14(a)(1)
should be read in conjunction with this summary.
<F2> (b) Includes approximately $5 million of charges related to
estimated costs associated with litigation settlements and
$3 million related to valuation of assets.
<F3> * Reclassified to conform to 1993 full year presentation.
F-7
</TABLE>
<TABLE>
IMO INDUSTRIES INC. AND SUBSIDIARIES SCHEDULE V
PROPERTY, PLANT AND EQUIPMENT
(Dollars in thousands)
THREE-YEAR PERIOD ENDED DECEMBER 31, 1993
<CAPTION>
BALANCE AT OTHER CHANGES BALANCE
BEGINNING ADDITIONS ADD (DEDUCT)- AT END
OF YEAR AT COST RETIREMENTS DESCRIBE OF YEAR(5)<F5>
<S> <C> <C> <C> <C> <C>
CLASSIFICATION
YEAR ENDED
DECEMBER 31, 1993:
Land $ 21,029 $ 5 $ - $ (40) (1)<F1> $ 18,499
(2,444) (2)<F2>
(51) (3)<F3>
Buildings and improvements 113,857 329 28 (1,080) (1)<F1> 105,624
(8,688) (2)<F2>
1,234 (3)<F3>
Machinery and equipment 250,887 13,551 3,244 (4,205) (1)<F1> 224,632
(33,790) (2)<F2>
1,433 (3)<F3>
$385,773 $13,885 $ 3,272 $(47,631) $348,755
======== ======= ======= ========= ========
YEAR ENDED
DECEMBER 31, 1992: *<F6>
Land $ 20,957 $ 1 $ - $ (233) (1)<F1> $ 21,029
304 (4)<F4>
Buildings and improvements 115,111 2,971 1,637 (3,842) (1)<F1> 113,857
2,337 (4)<F4>
(1,083) (3)<F3>
Machinery and equipment 251,243 15,154 5,006 (10,874) (1)<F1> 250,887
568 (4)<F4>
(198) (3)<F3>
$387,311 $18,126 $ 6,643 $(13,021) $385,773
======== ======= ======= ========= ========
YEAR ENDED
DECEMBER 31, 1991: *<F6>
Land $ 20,228 $ 20 $ - $ (87) (1)<F1> $ 20,957
404 (4)<F4>
392 (3)<F3>
Buildings and improvements 109,409 3,587 76 (395) (1)<F1> 115,111
1,999 (4)<F4>
587 (3)<F3>
Machinery and equipment 240,847 14,793 3,802 (909) (1)<F1> 251,243
2,473 (4)<F4>
(2,159) (3)<F3>
$370,484 $18,400 $ 3,878 $ 2,305 $387,311
======== ======= ======= ========= ========
<FN>
<F1>(1) Foreign currency exchange rate adjustment.
<F2>(2) Ending balances of businesses sold.
<F3>(3) Reclassifications and adjustments.
<F4>(4) Opening balance of companies acquired at fair market
value and related adjustments.
<F5>(5) Depreciation and amortization of plant and equipment are computed
principally by the straight-line method based upon the following
estimated useful life ranges:
Building and improvements -- 5-35 years
Machinery and equipment -- 3-15 years
<F6> * Reclassified to conform to the 1993 presentation
(continuing operations)
S-1
</TABLE>
<TABLE>
SCHEDULE VI
IMO INDUSTRIES INC. AND SUBSIDIARIES
ACCUMULATED DEPRECIATION AND AMORTIZATION
OF PROPERTY, PLANT AND EQUIPMENT
(Dollars in thousands)
THREE-YEAR PERIOD ENDED DECEMBER 31, 1993
<CAPTION>
ADDITIONS
BALANCE AT CHARGED TO OTHER CHANGES BALANCE
BEGINNING COSTS AND ADD(DEDUCT)- AT END
OF YEAR EXPENSES RETIREMENTS DESCRIBE OF YEAR
<S> <C> <C> <C> <C> <C>
DESCRIPTION
YEAR ENDED
DECEMBER 31, 1993:
Buildings and improvements $ 38,834 $ 4,026 $ 20 $ 1,714 (1)<F1> $ 39,532
(145) (2)<F2>
(4,877) (3)<F3>
Machinery and equipment 150,511 19,171 3,071 (474) (1)<F1> 139,428
(2,612) (2)<F2>
(24,097) (3)<F3>
$189,345 $23,197 $ 3,091 $(30,491) $178,960
======== ======= ======== ========= ========
YEAR ENDED
DECEMBER 31, 1992: *<F4>
Buildings and improvements $ 35,853 $ 4,154 $ 316 $ (237) (1)<F1> $ 38,834
(625) (2)<F2>
Machinery and equipment 139,403 20,744 2,955 259 (1)<F1> 150,511
(6,940) (2)<F2>
$175,256 $24,903 $ 3,271 $ (7,543) $189,345
======== ======= ======== ========= ========
YEAR ENDED
DECEMBER 31, 1991: *<F4>
Buildings and improvements $ 29,770 $ 3,791 $ 60 $ 2,322 (1)<F1> $ 35,853
30 (2)<F2>
Machinery and equipment 124,134 21,137 3,492 (2,223) (1)<F1> 139,403
(153) (2)<F2>
$153,904 $24,928 $ 3,552 $ (24) $175,256
======== ======= ======== ========= ========
<FN>
<F1> (1) Reclassifications and adjustments.
<F2> (2) Foreigh currency exchange rate adjustment.
<F3> (3) Ending balance of businesses sold.
<F4> * Reclassified to conform to the 1993 presentation
(continuing operations)
S-2
</TABLE>
<TABLE>
SCHEDULE VIII
IMO INDUSTRIES INC. AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
(Dollars in thousands)
THREE-YEAR PERIOD ENDED DECEMBER 31, 1993
<CAPTION>
ADDITIONS
BALANCE AT CHARGED TO BALANCE
BEGINNING COSTS AND OTHER - DEDUCTIONS - AT END
OF YEAR EXPENSES DESCRIBE DESCRIBE OF YEAR
<S> <C> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1993:
Allowance for doubtful accounts $ 3,506 $ 1,720 $ - $ 327 (8)<F8> $ 3,144
1,177 (4)<F4>
108 (2)<F2>
470 (3)<F3>
======= ======= ======= ======== =======
Inventory Valuation Allowance $17,293 $ 8,918 $ - $ 8,796 (7)<F7> $13,560
2,425 (3)<F3>
1,430 (8)<F8>
======= ======= ======= ======== =======
Valuation allowance for
deferred tax assets $ 1,500 $58,715 $ - $ - $60,215
======= ======= ======= ======== =======
Accrued product warranty liability $ 8,666 $ 4,747 $ 30 (2)<F2> $ 65 (2)<F2> $ 8,907
63 (3)<F3> 4,474 (5)<F5>
======= ======= ======= ======== =======
Accrued contract completion costs $ 773 $ 1,099 $ 60 (3)<F3> $ 965 (6)<F6> $ 967
======= ======= ======= ======== =======
YEAR ENDED DECEMBER 31, 1992: *<F9>
Allowance for doubtful accounts $ 3,449 $ 1,830 $ 135 (3)<F3> $ 248 (2)<F2> $ 3,506
1,102 (3)<F3>
558 (4)<F4>
======= ======= ======= ======== =======
Inventory Valuation Allowance $10,382 $17,960 $ 2,944 (3)<F3> $ 227 (2)<F2> $17,293
13,766 (7)<F7>
======= ======= ======= ======== =======
Valuation allowance for
deferred tax assets $ - $ 1,500 $ - $ - $ 1,500
======= ======= ======= ======== =======
Accrued product warranty liability $ 5,288 $ 5,995 $ 1,818 (3)<F3> $ 4,386 (5)<F5> $ 8,666
49 (2)<F2>
======= ======= ======= ======== =======
Accrued contract completion costs $ 1,094 $ 727 $ - $ 934 (6)<F6> $ 773
114 (3)<F3>
======= ======= ======= ======== =======
YEAR ENDED DECEMBER 31, 1991: *<F9>
Allowance for doubtful accounts $ 3,763 $ 1,101 $ - $ 62 (2)<F2> $ 3,449
324 (3)<F3>
1,029 (4)<F4>
======= ======= ======= ======== =======
Inventory Valuation Allowance $11,049 $ 3,624 $ - $ 29 (2)<F2> $10,382
966 (3)<F3>
3,296 (7)<F7>
======= ======= ======= ======== =======
Accrued product warranty liability $ 7,247 $ 3,291 $ 42 (2)<F2> $ 5,292 (5)<F5> $ 5,288
======= ======= ======= ======== =======
Accrued contract completion costs $ 2,471 $ 2,935 $ - $ 4,312 (6)<F6> $ 1,094
======= ======= ======= ======== =======
<FN>
<F1>(1) Opening balance of companies acquired during the year.
<F2>(2) Foreign exchange adjustments.
<F3>(3) Reclassification and adjustments.
<F4>(4) Uncollectible accounts written off, net of recoveries.
<F5>(5) Product warranty claims honored during the year.
<F6>(6) Current year charges for contract completion.
<F7>(7) Charges against inventory valuation account during the year.
<F8>(8) Ending balances of businesses sold.
<F9> * Reclassified to conform to the 1993 presentation (continuing operations).
S-3
</TABLE>
<TABLE>
SCHEDULE IX
IMO INDUSTRIES INC.
SHORT-TERM BORROWINGS
(Dollars in Thousands)
THREE-YEAR PERIOD ENDED DECEMBER 31, 1993
<CAPTION>
MAXIMUM AVERAGE WEIGHTED
WEIGHTED AMOUNT AMOUNT AVERAGE
BALANCE AVERAGE OUTSTANDING OUTSTANDING INTEREST RATE
CATEGORY OF AGGREGATE AT END INTEREST AT ANY DURING THE DURING THE
SHORT-TERM BORROWINGS OF YEAR RATE MONTH-END YEAR (2)<F2> YEAR (3)<F3>
<S> <C> <C> <C> <C> <C>
Year Ended December 31, 1993
Notes Payable to banks (1)<F1> 42,759 8.22% 80,530 65,048 9.65%
Year Ended December 31, 1992 *<F4>
Notes Payable to banks (1)<F1> 74,032 8.16% 87,191 66,589 9.51%
Year Ended December 31, 1991 *<F4>
Notes Payable to banks (1)<F1> 40,314 10.22% 94,083 70,759 9.30%
<FN>
<F1>(1) Represents borrowings under lines of credit borrowing arrangements
which have no termination date but are reviewed annually for renewal.
<F2>(2) The average amount outstanding during the year was computed by dividing
the total of month-end outstanding balances by 12.
<F3>(3) The weighted average interest rate during the year was computed by dividing
the actual interest expense on short-term debt by average short-term outstanding.
<F4> * Reclassified to conform to the 1993 presentation (continuing operations).
S-4
</TABLE>
<TABLE>
SCHEDULE X
IMO INDUSTRIES INC. AND SUBSIDIARIES
SUPPLEMENTARY INCOME STATEMENT INFORMATION
(Dollars in thousands)
THREE-YEAR PERIOD ENDED DECEMBER 31, 1993
<CAPTION>
CHARGED TO COSTS AND EXPENSES
Year ended December 31
Item 1993 1992*<F1> 1991*<F1>
<S> <C> <C> <C>
MAINTENANCE AND REPAIRS $11,365 $13,224 $12,603
======= ======= =======
Amounts for taxes, other than payroll and income, royalties, depreciation and amortization of
intangible assets, preoperating costs and similar deferrals and advertising costs are not
presented, as such amounts are less than 1% of total sales or are otherwise disclosed in the
financial statements or notes thereto.
<FN>
<F1> * Reclassified to conform to the 1993 presentation (continuing operations).
S-5
</TABLE>
FIRST SUPPLEMENTAL INDENTURE
_______________________________
IMO INDUSTRIES INC.
TO
IBJ SCHRODER BANK & TRUST COMPANY, Trustee
Dated as of February 14, 1994
_________________________________
First Supplemental Indenture, dated as of February 14,
1994, between IMO INDUSTRIES INC. (formerly, IMO DELAVAL INC.), a
corporation duly organized and existing under the laws of the
State of Delaware (herein called the "Company"), having its
principal office at 3450 Princeton Pike, Lawrenceville, New
Jersey 08648, and IBJ SCHRODER BANK & TRUST COMPANY, a banking
corporation duly organized and existing under the laws of the
State of New York, as Trustee (herein called the "Trustee"),
amending Section 1008 of the Indenture, dated as of August 15,
1987, between the Company and the Trustee (the "Indenture"),
relating to the 12.25% Senior Subordinated Debentures Due 1997 of
the Company (herein called the "Securities"). Capitalized terms
used herein and not defined herein have the meanings set forth in
the Indenture.
WHEREAS, the Company and the Trustee executed the
Indenture relating to issuance by the Company of the Securities
in the aggregate principal amount of $150,000,000; and
WHEREAS, the Company desires to amend Section 1008 of the
Indenture; and
WHEREAS, Section 902 of the Indenture authorizes the
Company and the Trustee to change certain of the provisions of
the Indenture with the consent of the Holders of not less than 66-
2/3% in principal amount of the Outstanding Securities, by Act of
said Holders delivered to the Company and the Trustee, which
consent has been obtained; and
WHEREAS, the Board of Directors of the Company has duly
adopted resolutions authorizing the Company to execute and
deliver this Supplemental Indenture;
NOW, THEREFORE, THIS SUPPLEMENTAL INDENTURE WITNESSETH:
For and in consideration of the premises, it is mutually
covenanted and agreed, for the equal and proportionate benefit of
Holders of the Securities, as follows:
ARTICLE ONE
Section 101. Amendment of Indenture. Clause (iv) of the
second paragraph of Section 1008 of the Indenture is hereby
amended to read in its entirety as follows: "Indebtedness in
aggregate principal amount outstanding at any time, after giving
effect to the use of proceeds thereof, not to exceed $35,000,000
plus an amount equal to the amount by which the aggregate
principal amount of all Indebtedness of the Company and its
Subsidiaries (other than the Securities and the Company's 12%
Senior Subordinated Debentures Due 2001) then outstanding is less
than the aggregate principal amount of all Indebtedness of the
Company and its Subsidiaries (other than the Securities and the
Company's 12% Senior Subordinated Debentures Due 2001)
outstanding at December 31, 1993; or".
ARTICLE TWO
Section 201. Confirmation. Except as set forth herein,
the Indenture is in all respects confirmed and preserved.
Section 202. Counterparts. This Supplemental Indenture
may be executed in any number of counterparts, each of which,
when so executed, shall be deemed to be an original, but all of
which shall together constitute but one and the same instrument.
Section 203. Effectiveness. This Supplemental Indenture
shall take effect immediately upon its execution and delivery by
the Company and the Trustee.
Section 204. Governing Law. This Supplemental Indenture
shall be governed by and construed in accordance with the law of
the State of New York.
IN WITNESS WHEREOF, the parties have caused this
Supplemental Indenture to be duly executed, all as of the date
and year first above written.
IMO INDUSTRIES INC.
By: /s/ William M. Brown
Name: William M. Brown
Title: Executive Vice President
Attest:
/s/ Thomas J. Bird_________________
[SEAL] Thomas J. Bird
Senior Vice President
IBJ SCHRODER BANK & TRUST COMPANY
By: /s/ Max Volmar
Name: Max Volmar
Title: Vice President
Attest:
/s/ Barbara McCluskey
[SEAL] Barbara McCluskey
Assistant Secretary
April 19, 1993
Dear Mr. Walker:
The Board of Directors (the "Board") of Imo Industries Inc. (the
"Company") considers it to be in the best interests of its
stockholders to foster the continuous employment of key
management personnel of the Company and its subsidiaries in the
event of a possible change in control of the Company.
In order to induce you, in the event of a possible change in
control of the Company, to remain in the employ of the Company
or its subsidiaries and to give your continued attention and
dedication to your assigned duties without distraction, and in
consideration of your agreement set forth in Section 2(ii)
hereof, the Company agrees that you shall receive the severance
benefits hereinafter set forth in the event your employment with
the Company or its subsidiaries is terminated subsequent to a
"change in control of the Company" (as defined in Section 2
hereof) under the circumstances described below.
1. Term of Agreement. This Agreement shall commence on the date
hereof and shall continue in effect through December 31, 1993
provided, however, that commencing on January 1, 1994 and each
January 1 thereafter, the term of this Agreement shall
automatically be extended for one additional year unless not
later than September 30 of the preceding year, the Company shall
have given notice that it does not wish to extend this
Agreement; and provided, further, that notwithstanding any such
notice by the Company not to extend, this Agreement shall
continue in effect for the lesser of (i) a period of 36 months
beyond the term provided herein or (ii) a period of such number
of months to your 65th birthday, if a change in control of the
Company, as defined in Section 2 hereof, shall have occurred
during such term.
2. Change in Control. (i) No benefits shall be payable hereunder
unless there shall have been a change in control of the Company,
as set forth below, and your employment by the Company or its
subsidiaries shall thereafter have been terminated in accordance
with Section 3 hereof. For purposes of this Agreement, a "change
in control of the Company" shall be deemed to have occurred if
following the corporate changes described in Form 10 filed with
the Securities and Exchange Commission in connection with the
distribution of the Company's common stock to the stockholders
of Transamerica Corporation (hereinafter referred to as the
"SpinOff") (A) any "person" (as defined in Sections 13(d) and
14(d) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act")) is or becomes the "beneficial owner" (as
defined in Rule 13d-3 under the Exchange Act), directly or
indirectly, of securities of the Company representing 35% or
more of the combined voting power of the Company's then
outstanding securities; (B) during the term of this Agreement,
individuals who at the beginning of such term constitute the
Board, including for this purpose any new director whose
election or nomination for election by the Company's
stockholders was approved by a vote of at least two-thirds of
the directors still in office who were directors at the
beginning of such term, cease, for any reason to constitute a
majority thereof; or (C) more than 50% of the assets of the
Company, including the business or businesses for which your
services are principally performed, is disposed of by the
Company pursuant to a partial or complete liquidation of the
Company, a sale of assets (including stock of a subsidiary or
subsidiaries) of the Company orotherwise. (ii) For purposes of
this Agreement, a "potential change in control of the Company"
shall be deemed to have occurred if following the Spin-Off (A)
the Company enters into an agreement, the consummation of which
would result in the occurrence of a change in control of the
Company, (B) any person (including the Company) publicly
announces an intention to take or to consider taking actions
which if consummated would constitute a change in control of the
Company; or (C) the Board of Directors adopts a resolution to
the effect that a potential change in control of the Company for
purposes of this Agreement has occurred. You agree that, subject
to the terms and conditions of this Agreement, in the event of a
potential change in control of the Company, you will remain in
the employ of the Company or its subsidiaries during the
pendency of any such potential change in control and for a
period of one year after the occurrence of an actual change in
control of the Company. However, nothing in this Agreement shall
confer upon you any right to continue in the employ of the
Company or its subsidiaries prior to an actual change in control
of the Company or shall interfere with or restrict in any way
the rights of the Company or its subsidiaries, which are hereby
expressly reserved, to discharge you at any time prior to an
actual change in control of the Company for any reason
whatsoever, with or without cause.
3. Termination Following Change in Control. If any of the events
described in Section 2 hereof constituting a change in control
of the Company shall have occurred, you shall be entitled to the
benefits provided in Section 4 hereof upon the subsequent
termination of your employment by the Company or its
subsidiaries within three years of a change in control of the
Company during the term of this Agreement unless such
termination is (A) because of your death or Retirement, (B) by
the Company for Cause or Disability, or (C) by you other than
for Good Reason.
(i) Disability: Retirement. If, as a result of your incapacity
due to physical or mental illness, you shall have been absent
from your duties with the Company or its subsidiaries on a full
time basis for six consecutive months, and within thirty (30)
days after written notice of termination is given, you shall not
have returned to the full-time performance of your duties, the
Company may terminate your employment with the Company or its
subsidiaries for "Disability". Termination by the Company or you
of your employment with the Company or its subsidiaries based on
"Retirement" shall mean termination in accordance with the
retirement policy of the Company, or the subsidiary of the
Company by which you are employed, generally applicable to its
salaried employees, including early retirement, or in accordance
with any retirement arrangement established with your consent
with respect to you.
(ii) Cause. Termination by the Company of your employment with
the Company or its subsidiaries for "Cause" shall mean
termination upon the willful engaging by you in misconduct which
is demonstrably and materially injurious to the Company and its
subsidiaries taken as a whole. No act, or failure to act, on
your part shall be considered "willful" unless done, or omitted
to be done, by you not in good faith and without reasonable
belief that your action or omission was in the best interest of
the Company or its subsidiaries. Notwithstanding the foregoing,
you shall not be deemed to have been terminated for Cause unless
and until there have been delivered to you a copy of a
resolution duly adopted by the affirmative vote of not less than
three-quarters of the entire membership of the Board at a
meeting of the Board called and held for the purpose (after
reasonable notice to you and an opportunity for you, together
with your counsel, to be heard before the Board), finding that
in the good faith opinion of the Board you were guilty of
misconduct set forth above in this Subsection and specifying the
particulars thereof in detail.
(iii) Good Reason. You shall be entitled to terminate your
employment for Good Reason within three years of a change in
control of the Company during the term of this Agreement. For
purposes of this Agreement, "Good Reason" shall mean any of the
following events which occurs without your express written
consent: (A) the assignment to you of any duties inconsistent
with your status as Executive Vice President of the Company or a
substantial alteration in the nature or status of your
responsibilities from those in effect immediately prior to a
change in control of the Company other than any such alteration
primarily attributable to the fact that the Company may no
longer be a public company; (B) a reduction by the Company in
your annual base salary as in effect on the date hereof or as
the same may be increased from time to time, except for across-
the-board salary reductions similarly affecting all executives
of the Company and its subsidiaries and all executives of any
organization in control of the Company; (C) the relocation of
Company's principal executive offices to a location outside the
Lawrenceville, New Jersey Area or the Company's requiring you to
be based anywhere other than Company's principal executive
offices except for required travel on the Company's business to
an extent substantially consistent with your present travel
obligations; (D) the failure by the Company to continue in
effect any compensation plan of the Company in which you
participate, including but not limited to the Company's Equity
Incentive Plan (the "Stock Option Plan") or any substitute or
additional plans adopted prior to the change in control, unless
an equitable arrangement (embodied in an ongoing substitute OF
alternative plan) has been made with respect to such plan in
connection with the change in control of the Company, or the
failure by the Company to continue your participation therein;
(E) the failure by the Company or its subsidiaries to continue
to provide you with benefits substantially similar to those
enjoyed by you under the Company's Salaried Employees Stock
Savings Plan or any of the pension, life insurance, medical,
health and accident, or disability plans of the Company or its
subsidiaries in which you were participating at the time of a
change in control of the Company, or the taking of any action by
the Company or its subsidiaries which would directly or
indirectly materially reduce any of such benefits or deprive you
of any material fringe benefit enjoyed by you at the time of the
change in control of the Company, or the failure by the Company
or its subsidiaries to provide you with the number of paid
vacation days to which you are entitled on the basis of years of
service with the Company or its subsidiaries in accordance with
the normal vacation policy of the Company or the subsidiary by
which you are employed as in effect at the time of the change in
control;
(F) the failure of the Company to obtain a satisfactory
agreement from any successor to assume and agree to perform this
Agreement, as contemplated in Section 5 hereof;or
(G) any purported termination of your employment which is not
effected pursuant to a Notice of Termination satisfying the
requirements of Subsection (iv) below (and, if applicable,
Subsection (ii) above); and for purposes of this Agreement, no
such purported termination shall be effective. Your right to
terminate your employment pursuant to this Subsection shall not
be affected by your incapacity due to physical or mental
illness.
(iv) Notice of Termination. Any purported termination by the
Company or by you shall be communicated by written Notice of
Termination to the other party hereto in accordance with Section
7 hereof. A "Notice of Termination" shall mean a notice which
indicates the specific termination provision in this Agreement
relied upon and sets forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of your
employment.
(v) Date of Termination. Etc. "Date of Termination" shall mean
(A) if your employment is terminated for Disability, thirty (30)
days after Notice of Termination is given (provided that you
shall not have returned to the performance of your duties on a
full-time basis during such thirty (30) day period, and (B) if
your employment is terminated pursuant to Subsection (ii) or
(iii) above or for any other reason, the date specified in the
Notice of Termination (which shall be not less than thirty (30)
days from the date such Notice of Termination is given).
4. Compensation Upon Termination or During Disability.
(i) During any period that you fail to perform your duties
hereunder as a result of incapacity due to physical or mental
illness, you shall continue to receive your full base salary at
the rate then in effect until this Agreement is terminated
pursuant to Section 3(i) hereof. Thereafter, your benefits shall
be determined in accordance with the Company's disability
program (without regard to any amendment to such disability
program made subsequent to a change in control of the Company
and on or prior to the Date of Termination, which amendment
adversely affects in any way the computation of benefits
thereunder).
(ii) If your employment shall be terminated for Cause, the
Company shall pay you your full base salary through the Date of
Termination at the rate in effect at the time Notice of
Termination is given and the Company and its subsidiaries shall
have no further obligations to you under this Agreement.
(iii) If your employment by the Company shall be terminated
during the term of this Agreement (a) by the Company other than
for Cause, Retirement or Disability within a period of three
years of a change in control of the Company or (b) by you for
Good Reason within a period of three years of the occurrence of
such a change in control, then you shall be entitled to the
benefits provided below:
(A) the Company shall pay for your full base salary through the
Date of Termination at the rate in effect at the time Notice of
Termination is given;
(B) in lieu of any further salary payments to you for periods
subsequent to theDate of Termination, the Company shall pay as
severance pay to you, not later than the fifth day following the
Date of Termination, a lump sum severance payment (together with
the payments provided in Subsections (C), (D), (F) and (G) below
(the "Severance Payments")) equal to 299.999% of your average
taxable compensation from the Company during the five taxable
years of the Company, immediately preceding the change in
control of the Company (or, if your employment by the Company
began during such five-years period, during the portion of the
period following your employment); provided that, in the event
there are fewer than 36 whole or partial months remaining from
the Date of Termination to your 65th birthday, the amount
provided for in this Subsection (B) will be reduced by
multiplying it by a fraction the numerator of which is the
number of whole or partial months so remaining to your 65th
birthday and the denominator of which is 36;
(C) notwithstanding any provisions of the Company's bonus plan,
the Company shall pay to you, not later than the fifth day
following the Date of Termination, a lump sum amount equal to
the sum of (x) any incentive compensation which has been
allocated for the fiscal year preceding that in which the Date
of Termination occurs but has not yet been paid and (y) any
award under the Company's bonus plan, if any, which has not yet
been paid for any other period which has closed prior to the
Date of Termination;
(D) in lieu of shares of common stock of the Company ("Company
Shares) issuable upon the exercise of outstanding options
("Options), if any, granted to you under the Company's Stock
Option Plan or any other stock option plan of the Company (which
Options shall be cancelled upon the making of the payment
referred to below), the Company shall pay to you, not later than
the fifth day following the Date of Termination, a lump sum
equal to the sum of:
(x) in the case of Options which are incentive stock options
("Incentive Stock Options"), as defined under Section 422A of
the Internal Revenue Code of 1986, as it may hereafter be
amended (the "Code"), granted after the date of this Agreement,
the product of (a)the difference (to the extent such difference
is a positive number) obtained by subtracting the per share
exercise price of each such Incentive Stock Option held by you
(to the extent then exercisable) from the higher of (i) the
closing price of Company Shares as reported on the New York
Stock Exchange on the Date of Termination or (ii) the highest
price per Company Share actually paid in connection with any
change in control of the Company (but not more than the fair
market value per share, within the meaning of Section 422A of
the Code and the regulations promulgated thereunder), on the
date of payment thereof and (b) the number of Company Shares
covered by each such Incentive Stock Option;
(y) in the case of all other Options (other than Incentive Stock
Options granted on or before the date of this Agreement, with
respect to which no provision is made herein for payment and
which Incentive Stock Options shall not be cancelled pursuant to
this Agreement), the product of (a) the difference (to the
extent that such difference is a positive number) obtained by
subtracting the per share exercise price of each such Option
held by you whether or not then fully exercisable from the
higher of (i) the closing price of Company Shares as reported on
the New York Stock Exchange on the Date of Termination, or (ii)
the highest price per Company Share actually paid in connection
with any change in control of the Company, and (b) the number of
Company Shares covered by such Option;
(E) the Company shall also pay to you all legal fees and
expenses incurred by you as a result of such termination
(including all such fees and expenses, if any, incurred in
contesting or disputing any such termination or in seeking to
obtain or enforce any right or benefit provided by this
Agreement);
(F) the Company shall arrange to provide you, for a 36-month
period after such termination (or such lesser number of months
to your 65th birthday), with life, disability, accident and
health insurance substantially similar to those which you are
receiving immediately prior to the Notice of Termination.
Benefits otherwise receivable by you pursuant to this Section 4
(iii)(F) shall be reduced to the extent comparable benefits are
actually received by you during the 36-month period following
your termination (or such shorter number of months to your 65th
birthday), and any such benefits its actually received by you
shall be reported by you to the Company; and
(G) in addition to the retirement benefits to which you are
entitled under the qualified and supplemental pension plans of
the Company or any of its subsidiaries in which you participate
(the "Pension Plans") or any successor plans thereto, the
Company shall pay you in one sum in cash on the fifth day
following the Date of Termination, a lump sum equal to the
actuarial equivalent of the excess of (x) the retirement pension
(determined as a straightlife annuity commencing at age 65)
which you would have accrued under the terms of thePension Plans
(without regard to any amendment to the Pension Plans made
subsequent to a change in control of the Company and on or prior
to the Date of Termination, which amendment adversely affects in
any manner the computation of retirement benefits thereunder),
determined as if you were fully vested thereunder and had
accumulated (after the Date of Termination) 36 additional months
of benefit accrual and service credit thereunder at your highest
annual rate of compensation during the 12 months immediately
preceding the Date of Termination (but in no event shall you be
deemed to have accumulated additional months of service credit
after your 65th birthday), over (y) the vested retirement
pension (determined as a straight life annuity commencing at age
65) which you had then accrued pursuant to the provisions of the
Pension Plans. For purposes of clause (x), the term
"compensation" shall include amounts payable pursuant to Section
4(iii)(B) hereof, and amounts payable pursuant to Section
4(iii)(B) hereof shall be deemed to represent 36 months of
compensation (or such lesser number of months of compensation to
your 65th birthday) for purposes of determining benefits under
the Pension Plans. For purposes of this Subsection,"actuarial
equivalent" shall be determined using the same methods and
assumptions utilized under the Pension Plans immediately prior
to the change in control of the Company;
(H) in the event that any payment or benefit received or to be
received by you in connection with either the termination of
your employment or a change in control of the Company (whether
payable pursuant to the terms of this Agreement or any other
plan, arrangement or agreement with the Company, any successor
to the Company or any corporation ("Affiliate") affiliated with
the Company or which becomes so affiliated pursuant to the
transactions resulting in a change in control of the Company,
both within the meaning of Section 1504 of the Code,
(collectively with the Severance Payments, "Total Payment"))
would not be deductible (in whole or part) by the Company or an
Affiliate as a result of Section 280G of the Code, the Severance
Payments shall be reduced (to zero, if necessary) until no
portion of the Total Payments is not deductible as a result of
Section 280G of the Code, or the Severance Payments are not
reduced to zero. For purposes of this limitation, (i) no portion
of the Total Payments, the receipt or enjoyment of which you
shall have effectively waived in writing prior to the date of
payment of the Severance Payments, shall be taken into account,
(ii) no portion of the Total Payments shall be taken into
account which in the opinion of taxcounsel selected by the
Company's independent auditors and acceptable to you does not
constitute a "parachute payment" within the meaning of Section
280G(b)(2) of the Code,(iii) the Severance Payments shall be
reduced only to the extent necessary so that the Total Payments
(other than those referred to in clause (ii)) in their entirety
constituted reasonable compensation for services actually
rendered within the meaning of Section 280G(b)(4) of the Code,
in the opinion of the tax counsel referred to in clause (ii),
and (iv) the value of any non-cash benefit or any deferred cash
payment included in the Total Payments shall be determined by
the Company's independent auditors in accordance with the
principles of Sections 280G(d)(3) and (4) of the Code.
(iv) You shall not be required to mitigate the amount of any
payment provided for in this Section 4 by seeking other
employment or otherwise, nor shall the amount of any payment or
benefit provided for in this Section 4 be reduced by any
compensation earned by you as the result of employment by
another employer or by retirement benefits after the Date of
Termination or otherwise.
(v) In addition to all other amounts payable to you under this
Section 4, you shall be entitled to receive all benefits payable
to you under the Pension Plans, and any other plan or agreement
relating to retirement benefits.
5. Letter of Credit Preceding Termination. In the event a
potential change in control of the Company shall have occurred,
the Company will promptly (and in no event more than seven days
thereafter) establish an irrevocable letter of credit (the
"Letter of Credit) in your favor in an amount equal to the
aggregate of the amounts which would be payable to you pursuant
to Subsections 4(iii)(B), (C), (D) and (E) hereof as if you were
immediately entitled to payment pursuant thereto plus $100,000,
such Letter of Credit to be issued by a commercial bank which is
not an affiliate of the Company, but which is a national banking
association or established under the laws of one of the states
of the United States, and which has equity in excess of $100
million (the "Bank"). The Letter of Credit shall be in form and
substance reasonably satisfactory to you and the Company and
will provide that the Bank shall pay you the amount of your
draft, at sight, on presentation to the Bank of a statement,
signed by you or your authorized representative, setting forth
(i) a statement that pursuant to any or all of Subsections
4(iii), 4(iv) or 4(v) of this Agreement you are entitled to
payments of not less than the amount of such draft and (ii) the
Date of Termination of your employment. Each time you shall draw
on the Letter of Credit, you shall provide the Company with a
copy of such draft and the accompanying statement referred to
above. The Company shall maintain the Letter of Credit in effect
for a period of two years from the date on which it is issued;
provided, however, that if during any such two-year period any
event shall occur which, pursuant to this Section 5, would have
required the Company to establish a Letter of Credit had none
then existed, then the Company shall maintain the Letter of
Credit in effect for a period of two years following such event,
unless further extended pursuant to this Section 5. During the
period in which a Letter of Credit is required to be maintained,
the Company shall, at sixmonth intervals commencing with the
date the Letter of Credit is established, calculate the mount
which would be payable to you pursuant to Subsections 4(iii)(B),
(C), (D) and (E) hereof as if your were immediately entitled to
payment pursuant thereto. If the amount so calculated plus
$100,000 exceeds the amount available to be drawn upon under the
Letter of Credit then in effect, the Company shall promptly (and
in no event later than seven days thereafter) cause the amount
payable under the Letter of Credit to be increased by the amount
of such excess.The payment by the Bank of the amount of your
draft in accordance with the terms hereof and of the Letter of
Credit shall not constitute a waiver by the Company of, or in
any way preclude the Company from asserting, any claim against
you that you are not entitled to some or all of such payment. In
addition, your drawing upon the Letter of Credit shall not
constitute a waiver by you, or in any way preclude you from
asserting, any claim against the Company that you are entitled
to amounts pursuant to this Agreement which were not paid by
amounts received under the Letter of Credit.
6. Successors: Binding Agreement.
(i) the Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to
all or substantially all of the business and/or assets of the
Company to expressly assume and agree to perform this Agreement
in the same manner and to the same extent that the Company
would be required to perform it if no such succession had taken
place. Failure of the Company to obtain such assumption and
agreement prior to the effectiveness of any such succession
shall be a breach of this Agreement and shall entitle you to
compensation from the Company in the same amount and on the
same terms as you would be entitled hereunder if you terminate
your employment for Good Reason, except that for purposes of
implementing the foregoing, the date on which any such
succession becomes effective shall be deemed the Date of
Termination. As used in this Agreement, "Company" shall mean
the Company as hereinbefore defined and any successor to its
business and/or assets as aforesaid which assumes and agrees to
perform this Agreement by operation of law, or otherwise.
(ii) This Agreement shall inure to the benefit of and be
enforceable by your personal or legal representatives,
executors, administrators, successors, heirs, distributees,
devisees and legatees. If you should die while any amount would
still be payable to you hereunder if you had continued to live,
all such amounts, unless otherwise provided herein, shall be
paid in accordance with the terms of this Agreement to your
devisee, legatee or other designee or if there is no such
designee, to your estate.
7. Notice. Notices and all other communications provided for in
this Agreement shall be in writing and shall be deemed to have
been duly given when delivered or mailed by the United States
registered mail, return receipt requested, postage prepaid,
addressed to the respective addresses set forth on the first
page of this Agreement, provided that all notices to the
Company shall be directed to the attention of the Board with a
copy to the Secretary of the Company, or to such other address
as either party may have furnished to the other in writing in
accordance herewith, except that notice of change of address
shall be effective only upon receipt.
8. Miscellaneous. No provision of this Agreement may be
modified, waived or discharged unless in writing and signed by
you and such officer as may be specifically designated by the
Board. No waiver by either party hereto at any time of any
breach by the other party hereto of, or compliance with, any
condition or provision of this Agreement to be performed by
such other party shall be deemed a waiver of similar or
dissimilar provisions or conditions at the same or at any prior
or subsequent time. No agreements or representations, oral or
otherwise, express or implied, with respect to the subject
matter hereof have been made by either party which are not
expressly set forth in this Agreement. The validity,
interpretation, construction and performance of this Agreement
shall be governed by the laws of the State of New Jersey.
9. Validity. The invalidity or unenforceability of any
provisions of this Agreement shall not affect the validity or
enforceability of any other provisions of this Agreement, which
shall remain in full force and effect. If this letter correctly
sets forth our agreement on the subject matter hereof, kindly
sign and return to the Company the enclosed copy of this letter
which will then constitute our agreement on this subject.
IMO INDUSTRIES INC.
By: /s/ William J. Holcombe
Name W. J. Holcombe
Title: Chairman of the Board of Directors &
CEO
Agreed to this 10 day
of May , 1993
/s/ Gary E. Walker
Name: Gary E. Walker
EMPLOYMENT AGREEMENT
THIS AGREEMENT is made and entered into effective as of September
13, 1993 by and between Imo Industries Inc., a Delaware
Corporation ("Employer") and Donald K. Farrar ("Employee").
WHEREAS, Employer desires to employ Employee for the period
provided in this Agreement and in accordance with its terms, and
Employee is willing and able to become so employed;
NOW THEREFORE, in consideration of the mutual covenants herein
contained, the parties hereby agree as follows:
1. Employment. Employer agrees to employ Employee and Employee
agrees to be employed for the period stated in paragraph 3 hereof
and upon the other terms and conditions herein provided.
2. Position. During the period of his employment hereunder,
Employee agrees to serve Employer and Employer shall employ
Employee as President and Chief Executive Officer reporting to
Employer's Board of Directors.
3. Terms and Performance.
a. Term of Employment. The period of Employee's
employment under this Agreement shall commence on the effective
date first above written and shall continue for a period of
twenty-four (24) months thereafter, expiring on August 31, 1995.
b. Performance. During the period of his employment
hereunder and except for illness, reasonable vacation periods and
reasonable leaves of absence, Employee shall devote all his
business time, attention, skill and efforts to the faithful
performance of his duties hereunder.
4. Compensation. For all services rendered by Employee during
his employment hereunder, Employer shall pay Employee as
compensation (i) a salary, in equal monthly installments, at a
rate not less than $500,000 per year, and (ii) such bonus or
incentive compensation as shall be determined annually, beginning
for the calendar year 1994, by the Board of Directors at the end
of each fiscal year and which shall be determined by the Board in
accordance with its usual evaluative process.
The Board shall review at least annually, beginning as at January
1, 1995, the annual basic salary stated above and shall in its
discretion grant such increases for cost of living, merit or
other similar or customary reasons, if any, as it may in good
faith deem appropriate.
5. Stock Option. Employer will recommend to its Board of
Directors the following stock awards to Employee:
a. Promptly after the effective date first above written
an option for 100,000 shares of Imo Industries Inc. common
capital stock under the current Equity Incentive Plan for Key
Employees.
b. Promptly after the effective date first above written,
a special option in the amount of 50,000 shares of Imo Industries
Inc. common capital stock which shall not vest until September 1,
1998, at which time the full amount shall vest, provided
nevertheless, that the market closing price of the company's
stock shall be at least $10.00 on that date or shall reach that
value during the 60-day period following that date and further
provided that Employee is an employee of Employer at the time of
vesting; these shares shall likewise be awarded under the current
Equity Incentive Plan for Key Employees. The parties acknowledge
the consistency of anticipatable continuous employment following
the expiration of this Agreement and the vesting referred to in
the within paragraph.
c. Promptly after the effective date first above written,
a special restricted stock award of 30,000 shares of Imo
Industries Inc. common capital stock will be granted under the
current Equity Incentive Plan for Key Employees which shall vest,
if at all, between the fifth and seventh anniversary date of the
grant provided that the closing price of the stock reaches at
least $12.00 for a period of not less than 30 consecutive
calendar days during the said two-year period; provided further
that Employee remains an employee of Employer and is so employed
at the time of vesting.
6. Additional Compensation. In addition to the basic
compensation set forth in paragraph 4, Employer shall provide
Employee during the period of his employment any and all
additional benefits (commensurate with his position and length of
service and in accordance with the terms of any such plan) which
the Board, in its sole and absolute discretion, may make
available to its executive officers (or employees in general, if
any such plan is not available solely for executive officers)
under any general profit-sharing plan, bonus or incentive
compensation plan, pension plan (including its related SERP),
employee stock purchase or ownership plan, restricted stock plan,
group life insurance plan, hospitalization plan, medical service
plan, vacation or other employee benefit plan which may be in
effect any time or from time to time during Employee's
employment.
7. Relocation. Employee shall, with reasonable promptness,
relocate his primary residence to the area which is within
reasonable automobile commuting distance to Employer's
headquarters in Lawrenceville, N.J. Employer will make available
to Employee
the benefits of Standard Practice No. 361. Employer will
reimburse Employee for the cost of interim housing of up to
$3,000 per month in the Lawrenceville, N.J. area for up to six
(6) months until a permanent residence is occupied.
8. Payment to Employee Upon Termination of Employment. In the
event that Employer, without good cause, terminates Employee's
employment during the term of this Agreement, Employer shall pay
Employee monthly (or in the event of his death following such
termination, his estate) as liquidated damages, for the remaining
period of this Agreement, a sum equal to the highest monthly rate
of salary paid to Employee at any time under this Agreement.
Should the remaining term under such termination be less than
twelve (12) months, the said payments shall be continued for
twelve (12) months. If Employee voluntarily terminates his
employment hereunder, payments hereunder shall be discontinued
forthwith.
9. Change in Control Agreement. Employer agrees that Employee
will be offered a change in control agreement in the form offered
to and entered into by other senior officers of Employer.
10. Board of Directors. Employer will recommend to its Board of
Directors that Employee be nominated and approved for membership
on the Board. Such recommendation shall be made not later than
at the first meeting of the Board following Employee's employment
hereunder.
11. Confidentiality. Employee agrees that he shall not violate
any obligations of confidentiality owing by him to a former
employer or others. Likewise, Employee agrees that he will not
disclose or use at any time during or subsequent to his
employment by Employer any trade secrets, know-how or other
proprietary or confidential information of Employer. Employee
acknowledges and agrees that his obligations of confidentiality
hereunder shall survive and be enforceable, at law and equity, by
Employer after termination of employment. Employee also agrees
that, following termination of employment, he shall not act in
any way inimical to the interests of Employer (except to enforce
a legal right of Employee), including, but not limited to, the
solicitation of Employer's employees for other employment.
12. Amendment and Governing Law. This Agreement may not be
amended except by written instrument signed by both parties.
This Agreement shall be governed by and construed in accordance
with the laws of New Jersey.
13. Miscellaneous.
a. Employee shall be eligible for four (4) weeks of
vacation per year.
b. Employee shall be provided with an American automobile
("luxury" standard; e.g., Lincoln or Cadillac) with phone and
expenses funded by Employer. Taxes attributable to the "income"
from personal use of the automobile shall be the responsibility
of Employee.
IN WITNESS WHEREOF, the parties have executed this Agreement as
of the date first above written.
IMO INDUSTRIES INC.
/s/ Donald K. Farrar by:/s/ W.J. Holcombe
Donald K. Farrar
September 13, 1993
Mr. Donald K. Farrar
President and Chief Executive Officer
Imo Industries Inc.
3450 Princeton Pike
Lawrenceville, NJ 08648
Dear Mr. Farrar:
The Board of Directors (the "Board") of Imo Industries Inc. (the
"Company") considers it to be in the best interests of its
stockholders to foster the continuous employment of key
management personnel of the Company and its subsidiaries in the
event of a possible change in control of the Company.
In order to induce you, in the event of a possible change in
control of the Company, to remain in the employ of the Company or
its subsidiaries and to give your continued attention and
dedication to your assigned duties without distraction, and in
consideration of your agreement set forth in Section 2(ii)
hereof, the Company agrees that you shall receive the severance
benefits hereinafter set forth in the event your employment with
the Company or its subsidiaries is terminated subsequent to a
"change in control of the Company" (as defined in Section 2
hereof) under the circumstances described below.
1. Term of Agreement. This Agreement shall commence on
the date hereof and shall continue in effect through December 31,
1993 provided, however, that commencing on January 1, 1994 and
each January 1 thereafter, the term of this Agreement shall
automatically be extended for one additional year unless not
later than September 30 of the preceding year, the Company shall
have given notice that it does not wish to extend this Agreement;
and provided, further, that notwithstanding any such notice by
the Company not to extend, this Agreement shall continue in
effect for the lesser of (i) a period of 36 months beyond the
term provided herein or (ii) a period of such number of months to
your 65th birthday, if a change in control of the Company, as
defined in Section 2 hereof, shall have occurred during such
term.
2. Change in Control. (i) No benefits shall be payable
hereunder unless there shall have been a change in control of the
Company, as set forth below, and your employment by the Company
or its subsidiaries shall thereafter have been terminated in
accordance with Section 3 hereof. For purposes of this
Agreement, a "change in control of the Company" shall be deemed
to have occurred if following the corporate changes described in
Form 10 filed with the Securities and Exchange Commission in
connection with the distribution of the Company's common stock to
the stockholders of Transamerica Corporation (hereinafter
referred to as the "Spin-Off") (A) any "person" (as defined in
Sections 13(d) and 14(d) of the Securities Exchange Act of 1934,
as amended (the "Exchange Act")) is or becomes the "beneficial
owner" (as defined in Rule 13d-3 under the Exchange Act),
directly or indirectly, of securities of the company representing
35% or more of the combined voting power of the Company's then
outstanding securities; (B) during the term of this Agreement,
individuals who at the beginning of such term constitute the
board, including for this purpose any new director whose election
or nomination for election by the Company's stockholders was
approved by a vote of at least two-thirds of the directors still
in office who were directors at the beginning of such term,
cease, for any reason to constitute a majority thereof; or (C)
more than 50% of the assets of the Company, including the
business or businesses for which your services are principally
performed, is disposed of by the Company pursuant to a partial or
complete liquidation of the Company, a sale of assets (including
stock of a subsidiary or subsidiaries) of the Company or
otherwise.
(ii) For purposes of this Agreement, a "potential change in
control of the Company" shall be deemed to have occurred if
following the Spin-Off (A) the Company enters into an agreement,
the consummation of which would result in the occurrence of a
change in control of the Company, (B) any person (including the
Company) publicly announces an intention to take or to consider
taking actions which if consummated would constitute a change in
control of the Company; or (C) the Board of Directors adopts a
resolution to the effect that a potential change in control of
the Company for purposes of this Agreement has occurred. You
agree that, subject to the terms and conditions of this
Agreement, in the event of a potential change in control of the
Company, you will remain in the employ of the Company or its
subsidiaries during the pendency of any such potential change in
control and for a period of one year after the occurrence of an
actual change in control of the Company. However, nothing in
this Agreement shall confer upon you any right to continue in the
employ of the Company or its subsidiaries prior to an actual
change in control of the Company or shall interfere with or
restrict in any way the rights of the Company or its
subsidiaries, which are hereby expressly reserved, to discharge
you at any time prior to an actual change in control of the
Company for any reason whatsoever, with or without cause.
3. Termination Following Change in Control. If any of the
events described in Section 2 hereof constituting a change in
control of the Company shall have occurred, you shall be entitled
to the benefits provided in Section 4 hereof upon the subsequent
termination of your employment by the Company or its subsidiaries
within three years of a change in control of the Company during
the term of this Agreement unless such termination is (A) because
of your Death or Retirement, (B) by the Company for Cause or
Disability, or (C) by you other than for Good Reason.
(i) Disability; Retirement. If, as a result of your
incapacity due to physical or mental illness, you shall have been
absent from your duties with the Company or its subsidiaries on a
full-time basis for six consecutive months, and within thirty
(30) days after written notice of termination is given, you shall
not have returned to the full-time performance of your duties,
the Company may terminate your employment with the Company or its
subsidiaries for "Disability". Termination by the Company or you
of your employment with the Company or its subsidiaries based on
"Retirement" shall mean termination in accordance with the
retirement policy of the Company, or the subsidiary of the
Company by which you are employed, generally applicable to its
salaried employees, including early retirement, or in accordance
with any retirement arrangement established with your consent
with respect to you.
(ii) Cause. Termination by the Company of your
employment with the Company or its subsidiaries for "Cause" shall
mean termination upon the willful engaging by you in misconduct
which is demonstrably and materially injurious to the Company and
its subsidiaries taken as a whole. No act, or failure to act, on
your part shall be considered "willful" unless done, or omitted
to be done, by you not in good faith and without reasonable
belief that your action or omission was in the best interest of
the Company or its subsidiaries. Notwithstanding the foregoing,
you shall not be deemed to have been terminated for Cause unless
and until there have been delivered to you a copy of a resolution
duly adopted by the affirmative vote of not less than three-
quarters of the entire membership of the Board at a meeting of
the Board called and held for the purpose (after reasonable
notice to you and an opportunity for you, together with your
counsel, to be heard before the Board), finding that in the good
faith opinion of the Board you were guilty of misconduct set
further above in this Subsection and specifying the particulars
thereof in detail.
(iii) Good Reason. You shall be entitled to
terminate your employment for Good Reason within three years of a
change in control of the Company during the term of this
Agreement. For purposes of this Agreement, "Good Reason" shall
mean any of the following events which occurs without your
express written consent.
(A) the assignment to you of any duties
inconsistent with your status as President and Chief Executive
Officer of the Company or a substantial alteration in the nature
or status of your responsibilities from those in effect
immediately prior to a change in control of the Company other
than any such alteration primarily attributable to the fact that
the Company may no longer be a public Company;
(B) a reduction by the Company in your annual
base salary as in effect on the date hereof or as the same may be
increased from time to time, except for across-the-board salary
reductions similarly affecting all executives of the Company and
its subsidiaries and all executives of any organization in
control of the Company;
(C) the relocation of the Company's principal
executive offices to a location outside the Lawrenceville, New
Jersey area or the Company requiring you to be based anywhere
other than Company's principal executive offices except for
required travel on the Company's business to an extent
substantially consistent with your present travel obligations;
(D) the failure by the Company to continue in
effect any compensation plan of the Company in which you
participate, including but not limited to the Company's Equity
Incentive Plan (the "Stock Option Plan") or any substitute or
additional plans adopted prior to the change in control, unless
an equitable arrangement (embodied in an ongoing substitute or
alternative plan) has been made with respect to such plan in
connection with the change in control of the Company, or the
failure by the Company to continue your participation therein;
(E) the failure by the Company or its
subsidiaries to continue to provide you with benefits
substantially similar to those enjoyed by you under the Company's
Salaried Employees Stock Savings Plan or any of the pension, life
insurance, medical, health and accident, or disability plans of
the Company or its subsidiaries in which you were participating
at the time of a change in control of the Company, or the taking
of any action by the Company or its subsidiaries which would
directly or indirectly materially reduce any of such benefits or
deprive you of any material fringe benefit enjoyed by you at the
time of the change in control of the Company, or the failure by
the Company or its subsidiaries to provide you with the number of
paid vacation days to which you are entitled on the basis of
years of service with the Company or its subsidiaries in
accordance with the normal vacation policy of the Company or the
subsidiary by which you are employed as in effect at the time of
the change in control;
(F) the failure of the Company to obtain a
satisfactory agreement from any successor to assume and agree to
perform this Agreement, as contemplated in Section 5 hereof; or
(G) any purported termination of your employment
which is not effected pursuant to a Notice of Termination
satisfying the requirements of Subsection (iv) below (and, if
applicable, Subsection (ii) above); and for purposes of this
Agreement, no such purported termination shall be effective.
Your right to terminate your employment pursuant to this
Subsection shall not be affected by your incapacity due to
physical or mental illness.
(iv) Notice of Termination. Any purported
termination by the Company or by you shall be communicated by
written Notice of Termination to the other party hereto in
accordance with Section 7 hereof. A "Notice of Termination"
shall mean a notice which indicates the specific termination
provision in this Agreement relied upon and sets forth in
reasonable detail the facts and circumstances claimed to provide
a basis for termination of your employment.
(v) Date of Termination, Etc. "Date of Termination"
shall mean (A) if your employment is terminated for Disability,
thirty (30) days after Notice of Termination is given (provided
that you shall not have returned to the performance of your
duties on a full-time basis during such thirty (30) day period,
and (B) if your employment is terminated pursuant to Subsection
(ii) or (iii) above or for any other reason, the date specified
in the Notice of Termination (which shall be not less than thirty
(30) days from the date such Notice of Termination is given).
4. Compensation Upon Termination or During Disability.
(i) During any period that you fail to perform your
duties hereunder as a result of incapacity due to physical or
mental illness, you shall continue to receive your full base
salary at the rate then in effect until this Agreement is
terminated pursuant to Section 3(i) hereof. Thereafter, your
benefits shall be determined in accordance with the Company's
disability program (without regard to any amendment to such
disability program made subsequent to a change in control of the
Company and on or prior to the Date of Termination, which
amendment adversely affects in any way the computation of
benefits thereunder).
(ii) If your employment shall be terminated for
Cause, the Company shall pay you your full base salary through
the Date of Termination at the rate in effect at the time Notice
of Termination is given and the Company and its subsidiaries
shall have no further obligations to you under this Agreement.
(iii) If your employment by the Company shall be
terminated during the term of this Agreement (a) by the Company
other than for Cause, Retirement or Disability within a period of
three years of a change in control of the Company or (b) by you
for Good Reason within a period of three years of the occurrence
of such a change in control, then you shall be entitled to the
benefits provided below.
(A) the Company shall pay for your full base
salary through the Date of Termination at the rate in effect at
the time Notice of Termination is given;
(B) in lieu of any further salary payments to you
for periods subsequent to the Date of Termination, the Company
shall pay as severance pay to you, not later than the fifth day
following the Date of Termination, a lump sum severance payment
(together with the payments provided in Subsections (C), (D), (F)
and (G) below (the "Severance Payments")) equal to 299.999% of
your average taxable compensation from the Company during the
five taxable years of the Company, immediately preceding the
change in control of the Company (or, if your employment by the
Company began during such five-years period, during the portion
of the period following your employment); provided that, in the
event there are fewer than 36 whole or partial months remaining
from the Date of Termination to your 65th birthday, the amount
provided for in this Subsection (B) will be reduced by
multiplying it by a fraction the numerator of which is the number
of whole or partial months so remaining to your 65th birthday and
the denominator of which is 36;
(C) notwithstanding any provisions of the
Company's bonus plan, the Company shall pay to you, not later
than the fifth day following the Date of Termination, a lump sum
amount equal to the sum of (x) any incentive compensation which
has been allocated for the fiscal year preceding that in which
the Date of Termination occurs but has not yet been paid, and (y)
any award under the Company's bonus plan, if any, which has not
yet been paid for any other period which has closed prior to the
Date of Termination;
(D) in lieu of shares of common stock of the
Company ("Company Shares") issuable upon the exercise of
outstanding options ("Options"), if any, granted to you under the
Company's Stock Option Plan or any other stock option plan of the
Company (which Options shall be cancelled upon the making of the
payment referred to below), the Company shall pay to you, not
later than the fifth day following the Date of Termination, a
lump sum equal to the sum of:
(x) in the case of Options which are
incentive stock options ("Incentive Stock Options"), as defined
under Section 422A of the Internal Revenue Code of 1986, as it
may hereafter be amended (the "Code"), granted after the date of
this Agreement, the product of (a) the difference (to the Extent
such difference is a positive number) obtained by subtracting the
per share exercise price of each such Incentive Stock Option held
by you (to the extent then exercisable) from the higher of (i)
the closing price of Company Shares as reported on the New York
Stock Exchange on the Date of Termination or (ii) the highest
price per Company Share actually paid in connection with any
change in control of the Company (but not more than the fair
market value per share, within the meaning of Section 422A of the
Code and the regulations promulgated thereunder), on the date of
payment thereof and (b) the number of Company shares covered by
each such Incentive Stock Option;
(y) in the case of all other Options (other
than Incentive Stock Options granted on or before the date of
this Agreement, with respect to which no provision is made herein
for payment and which Incentive Stock Options shall not be
cancelled pursuant to this Agreement), the product of (a) the
difference (to the extent that such difference is a positive
number) obtained by subtracting the per share exercise price of
each such Option held by you whether or not then fully
exercisable from the higher of (i) the closing price of Company
Shares as reported on the New York Stock Exchange on the Date of
Termination, or (ii) the highest price per Company Share actually
paid in connection with any change in control of the Company, and
(b) the number of Company Shares covered by such Option;
(E) the Company shall also pay to you all legal
fees and expenses incurred by you as a result of such termination
(including all such fees and expenses, if any, incurred in
contesting or disputing any such termination or in seeking to
obtain or enforce any right or benefit provided by this
Agreement);
(F) the Company shall arrange to provide you, for
a 36-month period after such termination (or such lesser number
of months to your 65th birthday), with life, disability, accident
and health insurance substantially similar to those which you are
receiving immediately prior to the Notice of Termination.
Benefits otherwise receivable by you pursuant to this Section 4
(iii)(F) shall be reduced to the extent comparable benefits are
actually received by you during the 36-month period following
your termination (or such shorter number of months to your 65th
birthday), and any such benefits actually received by you shall
be reported by you to the Company; and
(G) in addition to the retirement benefits to
which you are entitled under the qualified and supplemental
pension plans of the Company or any of its subsidiaries in which
you participate (the "Pension Plans") or any successor plans
thereto, the Company shall pay you in one sum in cash on the
fifth day following the Date of Termination, a lump sum equal to
the actuarial equivalent of the excess of (x) the retirement
pension (determined as a straight life annuity commencing at age
65) which you would have accrued under the terms of the Pension
Plans (without regard to any amendment to the Pension Plans made
subsequent to a change in control of the Company and on or prior
to the Date of Termination, which amendment adversely affects in
any manner the computation of retirement benefits thereunder),
determined as if you were fully vested thereunder and had
accumulated (after the Date of Termination) 36 additional months
of benefit accrual and service credit thereunder at your highest
annual rate of compensation during the 12 months immediately
preceding the Date of Termination (but in no event shall you be
deemed to have accumulated additional months of service credit
after your 65th birthday), over (y) the vested retirement pension
(determined as a straight life annuity commencing at age 65)
which you had then accrued pursuant to the provisions of the
Pension Plans. For purposes of clause (x), the term
"compensation" shall include amounts payable pursuant to Section
4(iii)(B) hereof, and amounts payable pursuant to Section
4(iii)(B) hereof shall be deemed to represent 36 months of
compensation (or such lesser number of months of compensation to
your 65th birthday) for purposes of determining benefits under
the Pension Plans. For purposes of this Subsection, "actuarial
equivalent" shall be determined using the same methods and
assumptions utilized under the Pension Plans immediately prior to
the change in control of the Company;
(H) in the event that any payment or benefit
received or to be received by you in connection with either the
termination of your employment or a change in control of the
Company (whether payable pursuant to the terms of this Agreement
or any other plan, arrangement or agreement with the Company, any
successor to the Company or any corporation ("Affiliate")
affiliated with the Company or which becomes so affiliated
pursuant to the transactions resulting in a change in control of
the Company, both within the meaning of Section 1504 of the Code,
(collectively with the Severance Payments, "Total Payment"))
would not be deductible (in whole or part) by the Company or an
Affiliate as a result of Section 280G of the Code, the Severance
Payments shall be reduced (to zero, if necessary) until no
portion of the Total Payments is not deductible as a result of
Section 280G of the Code, or the Severance Payments are not
reduced to zero. For purposes of this limitation, (i) no portion
of the Total Payments, the receipt or enjoyment of which you
shall have effectively waived in writing prior to the date of
payment of the Severance Payments, shall be taken into account,
(ii) no portion of the Total Payments shall be taken into account
which in the opinion of tax counsel selected by the Company's
independent auditors and acceptable to you does not constitute a
"parachute payment" within the meaning of Section 280G(b)(2) of
the Code, (iii) the Severance Payments shall be reduced only to
the extent necessary so that the Total Payments (other than those
referred to in clause (ii)) in their entirety constituted
reasonable compensation for services actually rendered within the
meaning of Section 280G(b)(4) of the Code, in the opinion of the
tax counsel referred to in clause (ii), and (iv) the value of any
non-cash benefit or any deferred cash payment included in the
Total Payments shall be determined by the Company's independent
auditors in accordance with the principles of Sections 280G(d)(3)
and (4) of the Code.
(iv) You shall not be required to mitigate the
amount of any payment provided for in this Section 4 by seeking
other employment or otherwise, nor shall the amount of any
payment or benefit provided for in this Section 4 be reduced by
any compensation earned by you as the result of employment by
another employer or by retirement benefits after the Date of
Termination or otherwise.
(v) In addition to all other amounts payable to you
under this Section 4, you shall be entitled to receive all
benefits payable to you under the Pension Plans, and any other
plan or agreement relating to retirement benefits.
5. Letter of Credit Preceding Termination. In the event a
potential change in control of the Company shall have occurred,
the Company will promptly (and in no event more than seven days
thereafter) establish an irrevocable letter of credit (the
"Letter of Credit") in your favor in an amount equal to the
aggregate of the amounts which would be payable to you pursuant
to Subsections 4(iii)(B), (C), (D) and (E) hereof as if you were
immediately entitled to payment pursuant thereto plus $100,000,
such Letter of Credit to be issued by a commercial bank which is
not an affiliate of the Company, but which is a national banking
association or established under the laws of one of the states of
the United States, and which has equity in excess of $100 million
(the "Bank"). The Letter of Credit shall be in form and
substance reasonably satisfactory to you and the Company and will
provide that the Bank shall pay you the amount of your draft, at
sight, on presentation to the Bank of a statement, signed by you
or your authorized representative, setting forth (i) a statement
that pursuant to any or all of Subsections 4(iii), 4(iv) or 4(v)
of this Agreement you are entitled to payments of not less than
the amount of such draft and (ii) the Date of Termination of your
employment. Each time you shall draw on the Letter of Credit,
you shall provide the Company with a copy of such draft and the
accompanying statement referred to above. The Company shall
maintain the Letter of Credit in effect for a period of two years
from the date on which it is issued; provided, however, that if
during any such two-year period any event shall occur which,
pursuant to this Section 5, would have required the Company to
establish a Letter of Credit had none then existed, then the
Company shall maintain the Letter of Credit in effect for a
period to two years following such event, unless further extended
pursuant to this Section 5. During the period in which a Letter
of Credit is required to be maintained, the Company shall, at six-
month intervals commencing with the date the Letter of Credit is
established, calculate the amount which would be payable to you
pursuant to Subsections 4(iii) (B), (C), (D) and (E) hereof as if
you were immediately entitled to payment pursuant thereto. If
the amount so calculated plus $100,000 exceeds the amount
available to be drawn upon under the Letter of Credit then in
effect, the Company shall promptly (and in no event later than
seven days thereafter) cause the amount payable under the Letter
of Credit to be increased by the amount of such excess.
The payment by the Bank of the amount of your draft in
accordance with the terms hereof and of the Letter of Credit
shall not constitute a waiver by the Company of, or in any way
preclude the Company from asserting, any claim against you that
you are not entitled to some or all of such payment. In
addition, your drawing upon the Letter of Credit shall not
constitute a waiver by you, or in any way preclude you from
asserting, any claim against the Company that you are entitled to
amounts pursuant to this Agreement which were not paid by amounts
received under the Letter of Credit.
6. Successors; Binding Agreement.
(i) the Company will require any successor (whether
direct or indirect, by purchase, merger, consolidation or
otherwise) to all or substantially all of the business and/or
assets of the Company to expressly assume and agree to perform
this Agreement in the same manner and to the same extent that the
Company would be required to perform it if no such succession had
taken place. Failure of the Company to obtain such assumption
and agreement prior to the effectiveness of any such succession
shall be a breach of this Agreement and shall entitle you to
compensation from the Company in the same amount and on the same
terms as you would be entitled hereunder if you terminate your
employment for Good Reasons, except that for purposes of
implementing the foregoing, the date on which any such succession
becomes effective shall be deemed the Date of Termination. As
used in this Agreement, "Company" shall mean the Company as
hereinbefore defined and any successor to its business and/or
assets as aforesaid which assumes and agrees to perform this
Agreement by operation of law, or otherwise.
(ii) This Agreement shall inure to the benefit of
and be enforceable by your personal or legal representatives,
executors, administrators, successors, heirs, distributees,
devisees and legatees. If you should die while any amount would
still be payable to you hereunder if you had continued to live,
all such amounts, unless otherwise provided herein, shall be paid
in accordance with the terms of this Agreement to your devisee,
legatee or other designee or if there is no such designee, to
your estate.
7. Notice. Notices and all other communications provided
for in this Agreement shall be in writing and shall be deemed to
have been duly given when delivered or mailed by the United
States registered mail, return receipt requested, postage
prepaid, addressed to the respective addresses set forth on the
first page of this Agreement, provided that all notices to the
Company shall be directed to the attention of the Board with a
copy to the Secretary of the Company, or to such other address as
either party may have furnished to the other in writing in
accordance herewith, except that notice of change of address
shall be effective only upon receipt.
8. Miscellaneous. No provision of this Agreement may be
modified, waived or discharged unless in writing and signed by
you and such officer as may be specifically designated by the
Board. No waiver by either party hereto at any time of any
breach by the other party hereto of, or compliance with, any
condition or provision of this Agreement to be performed by such
other party shall be deemed a waiver of similar or dissimilar
provisions or conditions at the same or at any prior or
subsequent time. No agreements or representations, oral or
otherwise, express or implied, with respect to the subject matter
hereof have been made by either party which are not expressly set
forth in this Agreement. The validity, interpretation,
construction and performance of this Agreement shall be governed
by the laws of the State of New Jersey.
9. Validity. The invalidity or unenforceability of any
provisions of this Agreement shall not affect the validity or
enforceability of any other provisions of this Agreement, which
shall remain in full force and effect.
If this letter correctly set forth our agreement on the subject
matter hereof, kindly sign and return to the Company the enclosed
copy of this letter which will then constitute our agreement on
this subject.
IMO INDUSTRIES INC.
By: /s/ D. C. Christensen
Name: D. C. Christensen
Title:Senior Vice President
Agreed to this 13th day
of September, 1993
/s/ Donald K. Farrar
Name Donald K. Farrar
_
Name
AMENDMENT No. 1, dated as of November 22, 1993 (this "Amendment") to the
COMBINED RESTATED CREDIT AGREEMENT, dated as of July 15, 1993, as amended
hereby and as the same may be further amended, amended and restated,
supplemented or otherwise modified (the "Credit Agreement"), among IMO
INDUSTRIES INC., a Delaware corporation (the "Borrower"), the lenders listed
on the signature pages thereto (each a "Lender" and collectively, the
"Lenders") and BANKERS TRUST COMPANY, a New York banking corporation ("BTCo"),
as a Lender, as Issuer Bank and as Agent for the Lenders (in such capacity,
including its successors and permitted assigns, the "Agent"). Capitalized
terms used and not otherwise defined herein shall have the meanings assigned
to them in the Credit Agreement.
WHEREAS, the Borrower has requested that each Lender amend or
waive compliance with certain provisions of the Credit Agreement;
WHEREAS, each Lender has individually considered and agreed to the
Borrower's requests, upon the terms and conditions set forth in this
Amendment;
NOW, THEREFORE, in consideration of the foregoing, and for other
good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto hereby agree as follows:
SECTION ONE - AMENDMENTS, WAIVER AND CONSENT.
1.1 Waiver to Section 6.1 (Financial Statements
and Other Reports)
Compliance with clause A(v)(i) of Section 6.1, pursuant to which
the Borrower is required to deliver not later than December 31, 1993 a
preliminary business plan of the Borrower on a Consolidated basis for the
immediately succeeding three year period, is hereby waived, provided said
clause is complied with on or before January 31, 1994.
1.2 Amendment to Section 7.2 (Liens)
Section 7.2 is hereby amended by (a) deleting the word "and" at
the end of clause (vii) thereof, (b) replacing the period at the end of
clause (viii) thereof with "; and" and (c) adding a new clause (ix) as
follows:
(ix) Liens in respect of Indebtedness permitted to be
incurred under Section 7.10H hereof, provided that such Liens are
granted only on the real property in respect of which such
Indebtedness was incurred.
1.3 Amendment to Section 7.10 (Incurrence of Indebtedness)
Section 7.10 is amended by (a) deleting the word "and" at the end
of clause F thereof, (b) replacing the period at the end of clause G thereof
with "; and" and (c) adding a new clause H as follows:
H. Indebtedness constituting mortgage financings in
respect of the Borrower's Lawrenceville, New Jersey headquarters
and Baird Corporation's Bedford, Massachusetts real properties, in
each case (a) provided by a Person who is not an Affiliate of the
Borrower, (b) in an amount not less than 70% of the fair market
value of such property (as determined by the appraisal or other
reasonable determination of the provider of such financing) and
(c) otherwise on terms and pursuant to documentation reasonably
satisfactory in form and substance to the Requisite Holders (as
defined in the Intercreditor Agreement).
1.4 Amendment to Section 7.12 (Contingent Obligations)
Clause (vi) of Section 7.12 is hereby amended by adding at the end
thereof "provided that the Borrower and its Subsidiaries shall be permitted to
incur an additional $5,000,000 advance payment bond and an additional
$10,000,000 performance bond in support of obligations of Warren Pumps Inc.
incurred in connection with a successful bid on a certain project in the State
of California, the bidding for which shall have commenced not earlier than
November 1, 1993 and shall have concluded not later than November 30, 1993;".
1.5 Consent to Release of Collateral
Pursuant to Section 7.2(a) of the Intercreditor Agreement, the
Requisite Holders hereby consent to the release of each of the real properties
constituting Collateral specifically referred to in Section 1.3 of this
Amendment upon the incurrence of Indebtedness and the granting of a related
Lien in respect of such real property in compliance with Sections 7.10H and
7.2(ix) of the Credit Agreement, provided that (a) concurrently therewith, to
the extent required pursuant to the Intercreditor Agreement, the Credit
Agreement, the Combined Restated Credit Agreement and the Restated Prudential
Agreements, the commitments to lend thereunder are reduced and the proceeds of
such Indebtedness are applied to repay obligations and/or cash collateralize
letters of credit in accordance with such agreements and (b) immediately
before and after giving effect to the incurrence of such Indebtedness and the
granting of such Lien there shall not have occurred and not be continuing any
Event of Default or Potential Event of Default.
1.6 Waiver to Section 6.2 (Corporate Existence)
Compliance with Section 6.2 pursuant to which the Borrower is
required to keep in full force its corporate existence and to cause each of
its Domestic Subsidiaries to keep and preserve its corporate existence is
waived to the extent necessary to permit the dissolution of two indirect
subsidiaries of the Borrower, Labtest Equipment Company, a California
corporation and KEI Laser Inc., a Maryland corporation.
1.7 Amendment to Schedule 7.12 (Non-Financial Guarantees)
Effective as of July 15, 1993, Schedule 7.12 to the Credit
Agreement is hereby deleted in its entirety and Schedule 7.12 attached hereto
is hereby added in lieu thereof.
SECTION TWO - REPRESENTATIONS AND WARRANTIES.
The Borrower hereby confirms, reaffirms and restates the
representations and warranties made by it in Section 5 of the Credit
Agreement, and that all such representations and warranties are true and
correct in all material respects as of the date hereof. The Borrower further
represents and warrants (which representations and warranties shall survive
the execution and delivery hereof) to the Agent and each Lender that:
(a) The Borrower has the corporate power, authority and legal
right to execute, deliver and perform this Amendment and has taken all actions
necessary to authorize the execution, delivery and performance of this
Amendment;
(b) No consent of any person, and no consent, permit, approval
or authorization of, exemption by, notice or report to, or registration,
filing or declaration with, any governmental authority is required in
connection with the execution, delivery or performance by the Borrower, of
this Amendment;
(c) This Amendment has been duly executed and delivered on
behalf of the Borrower by a duly authorized officer of the Borrower and
constitutes a legal, valid and binding obligation of the Borrower, enforceable
in accordance with its terms, subject to bankruptcy, insolvency,
reorganization, fradulent transfer, moratorium and similar laws affecting
creditor's rights generally and to general equitable principles;
(d) The execution, delivery and performance of this Amendment
will not violate any requirement of law or Contractual Obligation of the
Borrower; and
(e) After giving effect to the execution, delivery and
performance of this Amendment, no Event of Default or Potential Event of
Default shall have occurred and be continuing.
SECTION THREE - EFFECTIVENESS
This Amendment shall become effective upon (i) the execution and
delivery hereof by the Borrower and the Requisite Holders (as defined in the
Intercreditor Agreement) and (ii) the execution and delivery of an amendment
and waiver agreement to each of the New Credit Agreement and the Restated
Prudential Agreements, each on terms and conditions substantially identical to
those set forth herein.
SECTION FOUR - MISCELLANEOUS.
(a) This Amendment shall not constitute a consent or waiver to
or modification of any other provision, term or condition of the Credit
Agreement. Except as herein expressly amended, the Credit Agreement and all
other agreements, documents, instruments and certificates executed in
connection therewith, except as otherwise provided herein, are ratified and
confirmed in all respects and shall remain in full force and effect in
accordance with their respective terms.
(b) All references to the Credit Agreement shall mean the Credit
Agreement as amended as of the effective date hereof, and as the same may at
any time be amended, amended and restated, supplemented or otherwise modified
from time to time and as in effect.
(c) This Amendment may be executed in any number of
counterparts, and by different parties hereto in separate 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 agreement.
(d) THIS AMENDMENT SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED
AND ENFORCED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK WITHOUT
REGARD TO THE PRINCIPLES OF CONFLICT OF LAWS.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment
to be duly executed as of the date first above written.
IMO INDUSTRIES INC.
By: /s/ Thomas J. Bird
Name: Thomas J. Bird
Title: Senior Vice President
BANKERS TRUST COMPANY, as a Lender
By: /s/ June C. George
Name: June C. George
Title: Vice President
CHEMICAL BANK, as a Lender
By: /s/ Mary Ellen Egbert
Name: Mary Ellen Egbert
Title: Vice President
CIBC, INC., as a Lender
By: ___________________________
Name:
Title:
BARCLAYS BANK PLC, as a Lender
By: ___________________________
Name:
Title:
NATIONAL CITY BANK, as a Lender
By: /s/ Davis R. Bonner
Name: Davis R. Bonner
Title: Vice President
ISTITUTO BANCARIO SAN PAOLO
DI TORINO S.p.A, as a Lender
By: /s/ William J. De Angelo
Name: William J. De Angelo
Title: First Vice President
COMMERZBANK AG, NEW YORK BRANCH
as a Lender
By: /s/ Werner Niemeyer
Name: Werner Niemeyer
Title: Vice President
By: /s/ Johan Soerensson
Name: Johan Soerensson
Title: Assistant Treasurer
ABN-AMRO BANK, N.V., NEW YORK
BRANCH, as a Lender
By: /s/ Parker H. Douglas
Name: Parker H. Douglas
Title: Vice President
By: /s/ Janet T. Marple
Name: Janet T. Marple
Title: Credit Officer
IMO INDUSTRIES INC.
Schedule 7.12
Contingent Obligations
Category Report Dated
Letters of Credit May 31, 1993
Surety Bonds June 30, 1993
Interest Rate Agreements and Currency Agreements July 15, 1993
Non-Financial Guarantees July 15, 1993
Guarantees July 15, 1993
IMO INDUSTRIES INC.
Schedule 7.12
Contingent Obligations
Interest Rate Agreements and Currency Agreements
As of July 15, 1993
Transaction Termination Amount
Interest Rate/Currency Swaps Date Date (U.S.$)
TA International (TAIIS) 10/3/83 9/16/93 7,500,000
Morgan Guaranty 10/3/83 9/16/93 7,500,000
Total 15,000,000
<TABLE>
IMO INDUSTRIES INC.
Schedule 7.12
Schedule of Non-Financial Guarantees
As of July 15, 1993*
<CAPTION>
Date Amount Guarantor Subsidiary Supported Beneficiary Comments
<C> <C> <C> <C> <C> <C>
May 6, 1993 $3,600,819 Imo Industries Inc. Miller-Holzwarth Div., Dept.of the Army Contract to Miller-Holzwarth
Baird Corporation from Amccom for deliveries
from Dec. '93 to Jan. '95.
Sept. 20, 1991 $ 100,000 Imo Industries Inc. Baird Corporation IBM Credit Corp. Supports credit line for
lease payments permitting
Baird to pay on 30 day terms.
Sept. 18, 1992 $3,700,000 Imo Industries Inc. Varo Inc. Corporate Supports lease of 2201-03
Property Assoc. Walnut Street, Garland, Texas
*Updated 9/3/93
</TABLE>
<TABLE>
IMO INDUSTRIES INC.
Schedule 7.12
Schedule of Guarantees As of July 15, 1993
<CAPTIONS>
Date Amount Guarantor Subsidiary Supported Beneficiary Comments
<C> <C> <C> <C> <C> <C>
(Lire 400 mil.)
7/21/87 $269,542 Imo Industries Inc. Imo Industries S.R.L. Credito Italiano, Milan Replaced TA Gty of 4/3/84
12/30/92 (Df 12,500,000)
$ 6,868,132 Imo Industries Inc. Delaval Stork V.O.F. ABN-AMRO Bank N.V. 50% of NLG 25 mill.
(Formerly 50% of NLG 35 m)
8/1/84 $3,803,000 Imo Industries Inc. Varo (former OEC) Nations Bank - Texas IRB loan due 2001
@ 83% of Prime.
Payable.
</TABLE>
Total Imo Industries Inc. Guarantees - $11,277,601
325,000 on 3/1 and 9/1.
<TABLE>
SCHEDULE OF SURETY BONDS AS OF: JUNE 30, 1993
Pg. 1 of 6
INSURED: IMO INDUSTRIES INC.
A. FUEL/ROAD TAX STATE BONDS
<CAPTION>
EFFECTIVE CONTRACT EFFECTIVE % ESTIMATED
BOND NO. BOND AMT. PRICE DESCRIPTION OBLIGEE DATE COMPLETED COMP. DATE
- ------------ --------- ----------- ------------ ------- ------- -------- ----------
<C> <C> <C> <C> <C> <C> <C> <C>
T0022473A $ 1,000 Miscellaneous Payment of Tolls Massachusetts 04/13/90 N/A Annual
T00221247 $ 10,000 Miscellaneous Contractors License California 11/21/89 N/A Annual
T00335976 $ 10,000 Miscellaneous Contractors License California 06/08/93 N/A Annual
T00220322 $ 2,900 Miscellaneous Highway Motor Fuel Kentucky 01/15/90 N/A Annual
T00220358 $ 500 Miscellaneous Motor Carrier Tax Rhode Island 01/01/90 N/A Annual
T00220735 $ 1,000 Miscellaneous Motor Carrier Tax Pennsylvania 01/01/90 N/A Annual
T00221077 $ 500 Miscellaneous Sales Tax Oklahoma 02/27/90 N/A Annual
T00223268 $ 500 Miscellaneous Fuel Use Tax Arizona 03/01/90 N/A Annual
T00223657 $ 500 Miscellaneous Motor Carrier Tax Arizona 03/01/90 N/A Annual
T0023445A $ 1,000 Miscellaneous Petroleum Tax Mississippi 09/06/90 N/A Annual
T00234552 $ 1,000 Miscellaneous Fuel Tax Tennessee 09/12/90 N/A Annual
T00233717 $ 500 Miscellaneous Fuel Use Oklahoma 10/29/90 N/A Annual
T00234564 $ 1,000 Miscellaneous Fuel Use Arkansas 09/12/90 N/A Annual
T00234540 $ 500 Miscellaneous Special Fuel Missouri 09/12/90 N/A Annual
T00234448 $ 1,000 Miscellaneous Motor Fuel Tax Nebraska 09/06/90 N/A Annual
----------
A. SUB-TOTAL $ 31,900
</TABLE>
<TABLE>
SCHEDULE OF SURETY BONDS AS OF: JUNE 30, 1993
Pg. 2 of 6
INSURED: IMO INDUSTRIES INC.
B. CONTRACT RELATED BONDS
<CAPTION>
EFFECTIVE CONTRACT EFFECT. % ESTIMATED
BOND NO. BOND AMOUNT PRICE DESCRIPTION OBLIGEE DATE COMPLETE COMP. DATE
- ------------ ----------- ----------- ------------- ------- ------- ----------- ----------
<C> <C> <C> <C> <C> <C> <C> <C>
T00263515 $ 10,000 Miscellaneous Ann. Perf. Pennsylvania 01/10/91 N/A Annual
67PR-13779 $ 100,000 Miscellaneous Annual Puerto Rico 02/01/93
All Divisions Performance Electric Power
For All Div. Authority
of IMO
T00276340 $ 110,000 $ 1,100,000 Supply & Revamp Lion Oil 04/02/92 95% 07/93
MNR374452 $ 713,781 $ 1,427,562 Manufacture Saskatchewan 04/07/92 70% 09/93
& Install Blades Power, Canada
T00276509 $1,084,399 $ 1,084,399 Supply & Manuf. AECI 10/02/92 60% 09/93
Spare Parts Explosives &
Chemicals
T00271317 $ 54,500 $ 1,090,000 Wilcox Station El Paso Natur. 12/11/91 Shipped Ret. Req.
T00276315 $ 124,752 $ 124,752 100% Performance City of Colo. 90% 07/93
Bond Springs, Martin
Drake Power Plt.
T00276376 $ 847,000 $ 5,646,800 Supply Compressor RPC Chile 08/01/92 50% 12/93
Drives
T00276534 $1,183,000 $ 1,183,000 Turbocare-ProMac Jacksonville 12/11/92 50% 12/93
Quabbin-repair Elec. Auth.
of turbine
</TABLE>
<TABLE>
SCHEDULE OF SURETY BONDS AS OF: JUNE 30, 1993
Pg. 3 of 6
INSURED: IMO INDUSTRIES INC.
B. CONTRACT RELATED BONDS
<CAPTION>
CONTRACT EFFECT. % ESTIMATED
BOND NO. BOND AMOUNT PRICE DESCRIPTION OBLIGEE DATE COMPLETED COMP. DATE
- ------------ ----------- ----------- ---------------- ------- --------- --------- ----------
<C> <C> <C> <C> <C> <C> <C> <C>
T00281801 $ 50,000 $ 159,018 Turbocare-Deltex- Omaha Public 12/28/92 65% 12/93
Quabbin Power District
Repair Unit #3
T00149664 $ 245,520 $ 2,455,200 Maintenance Bond Initec 09/01/92 100% 09/93
Spain
T002713A $ 718,846 $ 4,792,305 Supply 2 Compressor Dept. of Water 02/11/92 95% 08/93-Not
Trains Power, City L.A. yet commiss.
T00276418 $ 430,839 $ 430,839 100% Performance City of Lake 09/01/92 65% 09/93
Bond Turbocare Worth, FLA
T0014969A $ 5,735 $ 114,712 Supply Bond Singapore 09/92 85% 08/93
Varo
T00276522 $ 71,017 $ N/A Maintenance Bond Twp.of Lawrence 12/9/92 -
Corporate 12/9/94
T0027370-3 $ 244,325 $ 244,325 Retainage Bond-5% Litwin/Mobil 100% 05/93
T0027371-5 $ 149,495 $ 149,495 Retainage Bond-5% Litwin/Mobil 100% 05/93
T00273727 $ 93,375 $ 93,375 Turbocare Repair City of Fairbanks 01/94
T00273739 $ 205,500 $ 205,500 Turbocare Repair Sierra Power Co. 45% 01/94
T0027375-2T0 $ 2,000 $ 20,000 Ann. Maintenance State of NJ 02/08/93
Serv. Baird
T00273740T00 $ 172,833 $ 172,833 Field Repair Pacificorp 02/02/93 01/94
Quabbin "Hunter
Station Plant"
T00273326 $ 240,245 $ 240,245 Field Service Pacificorp 01/26/93 01/94
Davey Johnson Plant
Quabbin
</TABLE>
<TABLE>
SCHEDULE OF SURETY BONDS AS OF: JUNE 30, 1993
Pg. 4 of 6
INSURED: IMO INDUSTRIES INC.
B. CONTRACT RELATED BONDS
<CAPTION>
CONTRACT EFFECT. ESTIMATED
BOND NO. BOND AMOUNT PRICE DESCRIPTION OBLIGEE DATE % COMPLETED COMP. DATE
- ------------ ----------- ----------- -------------- ------- ------- ------------ ----------
<C> <C> <C> <C> <C> <C> <C> <C>
T00273697 $ 285,229 $ 285,229 Field Repair Stillwater 02/25/93 02/94
Turbocare Util"Boomer
Station"
T002733302 $ 58,854 $ 58,854 Horizontal Jt. West Plains 03/11/93
Repair Cimarron Energy
River Sta.
T00273338 $ 728,365 $14,567,311 Mfg. & Supply Badger 03/17/93 50%
Compressor Dr Engineers,
Trains Inc.
T00335903 $ 50,000 $ 209,233 Inspect & Repair Omaha Public 03/31/93
Turbine Gin #2 Power District
T00335939 $ 104,454 $ 1,044,535 Contract FW007 Santee Cooper 04/01/93 Retainage
Supply 2 Boiler
Feed Pumps & 1
Spare Rotor
T00335915 $ 67,000 $ 2,546,100 Supply Only Foster Wheeler 05/12/93 Retainage
----------- Trading Co.(on
behalf of
Polybutenos
Argentina
$8,151,064
</TABLE>
<TABLE>
SCHEDULE OF SURETY BONDS AS OF: JUNE 30, 1993
INSURED: IMO INDUSTRIES INC.
Pg. 5 of 6
C. IMO CUSTOM BONDS
<CAPTION>
EFFECTIVE COMPLETION
BOND NO. BOND AMOUNT DESCRIPTION OBLIGEE DATE DATE
- ---------- ----------- ------------ ------- --------- ------------
<C> <C> <C> <C> <C> <C>
3013872 $ 500,000 (IMO) Customs U.S. Government 08/11/89 Annual
Import Bond
3001661 $ 200,000 (Incom) Customs U.S. Government 05/11/85 Annual
Import Bond
3011820 $ 50,000 (Baird) Customs U.S. Government 07/01/88 Annual
Import Bond
3011819 $ 20,000 (Varo) Customs U.S. Government 09/14/93 Annual
729003773 $ 40,000 (Morse) Drawback Bond U.S. Government 05/23/88 Annual
3062385 $ 80,000 (OEC) Drawback Bond U.S. Government 07/23/91 Annual
3062386 $ 300,000 (Varo/OEC)Import Bond U.S. Government 07/23/91 Annual
989031 $ 90,000 (Varo) Carnet Bond U.S. Council 12/24/91 Annual
Int'l Business
989205 $ 32,000 (Baird) Carnet Bond U.S. Council 09/25/92 Annual
Int'l Business
989151 $ 68,241 (Baird) Carnet U.S. Council 05/92 Annual
Int'l Business
989127 $ 48,000 (Varo) Carnet U.S. Council 06/92 Annual
Int'l Business
989233 $ 18,400 (Varo) Carnet U.S. Council 11/13/92 Annual
Int'l Business
989205 $ 32,000 (Baird) Carnet U.S. Council 01/15/93 Annual
Int'l Business
</TABLE>
<TABLE>
SCHEDULE OF SURETY BONDS AS OF: JUNE 30, 1993
INSURED: IMO INDUSTRIES INC.
Pg. 6 of 6
<CAPTION>
EFFECT. COMPLETION
BOND NO. BOND AMOUNT DESCRIPTION OBLIGEE DATE DATE
- -------- ----------- --------------- ------- --------- ----------
<C> <C> <C> <C> <C> <C>
556 $ 7,600 (Varo) Carnet U.S. Council 06/01/93
Int'l Business
TBA $ 61,900 (Varo) Carnet U.S. Council 06/15/93
Int'l Business
989256 $ 28,000 (Baird) Carnet U.S. Council 01/93 AnnuaL
Int'l Business
989055 $ 12,000 (Varo) Carnet U.S. Council 02/10/92 Annual
Int'l Business
032493-1C $ 48,000 (Baird) Carnet U.S. Council 03/24/93 Annual
Int'l Business
989043 $ 242,762 (Varo) Carnet U.S. Council 01/21/92 Annual
Int'l Business
989061 $ 4,950 (Baird) Carnet U.S. Council 06/01/93 Annual
Int'l Business
C. SUB
TOTAL $ 1,883,853
D. MISC. $ 10,000 (4 @ $2,500 ea) Notary
</TABLE>
Schedule 7.12
Contingent Obligations
Surety Bonds
SCHEDULE OF SURETY BONDS AS OF: JUNE 30, 1993
INSURED: IMO INDUSTRIES INC.
- ----------------------------------------------
SUMMARY
-----------
A. FUEL/ROAD TAX STATE BONDS $ 31,900
B. CONTRACTS VALUE 8,151,064
-----------
NET CONTRACTS 8,182,964
C. CUSTOMS BONDS 1,883,833
D. MISC. - NOTARY 10,000
-------------
TOTAL BONDS OUTSTANDING $ 10,076,797
=============
<TABLE>
OUTSTANDING STANDBY AND COMMERCIAL LETTERS OF CREDIT
BY BANK
FOR THE MONTH ENDING MAY 31, 1993
<CAPTION>
L/C ORIGINAL ISSUE EXPIRY L/C COGNIZANT
BANK L/C # BENEFICIARY/ADVISING BNK. PURP. AMOUNT DATE DATE BAL. DIVISION
- ----------- --------- ------------------------ ----- --------- ----- ------- -------- -----
<C> <C> <C> <C> <C> <C> <C> <C> <C>
ABN/AMRO S920059 MOBIL OIL INDONESIA PB $508,832 01/19/92 06/14/93 508,832 TURBINE
ABN/AMRO S920221 TRIPATRA/MOBIL BTB-PB 1,118,646 07/14/92 09/15/93 1,118,646 TURBINE
ABN/AMRO S910081 LIBERTY MUTUAL INSURANCE PB 3,909,903 04/26/91 07/31/93 3,209,000 CORPORATE
ABN/AMRO S910149 TOWNSHIP OF LAWRENCE PB 164,731 08/22/91 09/22/93 164,731 CORPORATE
ABN/AMRO S920206 PDVSA SERVICES/BARIVEN APG 817,000 07/30/92 08/24/93 817,000 TURBINE
S.A.
ABN/AMRO S920255 UBE INDUSTRIES LTD. APG 3,253,950 09/16/92 08/31/93 3,253,950 TURBINE
ABN/AMRO S920119 TRAVELERS INDEMNITY CO PB 1,450,000 04/01/92 09/15/93 2,900,000 CORPORATE
-----------
11,972,159
BANKERS TRUST S-07689 HELLENIC MNST'Y OF NATL DEF BTB/PB 69,400 03/27/91 08/02/93 69,400 BAIRD-OSD
BANKERS TRUST S-06229 SHANGHAI FOREIGN TRADE CORP. PB 10,000 12/19/91 06/22/93 10,000 BAIRD-AID
BANKERS TRUST S-07926 BOHAI OIL CORP BTB/PB 66,547 07/24/91 08/02/93 66,547 WARREN
BANKERS TRUST S-08801 TAIWAN POWER COMPANY PB 1,250,000 10/16/92 07/31/93 1,250,000 TURBINE
BANKERS TRUST S-06223 KHIC, SEOUL, KOREA PB 365,464 11/13/89 08/02/93 415,464 TURBINE
BANKERS TRUST S-07433 GOV'T OF INDIA, SPACE DEPT BTB/PB 20,858 12/05/90 08/02/93 20,858 VARO
BANKERS TRUST S-08752 MARATHON OIL CO. PB 153,575 09/21/92 07/31/93 153,575 TURBINE
BANKERS TRUST S-08066 GREEK HELLENIC ARMY BTB/PB 9,000 10/11/91 08/02/93 9,000 VARO
BANKERS TRUST S-08391 GOVERNMENT OF SINGAPORE APG 864,310 03/20/92 08/02/93 864,310 VARO
BANKERS TRUST S-07862 EGYPTIAN ELECTRICITY BTB/PB 196,650 06/17/91 08/02/93 98,325 TURBINE
BANKERS TRUST S-06224 KHIC, SEOUL, KOREA PB 431,410 11/13/89 08/02/93 481,411 TURBINE
BANKERS TRUST S-08390 GOVERNMENT OF SINGAPORE PB 328,523 03/20/92 08/02/93 328,523 VARO
BANKERS TRUST S-08067 GREEK HELLENIC ARMY BTB/PB 38,830 10/11/91 08/02/93 38,830 VARO
BANKERS TRUST S-07740 ISLAMIC REPUBLIC OF PAKISTAN BTB/PB 10,283 04/16/91 08/02/93 10,283 BAIRD
BANKERS TRUST S-08803 CHINA NAT. INST. IMP. EXP. PB 33,764 10/16/92 08/02/93 33,764 BAIRD-AID
BANKERS TRUST S-05129 TAIWAN POWER CO PB 549,183 10/01/89 08/03/93 549,183 TURBINE
BANKERS TRUST S-05130 TAIWAN POWER CO PB 549,183 10/01/89 08/03/93 549,183 TURBINE
BANKERS TRUST S-08772 KOREA IRON & STEEL CO. PB 10,500 09/29/92 08/15/93 10,500 BAIRD-AID
BANKERS TRUST S-08763 JORDAN VALLEY APPLIED RAD. PB 250,000 09/22/92 08/15/93 250,000 BAIRD-AID
BANKERS TRUST S-08775 INCHON IRON & STEEL PB 6,320 09/30/92 08/15/93 6,320 BAIRD-AID
BANKERS TRUST S-08722 PEC INTERNATIONAL LEASING PB 601,068 08/31/92 08/22/93 601,068 TURBINE
BANKERS TRUST S-09273 PDVSA SERVICES/BARIVEN, S.A. APG 2,453,400 05/21/93 08/24/93 2,453,400 TURBINE
BANKERS TRUST S-08771 DONGKUK STEEL MILL CO. LTD. PB 11,234 09/29/92 08/31/93 11,234 BAIRD-AID
BANKERS TRUST S-08778 DONGKUK STEEL MILL CO. LTD. PB 11,652 09/29/92 08/31/93 11,652 BAIRD-AID
</TABLE>
<TABLE>
OUTSTANDING STANDBY AND COMMERCIAL LETTERS OF CREDIT
BY BANK
FOR THE MONTH ENDING MAY 31, 1993
<CAPTION>
L/C ORIGINAL ISSUE EXPIRY L/C COGNIZANT
BANK L/C # BENEFICIARY/ADVISING BNK. PURP. AMOUNT DATE DATE BAL. DIVISION
- ----------- -------- ------------------------ ---- ------- ----- ------ -------- -----
<C> <C> <C> <C> <C> <C> <C> <C> <C>
BANKERS TRUST S-08725 SSANGYONG MOTOR COMPANY PB 10,800 08/31/92 09/15/93 10,800 BAIRD-AID
BANKERS TRUST S-09277 MINISTRY OF THE ARMY,BRASILIA APG 90,025 05/21/93 10/31/93 90,025 VARO
BANKERS TRUST S-09279 MINISTRY OF THE ARMY,BRASILIA PB 15,004 05/21/93 10/31/93 15,004 VARO
BANKERS TRUST S-07375 ATHENS GOVERNMENT BTB/PB 50,000 11/07/90 12/16/93 50,000 CORPORATE
BANKERS TRUST S-09278 GOV'T OF REP. OF KOREA-OSROK PB 4,935 05/21/93 01/15/94 4,935 BAIRD
BANKERS TRUST S-09276 TESORERIA DE LA FEDERACION PB 45,440 05/21/93 01/31/94 45,440 VARO/OEI
BANKERS TRUST S-09274 PEC-USA CO., LTD. APG 135,000 05/24/93 03/14/94 135,000 TURBINE
BANKERS TRUST S-09280 SANG CHAROEN FOUNDRY (1987) PB 6,000 05/21/93 05/25/94 6,000 BAIRD
BANKERS TRUST S-09281 TRAVELERS INDEMNITY CO. PB 900,000 05/21/93 05/26/94 900,000 CORPORATE
BANKERS TRUST S-08618 KANGWON INDUSTRIES PB 11,500 07/07/92 08/15/94 11,500 BAIRD-AID
BANKERS TRUST S-09282 CNMI&E CORP. PB 49,174 05/21/93 10/30/94 49,174 BAIRD
BANKERS TRUST S-08921 CNTIEC PB 92,500 12/22/92 12/31/94 92,500 TURBINE
BANKERS TRUST S-09233 GOV'T OF EGYPT, ARMAMENT AUTH.APG 2,881,821 05/21/93 05/31/95 2,881,821 VARO/OEI
BANKERS TRUST S-09275 ABU DHABI, GENERAL PURCHASING APG 220,000 05/21/93 06/30/95 220,000 VARO
BANKERS TRUST S-09234 GOV'T OF EGYPT, ARMAMENT AUTH.PB 1,440,910 05/21/93 08/31/95 1,440,910 VARO/OEI
BANKERS TRUST S-09235 GOV'T OF EGYPT, ARMAMENT AUTH.APG 1,600,000 05/21/93 03/31/96 1,600,000 BAIRD
BANKERS TRUST S-09237 GOV'T OF EGYPT, ARMAMENT AUTH.PB 800,000 05/21/93 03/31/96 800,000 BAIRD
BANKERS TRUST S-08645 OIL REFINERIES LTD. PB 160,603 07/27/92 07/22/93 160,603 TURBINE
16,806,543
SAN PAOLO 923029- INSURANCE CO.OF NORTH AMERICA PB 1,000,000 03/17/92 06/30/93 1,000,000 CORPORATE
793
TEXAS COMMERCE D424890 H. JUNTA DEFENSA, ECUADOR PB 46,500 12/09/91 06/30/93 46,500 VARO
TEXAS COMMERCE D429804 JORDAN ARMED FORCES PB 10,374 06/24/92 11/30/93 10,374 VARO
TEXAS COMMERCE D431795 GHG ARMED FORCES (ABU DHABI) PB(10%) 110,000 09/23/92 11/30/94 110,000 VARO
166,874
29,945,576
</TABLE>
AMENDMENT No. 1, dated as of November 22, 1993 (this "Amendment") to the
CREDIT AGREEMENT, dated as of July 15, 1993, as amended
hereby and as the same may be further amended, amended and restated,
supplemented or otherwise modified (the "Credit Agreement"), among IMO
INDUSTRIES INC., a Delaware corporation (the "Borrower"), the lenders listed
on the signature pages thereto (each a "Lender" and collectively, the
"Lenders") and BANKERS TRUST COMPANY, a New York banking corporation ("BTCo"),
as a Lender, as Issuer Bank and as Agent for the Lenders (in such capacity,
including its successors and permitted assigns, the "Agent"). Capitalized
terms used and not otherwise defined herein shall have the meanings assigned
to them in the Credit Agreement.
WHEREAS, the Borrower has requested that each Lender amend or
waive compliance with certain provisions of the Credit Agreement;
WHEREAS, each Lender has individually considered and agreed to the
Borrower's requests, upon the terms and conditions set forth in this
Amendment;
NOW, THEREFORE, in consideration of the foregoing, and for other
good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto hereby agree as follows:
SECTION ONE - AMENDMENTS, WAIVER AND CONSENT.
1.1 Waiver to Section 6.1 (Financial Statements
and Other Reports)
Compliance with clause A(v)(i) of Section 6.1, pursuant to which
the Borrower is required to deliver not later than December 31, 1993 a
preliminary business plan of the Borrower on a Consolidated basis for the
immediately succeeding three year period, is hereby waived, provided said
clause is complied with on or before January 31, 1994.
1.2 Amendment to Section 7.2 (Liens)
Section 7.2 is hereby amended by (a) deleting the word "and" at
the end of clause (vii) thereof, (b) replacing the period at the end of
clause (viii) thereof with "; and" and (c) adding a new clause (ix) as
follows:
(ix) Liens in respect of Indebtedness permitted to be
incurred under Section 7.10H hereof, provided that such Liens are
granted only on the real property in respect of which such
Indebtedness was incurred.
1.3 Amendment to Section 7.10 (Incurrence of Indebtedness)
Section 7.10 is amended by (a) deleting the word "and" at the end
of clause F thereof, (b) replacing the period at the end of clause G thereof
with "; and" and (c) adding a new clause H as follows:
H. Indebtedness constituting mortgage financings in
respect of the Borrower's Lawrenceville, New Jersey headquarters
and Baird Corporation's Bedford, Massachusetts real properties, in
each case (a) provided by a Person who is not an Affiliate of the
Borrower, (b) in an amount not less than 70% of the fair market
value of such property (as determined by the appraisal or other
reasonable determination of the provider of such financing) and
(c) otherwise on terms and pursuant to documentation reasonably
satisfactory in form and substance to the Requisite Holders (as
defined in the Intercreditor Agreement).
1.4 Amendment to Section 7.12 (Contingent Obligations)
Clause (vi) of Section 7.12 is hereby amended by adding at the end
thereof "provided that the Borrower and its Subsidiaries shall be permitted to
incur an additional $5,000,000 advance payment bond and an additional
$10,000,000 performance bond in support of obligations of Warren Pumps Inc.
incurred in connection with a successful bid on a certain project in the State
of California, the bidding for which shall have commenced not earlier than
November 1, 1993 and shall have concluded not later than November 30, 1993;".
1.5 Consent to Release of Collateral
Pursuant to Section 7.2(a) of the Intercreditor Agreement, the
Requisite Holders hereby consent to the release of each of the real properties
constituting Collateral specifically referred to in Section 1.3 of this
Amendment upon the incurrence of Indebtedness and the granting of a related
Lien in respect of such real property in compliance with Sections 7.10H and
7.2(ix) of the Credit Agreement, provided that (a) concurrently therewith, to
the extent required pursuant to the Intercreditor Agreement, the Credit
Agreement, the Combined Restated Credit Agreement and the Restated Prudential
Agreements, the commitments to lend thereunder are reduced and the proceeds of
such Indebtedness are applied to repay obligations and/or cash collateralize
letters of credit in accordance with such agreements and (b) immediately
before and after giving effect to the incurrence of such Indebtedness and the
granting of such Lien there shall not have occurred and not be continuing any
Event of Default or Potential Event of Default.
1.6 Waiver to Section 6.2 (Corporate Existence)
Compliance with Section 6.2 pursuant to which the Borrower is
required to keep in full force its corporate existence and to cause each of
its Domestic Subsidiaries to keep and preserve its corporate existence is
waived to the extent necessary to permit the dissolution of two indirect
subsidiaries of the Borrower, Labtest Equipment Company, a California
corporation and KEI Laser Inc., a Maryland corporation.
1.7 Amendment to Schedule 7.12 (Non-Financial Guarantees)
Effective as of July 15, 1993, Schedule 7.12 to the Credit
Agreement is hereby deleted in its entirety and Schedule 7.12 attached hereto
is hereby added in lieu thereof.
SECTION TWO - REPRESENTATIONS AND WARRANTIES.
The Borrower hereby confirms, reaffirms and restates the
representations and warranties made by it in Section 5 of the Credit
Agreement, and that all such representations and warranties are true and
correct in all material respects as of the date hereof. The Borrower further
represents and warrants (which representations and warranties shall survive
the execution and delivery hereof) to the Agent and each Lender that:
(a) The Borrower has the corporate power, authority and legal
right to execute, deliver and perform this Amendment and has taken all actions
necessary to authorize the execution, delivery and performance of this
Amendment;
(b) No consent of any person, and no consent, permit, approval
or authorization of, exemption by, notice or report to, or registration,
filing or declaration with, any governmental authority is required in
connection with the execution, delivery or performance by the Borrower, of
this Amendment;
(c) This Amendment has been duly executed and delivered on
behalf of the Borrower by a duly authorized officer of the Borrower and
constitutes a legal, valid and binding obligation of the Borrower, enforceable
in accordance with its terms, subject to bankruptcy, insolvency,
reorganization, fradulent transfer, moratorium and similar laws affecting
creditor's rights generally and to general equitable principles;
(d) The execution, delivery and performance of this Amendment
will not violate any requirement of law or Contractual Obligation of the
Borrower; and
(e) After giving effect to the execution, delivery and
performance of this Amendment, no Event of Default or Potential Event of
Default shall have occurred and be continuing.
SECTION THREE - EFFECTIVENESS
This Amendment shall become effective upon (i) the execution and
delivery hereof by the Borrower and the Requisite Holders (as defined in the
Intercreditor Agreement) and (ii) the execution and delivery of an amendment
and waiver agreement to each of the New Credit Agreement and the Restated
Prudential Agreements, each on terms and conditions substantially identical to
those set forth herein.
SECTION FOUR - MISCELLANEOUS.
(a) This Amendment shall not constitute a consent or waiver to
or modification of any other provision, term or condition of the Credit
Agreement. Except as herein expressly amended, the Credit Agreement and all
other agreements, documents, instruments and certificates executed in
connection therewith, except as otherwise provided herein, are ratified and
confirmed in all respects and shall remain in full force and effect in
accordance with their respective terms.
(b) All references to the Credit Agreement shall mean the Credit
Agreement as amended as of the effective date hereof, and as the same may at
any time be amended, amended and restated, supplemented or otherwise modified
from time to time and as in effect.
(c) This Amendment may be executed in any number of
counterparts, and by different parties hereto in separate 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 agreement.
(d) THIS AMENDMENT SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED
AND ENFORCED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK WITHOUT
REGARD TO THE PRINCIPLES OF CONFLICT OF LAWS.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment
to be duly executed as of the date first above written.
IMO INDUSTRIES INC.
By: /s/ Thomas J. Bird
Name: Thomas J. Bird
Title: Senior Vice President
BANKERS TRUST COMPANY, as a Lender
By: /s/ June C. George
Name: June C. George
Title: Vice President
CHEMICAL BANK, as a Lender
By: /s/ Mary Ellen Egbert
Name: Mary Ellen Egbert
Title: Vice President
CIBC, INC., as a Lender
By: ___________________________
Name:
Title:
BARCLAYS BANK PLC, as a Lender
By: ___________________________
Name:
Title:
NATIONAL CITY BANK, as a Lender
By: /s/ Davis R. Bonner
Name: Davis R. Bonner
Title: Vice President
ISTITUTO BANCARIO SAN PAOLO
DI TORINO S.p.A, as a Lender
By: /s/ William J. De Angelo
Name: William J. De Angelo
Title: First Vice President
COMMERZBANK AG, NEW YORK BRANCH
as a Lender
By: /s/ Werner Niemeyer
Name: Werner Niemeyer
Title: Vice President
By: /s/ Johan Soerensson
Name: Johan Soerensson
Title: Assistant Treasurer
ABN-AMRO BANK, N.V., NEW YORK
BRANCH, as a Lender
By: /s/ Parker H. Douglas
Name: Parker H. Douglas
Title: Vice President
By: /s/ Janet T. Marple
Name: Janet T. Marple
Title: Credit Officer
IMO INDUSTRIES INC.
Schedule 7.12
Contingent Obligations
Category Report Dated
Letters of Credit May 31, 1993
Surety Bonds June 30, 1993
Interest Rate Agreements and Currency Agreements July 15, 1993
Non-Financial Guarantees July 15, 1993
Guarantees July 15, 1993
IMO INDUSTRIES INC.
Schedule 7.12
Contingent Obligations
Interest Rate Agreements and Currency Agreements
As of July 15, 1993
Transaction Termination Amount
Interest Rate/Currency Swaps Date Date (U.S.$)
TA International (TAIIS) 10/3/83 9/16/93 7,500,000
Morgan Guaranty 10/3/83 9/16/93 7,500,000
Total 15,000,000
<TABLE>
IMO INDUSTRIES INC.
Schedule 7.12
Schedule of Non-Financial Guarantees
As of July 15, 1993*
<CAPTION>
Date Amount Guarantor Subsidiary Supported Beneficiary Comments
<C> <C> <C> <C> <C> <C>
May 6, 1993 $3,600,819 Imo Industries Inc. Miller-Holzwarth Div., Dept.of the Army Contract to Miller-Holzwarth
Baird Corporation from Amccom for deliveries
from Dec. '93 to Jan. '95.
Sept. 20, 1991 $ 100,000 Imo Industries Inc. Baird Corporation IBM Credit Corp. Supports credit line for
Baird to pay on 30 day terms.
Sept. 18, 1992 $3,700,000 Imo Industries Inc. Varo Inc. Corporate Supports lease of 2201-03
*Updated 9/3/93
</TABLE>
<TABLE>
IMO INDUSTRIES INC.
Schedule 7.12
Schedule of Guarantees As of July 15, 1993
<CAPTIONS>
Date Amount Guarantor Subsidiary Supported Beneficiary Comments
<C> <C> <C> <C> <C> <C>
(Lire 400 mil.)
7/21/87 $269,542 Imo Industries Inc. Imo Industries S.R.L. Credito Italiano, Milan Replaced TA Gty of 4/3/84
12/30/92 (Df 12,500,000)
$ 6,868,132 Imo Industries Inc. Delaval Stork V.O.F. ABN-AMRO Bank N.V. 50% of NLG 25 mill.
8/1/84 $3,803,000 Imo Industries Inc. Varo (former OEC) Nations Bank - Texas IRB loan due 2001
@ 83% of Prime.
</TABLE>
Total Imo Industries Inc. Guarantees - $11,277,601
325,000 on 3/1 and 9/1.
<TABLE>
SCHEDULE OF SURETY BONDS AS OF: JUNE 30, 1993
Pg. 1 of 6
INSURED: IMO INDUSTRIES INC.
A. FUEL/ROAD TAX STATE BONDS
<CAPTION>
EFFECTIVE CONTRACT EFFECTIVE % ESTIMATED
BOND NO. BOND AMT. PRICE DESCRIPTION OBLIGEE DATE COMPLETED COMP. DATE
- ------------ --------- ----------- ------------ ------- ------- -------- ----------
<C> <C> <C> <C> <C> <C> <C> <C>
T0022473A $ 1,000 Miscellaneous Payment of Tolls Massachusetts 04/13/90 N/A Annual
T00221247 $ 10,000 Miscellaneous Contractors License California 11/21/89 N/A Annual
T00335976 $ 10,000 Miscellaneous Contractors License California 06/08/93 N/A Annual
T00220322 $ 2,900 Miscellaneous Highway Motor Fuel Kentucky 01/15/90 N/A Annual
T00220358 $ 500 Miscellaneous Motor Carrier Tax Rhode Island 01/01/90 N/A Annual
T00220735 $ 1,000 Miscellaneous Motor Carrier Tax Pennsylvania 01/01/90 N/A Annual
T00221077 $ 500 Miscellaneous Sales Tax Oklahoma 02/27/90 N/A Annual
T00223268 $ 500 Miscellaneous Fuel Use Tax Arizona 03/01/90 N/A Annual
T00223657 $ 500 Miscellaneous Motor Carrier Tax Arizona 03/01/90 N/A Annual
T0023445A $ 1,000 Miscellaneous Petroleum Tax Mississippi 09/06/90 N/A Annual
T00234552 $ 1,000 Miscellaneous Fuel Tax Tennessee 09/12/90 N/A Annual
T00233717 $ 500 Miscellaneous Fuel Use Oklahoma 10/29/90 N/A Annual
T00234564 $ 1,000 Miscellaneous Fuel Use Arkansas 09/12/90 N/A Annual
T00234540 $ 500 Miscellaneous Special Fuel Missouri 09/12/90 N/A Annual
T00234448 $ 1,000 Miscellaneous Motor Fuel Tax Nebraska 09/06/90 N/A Annual
----------
A. SUB-TOTAL $ 31,900
</TABLE>
<TABLE>
SCHEDULE OF SURETY BONDS AS OF: JUNE 30, 1993
Pg. 2 of 6
INSURED: IMO INDUSTRIES INC.
B. CONTRACT RELATED BONDS
<CAPTION>
EFFECTIVE CONTRACT EFFECT. % ESTIMATED
BOND NO. BOND AMOUNT PRICE DESCRIPTION OBLIGEE DATE COMPLETE COMP. DATE
- ------------ ----------- ----------- ------------- ------- ------- ----------- ----------
<C> <C> <C> <C> <C> <C> <C> <C>
T00263515 $ 10,000 Miscellaneous Ann. Perf. Pennsylvania 01/10/91 N/A Annual
67PR-13779 $ 100,000 Miscellaneous Annual Puerto Rico 02/01/93
All Divisions Performance Electric Power
For All Div. Authority
of IMO
T00276340 $ 110,000 $ 1,100,000 Supply & Revamp Lion Oil 04/02/92 95% 07/93
MNR374452 $ 713,781 $ 1,427,562 Manufacture Saskatchewan 04/07/92 70% 09/93
& Install Blades Power, Canada
T00276509 $1,084,399 $ 1,084,399 Supply & Manuf. AECI 10/02/92 60% 09/93
Spare Parts Explosives &
Chemicals
T00271317 $ 54,500 $ 1,090,000 Wilcox Station El Paso Natur. 12/11/91 Shipped Ret. Req.
T00276315 $ 124,752 $ 124,752 100% Performance City of Colo. 90% 07/93
Bond Springs, Martin
Drake Power Plt.
T00276376 $ 847,000 $ 5,646,800 Supply Compressor RPC Chile 08/01/92 50% 12/93
Drives
T00276534 $1,183,000 $ 1,183,000 Turbocare-ProMac Jacksonville 12/11/92 50% 12/93
Quabbin-repair Elec. Auth.
of turbine
</TABLE>
<TABLE>
SCHEDULE OF SURETY BONDS AS OF: JUNE 30, 1993
Pg. 3 of 6
INSURED: IMO INDUSTRIES INC.
B. CONTRACT RELATED BONDS
<CAPTION>
CONTRACT EFFECT. % ESTIMATED
BOND NO. BOND AMOUNT PRICE DESCRIPTION OBLIGEE DATE COMPLETED COMP. DATE
- ------------ ----------- ----------- ---------------- ------- --------- --------- ----------
<C> <C> <C> <C> <C> <C> <C> <C>
T00281801 $ 50,000 $ 159,018 Turbocare-Deltex- Omaha Public 12/28/92 65% 12/93
Quabbin Power District
Repair Unit #3
T00149664 $ 245,520 $ 2,455,200 Maintenance Bond Initec 09/01/92 100% 09/93
Spain
T002713A $ 718,846 $ 4,792,305 Supply 2 Compressor Dept. of Water 02/11/92 95% 08/93-Not
Trains Power, City L.A. yet commiss.
T00276418 $ 430,839 $ 430,839 100% Performance City of Lake 09/01/92 65% 09/93
Bond Turbocare Worth, FLA
T0014969A $ 5,735 $ 114,712 Supply Bond Singapore 09/92 85% 08/93
Varo
T00276522 $ 71,017 $ N/A Maintenance Bond Twp.of Lawrence 12/9/92 -
Corporate 12/9/94
T0027370-3 $ 244,325 $ 244,325 Retainage Bond-5% Litwin/Mobil 100% 05/93
T0027371-5 $ 149,495 $ 149,495 Retainage Bond-5% Litwin/Mobil 100% 05/93
T00273727 $ 93,375 $ 93,375 Turbocare Repair City of Fairbanks 01/94
T00273739 $ 205,500 $ 205,500 Turbocare Repair Sierra Power Co. 45% 01/94
T0027375-2T0 $ 2,000 $ 20,000 Ann. Maintenance State of NJ 02/08/93
Serv. Baird
T00273740T00 $ 172,833 $ 172,833 Field Repair Pacificorp 02/02/93 01/94
Quabbin "Hunter
Station Plant"
T00273326 $ 240,245 $ 240,245 Field Service Pacificorp 01/26/93 01/94
Davey Johnson Plant
Quabbin
</TABLE>
<TABLE>
SCHEDULE OF SURETY BONDS AS OF: JUNE 30, 1993
Pg. 4 of 6
INSURED: IMO INDUSTRIES INC.
B. CONTRACT RELATED BONDS
<CAPTION>
CONTRACT EFFECT. ESTIMATED
BOND NO. BOND AMOUNT PRICE DESCRIPTION OBLIGEE DATE % COMPLETED COMP. DATE
- ------------ ----------- ----------- -------------- ------- ------- ------------ ----------
<C> <C> <C> <C> <C> <C> <C> <C>
T00273697 $ 285,229 $ 285,229 Field Repair Stillwater 02/25/93 02/94
Turbocare Util"Boomer
Station"
T002733302 $ 58,854 $ 58,854 Horizontal Jt. West Plains 03/11/93
Repair Cimarron Energy
River Sta.
T00273338 $ 728,365 $14,567,311 Mfg. & Supply Badger 03/17/93 50%
Compressor Dr Engineers,
Trains Inc.
T00335903 $ 50,000 $ 209,233 Inspect & Repair Omaha Public 03/31/93
Turbine Gin #2 Power District
T00335939 $ 104,454 $ 1,044,535 Contract FW007 Santee Cooper 04/01/93 Retainage
Supply 2 Boiler
Feed Pumps & 1
Spare Rotor
T00335915 $ 67,000 $ 2,546,100 Supply Only Foster Wheeler 05/12/93 Retainage
----------- Trading Co.(on
behalf of
Polybutenos
Argentina
$8,151,064
</TABLE>
<TABLE>
SCHEDULE OF SURETY BONDS AS OF: JUNE 30, 1993
INSURED: IMO INDUSTRIES INC.
Pg. 5 of 6
C. IMO CUSTOM BONDS
<CAPTION>
EFFECTIVE COMPLETION
BOND NO. BOND AMOUNT DESCRIPTION OBLIGEE DATE DATE
- ---------- ----------- ------------ ------- --------- ------------
<C> <C> <C> <C> <C> <C>
3013872 $ 500,000 (IMO) Customs U.S. Government 08/11/89 Annual
Import Bond
3001661 $ 200,000 (Incom) Customs U.S. Government 05/11/85 Annual
Import Bond
3011820 $ 50,000 (Baird) Customs U.S. Government 07/01/88 Annual
Import Bond
3011819 $ 20,000 (Varo) Customs U.S. Government 09/14/93 Annual
729003773 $ 40,000 (Morse) Drawback Bond U.S. Government 05/23/88 Annual
3062385 $ 80,000 (OEC) Drawback Bond U.S. Government 07/23/91 Annual
3062386 $ 300,000 (Varo/OEC)Import Bond U.S. Government 07/23/91 Annual
989031 $ 90,000 (Varo) Carnet Bond U.S. Council 12/24/91 Annual
Int'l Business
989205 $ 32,000 (Baird) Carnet Bond U.S. Council 09/25/92 Annual
Int'l Business
989151 $ 68,241 (Baird) Carnet U.S. Council 05/92 Annual
Int'l Business
989127 $ 48,000 (Varo) Carnet U.S. Council 06/92 Annual
Int'l Business
989233 $ 18,400 (Varo) Carnet U.S. Council 11/13/92 Annual
Int'l Business
989205 $ 32,000 (Baird) Carnet U.S. Council 01/15/93 Annual
Int'l Business
</TABLE>
<TABLE>
SCHEDULE OF SURETY BONDS AS OF: JUNE 30, 1993
INSURED: IMO INDUSTRIES INC.
Pg. 6 of 6
<CAPTION>
EFFECT. COMPLETION
BOND NO. BOND AMOUNT DESCRIPTION OBLIGEE DATE DATE
- -------- ----------- --------------- ------- --------- ----------
<C> <C> <C> <C> <C> <C>
556 $ 7,600 (Varo) Carnet U.S. Council 06/01/93
Int'l Business
TBA $ 61,900 (Varo) Carnet U.S. Council 06/15/93
Int'l Business
989256 $ 28,000 (Baird) Carnet U.S. Council 01/93 AnnuaL
Int'l Business
989055 $ 12,000 (Varo) Carnet U.S. Council 02/10/92 Annual
Int'l Business
032493-1C $ 48,000 (Baird) Carnet U.S. Council 03/24/93 Annual
Int'l Business
989043 $ 242,762 (Varo) Carnet U.S. Council 01/21/92 Annual
Int'l Business
989061 $ 4,950 (Baird) Carnet U.S. Council 06/01/93 Annual
Int'l Business
C. SUB
TOTAL $ 1,883,853
D. MISC. $ 10,000 (4 @ $2,500 ea) Notary
</TABLE>
Schedule 7.12
Contingent Obligations
Surety Bonds
SCHEDULE OF SURETY BONDS AS OF: JUNE 30, 1993
INSURED: IMO INDUSTRIES INC.
- ----------------------------------------------
SUMMARY
-----------
A. FUEL/ROAD TAX STATE BONDS $ 31,900
B. CONTRACTS VALUE 8,151,064
-----------
NET CONTRACTS 8,182,964
C. CUSTOMS BONDS 1,883,833
D. MISC. - NOTARY 10,000
-------------
TOTAL BONDS OUTSTANDING $ 10,076,797
=============
<TABLE>
OUTSTANDING STANDBY AND COMMERCIAL LETTERS OF CREDIT
BY BANK
FOR THE MONTH ENDING MAY 31, 1993
<CAPTION>
L/C ORIGINAL ISSUE EXPIRY L/C COGNIZANT
BANK L/C # BENEFICIARY/ADVISING BNK. PURP. AMOUNT DATE DATE BAL. DIVISION
- ----------- --------- ------------------------ ----- --------- ----- ------- -------- -----
<C> <C> <C> <C> <C> <C> <C> <C> <C>
ABN/AMRO S920059 MOBIL OIL INDONESIA PB $508,832 01/19/92 06/14/93 508,832 TURBINE
ABN/AMRO S920221 TRIPATRA/MOBIL BTB-PB 1,118,646 07/14/92 09/15/93 1,118,646 TURBINE
ABN/AMRO S910081 LIBERTY MUTUAL INSURANCE PB 3,909,903 04/26/91 07/31/93 3,209,000 CORPORATE
ABN/AMRO S910149 TOWNSHIP OF LAWRENCE PB 164,731 08/22/91 09/22/93 164,731 CORPORATE
ABN/AMRO S920206 PDVSA SERVICES/BARIVEN APG 817,000 07/30/92 08/24/93 817,000 TURBINE
S.A.
ABN/AMRO S920255 UBE INDUSTRIES LTD. APG 3,253,950 09/16/92 08/31/93 3,253,950 TURBINE
ABN/AMRO S920119 TRAVELERS INDEMNITY CO PB 1,450,000 04/01/92 09/15/93 2,900,000 CORPORATE
-----------
11,972,159
BANKERS TRUST S-07689 HELLENIC MNST'Y OF NATL DEF BTB/PB 69,400 03/27/91 08/02/93 69,400 BAIRD-OSD
BANKERS TRUST S-06229 SHANGHAI FOREIGN TRADE CORP. PB 10,000 12/19/91 06/22/93 10,000 BAIRD-AID
BANKERS TRUST S-07926 BOHAI OIL CORP BTB/PB 66,547 07/24/91 08/02/93 66,547 WARREN
BANKERS TRUST S-08801 TAIWAN POWER COMPANY PB 1,250,000 10/16/92 07/31/93 1,250,000 TURBINE
BANKERS TRUST S-06223 KHIC, SEOUL, KOREA PB 365,464 11/13/89 08/02/93 415,464 TURBINE
BANKERS TRUST S-07433 GOV'T OF INDIA, SPACE DEPT BTB/PB 20,858 12/05/90 08/02/93 20,858 VARO
BANKERS TRUST S-08752 MARATHON OIL CO. PB 153,575 09/21/92 07/31/93 153,575 TURBINE
BANKERS TRUST S-08066 GREEK HELLENIC ARMY BTB/PB 9,000 10/11/91 08/02/93 9,000 VARO
BANKERS TRUST S-08391 GOVERNMENT OF SINGAPORE APG 864,310 03/20/92 08/02/93 864,310 VARO
BANKERS TRUST S-07862 EGYPTIAN ELECTRICITY BTB/PB 196,650 06/17/91 08/02/93 98,325 TURBINE
BANKERS TRUST S-06224 KHIC, SEOUL, KOREA PB 431,410 11/13/89 08/02/93 481,411 TURBINE
BANKERS TRUST S-08390 GOVERNMENT OF SINGAPORE PB 328,523 03/20/92 08/02/93 328,523 VARO
BANKERS TRUST S-08067 GREEK HELLENIC ARMY BTB/PB 38,830 10/11/91 08/02/93 38,830 VARO
BANKERS TRUST S-07740 ISLAMIC REPUBLIC OF PAKISTAN BTB/PB 10,283 04/16/91 08/02/93 10,283 BAIRD
BANKERS TRUST S-08803 CHINA NAT. INST. IMP. EXP. PB 33,764 10/16/92 08/02/93 33,764 BAIRD-AID
BANKERS TRUST S-05129 TAIWAN POWER CO PB 549,183 10/01/89 08/03/93 549,183 TURBINE
BANKERS TRUST S-05130 TAIWAN POWER CO PB 549,183 10/01/89 08/03/93 549,183 TURBINE
BANKERS TRUST S-08772 KOREA IRON & STEEL CO. PB 10,500 09/29/92 08/15/93 10,500 BAIRD-AID
BANKERS TRUST S-08763 JORDAN VALLEY APPLIED RAD. PB 250,000 09/22/92 08/15/93 250,000 BAIRD-AID
BANKERS TRUST S-08775 INCHON IRON & STEEL PB 6,320 09/30/92 08/15/93 6,320 BAIRD-AID
BANKERS TRUST S-08722 PEC INTERNATIONAL LEASING PB 601,068 08/31/92 08/22/93 601,068 TURBINE
BANKERS TRUST S-09273 PDVSA SERVICES/BARIVEN, S.A. APG 2,453,400 05/21/93 08/24/93 2,453,400 TURBINE
BANKERS TRUST S-08771 DONGKUK STEEL MILL CO. LTD. PB 11,234 09/29/92 08/31/93 11,234 BAIRD-AID
BANKERS TRUST S-08778 DONGKUK STEEL MILL CO. LTD. PB 11,652 09/29/92 08/31/93 11,652 BAIRD-AID
</TABLE>
<TABLE>
OUTSTANDING STANDBY AND COMMERCIAL LETTERS OF CREDIT
BY BANK
FOR THE MONTH ENDING MAY 31, 1993
<CAPTION>
L/C ORIGINAL ISSUE EXPIRY L/C COGNIZANT
BANK L/C # BENEFICIARY/ADVISING BNK. PURP. AMOUNT DATE DATE BAL. DIVISION
- ----------- -------- ------------------------ ---- ------- ----- ------ -------- -----
<C> <C> <C> <C> <C> <C> <C> <C> <C>
BANKERS TRUST S-08725 SSANGYONG MOTOR COMPANY PB 10,800 08/31/92 09/15/93 10,800 BAIRD-AID
BANKERS TRUST S-09277 MINISTRY OF THE ARMY,BRASILIA APG 90,025 05/21/93 10/31/93 90,025 VARO
BANKERS TRUST S-09279 MINISTRY OF THE ARMY,BRASILIA PB 15,004 05/21/93 10/31/93 15,004 VARO
BANKERS TRUST S-07375 ATHENS GOVERNMENT BTB/PB 50,000 11/07/90 12/16/93 50,000 CORPORATE
BANKERS TRUST S-09278 GOV'T OF REP. OF KOREA-OSROK PB 4,935 05/21/93 01/15/94 4,935 BAIRD
BANKERS TRUST S-09276 TESORERIA DE LA FEDERACION PB 45,440 05/21/93 01/31/94 45,440 VARO/OEI
BANKERS TRUST S-09274 PEC-USA CO., LTD. APG 135,000 05/24/93 03/14/94 135,000 TURBINE
BANKERS TRUST S-09280 SANG CHAROEN FOUNDRY (1987) PB 6,000 05/21/93 05/25/94 6,000 BAIRD
BANKERS TRUST S-09281 TRAVELERS INDEMNITY CO. PB 900,000 05/21/93 05/26/94 900,000 CORPORATE
BANKERS TRUST S-08618 KANGWON INDUSTRIES PB 11,500 07/07/92 08/15/94 11,500 BAIRD-AID
BANKERS TRUST S-09282 CNMI&E CORP. PB 49,174 05/21/93 10/30/94 49,174 BAIRD
BANKERS TRUST S-08921 CNTIEC PB 92,500 12/22/92 12/31/94 92,500 TURBINE
BANKERS TRUST S-09233 GOV'T OF EGYPT, ARMAMENT AUTH.APG 2,881,821 05/21/93 05/31/95 2,881,821 VARO/OEI
BANKERS TRUST S-09275 ABU DHABI, GENERAL PURCHASING APG 220,000 05/21/93 06/30/95 220,000 VARO
BANKERS TRUST S-09234 GOV'T OF EGYPT, ARMAMENT AUTH.PB 1,440,910 05/21/93 08/31/95 1,440,910 VARO/OEI
BANKERS TRUST S-09235 GOV'T OF EGYPT, ARMAMENT AUTH.APG 1,600,000 05/21/93 03/31/96 1,600,000 BAIRD
BANKERS TRUST S-09237 GOV'T OF EGYPT, ARMAMENT AUTH.PB 800,000 05/21/93 03/31/96 800,000 BAIRD
BANKERS TRUST S-08645 OIL REFINERIES LTD. PB 160,603 07/27/92 07/22/93 160,603 TURBINE
16,806,543
SAN PAOLO 923029- INSURANCE CO.OF NORTH AMERICA PB 1,000,000 03/17/92 06/30/93 1,000,000 CORPORATE
793
TEXAS COMMERCE D424890 H. JUNTA DEFENSA, ECUADOR PB 46,500 12/09/91 06/30/93 46,500 VARO
TEXAS COMMERCE D429804 JORDAN ARMED FORCES PB 10,374 06/24/92 11/30/93 10,374 VARO
TEXAS COMMERCE D431795 GHG ARMED FORCES (ABU DHABI) PB(10%) 110,000 09/23/92 11/30/94 110,000 VARO
166,874
29,945,576
</TABLE>
GUARANTEE
GUARANTEE dated as of July 15, 1993 (this "Guaran-
tee") by EACH OF THE SUBSIDIARIES LISTED AS GUARANTORS ON THE
SIGNATURE PAGE HEREOF and any subsidiaries becoming a party
hereto pursuant to Section 18 hereof (collectively, and
together with their respective successors, the "Guarantors),
in favor of BANKERS TRUST COMPANY, a New York banking corpora-
tion having an office at 280 Park Avenue, New York, New York
10017, as collateral agent (in such capacity and together with
any successors and assigns in such capacity, the "Collateral
Agent"), for the benefit of the Guaranteed Parties (as herein-
after defined).
R E C I T A L S :
A. Imo Industries Inc., a Delaware corporation (the
"Borrower"), owns, directly or through its subsidiaries, all of
the issued and outstanding stock of each of the Guarantors;
B. The Borrower, certain lenders (including their
respective successors and permitted assigns, each an "Old
Revolver Lender and collectively, the "Old Revolver Lenders")
and Bankers Trust Company, as an Old Revolver Lender and as
agent for the Old Revolver Lenders (including its successors
and permitted assigns in such capacity, the "Agent) have
entered into a certain Revolving Credit Agreement, dated as of
September 18, 1988, as amended by Amendment Nos. 1-6 (the "Old
Revolving Credit Agreement).
C. The Borrower and The Prudential Insurance Com-
pany of America (including its successors and permitted
assigns, Prudential") have entered into certain Note Agree-
ments, in connection with certain 10.35% Senior Notes and cer-
tain 12.75% Senior Notes, dated December 29, 1982 and
September 16, 1988, respectively (such Note Agreements, as
amended from time to time, collectively, the Old Prudential
Agreements").
D. The Borrower and ABN Amro Bank N.V., New York
(including its successors and permitted assigns, "ABN") are
parties to a certain letter agreement dated July 30, 1990 (such
agreement as amended from time to time, the "ABN Facility").
E. The Borrower and Commerzbank AG, New York
(including its successors and permitted assigns, "Commerzbank)
are parties to a certain letter agreement dated December 20,
1990 (such agreement as amended from time to time, the
"Commerzbank Facility").
F. The Borrower and Istituto Bancario San Paolo di
Torino S.p.A., acting through its New York Limited Branch
(including its successors and permitted assigns, "San Paolo)
are parties to a certain Application and Agreement for Standby
Credit dated March 5, 1992 (such agreement, as amended from
time to time, the "San Paolo Facility"; and together with the
Old Revolving Credit Agreement, the Old Prudential Agreements,
the ABN Facility and the Commerzbank Facility, the "Old Debt
Documents" ).
G. The Borrower has requested that each of the
Agent, the Old Revolver Lenders, Prudential, ABN, Commerzbank
and San Paolo (collectively, and together with the Issuer Bank
(as defined below) and the Collateral Agent, the "Guaranteed
Parties") restructure the indebtedness and contingent obliga-
tions outstanding under the Old Debt Documents, and extend to
Imo certain additional credit.
H. The Borrower is entering into a certain combined
restated credit agreement dated as of the date hereof (as it
may be amended, supplemented or otherwise modified from time to
time, the "Combined Restated Credit Agreement") with the Agent,
the Old Revolver Lenders, ABN, Commerzbank and San Paolo, pur-
suant to which the indebtedness and contingent obligations out-
standing under the Old Debt Documents (other than the indebted-
ness outstanding under the Old Prudential Agreements) are being
consolidated and the terms thereof are being amended and
restated.
I. The Borrower and Prudential are, as of the date
hereof, amending and restating the Old Prudential Agreements
(such Old Prudential Agreements, as amended and restated, and
as they may be amended, supplemented or otherwise modified from
time to time, collectively, the "Restated Prudential
Agreements").
J. The Borrower is entering into a certain new
credit agreement dated as of the date hereof (as it may be
amended, supplemented or otherwise modified from time to time,
the "New Credit Agreement"; and together with the Combined
Restated Credit Agreement, the Restated Prudential Agreements
and the other documents being entered into that are exhibits to
the New Credit Agreement, the Combined Restated Credit Agree-
ment and the Restated Prudential Agreements, collectively, the
"Debt Restructuring Documents") with the Secured Parties, pur-
suant to which the Secured Parties have agreed to extend to or
for the account of the Borrower certain revolving loans and
letters of credit.
K. The Borrower, the Guarantors and the Guaranteed
Parties are entering into a certain Inter creditor and Collat-
eral Agency Agreement dated as of the date hereof (as it may be
amended, supplemented or otherwise-modified from time to time,
the Inter creditor Agreement) pursuant to which, among other
things, the Collateral Agent will act as collateral agent and
paying agent for the benefit of the Guaranteed Parties, on the
terms and conditions set forth in such agreement.
L. This Guarantee is given by each Guarantor in
favor of the Collateral Agent for the benefit of the Guaranteed
Parties and to secure the payment and performance in full when
due, whether at stated maturity, by acceleration or otherwise
(including, without limitation, the payment of interest and
other amounts which would accrue and become due but for the
filing of a petition in bankruptcy or the operation of the
automatic stay under Section 362(a) of the Bankruptcy Code) of
(i) all obligations of the Borrower now or hereafter existing
under the Combined Restated Credit Agreement; (ii) all obliga-
tions of the Borrower now or hereafter existing under the
Restated Prudential Agreements; (iii) all obligations of the
Borrower now or hereafter existing under the New Credit Agree-
ment; (iv) all obligations of the Borrower and the Guarantors
now or hereafter existing under the Inter creditor Agreement,
this Agreement and the other Security Agreements (as defined in
the New Credit Agreement); and (v) all interest, charges, fees,
costs, expenses, reimbursements, premiums, indemnities or other
payments of any kind or nature in respect of amounts or instru-
ments referred to in any of clauses (i) through (iv) (the obli-
gations described in clauses (i) through (v) collectively, the
"Guaranteed Obligations").
M. Each of the Guarantors is a Wholly-Owned Subsid-
iary (as defined in the New Credit Agreement) of the Borrower
and expects to receive substantial benefit from the execution,
delivery and performance of the Debt Restructuring Documents
and in connection therewith has agreed to enter into this Guar-
antee to support the Guaranteed Obligations.
- -4 -
N. The Guaranteed Parties are willing to enter into
the Debt Restructuring Documents and make the Loans and issue
and participate in the issuance of one or more Letters of
Credit pursuant to the New Credit Agreement but only upon the
condition, among others, that each of the Guarantors shall have
executed and delivered to the Guaranteed Parties this
Guarantee.
O. The Borrower wishes to induce the Lenders to
enter into the Debt Restructuring Documents and make Loans to
and issue and participate in the issuance of Letters of Credit
for the account of the Borrower.
A G R E E M E N T :
NOW, THEREFORE, in consideration of the mutual prom-
ises contained herein and other good and valuable considera-
tion, the receipt and sufficiency of which are hereby acknowl-
edged, each Guarantor and the Collateral Agent hereby agree as
follows:
SECTION 1. Defined Terms. Capitalized terms used
and not otherwise defined herein have the meanings assigned to
such terms in the Inter creditor Agreement and, in the event
that such term is not defined therein, as defined in the New
Credit Agreement. The following terms shall have the following
meanings:
"Adjusted Net Worth" of any Guarantor as of any date
shall mean the excess of (a) the amount of the fair saleable
value of the assets of such Guarantor as of such date deter-
mined in accordance with applicable federal and state laws gov-
erning determinations of the insolvency of debtors over (b) the
amount of all liabilities of such Guarantor, contingent or
otherwise, as of such date, determined on the basis provided in
clause (a) above (excluding liabilities of such Guarantor under
this Guarantee).
"Bankruptcy Code" shall mean Title 11 of the United
States Code.
"Credit Proceeds" shall mean the proceeds of any
Extension of Credit under the Debt Restructuring Documents.
"Extension of Credit shall mean any extension of
credit by the Guaranteed Parties to or for the account of the
Borrower pursuant to the Debt Restructuring Documents,
- -5-
including, without limitation, the making of any loan, the
advancing of any funds, or the issuance of any letter of
credit.
Maximum Guaranteed Amount for each Guarantor shall
mean the sum (without duplication) of:
A. the amount received by such Guarantor in respect
of: all loans, advances or capital contributions made to
such Guarantor with Credit Proceeds; all debt securities
of such Guarantor acquired with Credit Proceeds; the fair
market value of all property acquired with Credit Proceeds
and transferred to such Guarantor; and all equity securi-
ties of such Guarantor acquired with Credit Proceeds (each
such transfer to such Guarantor being referred to as a
"Special Transfer"); and interest on all unpaid or
unreimbursed amounts of Extensions of Credit that are used
to make such Special Transfers; plus
B. with respect to any Extension of Credit not used
by the Borrower to make a Special Transfer to such Guaran-
tor, the lesser of (A) the unpaid or unreimbursed amount
of such Extension of Credit and interest thereon and (B)
ninety-five percent (95%) of the greatest of (1) the
Adjusted Net Worth of such Guarantor as of the end of the
fiscal quarter of such Guarantor most recently concluded
on or prior to the date such Extension of Credit is or was
made, (2) the highest Adjusted Net Worth of such Guarantor
at the end of any fiscal quarter of such Guarantor subse-
quent to the fiscal quarter referred to in subclause (1)
of this clause (B) and prior to the earlier of the date of
the commencement of a case under the Bankruptcy Code
involving the Borrower or such Guarantor and the date on
which enforcement hereunder is sought and (3) the Adjusted
Net Worth of such Guarantor at the earlier of the date of
the commencement of a case under the Bankruptcy Code
involving the Borrower or such Guarantor and the date on
which enforcement hereunder is sought.
SECTION 2. Guarantee. (i) To induce the Guaranteed
Parties to execute and deliver the Debt Restructuring Docu-
ments, to make the Loans and to issue and participate in the
issuance of one or more Letters of Credit, each as provided in
the New Credit Agreement, in each case upon the terms and con-
ditions set forth therein, and in consideration thereof, each
Guarantor hereby, jointly and severally, unconditionally and
irrevocably, (a) guarantees to the Guaranteed Parties and their
respective successors and permitted assigns the prompt and com-
plete payment when due (whether at the stated maturity, by
acceleration or otherwise) of the Guaranteed Obligations; and
(b) agrees to pay any and all reasonable expenses which may be
paid or incurred by the Guaranteed Parties in enforcing any
rights with respect to, or collecting, any or all of the Guar-
anteed Obligations; provided, however, that the maximum lia-
bility of such Guarantor hereunder shall in no event exceed
such Guarantor's Maximum Guaranteed Amount.
(ii) Each Guarantor agrees that the Guaranteed Obli-
gations may at any time and from time to time exceed the Maxi-
mum Guaranteed Amount of such Guarantor without impairing this
Guarantee or, subject to Section 2(i), affecting the rights and
remedies of the Guaranteed Parties hereunder.
(iii) No payment or payments made by the Borrower,
any Guarantor, any other guarantor or any other Person (as
defined in the New Credit Agreement) or received or collected
by the Guaranteed Parties, or the Collateral Agent on behalf of
the Guaranteed Parties, from the Borrower, any Guarantor, any
other guarantor or any other Person by virtue of any action or
proceeding or any set-off or appropriation or application at
any time or from time to time in reduction of or in payment of
the Guaranteed Obligations shall be deemed to modify, reduce,
release or otherwise affect the liability of any Guarantor
hereunder which shall, notwithstanding any such payment or pay-
ments other than payments made to the Guaranteed Parties, or
the Collateral Agent on behalf of the Guaranteed Parties, by
any Guarantor or payments received or collected by the Guaran-
teed Parties, or the Collateral Agent on behalf of the Guaran-
teed Parties, from any Guarantor, remain liable for the Guaran-
teed Obligations up to its Maximum Guaranteed Amount until the
Guaranteed Obligations are paid in full, subject to the provi-
sions of Section 5.
SECTION 3. Subroqation. Notwithstanding any payment
or payments made by the Guarantors hereunder or any set-off or
application of funds of the Guarantors by the Guaranteed Par-
ties, no Guarantor shall be entitled to be subrogated to any of
the rights of the Guaranteed Parties against the Borrower or
any collateral security or guarantee or right of offset held by
the Guaranteed Parties for the payment of the Guaranteed Obli-
gations, nor shall any Guarantor seek any reimbursement from
the Borrower in respect of payments made by such Guarantor
hereunder, until all amounts owing to the Guaranteed Parties by
the Borrower for or on account of the Guaranteed Obligations
are paid in full.
SECTION 4. Consent by Guarantors. Each Guarantor
hereby consents that, without the necessity of any reservation
of rights against such Guarantor and without notice to or fur-
ther assent by such Guarantor, any demand for payment of any of
the Guaranteed Obligations made by the Guaranteed Parties may
be rescinded by the Collateral Agent on behalf of the Guaran-
teed Parties, and any of the Guaranteed Obligations continued,
and the Guaranteed Obligations, or the liability of any other
party upon or for any part thereof, or any collateral security
or guarantee therefor or right of offset with respect thereto,
may, from time to time, in whole or in part, be renewed,
extended, amended, modified, accelerated, compromised, waived,
surrendered or released by the Collateral Agent; and any Debt
Restructuring Document, or other guarantee or document in con-
nection therewith, may be amended, modified, supplemented or
terminated, in whole or in part, as the applicable Guaranteed
Parties may deem advisable from time to time; and any guarantee
or right of offset or any collateral at any time held by the
Guaranteed Parties, or the Collateral Agent on behalf of the
Guaranteed Parties, for the payment of the Guaranteed Obliga-
tions may be sold, exchanged, waived, surrendered or released,
all without the necessity of any reservation of rights against
any Guarantor and without notice to or further assent by any
Guarantor, which will remain bound hereunder, notwithstanding
any such renewal, extension, modification, acceleration, com-
promise, amendment, supplement, termination, sale, exchange,
waiver, surrender or release. When making any demand hereunder
against a Guarantor, the Collateral Agent may, but shall be
under no obligation to, make a similar demand on the Borrower
or any other Guarantor, and any failure by the Collateral Agent
to make any such demand or to collect any payments from the
Borrower or any such other Guarantor or any release of the Bor-
rower or any such other Guarantor or of any Guarantor's obliga-
tions or liabilities hereunder shall not impair or affect the
rights and remedies, express or implied, or as a matter of law,
of the Collateral Agent or the Guaranteed Parties against any
Guarantor hereunder. For the purposes hereof demand shall
include the commencement and continuance of any legal
proceedings.
SECTION 5. Waivers, Successors and Assigns. Each
Guarantor waives any and all notice of the creation, renewal,
extension or accrual of any of the Guaranteed Obligations and
notice of or proof of reliance by the Guaranteed Parties upon
- -8-
this Guarantee or acceptance of this Guarantee, and the Guaran-
teed Obligations, and any of them, shall conclusively be deemed
to have been created, contracted or incurred in reliance upon
this Guarantee, and all dealings between the Borrower or any
Guarantor and the Guaranteed Parties shall likewise be conclu-
sively presumed to have been had or consummated in reliance
upon this Guarantee. Each Guarantor waives diligence, present-
ment, protest, demand for payment and notice of default or non-
payment to or upon the Borrower or such Guarantor with respect
to the Guaranteed Obligations. This Guarantee shall be con-
strued as a continuing, absolute and unconditional guarantee of
payment without regard to the validity, regularity or enforce-
ability of any other Debt Restructuring Document, any of the
Guaranteed Obligations or any guarantee therefor or right of
offset with respect thereto at any time or from time to time
held by the Guaranteed Parties and without regard to any
defense (other than the defense of payment), set-off or
counterclaim which may at any time be available to or be
asserted by the Borrower against the Guaranteed Parties, or by
any other circumstance whatsoever (with or without notice to or
knowledge of the Borrower or the Guarantors) which constitutes,
or might be construed to constitute, an equitable or legal dis-
charge of the Borrower for the Guaranteed Obligations, or of
any Guarantor under this Guarantee, in bankruptcy or in any
other instance, and the obligations and liabilities of the
Guarantors hereunder shall not be conditioned or contingent
upon the pursuit by the Guaranteed Parties or any other Person
at any time of any right or remedy against the Borrower or
against any other Person which may be or become liable in
respect of all or any part of the Guaranteed Obligations or
against any collateral security or guarantee therefor or right
of offset with respect thereto. Except as provided in
Section 9 hereof or in Article 7 of the Inter creditor Agree-
ment, this Guarantee shall remain in full force and effect and
be binding in accordance with and to the extent of its terms
upon each Guarantor and the successors and assigns thereof, and
shall inure to the benefit of the Guaranteed Parties, and their
respective successors, and permitted assigns, notwithstanding
that from time to time during the term of the Debt Restructur-
ing Documents the Borrower may be free from all Guaranteed
Obligations thereunder.
SECTION 6. Riqhts of Set-Off. The Guaranteed Par-
ties, and the Collateral Agent on behalf of the Guaranteed Par-
ties, are each hereby irrevocably authorized upon the occur-
rence and during the continuance of an Event of Default without
notice to the Guarantors, any such notice being expressly
- -9 -
waived by the Guarantors to the extent permitted by applicable
law, to set off and appropriate and apply any and all deposits
(general or special, time or demand, provisional or final), in
any currency, and any other credits, indebtedness or claims, in
any currency, in each case whether direct or indirect or con-
tingent or matured or unmatured, at any time held or owing by
the Guaranteed Parties to or for the credit or the account of
any Guarantor, or any part thereof, in such amounts as the
Guaranteed Parties, or the Collateral Agent on behalf of the
Guaranteed Parties, may elect, against and on account of the
obligations and liabilities of any Guarantor to the Guaranteed
Parties, in any currency, whether arising hereunder or other-
wise, as the Guaranteed Parties, or the Collateral Agent on
behalf of the Guaranteed Parties, may elect, whether or not the
Guaranteed Parties, or the Collateral Agent on behalf of the
Guaranteed Parties, have made any demand for payment but only
to the extent that such obligations, liabilities and claims
shall have become due and payable (whether as stated, by accel-
eration or otherwise). The Guaranteed Parties, or the Collat-
eral Agent on behalf of the Guaranteed Parties, agree to notify
such Guarantor promptly of any such set-off and the application
made by the Guaranteed Parties, or the Collateral Agent on
behalf of the Guaranteed Parties, provided that the failure to
give such notice shall not affect the validity of such set-off
and application. The rights of the Guaranteed Parties, or the
Collateral Agent on behalf of the Guaranteed Parties, under
this paragraph are in addition to other rights and remedies
(including, without limitation, other rights of set-off) which
the Guaranteed Parties, or the Collateral Agent on behalf of
the Guaranteed Parties, may have.
SECTION 7. Effectiveness; Reinstatement. This Guar-
antee shall continue to be effective, or be reinstated, as the
case may be, if at any time payment, or any part thereof, of
any of the Guaranteed Obligations is rescinded or must other-
wise be restored or returned by any Guaranteed Party upon the
insolvency, bankruptcy, dissolution, liquidation or reorganiza-
tion of the Borrower, or upon or as a result of the appointment
of a receiver, intervenor or conservator of, or trustee or
similar officer for, the Borrower or any substantial part of
its property, or otherwise, all as though such payments had not
been made.
SECTION 8. Payment of Obligations. Each Guarantor
hereby guarantees, up to such Guarantor s Maximum Guaranteed
Amount, that the Guaranteed Obligations will be paid to the
Collateral Agent for the benefit of the Guaranteed Parties
without set-off or counterclaim in lawful currency of the
United States of America at the office of the Collateral Agent
located at 280 Park Avenue, New York, New York 10017. Each
Guarantor shall make any payments required hereunder upon
receipt of written notice-thereof from the Collateral Agent;
provided, however, that the failure of the Borrower, the Col-
lateral Agent or any Guaranteed Party to give such notice shall
not affect any Guarantor s obligations hereunder. All payments
pursuant to this Guarantee, including by way of set-off, shall
be made or turned over to the Collateral Agent for application
in accordance with the terms of the Inter creditor Agreement.
SECTION 9. Merger. If any Guarantor shall merge
into or consolidate with another corporation, or liquidate,
wind up or dissolve itself in a transaction not prohibited by
the Debt Restructuring Documents, or if all of the stock of any
Guarantor shall be sold or otherwise disposed of in a manner
not prohibited by the Debt Restructuring Documents, the obliga-
tions o such Guarantor hereunder shall automatically be dis-
charged and released without any further action by the Guaran-
teed Parties or the Collateral Agent, effective as of the time
of such transaction.
SECTION 10. Representations and Warranties. Each
Guarantor hereby represents and warrants that:
(a) Good Standing. Such Guarantor is duly incorpo-
rated, validly existing and in good standing under the
laws of the jurisdiction of its incorporation and has full
power, authority and legal right to own its property and
assets, and to transact the business in which it is
engaged;
(b) Authorization, Enforceability. Such Guarantor
has full corporate power, authority and legal right to
execute, deliver and perform this Guarantee, and this
Guarantee constitutes the legal, valid and binding obliga-
tion of such Guarantor, enforceable against such Guarantor
in accordance with its terms;
(c) No Consents, etc. Except as heretofore obtained
and in effect, no consent of any party (including, without
limitation, stockholders or creditors of such Guarantor)
and no consent, authorization, approval, or other action
by, and no notice to or filing with, any Governmental
Authority (as defined in the New Credit Agreement) or reg-
ulatory body or other Person is required for the
execution, delivery and performance by such Guarantor of
this Guarantee;
(d) No Conflicts. The execution, delivery and per-
formance by such Guarantor of this Guarantee does not (or
with notice or lapse of time or both, will not) violate,
conflict with or constitute a default under, or result in
the termination of, or accelerate the performance required
by, or result in there being declared void, voidable or
without further finding effect, any provision of any other
agreement, instrument or document to which such Guarantor
is a party; and
(e) Benefit to Guarantors. Such Guarantor shall
receive substantial benefit as a result of the execution,
delivery and performance of the Debt Restructuring
Documents.
SECTION 11.No Waiver. No failure to exercise and
no delay in exercising, on the part of the Collateral Agent on
behalf of the Guaranteed Parties, any right, power or privilege
hereunder shall operate as a waiver thereof, nor shall any sin-
gle or partial exercise of any right, power or privilege pre-
clude any other or further exercise thereof, or the exercise of
any other power or right. The rights and remedies herein pro-
vided are cumulative and not exclusive of any rights or reme-
dies provided by law.
SECTION 12. Notices. All notices or other communi-
cations herein required to be given shall be given at the
address and in the manner required in the Intercreditor
Agreement.
SECTION 13. Modification in writing. No amendment,
modification, supplement, termination or waiver of or to any
provision of this Guarantee, nor consent to any departure by
any Guarantor therefrom, shall be effective unless the same
shall be done in accordance with the terms of the Inter creditor
Agreement and unless the same shall be in writing and signed by
the Collateral Agent. Any amendment, modification or supple-
ment of or to any provision of this Guarantee, any waiver of
any provision of this Guarantee, and any consent to any depar-
ture by any Guarantor from the terms of any provision of this
Guarantee, shall be effective only in the specific instance and
for the specific purpose for which made or given. Except where
notice is specifically required by this Guarantee, no notice to
or demand on any Guarantor in any case shall entitle any such
- -12-
Guarantor to any other or further notice or demand in similar
or other circumstances.
SECTION 14. GOVERNING LAW; TERMS. THIS GUARANTEE
SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN
ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK WITHOUT
REGARD TO PRINCIPLES OF CONFLICT OF LAWS.
SECTION 15. CONSENT TO JURISDICTION- WAIVER OF JURY
TRIAL; FORUM NON CONVENIENT. ALL JUDICIAL PROCEEDINGS BROUGHT
AGAINST ANY GUARANTOR WITH RESPECT TO THIS GUARANTEE MAY BE
BROUGHT IN ANY STATE OR FEDERAL COURT OF COMPETENT JURISDICTION
IN THE STATE OF NEW JERSEY AND BY EXECUTION AND DELIVERY OF
THIS AGREEMENT EACH GUARANTOR ACCEPTS FOR ITSELF AND IN CONNEC-
TION WITH ITS PROPERTIES, GENERALLY AND UNCONDITIONALLY, THE
NON-EXCLUSIVE JURISDICTION OF THE AFORESAID COURTS, AND IRREVO-
CABLY AGREES TO BE BOUND BY ANY JUDGMENT RENDERED THEREBY IN
CONNECTION WITH THIS GUARANTEE. EACH GUARANTOR HEREBY IRREVO-
CABLY WAIVES TRIAL BY JURY, AND EACH GRANTOR HEREBY IRREVOCA-
BLY WAIVES ANY OBJECTION, INCLUDING, WITHOUT LIMITATION, ANY
OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF
FORUM NON CONVENIENT, WHICH IT MAY NOW OR HEREAFTER HAVE TO THE
BRINGING OF ANY SUCH ACTION OR PROCEEDING IN SUCH RESPECTIVE
JURISDICTIONS.
SECTION 16. Severability of Provisions. Any provi-
sion of this Guarantee which is prohibited or unenforceable in
any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof or affecting the
validity or enforceability of such provision in any other
jurisdiction.
SECTION 17. Execution in Counterparts. This Guaran-
tee and any amendments, waivers, consents or supplements hereto
may be executed in any number of counterparts and by different
parties hereto in separate counterparts, each of which when so
executed and delivered shall be deemed to be an original, but
all such counterparts together shall constitute one and the
same agreement.
SECTION 18. Additional Guarantors. If, after the
date hereof, any Person not already a party hereto shall be
required, pursuant to the Debt Restructuring Documents, to
become a Guarantor, such Person shall execute and deliver to
the Collateral Agent a supplement to this Guarantee (wherein
such Person shall agree to be bound by all of the terms,
- -13-
covenants and conditions set forth in this Guarantee to the
same extent that such Person would have been bound if it had
been a signatory hereto on the date hereof and shall make all
the representations and warranties set forth herein to the
extent relating to it.
SECTION 19. Headings. The Section headings used in
this Guarantee are for convenience of reference only and shall
not affect the construction of this Guarantee.
IN WITNESS WHEREOF, the undersigned have caused this
Guarantee to be duly executed and delivered by its duly autho-
rized officer on the day and year first above written.
GUARANTORS:
APPLIED OPTICS CENTER CORPORATION
BAIRD CORPORATION
DELTEX SERVICE INC.
INCOME TRANSPORTATION INC.
OPTIC-ELECTRONIC INTERNATIONAL INC.
WARREN PUMPS INC.
VARO, INC.
VARO TECHNOLOGY CENTER INC.
TURBODEL INC.
By: /s/ Thomas J. Bird
Name: Thomas J. Bird
Title: Senior Vice President:
of each of the
above-named corporations
BANKERS TRUST COMPANY,
as Collateral Agent
By: /s/ June C. George
Name: June C. George
Title: Vice President
VARO, INC.
2800 West Kingsley
Garland, Texas 75041
December 1, 1993
Bankers Trust Company,
as Collateral Agent
One Bankers Trust Plaza
New York, New York 10017
Attention: Commercial Loan Division
Ladies/Gentlemen:
Reference is made to the General Security Agreement
(the Agreement), dated as of July 15, 1993, made by Imo
Industries Inc. ("Imo") and each of the subsidiaries of Imo
listed on the signature pages thereto in favor of Bankers Trust
Company, as collateral agent for the Secured Parties. Capital-
ized terms used herein but not otherwise defined herein have
the meanings assigned such terms in the Agreement.
This letter supplements the Agreement and is deliv-
ered by the undersigned, Varo, Inc. (Varo), pursuant to Sec-
tion 4(j) of the Agreement. Varo hereby agrees to be bound as
a Subsidiary Pledgor by all of the terms, covenants and condi-
tions set forth in the Agreement to the same extent that it
would have would have been bound if it had been a signatory to
the Agreement on the execution date of the Agreement. Varo
hereby makes each of the representations and warranties and
agrees to each of the covenants, as applicable, contained in
Sections 4(a), 4(f), 4(g), 4(h), 4(i) and 4(j) of the
Agreement.
Varo further represents, warrants and covenants as
follows:
a. Ownership. Varo is, as of the date hereof, and,
as to Pledged Collateral acquired by it from time to time after
the date hereof, Varo will be, the legal record and beneficial
owner of all of its Pledged Collateral free from any Lien or
other right, title or interest of any Person other than (i) the
Liens set forth on Schedule 1 hereto, (ii) Permitted Liens,
(iii) Liens and security interests granted by Varo to the Col-
lateral Agent pursuant to the Agreement and (iv) Liens on other
than a Material Portion (as defined in the New Credit Agree-
ment) of the Collateral. Varo shall defend its ownership of
its Pledged Collateral against all claims and demands of all
other Persons at any time claiming any interest in any Material
Portion of Collateral adverse to the Collateral Agent.
b. Other Financing Statements. Except as set forth
on Schedule 1 hereto, and other than with respect to less than
a Material Portion of the Collateral, there is no financing
statement (or similar statement or instrument of registration
under the law of any jurisdiction) covering or purporting to
cover any interest of any kind in its Pledged Collateral and,
so long as the Agreement remains in effect, Varo shall not exe-
cute or authorize to be filed in any public office any financ-
ing statement (or similar statement or instrument of registra-
tion under the law of any jurisdiction) or statements relating
to its Pledged Collateral, except financing statements filed or
to be filed in respect of and covering the security interests
granted by Varo to the Collateral Agent pursuant to the
Agreement.
c. Chief Executive Office: Corporate Name: Records.
The chief executive office and the corporate name of Varo are
as set forth on Annex A hereto. Varo shall not change its name
or move its chief executive office, except in accordance with
the last sentence of this Section (c). All tangible record
evidence of all of Varo's Pledged Collateral and the only
original books of account and records of Varo relating thereto
are, and will continue to be, kept at such chief executive
office, or at such new location for such chief executive office
as Varo may establish in accordance with the last sentence of
this Section (c) or at the chief executive office of Imo. Varo
shall not establish a new location for its chief executive
office and shall not change its name until it shall have given
the Collateral Agent not less than 30 days' prior written
notice of its intention to do so, identifying such new location
or name and providing such other information in connection
therewith as the Collateral Agent reasonably may request.
d. Location of Inventory. All Inventory now held
or subsequently acquired by Varo shall be kept at any one of
the locations shown on Annex B hereto, or such new location not
shown on Annex B hereto as Varo may establish if (i) it shall
have given to the Collateral Agent at least 30 days' prior
written notice of its intention to do so, identifying such new
location and providing such other information in connection
therewith as the Collateral Agent may reasonably request, and
(ii) with respect to such new location, Varo shall have taken
all action reasonably satisfactory to the Collateral Agent to
maintain the perfection and proof of the security interest in
Varo's Pledged Collateral intended to be granted by the
Agreement.
Execution in Counterparts. This supplement and any
amendments, waivers, consents or supplements hereto may be exe-
cuted in any number of counterparts and by different parties
hereto in separate counterparts, each of which when so executed
and delivered shall be deemed to be an original, but all such
counterparts together shall constitute one and the same
agreement.
GOVERNING LAW: TERMS. THIS AGREEMENT SHALL E GOV-
ERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE
WITH, THE LAW OF THE STATE OF NEW YORK, WITHOUT REGARD TO PRIN-
CIPLES OF CONFLICT OF LAWS.
- -4 -
IN WITNESS WHEREOF, Varo has caused this supplement
to be executed and delivered by its duly authorized officer as
of the date first above written.
VARO, INC.
By: /s/ Thomas J. Bird
Name: THOMAS J. BIRD
Title: Senior Vice President
AGREED TO AND ACCEPTED:
BANKERS TRUST COMPANY,
as Collateral Agent
By : /s/ June C. George
Name: JUNE C. GEORGE
Vice President
ANNEX A
Pledgor Chief Executive Office
Varo, Inc. 2800 West Kingsley Road
Garland, Texas 75041
ANNEX B
OWNED OR
PROPERTY ADDRESS LEASED
555 5th Street Leased
Garland, Texas
900 & 932 North Shiloh Road Owned
Garland, Texas 75042
3414 Herrmann St Owned
Garland, Texas 75041
2800 N. Kingsley Road Leased
Garland, Texas 75041
3609 Marquis Drive Owned
Garland, Texas 75042
9839 Chartwell Leased
Dallas, Texas 75243
2201-2203 N. Walnut Street Leased
Garland, Texas 75042
538 Shepherd Street Leased
Garland, Texas 75402
Note: THE LESSOR UNDER ALL ABOVE LEASES IS VARO INC.
VARO, INC.
2800 West Kingsley
Garland, Texas 75041
December 1, 1993
Bankers Trust Company,
as Collateral Agent
One Bankers Trust Plaza
New York, New York 10017
Attention: Commercial Loan Division
Ladies/Gentlemen:
Reference is made to the Securities Pledge Agreement
(the "Agreement), dated as of July 15, 1993, made by Imo
Industries Inc. ("Imo") and each of the subsidiaries of Imo
listed on the signature pages thereto in favor of Bankers Trust
Company, as collateral agent for the Secured Parties. Capital-
ized terms used herein but not otherwise defined herein have
the meanings assigned such terms in the Agreement.
This letter supplements the Agreement and is deliv-
ered by the undersigned, Varo, Inc. (Varo), pursuant to Sec-
tion 5(k) of the Agreement. Varo hereby agrees to be bound as
a Subsidiary Pledgor by all of the terms, covenants and condi-
tions set forth in the Agreement to the same extent that it
would have would have been bound if it had been a signatory to
the Agreement on the execution date of the Agreement. Varo
hereby makes each of the representations and warranties and
agrees to each of the covenants, as applicable, contained in
Sections 5(a), 5(c), 5(d), 5(e), 5(f), 5(g), 5(h) and 5(k) of
the Agreement.
Varo further represents, warrants and covenants as
follows:
a. Chief Executive Office: Corporate Name: Records.
The chief executive office and the corporate name of Varo are
as set forth on Annex A hereto. Varo shall not change its name
- -2-
or move its chief executive office, except in accordance with
the last sentence of this Section (a). All tangible record
evidence of all of Varo's Pledged Collateral and the only
original books of account and records of Varo relating thereto
are, and will continue to be, kept at such chief executive
office, or at such new location for such chief executive office
as Varo may establish in accordance with the last sentence of
this Section (a) or at the chief executive office of Imo. Varo
shall not establish a new location for its chief executive
office and shall not change its name until it shall have given
the Collateral Agent not less than 30 days' prior written
notice of its intention to do so, identifying such new location
or name and providing such other information in connection
therewith as the Collateral Agent reasonably may request.
b. Pledged Shares. As of the date hereof, (x) the
Pledged Shares consisting of capital stock of the corporations
identified in Schedule I hereto constitute the percentage of
the issued and outstanding shares of capital stock of such cor-
porations as identified in Schedule I, and (y) other than the
Pledged Shares, and as otherwise provided in Schedule I, Varo
does not own, directly or indirectly, any other shares of capi-
tal stock of any of its Subsidiaries required to be pledged pur-
suant to the Agreement as provided in the Debt Restructuring
Documents.
c. Intercompany Notes. As of the date hereof,
(x) the Intercompany Notes identified on Schedule III hereto
constitute all of the Intercompany Notes of such corporations
as identified on Schedule III, and (y) other than the
Intercompany Notes, Varo does not on, directly or indirectly,
any other Intercompany Notes of any of its Subsidiaries.
Execution in Counterparts. This supplement and any
amendments, waivers, consents or supplements hereto may be exe-
cuted in any number of counterparts and by different parties
hereto in separate counterparts, each of which when so executed
and delivered shall be deemed to be an original, but all such
counterparts together shall constitute one and the same
agreement.
GOVERNING LAW: TERMS. THIS AGREEMENT SHALL BE GOV-
ERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE
WITH, THE LAW OF THE STATE OF NEW YORX, WITHOUT REGARD TO PRIN-
CIPLES OF CONFLICT OF LAWS.
IN WITNESS WHEREOF, Varo has caused this supplement
to be executed and delivered by its duly authorized officer as
of the date first above written.
VARO, INC.
By : /s/ Thomas J. Bird
Name: THOMAS J. BIRD
Title: Senior Vice President
AGREED TO AND ACCEPTED:
BANKERS TRUST COMPANY,
as Collateral Agent
By: /s/ June C. George
Name: JUNE C. GEORGE
Title: Vice President
ANNEX A
Pledgor Chief Executive Office
Varo, Inc. 2800 West Kingsley Road
Garland, Texas 75041
SCHEDULE I
Stock owned by Varo, Inc.:
Percentage
of All Capital
or Other
Class Par Certif. Number Equity Interests
Issuer of Stock Value No(s). of Sh. of Issuer
Varo Technology Common $.10 l-A 1,000 100
Center Inc.
Turbodel Inc. Common 2 8,000 100%
Applied Optic Common 2 100 100%
Center Corp.
Tecnologia Series A One New l-A 6,500 64.99%
Electronica Mexican
Peso
De Juarez, S.A. Series B One New l-B 280,895 64.99%
DE C.V. Mexican
Peso
Optic-Electronic Common $1.00 2 100 100%
International
Inc.
SCHEDULE III
Inter company Notes owned by Varo, Inc.:
Original
Name of Principal Date of Final
Obligor Amount Note Maturity Date
NONE
VARO, INC.
2800 West Kingsley
Garland, Texas 75041
December 1, 1993
Bankers Trust Company,
as Collateral Agent
One Bankers Trust Plaza
New York, New York 10017
Attention: Commercial Loan Division
Ladies/Gentlemen:
Reference is made to the Intellectual Property Pledge
Agreement (the Agreement), dated as of July 15, 1993, made by
Imo Industries Inc. (Imo) and each of the subsidiaries of Imo
listed on the signature pages thereto in favor of Bankers Trust
Company, as collateral agent for the Secured Parties. Capital-
ized terms used herein but not otherwise defined herein have
the meanings assigned such terms in the Agreement.
This letter supplements the Agreement and is deliv-
ered by the undersigned, Varo, Inc. (Varo), pursuant to Sec-
tion 4(k) of the Agreement. Varo hereby agrees to be bound as
a Subsidiary Pledgor by all of the terms, covenants and condi-
tions set forth in the Agreement to the same extent that it
would have would have been bound if it had been a signatory to
the Agreement on the execution date of the Agreement. Varo
hereby makes each of the representations and warranties and
agrees to each of the covenants, as applicable, contained in
Sections 4(a), 4(e), 4(f), 4(g), 4(h), 4(j) and 4(k) of the
Agreement.
Varo further represents, warrants and covenants as
follows:
a. Ownership. Except as set forth on Schedule 1
hereto, Varo is as of the date hereof, and, as to Pledged Col-
lateral acquired by it from time to time after the date hereof,
the owner or, as applicable, licensee of all of its Pledged
Collateral free from any Lien or other right, title or interest
of any Person other than the Liens and security interests
granted by Varo to the Collateral Agent pursuant to the Agree-
ment and other than Permitted Encumbrances, and Varo shall
defend its ownership of its Pledged Collateral against all
claims and demands of all other Persons at any time claiming
any interest adverse to the Collateral Agent; it being under-
stood that title irregularities in respect of the Pledged Col-
lateral existing as of the date hereof shall not constitute a
Material Portion of the Collateral.
b. Other Financing Statements. Except as set forth
on Schedule 1 hereto, there are no filings, including any
financing statement (or similar statement or instrument of reg-
istration under the law of any jurisdiction) covering or pur-
porting to cover any interest of any kind in Varo's Pledged
Collateral and, so long as the Agreement remains in effect,
Varo shall not execute or authorize to be filed in any public
office any financing statement (or similar statement or instru-
ment of registration under the law of any jurisdiction) or
statements relating to its Pledged Collateral or otherwise make
any PTO Filings relating to the Pledged Collateral, except
financing statements and PTO filings filed or to be filed in
respect of and covering the security interests granted by Varo
to the Collateral Agent pursuant to the Agreement.
c. Chief Executive Office: Corporate Name: Records.
The chief executive office and the corporate name of Varo are
as set forth on Annex A hereto. Varo shall not change its name
or move its chief executive office, except in accordance with
the last sentence of this Section (c). All tangible record
evidence of all of Varo's Pledged Collateral and the only
original books of account and records of Varo relating thereto
are, and will continue to be, kept at such chief executive
office, or at such new location for such chief executive office
as Varo may establish in accordance with the last sentence of
this Section (c) or at the chief executive office of Imo. Varo
shall not establish a new location for its chief executive
office and shall not change its name until it shall have given
the Collateral Agent not less than 30 days' prior written
notice of its intention to do so, identifying such new location
or name and providing such other information in connection
therewith as the Collateral Agent reasonably may request.
d. Pledged Collateral. Schedules I, II, III and
IV, respectively, attached hereto, are lists which are accurate
and complete in all material respects as of the date hereof of
all registered and applied for Patents, Trademarks, Copyrights
and Licenses owned or licensed by Varo. All information set
forth relating to the Pledged Collateral is accurate and com-
plete in all material respects.
Execution in Counterparts. This supplement and any
amendments, waivers, consents or supplements hereto may be exe-
cuted in any number of counterparts and by different parties
hereto in separate counterparts, each of which when so executed
and delivered shall be deemed to be an original, but all such
counterparts together shall constitute one and the same
agreement.
GOVERNING LAW: TERMS. THIS AGREEMENT SHALL BE GOV-
ERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE
WITH, THE LAW OF THE STATE OF NEW YORK, WITHOUT REGARD TO PRIN-
CIPLES OF CONFLICT OF LAWS.
IN WITNESS WHEREOF, Varo has caused this supplement
to be executed and delivered by its duly authorized officer as
of the date first above written.
VARO, INC.
By: /s/ Thomas J. Bird
Name: THOMAS J. BIRD
Title: Senior Vice President
AGREED TO AND ACCEPTED:
BANKERS TRUST COMPANY,
as Collateral Agent
By: /s/ June C. George
Name: JUNE C. GEORGE
Vice President
ANNEX A
Pledgor Chief Executive Office
Varo, Inc. 2800 West Kingsley Road
Garland, Texas 75041
SCHEDULE I
PATENTS
PLEDGOR COUNTRY PATENT NO. ISSUE DATE
VARO INC.l U.S. 3,992,099 11/16/76
VARO INC.l U.S. 4,015,126 3/29/77
VARO INC.l U.S. 4,021,974 5/10/77
VARO INC.l U.S. 4,054,794 10/18/77
VARO INC.l U.S. 4,060,328 11/29/77
VARO INC.l U.S. 4,112,334 9/5/78
VARO INC. U.S. 4,127,398 11/28/78
VARO INC. U.S. 4,128,340 12/5/78
VARO INC.l U.S. 4,129,780 12/12/78
VARO INC.l U.S. 4,151,415 4/24/79
VARO INC.l U.S. 4,157,484 6/5/79
VARO INC. U.S. 4,175,808 11/27/79
VARO INC. U.S. 4,186,980 2/5/80
VARO INC.l U.S. 4,198,106 4/15/80
VARO INC.l U.S. 4,236,069 11/25/80
VARO INC. U.S. 4,385,092 5/24/83
1 In the name of Varo, Inc.
PLEDGOR COUNTRY PATENT NO. ISSUE DATE
VARO INC. U. S. 4,403,148 9/6/83
VARO INC.l U.S. 4,439,821 3/27/84
VARO INC. U.S. 4,670,912 6/9/87
VARO INC. 1 U.S. 4,672,194 6/8/87
VARO INC. 1 U.S. 4,687,879 8/18/87
VARO INC. 1 U.S. 4,697,783 10/6/87
VARO INC.l U.S. 4,698,857 10/13/87
VARO INC.l U.S. 4,703,879 11/3/87
VARO INC.l U.S. 4,736,669 4/12/88
VARO INC.l U.S. 4,737,023 4/12/88
VARO INC.l U.S. 4,741,608 5/3/88
VARO INC.l U.S. 4,745,278 5/17/88
VARO INC. 1 U.S. 4,745,840 5/24/88
VARO INC. 1 U.S. 4,750,404 6/14/88
VARO INC. 1 U.S. 4,753,378 6/28/88
VARO INC.l U.S. 4,755,725 7/5/88
VARO INC.l U.S. 4,766,610 0/0/88
VARO INC. 1 U.S. 4,786,966 11/22/88
PLEDGOR COUNTRY PATENT NO. ISSUE DATE
VARO INC.l U.S. 4,792,681 12/20/88
VARO INC.l U.S. 4,799,911 1/24/89
VARO INC .1 U.S. 4,820,031 4/11/89
VARO INC.l U.S. 4,835,381 5/30/89
VARO INC.l U.S. 4,884,137 11/28/89
VARO INC.l U.S. 4,887,887 12/19/89
VARO INC.l U.S. 4,902,895 2/20/90
VARO INC.l U.S. 4,927,237 5/20/90
VARO INC.l U.S. 4,970,589 11/13/90
VARO INC.l U.S. 5,005,213 4/2/91
VARO INC.l U.S. 5,008,657 4/16/91
VARO INC. U.S. 5,194,734 3/16/93
VARO INC. U.S. 5,200,827 4/6/93
VARO INC. U.S. 5,204,774 4/20/93
VARO INC. U.S. 5,218,194 6/8/93
SCHEDULE II
T R A D E M A R K
PLEDGOR MARX REG. NUMBER REG. DATE
VARO INC. OPTIC-ELECTRONIC CORP. 1,627,609 12/11/90
VARO INC. NI-TEC 1,032,845 2/10/76
VARO INC.l NITE-EYE 1,388,888 4/8/86
VARO INC.l VARO 1,258,366 11/22/83
VARO INC.l NOCTRON IV 999,963 12/17/74
VARO INC.l V VARO and design 1,288,716 8/7/84
VARO INC.l V VARO 1,004,578 2/11/75
1 In the name of Varo, Inc.
SCHEDULE III
C O P Y R I G H T S
PLEDGOR REG.NUMBER: REG. DATE COPYRIGHT TITLE
VARO INC.1 A 745376 1/29/65 "Salisbury Effect
Devices (Report No.
PS265)"
VARO INC.1 A 417 5/22/68 "Varoformer"
Applied Authors: Paul
J. Thompson &
Laurence M. Silva
VARO INC.1 PA352-737 9/18/97 "Preparation and Use
of AN/PVS-7B night
vision goggle"
1 In the name of Varo, Inc.
262 SCHEDULE IV
268 Pledgor Licenses
270 Varo, Inc. NONE.
IMO INDUSTRIES INC.
FORM 10-K
FOR FISCAL YEAR ENDED DECEMBER 31, 1993
EXHIBIT 10.19 (N)
SCHEDULE OF ADDITIONAL OMITTED MORTGAGES AND DEEDS OF TRUST
SCHEDULE OF ADDITIONAL OMITTED MORTGAGES AND DEEDS OF TRUST
Mortgages or deeds of trust substantially identical to exhibit
16(L) to the Company's Form 10-5/A for the fiscal year ended
December 31, 1993, in all material respects, except they are
dated December 1, 1993 and except for differences required to
reflect local law, were granted by the following parties
regarding their property at locations beside each party's name:
Mortgagor/Grantor Location
Varo Inc. (Grantor) Dallas County, Texas
(900-932 Shiloh, Garland)
Varo Inc. (Grantor) Dallas County, Texas
(3609 Marquis Drive, Garland)
Turbodel Inc. (Grantor) Dallas County, Texas
(1010 Shiloh, Garland)
Varo Technology Center Joint Venture Dallas County,Texas
(Two Shiloh, Garland)
One of the mortgages or deeds of trust listed on Exhibit 16(L) to
the Company's Form 10-5/A for the fiscal year ended December 31,
1993 is identified thereon as:
Imo Industries Inc. (Grantor) Norfolk County,
Massachusetts
This instrument was amended and restated as of February 28, 1994
to decrease the amount of property covered, but there were no
other material changes.
AMENDMENT NO. 1
TO THE
AMENDED AND RESTATED 12.75% NOTE AGREEMENT
Amendment No. 1, dated as of December 17, 1993 (this
"Amendment"), to the Amended and Restated 12.75% Note Agreement,
dated July 15, 1993, by and between IMO Industries, Inc., a
Delaware corporation (the "Company"), and The Prudential
Insurance Company of America ("PRICOA", and such agreement as
amended, restated, supplemented or otherwise modified from time
to time, the "12.75% Note Agreement"). Capitalized terms used
and not otherwise defined herein shall have the meanings assigned
to them in the 12.75% Note Agreement.
WHEREAS, the Company has requested that PRICOA amend or
waive compliance with certain provisions of the 12.75% Note
Agreement; and
WHEREAS, PRICOA is prepared to grant such amendment and
waiver.
NOW, THEREFORE, in consideration of the foregoing, and
for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto
hereby agree as follows:
Section 1. Amendments, Waiver and Consent.
Section 1.1. Waiver to Section 5A(1). Compliance with
clause (a)(v)(i) of Section 5A(1), pursuant to which the Company
is required to deliver not later than December 31, 1993 a
preliminary business plan of the Company on a Consolidated basis
for the immediately succeeding three year period, is hereby
waived, provided said clause is complied with on or before
January 31, 1994.
Section 1.2. Waiver to Section 5A(2). Compliance with
Section 5A(2) pursuant to which the Company is required to keep
in full force its corporate existence and to cause each of its
Domestic Subsidiaries to keep and preserve its corporate
existence is waived to the extent necessary to permit the
dissolution of two indirect subsidiaries of the Company, Labtest
Equipment Company, a California corporation and KEI Laser Inc., a
Maryland corporation.
Section 1.3. Amendment to Section 6A(2). Section
6A(2) is hereby amended by (1) deleting the word "and" at the end
of clause (h) thereof, (2) replacing the period at the end of
clause (i) thereof with "; and" and (3) adding a new clause (j)
as follows:
(j) Liens in respect of Indebtedness permitted to
be incurred under Section 6A(10)(i) hereof, provided that
such Liens are granted only on the real property in respect
of which such Indebtedness was incurred.
Section 1.4. Amendment to Section 6A(10). Section
6A(10) is amended by (1) deleting the word "and" at the end of
clause (g) thereof, (2) replacing the period at the end of clause
(h) thereof with "; and" and (3) adding a new clause (i) as
follows:
(i) Indebtedness constituting mortgage financings
in respect of the Company's Lawrenceville, New Jersey
headquarters and Baird Corporation's Bedford, Massachusetts
real properties, in each case (i) provided by a Person who
is not an Affiliate of the Company, (ii) in an amount not
less than 70% of the fair market value of such property (as
determined by the appraisal or other reasonable deter
mination of the provider of such financing) and (iii)
otherwise on terms and pursuant to documentation reasonably
satisfactory in form and substance to the Requisite Holders
(as defined In the Intercreditor Agreement).
Section 1.5. Amendment to Section 6A(12). Clause (vi)
of Section 6A(12) is hereby amended by adding at the end thereof
"provided that the Company and its Subsidiaries shall be
permitted to incur an additional $5,000,000 advance payment bond
and an additional $10,000,000 performance bond in support of
obligations of Warren Pumps Inc. incurred in connection with a
successful bid on a certain project in the State of California,
the bidding for which shall have commenced not earlier than
November 1, 1993 and shall have concluded not later then November
30, 1993;"
Section 1.6. Consent to Release of Collateral.
Pursuant to Section 7.2(a) of the Intercreditor Agreement, PRICOA
hereby consents to the release of each of the real properties
constituting Collateral specifically referred to in Section 1.4
of this Amendment upon the incurrence of Indebtedness and the
granting of a related Lien in respect of such real property in
compliance with Sections 6A(10)(i) and 6A(2)(j) of the 12.75%
Note Agreement, provided that (a) concurrently therewith, to the
extent required pursuant to the Intercreditor Agreement, the
12.75% Note Agreement, the Credit Agreement and the Combined
Restated Credit Agreement, the commitments to lend thereunder are
reduced and the proceeds of such Indebtedness are applied to
repay obligations and/or cash collateralize letters of credit in
accordance with such agreements and (b) immediately before and
after giving effect to the incurrence of such Indebtedness and
the granting of such Lien there shall not have occurred and not
be continuing any Event of Default or Potential Event of Default.
Section 2. Representations and Warranties. The
Company hereby confirms, reaffirms and restates the
representations and warranties made by it in Section 8 of the
12.75% Note Agreement, and that all such representations and
warranties are true and correct in all material respects as of
the date hereof. The Company further represents and warrants
(which representations and warranties shall survive the execution
and delivery hereof) that:
(a) The Company has the corporate power, authority and
legal right to execute, deliver and perform this Amendment and
has taken all actions necessary to authorize the execution,
delivery and performance of this Amendment;
(b) No consent of any person, and no consent, permit,
approval or authorization of, exemption by, notice or report to,
or registration, filing or declaration with, any governmental
authority is required in connection with the execution, delivery
or performance by the Company, of this Amendment;
(c) This Amendment has been duly executed and deliv
ered on behalf of the Company by a duly authorized officer of the
Company and constitutes a legal, valid and binding obligation of
the Company, enforceable in accordance with its terms, subject to
bankruptcy, insolvency, reorganization, fraudulent transfer,
moratorium and similar laws affecting creditor's rights generally
and to general equitable principles;
(d) The execution, delivery and performance of this
Amendment will not violate any requirement of law or Contractual
Obligation of the Company; and
(e) After giving effect to the execution, delivery and
performance of this Amendment, no Event of Default or Potential
Event of Default shall have occurred and be continuing.
Section 3. Effectiveness. This Amendment shall become
effective upon (i) the execution and delivery hereof by the
Company and PRICOA and (ii) the execution and delivery of an
amendment and waiver agreement to each of the Credit Agreement
and the Combined Restated Credit Agreement, each on terms and
conditions substantially identical to those set forth herein.
Section 4. Miscellaneous.
(a) This Amendment shall not constitute a consent or
waiver to or modification of any other provision, term or con
dition of the 12.75% Note Agreement. Except as herein expressly
amended, the 12.75% Note Agreement and all other agreements, docu
ments, instruments and certificates executed in connection
therewith, except as otherwise provided herein, are ratified and
confirmed in all respects and shall remain in full force and
effect in accordance with their respective terms.
(b) All references to the 12.75% Note Agreement shall
mean the 12.75% Note Agreement as amended as of the effective
date hereof, and as the same may at any time be amended,
restated, supplemented or otherwise modified from time to time
and as in effect.
(c) This Amendment may be executed in any number of
counterparts, and by different parties hereto in separate coun
terparts, 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 agreement.
(d) THIS AMENDMENT SHALL BE GOVERNED BY, AND SHALL BE
CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAW OF THE STATE
OF NEW YORK WITHOUT REGARD TO THE PRINCIPLES OF CONFLICT OF LAWS.
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment No. 1 to be duly executed as of the date first written
above.
IMO INDUSTRIES, INC.
By:/s/ Thomas J. Bird
Name: Thomas J. Bird
Title: Senior Vice President
THE PRUDENTIAL INSURANCE COMPANY
OF AMERICA
By:/s/ Robert E. Davis
Name: Robert E. Davis
Title: Vice President
AMENDMENT NO. 1
TO THE
AMENDED AND RESTATED 10.35% NOTE AGREEMENT
Amendment No. 1, dated as of December 17, 1993 (this
"Amendment"), to the Amended and Restated 10.35% Note Agreement,
dated July 15, 1993, by and between IMO Industries, Inc., a
Delaware corporation (the "Company"), and The Prudential
Insurance Company of America ("PRICOA", and such agreement as
amended, restated, supplemented or otherwise modified from time
to time, the "10.35% Note Agreement"). Capitalized terms used
and not otherwise defined herein shall have the meanings assigned
to them in the 10.35% Note Agreement.
WHEREAS, the Company has requested that PRICOA amend or
waive compliance with certain provisions of the 10.35% Note
Agreement; and
WHEREAS, PRICOA is prepared to grant such amendment and
waiver.
NOW, THEREFORE, in consideration of the foregoing, and
for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto
hereby agree as follows:
Section 1. Amendments, Waiver and Consent.
Section 1.1. Waiver to Section 3A(1). Compliance with
clause (a)(v)(i) of Section 3A(1), pursuant to which the Company
is required to deliver not later than December 31, 1993 a
preliminary business plan of the Company on a Consolidated basis
for the immediately succeeding three year period, is hereby
waived, provided said clause is complied with on or before
January 31, 1994.
Section 1.2. Waiver to Section 3A(2). Compliance with
Section 3A(2) pursuant to which the Company is required to keep
in full force its corporate existence and to cause each of its
Domestic Subsidiaries to keep and preserve its corporate
existence is waived to the extent necessary to permit the
dissolution of two indirect subsidiaries of the Company, Labtest
Equipment Company, a California corporation and KEI Laser Inc., a
Maryland corporation.
Section 1.3. Amendment to Section 4A(2). Section
4A(2) is hereby amended by (1) deleting the word "and" at the end
of clause (g) thereof, (2) replacing the period at the end of
clause (h) thereof with "; and" and (3) adding a new clause (i)
as follows:
(i) Liens in respect of Indebtedness permitted to
be incurred under Section 4A(10)(h) hereof, provided that
such Liens are granted only on the real property in respect
of which such Indebtedness was incurred.
Section 1.4. Amendment to Section 4A(10). Section
4A(10) is amended by (1) deleting the word "and" at the end of
clause (f) thereof, (2) replacing the period at the end of clause
(g) thereof with "; and" and (3) adding a new clause (h) as
follows:
(h) Indebtedness constituting mortgage financings
in respect of the Company's Lawrenceville, New Jersey
headquarters and Baird Corporation's Bedford, Massachusetts
real properties, in each case (i) provided by a Person who
is not an Affiliate of the Company, (ii) in an amount not
less than 70% of the fair market value of such property (as
determined by the appraisal or other reasonable deter
mination of the provider of such financing) and (iii)
otherwise on terms and pursuant to documentation reasonably
satisfactory in form and substance to the Requisite Holders
(as defined In the Intercreditor Agreement).
Section 1.5. Amendment to Section 4A(12). Clause (vi)
of Section 4A(12) is hereby amended by adding at the end thereof
"provided that the Company and its Subsidiaries shall be
permitted to incur an additional $5,000,000 advance payment bond
and an additional $10,000,000 performance bond in support of
obligations of Warren Pumps Inc. incurred in connection with a
successful bid on a certain project in the State of California,
the bidding for which shall have commenced not earlier than
November 1, 1993 and shall have concluded not later then November
30, 1993;"
Section 1.6. Consent to Release of Collateral.
Pursuant to Section 7.2(a) of the Intercreditor Agreement, PRICOA
hereby consents to the release of each of the real properties
constituting Collateral specifically referred to in Section 1.4
of this Amendment upon the incurrence of Indebtedness and the
granting of a related Lien in respect of such real property in
compliance with Sections 4A(10)(h) and 4A(2)(i) of the 10.35%
Note Agreement, provided that (a) concurrently therewith, to the
extent required pursuant to the Intercreditor Agreement, the
10.35% Note Agreement, the Credit Agreement and the Combined
Restated Credit Agreement, the commitments to lend thereunder are
reduced and the proceeds of such Indebtedness are applied to
repay obligations and/or cash collateralize letters of credit in
accordance with such agreements and (b) immediately before and
after giving effect to the incurrence of such Indebtedness and
the granting of such Lien there shall not have occurred and not
be continuing any Event of Default or Potential Event of Default.
Section 2. Representations and Warranties. The
Company hereby confirms, reaffirms and restates the
representations and warranties made by it in Section 6 of the
10.35% Note Agreement, and that all such representations and
warranties are true and correct in all material respects as of
the date hereof. The Company further represents and warrants
(which representations and warranties shall survive the execution
and delivery hereof) that:
(a) The Company has the corporate power, authority and
legal right to execute, deliver and perform this Amendment and
has taken all actions necessary to authorize the execution,
delivery and performance of this Amendment;
(b) No consent of any person, and no consent, permit,
approval or authorization of, exemption by, notice or report to,
or registration, filing or declaration with, any governmental
authority is required in connection with the execution, delivery
or performance by the Company, of this Amendment;
(c) This Amendment has been duly executed and deliv
ered on behalf of the Company by a duly authorized officer of the
Company and constitutes a legal, valid and binding obligation of
the Company, enforceable in accordance with its terms, subject to
bankruptcy, insolvency, reorganization, fraudulent transfer,
moratorium and similar laws affecting creditor's rights generally
and to general equitable principles;
(d) The execution, delivery and performance of this
Amendment will not violate any requirement of law or Contractual
Obligation of the Company; and
(e) After giving effect to the execution, delivery and
performance of this Amendment, no Event of Default or Potential
Event of Default shall have occurred and be continuing.
Section 3. Effectiveness. This Amendment shall become
effective upon (i) the execution and delivery hereof by the
Company and PRICOA and (ii) the execution and delivery of an
amendment and waiver agreement to each of the Credit Agreement
and the Combined Restated Credit Agreement, each on terms and
conditions substantially identical to those set forth herein.
Section 4. Miscellaneous.
(a) This Amendment shall not constitute a consent or
waiver to or modification of any other provision, term or con
dition of the 10.35% Note Agreement. Except as herein expressly
amended, the 10.35% Note Agreement and all other agreements, docu
ments, instruments and certificates executed in connection
therewith, except as otherwise provided herein, are ratified and
confirmed in all respects and shall remain in full force and
effect in accordance with their respective terms.
(b) All references to the 10.35% Note Agreement shall
mean the 10.35% Note Agreement as amended as of the effective
date hereof, and as the same may at any time be amended,
restated, supplemented or otherwise modified from time to time
and as in effect.
(c) This Amendment may be executed in any number of
counterparts, and by different parties hereto in separate coun
terparts, 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 agreement.
(d) THIS AMENDMENT SHALL BE GOVERNED BY, AND SHALL BE
CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAW OF THE STATE
OF NEW YORK WITHOUT REGARD TO THE PRINCIPLES OF CONFLICT OF LAWS.
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment No. 1 to be duly executed as of the date first written
above.
IMO INDUSTRIES, INC.
By: /s/ Thomas J. Bird
Name: Thomas J. Bird
Title: Senior Vice President
THE PRUDENTIAL INSURANCE COMPANY
OF AMERICA
By: /s/ Robert E. Davis
Name: Robert E. Davis
Title: Vice President
AMENDMENT NO. 2
AMENDMENT NO. 2 (this "Amendment"), dated as of
December 31, 1993, to the New Credit Agreement, the Combined
Restated Credit Agreement and the Prudential Agreements (each as
hereinafter defined), among Imo Industries Inc., a Delaware
corporation (the "Borrower"), each of the financial institutions
party to the New Credit Agreement (together with their respective
successors and permitted assigns and transferees, the "New Credit
Agreement Lenders"), each of the financial institutions party to
the Combined Restated Credit Agreement (together with their
respective successors and permitted assigns and transferees, the
"Combined Restated Credit Agreement Lenders"), Bankers Trust
Company, a New York banking corporation ("BTCo") as Issuer Bank
and as Agent under the New Credit Agreement and the Combined
Restated Credit Agreement, and The Prudential Insurance Company
of America, as holder of the notes issued pursuant to the
Prudential Agreements ("Prudential").
W I T N E S S E T H :
WHEREAS, the Borrower has entered into (i) the Credit
Agreement, dated as of July 15, 1993, as amended (the "New Credit
Agreement"), among the Borrower, each of the New Credit Agreement
Lenders and BTCo as Issuer Bank and as Agent, (ii) the Combined
Restated Credit Agreement, dated as of July 15, 1993, as amended
(the "Combined Restated Credit Agreement"), among the Borrower,
each of the Combined Restated Credit Agreement Lenders and BTCo
as Issuer Bank and as Agent, (iii) the Amended and Restated Note
Agreement, dated July 15, 1993, as amended, with Prudential,
relating to the Borrower's 10.35% Senior Note due March 31, 1995
(the "10.35% Agreement") and (iv) the Amended and Restated Note
Agreement, dated July 15, 1993, as amended, with Prudential,
relating to the Borrower's 12.75% Promissory Note due March 31,
1995 (the "12.75% Agreement" and, together with the
10.35% Agreement, the "Prudential Agreements"); capitalized terms
used but not defined herein have the meanings assigned to them in
the applicable New Facilities (as defined in the New Credit
Agreement); and
WHEREAS, pursuant to Section 10.6 of the New Credit
Agreement and Section 10.6 of the Combined Restated Credit
Agreement, the parties thereto may amend or waive certain
provisions thereof upon the written concurrence of the Borrower
and the Requisite Holders (as defined in the New Credit Agreement
and the Combined Restated Credit Agreement, respectively); and
WHEREAS, pursuant to Section 8C of the 10.35% Agreement
and Section 10C of the 12.75% Agreement, the provisions of the
Prudential Agreements may be amended or waived only with the
prior written consent of Prudential; and
WHEREAS, the Borrower has requested that the New Credit
Agreement Lenders and BTCo, in its capacities as Agent and Issuer
Bank under the New Credit Agreement, consent to the amendment or
waiver of certain provisions of the New Credit Agreement the
amendment or waiver of which requires the prior written
concurrence of the Requisite Holders (as defined therein); and
WHEREAS, the Borrower has requested that the Combined
Restated Credit Agreement Lenders and BTCo, in its capacities as
Agent and Issuer Bank under the Combined Restated Credit
Agreement, consent to the amendment or waiver of certain
provisions of the Combined Restated Credit Agreement the
amendment or waiver of which requires the prior written
concurrence of the Requisite Holders (as defined therein); and
WHEREAS, the Borrower has requested that Prudential
consent to the amendment or waiver of certain provisions of the
Prudential Agreements the amendment or waiver of which requires
the prior written concurrence of Prudential; and
WHEREAS, the New Credit Agreement Lenders, the Combined
Restated Credit Agreement Lenders and Prudential intend to grant
the requested consents, with respect to each of the New
Facilities to which they are party, on the terms and subject to
the conditions set forth herein;
NOW THEREFORE, in consideration of the foregoing and
the mutual covenants and agreements contained herein, and for
other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto
hereby agree as follows:
SECTION ONE - AMENDMENTS
(a) The preamble of each of the Prudential Agreements
is hereby amended by adding after the word "'Company'" the
following: "or the 'Borrower'".
(b) Section 1.1 of each of the New Credit Agreement
and the Combined Restated Credit Agreement, Section 7 of the
10.35% Agreement and Section 9 of the 12.75% Agreement (together,
the "Definition Sections") are each hereby amended by adding the
following definitions in appropriate alphabetical order:
(1) "'Amendment No. 2' means Amendment No. 2, dated as
of December 31, 1993, to each of the New Facilities."
(2) "'Asset Sale L/C Reduction Amount' means, upon the
sale of all or substantially all the assets or the capital
stock of any Subsidiary of the Borrower in a single
transaction or a series of transactions, the highest Stated
Amount of Letters of Credit issued in support of obligations
of such Subsidiary outstanding at any one time during the
three months prior to the date of such sale (or most recent
sale in the case of a series of transactions), calculated in
the aggregate for any and all such Subsidiaries that are the
subject of an Asset Sale (including the sale of any such
Subsidiary's stock) on or after the date of Amendment
No. 2."
(3) "'Baird' means Baird Corporation, a Massachusetts
corporation."
(4) "'1993 Special Charges' means charges against
earnings for the fiscal year ended December 31, 1993
reflecting (i) a write-down at December 31, 1993 of the
value of the assets of the Borrower and its Subsidiaries and
(ii) restructuring charges incurred in 1993 by the Borrower
and its Subsidiaries, in an aggregate amount not exceeding
$232 million, as all such charges are reflected in the
Borrower's audited financial statements at and for the year
ended December 31, 1993."
(c) The Definition Sections are each hereby further
amended by adding at the end of the definition of the term
"Consolidated Net Worth" therein, the following sentence: "Other
than by reason of the reversal of any reserve for retiree medical
benefits, Consolidated Net Worth shall not be increased by the
reversal of any reserves set forth or provided for in the
Borrower's audited consolidated financial statements for the
fiscal year ended December 31, 1993."
(d) The Definition Sections are each hereby further
amended by adding, after the word "Subsidiaries" the first time
such word appears in the definition of the term "Material Adverse
Change" therein, the following: ", other than the 1993 Special
Charges,".
(e) The Definition Sections are each hereby further
amended by adding in the definition of the term "Net Proceeds"
therein at the end thereof, the following: "and, in the case of
Asset Sales or sales of stock of Varo or Baird, net of the
principal amounts of Indebtedness set forth on Attachment 1 to
Amendment No. 2, which principal amounts will be paid to the
lenders of Varo and Baird, as the case may be, set forth on such
Attachment.
(f) The Definition Sections are each hereby further
amended by adding in the definition of the term "Restricted
Junior Payment" therein, at the end of clause (iv) thereof, the
following: ", and other than payments by the Borrower to holders
of its 12.25% Senior Subordinated Debentures due August 15, 1997,
of up to a maximum amount to which the Requisite Holders have
consented as the sole consideration for the consent of such
debenture holders to an amendment to the indenture pursuant to
which such debentures were issued, which amendment shall be
attached to Amendment No. 2 as Annex I".
(g) Section 1.4 of the New Credit Agreement is hereby
amended and restated in its entirety as follows:
1.4 Exposures and Commitments
Anything contained in this Agreement to the
contrary notwithstanding, (a) no Lender's Credit Exposure
outstanding at any time shall exceed its Commitment then in
effect; (b) Total Credit Exposure outstanding at any time
shall not exceed the lesser of (i) the Total Commitment then
in effect and (ii) the sum of (A) $19.2 million plus (B) the
aggregate principal amount of Old Senior Debt Loans repaid
on and after the Effective Date plus (C) the maximum amount
of Total Certain New Business L/C Exposure that could be
outstanding at such time in accordance with clause
(d)(ii)(C) below; (c) Total Loan Exposure outstanding at any
time shall not exceed the lesser of (i) $20 million and
(ii) the sum of (A) $10 million plus (B) the aggregate
principal amount of Old Senior Debt Loans repaid on and
after the Effective Date; (d) Total Letter of Credit
Exposure outstanding at any time shall not exceed the lesser
of (i) $49.2 million less the Asset Sale L/C Reduction
Amount and (ii) the sum of (A) $9.2 million less the Asset
Sale reduction Amount plus (B) the aggregate principal
amount of Old Senior Debt Loans repaid on and after the
Effective Date plus (C) Total Certain New Business L/C
Exposure up to the lesser of (i) $5 million and (ii) the
amount by which $15 million exceeds the Total Old Senior
Debt L/C Exposure.
(h) Each of Section 7.8 of the New Credit Agreement,
Section 7.8 of the Combined Restated Credit Agreement and
Section 4A(8) of the 10.35% Agreement is hereby amended and
restated in its entirety as follows:
Financial Covenants
A. Consolidated Interest Coverage Ratio.
The Consolidated Interest Coverage Ratio at the end of
the following fiscal quarters shall not be less than the minimum
ratio set forth opposite such quarter:
Fiscal Quarter Ending Minimum Ratio
9/30/93 1.30 to 1
12/31/93 1.40 to 1
3/31/94 1.00 to 1
6/30/94 1.15 to 1
9/30/94 1.25 to 1
12/31/94 1.35 to 1
3/31/95 1.45 to 1
provided that for the fiscal quarter ending
(i) 9/30/93 the components of the ratio shall be
measured only with respect to such fiscal quarter;
(ii) 12/31/93 the components of the ratio shall be
measured only with respect to such fiscal quarter and the prior
fiscal quarter;
(iii) 3/31/94 the components of the ratio shall be
measured only with respect to such fiscal quarter;
(iv) 6/30/94 the components of the ratio shall be
measured only with respect to such fiscal quarter and the prior
fiscal quarter;
(v) 9/30/94 the components of the ratio shall be
measured only with respect to such fiscal quarter and the prior
two consecutive fiscal quarters.
B. Consolidated Current Ratio.
The ratio of Adjusted Consolidated Current Assets to
Adjusted Consolidated Current Liabilities shall not at any time
be less than 1.50 to 1, other than during the fiscal year ending
December 31, 1994, for which such ratio shall not at any time be
less than 1.25 to 1.
C. Consolidated Capital Expenditures.
Consolidated Capital Expenditures shall not exceed the
following levels for the following periods:
Initial Maximum
Fiscal Period Amount _
1/1/93 - 12/31/93 $26,200,000
1/1/94 - 12/31/94 35,700,000
1/1/95 - 3/31/95 35,000,000
; provided, however that the Initial Maximum Amount in each
fiscal year commencing January 1, 1994 shall be increased by the
lesser of (a) the amount by which the Initial Maximum Amount for
the prior fiscal year (as adjusted pursuant to this proviso)
exceeded the Consolidated Capital Expenditures made during such
prior fiscal year and (b) $5,000,000.
D. Indebtedness.
(i) Consolidated Senior Debt shall not at any time
(a) on or prior to December 31, 1993 exceed 35% of Consolidated
Capitalization or (b) after December 31, 1993 exceed 38% of
Consolidated Capitalization.
(ii) Consolidated Total Debt (other than debt of the
Borrower owing to its Subsidiaries and other than debt of any of
the Borrower's Subsidiaries owing to the Borrower or to another
of the Borrower's Subsidiaries) outstanding shall not exceed the
following percentages of Consolidated Capitalization for the
following periods:
Percentage of
Consolidated
On and After Until and including Capitalization
1/1/93 12/31/93 72.0%
1/1/94 12/31/94 110.0
1/1/95 3/31/95 100.0
E. Minimum Consolidated Net Worth.
Consolidated Net Worth shall not at any time be
more negative than the following levels during the following
periods:
Minimum
Consolidated
On and After Until and including Net Worth _
1/1/94 12/31/94 ($10,000,000)
1/1/95 03/31/95 ( 5,000,000)
F. Consolidated Rent Expense.
Consolidated Rent Expense for any fiscal year
shall not exceed $14,000,000.
G. Calculations of Special Charges.
Because the levels in the covenants contained in
subsections A-F above were set based upon the 1993 Special
Charges being the maximum amount permitted to be charged by the
Borrower pursuant to the definition of "1993 Special Charges"
herein, to the extent any such covenants include an item in the
calculation thereof that is increased or decreased by the actual
1993 Special Charges rather than such maximum amount, such item
shall be adjusted to add back or subtract, as applicable, the
amount by which the actual 1993 Special Charges as reflected in
the Borrower's audited financial statements at and for the year
ended December 31, 1993 are less than said maximum amount.
(i) Section 6A(8) of the 12.75% Agreement is hereby
amended and restated in its entirety as follows:
Financial Covenants
a. Consolidated Interest Coverage Ratio.
The Consolidated Interest Coverage Ratio at the end of
the following fiscal quarters shall not be less than the minimum
ratio set forth opposite such quarter:
Fiscal Quarter Ending Minimum Ratio
9/30/93 1.30 to 1
12/31/93 1.40 to 1
3/31/94 1.00 to 1
6/30/94 1.15 to 1
9/30/94 1.25 to 1
12/31/94 1.35 to 1
3/31/95 1.45 to 1
6/30/95 through 12/31/95 1.60 to 1
3/31/96 through 12/31/02 1.75 to 1
; provided that for the fiscal quarter ending
(i) 9/30/93 the components of the ratio shall be
measured only with respect to such fiscal quarter;
(ii) 12/31/93 the components of the ratio shall be
measured only with respect to such fiscal quarter and the prior
fiscal quarter;
(iii) 3/31/94 the components of the ratio shall be
measured only with respect to such fiscal quarter;
(iv) 6/30/94 the components of the ratio shall be
measured only with respect to such fiscal quarter and the prior
fiscal quarter;
(v) 9/30/94 the components of the ratio shall be
measured only with respect to such fiscal quarter and the prior
two consecutive fiscal quarters.
b. Consolidated Current Ratio.
The ratio of Adjusted Consolidated Current Assets to
Adjusted Consolidated Current Liabilities shall not at any time
be less than 1.50 to 1, other than during the fiscal year ending
December 31, 1994, for which such ratio shall not at any time be
less than 1.25 to 1.
c. Consolidated Capital Expenditures.
Consolidated Capital Expenditures shall not exceed the
following levels for the following periods:
Initial Maximum
Fiscal Period Amount _
1/1/93 - 12/31/93 $26,200,000
1/1/94 - 12/31/94 35,700,000
1/1/95 - 12/31/95 35,000,000
1996-2001 and the period for each such fiscal year
from 1/1/02 through (or, in the case of
12/1/02 the period from 1/1/02
through 12/1/02, such
fiscal period), the
applicable Maximum
Capital Expenditures
Amount
; provided, however that the Initial Maximum Amount in each
fiscal year commencing January 1, 1994 shall be increased by the
lesser of (a) the amount by which the Initial Maximum Amount for
the prior fiscal year (as adjusted pursuant to this proviso)
exceeded the Consolidated Capital Expenditures made during such
prior fiscal year and (b) $5,000,000. For purposes of this
financial covenant, the "Maximum Capital Expenditures Amount" for
any fiscal year (or, in the case of the period from January 1,
2002 through December 1, 2002, such fiscal period) beginning
after December 31, 1995 shall equal the lesser of (i) $45,000,000
and (ii) the product of (x) 1.2 and (y) the aggregate amount of
depreciation expense with respect to the Company's physical
property charged and accrued on the books of the Company for the
immediately preceding fiscal year (all of which shall have been
charged and accrued by the Company in the ordinary course of
business consistent with past practices and determined in
accordance with GAAP).
d. Indebtedness.
(i) Consolidated Senior Debt shall not at any time
(a) on or prior to December 31, 1993 or after March 31, 1995
exceed 35% of Consolidated Capitalization or (b) after
December 31, 1993 through March 31, 1995 exceed 38% of
Consolidated Capitalization.
(ii) Consolidated Total Debt (other than debt of the
Borrower owing to its Subsidiaries and other than debt of any of
the Borrower's Subsidiaries owing to the Borrower or to another
of the Borrower's Subsidiaries) outstanding shall not exceed the
following percentages of Consolidated Capitalization for the
following periods:
Percentage of
Consolidated
On and After Until and including Capitalization
1/1/93 12/31/93 72.0%
1/1/94 12/31/94 110.0
1/1/95 12/31/95 100.0
1/1/96 12/31/96 95.0
1/1/97 12/31/02 90.0
e. Minimum Consolidated Net Worth.
Consolidated Net Worth shall not at any time fall
below (in the case of a positive minimum) or be more negative (in
the case of a negative minimum) the following levels during the
following periods:
Minimum
Consolidated
On and After Until and including Net Worth _
1/1/94 12/31/94 ($10,000,000)
1/1/95 12/31/95 ( 5,000,000)
1/1/96 12/31/97 0
1/1/98 12/31/98 10,000,000
1/1/99 12/31/99 20,000,000
1/1/00 12/31/02 30,000,000
f. Consolidated Rent Expense.
Consolidated Rent Expense for any fiscal year
through and including the fiscal year ending December 31, 1995
shall not exceed $14,000,000. For each succeeding fiscal year,
Consolidated Rent Expense for such fiscal year shall not exceed
an amount equal to 105% of the maximum Consolidated Rent Expense
permitted hereunder for the immediately preceding fiscal year.
g. Calculations of Special Charges.
Because the levels in the covenants contained in
subsections A-F above were set based upon the 1993 Special
Charges being the maximum amount permitted to be charged by the
Borrower pursuant to the definition of "1993 Special Charges"
herein, to the extent any such covenants include an item in the
calculation thereof that is increased or decreased by the actual
1993 Special Charges rather than such maximum amount, such item
shall be adjusted to add back or subtract, as applicable, the
amount by which the actual 1993 Special Charges as reflected in
the Borrower's audited financial statements at and for the year
ended December 31, 1993 are less than said maximum amount.
(j)From and after the date of this Amendment, Schedule
A attached hereto shall be Schedule 7.9 of each of the New Credit
Agreement (including for purposes of Section 4A(9) of the 10.35%
Agreement and Section 6A(9) of the 12.75% Agreement) and the
Combined Restated Credit Agreement.
SECTION TWO - WAIVERS
a. Compliance with Section 7.8A of each of the New
Credit Agreement and the Combined Restated Credit Agreement,
Section 4A(8)(a) of the 10.35% Agreement and Section 6A(8)(a) of
the 12.75% Agreement, each as amended by this Amendment, at the
end of the fiscal quarter ending December 31, 1993, pursuant to
which the Borrower is required to maintain a Consolidated
Interest Coverage Ratio of at least 1.4 to 1, is hereby waived,
provided such Consolidated Interest Coverage Ratio is not more
negative than (7.2) to 1 at such time, after giving effect to the
1993 Special Charges.
b. Compliance with Section 7.8B of each of the New
Credit Agreement and the Combined Restated Credit Agreement,
Section 4A(8)(b) of the 10.35% Agreement and Section 6A(8)(b) of
the 12.75% Agreement, each as amended by this Amendment, for the
fiscal quarter ending December 31, 1993, pursuant to which the
Borrower is required to maintain a ratio of Adjusted Consolidated
Current Assets to Adjusted Consolidated Liabilities of at least
1.50 to 1, is hereby waived, provided such ratio is at least
1.25 to 1 at such time, after giving effect to the 1993 Special
Charges.
c. Compliance with Section 7.8D(i) of each of the New
Credit Agreement and the Combined Restated Credit Agreement,
Section 4A(8)(d)(i) of the 10.35% Agreement and
Section 6A(8)(d)(i) of the 12.75% Agreement, each as amended by
this Amendment, for the fiscal quarter ending December 31, 1993,
pursuant to which the Borrower is required to maintain
Consolidated Senior Debt as a percentage of Consolidated
Capitalization of not more than 35%, is hereby waived, provided
such percentage is not more than 38% at such time, after giving
effect to the 1993 Special Charges.
d. Compliance with Section 7.8D(ii) of each of the
New Credit Agreement and the Combined Restated Credit Agreement,
Section 4A(8)(d)(ii) of the 10.35% Agreement and
Section 6A(8)(d)(ii) of the 12.75% Agreement, each as amended by
this Amendment, for the fiscal quarter ending December 31, 1993,
pursuant to which the Borrower is required to maintain
Consolidated Total Debt as a percentage of Consolidated
Capitalization of not more than 72%, is hereby waived, provided
such percentage is not more than 110.0% at such time, after
giving effect to the 1993 Special Charges.
e. Compliance with Section 7.8E of each of the New
Credit Agreement and the Combined Restated Credit Agreement,
Section 4A(8)(e) of the 10.35% Agreement and Section 6A(8)(e) of
the 12.75% Agreement, each as amended by this Amendment, for the
fiscal quarter ending December 31, 1993, pursuant to which the
Borrower is required to maintain a Consolidated Tangible Net
Worth of at least $25,000,000, is hereby waived, provided that
Consolidated Net Worth is not more negative than ($15,000,000) at
such time, after giving effect to the 1993 Special Charges.
f. For purposes of this Section Two, Special Charges
shall be determined without giving effect to the maximum
limitation on the amount thereof set forth in the definition of
such term.
SECTION THREE - TOTAL COMMITMENT REDUCTION
The Total Commitment as currently in effect is hereby
permanently reduced by $5 million.
SECTION FOUR - LETTERS OF CREDIT
It shall be a condition to the issuance of each Letter
of Credit to be issued under the New Credit Agreement on or after
the date of this Amendment and prior to the satisfaction of
clause (i) of the second sentence of subsection (a) of Section
Six of this Amendment, that (i) the Borrower pay to the
Collateral Agent on the date of issuance of such Letter of Credit
an amount (a "Prepayment Amount") in cash equal to the Stated
Amount of such Letter of Credit and (ii) the aggregate Stated
Amount of all such Letters of Credit not exceed $8.2 million.
Any Prepayment Amount received by the Collateral Agent shall be
applied first to the March 31, 1994 amortization payment until
fully satisfied and thereafter to the September 30, 1994
amortization payment, in each case as described in Section
2.9D(i)(x) of the New Credit Agreement, and shall be applied in
accordance with the Intercreditor Agreement.
SECTION FIVE - REPRESENTATIONS AND WARRANTIES
The Borrower hereby confirms, reaffirms and restates
the representations and warranties made by it in Section 5 of
each of the New Credit Agreement and the Combined Restated Credit
Agreement, and in Section 6 of the 10.35% Agreement and Section 8
of the 12.75% Agreement, and that all such representations and
warranties are true and correct in all material respects as of
the date hereof; provided that the foregoing confirmation,
reaffirmation and restatement in the case of the representations
and warranties contained in Sections 5.7, 5.14 and 5.26 of the
New Credit Agreement and the Combined Restated Credit Agreement,
Sections 6G, 6N and 6Z of the 10.35% Agreement and Sections 8G,
8N and 8Z of the 12.75% Agreement assume the effectiveness and
performance of each provision of this Amendment. The Borrower
further represents and warrants (which representations and
warranties shall survive the execution and delivery hereof) to
the Agent, each New Credit Agreement Lender, each Combined
Restated Credit Agreement Lender and Prudential that:
(a) the Borrower has the corporate power, authority
and legal right to execute, deliver and perform this Amendment
and has taken all actions necessary to authorize the execution,
delivery and performance of this Amendment;
(b) no consent of any person, and no consent, permit,
approval or authorization of, exemption by, notice or report to,
or registration, filing or declaration with, any governmental
authority is required in connection with the execution, delivery
or performance by the Borrower, of this Amendment;
(c) this Amendment has been duly executed and
delivered on behalf of the Borrower by a duly authorized officer
of the Borrower and constitutes a legal, valid and binding
obligation of the Borrower, enforceable in accordance with its
terms, subject to bankruptcy, insolvency, reorganization,
fraudulent transfer, moratorium and similar laws affecting
creditors' rights generally and to general equitable principles;
(d) the execution, delivery and performance of this
Amendment will not violate any requirement of law or Contractual
Obligation of the Borrower;
(e) after giving effect to the execution, delivery and
performance of this Amendment and the effectiveness and
performance of each provision hereof, no Event of Default or
Potential Event of Default (as such terms are defined in each of
the New Facilities) shall have occurred and be continuing; and
(f) the financial statements, projections and related
information of the Borrower and its Subsidiaries for each of the
years in the four year period ending December 31, 1996 and the
sales summaries for each of the fiscal quarters in the year
ending December 31, 1994, which were delivered to BTCo as agent
on and after January 13, 1994 and prior to the execution and
delivery of this Amendment, were prepared in good faith by the
Borrower based upon assumptions and its best estimate, for which
the Borrower believes it has a reasonable basis, of the results
of operations of the Borrower and its Subsidiaries as at the
dates thereof.
SECTION SIX - EFFECTIVENESS AND RESCISSION
(a) Subsection (g) of Section One and Sections Three,
Four, Five and Seven of this Amendment and this Section Six shall
become effective upon satisfaction of the requirement contained
in clause (ii) of the immediately succeeding sentence. Section
One (other than subsection (g) of Section One) and Section Two
(for all purposes including as described in subsection (b) of
this Section Six) of this Amendment shall become effective upon
(i) the effectiveness of a supplemental indenture to the
indenture governing the 12.25% Senior Subordinated Debentures due
August 15, 1997 of the Borrower, the form of which supplemental
indenture is set forth as Annex I hereto and (ii) the execution
and delivery hereof by the Borrower, BTCo (as Agent and Issuer
Bank under each of the New Credit Agreement and the Combined
Restated Credit Agreement) the Requisite Holders (with respect to
each of the New Credit Agreement and the Combined Restated Credit
Agreement, as defined therein, respectively; it being understood
that the effectiveness of subsection (e) of Section One hereof is
subject to the execution and delivery of this Amendment by
lenders having at least 80% of the Total Credit Exposure then
outstanding plus any unutilized commitments to lend and/or issue
Letters of Credit) and Prudential.
(b) Prior to the effectiveness of Sections One and Two
of this Amendment as described in the second sentence of
subsection (a) of this Section Six, the waivers set forth in
Section Two of this Amendment shall be deemed to be effective,
solely for purposes of the issuance of Letters of Credit as
described in Section Four of this Amendment or the extension or
renewal of already outstanding Letters of Credit, upon
satisfaction of the requirement contained in clause (ii) of the
second sentence of said subsection (a). Each of the New Credit
Agreement Lenders, the Combined Restated Credit Agreement
Lenders, Prudential and BTCo (in its capacity as Agent and Issuer
Bank under the Credit Agreements) otherwise reserves all rights
and remedies available to it under the New Facilities to which it
is party (including all other agreements, documents, instruments
and certificates executed in connection therewith (collectively,
the "Ancillary Documents")) and under applicable law, including,
without limitation, to the extent permitted thereunder, the
ability to call a default and furnish notices to the Borrower and
third parties in respect thereof, accelerate indebtedness,
decline to extend additional loans, or (except to the extent
expressly set forth in Section Two of this Amendment) decline to
issue additional or replacement letters of credit or decline to
renew or extend existing letters of credit based on
circumstances or events that have occurred or may occur in the
future.
(c) Prior to the effectiveness of Sections One and Two
of this Amendment as described in the second sentence of
subsection (a) of this Section Six, this Amendment may be
rescinded (whereupon all provisions of this Amendment shall be of
no force and effect), with respect to the New Credit Agreement or
the Combined Restated Credit Agreement, by the affirmative vote
of the Requisite Holders and, with respect to the Prudential
Agreements, by the affirmative vote of Prudential.
SECTION SEVEN - MISCELLANEOUS
(a) Notwithstanding anything contained in this
Amendment to the contrary, this Amendment shall terminate and be
of no force and effect, unless the requirements contained in the
second sentence of subsection (a) of Section Six hereof shall
have already been satisfied, upon the earliest to occur of
(i) this Amendment being rescinded in accordance with
subsection (c) of Section Six hereof, (ii) (A) any obligations
under any of the New Facilities being declared due and payable
prior to their stated maturity, (B) the Borrower or any of its
Subsidiaries failing to pay any amount when due and payable under
any of the New Facilities (after giving effect to any applicable
grace period), (C) any of the secured parties in respect of the
Collateral (as defined in the New Facilities) realizing thereon
or (D) any of the New Credit Agreement Lenders, the Combined
Restated Credit Agreement Lenders, Prudential or BTCo (in its
capacity as Agent, Issuer Bank or Collateral Agent) exercising
any remedies under the New Facilities or any of the other
agreements, documents, instruments and certificates executed in
connection therewith (collectively, the "Ancillary Documents") or
under law in respect of the obligations under the New Facilities
and the Ancillary Documents, in each case in this clause (D) to
the extent permitted thereunder and (iii) March 31, 1994.
(b) Upon the satisfaction of the requirements
contained in clause (ii) of the second sentence of subsection (a)
of Section Six of this Amendment, the Borrower shall pay the
reasonable fees and expenses of Cahill Gordon & Reindel, counsel
for the New Credit Agreement Lenders and the Combined Restated
Credit Agreement Lenders, and Wachtell, Lipton, Rosen & Katz,
counsel for Prudential, incurred in connection with this
Amendment or otherwise outstanding in connection with the New
Facilities.
(c) Except as expressly provided herein, this
Amendment shall not constitute a consent or waiver to or
modification of any provision, term or condition of any of the
New Facilities. Except as herein expressly waived or amended,
each of the New Facilities and all other agreements, documents,
instruments and certificates executed in connection therewith,
except as otherwise provided herein, are ratified and confirmed
in all respects and shall remain in full force and effect in
accordance with their respective terms.
(d) From and after the date of this Amendment, any
reference to any of the New Facilities (or any particular
subsection thereof), whether contained in any agreement,
instrument, document, note, certificate or writing of any kind or
character, shall be deemed to be a reference to such New Facility
as amended or waived hereby, to the extent of the effectiveness
of such amendment or waiver as set forth herein, and as the same
may at any time hereafter be amended, amended and restated,
supplemented or otherwise modified from time to time and as in
effect.
(e) This Amendment may be executed in any number of
counterparts, and by different parties hereto in separate
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 agreement.
(f) THIS AMENDMENT SHALL BE GOVERNED BY, AND SHALL BE
CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAW OF THE STATE
OF NEW YORK WITHOUT REGARD TO PRINCIPLES OF CONFLICT OF LAWS.
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be duly executed as of the date first above written.
IMO INDUSTRIES INC.
By: /s/ William M. Brown
Name: William M. Brown
Title: Chief Financial
Officer
BANKERS TRUST COMPANY, as Lender,
as Issuer Bank and as Agent
By: /s/ June C. George
Name: June C. George
Title: Vice President
CHEMICAL BANK
By: /s/ Mary Ellen Egbert
Name: Mary Ellen Egbert
Title: Vice President
CIBC, INC.
By: /s/ Timothy E. Doyle
Name: Timothy E. Doyle
Title: Authorized
Signatory
BARCLAYS BANK PLC
By:
Name:
Title:
NATIONAL CITY BANK
By: /s/ Davis R. Bonner
Name: Davis R. Bonner
Title: Vice President
ISTITUTO BANCARIO SAN PAOLO DI
TORINO S.p.A., NEW YORK LIMITED
BRANCH
By:
Name:
Title:
COMMERZBANK AG, NEW YORK BRANCH
By:
Name:
Title:
ABN AMRO BANK N.V., NEW YORK BRANCH
By:
Name:
Title:
THE PRUDENTIAL INSURANCE COMPANY OF
AMERICA
By: /s/ Robert E. Davis
Name: Robert E. Davis
Title: Vice President
ATTACHMENT 1
Certain Indebtedness of Varo Inc. and Baird Corporation
Borrower Lender Amount
Varo Inc. Sterling Savings Association $1,693,000
Baird Corporation ABN Amro Bank N.V. 168,000
Baird Europe ABN Amro Bank N.V. 1,358,000
SCHEDULE A
Schedule 7.9 to New Credit Agreement and
Combined Restated Credit Agreement
Business Low High
Aerospace Components Group
Wiggins1 $25.0 $35.0
Aeroproducts 15.0 18.0
Adel Fasteners 5.0 7.0
Controlex1 11.0 14.0
Heim Bearings1 4.0 6.0
Total $60.0 $80.0
Group Value2 $55.0 $75.0
Transducers and Controls Group
Barksdale $30.0 $40.0
Transinstruments 16.0 20.0
CSC Instruments1 4.0 6.0
Total $50.0 $66.0
Group Value2 $45.0 $61.0
Other
Turboflex $1.9 $2.3
Singapore Chain 3.0 5.0
Miller-Holzwarth 3.0 5.0
Total $7.9 $12.3
Real Estate3
Wiggins $3.0 $ 4.0
Controlex 1.0 2.0
Heim Bearings 4.0 6.0
CSC Instruments 5.0 7.0
Other
Quincy, MA 7.0 10.0
Oakland, CA 5.0 8.0
Garland, TX 2.5 3.5
Total $27.5 $40.5
Additional Assets
Baird/Varo - Optical Systems Division $30.0 $65.0
Baird - Analytical 15.0 20.0
Varo - Electronic Systems Division 10.0 15.0
Lawrenceville, New Jersey Real Estate 4.0 5.5
_______________________________
1 Real Estate is valued separately below.
2 Includes volume discount to the sum of the parts.
3 Values based on independent market assessments.
CONSENT AND AMENDMENT NO. 3
CONSENT AND AMENDMENT NO. 3 (this "Amendment"), dated
as of February 28, 1994, relating to the New Credit Agreement,
the Combined Restated Credit Agreement and the Prudential
Agreements (each as hereinafter defined), among Imo Industries
Inc., a Delaware corporation (the "Borrower"), each of the
financial institutions party to the New Credit Agreement
(together with their respective successors and permitted assigns
and transferees, the "New Credit Agreement Lenders"), each of the
financial institutions party to the Combined Restated Credit
Agreement (together with their respective successors and
permitted assigns and transferees, the "Combined Restated Credit
Agreement Lenders"), Bankers Trust Company, a New York banking
corporation ("BTCo") as Issuer Bank and as Agent under the New
Credit Agreement and the Combined Restated Credit Agreement, and
The Prudential Insurance Company of America, as holder of the
notes issued pursuant to the Prudential Agreements ("Prudential";
together with the New Credit Agreement Lenders and the Combined
Restated Credit Agreement Lenders, the "Lenders").
W I T N E S S E T H :
WHEREAS, the Borrower has entered into (i) the Credit
Agreement, dated as of July 15, 1993, as amended (the "New Credit
Agreement"), among the Borrower, each of the New Credit Agreement
Lenders and BTCo as Issuer Bank and as Agent, (ii) the Combined
Restated Credit Agreement, dated as of July 15, 1993, as amended
(the "Combined Restated Credit Agreement"), among the Borrower,
each of the Combined Restated Credit Agreement Lenders and BTCo
as Issuer Bank and as Agent, (iii) the Amended and Restated Note
Agreement, dated July 15, 1993, as amended, with Prudential,
relating to the Borrower's 10.35% Senior Note due March 31, 1995
(the "10.35% Agreement") and (iv) the Amended and Restated Note
Agreement, dated July 15, 1993, as amended, with Prudential,
relating to the Borrower's 12.75% Promissory Note due March 31,
1995 (the "12.75% Agreement" and, together with the
10.35% Agreement, the "Prudential Agreements"); capitalized terms
used but not defined herein have the meanings assigned to them in
the applicable New Facilities (as defined in the New Credit
Agreement); and
WHEREAS, pursuant to Section 10.6 of the New Credit
Agreement and Section 10.6 of the Combined Restated Credit
Agreement, the parties thereto may amend or waive certain
provisions thereof upon the written concurrence of the Borrower
and the Requisite Holders (as defined in the New Credit
Agreement and the Combined Restated Credit Agreement,
respectively); and
WHEREAS, pursuant to Section 8C of the 10.35% Agreement
and Section 10C of the 12.75% Agreement, the provisions of the
Prudential Agreements may be amended or waived only with the
prior written consent of Prudential; and
WHEREAS, pursuant to Section 7.9 of the New Credit
Agreement and the Combined Restated Credit Agreement, Section
4A(9) of the 10.35% Agreement and Section 6A(9) of the 12.75%
Agreement, the Borrower has agreed not to make any Asset Sale
(except as otherwise permitted thereunder) without the consent of
the applicable Lenders; and
WHEREAS, pursuant to that certain Purchase and Sale
Agreement, dated March 1, 1994 (the "Purchase Agreement"),
between the Borrower and Hayward Street Realty Trust (the
"Purchaser"), it is contemplated that the Borrower will sell to
the Purchaser certain parcels (the "Parcels") of real property
comprising part, but not all, of the Borrower's real estate
assets in Quincy, Massachusetts (the "Quincy Property") for a
purchase price of approximately $2.3 million; and
WHEREAS, pursuant to Section 7.9 and Schedule 7.9 of
each of the New Credit Agreement and the Combined Restated Credit
Agreement, Section 4A(9) of the 10.35% Agreement and
Section 6A(9) of the 12.75% Agreement, the Borrower is permitted
to make an Asset Sale of the entire Quincy Property without
consent of the Requisite Holders only if the purchase price is at
least $7.0 million; and
WHEREAS, the Borrower has requested that the Lenders
consent to the sale of the Parcels and amend Section 7.9 and
Schedule 7.9 of each of the New Credit Agreement and the Combined
Restated Credit Agreement, Section 4A(9) of the 10.35% Agreement
and Section 6A(9) of the 12.75% Agreement relating to the Quincy
Property.
A G R E E M E N T :
NOW, THEREFORE, in consideration of the foregoing, and
for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto
hereby agree as follows:
SECTION ONE - CONSENT
The Lenders hereby consent to the Asset Sale of the
Parcels by the Borrower to the Purchaser as contemplated and on
the terms set forth in the Purchase Agreement, and the Lenders
authorize and direct the Agent and the Collateral Agent to take
any and all actions and to execute and deliver all such
instruments and documents as either of them shall deem necessary
or desirable in connection therewith; provided, that any Net
Proceeds received or to be received from such Asset Sale shall be
remitted to the Collateral Agent for application in accordance
with Section 4.1 of the Intercreditor Agreement.
SECTION TWO - AMENDMENT
(a) Section 1.1 of each of the New Credit Agreement
and the Combined Restated Credit Agreement, Section 7 of the
10.35% Agreement and Section 9 of the 12.75% Agreement (together,
the "Definition Sections") are each hereby amended by adding the
following definition in appropriate alphabetical order:
"'Amendment No. 3' means Consent and Amendment No. 3,
dated as of February 28, 1994, to each of the New
Facilities."
(b) Section 7.9(A) of each of the New Credit Agreement
and the Combined Restated Credit Agreement, Section 4A(9)(A) of
the 10.35% Agreement and Section 6A(9)(A) of the 12.75% Agreement
are each hereby amended by adding immediately after the last
sentence thereof the following sentence: "Notwithstanding
anything to the contrary contained herein, the real property
owned by the Borrower in Quincy, Massachusetts not constituting
Parcels (as such term is defined in Amendment No. 3) may be sold
in one or more Asset Sales without compliance with clauses (i),
(ii) and (iii) above and without the consent of any of the
Lenders, provided that any Net Proceeds received or to be
received from any such Asset Sale, notwithstanding that such
assets might otherwise constitute Miscellaneous Assets, shall be
remitted to the Collateral Agent
immediately upon receipt thereof for application in accordance
with Section 4.1 of the Intercreditor Agreement".
(c) Schedule 7.9 of each of the New Credit Agreement
and the Combined Restated Credit Agreement is hereby amended by
deleting the words "Quincy, MA 7.0 10.0", replacing "$27.5" at
the bottom of the column titled "Low" under the heading "Real
Estate (3)" with "$20.5" and replacing "$40.5" at the bottom of
the column titled "High" under the heading "Real Estate (3)" with
"$30.5".
SECTION THREE - EFFECTIVENESS
This Amendment shall become effective upon (i) the
execution and delivery hereof by the Borrower, BTCo (as Agent and
Issuer Bank under each of the New Credit Agreement and the
Combined Restated Credit Agreement), the Requisite Holders (with
respect to each of the New Credit Agreement and the Combined
Restated Credit Agreement, as defined therein, respectively) and
Prudential and (ii) the receipt by the Collateral Agent of the
Net Proceeds of the Asset Sale of the Parcels.
SECTION FOUR - MISCELLANEOUS.
(a) This Amendment shall not constitute a consent or
waiver to or modification of any other provision, term or
condition of the New Facilities. Except as herein expressly
consented, the New Facilities and all other agreements,
documents, instruments and certificates executed in connection
therewith are ratified and confirmed in all respects and shall
remain in full force and effect in accordance with their
respective terms.
(b) All references to any of the New Facilities shall
mean such New Facility as amended as of the effective date
hereof, and as the same may at any time be amended, amended and
restated, supplemented or otherwise modified from time to time
and as in effect.
(c) This Amendment may be executed in any number of
counterparts, and by different parties hereto in separate
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 agreement.
(d) THIS AMENDMENT SHALL BE GOVERNED BY, AND SHALL BE
CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAW OF THE STATE
OF NEW YORK WITHOUT REGARD TO THE PRINCIPLES OF CONFLICT OF LAWS.
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be duly executed as of the date first above written.
IMO INDUSTRIES INC., as Borrower
By: /s/ Geoffrey M. Dobson
Name: Geoffrey M. Dobson
Title: Vice President and
Treasurer
BANKERS TRUST COMPANY, as a Lender,
as Issuer Bank and
as Agent
By: /s/ June C. George
Name: June C. George
Title: Vice President
CHEMICAL BANK, as a Lender
By: /s/ Mary Ellen Egbert
Name: Mary Ellen Egbert
Title: Vice President
CIBC, INC., as a Lender
By: /s/ Julie Wochos
Name: Julie Wochos
Title: Authorized Signatory
BARCLAYS BANK PLC, as a Lender
By: ___________________________
Name:
Title:
NATIONAL CITY BANK, as a Lender
By: /s/ Davis R. Bonner
Name: Davis R. Bonner
Title: Vice President
ISTITUTO BANCARIO SAN PAOLO
DI TORINO S.p.A, as a Lender
By: /s/ William J. De Angelo
Name: William J. De Angelo
Title: First Vice President
COMMERZBANK AG, NEW YORK BRANCH
as a Lender
By: /s/ Werner Niemeyer
Name: Werner Niemeyer
Title: Vice President
By: /s/ Michael Hintz
Name: Michael Hintz
Title: Vice President
ABN-AMRO BANK, N.V., NEW YORK
BRANCH, as a Lender
By: ___________________________
Name:
Title:
By: ___________________________
Name:
Title:
THE PRUDENTIAL INSURANCE COMPANY
OF AMERICA, as a Lender
By: /s/ Robert E. Davis
Name: Robert E. Davis
Title: Vice President
ASSET SALE AGREEMENT
ASSET SALE AGREEMENT (the "Agreement"), dated as
of May 10, 1993, by and between Imo Industries Inc., a
Delaware corporation (the "Seller"), and Roller Bearing
Company of America, Inc., a Delaware corporation (the
"Purchaser").
W I T N E S S E T H :
WHEREAS, the Seller, through its Heim Bearings
division, is engaged in the business of manufacturing,
selling and distributing ball, spherical and rod end
bearings and related products (the "Business"); and
WHEREAS, the Purchaser desires to purchase, and
the Seller desires to sell, all of the assets and properties
of the Seller employed in connection with the Business
(other than any real property and buildings), and, as part
of such purchase and sale, the Seller desires to assign, and
the Purchaser desires to assume, certain obligations and
liabilities of the Business, subject, in each case, to the
exceptions, terms and conditions set forth herein; and
WHEREAS, certain capitalized terms used herein are
defined in Section 14.1 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 Seller hereby agree as follows:
ARTICLE I.
ASSETS TO BE ACQUIRED
1.1. 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 to the Purchaser, and the Purchaser shall purchase,
acquire and accept from the Seller, all of the Seller's
right, title and interest in and to the Business, including,
without limitation, in and to all of the assets, properties,
rights, contracts and claims, primarily related to or used
primarily in connection with the Business (except as
otherwise set forth in Section 1.2 hereof), wherever
located, whether tangible or intangible, as the same shall
exist as of the Closing (such rights, title and interest in
and to all such assets, properties, rights, contracts and
claims, being collectively referred to herein as, the
"Assets"). The Assets shall include, without limitation,
all of the Seller's rights, title and interest in and to the
assets, properties, rights, contracts and claims described
in the following paragraphs (a) through (n) but in each
case, only to the extent primarily related to or used
primarily in connection with the Business; provided,
however, that the Assets shall in any event include all of
the foregoing listed on the schedules referred to in clauses
(a) through (n) below:
(a) all furnishings, furniture, office and
other supplies, vehicles, spare parts, tools, dies,
fuel, machinery, equipment and other tangible personal
property of any kind (collectively, the "Equipment"),
including, without limitation, all of the Equipment
listed on Schedule 1.1(a) hereto;
(b) all items of inventory notwithstanding
how classified in the financial records of the Seller,
including, without limitation, raw materials, work-in-
process, finished goods, supplies, spare parts, samples
and stores (collectively the "Inventory");
(c) all accounts, accounts receivable and
notes receivable (whether short-term or long-term) from
third parties or affiliated entities and all deposits
with third parties or affiliated entities, together
with any unpaid interest and fees accrued thereon from
the respective obligors and any security or collateral
therefor, including recoverable deposits and advances
(collectively, the "Accounts Receivable");
(d) (i) all patents and patent applications
owned by the Seller, all licenses to patents and patent
applications to and from third parties and all patents
and patent applications in which the Seller otherwise
has rights, including, without limitation, those listed
in Schedule 1.1(d) hereto, (ii) research and
development data and results, manufacturing and other
processes, trade secrets, know how, inventions, mask
work, designs, technology, proprietary data or
information, formulae, and manufacturing, engineering
and other technical information, whether owned by the
Seller or licensed to the Seller by third parties or
affiliated entities, (iii) all notebooks, records,
reports and data relating thereto and (iv) all appli
cations and registrations for any of the foregoing
(collectively, the assets referred to in clauses (i)
through (iv) are referred to herein as the "Patent-
Related Assets");
(e) all trademarks, trade names, service
marks and copyrights, any applications and regis
trations for any of the foregoing listed on Schedule
1.1(e) hereto, and all computer programs, software and
data bases owned by the Seller, all licenses to and
from third parties or affiliated entities in respect of
any of the foregoing and each of the foregoing in which
the Seller otherwise has rights (collectively all of
the foregoing assets, whether or not listed on Schedule
1.1(e), together with the Patent-Related Assets, are
referred to herein as the "Intangible Assets");
(f) all marketing brochures and materials
and other printed and written materials relating to the
Sellers' ownership of or operation of the Business that
the Seller is not required by law to retain (of which
the Seller may retain duplicates so long as the
confidentiality thereof is maintained by the Seller),
and duplicates of any such materials that the Seller is
required by law to retain;
(g) all rights under or pursuant to all
warranties, representations and guarantees made by
suppliers, manufacturers, contractors and other third
parties or affiliated entities in connection with the
operation of the Business or affecting any of the
Assets;
(h) all Permits related to or used in
connection with the Business or the Assets, including,
without limitation, the Permits listed on Schedule
1.1(h) hereto held by the Seller (to the extent
permitted by applicable Law to be transferred);
(i) all Contracts including, without
limitation, those listed on Schedule 1.1(i) hereto;
(j) all deferred and prepaid charges, sums
and fees, other than in respect of taxes and insurance
premiums;
(k) all Bids;
(l) all of the Seller's rights, claims,
credits, causes of action or rights of set-off against
third parties relating to the Business or the Assets,
whether liquidated or unliquidated, fixed or
contingent, including all claims under the Contracts;
(m) all books, records, files and papers
related to the Assets or the conduct of the Business;
and
(n) all goodwill relating to the foregoing
Assets.
1.2. Excluded Assets. Notwithstanding anything
to the contrary contained in Section 1.1 hereof, the Seller
and the Purchaser expressly understand and agree that the
Seller is not hereunder selling, assigning, transferring,
conveying or delivering to the Purchaser the following
assets, properties, rights, contracts and claims (collec
tively, the "Excluded Assets"):
(a) cash, bank accounts, certificates of
deposits, treasury bills, treasury notes and marketable
securities;
(b) except as otherwise specifically
provided in Section 8.3 hereof with respect to the CB
Employee Benefit Plans and CB Benefit Arrangements
assumed by the Purchaser, pension or other funded
employee benefit plan assets;
(c) any policy of insurance;
(d) except as set forth in Schedule 1.1(e)
hereto, any of the Seller's right, title or interest in
or to any name, mark, trade name or trademark, includ
ing, without limitation, any incorporating "Imo" or
"Imo Delaval" and all corporate symbols or logos incor
porating "Imo" or "Imo Delaval", either alone or in
combination, and any and all goodwill represented
thereby and pertaining thereto;
(e) all Contracts that relate solely to the
Excluded Assets or the Excluded Liabilities;
(f) all prepaid insurance premiums and
prepaid taxes pertaining to the Business and all
prepaid charges, sums and fees pertaining to any of the
Excluded Assets or the Excluded Liabilities;
(g) any of the Seller's right, title or
interest in real property and buildings located
thereon, including, without limitation, the office of
the Business in Fairfield, Connecticut and any of the
fixtures attached thereto (including all environmental
systems) and any Permits relating to the ownership of
the real property or the buildings located thereon,
including, without limitation, those Permits relating
to the occupancy of such buildings, but excluding those
Permits necessary for the operation of Business;
(h) any books, records or other data relat
ing to the Seller's ownership or operation of the
Business not located on the premises of the Business
and which are part of the Seller's general corporate
books and records or required by applicable Law to be
retained by the Seller, provided, however, that copies
of such books, records or other data relating to the
Business shall be furnished to the Purchaser promptly
upon reasonable written request;
(i) except as otherwise set forth in the
last sentence of Section 11.1 hereof, any of 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
transferrable without consent (unless such consent has
been obtained); and
(j) any claims for refunds or rebates of any
previously paid taxes, levies or duties including,
without limitation, the Customs Receivable.
1.3. Assumed Liabilities. Effective as of the
Closing, the Purchaser shall assume and pay, perform and
discharge all debts, claims, liabilities, obligations,
damages and expenses (collectively, the "Liabilities") of
the Seller of every kind and nature, whether known, unknown,
contingent, absolute, determined, indeterminable or other
wise on the Closing Date and whether incurred or accruing
prior to, on or after the Closing Date, to the extent
primarily relating to or arising primarily from the
operation of the Business including, without limitation, all
claims against, and liabilities and obligations of, the
Seller with respect to the Contracts being transferred to
the Purchaser hereunder (to the extent that such liabilities
and obligations remain unsatisfied or are required to be
performed on or after the Closing Date) and all such
liabilities and obligations with respect to Employees and CB
Retirees as are specifically set forth in Article VIII
hereof (collectively, the "Assumed Liabilities").
1.4. Excluded Liabilities. Notwithstanding any
thing in Section 1.3 hereof to the contrary, the Seller and
the Purchaser expressly understand and agree that the
Purchaser shall not assume or become liable for any of the
following Liabilities of the Seller (the "Excluded Liabili
ties"):
(a) any liability or obligation (whether
presently in existence or arising hereafter) of the
Seller for any Taxes;
(b) except as provided in the Lease, any
liability or obligation arising out of any violation of
any Environmental Law by the Seller (including, without
limitation, the items set forth in Schedule 4.11) or
arising out of the presence, transportation, storage or
disposal of Hazardous Substances, in each case to the
extent such violation existed, or such Hazardous
Substances were present, transported, stored or
disposed of, on or prior to the Closing Date;
(c) any liability or obligation, whether
presently in existence or arising hereafter, that is
not primarily attributable to, or does not arise
primarily out of the conduct of, the Business;
(d) any liability or obligation, whether
presently in existence or arising hereafter, relating
to any of the Excluded Assets;
(e) any liability or obligation, whether
presently in existence or arising hereafter, arising in
connection with the operation of the Business or the
ownership of the Assets prior to the Closing Date
(whether based on occurrences prior to the Closing or
after the Closing), but only to the extent that the
Seller or any of its Affiliates is reimbursed for such
liability or obligation under any insurance policy or
such liability or obligation is paid directly to the
Seller or any of its Affiliates pursuant to any
insurance policy; provided, however, that the Seller
shall use all reasonable efforts to obtain
reimbursement of or payment for such liability or
obligation under any insurance policy pursuant to which
the Seller may be entitled to reimbursement or payment
(which shall not be interpreted as requiring the Seller
to commence legal action against any insurance
carrier);
(f) any liability or obligation of the
Seller to Employees, former Employees (including the
spouses and beneficiaries of such individuals), and CB
Retirees arising from the employment of any such
individual with the Seller or in connection with
compensation or benefits under any Employee Benefit
Plan or Benefit Arrangement provided by Seller, except
as specifically provided in Article VIII hereof;
(g) any liability or obligation of the
Seller arising out of (i) any threatened or pending
litigation that is pending or threatened as of the
Closing Date, whether or not listed on any schedule
hereto or (ii) any negligent, reckless, tortious or
unlawful action or inaction of the Seller prior to the
Closing Date, including, without limitation, any of the
foregoing in clause (i) or (ii) relating to the
Business or the Assets (it being understood that to the
extent any liability of the Purchaser results from the
combined effect or duration of actions or inactions on
the part of each of the Seller and the Purchaser, the
apportionment of such liability shall be determined
pursuant to equitable principles of contribution);
(h) any liability or obligation arising out
of defects in, or damages to persons or property
arising out of defects in, products manufactured and
sold by, or services rendered by, the Seller prior to
the Closing Date;
(i) (i) any current liability or obligation
of the Seller existing on the Closing Date that should
have been accrued on the Closing Balance Sheet or
reflected in the notes thereto in accordance with GAAP
but that was not so accrued or reflected and (ii) any
non-current liability or obligation of the Seller
existing on the Closing Date that should have been
accrued on the Initial Balance Sheet or reflected in
the notes thereto in accordance with GAAP but that was
not so accrued or reflected;
(j) any liability or obligation relating to
workers' compensation claims made by any employee of
the Seller (whether filed or presented before or after
the Closing Date) in connection with any claim arising
as a result of any incidents or circumstances occurring
or in existence on or before the Closing Date, provided
that with respect to any claim that is solely stress
related, any claim that is solely other than a physical
injury and any stress related or non-physical component
of a claim, such claim shall have been made or
presented to the Seller prior to the Closing Date and
if not so made or presented shall constitute an Assumed
Liability;
(k) all of the obligations of the Seller
under (i) the letter agreement, dated November 16,
1992, between the Seller and Larry Raffone (the
"Raffone Agreement") and (ii) the letter agreement,
dated November 16, 1992, between the Seller and Mario
di Domenico (collectively with the Raffone Agreement,
the "Letter Agreements"); and
(l) any other obligation, liability or
indebtedness of the Seller described in Schedule 1.4(l)
hereto.
1.5. Cancellation of Permits, Bonds and
Guarantees.
(a) Subsequent to the Closing, to the extent
permitted by Law, the Seller shall have the right to cancel
any Permit and any bond, guarantee or undertaking by the
Seller now applicable to the Business or the Assets to the
extent such is not assigned or transferred to the Purchaser
pursuant to Section 1.1 hereof. The failure of the Seller
to cancel any Permit, bond, guarantee or undertaking shall
not affect the respective rights, obligations, liabilities
and indemnifications of the Seller by the Purchaser under
this Agreement. Notwithstanding the foregoing, the Seller
shall provide written notice to the Purchaser of the
Seller's intention to cancel any such Permit, bond, guaranty
or undertaking and shall provide the Purchaser with the
reasonable opportunity to obtain a new Permit or replace any
such bond, guaranty or undertaking, prior to any cancella
tion thereof by the Seller.
(b) The Purchaser shall assume, or promptly
reimburse the Seller for all costs associated with the
assignment or transfer of all Permits related to the
Business and the costs of all bonds related to the Business,
which are set forth on Schedule 1.5(b) hereto and, in either
case, cannot be cancelled for as long as they remain
outstanding.
ARTICLE II.
PURCHASE PRICE
2.1. Purchase Price and Payment. The considera
tion for the transfer of the Assets and the Business to the
Purchaser by the Seller shall be the Purchaser's assumption
of the Assumed Liabilities as provided in Section 1.3
hereof, plus the payment to the Seller of $6,000,000 (the
"Purchase Price"), subject to adjustment as provided in
Section 2.2 hereof. Payment of the $6,000,000 portion of
the Purchase Price shall be in U.S. dollars, and shall be
made on the Closing Date by wire transfer of immediately
available funds to the account or accounts designated by the
Seller.
2.2. Purchase Price Adjustment.
(a) As soon as practicable (but in no event
later than 60 days) following the Closing Date, the
Seller shall prepare and deliver to the Purchaser a
balance sheet for the Business as of the Closing Date
(the "Closing Balance Sheet"), which shall include a
computation of the Preliminary Working Capital Adjust
ment (as defined below). The Closing Balance Sheet
shall be prepared by the Seller on a basis consistent
with the Initial Balance Sheet in accordance with GAAP,
except as set forth in the notes thereto (which notes
shall be prepared on a basis consistent with the notes
to the Initial Balance Sheet) and that the Customs
Receivable shall not be reflected as an asset on the
Initial Balance Sheet or the Closing Balance Sheet.
(b) The "Preliminary Working Capital
Adjustment" shall equal the amount of Working Capital
reflected on the Initial Balance Sheet minus the amount
of Working Capital reflected on the Closing Balance
Sheet. As used herein, "Working Capital" for purposes
of both the Initial Balance Sheet and the Closing
Balance Sheet shall mean the difference between the
total current assets (excluding any current assets that
are Excluded Assets including, without limitation, the
Customs Receivable) of the Business and the total
current liabilities (excluding short-term borrowings
and any other current liabilities that are Excluded
Liabilities) of the Business, as reflected on the
Initial Balance Sheet or the Closing Balance Sheet, as
the case may be.
(c) Following the Closing Date, the
Purchaser shall afford the Seller access to all books
and records relating to the Business and make available
the assistance of any employees of the Purchaser
related to the Business, in each case as is necessary
to enable the Seller to prepare the Closing Balance
Sheet and to calculate the Preliminary Working Capital
Adjustment, both of which shall be certified by the
Seller's Chief Financial Officer as having been
prepared and calculated in accordance with the terms of
this Agreement.
(d) The Purchaser shall have a period of 20
Business Days to review the Closing Balance Sheet and
the calculation of the Preliminary Working Capital
Adjustment following delivery of the Closing Balance
Sheet by the Seller. During such period, the Seller
shall afford the Purchaser access to any of its books,
records and work papers necessary to enable the
Purchaser to review the Closing Balance Sheet and the
calculation of the Preliminary Working Capital Adjust
ment. The Purchaser may dispute any amounts reflected
in the Preliminary Working Capital Adjustment by giving
notice in writing to the Seller specifying each of the
disputed items and setting forth in reasonable detail
the basis for such dispute. Failure by the Purchaser
to dispute the amounts reflected in the Preliminary
Working Capital Adjustment within 20 Business Days of
delivery of the Closing Balance Sheet by the Seller
shall be deemed an acquiescence therein by the
Purchaser. If within 30 days after delivery by the
Purchaser to the Seller of any notice of dispute, the
Purchaser and the Seller are unable to resolve all of
such disputed items, then any remaining items in
dispute shall be submitted to Arthur Andersen & Co.(the
"Arbitrator"). The Arbitrator shall determine the
remaining disputed items and report to the Seller and
the Purchaser upon such items. The Arbitrator's
decision shall be final, conclusive and binding on all
parties. The Purchaser and the Seller agree that
judgment may be entered upon the determination of the
Arbitrator in any court having jurisdiction over the
party against whom such determination is to be
enforced. The fees and disbursements of the Arbitrator
shall be borne equally by the Purchaser and the Seller.
The Preliminary Working Capital Adjustment if undis
puted or deemed undisputed or as revised in accordance
with the procedure outlined above shall be the "Final
Working Capital Adjustment."
(e) If the amount of the Final Working
Capital Adjustment is positive then the Purchase Price
shall be decreased by such amount and the Seller shall
pay to the Purchaser, within five (5) Business Days of
the final determination thereof pursuant to the fore
going provisions of this Section 2.2, an amount equal
to the Final Working Capital Adjustment in cash, with
interest from the Closing Date until paid, computed at
the prime rate announced from time to time by Bankers
Trust Company, as in effect on the Closing Date.
(f) If the amount of the Final Working
Capital Adjustment is negative then the Purchase Price
shall be increased by such amount and the Purchaser
shall pay to the Seller, within five (5) Business Days
of the final determination thereof pursuant to the fore
going provisions of this Section 2.2, an amount equal
to the Final Working Capital Adjustment in cash, with
interest from the Closing Date until paid, computed at
the prime rate announced from time to time by Bankers
Trust Company, as in effect on the Closing Date.
(g) The Purchaser and the Seller agree that
the procedures established by this Section 2.2 shall
constitute the exclusive procedures for determining the
Preliminary Working Capital Adjustment and the Final
Working Capital Adjustment.
2.3. Allocation of Purchase Price. The Purchaser
and the Seller hereby agree that the Purchase Price of the
Assets will be allocated in a mutually acceptable manner
within sixty (60) Business Days after the Closing Date.
Subject to the requirements of any applicable tax law, all
tax returns and reports filed by the Purchaser and the
Seller shall be prepared consistently with such allocation.
In the event of any purchase price adjustment hereunder, the
Purchaser and the Seller agree to adjust such allocation to
reflect such purchase price adjustment and to file consis
tently any tax returns and reports required as a result of
such purchase price adjustment.
ARTICLE III.
THE CLOSING
3.1. Closing Date. The Closing shall take place
at the offices of Weil, Gotshal & Manges, 767 Fifth Avenue,
York, New York at 10:00 A.M., not later than the fifth
Business Day following satisfaction of all of the conditions
precedent thereto set forth in this Agreement, or at such
other place and at such other time and date as may be
mutually agreed upon by the Purchaser and the Seller. In
the event that by the date of the Closing the Seller is
unable to obtain the consents, waivers, approvals and
authorizations required by Section 10.6 hereof, the Closing
shall be adjourned until the Seller obtains such consents,
waivers, approvals and authorizations. The date of the
Closing is referred to in this Agreement as the "Closing
Date."
3.2. Proceedings at Closing. All proceedings to
be taken and all documents to be executed and delivered by
the Seller in connection with the consummation of the trans
actions 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 consumma
tion of the transactions contemplated hereby shall be reason
ably 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.
3.3. 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:
(a) executed assignments, patent assign
ments, trademark assignments, bills of sale and/or
certificates of title, in forms to be mutually agreed
upon by Purchaser and Seller, dated the Closing Date,
transferring to the Purchaser all of the Assets;
(b) the certificate referred to in Section
9.1(c) hereof signed by the Chief Financial Officer and
another duly authorized senior executive officer of the
Seller referred to in Section 9.1(c) hereof;
(c) the opinions of counsel for the Seller
referred to in Section 9.3 hereof;
(d) a lease with respect to the office of
the Business in Fairfield, Connecticut having the terms
set forth on Exhibit B hereto (the "Lease"), signed by
a duly authorized officer of the Seller;
(e) a receipt for the Purchase Price; and
(f) such other documents, certificates and
agreements as the Purchaser reasonably requests.
3.4. Deliveries by the Purchaser to the Seller.
At the Closing, the Purchaser shall deliver to the Seller
the following:
(a) immediately available funds in the
amount of the Purchase Price, by wire transfer as
provided in Section 2.1 hereof;
(b) the certificate referred to in Section
10.1(c) hereof signed by the Chief Financial Officer
and another duly authorized senior executive officer of
the Purchaser;
(c) the opinion of counsel for the Purchaser
referred to in Section 10.3 hereof;
(d) an executed assumption agreement, in a
form to be mutually agreed upon by Purchaser and
Seller, dated the Closing Date, pursuant to which the
Purchaser assumes all of the Assumed Liabilities;
(e) the Lease, signed by a duly authorized
officer of the Purchaser; and
(f) such other documents, certificates and
agreements as the Seller reasonably requests.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES OF THE SELLER
The Seller hereby represents and warrants to the
Purchaser as follows:
4.1. Organization and Good Standing. The Seller
is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware and
has all requisite corporate power and authority to carry on
its business (including, without limitation, the Business)
as it is now being conducted, and to execute, deliver and
perform this Agreement and to consummate the transactions
contemplated hereby.
4.2. Authorization of Agreement. The Seller has
full corporate power and authority to execute and deliver
this Agreement and each other agreement, document, instru
ment or certificate contemplated by this Agreement or to be
executed by the 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 Seller being hereinafter
referred to, collectively, as the "Seller Documents"), and
to perform fully its obligations hereunder and thereunder.
The execution, delivery and performance by the Seller of
this Agreement and each of the Seller Documents has been
duly authorized by all necessary corporate action on the
part of the Seller. This Agreement has been, and each of
the Seller Documents will be at or prior to the Closing,
duly executed and delivered by the Seller, and (assuming the
due authorization, execution and delivery by the other
parties hereto and thereto) this Agreement constitutes, and
the Seller Documents when so executed and delivered will
constitute, legal, valid and binding obligations of the
Seller, enforceable against the Seller 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). None of the execution and
delivery by the Seller of this Agreement and 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,
Order or Permit to which the Seller is a party or by which
it or any of the Assets is bound or subject, (iii) con
stitute a violation of any Law applicable to the Seller, 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 in the aggregate would not materially hinder
or impair the transactions contemplated hereby or have a
Material Adverse Effect.
4.3. Properties; Leases; Assets.
(a) The Seller owns and has good and valid title
to or, in the case of leased properties, a good and valid
leasehold interest in, all of the Assets, including all such
Assets reflected in the Financial Statement, except Assets
disposed of in the ordinary course of business after
December 31, 1992. The Seller holds title to each such
Asset free and clear of all Liens other than Permitted
Exceptions.
(b) Except with respect to the real property of
the Seller utilized in the Business, the Assets to be
transferred to the Purchaser on the Closing Date comprise
all of the assets necessary to operate the Business as
presently being conducted in all material respects.
4.4. Consents. No consent, waiver, approval, or
authorization of, or declaration, registration or filing
with, or notification to, any Person or Governmental Body is
required on the part of the Seller in connection with the
execution and delivery by the Seller of this Agreement or
the Seller Documents, or the compliance by the Seller with
any of the provisions hereof or thereof, or the consummation
of the transactions contemplated hereby or thereby, except
(i) as set forth on Schedule 4.4 hereto and (ii) consents,
waivers, approvals, Orders or Permits, if any, which the
Purchaser is required to obtain.
4.5. Financial Statement. The Initial Balance
Sheet of the Business as of the month ended April 30, 1993,
a copy of which is attached hereto as Schedule 4.5 (the
"Financial Statement"), has been prepared based on informa
tion in the books and records of the Seller in accordance
with GAAP except as set forth in the notes thereto and
presents fairly the financial position of the Business as at
the date indicated.
4.6. Absence of Certain Developments. Except as
set forth on Schedule 4.6 hereto, since December 31, 1992
the Seller has operated the Business in the ordinary course
consistent with past practice and there has arisen no event,
condition or circumstance, or group of events, conditions or
circumstances that have resulted in, or could be reasonably
expected to result in, a Material Adverse Effect. Without
limiting the generality of the foregoing, except as set
forth on Schedule 4.6 hereto, since December 31, 1992, there
has not been:
(a) other than in the ordinary course of business
and in accordance with past practice, any (i) increase in
benefits payable or potentially payable under any severance,
continuation or termination pay policies or employment
agreements with any officer or employee of the Seller who is
employed in connection with the Business or who may
otherwise become an employee of the Purchaser following the
Closing, (ii) increase in compensation, bonus or other
benefits payable or potentially payable to officers or
employees of the Seller who are employed in connection with
the Business or who may otherwise become employees of the
Purchaser following the Closing, or (iii) change in the
terms of any bonus, pension, insurance, health or other
employee benefit plan or arrangement of the Seller with
respect to any officer or employee who is employed in
connection with the Business or who may otherwise become an
employee of the Purchaser following the Closing;
(b) any loan to or guarantee or assumption of any
loan or obligation on behalf of any officer or employee of
the Seller involved in the Business;
(c) any change by the Seller in its accounting
principles, methods or practices or in the manner it keeps
its books and records; or
(d) any labor dispute (other than routine
individual grievances) or activity or proceeding by a labor
union or representative thereof to organize any employees of
the Seller involved in the Business who were not subject to
a collective bargaining agreement at December 31, 1992, or
any lockouts, strikes, slowdowns, work stoppages or threats
thereof by or with respect to any such employee.
4.7. Intangible Property. The Intangible Assets
set forth on Schedules 1.1(d) and 1.1(e) constitute all of
the registered patents, trademarks, trade names, service
marks and copyrights, and all applications therefor relating
to any of the foregoing, used in connection with, or
necessary for the operation of, the Business, except for any
name, mark, trade name or trade mark incorporating "IMO" or
"IMO Delaval." Except as set forth on Schedule 4.7 hereto,
each of the Intangible Assets listed on Schedule 1.1(d) or
1.1(e) as being owned by the Seller is owned by the Seller
free and clear of any and all Liens (other than Permitted
Exceptions) and, to the knowledge of the Seller, no other
Person has any claim of ownership with respect thereto. The
Seller has adequate licenses or other valid rights to use
all of the Intangible Assets which it does not own and which
are material to the conduct of the Business as presently
conducted, and such licenses and rights are included in the
Assets. To the Seller's knowledge, the Seller's use of the
foregoing Intangible Assets does not conflict with, infringe
upon, violate or interfere with any intellectual property
rights of any other Person. Except as set forth on Schedule
4.7, there are not and have not been any legal Proceedings
involving any of the Intangible Assets nor, to the Seller's
knowledge, is any such action or proceeding threatened.
4.8. Taxes. 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.
4.9. Employees and Employee Benefits.
(a) Except as set forth on Schedule 4.9(a)
hereto, (i) the Seller is not delinquent in any material
payments to any of its Employees for any wages, salaries,
commissions, bonuses or other direct compensation for any
services performed by them through Closing Date or amounts
required to be reimbursed to such Employees; (ii) the Seller
is not a party to any collective bargaining agreement
applicable to the Employees; (iii) none of the Employees is
represented by any labor organization; (iv) there is no
unfair labor practice complaint against the Seller pending
before the National Labor Relations Board or any comparable
state, local or foreign agency and neither any grievance
which might have a Material Adverse Effect nor any
arbitration proceeding arising out of or under any
collective bargaining agreement is currently pending; (v)
there is no labor strike, work stoppage or slowdown actually
occurring or, to the knowledge of the Seller, threatened
against or directly affecting the operations of the Business
which would have a Material Adverse Effect.
(b) Schedule 4.9(b)(i) hereto lists each CB
Employee Benefit Plan. Schedule 4.9(b)(ii) hereto lists
each CB Benefit Arrangement. Schedule 4.9(b)(iii) hereto
lists each Severance Arrangement.
(c) Except as set forth on Schedule 4.9(c)
hereto:
(i) all CB Employee Benefit Plans intended
to be qualified under Section 401 of the Code have received
favorable determinations from the Internal Revenue Service,
and to the best knowledge of the Seller, nothing has
occurred since such determinations to affect adversely such
determinations, and true and correct copies of such plans
and determination letters have been delivered to the
Purchaser;
(ii) no CB Employee Benefit Plans which
constitute "employee welfare benefit plans," as defined in
Section 3(1) of ERISA, are funded through trusts under
Section 501(c) of the Code;
(iii) no CB Employee Benefit Plan has
participated in, engaged in or been a party to any
"prohibited transaction" (as defined in ERISA or the Code),
and neither the Seller nor any of its ERISA Affiliates has
incurred, or is reasonably expected to incur, any liability
for taxes under Code Section 4975, with respect to any CB
Employee Benefit Plan;
(iv) other than normal claims for benefits,
there is no material claim, pending or threatened, involving
any CB Employee Benefit Plan or CB Benefit Arrangement by
any person against such plan or arrangement, or the Seller
or any ERISA Affiliate, nor to the knowledge of the Seller
is there any reasonable basis to anticipate any such claim;
there is no material violation of any reporting or
disclosure requirement imposed by ERISA or the Code with
respect to any CB Employee Benefit Plan. True and correct
copies of the most recent annual report on IRS Form 5500
(including attachments, exhibits, schedules, actuarial
report and audited financial statement) for each CB Employee
Benefit Plan have been delivered to the Purchaser. These
reports and related exhibits and attachments accurately
described the assets and liabilities of each such plan as of
the date thereof and since the date of such annual reports
there has been no material adverse change in the funding
status of any funded CB Employee Benefit Plan; and
(v) no CB Employee Benefit Plan which is an
employee pension benefit plan, as defined in Section 3(2) of
ERISA, has incurred an "accumulated funding deficiency"
(within the meaning of Section 412(a) of the Code) whether
or not waived. Except as disclosed in Schedule 4.9(c)
hereto, no "reportable event" within the meaning of Section
4043(b) of ERISA (to the extent that the reporting of such
events to the Pension Benefit Guaranty Corporation ("PBGC")
within 30 days of the occurrence has not been waived) with
respect to any such pension plan has occurred and is
continuing or is reasonably expected to occur. No
termination liability to the PBGC has been or is expected to
be incurred with respect to any such pension plan, and no
conditions or events have occurred that present significant
risk of termination by the PBGC.
(d) Neither the Seller nor any of its ERISA
Affiliates have at any time during the six (6) years
immediately prior to the Closing Date sponsored, maintained
or contributed to or incurred an obligation to contribute to
any "multiemployer plan", as defined in Sections 3(37) and
4001(a)(3) of ERISA.
(e) With respect to each CB Employee Benefit Plan
and CB Benefit Arrangement, all contributions to or payments
under any such plan which were required to be paid as of the
Closing Date have been paid by the Seller and all amounts
accrued to date under such plans as liabilities of the
Seller which have not been paid because they are not yet due
under applicable law have been properly recorded on the
books of the Seller, as reflected on the Closing Balance
Sheet.
4.10. Litigation. Except as set forth on
Schedule 4.10 hereto, there is no Legal Proceeding pending
or, to the knowledge of the Seller, threatened (i) against
or initiated by the Seller in connection with the operation
of the Business or ownership of the Assets; (ii) that seeks
to enjoin or obtain damages in respect of the consummation
of the transactions contemplated by this Agreement or the
Seller Documents; or (iii) that questions the validity of
this Agreement, any of the Seller Documents or any action
taken or to be taken by the Seller in connection with the
consummation of the transactions contemplated hereby or
thereby.
4.11. Compliance with Law. Except as set forth
on Schedule 4.11 hereto or on another Schedule hereto, the
Business has been and is being conducted, and the uses to
which the Assets have been and are being put, have been and
are in compliance in all material respects with all appli
cable Laws, Orders and Permits. Except as set forth on
Schedule 4.11 hereto, the Seller has neither received, nor
knows of the issuance of, any notice of any such violation
or alleged violation.
4.12. Receivables. All of the accounts and
accounts receivable reflected on the Initial Balance Sheet,
and all accounts and accounts receivable arising subsequent
to the date thereof, have arisen from bona fide transactions
in the ordinary course of business consistent with past
practice.
4.13. Inventory. Subject to any reserve therefor
that may be set forth in the Financial Statement or set
forth in Schedule 4.13 hereto, all of the Inventory: (a)
has been acquired or manufactured in the ordinary course of
business, consistent with past practice; (b) is of a quality
useable in the ordinary course of business (including
processing into merchantable finished inventories for sale
in the ordinary course of business) free of any material
defect or deficiency; (c) is in merchantable and undamaged
condition in all material respects; and (d) is not obsolete.
4.14. Environmental Matters. (a) The Seller has
obtained all approvals, authorizations, certificates,
consents, licenses, orders and permits or other similar
authorizations of all Governmental Bodies, or from any other
person, that are required under any Environmental Law and
relate to the Business or the Assets. Schedule 4.14(a) sets
forth all permits, licenses and other authorizations issued
under any Environmental Law to the Seller relating to the
Business or the Assets.
(b) Except as set forth on Schedule 4.14(b),
the Seller is in compliance in all material respects with
all terms and conditions of all approvals, authorizations,
certificates, consents, licenses, orders and permits or
other similar authorizations of all Governmental Bodies and
all other persons required under all Environmental Laws and
used in the Business or that relate to the Assets, and is
also in compliance in all material respects with all other
limitations, restrictions, conditions, standards,
requirements, schedules and timetables required or imposed
under all Environmental Laws.
(c) Except as set forth in Schedule 4.14(c),
there is no pending or, to the Seller's knowledge,
threatened, Legal Proceeding, citation or notice of
violation under any Environmental Law relating to the
Business or any of the Assets.
4.15. Brokers. Other than Morgan Stanley & Co.
Incorporated ("Morgan Stanley"), 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 Agree
ment and no Person other than Morgan Stanley 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 responsible for the payment of the fees of Morgan
Stanley in connection with the transactions contemplated by
this Agreement.
4.16. Material Contracts and Bids.
(a) Schedule 4.16 hereto contains a true and
correct list of each oral or written contract, agreement,
commitment or obligation with respect to the Assets or the
Business to which the Seller is a party, other than all
purchase orders entered into in the ordinary course of
business, which is being assigned to the Purchaser hereunder
and which involves the payment to or from the Seller of
amounts in excess of $25,000 per year or the loss of which
could result in a Material Adverse Effect (collectively, the
"Material Contracts").
(b) Except as disclosed in Schedule 4.16, each
Contract constitutes the legal, valid and binding obligation
of the Seller and, to the Seller's knowledge, each other
party thereto, enforceable against the Seller in accordance
with each Contract's terms, subject to applicable
bankruptcy, insolvency, fraudulent conveyance, reorganiza
tion, moratorium and similar laws affecting creditors'
rights and remedies generally, and subject, as to enforce
ability, to general principles of equity, including
principles of commercial reasonableness, good faith and fair
dealing (regardless of whether enforcement is sought in a
proceeding at law or in equity) and except to the extent
that rights to indemnification and contribution under any
Contract may be limited by federal or state securities laws
or public policy relating thereto. The Seller has no
knowledge of any other party to any Contract being in
default or having failed to perform any material obligation
thereunder.
4.17. No Undisclosed Liabilities. Except as set
forth on any schedule hereto and for liabilities incurred in
the ordinary course of business and consistent with past
practices, since the date of the Financial Statement, the
Seller has not incurred any material liability or obligation
(whether accrued, absolute, contingent or otherwise), and
whether due or to become due, of a nature required by GAAP
to be reflected on a corporate balance sheet or disclosed in
the notes thereto.
ARTICLE V.
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
The Purchaser hereby represents and warrants to
the Seller that:
5.1. Organization and Good Standing. The
Purchaser is a corporation duly organized, validly existing
and in good standing under the laws of the State of
Delaware, 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.
5.2. Authorization of Agreement. The Purchaser
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 it 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 respective obligations hereunder and
thereunder. The execution, delivery and performance by the
Purchaser of this Agreement and each Purchaser Document has
been duly authorized by all necessary corporate action on
the part of the Purchaser. This Agreement has been, and the
Purchaser Documents will be at or prior to the Closing, duly
executed and delivered by the Purchaser and (assuming the
due authorization, execution and delivery by the other
parties hereto and thereto) this Agreement constitutes, and
the Purchaser Documents when so executed and delivered will
constitute, legal, valid and binding obligations of the
Purchaser, enforceable against it 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). None of the execution and
delivery by the Purchaser of this Agreement and the
Purchaser Documents, or the consummation of the transactions
contemplated hereby or thereby, or compliance by the Pur
chaser 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, (ii) conflict with, violate, result in the breach
termination of, or constitute a default under any contract
or Order to which the Purchaser is a party or by which it or
any of its respective properties or assets is bound or
subject, or (iii) constitute a violation of any Law
applicable to the Purchaser, 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.
5.3. 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 in connection with the
execution and delivery of this Agreement or the Purchaser
Documents or the compliance by the Purchaser with any of the
provisions hereof or thereof, except consents, waivers,
approvals, Orders or Permits, if any, which the Seller is
required to obtain pursuant to Section 4.4 hereof.
5.4. Availability of Funds. The Purchaser has
available sufficient funds or commitments from lending
institutions for such funds to enable it to consummate the
transactions contemplated by this Agreement.
5.5. 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 or any action taken or to be taken
by the Purchaser in connection with the consummation of the
transactions contemplated hereby or thereby.
5.6. Brokers. Other than Aurora Capital Partners
L.P. ("Aurora"), 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 trans
actions 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. The
Purchaser acknowledges that it is responsible for the pay
ment of the fees of Aurora in connection with the
transactions contemplated by this Agreement.
ARTICLE VI.
COVENANTS OF THE SELLER
From and after the date hereof and until the
Closing, the Seller hereby covenants and agrees with the
Purchaser that:
6.1. Cooperation. The Seller shall use its best
efforts to cause the consummation of the transactions con
templated hereby in accordance with the terms and conditions
hereof, including, without limitation, cooperating with the
Purchaser to obtain novations for all government contracts
to be transferred hereunder.
6.2. Access to Documents; Opportunity to Ask
Questions . The Seller shall provide the Purchaser with
such information as the Purchaser from time to time
reasonably may request with respect to the Business, and
shall permit the Purchaser and any of its directors,
officers, employees, counsel, 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 Business, as the
Purchaser from time to time reasonably may request;
provided, however, that the Seller shall not 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 whatsoever during any investi
gation by the Purchaser shall constitute an enlargement of
or additional warranty or representation of the Seller
beyond those expressly set forth in this Agreement. All
information and access obtained by the Purchaser in con
nection 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 December
7, 1992, between the Seller and the Purchaser (the "Confiden
tiality Agreement").
6.3. 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 (which consent shall not be unreason
ably withheld), the Seller shall cause the Business to be
operated, and the Assets to be used and maintained, in the
ordinary course consistent with past practice and use all
reasonable efforts consistent with past practice to
(i) preserve present business operations, organization and
goodwill of the Business, (ii) keep available the services
of present employees of the Business, (iii) preserve present
relationships with persons having business dealing(s) with
the Business, (iv) maintain all of the assets and properties
of the Business in their current condition, normal wear and
tear excepted, (v) 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), (vi) comply with all Laws; (vii) file
all foreign, federal, state and local tax returns applicable
to the Business or the Assets required to be filed and make
timely payment of all applicable Taxes when due, (viii)
notify the Purchaser in writing of any action, event,
condition or circumstance, or group of actions, events,
conditions or circumstances, relating to the Business or the
Assets, or to the Seller's knowledge, any other person, that
results in, or could reasonably be expected to result in, a
Material Adverse Effect, other than changes in general
economic conditions or in the bearings business in general,
such notification to be provided to the Purchaser by the
Seller promptly after the occurrence of any such action,
event, condition or circumstance, or group thereof, and (ix)
if related in any way to the Business or the Assets, notify
the Purchaser in writing of the commencement of any Legal
Proceedings by or against the Seller, or upon the Seller's
becoming aware of any threat, claim, action, suit, inquiry,
proceeding, notice of violation, demand letter, subpoena,
government audit or disallowance that could reasonably be
expected to result in a Legal Proceeding, such notification
to be provided to the Purchaser by the Seller promptly after
such commencement or after the Seller's becoming aware
thereof.
(b) 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 (which consent shall not be
unreasonably withheld), the Seller shall not do any of the
following:
(i) (A) increase the rate of compensa
tion payable or to become payable to any of the employ
ees or agents of the Business other than in the
ordinary course of business, (B) amend in any material
respect any bonus, stock option, stock purchase, profit-
sharing, deferred compensation, pension, retirement or
other similar plan or 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 or (C) enter into any new, or amend in any
material respect any existing, employment, severance or
consulting agreement, sales agency, or other Contract
with respect to the performance of personal services
for the Business, other than as may be required to
maintain compliance with ERISA and/or the Code;
(ii) (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 Business, except (x) normal trade or
business obligations (including Contracts) incurred in
the ordinary course of business and consistent with
past practice and (y) existing obligations under
Contracts listed on any Schedule to this Agreement, (B)
sell, assign, transfer, convey, lease or otherwise
dispose of any of the Assets (other than inventory of
the Business in the ordinary course of business
consistent with past practice), (C) cancel or
compromise any material debt or claim or waive or
release any material right relating to the Business or
the Assets, except for adjustments or settlements made
in the ordinary course of business consistent with past
practice, (D) acquire any material assets relating to
the Business other than in the ordinary course of
business, (E) mortgage, pledge or encumber (or permit
to be encumbered) any of the Assets or permit the
Assets to become subject to any Lien, except for (1)
liens on certain Assets of the Business in connection
with the restructuring of the Seller's senior
indebtedness (which the Seller covenants and agrees to
have removed on or prior to the Closing Date), (2)
liens for Taxes not due and (3) mechanics' liens being
disputed by the Seller in good faith and by appropriate
proceedings, (F) amend, modify or terminate any
Contract, except for amendments or modifications to (or
scheduled expirations of) sales or supply contracts
that do not materially and adversely affect the
benefits available to the Business thereunder, or (G)
alter the manner of keeping its books, accounts or
records or the accounting practices therein reflected.
6.4. Consents and Conditions; Assignment of
Assets. The Seller shall use its best efforts to obtain all
approvals, consents or waivers from Persons other than
Governmental Bodies (provided that the Seller and the
Purchaser shall use their best efforts to obtain the consent
of all Governmental Bodies to the assignment to the
Purchaser of the Permits set forth on Schedule 4.4 hereof)
necessary to assign to the Purchaser all of the Seller's
interest in the Assets or any claim, right or benefit aris
ing thereunder or resulting therefrom (each, an "Interest")
as soon as practicable; provided, however, that in no event
shall the Seller be obligated to pay any consideration there
for 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.
6.5. Compliance with Connecticut Transfer Act.
The Seller shall comply with the Connecticut Transfer Act,
Connecticut General Statutes Section 22a-134 et seg and file
a Form III with the Commissioner of Environmental Protection
prior to the Closing. In accordance with Connecticut
General Statutes Section 22a-134e, the Purchaser shall pay
all applicable fees at the time of the filing of the Form
III.
6.6 No Solicitation. Between the date hereof and
the earlier to occur of the Closing Date or the termination
of this Agreement, neither the Seller nor any of its
Affiliates, directors, officers, employees, representatives
or agents shall solicit, encourage or consider any other
acquisition proposal (including by way of furnishing any
information concerning all or a portion of the Business or
the Assets); provided, however, that the Seller may consider
another acquisition proposal (including by way of furnishing
any information concerning all or a portion of the Business
or the Assets) if the failure to do so would cause the
Seller, its officers or directors to breach their fiduciary
duties under applicable Law. As used in this Section 6.6,
the phrase "acquisition proposal" means a proposal for the
acquisition of all or a portion of the Business or the
Assets.
ARTICLE VII.
COVENANTS OF THE PURCHASER
From and after the date hereof, and until the
Closing Date, the Purchaser hereby covenants and agrees with
the Seller that:
7.1. Cooperation. The Purchaser shall use its
best efforts to cause the consummation of the transactions
contemplated hereby in accordance with the terms and condi
tions hereof, including, without limitation, cooperating
with the Seller to obtain novations for all government
contracts to be transferred hereunder.
7.2. Confidentiality. The Purchaser and Aurora
shall comply with the terms of the Confidentiality
Agreement.
7.3. 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 Seller's
interest in the Assets or any claim, right or benefit aris
ing thereunder or resulting therefrom as soon as practi
cable; provided, however, that in no event shall the
Purchaser 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.
7.4. Permits, Bonds and Guarantees. The
Purchaser shall use its best efforts to obtain as of the
Closing all Permits required by any Governmental Body with
respect to the Purchaser's operation of the Business or the
Purchaser's ownership or operation of the Assets (including
all such Permits required under Environmental Laws) without
any guaranty or liability of the Seller with respect
thereto; provided, however, that, as provided in Section 1.1
hereof, the Seller shall assign, transfer or convey to the
Purchaser at the Closing those Permits described in one or
more Schedules hereto that are held by the Seller in
connection with the Business and that can be assigned
without having to obtain the consent of any Governmental
Body with respect thereto or for which such consent is
obtained.
ARTICLE VIII.
COVENANTS RELATING TO EMPLOYMENT AND EMPLOYEE MATTERS
8.1. Employees.
(a) The Purchaser shall offer employment as
of the Closing Date to each Employee who is not a CB
Employee on terms and conditions of employment substantially
similar to those the Purchaser provides to similarly
situated employees on the Business Day immediately preceding
the Closing Date; provided, however, that such Employees
shall not be third party beneficiaries of this Agreement.
The Purchaser shall offer each CB Employee employment under
terms and conditions provided in the collective bargaining
agreement applicable to each such CB Employee. The
Purchaser agrees to assume all of the rights and obligations
of the Seller under all collective bargaining agreements
applicable to the CB Employees and the CB Retirees and which
are in effect on the Business Day immediately preceding the
Closing Date.
(b) Upon the reasonable request of the
Purchaser, the Seller shall provide to the Purchaser a
statement of all accrued compensation and benefits of
Employees under the Seller's Employee Benefit Plans, Benefit
Arrangements and Severance Arrangements as of the Closing
Date.
8.2. COBRA. Except as provided in the following
sentence, the Seller agrees that, with respect to group
health plans sponsored by it prior to the Closing Date, it
shall be liable for compliance with the continuation
coverage provisions of Sections 601 through 608 of ERISA
imposed as the result of a "qualifying event" (as that term
is defined in ERISA Section 603 and Code Section
4980B(f)(3)) that occurs prior to the Closing Date with
respect to any CB Employee or CB Retiree and that occurs
prior to or on the Closing Date with respect to any other
Employee or former Employee, (including the spouse and
beneficiaries of any such individual) provided that the
Purchaser shall reimburse the Seller for the administrative
costs of providing such coverage with respect to a
qualifying event occurring on the Closing Date that are not
paid by the Employee. The Purchaser agrees that it shall be
liable for compliance with the continuation coverage
provisions of Sections 601 through 608 of ERISA (i) imposed
as the result of a qualifying event that occurs on or after
the Closing Date with respect to any CB Employee or CB
Retiree or (ii) imposed for any period extending beyond the
Closing Date with respect to a qualifying event which
occurred prior to the Closing Date with respect to any CB
Employee or CB Retiree, provided that with respect to (ii)
hereof the Seller (or the plan administrator appointed by
it) has met all relevant notice requirements under Section
606 of ERISA or Section 4980B(f)(6) of the Code pertaining
to any "covered employee" or "qualified beneficiary" (as
such terms are defined in Section 607 of ERISA and Sections
4980B(f) and (g) of the Code) affected by such qualifying
event.
8.3. Union Plans. Effective on and after the
Closing, the Purchaser shall assume the sponsorship of each
CB Employee Benefit Plan and CB Benefit Arrangement provided
for under the collective bargaining agreements applicable to
the Business, but shall be permitted to amend or terminate
any of such plans at any time after the Closing in
accordance with the terms of such plans with respect to
amendment or termination thereof and in accordance with any
applicable duty to bargain with its employees' bargaining
representatives. The Seller agrees that it will adopt such
resolutions and undertake such other actions as may be
necessary or appropriate to transfer sponsorship of such
plans to the Purchaser, including, but not limited to the
orderly transfer of assets of all funded CB Employee Benefit
Plans and CB Benefit Arrangements to the successor
fiduciaries of such plans as soon as practicable after the
Closing Date, and Purchaser shall adopt appropriate
resolutions assuming sponsorship of such plans.
8.4. Termination Obligations. From and after the
Closing Date, the Purchaser shall be liable for all payments
that may be required to be made under any Severance
Arrangement, other than any payments made under the Letter
Agreements.
8.5. Indemnification. The Purchaser shall
indemnify the Seller from any liability, loss, damage or
expense the Seller may incur (including reasonable
attorneys' fees) with respect to any claims of Employees (i)
arising out of their employment with the Purchaser, (ii)
under any Law relating to the termination, whether
constructive or actual, of such Employee's employment
arising on or after the Closing Date, except as provided in
Section 8.2 hereof concerning COBRA obligations, (iii)
arising out of or in connection with post-retirement welfare
benefits for CB Retirees or (iv) in connection with
Liabilities assumed by the Purchaser under this Article
VIII.
ARTICLE IX.
CONDITIONS PRECEDENT TO THE PURCHASER'S OBLIGATIONS
The obligation of the Purchaser to consummate the
purchase of the Assets and the assumption of the Assumed
Liabilities on the Closing Date is, at the option of the
Purchaser, subject to the satisfaction of the following
conditions:
9.1. 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,
it being understood that to the extent that such repre
sentations and warranties were made as of a specified
date the same shall continue on the Closing Date to be
true and correct in all material respects as of the
specified date.
(b) The Seller shall have performed and
complied, in all material respects, with the covenants
and provisions of this Agreement required to be per
formed or complied with by it at or prior to the
Closing Date.
(c) The Purchaser shall have received a
certificate of the Seller, dated as of the Closing Date
and signed by the Chief Financial Officer and another
duly authorized senior executive officer of the Seller,
certifying as to the fulfillment of the conditions set
forth in this Section 9.1.
9.2. No Prohibition. No Law or Order of any
Governmental Body shall be in effect which prohibits the
Purchaser or the Seller from consummating the transactions
contemplated hereby or would be violated as a result of such
consummation.
9.3. Opinion of the Seller's Counsel. The
Purchaser shall have received an opinion or opinions of
counsel for the Seller, dated the Closing Date, in a form
reasonably acceptable to the Purchaser.
9.4. Delivery of Documents. The Seller shall
have executed and delivered to the Purchaser at the Closing
a bill of sale, certificates of title, an assignment and
assumption agreement, a patent, application, trademark
information and assignment agreement and such other
documents as shall reasonably be requested by the Purchaser
to transfer the Assets and otherwise consummate the
transactions contemplated by this Agreement.
9.5. Lease. The Seller shall have executed and
delivered to the Purchaser the Lease.
9.6. Absence of Material Adverse Effect. There
shall not have occurred between the date hereof and the
Closing Date any Material Adverse Effect, regardless whether
such Material Adverse Effect is the result of a single
occurrence, condition or circumstance, or group of
occurrences, conditions and circumstances.
9.7. Approvals and Consents. All Permits of all
Governmental Bodies and all consents of all other Persons
shall have been obtained (a) as are necessary to consummate
the transactions contemplated hereby and for the Purchaser
to receive the benefits contemplated by this Agreement and
(b) where the failure to obtain any of the foregoing,
whether alone or in the aggregate, could result in a
Material Adverse Effect.
ARTICLE X.
CONDITIONS PRECEDENT TO THE SELLER'S OBLIGATIONS
The obligation of the Seller to consumate the
sale, transfer and assignment to the Purchaser of the
Assets and the assignment of the Assumed Liabilities
on the Closing Date is, at the option of the Seller,
subject to the satisfaction of the following
conditions.
10.1. 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,
it being understood that to the extent that such
representations and warranties were made as of a
specified date the same shall continue on the Closing
Date to be true and correct in all material respects as
of the specified date.
(b) 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 them at or prior to the
Closing Date.
(c) The Seller shall have received a
certificate of the Purchaser, dated as of the Closing
Date and signed by the Chief Financial Officer and
another duly authorized senior executive officer of the
Purchaser, certifying as to the fulfillment of the
conditions set forth in this Section 10.1.
10.2. No Prohibition. No Law or Order of any
Governmental Body shall be in effect which prohibits the
Seller or the Purchaser from consummating the transactions
contemplated hereby or would be violated as a result of such
consummation.
10.3. Opinion of the Purchaser's Counsel. The
Seller shall have received an opinion or opinions of counsel
for the Purchaser, dated the Closing Date, in a form
reasonably acceptable to the Seller.
10.4. Delivery of Documents. The Purchaser shall
have executed and delivered to the Seller at the Closing an
assignment and assumption agreement.
10.5. Lease. The Purchaser shall have executed
and delivered to the Seller the Lease.
ARTICLE XI.
ADDITIONAL POST-CLOSING COVENANTS
11.1. Further Assurances.
(a) From time to time after the Closing
Date, each of the Seller and the Purchaser shall, at
its sole cost and expense, at the reasonable request of
the Purchaser, execute and deliver such other and
further instruments of sale, assignment, assumption,
transfer and conveyance and take such other and further
actions as the Purchaser may reasonably request in
order to vest in the Purchaser and put the Purchaser in
possession of the Assets and to transfer to the
Purchaser any Contracts and rights of the Seller
relating to the Assets and assure to the Purchaser the
benefits thereof, and, at the reasonable request of the
Seller, to give effect to the Purchaser's assumption of
the Assumed Liabilities.
(b) Anything in this Agreement to the
contrary notwithstanding, this Agreement shall not
constitute an agreement to assign any Asset, Permit or
any claim or right or any benefit arising thereunder or
resulting therefrom if an attempted assignment thereof,
without the consent of a Governmental Body or other
third party thereto, would constitute a breach or other
contravention thereof, be ineffective with respect to
any party thereto or in any way adversely affect the
rights of the Purchaser.
(c) With respect to any Contract or any
claim, right or benefit arising thereunder or resulting
therefrom, promptly after the date hereof, to the
extent reasonably requested by the Purchaser, the
Purchaser and the Seller will use their respective best
efforts to obtain the written consent of the other
parties to any such Contract for the assignment thereof
to the Purchaser, or written confirmation from such
parties reasonably satisfactory in form and substance
to the Purchaser confirming that such consent is not
required; provided, however, that the Seller shall not
be obligated to pay any consideration for obtaining any
such consent unless the Purchaser in writing requests
the Seller to pay such consideration and agrees to
reimburse the Seller for any such payment. If such
consent, waiver or confirmation is not obtained, the
Seller and the Purchaser will cooperate in an arrange
ment reasonably satisfactory to the Purchaser under
which the Purchaser would obtain, to the extent
practicable, the claims, rights and benefits and assume
the corresponding obligations thereunder in accordance
with this Agreement, including subcontracting, sub-
licensing or sub-leasing to the Purchaser, or under
which the Seller would enforce for the benefit of the
Purchaser, with the Purchaser assuming the Seller's
obligations thereunder, any and all claims, rights and
benefits of the Seller against the third party thereto.
The Seller will promptly pay to the Purchaser when
received all monies received by the Seller under any
such Contract or claim, right or benefit. The
Purchaser shall indemnify the Seller with respect to
any of the obligations assumed by the Purchaser under
any such Contract, claim, right or benefit.
(d) To the extent any of the approvals,
consents or waivers of any Governmental Body referred
to in Section 9.7 hereof has not been obtained by the
Seller as of the Closing and the Purchaser nevertheless
elects to close the transactions contemplated hereby,
the Seller's only obligation with respect thereto shall
be to use its reasonable efforts to do the following:
(i) 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 cooperates in
all material respects with the Seller in such
arrangements and promptly reimburses the Seller
for all payments, charges or other liabilities
made or suffered by the Seller in connection
therewith; and
(ii) 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
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 request of the Purchaser).
To the extent that the Seller enters into lawful
arrangements designed to provide the benefits of any
Interest as set forth above, such Interest shall be
deemed an Asset.
11.2. Public Announcements. Neither the Seller
(nor any of its 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 party (which consent
may not be unreasonably withheld), except as may be required
by Law.
11.3. Joint Post-Closing Covenant of the Seller
and the Purchaser. The Seller and the Purchaser jointly
covenant and agree that, from and after the Closing Date,
the Seller and the Purchaser will cooperate with each other
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 and the Purchaser's
tax returns for all periods up to and including the Closing
Date, and (b) any audit of the Purchaser and/or the Seller
with respect to the sales, transfer and similar taxes
imposed by the laws of any state, relating to the transac
tions contemplated by this Agreement. In furtherance here
of, the Purchaser and the Seller further covenant and agree
to respond to all reasonable inquiries related to such
matters and to provide, to the extent possible, substan
tiation of transactions and to make available and furnish
appropriate documents and personnel in connection therewith.
11.4. Books and Records; Personnel. For a period
of six (6) years after the Closing Date (or such longer
period as may be required by any Governmental Body or
ongoing Legal Proceeding):
(a) Neither party hereto shall dispose of or
destroy any of the business records and files relating
to the Business. If either party wishes to dispose of
or destroy such records and files after that time, it
shall first give thirty (30) days' prior written notice
to the other party and such other party shall have the
right, at its option and expense, upon prior written
notice to the first party within such thirty (30) day
period, to take possession of the records and files
within sixty (60) days after the date of such other
party's notice to the first party.
(b) Each party hereto shall allow the other
party and its Representatives access to all business
records and files relating to the Business, during
regular business hours and upon reasonable notice at
the Purchaser's or the Seller's, as the case may be,
principal place of business or at any location where
such records are stored, and each party 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 interfere with the normal conduct of the
Purchaser's or the Seller's, as the case may be,
business or operations.
(c) Each party hereto shall make available
to the other party, upon written request and at such
other party's expense (i) personnel to assist the other
party in locating and obtaining records and files
maintained by such first party and (ii) as regards the
Purchaser, any of the Purchaser's personnel previously
in the Seller's employ whose assistance or
participation is reasonably required by the Seller in
anticipation of, or preparation for, existing or future
litigation, arbitration, administrative proceeding, tax
return preparation or other matters in which the Seller
or any of its affiliates is involved and which is
related to the Business.
(d) Each party hereto hereby agrees to keep
the information given to it by the other party pursuant
to this Section 11.4 confidential and will not (except
as required by applicable law, regulation or legal
process, and only after compliance with this Section
11.4(d)), without the other party's prior written
consent, disclose any such information to any third
party other than such first party's attorneys,
accountants, other representatives or agents
(collectively, the "Representatives") who need to know
such information for reasonable business purposes of
such first party; provided, however, that such first
party shall be responsible for any such person's
maintaining the confidentiality of such information.
In the event that such first party or any of the
Representatives are requested pursuant to, or required
by, applicable law, regulation or legal process to
disclose any of such information, such first party will
notify the other party promptly thereof so that the
other party may seek a protective order or other
appropriate remedy or, in the other party's sole
discretion, waive compliance with the terms of this
Section 11.4(d); provided, however, that in the event
that no such protective order or other remedy is
obtained, or that the other party waives compliance
with the terms of this Section 11.4(d), the first party
will furnish only the portion of such information which
the first party is advised by counsel is legally
required and will exercise all reasonable efforts to
obtain reliable assurance that confidential treatment
will be accorded such information.
ARTICLE XII.
INDEMNIFICATION AND RELATED MATTERS
12.1. Indemnification by the Seller. From and
after the Closing Date, the Seller and its successors and
assigns (such entities being collectively hereinafter
referred to for purposes of this Article XII as the
"Seller") shall indemnify and hold the Purchaser and its
successors, assigns and Affiliates harmless to the extent
provided in this Article XII from and against any and all
Damages resulting from or arising out of the following:
(a) the failure of any of the Seller's
representations and warranties contained in this Agree
ment to have been true 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 representation or warranty to be true
as of such specified date;
(b) the failure of the 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;
(c) the Excluded Liabilities; and
(d) the failure to comply with any bulk
sales or bulk transfer laws in connection with the
transactions contemplated hereby; provided, however,
that nothing herein shall relieve the Purchaser of any
obligation with respect to the Assumed Liabilities.
12.2. Indemnification by the Purchaser. From and
after the Closing Date, the Purchaser and its successors and
assigns (such entities being collectively hereinafter
referred to for purposes of this Article XII as the
"Purchaser") shall indemnify and hold the Seller and its
successors, assigns and Affiliates harmless to the extent
provided in this Article XII from and against any and all
Damages resulting from or arising out of the following:
(a) the failure of any of the Purchaser's
representations and warranties contained in this
Agreement to have been true 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 representation or warranty to be
true as of such specified date;
(b) 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;
(c) the Assumed Liabilities;
(d) the Purchaser's operation of the
Business or ownership of the Assets on or after the
Closing Date; and
(e) any workers' compensation claims made by
any employee of Seller in connection with any claim
arising as a result of any incidents or circumstances
occurring or in existence on or before the Closing Date
to the extent the aggregate amount of all such claims
does not exceed $100,000.
12.3. Determination of Damages and Related
Matters. In calculating any amount payable to the Purchaser
pursuant to Section 12.1 or payable to the Seller pursuant
to Section 12.2, the Seller or the Purchaser, as the case
may be, shall receive credit for (i) any tax benefit allow
able 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 informa
tion regarding the Business.
12.4. Limitation on Indemnification Liabilities
Under Section 12.1(a). The indemnifications in favor of the
Purchaser contained in Section 12.1(a) hereof (a) shall not
be effective until the aggregate dollar amount of all
Damages exceeds $100,000 (the "Threshold Amount"), and then
only to the extent such aggregate amount exceeds the
Threshold Amount, and (b) shall terminate once the dollar
amount of all Damages indemnified against under such Section
aggregates 67 percent of the Purchase Price. Neither the
requirement that Damages exceed the Threshold Amount nor the
aggregate limit on indemnification obligations of the Seller
referred to in this Section 12.4 shall apply with respect to
the indemnification obligations of the Seller under Section
12.1(b), (c) or (d).
12.5. Survival of Representations, Warranties
and Covenants. The parties hereto agree that the indem
nification obligations of the Seller under Section 12.1(a)
hereof and the Purchaser under Section 12.2(a) hereof with
respect to the representations and warranties made in this
Agreement shall survive for one year after the Closing Date;
provided, however, that the representations and warranties
set forth in Sections 4.1, 4.2, 4.8, 4.9 and 4.14 hereof
shall survive until expiration of the applicable statutes of
limitation. All other indemnification obligations of the
parties shall survive until expiration of all applicable
statutes of limitation.
12.6. 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
XII or for breach of any of the representations and war
ranties 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 no later than thirty (30) days
after the expiration of the one year period described above
in Section 12.5 (except for indemnification pertaining to
representations, covenants and agreements referred to in
Section 12.5 hereof as to which such one year limitation is
not 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. Notwithstanding the
foregoing, the failure of either the Purchaser or the Seller
to give notice of any claim for indemnification in
accordance with the foregoing provision shall not adversely
affect such party's right to indemnity hereunder except to
the extent that such failure adversely affects the right of
the Indemnitor to assert any reasonable defense to such
claim. The Indemnitor shall have thirty (30) Business Days
following its receipt of such notice either (y) to acquiesce
in such claim by giving the Indemnitee written notice of
such acquiescence or (z) to object to the claim by giving
Indemnitee written notice of the objection. If the Indem
nitor does not object within such thirty (30) Business Days,
the Indemnitee shall be entitled to be indemnified for all
Damages reasonably and proximately incurred by Indemnitee in
respect of such claim. If the Indemnitor objects to such
claim in a timely manner, and the Indemnitee and the Indem
nitor are unable to resolve their dispute within ten (10)
Business Days following such objection (or such additional
period of time as may be mutually agreed to by such
parties), the claim shall be submitted immediately to
arbitration pursuant to Section 12.8.
12.7. Indemnification Procedure for Third-Party
Claims . In connection with any claim that may give rise to
indemnity under this Article XII resulting from or arising
out of any claim or proceeding by a person that is not a
party hereto, the Indemnitor (unless the Indemnitee elects
not to seek indemnity hereunder for such claim) may, upon
written notice to the Indemnitee, assume the defense of any
such claim or proceeding if the Indemnitor acknowledges to
the Indemnitee its right to indemnity pursuant hereto in
respect of such claim (as such claim may have been modified
through written agreement of the parties or arbitration
hereunder). If the Indemnitor assumes the defense of any
such claim or proceeding, the Indemnitor shall select
counsel reasonably acceptable to the Indemnitee to conduct
the defense of such claim or proceeding, shall take all
steps necessary in the defense or settlement thereof and
shall at all times diligently and promptly pursue the
resolution thereof. If the Indemnitor shall have assumed
the defense of any claim or proceeding in accordance with
this Section 12.7, the Indemnitor shall be authorized to
consent to a settlement of, or the entry of any judgment
arising from, any such claim or proceeding, without the
prior written consent of the Indemnitee; provided, however,
that the Indemnitor shall pay or cause to be paid all
amounts arising out of such settlement or judgment
concurrently with the effectiveness thereof; provided
further, that the Indemnitor shall not be authorized to
encumber any of the assets of the Indemnitee or to agree to
any restriction that would apply to the Indemnitee or to its
conduct of business; and provided further, that a condition
to any such settlement shall be a complete release of the
Indemnitee with respect to such claim. The Indemnitee shall
be entitled to participate in (but not control) the defense
of any such action with its own counsel at its own expense.
Each Indemnitee shall, and shall cause each of each
Affiliates, officers, employees, consultants and agents to,
cooperate fully with the Indemnitor in the defense of any
claim or proceeding being defended by the Indemnitor
pursuant to this Section 12.7. If the Indemnitor does not
assume the defense of any claim or proceeding resulting
therefrom in accordance with the terms of this Section 12.7,
the Indemnitee may defend against such claim or proceeding
in such manner as it may deem appropriate including settling
such claim or proceeding after giving notice of the same to
the Indemnitor, on such terms as the Indemnitee may deem
appropriate. If the Indemnitor seeks to question the manner
in which the Indemnitee defended such claim or proceeding or
the amount of or nature of any such settlement, the
Indemnitor shall have the burden of proof by a preponderance
of the evidence that such Indemnitee did not defend such
claim or proceeding in a reasonably prudent manner.
12.8. Arbitration of Disputes Relating to
Indemnification.
(a) Any dispute with respect to any claim for
indemnification under this Article XII shall be resolved by
one arbitrator in accordance with the procedures set forth
in this Section 12.8. Within ten (10) Business Days after
expiration of the ten (10) Business Day period referred to
in Section 12.6, the Seller and the Purchaser shall
designate a mutually acceptable arbitrator who is a retired
or former judge of any appellate court of the State of New
York, any United States appellate court or the United States
District Court for any New York district who is, in any such
case, not affiliated with any party in interest to such
arbitration and who has substantial professional experience
with regard to corporate legal matters. If the parties
hereto are unable to agree upon such arbitrator within such
ten (10) Business Day period, the arbitrator shall be
appointed by the American Arbitration Association as soon as
practicable and shall be a retired or former judge of any
appellate court of the State of New York, any United States
appellate court or the United States district court for any
New York district who is, in any such case, not affiliated
with any party in interest in such arbitration and who has
substantial professional experience with regard to corporate
legal matters.
(b) The arbitrator shall consider the dispute at
issue in New York City, New York, at a mutually agreed upon
time within thirty (30) days (or such longer period as may
be acceptable in writing to the parties to such arbitration)
of the designation of the arbitrator. The arbitration
proceeding shall be held in accordance with the rules for
the arbitration of commercial disputes promulgated by the
American Arbitration Association in effect on the date of
the initial request by the party seeking indemnification and
shall include an opportunity for the parties to conduct
discovery in advance of the proceeding. Notwithstanding the
foregoing, the Purchaser and the Seller agree that they will
attempt, and they intend that they and the arbitrator should
use their best efforts in that attempt, to conclude the
arbitration proceeding and have a final decision from the
arbitrator within ninety (90) days from the date of
selection of the arbitrator; provided, however, that the
arbitrator shall be entitled to extend such 90-day period
one or more times to the extent necessary for such
arbitrator to place a dollar value on any claim that may be
unliquidated. The arbitrator shall immediately deliver his
or her written decision with respect to the dispute to each
of the parties, who shall promptly act in accordance
therewith. The Purchaser and the Seller each agrees that
any decision of the arbitrator shall be final, conclusive
and binding, and that it will not contest any action by any
other party thereto in accordance with the decision of the
arbitrator. It is specifically understood and agreed that
any party may enforce any award rendered pursuant to the
arbitration provisions of this Section 12.8 by bringing suit
in any court of competent jurisdiction.
(c) All fees, costs and expenses (including
reasonable attorneys' fees and expenses) incurred by the
party that prevails in any such arbitration commenced
pursuant to this Section 12.8 or any judicial action or
proceeding seeking to enforce the agreement to arbitrate
disputes as set forth in this Section 12.8 or seeking to
enforce any order or award of any arbitration commenced
pursuant to this Section 12.8 in such manner as the
arbitrator or the court in such judicial action, as the case
may be, may determine to be appropriate under the
circumstances. All costs and expenses attributable to the
arbitrator shall be allocated among the parties to the
arbitration in such manner as the arbitrator shall determine
to be appropriate under the circumstances.
12.9. Exclusive Remedy. The exclusive remedy
available to a party hereto in respect of the matters
covered by Section 12.1 or Section 12.2 hereof shall be to
proceed in the manner and subject to the limitations
contained in this Article XII.
ARTICLE XIII.
TERMINATION
13.1. Termination. This Agreement may be termi
nated:
(a) by the written agreement of the
Purchaser and the Seller;
(b) 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; and
(c) by either the Purchaser or the Seller if
the Closing shall not have occurred on or before June
30, 1993 provided that such date shall be extended to
July 31, 1993 to the extent necessary to obtain
approval of the Connecticut Department of Environmental
Protection of the transfer of Permit No. SP001170
relating to the treatment and discharge of waste water
as specified on Schedule 4.4.
13.2. Liabilities After Termination. Upon any
termination of this Agreement pursuant to Section 13.1
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.
ARTICLE XIV.
MISCELLANEOUS
14.1. 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):
"Accounts Receivable" has the meaning set forth in
Section 1.1(c) hereof.
"Affiliate" means, with respect to any Person, any
Person directly or indirectly controlling, controlled by or
under direct or indirect common control with such other
Person.
"Assets" has the meaning set forth in Section 1.1
hereof.
"Assumed Liabilities" has the meaning set forth in
Section 1.3.
"Benefit Arrangement" means each employment or
severance contract or arrangement providing for insurance
coverage, severance, termination, vacation pay or similar
coverage and all written compensation policies and practices
maintained by the Seller or any ERISA Affiliate covering any
Employee or former Employee of the Business that is not an
Employee Benefit Plan.
"Bid" means any quotation, bid or proposal made by
the Seller that if accepted or awarded would lead to a
Contract with any Person for the design, manufacture and
sale of products or the provision of services by or to the
Business or with respect to any Asset.
"Business" has the meaning set forth in the
recitals hereof.
"Business Day" means a day other than a Saturday,
Sunday or other day on which commercial banks in New York,
New York are authorized or required by law to close.
"CB Benefit Arrangement" means each Benefit
Arrangement covering any CB Employee or CB Retiree.
"CB Employee Benefit Plan" means each Employee
Benefit Plan covering any CB Employee or CB Retiree.
"CB Employees" means Employees who are covered by
a collective bargaining agreement.
"CB Retirees" means former Employees of the
Business who were employed pursuant to a collective
bargaining agreement and their spouses and beneficiaries
with a right to receive post-retirement welfare benefits
from the Seller and listed on Schedule 14.1 hereto.
"Closing" means the consummation of the trans
actions contemplated by this Agreement.
"Closing Balance Sheet" has the meaning set forth
in Section 2.2(a) hereof.
"Closing Date" has the meaning set forth in
Section 3.1 hereof.
"Code" means the Internal Revenue Code of 1986, as
amended.
"Confidentiality Agreement" has the meaning set
forth in Section 6.2 hereof.
"Contract" means any contract, agreement, inden
ture, note, bond, loan, instrument, lease, conditional sale
contract, mortgage, license, franchise, insurance policy,
commitment or other arrangement or agreement, whether
written or oral, relating to the Business or any of the
other Assets.
"Customs Receivable" means that certain receivable
in the amount of $509,394 in respect of a refund of customs
duties related to the Business.
"Damages" means all demands, claims, actions or
causes of action, assessments, losses, damages, costs,
expenses, liabilities, judgments, awards, fines, sanctions,
penalties, charges and amounts paid in settlement, including
(y) interest on cash disbursements at a rate per annum equal
to the prime rate of Bankers Trust Company plus two percent
(2%) from the date each such cash disbursement is made until
the Person incurring the same shall have been indemnified in
respect thereof and (z) reasonable costs, fees and expenses
of attorneys, experts, accountants, appraisers, consultants,
witnesses, investigators and any other agents of such
person.
"Employee Benefit Plan" means each employee
benefit plan, as defined in Section 3(3) of ERISA, that is
sponsored or contributed to by Seller or any ERISA Affiliate
and which covers any Employee or former Employee of the
Business.
"Employees" means all persons employed in the
Business on the day immediately prior to the Closing Date,
including any persons on layoff, disability, sick leave or
leave of absence from the Business.
"Environmental Laws" means all Laws which exist on
the Closing Date relating to the protection of human health,
safety or the environment including: (i) all requirements
pertaining to reporting, licensing, permitting, controlling,
investigating or remediating emissions, discharges, releases
or threatened releases of Hazardous Substances, chemical
substances, pollutants, contaminants or toxic substances,
materials or wastes, whether solid, liquid or gaseous in
nature, into the air, surface water, ground water or land,
or relating to the manufacture, processing, distribution,
use, treatment, storage, disposal, transport or handling of
Hazardous Substances, chemical substances, pollutants,
contaminants or toxic substances, materials or wastes,
whether solid, liquid or gaseous in nature; and (ii) all
requirements pertaining to the protection of the health and
safety of employees or the public.
"Equipment" has the meaning set forth in
Section 1.1(a) hereof.
"ERISA" means the Employee Retirement Income
Security Act of 1974, as amended.
"ERISA Affiliate" means any entity that, as of the
relevant measuring date under ERISA, is a member of a
controlled group of corporations or under common control
with Seller within the meaning of Section 414 of the Code.
"Excluded Assets" has the meaning set forth in
Section 1.2 hereof.
"Excluded Liabilities" has the meaning set forth
in Section 1.4 hereof.
"Final Working Capital Adjustment" has the meaning
set forth in Section 2.2(d) hereof.
"Financial Statement" has the meaning set forth in
Section 4.5 hereof.
"GAAP" means generally accepted accounting prin
ciples in the United States consistently applied. Unless
otherwise specified in this Agreement, all accounting terms
shall have the meanings ascribed to such terms by GAAP.
"Governmental Body" means any government or govern
mental or regulatory body 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).
"Hazardous Substance" means any chemical
substance: (i) the presence of which requires investigation
or remediation under any Law; (ii) that is defined as a
"hazardous waste" or "hazardous substance" under any Law;
(iii) that is toxic, explosive, corrosive, flammable,
infectious, radioactive, carcinogenic or mutagenic or
otherwise hazardous and is regulated by any Governmental
Body having or asserting jurisdiction over the Business or
any of the Assets; (iv) the presence of which causes a
nuisance to adjacent properties or poses a hazard to the
health or safety or any Person; (v) the presence of which on
adjacent properties constitutes a trespass by the Seller; or
(vi) without limitation, that contains gasoline, diesel fuel
or other petroleum hydrocarbons, polychlorinated biphenyls
("PCBs") or asbestos.
"Indemnitee" has the meaning set forth in Section
12.6 hereof.
"Indemnitor" has the meaning set forth in Section
12.6 hereof.
"Initial Balance Sheet" means the balance sheet of
the Business at April 30, 1993 attached hereto as Schedule
4.5.
"Intangible Assets" has the meaning set forth in
Section 1.1(e) hereof.
"Interest" has the meaning set forth in Section
6.4 hereof.
"Inventory" has the meaning set forth in Section
1.1(c) hereof.
"Knowledge" or "knowledge" means, with respect to
the Seller, the actual knowledge (after due inquiry) of the
officers and directors of the Seller and its Affiliates, and
the employees of the Seller set forth on Schedule 14.2, and
with respect to the Purchaser, the actual knowledge of the
officers and directors of the Purchaser and its Affiliates.
"Law" means any federal, state, local or foreign
law (including common law), statute, code, ordinance, rule,
regulation or other requirement or guideline.
"Lease" has the meaning set forth in Section
3.3(d) hereof.
"Legal Proceeding" means any judicial, admini
strative or arbitral action, suit, proceeding (public or
private), claim or governmental proceeding.
"Liabilities" has the meaning set forth in Section
1.3 hereof.
"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 limi
tation whatsoever.
"Material Adverse Effect" means any material
adverse change in, or effect on, or any effect that results
in a material adverse change in, the operations, affairs,
financial condition, results of operations, Assets,
Liabilities or any other aspect of the Business.
"Material Contracts" has the meaning set forth in
Section 4.16(a) hereof.
"Order" means any order, injunction, judgment,
decree, ruling, writ, assessment or arbitration award.
"Parent" has the meaning set forth in the recitals
hereof.
"Patent-Related Assets" has the meaning set forth
in Section 1.1(d) hereof.
"Permit" means any written approval, waiver,
authorization, consent, franchise, license, permit or
certificate by, or any filing with, any Governmental Body.
"Permitted Exceptions" means (i) 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;
(ii) mechanics', carriers', workers', repairers' and similar
Liens arising or incurred in the ordinary course of business
that are not in the aggregate material to the Business or
the Assets; (iii) zoning, entitlement and other land use and
environmental regulations by Governmental Bodies, provided
that such regulations have not been violated; (iv) Liens
arising out of a failure to comply with the provisions of
any bulk transfer laws of any jurisdiction; and (v) such
other imperfections in title, charges, easements, restric
tions and encumbrances which do not in the aggregate have a
Material Adverse Effect.
"Person" or "person" means any individual, corpora
tion, partnership, firm, joint venture, association, joint-
stock company, trust, unincorporated organization or
Governmental Body.
"Preliminary Working Capital Adjustment" has the
meaning set forth in Section 2.2(b) hereof.
"Purchase Price" has the meaning set forth in
Section 2.1 hereof.
"Purchaser" has the meaning set forth in the
recitals hereof.
"Purchaser Documents" has the meaning set forth in
Section 5.2 hereof.
` "Representatives" has the meaning set forth in
Section 11.4(d) hereof.
"Purchaser Representatives" has the meaning set
forth in Section 6.2 hereof.
"Seller" has the meaning set forth in the recitals
hereof.
"Seller Documents" has the meaning set forth in
Section 4.2 hereof.
"Severance Arrangement" means each termination,
severance or similar plan, policy or arrangement of the
Seller concerning Employees.
"Taxes" means all federal, state, municipal, local
or foreign taxes, assessments, additions to tax, interest,
penalties, deficiencies, duties, fines, fees, withholding
tax obligations, trust fund taxes and other governmental
charges or impositions of any kind or description, whether
measured by properties, assets, wages, payroll, purchases,
value added, payments, sales, use, business, capital stock,
surplus or income, arising out of or in connection with the
operation and ownership of the Business and the Assets by
the Seller or otherwise.
"Threshold Amount" has the meaning set forth in
Section 12.4 hereof.
"Working Capital" has the meaning set forth in
Section 2.2(b) hereof.
14.2. Prorations. The Purchaser and the Seller
hereby agree as follows with regard to prorations applicable
to the consummation of the transactions contemplated hereby.
The parties agree that all operational expenses incurred
directly in the operation of the Business, including,
without limitation, utility bills, the expense of supplies,
the expense of fuel, and the like, shall be prorated between
the parties as of the Closing Date, and as of such date
shall become the obligation and responsibility of the
Purchaser. Prorations which are to be effected on the
Closing Date shall be made on the Closing Date or, if such
prorations cannot reasonably be made as of the Closing Date,
as soon thereafter as possible and "as of" the Closing Date.
In addition, all pre-paid expenses shall be prorated between
the parties as of the Closing Date. 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 Business, 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 personal property taxes and special and
general assessments relating to the Assets shall be prorated
by the parties 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 paid by the Seller. All such
assessments and taxes applicable to periods following the
Closing Date shall be the sole obligation, responsibility
and expense of the Purchaser.
14.3. 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.
14.4. 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.
14.5. Governing Law. This Agreement shall be
governed by and construed in accordance with the law of the
State of New York without reference to choice or conflict of
law principles.
14.6. Transfer Taxes. The Purchaser and the
Seller shall equally share in the cost 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, gains, excise and other
transfer or similar taxes on the transfer of the Assets
contemplated hereunder (not including any tax determined by
the overall net income of the Seller). 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 perfect any exemption
from any such transfer, documentary, sales, gains, excise or
use tax.
14.7. Expenses. 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 Agree
ment and the consummation of the transactions contemplated
hereby and thereby.
14.8. 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.
14.9. Notices. All notices and other communica
tions under this Agreement shall be in writing and shall be
deemed given when delivered personally or four days after
being mailed by registered mail, return receipt requested,
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, to:
Imo Industries Inc.
3450 Princeton Pike
Lawrenceville, New Jersey 08648
Telephone: (609) 896-7600
Facsimile: (609) 896-7688
Attention: Thomas J. Bird; 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:
Roller Bearing Company of America, Inc.
P.O. Box 1237
140 Terry Drive, Suite 100
Newtown, Pennsylvania 18940-0870
Telephone: 215-579-4300
Facsimile: 215-579-4381
Attention: Michael Hartnett, President
with a copy to:
Aurora Capital Partners L.P.
1800 Century Park East
10th Floor
Los Angeles, California 90067
Telephone: 310-551-0101
Facsimile: 310-277-5591
Attention: Richard Roeder
and a copy to:
Gibson, Dunn & Crutcher
2029 Century Park East
Los Angeles, California 90067
Telephone: 310-552-8500
Facsimile: 310-277-5827
Attention: Kenneth R. Lamb, Esq.
14.10. Severability. The invalidity or unenforce
ability 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.
14.11. Binding Effect; No Assignment. This
Agreement shall be binding upon and inure to the benefit of
the parties and their respective successors and assigns.
Nothing in this Agreement shall create or be deemed to
create any third party beneficiary rights in any person or
entity not party to this Agreement. 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 and any attempted assignment without such required
consents shall be void; provided, however, that the
Purchaser shall, without the Seller's consent, be entitled
to assign this Agreement to any Person that shall merge with
the Purchaser and be the survivor of such merger, or shall
acquire all or substantially all of the assets of the
Purchaser.
14.12. 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.
14.13. 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.
IN WITNESS WHEREOF, the parties hereto have
executed this Asset Sale Agreement as of the date and year
first above written.
IMO INDUSTRIES INC.
By:/s/ Thomas J. Bird
Name: Thomas J. Bird
Title: Senior Vice President and
General Counsel
ROLLER BEARING COMPANY OF AMERICA, INC.
By:/s/ Richard K. Roeder
Name: Richard K. Roeder
Title: An Authorized Officer
ASSET SALE AGREEMENT
BY AND BETWEEN
IMO INDUSTRIES INC.
AND
ROLLER BEARING COMPANY OF AMERICA, INC.
Dated as of May 10, 1993
Table of Contents
Page
ARTICLE I. ASSETS TO BE ACQUIRED 1
1.1. Acquisition and Transfer of Assets 1
1.2. Excluded Assets 4
1.3. Assumed Liabilities 5
1.4. Excluded Liabilities 6
1.5. Cancellation of Permits, Bonds
and Guarantees 8
ARTICLE II. PURCHASE PRICE 9
2.1 Purchase Price and Payment 9
2.2. Purchase Price Adjustment 9
2.3. Allocation of Purchase Price 11
ARTICLE III. THE CLOSING 12
3.1. Closing Date 12
3.2. Proceedings at Closing 12
3.3. Deliveries by the Seller to the
Purchaser 12
3.4. Deliveries by the Purchaser to
the Seller 13
ARTICLE IV. REPRESENTATIONS AND WARRANTIES
OF THE SELLER 14
4.1. Organization and Good Standing 14
4.2. Authorization of Agreement 14
4.3. Properties; Leases; Assets 15
4.4. Consents 15
4.5. Financial Statement 15
4.6. Absence of Certain Developments 16
4.7. Intangible Property 17
4.8. Taxes 17
4.9. Employees and Employee Benefits 17
4.10. Litigation 19
4.11. Compliance with Law 20
4.12. Receivables 20
4.13. Inventory 20
4.14. Environmental Matters 20
4.15. Brokers 21
4.16. Material Contracts and Bids 21
4.17. No Undisclosed Liabilities. 22
ARTICLE V. REPRESENTATIONS AND WARRANTIES OF
THE PURCHASER 22
5.1. Organization and Good Standing 22
5.2. Authorization of Agreement 22
5.3. Consents 23
5.4. Availability of Funds 23
5.5. Litigation 24
5.6. Brokers 24
ARTICLE VI. COVENANTS OF THE SELLER 24
6.1. Cooperation 24
6.2. Access to Documents; Opportunity
to Ask Questions 24
6.3. Conduct of Business 25
6.4. Consents and Conditions; Assignment
of Assets 27
6.5. Compliance with Connecticut Transfer Act27
6.6 No Solicitation. 27
ARTICLE VII. COVENANTS OF THE PURCHASER 28
7.1. Cooperation 28
7.2. Confidentiality 28
7.3. Consents and Conditions 28
7.4. Permits, Bonds and Guarantees 29
ARTICLE VIII. COVENANTS RELATING TO EMPLOYMENT
AND EMPLOYEE MATTERS 29
8.1. Employees 29
8.2. COBRA 29
8.3. Union Plans 30
8.4. Termination Obligations 31
8.5. Indemnification 31
ARTICLE IX. CONDITIONS PRECEDENT TO THE PURCHASER'S
OBLIGATIONS 31
9.1. Representations, Warranties and Covenants31
9.2. No Prohibition 32
9.3. Opinion of the Seller's Counsel 32
9.4. Delivery of Documents 32
9.5. Lease 32
9.6. Absence of Material Adverse Effect 32
9.7. Approvals and Consents 32
ARTICLE X. CONDITIONS PRECEDENT TO THE SELLER'S
OBLIGATIONS 33
10.1. Representations, Warranties and Covenants 33
10.2. No Prohibition 33
10.3. Opinion of the Purchaser's Counsel 33
10.4. Delivery of Documents 34
10.5. Lease 34
ARTICLE XI. ADDITIONAL POST-CLOSING COVENANTS 34
11.1. Further Assurances 34
11.2. Public Announcements 36
11.3. Joint Post-Closing Covenant of the
Seller and the Purchaser 36
11.4. Books and Records; Personnel 37
ARTICLE XII. INDEMNIFICATION AND RELATED MATTERS 38
12.1. Indemnification by the Seller 38
12.2. Indemnification by the Purchaser 39
12.3. Determination of Damages and
Related Matters 39
12.4. Limitation on Indemnification
Liabilities Under Section 12.1(a) 40
12.5. Survival of Representations,
Warranties and Covenants 40
12.6. Notice of Indemnification 40
12.7. Indemnification Procedure for
Third-Party Claims 41
12.8. Arbitration of Disputes Relating
to Indemnification 42
12.9. Exclusive Remedy 44
ARTICLE XIII. TERMINATION 44
13.1. Termination 45
13.2. Liabilities After Termination 45
ARTICLE XIV. MISCELLANEOUS 45
14.1. Certain Definitions 45
14.2. Prorations 51
14.3. Waiver of Compliance with Bulk
Transfer Laws 52
14.4. Entire Agreement 52
14.5. Governing Law 52
14.6. Transfer Taxes 52
14.7. Expenses 53
14.8. Table of Contents and Headings 53
14.9. Notices 53
14.10. Severability 54
14.11. Binding Effect; No Assignment 54
14.12. Amendments 55
14.13. Counterparts 55
Exhibits and Schedules
Schedule 1.1(a) -- Equipment
Schedule 1.1(d) -- Patents and Patent Applications
Schedule 1.1(e) -- Trademarks and Copyrights
Schedule 1.1(h) -- Permits
Schedule 1.1(i) -- Included Contracts
Schedule 1.2(e) -- Excluded Contracts
Schedule 1.4(l) -- Excluded Obligations, Liabilities
and Indebtedness
Schedule 1.5(b) -- Bonds
Schedule 4.4 -- Consents
Schedule 4.5 -- Initial Balance Sheet
Schedule 4.6 -- Certain Business Developments
Schedule 4.7 -- Intangible Assets
Schedule 4.9(a) -- Employees and Employee Benefits
Schedule 4.9(b)(i) -- CB Employee Benefit Plans
Schedule 4.9(b)(ii) -- CB Benefit Arrangements
Schedule 4.9(b)(iii) -- Severance Arrangements
Schedule 4.9(c) -- CB Employee Benefit Plan Exceptions
Schedule 4.10 -- Litigations
Schedule 4.11 -- Compliance With Law
Schedule 4.13 -- Inventory
Schedule 4.14(a) -- Environmental Permits
Schedule 4.14(b) -- Non-Compliance with Environmental Laws
Schedule 4.14(c) -- Environmental Legal Proceedings
Schedule 4.16 -- Material Contracts
Schedule 14.1 -- Retirees
Schedule 14.2 -- Certain Employees
Exhibit A -- Intentionally Omitted
Exhibit B -- Lease Term Sheet
STOCK SALE AND ASSET TRANSFER AGREEMENT
STOCK SALE AND ASSET TRANSFER AGREEMENT (the
"Agreement"), dated as of July 14, 1993, by and
between IMO Industries Inc., a Delaware corporation
(the "Seller"), and NovaDigm Acquisition, Inc., a
Delaware corporation (the "Purchaser").
W I T N E S S E T H :
WHEREAS, as of the Closing Date, the Seller
will be the sole record and beneficial owner of all of
the issued and outstanding shares of common stock (the
"Newco Shares"), of a newly formed and wholly-owned
subsidiary of the Seller ("Newco"); and
WHEREAS, the Seller, through its (i) Wiggins
Connectors division is engaged in the business of
manufacturing, selling and distributing high
performance tube couplings, quick disconnect couplings
and precision fuel components and systems and related
products (the "Wiggins Business"); (ii) Aeroproducts
division, is engaged in the business of manufacturing,
selling and distributing specialty small compressors,
dehydrators, hydraulic pumps, valves and systems for
commercial and military aerospace application and
related products (the "Aeroproducts Business");
(iii) Adel Fasteners division, is engaged in the
business of manufacturing, selling and distributing
bone and cushion metal clamps, blocks, stamped metal
parts and related products (the "Adel Business"); and
(iv) Controlex division, is engaged in the business of
manufacturing, selling and distributing precision
aircraft mechanical remote control systems, including
sliding and ball bearing controls, gear boxes and
throttle quadrants, and related products (the
"Controlex Business," collectively with the Wiggins
Business, the Aeroproducts Business and the Adel
Business, the "Businesses," and each individually
referred to herein as a "Business"); and
WHEREAS, on the Closing Date, the Seller will
assign to Newco all of the assets and properties of
the Seller employed exclusively in the Businesses and
the Seller will assign and Newco will assume, certain
of the obligations and liabilities of the Businesses,
subject, in each case, to the exceptions, terms and
conditions set forth herein (the "Asset Assignment");
and
WHEREAS, immediately following the Asset
Assignment, the Purchaser will purchase, and the
Seller will sell, all of the Newco Shares; and
WHEREAS, certain capitalized terms used
herein are defined in Section 14.1 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 Seller
hereby agree as follows:
Article I.
ASSETS TO BE ACQUIRED
1.1 Sale and Purchase of Newco Shares. Upon the terms and
subject to the conditions hereinafter set forth, the Seller
shall sell, assign, transfer, convey and deliver to the
Purchaser, and the Purchaser shall purchase, acquire and
accept from the Seller, all of its right, title and interest
in the Newco Shares.
1.2 Transfer and Assignment of Assets to Newco. Upon the
terms and subject to the conditions hereinafter set forth,
immediately prior to the Closing, the Seller shall assign,
transfer, convey and deliver to Newco, and Newco shall
acquire and accept from the Seller, all of the Seller's
right, title and interest in and to the Businesses,
including, without limitation, in and to all of the assets,
properties, rights, contracts and claims, employed exclu
sively in such Businesses (except as otherwise set forth in
Section 1.3 hereof), wherever located, whether tangible or
intangible, as the same shall exist as of the Closing (such
rights, title and interest in and to all such assets,
properties, rights, contracts and claims, being collectively
referred to herein as, the "Assets"). The Assets shall
include, without limitation, all of the Seller's rights,
title and interest in and to the assets, properties, rights,
contracts and claims described in the following paragraphs
(a) through (m) but in each case, only to the extent exclu
sively used in, held for exclusive use in or exclusively
related to the Businesses:
(a) all furnishings, furniture, office supplies,
vehicles, spare parts, tools, dies, machinery, equipment,
computers and other tangible personal property (collective
ly, the "Equipment");
(b) all items of inventory, including, without
limitation, raw materials, work-in-process, finished goods,
supplies, spare parts and samples;
(c) all accounts receivable and all notes receivable
(whether short-term or long-term) and all deposits, together
with any unpaid interest accrued thereon from the respective
obligors and any security or collateral therefor, including
recoverable deposits (collectively, the "Accounts
Receivable");
(d) any of the Seller's right, title or interest in the
Owned Real Property and the Leased Real Property set forth
on Schedule 1.2(d) hereto (collectively, the "Real
Property"), including all buildings located thereon, any of
the fixtures attached thereto and any Permits relating
thereto;
(e) except as set forth in Section 1.3(d) hereof,
Intellectual Property (including, but not limited to,
copyrights and/or trade secrets relating to any Assets set
forth in Section 1.2(f) hereof) and 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");
(f) all copies of marketing brochures and materials and
other non-proprietary printed or written materials in any
form or medium relating to the Sellers' ownership of or
operation of the Businesses that the Seller is not required
by law to retain (of which the Seller may retain
duplicates), and duplicates of any such materials that the
Seller is required by law to retain;
(g) all rights under or pursuant to all warranties,
representations and guarantees made by suppliers,
manufacturers and contractors in connection with the
operation of the Businesses or affecting the Equipment;
(h) all Permits listed on Schedule 4.20 hereto held by
the Seller (to the extent permitted by applicable Law to be
transferred);
(i) all Contracts including, without limitation, those
listed on Schedule 4.9(a)(i) hereto;
(j) all deferred and prepaid charges, sums and fees
reflected on the Statement of Working Capital as finally
agreed to by the Purchaser and the Seller pursuant to
Section 2.3 hereof;
(k) all books, records, or other data relating to the
Seller's ownership or operation of the Businesses;
(l) any claims or causes of action relating to the Assets
and any counterclaims, set-offs or defenses the Seller may
have with respect to any Assumed Liability; and
(m) all goodwill relating to the foregoing Assets and the
Businesses.
1.3 Excluded Assets. Notwithstanding anything to the
contrary contained in Section 1.2 hereof, the Seller and
Newco expressly understand and agree that the Seller is not
hereunder assigning, transferring, conveying or delivering
to Newco the following assets, properties, rights, contracts
and claims (collectively, the "Excluded Assets"):
(a) cash, bank accounts, certificates of deposits,
treasury bills, treasury notes and marketable securities;
(b) employee or retiree compensation or benefit plans,
policies, programs, agreements and arrangements and related
plan assets other than the Union Pension Plans;
(c) any policy of insurance;
(d) except to the extent set forth in Section 11.6
hereof, any of the Seller's right, title or interest in or
to any trade name or trademark, incorporating "IMO," "IMO
Delaval," "Transamerica Delaval" or "Delaval" and all
corporate logos incorporating "IMO," "IMO Delaval,"
"Transamerica Delaval" or "Delaval" and any and all goodwill
represented thereby and pertaining thereto;
(e) all prepaid insurance premiums and prepaid taxes
pertaining to the Businesses to the extent not reflected on
the Statement of Working Capital as finally agreed to by the
Purchaser and the Seller pursuant to Section 2.3 hereof and
all prepaid charges, sums and fees pertaining exclusively to
any of the Excluded Assets or the Excluded Liabilities;
(f) any books, records or other data relating to the
Seller's ownership or operation of the Businesses not
located on the premises of any Business and which are either
part of the Seller's general corporate books and records or
required by applicable Law to be retained by the Seller;
provided, however, that copies of such books, records or
other data relating to the Businesses shall be furnished to
the Purchaser promptly upon reasonable written request;
(g) except as otherwise set forth in the last sentence of
Section 11.1(b) hereof, any of Seller's right, title and
interest under any Contracts (other than purchase orders
entered into in the ordinary course of business) or Permits
which, in either case, are not transferrable without consent
(unless such consent has been obtained); and
(h) any claims for refunds or rebates of any previously
paid taxes, levies or duties, including, without limitation,
customs duties, to the extent not reflected on the Statement
of Working Capital as finally agreed to by the Purchaser and
the Seller pursuant to Section 2.3 hereof.
1.4 Assumed Liabilities. Effective as of the Closing,
Newco shall assume and pay, perform and discharge all claims
against, and liabilities and obligations of, the Seller with
respect to:
(a) the Contracts being transferred to Newco hereunder
(to the extent that such liabilities and obligations remain
unsatisfied or are required to be performed on or after the
Closing Date);
(b) Employees and employee benefits solely to the extent
specifically set forth in Article VIII hereof;
(c) 1 any liability or obligation reflected on the
Statement of Working Capital as finally agreed to by the
Purchaser and the Seller pursuant to Section 2.3 hereof or
set forth on Schedule 1.4 hereto;
a) 1 the first $500,000 of Environmental Liabilities;
(a) once the $500,000 threshold in subsection 1.4(d) has
been met, 10% of all Environmental Liabilities thereafter; and
(b) any liability or obligation associated with the Wiggins
Remediation not in excess of $150,000 (clauses (a) through (f)
being collectively, the "Assumed Liabilities").
1.5 Excluded Liabilities. The Seller and Newco expressly
understand and agree that Newco shall not assume, pay, perform
or discharge or become liable for: (a) any Liabilities of the
Seller, including, without limitation, those Liabilities
relating to the operation of the Businesses prior to the
Closing, of any kind or nature, whether known, unknown,
contingent, absolute, determined, indeterminable or otherwise,
except for the Assumed Liabilities or (b) except as set forth
in Section 14.6 hereof, any liability or obligation for Taxes
(whether presently in existence or arising hereafter) imposed
on the Seller, Newco or the Assets as a result of the ownership
or operation of the Assets or the Businesses or arising solely
by reason of the inclusion of Newco in any consolidated,
combined or unitary tax return of the Seller, prior to and
including the Closing Date (collectively, the "Excluded
Liabilities").
Article II.
PURCHASE PRICE
2.1 Purchase Price and Payment. The aggregate purchase
price to be paid by the Purchaser to the Seller for the Newco
Shares shall be $56,000,000 (the "Purchase Price"), allocated
as provided in Section 2.4 hereof and subject to adjustment as
provided in Sections 2.2 and 2.3 hereof. Payment of the
Purchase Price shall be in U.S. dollars, and shall be made no
later than 11:30 a.m. (New York City time) on the Closing Date
by wire transfer of immediately available funds to the account
or accounts designated by the Seller.
2.2 The Initial Working Capital. The Seller and the
Purchaser hereby agree that the Working Capital as of December
31, 1992 (the "Initial Working Capital") shall equal
$25,673,000 (calculated as shown on Schedule 2.2(a) hereto and
which excludes all Excluded Assets and Excluded Liabilities).
The "Preliminary Working Capital Adjustment" shall equal the
Initial Working Capital minus the amount of the Working Capital
reflected on the Statement of Working Capital (as defined
below). As used herein, "Working Capital" shall be calculated
in accordance with GAAP except as modified by Section 2.3(b)
hereof and shall include, without limitation, the categories of
working capital accounts set forth on Schedule 2.2(a) hereto.
In the event an Excluded Asset or an Excluded Liability was
included in the Initial Working Capital, such amount shall be
subtracted from or added to the Initial Working Capital, as the
case may be, in order to insure that Initial Working Capital
excludes all Excluded Assets and Excluded Liabilities.
2.3 Statement of Working Capital. (a) As soon as
practicable (but in no event later than 60 days) following the
Closing Date, the Seller shall prepare and deliver to the
Purchaser an audited statement of working capital for the
Businesses as of the Closing Date (the "Statement of Working
Capital"), which shall include a computation of the Preliminary
Working Capital Adjustment together with a report thereon of
Ernst & Young, independent accountants of the Seller ("Ernst &
Young"), stating that the Statement of Working Capital fairly
presents the Working Capital as of the Closing Date in
accordance with GAAP except as modified pursuant to Section
2.3(b) hereof. The Seller shall be responsible for the entire
cost of the preparation of the audited Statement of Working
Capital.
(b) The Statement of Working Capital shall be prepared in
accordance with GAAP and shall include, without limitation, the
categories of working capital accounts set forth on Schedule
2.2(a) hereto, except as modified by the following:
(i) all Excluded Assets and Excluded Liabilities shall be
excluded from the Statement of Working Capital;
(ii) (1) all Inventory shall be determined by a physical
count of items valued at cost in a manner consistent with the
preparation of the Initial Balance Sheet; provided, that any
inventory recorded on the Initial Balance Sheet which has not
been sold as of the Closing Date shall be recorded on the
Statement of Working Capital at no greater amount than the
amount that was recorded on the Initial Balance Sheet in
respect of such inventory; provided, further, that the amount
of inventory recorded on the Statement of Working Capital shall
include the excess of (x) the amount recorded on the Initial
Balance Sheet for obsolete inventory of the Adel Business which
has been physically disposed of since December 31, 1992 over
(y) any proceeds received by the Seller in respect of such
disposition and (2) there shall be no provision, allowance or
reserve made with respect to excess or obsolete inventory;
(iii) Accounts Receivable shall be valued without
consideration of any amount associated with allowance for
doubtful accounts; and
(iv) there shall be no reserve, write-off or accrual of any
of the following items:
(A) prepaid severance expense;
(B) product warranties or claims for failure to comply with
contractual commitments in respect of products manufactured;
(C) state unemployment insurance;
(D) employee vacations;
(E) property taxes for the Adel Business;
(F) pending workers' compensation or medical claims;
(G) underfunded union pension obligations;
(H) FAS 106 liability for Employees other than Inactive
Employees;
(I) the Wiggins Remediation; and
(J) "other assets" relating to termination for convenience
and other customer related claims, including, without
limitation, the claims against International Management Systems
and the claims related to the A-12 project.
(c) Following the Closing Date, the Purchaser shall afford
the Seller and Ernst & Young access to all books and records
relating to the Businesses and make available the assistance of
any employees of the Purchaser related to the Businesses, in
each case as is necessary to enable the Seller and Ernst &
Young to prepare the Statement of Working Capital and to
calculate the Preliminary Working Capital Adjustment.
(d) The Purchaser shall have a period of 30 days to review
the Statement of Working Capital and the calculation of the
Preliminary Working Capital Adjustment following delivery of
the Statement of Working Capital by the Seller. During such
period, the Seller shall afford the Purchaser and its
accountants access to any of its books, records and work
papers, and the Seller shall use its reasonable best efforts to
make available the working papers of Ernst & Young prepared in
connection with the audit of the Statement of Working Capital
and the assistance of Ernst & Young, in each case as is
necessary to enable the Purchaser to review the Statement of
Working Capital and the calculation of the Preliminary Working
Capital Adjustment. The Purchaser may dispute any amounts
reflected in the Preliminary Working Capital Adjustment by
giving notice in writing to the Seller specifying each of the
disputed items and setting forth in reasonable detail the basis
for such dispute; provided, however, that the Purchaser may
only dispute the calculation of the Preliminary Working Capital
Adjustment to the extent that the aggregate of all items in
dispute would reduce the Preliminary Working Capital Adjustment
by more than $75,000 and, provided, further, that the Purchaser
may not dispute any of the items specified in Section 2.3(b)
hereof. Failure by the Purchaser to dispute the amounts re
flected in the Preliminary Working Capital Adjustment within 30
days of delivery of the Statement of Working Capital by the
Seller shall be deemed an acquiescence therein by the
Purchaser. If within 30 days after delivery by the Purchaser
to the Seller of any notice of dispute, the Purchaser and the
Seller are unable to resolve all of such disputed items, then
any remaining items in dispute shall be submitted to Arthur
Andersen & Co. (the "Arbitrator"). The Arbitrator shall
determine the remaining disputed items and report to the Seller
and the Purchaser upon such items. The Arbitrator's decision
shall be final, conclusive and binding on all parties. The
fees and disbursements of the Arbitrator shall be borne equally
by the Purchaser and the Seller. The Preliminary Working
Capital Adjustment for the Businesses if undisputed or deemed
undisputed or as revised in accordance with the procedure
outlined above shall be the "Final Working Capital Adjustment."
(e) If the amount of the Final Working Capital Adjustment is
positive then the Purchase Price shall be decreased by such
amount and the Seller shall promptly pay to the Purchaser an
amount equal to the Final Working Capital Adjustment in cash,
with interest from the Closing Date computed at the prime rate
announced from time to time by Bankers Trust Company, as in
effect from time to time.
(f) If the amount of the Final Working Capital Adjustment is
negative then the Purchase Price shall be increased by such
amount and the Purchaser shall promptly pay to the Seller an
amount equal to the Final Working Capital Adjustment in cash,
with interest from the Closing Date computed at the prime rate
announced from time to time by Bankers Trust Company, as in
effect from time to time.
2.4 Allocation of Purchase Price. The Purchaser and the
Seller hereby agree that prior to the Closing Date the
Purchaser shall prepare (a) an allocation of the Purchase Price
to the Newco Shares and the Seller's agreement not to compete
set forth in Section 11.5 hereof, and (b) a further allocation
among the Assets of the consideration allocated to the Newco
Shares (the "Asset Allocation"), and the Seller will be given
an opportunity to review and consent to such allocations, which
consent shall not be unreasonably withheld. Promptly following
delivery of the Statement of Working Capital, the Purchaser may
amend the Asset Allocation, subject to the consent of the
Seller, which consent shall not be unreasonably withheld. The
Purchaser and the Seller shall timely file Form 8954 pursuant
to Section 1060 of the Code and the Temporary Treasury
Regulations thereunder and shall reflect on such form
allocations consistent with the Asset Allocation agreed to
pursuant to this paragraph. Subject to the requirements of any
applicable tax law, all tax returns and reports filed by the
Purchaser, the Seller and Newco shall be prepared consistently
with the allocations determined pursuant to this Section 2.4.
In the event of any purchase price adjustment hereunder, the
Purchaser and the Seller agree to adjust the Asset Allocation
to reflect the purchase price adjustment and, in each case, to
file consistently any tax returns and reports required as a
result of such purchase price adjustment.
Article III
THE CLOSING
3.1 Closing Date. 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 waived by the party entitled to do so, 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."
3.2 Proceedings at Closing. All proceedings to be taken and
all documents to be executed and delivered by the Seller 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 simulta
neously, and no proceedings shall be deemed taken nor any
documents executed or delivered until all have been taken,
executed and delivered.
3.3 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:
(a) a stock certificate or stock certificates evidencing the
Newco Shares being sold by the Seller pursuant to the terms
hereof, in each case endorsed in blank or with an executed
blank stock power attached thereto and with all required stock
transfer stamps attached thereto;
(b) resignations of each of the directors and officers of
Newco as required by Section 9.10 hereof;
(c) the original minute books and stock books of Newco;
(d) the certificates signed by a duly authorized officer of
the Seller referred to in Section 9.1(c) hereof;
(e) the opinions of counsel for the Seller referred to in
Section 9.4 hereof;
(f) an affidavit, in a form reasonably satisfactory to the
Purchaser, of the Seller stating under penalties of perjury the
Seller's United States taxpayer identification number and that
the Seller is not a foreign person within the meaning of
Section 1445(b)(2) of the Code;
(g) a receipt for the Purchase Price; and
(h) all other agreements, certificates, documents and
instruments referred to in Article IX to be executed by the
Seller on or prior to the Closing Date.
3.4 Deliveries by the Purchaser to the Seller. At the
Closing, the Purchaser shall deliver to the Seller the
following:
(a) immediately available funds in the amount of the
Purchase Price, by wire transfer as provided in Section 2.1
hereof;
(b) the certificates referred to in Section 10.1(c) hereof
signed by duly authorized officers of the Purchaser;
(c) the opinion of counsel for the Purchaser referred to in
Section 10.3 hereof; and
(d) all other agreements, certificates, documents and
instruments referred to in Article X to be executed by the
Purchaser on or prior to the Closing Date.
3.5 Deliveries by the Seller to Newco and the Purchaser. At
the Closing, the Seller shall deliver to Newco and the
Purchaser the following:
(a) an executed assignment and assumption agreement, dated
the Closing Date, in a form reasonably acceptable to the
Purchaser and Newco, transferring to Newco all of the Assets
and pursuant to which Newco assumes all of the Assumed
Liabilities;
(b) a patent and trademark assignment agreement, dated the
Closing Date, in a form reasonably acceptable to the Purchaser
and Newco;
(c) bargain and sale deeds (with covenants against grantor)
in recordable form in each jurisdiction in which the Owned Real
Property is located, in each case dated the Closing Date and
substantially in the form attached hereto as Exhibit A; and
(d) assignment and assumption agreements of leases in
recordable form in each jurisdiction in which Leased Real
Property is located, in each case dated the Closing Date and in
a form reasonably acceptable to Purchaser and Newco.
3.6. Deliveries by Newco to the Seller. At the Closing,
Newco shall deliver to the Seller executed copies of the
assignment and assumption agreement, patent and trademark
assignment agreement and assignment and assumption agreements
of leases described in Sections 3.5(a),(b) and (d) hereof, in
each case dated the Closing Date.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE SELLER
The Seller hereby represents and warrants to the
Purchaser as follows:
4.1 Organization and Good Standing. The Seller is and as of
the Closing Date Newco will be corporations duly organized,
validly existing and in good standing under the laws of the
State of Delaware and have all requisite corporate power and
authority to carry on their businesses as they are now being
conducted, and to execute, deliver and perform this Agreement
and to consummate the transactions contemplated hereby. The
Seller is duly qualified to do business as a foreign
corporation and in good standing in each jurisdiction where the
character of the property owned or leased by a Business or the
nature of the activities of any Business make such
qualification necessary. The Seller has and prior to the
Closing Newco will have delivered to the Purchaser true and
complete copies of their respective certificate of
incorporation and by-laws as currently in effect in the case of
the Seller and as will be in effect as of the Closing Date in
the case of Newco.
4.2 Authorization of Agreement; No Conflicts. (a) The
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 Seller in connection with the consummation
of the transactions contemplated hereby or thereby (all such
other agreements, documents, instruments and certificates
required to be executed by the Seller being hereinafter
referred to, collectively, as the "Seller Documents"), and to
perform fully its obligations hereunder and thereunder. The
execution, delivery and performance by the Seller of this
Agreement and each of the Seller Documents has been duly
authorized by all necessary corporate action on the part of the
Seller. This Agreement has been, and each of the Seller
Documents will be at or prior to the Closing, duly executed and
delivered by the Seller, and (assuming the due authorization,
execution and delivery by the other parties hereto and thereto)
this Agreement constitutes, and the Seller Documents when so
executed and delivered will constitute, legal, valid and
binding obligations of the Seller, enforceable against the
Seller 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
1principles of equity (regardless of whether enforcement is
sought in a proceeding at law or in equity). Except as set
forth on Schedule 4.2 hereto, none of the execution and
delivery by the Seller of this Agreement and 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 incorpo
ration or by-laws of the Seller, (ii) conflict with, violate,
result in the breach or termination of, or constitute a default
under any Material Contract or Order relating to any of the
Businesses to which the Seller is a party or by which it or any
of the Assets is bound or subject, (iii) constitute a violation
of any Law applicable to the Seller, or (iv) result in the
creation of any Lien (other than any Lien in favor of the
Purchaser or other than Liens created in connection with any
financing obtained by the Purchaser with respect to the
purchase of the Newco Shares) upon any of the Assets.
(b) As of the Closing Date, Newco will have 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 Newco in connection with the consummation of the
transactions contemplated hereby or thereby (all such other
agreements, documents, instruments and certificates required
to be executed by Newco being hereinafter referred to,
collectively, as the "Newco Documents"), and to perform
fully its obligations hereunder and thereunder. As of the
Closing Date, the execution, delivery and performance by
Newco of this Agreement and each of the Newco Documents will
have been duly authorized by all necessary corporate action
on the part of Newco. This Agreement and each of the Newco
Documents will be at or prior to the Closing, duly executed
and delivered by Newco, and (assuming the due authorization,
execution and delivery by the other parties hereto and
thereto) when so executed and delivered will constitute,
legal, valid and binding obligations of Newco, enforceable
against Newco in accordance with their respective terms,
subject to applicable bankruptcy, insolvency, reorganiza
tion, moratorium and similar laws affecting creditors'
rights and remedies generally and subject, as to enforceabi
lity, to general principles of equity (regardless of whether
enforcement is sought in a proceeding at law or in equity).
None of the execution and delivery by Newco of this
Agreement and the Newco Documents, or the consummation of
the transactions contemplated hereby or thereby, or
compliance by Newco 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 Newco, (ii) conflict with, violate, result in the breach
or termination of, or constitute a default under any
Contract or Order to which Newco is a party or by which it
or any of its assets is bound or subject, (iii) constitute a
violation of any Law applicable to Newco, or (iv) result in
the creation of any Lien (other than any Lien in favor of
the Purchaser or other than Liens created in connection with
any financing obtained by the Purchaser with respect to the
purchase of the Newco Shares) upon any of the Assets.
4.3 Capitalization of Newco; Ownership. (a) As of the
Closing Date, the Newco Shares will constitute all of the
issued and outstanding shares of the capital stock of Newco
and all of the Newco Shares will be duly authorized, validly
issued, fully paid and nonassessable and free of preemptive
rights. As of the Closing Date, the authorized capital
stock of Newco will consist of 1,000 shares of common stock,
par value $.01 per share, of which 1,000 shares will be
outstanding. As of the Closing Date, there will be no
outstanding options, warrants or other rights of any kind to
acquire any shares of capital stock of Newco or securities
convertible into or exchangeable for, or which otherwise
confer on the holder thereof any right to acquire, any
shares of capital stock of Newco, nor is Newco committed to
issue any such option, warrant, right or security. As of
the Closing Date, there will be no restrictions on the
transfer of the Newco Shares except as may be imposed by
applicable securities laws of the relevant jurisdiction.
(b) As of the Closing Date, the Newco Shares will be
owned of record and beneficially by the Seller and the
Seller will have good and valid title to the Newco Shares,
free and clear of any and all Liens.
4.4 Title to Assets Other than Real Property. (a) Except
as set forth in Section 4.4(b) hereof, the Seller 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, including all of such Assets
reflected on the Initial Balance Sheet, except Assets
disposed of in the ordinary course of business after
December 31, 1992. The Seller holds title to each Asset
other than Real Property free and clear of all Liens other
than Permitted Exceptions.
(b) On the Closing Date, Newco will own and have good and
valid title to all of the Assets other than the Real
Property, including all of the Assets reflected on the
Initial Balance Sheet, except Assets disposed of in the
ordinary course of business after December 31, 1992. On the
Closing Date, Newco will hold title to each Asset other than
Real Property free and clear of all Liens other then
Permitted Exceptions.
(c) The Assets and any other assets used by the Seller in
connection with the Businesses pursuant to any Contract or
Permit or otherwise are in all material respects adequate
for the purposes for which such assets are currently used or
contemplated to be used, and are in reasonably good repair
and operating condition, subject to normal wear and tear.
Except for Accounts Receivables, Intangible Assets, other
general intangibles of the Businesses and other assets of
the Businesses currently in transit either to or from any of
the premises of the Businesses, the Assets are not located
anywhere other than at the Real Property.
4.5 Title to Real Property. (a) Except as set forth in
Section 4.5(b) hereof, the Seller has (i) good and valid fee
title to all the Owned Real Property and (ii) good and valid
leasehold title to the Leased Real Property, in each case,
free and clear of any Liens, except Permitted Exceptions.
Complete and correct copies of each deed or lease,
respectively, relating to the Real Property (the "Real
Property Documents") have been furnished to the Purchaser.
(b) On the Closing Date, Newco will have (i) good and
valid fee title to all the Real Property and (ii) good and
valid leasehold title to the Leased Real Property, in each
case, free and clear of any Liens, except Permitted
Exceptions.
(c) No damage or destruction has occurred with respect to
any of the Real Property that would individually or in the
aggregate materially impair the continued use or operation
of the Real Property.
(d) The Seller has not received notice of any proceedings
in eminent domain or otherwise pending or, to the Seller's
knowledge, threatened affecting any portion of the Real
Property. Except as disclosed in the Real Property
Documents, the Seller is not obligated under or is not a
party to any option, right of first refusal or other
contractual right to purchase, acquire, sell or dispose of
any Owned Real Property.
(e) The Seller enjoys peaceful and undisturbed possession
of all Leased Real Property. Each lease of Leased Real
Property is in full force and effect. The Seller has not
received notice of any default under any lease of Leased
Real Property.
4.6 Consents. No consent, waiver, approval, order or
authorization of, or registration, declaration or filing
with, or notification to, any Person or Governmental Body is
required on the part of the Seller or Newco in connection
with the execution and delivery by the Seller of this
Agreement or the Seller Documents, the assignment of the
Contracts (except that no representation is made with
respect to purchase orders in the ordinary course of
business) and other Assets to Newco on the Closing Date, the
sale and purchase of the Newco Shares on the Closing Date or
the compliance by the Seller with any of the provisions
hereof or thereof, except (i) as set forth on Schedule 4.6
hereto and (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").
4.7 Financial Statements. (a) The Initial Balance Sheet
as of, and the statement of income of the Businesses for the
year ended December 31, 1992, copies of which are attached
hereto as Schedule 4.7(a) hereto (collectively, the "Finan
cial Statements"), have been prepared in accordance with
GAAP consistently applied throughout the periods indicated
except as set forth in the notes thereto or in Schedule
4.7(b) hereto and present fairly the financial position and
results of operations of the Businesses at the date and for
the period indicated.
(b) Except (i) as set forth on any schedule hereto,
(ii) to the extent specifically reserved against on the
Initial Balance Sheet or the Statement of Working Capital as
finally agreed to by Purchaser and the Seller pursuant to
Section 2.3 hereof or (iii) incurred in the ordinary course
of business since the date of such Initial Balance Sheet or
specifically described as to nature and amount on Schedule
4.7(b) hereto, the Seller has no liabilities or obligations
of any nature, whether liquidated, unliquidated, absolute,
contingent or otherwise which are or would be material to
the business, operations or financial condition of the
Businesses taken as a whole.
4.8 Absence of Certain Developments. Except as set forth
on Schedule 4.8 hereto, since December 31, 1992 the Seller
has operated the Businesses in the ordinary course
consistent with past practice and there has not been:
(a) any material damage, destruction or other casualty
loss or interruption in use, with respect to any material
Asset;
(b) any sale, transfer, lease or other disposition of any
material assets or property of any of the Businesses
(including the Assets), except for sales of inventory in the
ordinary course of business, or any cancellation or
compromise of any material debt or material claim of value
related to the Businesses or the Assets, or any waiver or
release of any right of material value related to the
Businesses or the Assets;
(c) any incurrence, assumption or guarantee of any
indebtedness for borrowed money with respect to the
Businesses;
(d) any mortgage or pledge of or creation of any Lien on
any of the Assets (other than Permitted Exceptions);
(e) any incurrence of liability or obligation or entry
into any transaction, Contract or commitment other than in
the ordinary course of business, in each case, relating to
the Businesses or the Assets;
(f) transactions with Affiliates other than in the
ordinary course of business and on terms no less favorable
than could be obtained on an arms-length basis;
(g) any transfer or grant of any material rights under or
entry into any material settlement regarding the breach or
infringement of any Intellectual Property, or any
modification of any material existing rights with respect
thereto;
(h) any institution or settlement of or agreement to
settle any material litigation, action or proceeding before
any court or governmental body, in each case, relating to
the Businesses or the Assets (other than monetary judgments
or settlements which have been discharged by the Seller and
which judgments and settlements are set forth on Schedule
4.8(h) hereto);
(i) any labor union organizing activity or material
adverse change in the Seller's relations with its employees,
agents, customers or suppliers, in each case, relating to
the Businesses or the Assets;
(j) any increase in the compensation of any Employee, or
any institution or adoption of or amendment to any
compensation or benefit program, plan or arrangement, which
would increase the payments, compensation or benefits
thereunder, for Employees, in each case, other than in the
ordinary course of business;
(k) any entry into any agreement or commitment (whether
written or oral) to take any of the types of action
described in subparagraphs (a) through (j) above; or
(l) any event, occurrence, development or state of
circumstances or facts which has resulted or could be
reasonably expected to result in a Material Adverse Effect.
4.9 Material Contracts. (a) Schedule 4.9(a)(i) hereto
contains a true and correct list of each Contract (other
than purchase orders in the ordinary course of business),
with respect to the Assets or of the Businesses to which the
Seller or any Business is a party and which involves (i) in
the case of the Adel Business, the payment to or from the
Adel Business of amounts in excess of $50,000, (ii) in the
case of the Controlex Business, the payment to or from the
Controlex Business of amounts in excess of $75,000, (iii) in
the case of the Wiggins Business, the payment to or from the
Wiggins Business of amounts in excess of $20,000, (iv) in
the case of the Aeroproducts Business, the payment to or
from the Aeroproducts Business of amounts in excess of
$50,000 or (v) a term in excess of one year. The Purchaser
has been provided with true and complete copies of each
Contract listed on Schedule 4.9(a)(i) hereto. Except as
disclosed in Schedule 4.9(a)(ii) hereto, each Contract is a
valid and binding agreement of the Seller or a Business, and
the Seller or a Business is not nor, to the knowledge of the
Seller, is any other party thereto in default or breach in
any material respect under the terms of any such Contract,
nor has any event occurred which with the passage of time or
the giving of notice would result in a default or breach
under any Contract. Neither the Seller nor any other Person
has issued or is a party to any bond, guarantee, letter of
credit or similar undertaking or performance obligation with
respect to the operation of the Businesses.
(b) Schedule 4.9(a)(i) also indicates which Contracts set
forth thereon are Government Contracts.
(c) Except as set forth on Schedule 4.9(c) hereto and for
routine investigations or audits in the ordinary course of
business, the Seller is not participating in or the subject
of any investigation by any Governmental Body relating to
any Government Contract or any business practices of any
Business that could lead to criminal or civil penalties.
The Seller has not received any notice that it (with respect
to any Business) has been or is debarred or suspended by any
Governmental Body from bidding for or obtaining any
government contract or subcontract, and no such proceeding
is pending, or to the knowledge of the Seller, threatened,
which could result in the debarment or suspension of the
Seller (with respect to any Business).
(d) As to any Government Contract subject to the U.S.
Government Cost Accounting Standards or the Federal Truth in
Negotiations Act, except as set forth on Schedule 4.9(d)
hereto, the Seller has complied in all material respects
with all requirements thereunder and there are presently no
audits or investigations being conducted with respect to
asserted violations of government cost accounting standards
or cost principles.
(e) Except as set forth on Schedule 4.9(e) hereto,
there have not been and are not projected to be any cost
overruns in excess of $50,000 in respect of any Government
Contract. For purposes of this Section 4.9(e), a cost
overrun in respect of a Government Contract shall occur if
the aggregate actual costs (direct or indirect) incurred to
date plus current estimated costs (direct or indirect) to
complete a Government Contract exceeds expected revenues
from such Government Contract.
4.10 Intangible Property. (a) The Intangible Assets set
forth on Schedule 4.10(a) hereto constitute all of the
patents, registered and material unregistered 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 Businesses, except for any name, mark,
trade name or trade mark incorporating "IMO" or "IMO
Delaval." To the Seller's knowledge, the Seller's use of
the foregoing Intangible Assets does not conflict with,
infringe upon, violate or interfere with any intellectual
property rights of any other Person. Except as set forth on
Schedule 4.10(a)(i) hereto, the Seller shall transfer, or
cause to be transferred to Newco at the Closing, and
immediately after the Closing, Newco will own or have the
right to use, all Intangible Assets set forth on Schedule
4.10(a) hereto, free from any Liens (other than Permitted
Exceptions) and on the same terms and conditions as in
effect prior to the Closing or as otherwise acceptable to
the Purchaser.
(b) To the knowledge of Seller, none of the Intangible
Assets is being infringed, except as set forth on Schedule
4.10(b) hereto.
(c) The Seller has 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 (including, but not limited to, other
divisions, subsidiaries and/or Affiliates of the Seller)
only pursuant to the agreements or arrangements set forth on
Schedule 4.10(c) hereto. The Businesses (or the Seller on
their behalf) have had Intellectual Property licensed to
them, or have otherwise been permitted to use Intellectual
Property, only pursuant to the agreements or arrangements
set forth on Schedule 4.10(c) hereto. All of the agreements
or arrangements set forth on Schedule 4.10(c) hereto:
(i) are in full force and effect and enforceable in
accordance with their terms, and no default exists or is
threatened thereunder by the Seller or any Business, or, to
the knowledge of the Seller, by any other party thereto and
(ii) are free and clear of all Liens by the Seller or any
Business, other than Permitted Exceptions. The Seller
confirms that it has delivered to the Purchaser complete and
correct copies of all licenses and arrangements set forth on
Schedule 4.10(c) hereto.
(d) No claim or demand of any Person has been made nor is
there any proceeding that is pending or, to the knowledge of
the Seller, threatened, which (i) challenges the rights of
the Seller or the Businesses in respect of any Intangible
Property or (ii) asserts that the Businesses are infringing
or otherwise in conflict with, or are, except as set forth
on Schedule 4.10(d), required to pay any royalty, license
fee, charge or other amount with regard to, any Intellectual
Property. None of the Intangible Assets is subject to any
outstanding order, ruling, decree, judgment or stipulation
by or with any court, arbitrator, or administrative agency,
or has been the subject of any litigation within the last
year, whether or not resolved in favor of the Seller or any
of the Businesses.
4.11 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.
(b) Seller is not a foreign person within the meaning of
Section 1445(b)(2) of the Code.
4.12 Employees and Employee Benefits. (a) Except as set
forth on Schedule 4.12(a) hereto, (i) the Seller is not a
party to or bound by any collective bargaining agreement
applicable to the Employees; (ii) none of the Employees is
represented by any labor organization and there are, to the
knowledge of the Seller, no attempts to organize any
Employees; (iii) there is no labor strike, work stoppage or
slowdown pending or, to the knowledge of the Seller,
threatened and no pending lockout by the Seller; (iv) to the
knowledge of the Seller, there is no material grievance
currently pending or threatened by any CB Employee against
the Seller; and (v) to the knowledge of the Seller, the
Seller is and during the term of its current collective
bargaining agreements has been, in compliance with all of
its obligations under such collective bargaining agreements,
except where any noncompliance could not reasonably result
in a material liability.
(b) Schedule 4.12(b) hereto contains a true and complete
list of each "employee benefit plan" as defined in Section
3(3) of ERISA of the Seller and each employment, severance,
termination, compensation, or deferred compensation, bonus,
incentive, retention, change in control, stock option, stock
appreciation, stock purchase, phantom stock, fringe benefit
plan, program, arrangement, agreement or policy that
provides benefits or compensation in respect of any Employee
or Former Employee (including beneficiaries and dependents
of such persons) or under which any Employee, Former
Employee, beneficiary or dependent is entitled to
participate (the "Employee Benefit Plans"). No Employee
Benefit Plan is a "multiemployer plan" or a "multiple
employer plan" within the meaning of Section 4001(a)(3) or
4064 of ERISA, respectively. With respect to any Employee
Benefit Plan covering CB Employees (a "Union Plan"), the
Seller has provided the Purchaser true and complete copies
of all written plan documents and amendments thereto; a
written description of all material unwritten Union Plans;
all trust agreements or agreements reflecting other funding
arrangements; the most recent actuarial and trust reports;
the most recent Form 5500 filed and all schedules thereto;
the most recent determination letter issued; current summary
plan descriptions; and all material communications received
from or sent to the Internal Revenue Service, the Pension
Benefit Guaranty Corporation or the Department of Labor.
Each Union Plan intended to be qualified under
Section 401(a) of the Code so qualifies and the trust (if
any) forming a part thereof is exempt from taxation pursuant
to section 501(a) of the Code. Each of the Union Plans and
each related funding arrangement, if any, has been operated
and administered in accordance with all applicable laws,
including but not limited to ERISA and the Code, and all
reports required to have been filed under Title I of ERISA
have been timely filed, except where any such noncompliance
could not result in a material liability to the Business or
the Purchaser. There are no pending or, to the knowledge of
the Seller, threatened claims by or on behalf of any of the
Union Plans, by any Employee or otherwise involving any such
Union Plan or the assets thereof (other than routine claims
for benefits) that could result in a material liability to
any Business, Newco or the Purchaser. All contributions
required to have been made by the Seller to any Union Plan
under the terms of any such plan or pursuant to any
applicable collective bargaining agreement or applicable law
(including, without limitation, ERISA and the Code) have
been made within the time prescribed by any such plan,
agreement or Law and no Union Plan has incurred an
"accumulated funding deficiency," within the meaning of
ERISA or the Code, whether or not waived.
Except as set forth on Schedule 4.12(b) hereto, as
of the date of the most recent actuarial report prepared for
each Union Plan subject to Title IV of ERISA, the "accrued
liability" (within the meaning of section 412 of the Code)
under each Union Plan did not exceed the fair market value
of the assets of each such Union Plan and no event or
condition has occurred or exists since such date that could
result in a material increase in the unfunded accrued
liability under any such Union Plan.
(c) No event or condition has occurred or exists or is
reasonably expected to occur or exist with respect to any
Employee Benefit Plan (other than a Union Plan) that would
materially adversely affect the benefits accrued or owing or
the amount payable to or in respect of any Employee or any
dependent or beneficiary of any Employee.
4.13 Litigation. Except as set forth on Schedule 4.13
hereto, there is no Legal Proceeding pending or, to the
knowledge of the Seller, threatened (i) against the Seller
in connection with the operation of any of the Businesses
which is not covered by insurance and if determined
adversely would have a Material Adverse Effect or result in
damages in excess of $500,000, with respect to any Legal
Proceeding, or $1,000,000, with respect to all such Legal
Proceedings in the aggregate; (ii) that seeks to enjoin or
obtain damages in respect of the consummation of the trans
actions contemplated by this Agreement; or (iii) that
questions the validity of this Agreement, any of the Seller
Documents or any action taken or to be taken by the Seller
in connection with the consummation of the transactions
contemplated hereby or thereby. There are no material
Orders issued by any Governmental Body against any of the
Assets or in any way affecting any Business.
4.14 Compliance with Law. Except as set forth on Schedule
4.14 or 4.18 hereto or on another Schedule hereto, the
Businesses are currently operating in compliance in all
material respects with all applicable Laws and Orders.
Except as set forth on Schedule 4.14 hereto, the Seller has
neither received, nor knows of the issuance of, any notice
of any such violation or alleged violation.
4.15 Receivables. All of the accounts receivable
reflected on the Initial Balance Sheet and to be reflected
on the Statement of Working Capital have arisen or will
arise, as the case may be, from bona fide transactions in
the ordinary course of business consistent with past
practice.
4.16 Inventory. All finished goods and components
contained in the inventory of the Businesses reflected on
the Initial Balance Sheet and to be reflected on the
Statement of Working Capital are, or will be, as the case
may be, (i) of a quality saleable in the ordinary course of
any Business at prevailing market conditions and (ii) of
such quality as to meet in all material respects the
Businesses' quality control standards.
4.17 Assets Necessary to Conduct the Businesses. Except
as set forth on Schedule 4.17 hereto, the Assets comprise
all of the assets necessary for the Purchaser to operate the
Businesses as presently being conducted. Schedule 4.17
hereto lists (a) all assets or services currently being
provided to the Businesses by the Seller or any division
(other than the divisions comprising the Businesses) or any
Affiliate thereof and (b) all arrangements (whether written
or oral) which exist between any of the Businesses and the
Seller or any division (other than the divisions comprising
the Businesses) or any Affiliate thereof which, in each
case, will not be transferred to Newco as an Asset.
4.18 Environmental Matters. (a) Except as set forth on
Schedule 4.18 hereto, to the knowledge of the Seller, it has
complied and is in compliance in all material respects with
all applicable Environmental Laws pertaining to the Assets,
including but not limited to the Real Property and the use,
ownership or transferability thereof, and to the operation
of the Businesses as presently conducted. Except as set
forth on Schedule 4.18 hereto, to the knowledge of the
Seller, no violation by the Seller is being alleged of any
applicable Environmental Law relating to the operation of
the Businesses or the use, ownership or transferability of
the Assets, including but not limited to the Real Property;
(b) Except as set forth on Schedule 4.18 hereto, (i) to
the knowledge of the Seller, it has not caused and has not
taken any action that would result in, and it is not subject
to, any material liability under any applicable
Environmental Law relating to (x) the environmental
conditions on, under or about the Real Property or other
properties or assets owned, leased or used by the Seller in
connection with the Businesses at the present time or in the
past, including without limitation, the soil and groundwater
conditions at such properties, or (y) the past or present
use, management, handling, transport, treatment, generation,
storage or Release for which the Purchaser or Newco could be
liable of any Hazardous Materials, and (ii) the Seller has
provided the Purchaser all written information, which the
Purchaser has requested be provided, in its possession,
including, without limitation, all studies, analyses and
test results, in its possession, custody or control relating
to (x) the environmental conditions on, under or about the
Real Property and (y) Hazardous Materials used, managed,
handled, transported, treated, generated, stored or Released
by the Seller in connection with the Businesses at any time
or by the Seller or any other person on any of the Real
Property, or otherwise in connection with the use or
operation of the Assets or the Businesses.
4.19 Brokers. Other than Morgan Stanley & Co.
Incorporated ("Morgan Stanley"), 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 Agree
ment and no Person other than Morgan Stanley 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 responsible for the payment of the fees of Morgan
Stanley in connection with the transactions contemplated by
this Agreement.
4.20 Permits. The Seller has obtained all material
Permits from all Persons, including Governmental Bodies,
that are needed for the ownership of the Assets and the
conduct or operation of the Businesses and the Real Property
(including, without limitation, all Permits required by any
Environmental Law, all health and safety Permits and all
certificates of occupancy). All such Permits are listed on
Schedule 4.20 hereto. Except as set forth on Schedule 4.20
hereto, all such Permits are in full force and effect; no
material violations have occurred, are continuing to occur
or have been recorded in respect of any such Permit; no
claim is pending or, to the knowledge of the Seller,
threatened, to revoke or limit any such Permit; the Seller
is in compliance with the terms and conditions of all such
Permits in all material respects; and except as set forth on
Schedule 4.20 hereto and subject to applicable Law which may
dictate the transferability of any Permit listed on Schedule
4.20 hereto, all of the Permits will be freely transferable
to Newco on the Closing Date, without the consent,
authorization or approval of any Person, and no additional
consent, authorization or approval of any Person will be
required with respect to any Permit to transfer the Newco
Shares to the Purchaser.
4.21 Insurance Coverage. All of the insurance covering
the Businesses and the Assets has been obtained by the
Seller and there are no insurance policies relating
exclusively to the Businesses.
4.22 Customers. The Seller has not received any notice
that any of the ten largest customers of each of the
Businesses for the year ended December 31, 1992 has either
ceased or materially reduced since December 31, 1992, or
plans to cease or materially reduce, its purchase of
products of the Businesses.
4.23 Bank and Brokerage Accounts. Schedule 4.23 hereto
lists the name and address of each bank or trust company
where the Seller has an account or safe deposit box or
brokerage account maintained by the Seller, in each case
with respect to any of the Businesses, and the name of each
person authorized to draw thereon or have access thereto.
4.24 Operations of Newco. Immediately prior to the
transfer of the Assets to, and the assumption of the Assumed
Liabilities by, Newco, Newco will have no assets or
liabilities of any kind whatsoever and will not have
conducted any business operations of any kind whatsoever,
other than the activities associated with its incorporation,
its authorization of this Agreement and the Newco Agreements
and its consummation of transactions contemplated hereby and
thereby.
4.25 Disclosure. Neither this Agreement or any Seller
Document, nor any other document or certificate furnished at
or prior to the Closing to the Purchaser by or on behalf of
the Seller in connection with the transactions contemplated
hereby or thereby contains any untrue statement of a
material fact or omits to state a material fact necessary in
order to make the statements contained herein or therein not
misleading.
Article V.
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
The Purchaser hereby represents and warrants to
the Seller that:
5.1 Organization and Good Standing. The Purchaser is a
corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware, 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.
5.2 Authorization of Agreement; No Conflicts. The
Purchaser has full corporate power and authority to execute
and deliver this Agreement and each other agreement, docu
ment, instrument or certificate contemplated by this Agree
ment or to be executed by the Purchaser in connection with
the consummation of the transactions contemplated hereby or
thereby (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 each
Purchaser Document has been duly authorized by all necessary
action on the part of the Purchaser. This Agreement has
been, and the Purchaser Documents will be at or prior to the
Closing, duly executed and delivered by the Purchaser and
(assuming the due authorization, execution and delivery by
the other parties hereto and thereto) this Agreement
constitutes, and the Purchaser Documents when so executed
and delivered will constitute, legal, valid and binding
obligations of the Purchaser, enforceable against the
Purchaser 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).
None of the execution and delivery by the Purchaser of this
Agreement and the Purchaser Documents, or the consummation
of the transactions contemplated hereby or thereby, or
compliance by the Purchaser 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, (ii) conflict with, violate,
result in the breach or termination of, or constitute a
default under any Contract or Order to which the Purchaser
is a party or by which it or any of its properties or assets
is bound or subject, or (iii) constitute a violation of any
Law applicable to the Purchaser.
5.3 Consents. No consent, waiver, approval, Order,
Permit or authorization of, or declaration or filing with,
or notification to, any Person or Governmental Body is re
quired on the part of the Purchaser in connection with the
execution and delivery of this Agreement or the Purchaser
Documents or the compliance by the Purchaser with any of the
provisions hereof or thereof, except for compliance with the
HSR Act.
5.4 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 or any action taken or to be taken by the
Purchaser in connection with the consummation of the
transactions contemplated hereby or thereby.
5.5 Brokers. Except as set forth on Schedule 5.5 hereto,
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 understand
ings made by or on behalf of the Purchaser.
5.6 Investment Intention. The Purchaser is acquiring the
Newco Shares for investment purposes only and not with a
present view for the public resale or the public
distribution thereof. The Purchaser acknowledges that the
Newco Shares have not been registered under the Securities
Act of 1933, as amended and cannot be resold unless
subsequently registered under such act (unless an exemption
from such registration is available).
Article VI
COVENANTS OF THE SELLER
From and after the date hereof and until the
Closing, the Seller hereby covenants and agrees with the
Purchaser that:
6.1 Cooperation. The Seller shall use its best efforts
to take, or cause to be taken, all actions necessary or
advisable in order for it to fulfill its obligations
hereunder and to cause the consummation of the transactions
contemplated hereby in accordance with the terms and
conditions hereof.
6.2 Access to Documents; Opportunity to Ask Questions.
The Seller shall provide the Purchaser with such information
as the Purchaser from time to time reasonably may request
with respect to the Businesses, and shall permit the
Purchaser and any of the directors, officers, employees,
counsel, representatives, accountants and auditors (collec
tively, the "Purchaser Representatives") reasonable access
(including the right to make copies), during normal business
hours and upon reasonable prior notice, to the properties,
corporate records, books of accounts and employees of each
of the Businesses, as the Purchaser from time to time
reasonably may request; provided, however, that the Seller
shall not be obligated to provide the Purchaser with any
information the provision of which may be prohibited by Law.
Without limiting the foregoing, the Seller shall provide the
Purchaser reasonable access to the Seller's insurance
manager for the purposes of reviewing the Seller's current
insurance policies relating to the Businesses and
determining the insurance needs of the Businesses from and
after the Closing. The Seller shall promptly (i) provide
the Purchaser with copies of all notices or other written
communications received from or sent to the Pension Benefit
Guaranty Corporation and (ii) inform the Purchaser of the
substance of any other material communications between the
Seller and the Pension Benefit Guaranty Corporation, in each
case, relating to the possible termination of any
underfunded employee benefit plan subject to Title IV of
ERISA. No disclosure by the Seller whatsoever during any
investigation by the Purchaser shall constitute an
enlargement of or additional warranty or representation of
the 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 January 21, 1993, between the
Seller and the Purchaser (the "Confidentiality Agreement").
6.3 Conduct of the Businesses. (a) Except as otherwise
may be contemplated by this Agreement, or as the Purchaser
otherwise may consent to in writing (which consent shall not
be unreasonably withheld), the Seller shall cause each
Business 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 each Business,
(ii) keep available the services of the present employees of
each Business, (iii) preserve the present relationships with
persons having business dealing(s) with each Business,
(iv) maintain all of the assets and properties of each
Business in their current condition, normal wear and tear
excepted, and (v) 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).
(b) Except as otherwise may be contemplated by this
Agreement or as the Purchaser otherwise may consent to in
writing (which consent shall not be unreasonably withheld),
the Seller shall not do any of the following:
(i)(A) increase the rate of compensation payable or to become
payable to any of the employees or agents of any of the
Businesses other than in the ordinary course of business,
(B) amend in any material respect any bonus, stock option,
stock purchase, profit-sharing, deferred compensation,
pension, retirement or other similar plan or arrangement to
or in respect of any such employee or agent, other than in
the ordinary course of business and as may be required to
maintain compliance with ERISA and/or the Code or (C) enter
into any new, or amend in any material respect any existing,
employment, severance or consulting agreement (to increase
the payments, compensation or benefits thereunder), sales
agency, or other Contract with respect to the performance of
personal services for the Business, other than in the
ordinary course of business and as may be required to
maintain compliance with ERISA and/or the Code;
(ii) (A) incur or become subject to, or agree to incur or
become subject to, any material obligation or liability
(contingent or otherwise) relating to any of the Businesses,
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, other than inventory of the
Businesses, in the ordinary course of business, (C) cancel
or compromise any material debt or claim or waive or release
any material right relating to any of the Businesses or the
Assets, except for adjustments or settlements made in the
ordinary course of business consistent with past practice,
(D) acquire any material assets relating to any of the
Businesses other than in the ordinary course of business or
(E) cause any of the representations and warranties in
Article IV to become materially untrue; or
(iii) agree, whether or not in writing, to do any of the
foregoing.
6.4 Consents and Conditions; Assignment of Assets. The
Seller shall use its best efforts to obtain all approvals,
consents or waivers from Persons necessary to assign to
Newco the Assets and to transfer to the Purchaser all of the
Seller's interest in the Newco Shares or any claim, right or
benefit arising thereunder or resulting therefrom (each, an
"Interest") as soon as practicable; provided, however, that
in no event shall the Seller be obligated to pay any
consideration therefor to the third party from whom such
approval, consent or waiver is requested or release any
material right, benefit or claim in order to obtain such
approval, consent or waiver.
6.5 HSR Act Filings. As promptly as practicable after
the execution of this Agreement, the Seller shall file any
reports or notifications that may be required to be filed
under the HSR Act and shall cooperate with the Purchaser in
connection with such filings or responses to requests for
additional information.
6.6 Exclusive Dealing. During the period from the date
of this Agreement to the earlier of the Closing Date or the
termination of this Agreement, the Seller shall not take any
action, directly or indirectly, to encourage, initiate or
engage in discussions or negotiations with, or provide any
information to, any Person other than the Purchaser and its
representatives concerning any sale of the Assets, the Newco
Shares or the Businesses, or any part thereof; provided,
however, that the Seller may consider another acquisition
proposal (including by way of furnishing any information
concerning all or a portion of the Businesses or the Assets,
if the failure to do so would cause the Seller, its officers
or directors to breach their fiduciary duties under
applicable Law. As used in this Section 6.6, the phrase
"acquisition proposal" means a proposal for the acquisition
of all or a portion of the Businesses or the Assets. The
Seller will promptly communicate to the Purchaser the terms
of any acquisition proposal or inquiry that it may receive
in respect of any such transaction or of any such
negotiations or discussions being sought to be initiated
with the Seller and, if known, the identity of the third
party initiating any such proposal, inquiry, discussion or
negotiation. Promptly upon the execution of this Agreement,
the Seller shall cause each Person to whom confidential
information was sent in connection with the sale of the
Businesses to either destroy such information or return it
to the Seller.
6.7 Notices of Certain Events. The Seller shall promptly
notify the Purchaser of:
(a) any notice or other communication from any Person
alleging that the consent of such Person is or may be
required in connection with the transactions contemplated by
this Agreement;
(b) any notice or other communication from any
Governmental Body in connection with the transactions
contemplated by this Agreement; and
(c) any event or condition, which if it existed on the
date of this Agreement, would result in any of the
representations and warranties of the Seller contained
herein being untrue in any material respect.
6.8 Novation Agreements. The Seller shall use its
reasonable best efforts to satisfy all conditions to
obtaining the novation agreements with respect to Government
Contracts, other than the Closing under this Agreement and
the delivery to the United States Government of any document
set forth in 42.1204(c) of the Federal Acquisition
Regulations that cannot be delivered prior to Closing.
6.9 Filing of Tax Returns. To the extent required by
applicable Law, the Seller shall include Newco in all
consolidated, combined or unitary Tax returns of the Seller
for tax periods of Newco ending on or prior to the Closing
Date.
6.10 Qualification of Newco. The Seller shall use its
reasonable best efforts to cooperate with the Purchaser to
cause, as of the Closing Date, Newco to be duly qualified to
do business as a foreign corporation and in good standing in
each jurisdiction where the character of the property owned
or leased by a Business or the nature of the activities of
any Business make such qualification necessary.
6.11 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 Newco Shares or the Assets in favor of
Bankers Trust Company, as collateral agent, relating to
certain indebtedness of the Seller.
6.12 Special Intellectual Property Actions. (a) The
Seller prior to Closing shall file with the United States
Patent and Trademark Office all necessary documents to
effect the change of the record name of ownership of the
patents and registered trademarks set forth on Schedule
6.12(a) hereto to "IMO Industries Inc." The Seller prior to
Closing shall provide the Purchaser with copies of all
documentation evidencing the foregoing changes.
(b) The Seller shall use its reasonable best efforts to
have Roush Bakery Products Co., Inc. instruct the United
States Patent and Trademark Office to remove the security
lien in favor of The Toronto-Dominion Bank Trust Company
(Reel: 0650; Frame: 0447) inadvertently registered on the
Wiggins Business' U.S. registered trademark, registration
number 0608567 ("INST-O-MATIC").
Article VII
COVENANTS OF THE PURCHASER
From and after the date hereof, and until the
Closing Date, the Purchaser hereby covenants and agrees with
the Seller that:
7.1 Cooperation. The Purchaser shall use its best
efforts to take, or cause to be taken, all actions necessary
or advisable in order for it to fulfill its obligations
hereunder and to cause the consummation of the transactions
contemplated hereby in accordance with the terms and condi
tions hereof.
7.2 Confidentiality. The Purchaser shall comply with the
terms of the Confidentiality Agreement.
7.3 Consents and Conditions. The Purchaser shall use its
best efforts to obtain all approvals, consents or waivers
from Persons necessary to assign to the Purchaser all of the
Seller's interest in the Newco Shares or any claim, right or
benefit arising thereunder or resulting therefrom as soon as
practicable; provided, however, that in no event shall the
Purchaser be obligated to pay any consideration therefor to
the third party from whom such approval, consent or waiver
is requested or release any material right, benefit or claim
in order to obtain such approval, consent or waiver.
7.4 HSR Act Filings; Compliance with Antitrust and
Competition Laws. 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 and shall cooperate with the Seller in
connection with such filings or responses to requests for
additional information. The Purchaser shall use reasonable
commercial efforts to resolve such objections, if any, as
the Antitrust Division of the Department of Justice, the
Federal Trade Commission, state antitrust enforcement
authorities or competition authorities of any other
jurisdiction may assert under the antitrust or competition
laws with respect to the transaction contemplated hereby.
7.5 Financing. The Purchaser will use its reasonable
best efforts to obtain financing necessary to consummate the
transactions contemplated by this Agreement and to provide
an adequate working capital facility for the Purchaser and
Newco after the Closing. The Purchaser shall periodically
brief the Seller on the status of the negotiations to obtain
such financing and will promptly remit copies of any
commitment letters the Purchaser obtains in respect of such
financing.
7.6 Novation Agreements. The Purchaser shall use its
reasonable best efforts to satisfy all conditions to
obtaining the novation agreements with respect to Government
Contracts, other than the Closing under this Agreement and
the delivery to the United States Government of any document
set forth in 42.1204(c) of the Federal Acquisition
Regulations that cannot be delivered prior to Closing.
7.7 Qualification of Newco. The Purchaser shall use its
reasonable best efforts to cooperate with the Seller to
cause, as of the Closing Date, Newco to be duly qualified to
do business as a foreign corporation and in good standing in
each jurisdiction where the character of the property owned
or leased by a Business of the nature of the activities of
any Business make such qualification necessary.
Article VIII
COVENANTS RELATING TO EMPLOYMENT AND EMPLOYEE MATTERS
8.1 Continuation of Employment. As of the Closing and in
connection with the Asset Assignment, the Seller shall cause
the employment of the Employees to be transferred to Newco
and the Purchaser shall cause Newco to continue the
employment of each CB Employee under the terms and condi
tions provided in the collective bargaining agreement
applicable to such CB Employee's employment with the Seller,
and crediting each CB Employee with the service recognized
by the Seller for all purposes under the applicable
collective bargaining agreement. As of the Closing Date,
the Purchaser shall cause Newco to continue the employment
of each Non-CB Employee in the same position and location
and, in each case, at a rate of pay substantially equal to
such Non-CB Employee's rate of pay in effect and with such
benefits as shall be substantially comparable to the Non-CB
Employee's benefits in effect, on the business day immedi
ately preceding the Closing Date. From and after the
Closing, the Seller shall be solely responsible for all
liabilities, obligations, costs and expenses in respect of
Inactive Non CB Employees; provided, however, that upon the
expiration of any such Inactive Non-CB Employee's authorized
leave status, Purchaser shall cause Newco to offer to employ
such Inactive Non CB Employee and, in the event such
Inactive Non CB Employee does not accept such offer, Newco
shall be responsible for all liabilities and obligations in
connection with the termination of such Non CB Employee's
employment with the Seller; provided, further, that Newco
shall not be required to offer employment, or bear any
responsibility or obligation, to any Inactive Non-CB
Employee whose authorized leave status does not expire prior
to the second anniversary of the Closing Date. From and
after the Closing, Seller shall be solely responsible for
all liabilities, costs and expenses in respect of Inactive
CB Employees; provided, however, that the Purchaser shall
cause Newco to offer to employ or recall each such Inactive
CB Employee in accordance with any applicable collective
bargaining agreement and, upon the expiration of any such
Inactive CB Employee's disability, sick leave or authorized
leave status or, in the case of any Inactive CB Employee on
layoff, on the date any such Inactive CB Employee is
required to be recalled pursuant to the applicable
collective bargaining agreement, the Purchaser shall also
become solely responsible for any other liabilities,
obligations, costs and expenses to such Inactive CB Employee
arising under any applicable collective bargaining
agreement.
The Purchaser shall cause Newco to provide medical
and hospitalization benefits to Non-CB Employees that do not
exclude coverage for preexisting conditions and that do not
provide for a waiting period for eligibility.
From and after the Closing Date, Newco shall be
solely responsible for all liabilities, obligations, costs
and expenses in respect of salaries, wages, disability pay,
bonus, retention or incentive compensation, deferred
compensation or other payroll or compensation items (the
"Compensation Items") accrued in respect of, or relating to
services performed by, any Employee whether on, after or
prior to the Closing Date but only to the extent the
liability therefor is adequately reflected on the Statement
of Working Capital as finally agreed to by the Purchaser and
the Seller pursuant to Section 2.3 hereof, or, with respect
to vacation entitlement and sick pay, whether or not such
liability is so reflected. From and after the Closing Date,
the Seller shall be solely responsible for all liabilities,
obligations, costs and expenses in respect of (i) the
Seller's special divestiture incentive program and (ii) the
Compensation Items (other than Union Pension Plans and, with
respect to the Employees, vacation and sick pay) in respect
of (A) the Employees to the extent the accruals therefor on
the Statement of Working Capital as finally agreed to by the
Purchaser and the Seller pursuant to Section 2.3 hereof are
not adequate and (B) the Former Employees.
8.2 Collective Bargaining and Other Agreements.
Effective as of the Closing, Newco shall assume and the
Purchaser shall cause Newco to honor all of the rights and
obligations of the Seller under all collective bargaining
agreements and change of control agreements applicable to
the Employees which are disclosed on Schedule 4.12(b) hereto
and are in effect on the business day immediately preceding
the Closing Date.
8.3 Salaried Pension Plans. Effective as of the Closing,
the Seller will cause the Non-CB Employees to be fully
vested in the benefits accrued under any Employee Benefit
Plan that is a defined benefit plan and will eliminate any
further accruals of service, compensation or benefits under
such plan for such Non-CB Employees.
8.4 Welfare Plans. From and after the Closing Date, the
Seller shall be solely responsible for all liabilities,
obligations, costs and expenses in respect of claims
incurred on or before the Closing Date whether such claims
are made before, on, or after the Closing Date, in respect
of any Employee or his or her beneficiary or dependent under
any Employee Benefit Plan that is an "employee welfare
benefit plan" within the meaning of Section 3(1) of ERISA (a
"Welfare Plan").
From and after the Closing Date, the Seller shall
be solely responsible for all liabilities, obligations,
costs and expenses relating to or arising in connection with
coverage in respect of any Former Employee or his or her
beneficiaries or dependents under any Welfare Plan,
including, without limitation, all liabilities, obligations,
costs and expenses in respect of claims for welfare benefits
or expense reimbursements of any Former Employee or his or
her beneficiaries or dependents, regardless of when any such
claims are incurred; provided, however, that with respect to
any Inactive Employee hired by Newco pursuant to Section 8.1
hereof, Newco shall be responsible for providing such
Employee coverage under Newco's welfare benefit plans in
accordance with the terms thereof from and after any such
Employee's date of hire by Newco.
8.5 Union Plans. Effective as of the Closing, Newco
shall assume and the Purchaser shall cause Newco to continue
the sponsorship of each Union Plan including the assets and
liabilities thereof. Notwithstanding the foregoing, from
and after the Closing Date, the Seller shall remain solely
responsible for all liabilities, obligations, costs and
expenses relating to or arising in connection with the audit
by the Internal Revenue Service of the Pension Plan for
Hourly Employees for IMO Industries Inc., Wiggins Connectors
Division commenced during 1993 (other than liabilities,
obligations, costs and expenses relating to the underfunding
of such plan as set forth on Schedule 4.12(b) hereto);
provided, however, that the Seller shall maintain absolute
control with respect to the litigation or settlement of any
claim arising in connection with such audit and the
Purchaser shall, and shall cause Newco to, cooperate with
the Seller in the prosecution or settlement of any such
claim, including, without limitation, the execution of any
power of attorney or other documentation in connection
therewith.
8.6 Credited Service. For purposes of eligibility and
vesting under all benefit plans, benefit arrangements and
compensation policies and practices of Newco from and after
the Closing Date, the Purchaser shall cause Newco to credit
the Non-CB Employees with all previous service recognized by
the Seller for such Employees under the Employee Benefit
Plans on the business day immediately preceding the Closing
Date.
8.7 Workers' Compensation. From and after the Closing
Date, the Seller shall be solely responsible for all
liabilities, obligations, costs and expenses in respect of
claims made before, on or after the Closing Date for
workers' compensation benefits arising in connection with
any occupational injury occurring on or prior to the Closing
Date or disease existing solely on or prior to the Closing
Date. From and after the Closing Date, the Purchaser and
Newco shall be solely responsible for all liabilities,
obligations, costs, and expenses in respect of claims by any
Employee for workers' compensation benefits arising in
connection with any occupational injury occurring after the
Closing Date or disease existing solely after the Closing
Date. With respect to claims for workers' compensation
benefits arising in connection with any occupational disease
occurring or existing prior to and after the Closing Date,
the Seller, on the one hand, and the Purchaser and Newco,
jointly, on the other hand, shall share pro rata all
liabilities, obligations, costs and expenses in respect of
(and shall cooperate in the processing and determination of)
each such claim. The Seller's pro rata share shall equal
the quotient, expressed as a percentage, of (x) the number
of years and partial years in the Determination Period (as
defined below) that precede the Closing Date, divided by (y)
the aggregate number of years and partial years of service
in any of the Businesses during which the applicable disease
developed or the exposure resulting in the applicable
disease existed (the "Determination Period"). The
Purchaser's and Newco's joint pro rata share shall equal the
difference, expressed as a percentage, of (w) 100 and
(y) the Seller's pro rata share determined in accordance
with the preceding sentence.
8.8 Termination Obligations. (a) From and after the
Closing Date, the Purchaser and Newco, jointly, on one hand,
and the Seller, on the other hand, shall share equally all
liabilities, obligations, costs and expenses in respect of
any claims for severance or termination benefits which arise
as a result of or in connection with any constructive
termination of employment of any Employee from the Seller or
Newco on the Closing Date or otherwise in connection with
the Asset Assignment, except that (i) the Seller shall be
solely responsible for all such liabilities, obligations,
costs and expenses in the event that, prior to the Closing
Date, the Seller does not amend its severance plans,
policies, programs and arrangements to provide that benefits
are not payable in connection with the sale of a division,
or (ii) notwithstanding the adoption by the Seller of
amendments to its severance plans, policies, programs and
arrangements in accordance with the foregoing clause (i),
any such amendment is not recognized or given complete
effect in any litigation or settlement of any such claim.
(b) From and after the Closing Date, the Purchaser shall
cause Newco to maintain for a period of no less than one
year, severance policies and programs for the benefit of the
Non-CB Employees which provide severance benefits equal to
one week's pay times years of employment in a Business
(including years of employment with the Seller for this
purpose) ("Newco's Severance Plan"). From and after the
Closing Date, the Purchaser and Newco shall be solely
responsible for all liabilities, obligations, costs and
expenses in respect of claims under Newco's Severance Plan
in connection with the termination of employment with Newco
of any Non-CB Employee and, except to the extent liability
therefor is adequately reflected on the Closing Balance
Sheet or as provided otherwise in paragraph (a) of this
Section 8.8, the Seller shall be solely responsible for all
liabilities, obligations, costs and expenses in respect of
claims under the Seller's severance benefit plans, policies,
programs or arrangements in connection with the termination
of employment with the Seller of any Employee or Former
Employee prior to the Closing Date.
8.9 Indemnification. (a) The Purchaser and Newco,
jointly and severally, shall indemnify and hold harmless the
Seller from and against, and shall pay or reimburse the
Seller for, any and all liability, obligation, cost or
expense the Seller may incur with respect to (i) any claims
of Employees arising out of their employment with Newco from
and after the Closing Date, (ii) any claims of Inactive
Employees arising out of (x) their employment with Newco
from and after their date of hire by Newco or (y) Newco's
obligation to offer them employment under Section 8.1 here
of, (iii) except as provided under Section 8.8 hereof, any
claims of Employees or Inactive Employees under any Law
relating to the termination of such Employee's employment
with Newco arising, with respect to Employees, on or after
the Closing Date and, with respect to Inactive Employees,
from and after the date Newco is required to offer them
employment pursuant to Section 8.1 hereof, or (iv) the
Liabilities assumed by the Purchaser and Newco under this
Article VIII (including, without limitation, the Union
Pension Plans).
(b) The Seller shall indemnify and hold harmless the
Purchaser and Newco from and against, and shall pay or
reimburse the Purchaser or Newco for, any and all liabili
ties, obligations, costs or expenses the Purchaser or Newco
may incur, whether relating to events or conditions
occurring or existing before, on or after the Closing Date,
and whether asserted at any time before, on or after the
Closing Date (i) in respect of or pursuant to any Employee
Benefit Plan other than a Union Pension Plan, (ii) in
connection with the Seller's employment or termination of
employment of any Employee or Former Employee, except to the
extent any such liability, obligation, cost or expense
(x) is adequately reflected as a liability on the Statement
of Working Capital as finally agreed to by the Purchaser and
the Seller pursuant to Section 2.3 hereof or (y) is
specifically assumed by the Purchaser pursuant to this
Article VIII or (iii) in respect of any "employee pension
benefit plan," as defined in Section 3(2) of ERISA (other
than a Union Pension Plan), of the Seller or any entity
under common control with, or treated as a single employer
together with, the Seller under Section 414 of the Code that
is subject to Section 412 of the Code or Title IV of ERISA.
8.10 Right to Make Modifications. Notwithstanding any
other provision of this Article VIII, subject to any
applicable collective bargaining agreement, nothing herein
shall prejudice the right of the Purchaser or Newco to amend
or terminate any plan, programs, policy or arrangement of
the Purchaser or Newco (other than Newco's Severance Plan)
or to discharge or lay off any Employee following the
Closing Date; provided, however, that the Purchaser and
Newco, jointly and severally, shall indemnify and hold
harmless the Seller for all liabilities, obligations, costs
and expenses the Seller incurs as a result thereof.
Article IX
CONDITIONS PRECEDENT TO THE PURCHASER'S OBLIGATIONS
The obligation of the Purchaser to consummate the
purchase of the Newco Shares on the Closing Date is, at the
option of the Purchaser, subject to the satisfaction of the
following conditions:
9.1 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, it being understood that to the extent that
such representations and warranties were made as of a
specified date the same shall continue on the Closing Date
to be true and correct in all material respects as of the
specified date.
(b) The Seller 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 it at
or prior to the Closing Date.
(c) The Purchaser shall have received a certificate of
the Seller, dated as of the Closing Date and signed by an
officer of the Seller, certifying as to the fulfillment of
the conditions set forth in this Section 9.1.
9.2 HSR Act. All applicable waiting periods in respect
of the transactions contemplated by this Agreement under the
HSR Act shall have expired.
9.3 No Prohibition. No Legal Proceeding before any court
or administrative agency shall have been commenced (i) which
seeks to restrain, prevent or modify, or which seeks
material damages in connection with, any of the transactions
contemplated hereby, and (ii) as to which there is a
reasonable possibility of an adverse determination.
9.4 Opinion of the Seller's Counsel. The Purchaser shall
have received an opinion or opinions of counsel for the
Seller, dated the Closing Date, in a form reasonably
acceptable to the Purchaser.
9.5 Delivery of Documents. The Seller shall have
executed and delivered to the Purchaser or Newco, as
appropriate, at the Closing all of the documents required to
be delivered by it pursuant to Section 3.3 or 3.5 hereof.
9.6 Secretary's Certificate. The Purchaser shall have
received from the Seller a certificate, dated the Closing
Date, of the Secretary or Assistant Secretary of the Seller
certifying as to the incumbency of the officers of the
Seller executing this Agreement, any Seller Document or any
closing documents delivered hereunder or thereunder.
Attached to such certificate shall be (i) a copy of the by-
laws of the Seller certified by such Secretary or Assistant
Secretary as in effect on the Closing Date and (ii) copies
of the resolutions of the Board of Directors of the Seller
authorizing the execution and delivery of this Agreement,
each Seller Document and the consummation of the
transactions contemplated hereby and thereby.
9.7 Consents and Permits. All of the consents and
Permits set forth on Schedules 4.6, 4.20 and 5.3 hereto
shall have been obtained, except those consents and Permits
which the failure to obtain could not, in the reasonable
judgment of the Purchaser, have a material adverse effect on
any Business.
9.8 Purchaser Financing. The Purchaser shall have
obtained financing for the Purchase Price and for the
working capital requirements of the Purchaser and Newco
after the Closing upon terms and conditions satisfactory to
it in its sole discretion.
9.9 Additional Documents and Matters. The Purchaser
shall have received 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.
9.10 Resignations. The Purchaser shall have received the
resignations, effective the Closing Date, of such officers
and directors of Newco as the Purchaser shall designate by
notice in writing to Newco reasonably prior to the Closing
Date.
9.11 Asset Assignment. The Asset Assignment contemplated
by Sections 1.2, 1.3, 1.4 and 1.5 hereof shall have been
consummated in accordance with this Agreement and, upon the
acquisition of the Newco Shares by the Purchaser and of the
Assets by Newco, in each case in accordance with this
Agreement, and assuming the Purchaser or Newco, as the case
may be, has no notice of any adverse claim, the Purchaser
shall own the Newco Shares and Newco shall own the Assets,
in each case free and clear of any Liens other than
Permitted Exceptions and the Liens created by the Purchaser
or Newco.
9.12 Signatory. Newco shall have executed this Agreement
and become party hereto.
9.13 Employee Pension Benefit Plans. The Pension Benefit
Guaranty Corporation has not terminated or instituted
proceedings to terminate, or appointed a trustee to
administer, and the Seller has not terminated, or instituted
proceedings to terminate, any "single-employer plan" with
respect to which (i) the Seller or any member of the
Seller's "controlled group" is a "contributing sponsor" and
(ii) there is any "amount of unfunded benefit liabilities."
For purposes of this Section 9.13, the terms "single
employer plan," "controlled group," "contributing sponsor"
and "amount of unfunded benefit liabilities" shall have the
respective meanings assigned to such terms in Section
4001(a) of ERISA.
Article X
CONDITIONS PRECEDENT TO THE SELLER'S OBLIGATIONS
The obligation of the Seller to consummate the
sale, transfer and assignment to the Purchaser of the Newco
Shares on the Closing Date is, at the option of the Seller,
subject to the satisfaction of the following conditions.
10.1. Representations, Warranties and Covenants. (a) Each
of the representations and warranties of the Purchaser con
tained 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, it being understood that to the extent that
such representations and warranties were made as of a
specified date the same shall continue on the Closing Date
to be true and correct in all material respects as of the
specified date.
(b) 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.
(c) 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.
10.2 No Prohibition. No Legal Proceeding before any court
or administrative agency shall have been commenced (i) which
seeks to restrain, prevent or modify, or which seeks
material damages in connection with, any of the transactions
contemplated hereby, and (ii) as to which there is a
reasonable possibility of an adverse determination.
10.3 Opinion of the Purchaser's Counsel. The Seller shall
have received an opinion or opinions of counsel for the
Purchaser, dated the Closing Date, in a form reasonably
acceptable to the Seller.
10.4 Delivery of Documents. The Purchaser shall have
executed and delivered to the Seller at the Closing all of
the documents required to be delivered by it pursuant to
Section 3.4 hereof. Newco shall have executed and delivered
to the Seller at the Closing all of the documents required
to be delivered by it pursuant to Section 3.6 hereof.
10.5 HSR Act. All applicable waiting periods in respect
of the transactions contemplated by this Agreement under the
HSR Act shall have expired.
10.6 Secretary's Certificate. The Seller shall have
received from the Purchaser a certificate, dated the Closing
Date, of the Secretary or the Assistant Secretary of the
Purchaser certifying as to the incumbency of the officers of
the Purchaser executing this Agreement, any Purchaser
Document or any closing documents delivered hereunder or
thereunder. Attached to such certificate shall be copies of
the resolutions of the Board of Directors of the Purchaser,
authorizing the execution and delivery of this Agreement,
each Purchaser Document and the consummation of the
transactions contemplated hereby and thereby.
10.7 Signatory. Newco shall have executed this Agreement
and become a party hereto.
10.8 Additional Documents and Matters. The Seller shall
have received 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.
10.9 Consent and Permits. All of the consents and Permits
set forth on Schedule 10.9 hereto shall have been obtained.
Article XI
ADDITIONAL POST-CLOSING COVENANTS
11.1 Further Assurances. (a) From time to time after the
Closing Date, each of the Seller, Newco and the Purchaser
shall, at its sole cost and expense, at the reasonable
request of the Purchaser or Newco, 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 Newco may reasonably
request in order to (i) vest in the Purchaser and put the
Purchaser in possession of the Newco Shares or (ii) vest in
Newco and put Newco in possession of the Assets and to trans
fer to the Newco any Contracts and rights of the Seller
relating to the Assets and assure to Newco the benefits
thereof, and, at the reasonable request of the Seller, to
give effect to the Newco's assumption of the Assumed
Liabilities.
(b) To the extent any of the approvals, consents or
waivers referred to in Section 6.4 hereof have not been
obtained by the Seller as of the Closing, the Seller's only
obligation with respect thereto shall be as set forth in
subsection (c) below and to use its reasonable best efforts
to do the following:
(i) cooperate with the Purchaser and Newco in any
reasonable and lawful arrangements designed to provide the
benefits of such Interest (including, without limitation,
the right to receive all amounts owing to the Seller
thereunder) to Newco as long as the Purchaser and Newco
fully cooperate with the Seller in such arrangements, and
the Seller and the Purchaser shall equally share all
payments, charges or other liabilities made or suffered in
connection therewith; and
(ii) enforce, at the request of the Purchaser or Newco and
at the expense and for the account of the Purchaser or
Newco, any and all rights of the Seller 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 or Newco).
To the extent that the Seller enters into lawful arrange
ments 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 Newco for purposes of
Section 1.2 hereof.
(c) In addition to the arrangements described in
subsection (b) above, the Seller and the Purchaser mutually
agree to use their reasonable best efforts to enter into a
novation agreement among the Seller, Newco and the United
States Government, with respect to each Government Contract
for which novation is required by the terms thereof, in each
case substantially in the form set forth in the Federal
Acquisition Regulations and as soon as practicable after the
Closing Date. The Seller shall indemnify the Purchaser and
Newco from and against any liabilities or losses, including
any increased costs or reductions in revenue, under any
Government Contract that the Purchaser or Newco may suffer
arising from or relating to claims made by the U.S.
Government in connection with the transactions contemplated
by this Agreement relating to the recapture of costs or the
sharing of financial benefits in respect of periods prior to
the Closing Date, such as those relating to pension
liabilities for employees of the Businesses; provided,
however, that the Seller shall not indemnify the Purchaser
or Newco or in any way be liable for any Damages arising
from or relating to claims made by the U.S. Government in
connection with any changes in the cost accounting standards
or cost principles for the Businesses on or after the
Closing Date, including, without limitation, changes as a
result of purchase accounting.
11.2. Public Announcements. Neither the Seller (nor any of
its Affiliates) nor the Purchaser or Newco (nor any of their
respective 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 party
(which consent may not be unreasonably withheld), except as
may be required by Law.
11.3 Joint Post-Closing Covenant of the Seller and the
Purchaser. The Seller and the Purchaser jointly covenant
and agree that, from and after the Closing Date, the Seller
and the Purchaser will each use reasonable efforts to
cooperate with each other in connection with any action,
suit, proceeding, investigation or audit of the other
relating to (a) the preparation and audit of the Seller's,
Newco's or the Purchaser's tax returns for all periods prior
to or including the Closing Date, and (b) any audit of the
Purchaser, Newco and/or the Seller with respect to the
sales, transfer and similar taxes imposed by the laws of any
state or political subdivision thereof, relating to the
transactions contemplated by this Agreement. In furtherance
hereof, the Purchaser and the Seller further covenant and
agree to promptly respond to all reasonable inquiries
related to such matters and to provide, to the extent
reasonably possible, substantiation of transactions and to
make available and furnish appropriate documents and
personnel in connection therewith; provided that all costs
and expenses relating to the foregoing shall be paid by the
party initiating such request.
11.4 Books and Records; Personnel. For a period of six
years after the Closing Date (or such longer period as may
be required by any Governmental Body or ongoing Legal
Proceeding):
(a) Neither the Purchaser nor Newco shall dispose of or
destroy any of the business records and files of the Busi
nesses. If either the Purchaser or Newco wishes to dispose
of or destroy such records and files after that time, it
shall first give 30 days' prior written notice to the Seller
and the Seller shall have the right, at its option and
expense, upon prior written notice to the Purchaser or
Newco, as the case may be, within such 30 day period, to
take possession of the records and files within 60 days
after the date of the Seller's notice.
(b) The Purchaser or Newco, as the case may be, shall
allow the Seller and any of its directors, officers,
employees, counsel, representatives, accountants and
auditors (collectively, the "Seller Representatives") access
to all business records and files of the Businesses which
are transferred to it in connection herewith, which are
reasonably required by such party in anticipation of, or
preparation for, any existing or future litigation,
arbitration, administrative proceeding or tax return
preparation; during regular business hours and upon
reasonable notice at the Purchaser's or Newco'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 interfere with the
normal conduct of the Purchaser's or Newco's business or
operations.
(c) The Purchaser or Newco, as the case may be, shall
make available to the Seller or the Seller Representatives,
upon written request and at the Seller's expense
(i) personnel to assist the Seller in locating and obtaining
records and files maintained by the Purchaser or Newco and
(ii) any of the personnel previously in the Seller's employ
whose assistance or participation is reasonably required by
the Seller in anticipation of, or preparation for, existing
or future litigation, arbitration or administrative
proceeding, tax return preparation or other matters in which
the Seller or any of its Affiliates is involved and which is
related to any of the Businesses; provided, however, that
any such access to personnel shall be had in such a manner
so as not to interfere with the normal conduct of the
Purchaser's or Newco's business or operations.
(d) The Seller shall allow the Purchaser, Newco or the
Purchaser Representatives access to all business records and
files of the Businesses retained by the Seller, which are
reasonably required by such party in anticipation of, or
preparation for, any existing or future litigation,
arbitration, administrative proceeding or tax return
preparation; during regular business hours and upon
reasonable notice at the Seller's principal place of
business or at any location where such records are stored,
and the Purchaser or Newco, as the case may be, 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 interfere with the normal conduct of the Seller's
business or operations.
(e) The Seller shall make available to the Purchaser,
Newco or the Purchaser Representatives, upon written request
and at the Purchaser's or Newco's, as the case may be,
expense (i) personnel to assist the Purchaser or Newco, as
the case may be, in locating and obtaining records and files
maintained by the Seller and (ii) any other personnel whose
assistance or participation is reasonably required by the
Purchaser or Newco, as the case may be, in anticipation of,
or preparation for, existing of future litigation,
arbitration or administrative proceeding, tax return
preparation or other matters in which the Purchaser or
Newco, as the case may be, or any of their respective
Affiliates is involved in which is related to any of the
Businesses; provided, however, that any such access to
personnel shall be had in such a manner so as not to
interfere with the normal conduct of the Seller's business
or operations.
11.5 Noncompetition. The Seller agrees that, in exchange
for consideration of $6,000,000, for a period of three (3)
years following the Closing Date, the Seller will not,
directly or indirectly:
(a) 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 manufacturers or sells products which are the
same or similar to and competitive with the products
manufactured or sold by any of the Businesses 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
Morse Controls division, regardless of whether such products
are competitive with the products of any Business. For
these purposes, ownership of securities of a company whose
securities are registered under the Securities Exchange Act
of 1934 not in excess of 5% of any class of such securities
shall not be considered to be competition with any of the
Businesses;
(b) persuade or attempt to persuade any employee of any
Business, or any Person who is an employee of the Purchaser
or Newco after the Closing Date, to leave the Purchaser's or
Newco's employ or such employ of such Business, or to become
employed by any Person other than the Purchaser or Newco; or
(c) engage in any activity the purpose of which is to
evade the provisions of this Section 11.5.
In addition, the Seller agrees, covenants and
acknowledges that, from and after the Closing Date, the
Seller will not, and will cause its Affiliates not to
disclose, give, sell, use or otherwise divulge any confi
dential or secret information (including but not limited to
any technology, process, trade secrets, know-how, other
intellectual property rights, strategies, financial state
ments or other financial information not otherwise publicly
available, forecasts, operations, business plans, prices,
discounts, products, product specifications, designs, plans,
data or ideas) relating exclusively to any of the Busi
nesses. The Seller's foregoing obligations of
confidentiality shall not apply to confidential information
which (i) is or becomes generally available to the public
through no act or omission on the part of the Seller,
(ii) is hereafter received on a non-confidential basis by
the Seller from a third party who has the lawful right to
disclose such confidential information, (iii) is
independently developed by an employee or agent of the
Seller who did not have access to the confidential
information or (iv) the Seller must disclose pursuant to
court order or Law.
It is the desire and intent of the parties to this
Agreement that the provisions of this Section 11.5 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 provisions or
portions of this Section 11.5 shall be adjudicated to be
invalid or unenforceable, this Section 11.5 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 Section
11.5 in the particular jurisdiction in which such
adjudication is made.
The parties acknowledge that damages and remedies
at law for any breach of this Section 11.5 will be inade
quate and that the Purchaser and Newco 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 Newco may have.
11.6 Use of IMO Name. Newco shall be entitled for a
period of not more than 120 calendar days following the
Closing Date to use any signs, purchase orders, invoices,
sales orders, labels, letterheads or shipping documents
existing on the Closing Date that bear any "IMO Industries"
name, mark or logo, in each case where the removal of such
name, mark or logo would be impractical; provided, however,
that to the extent practicable, Newco shall place a stamp,
mark or other notation on any such item that identifies any
Business as its business (and not that of the Seller);
provided, further, however, that Newco will use such mark,
name or logo only to the extent necessary to make an orderly
transition with respect to the goodwill of the Businesses
and may not use such mark, name or logo in any advertising
without the Seller's prior written consent.
11.7. Closing Balance Sheet. As soon as practicable (but in
no event later than 60 days) following the Closing Date, at
the request of the Purchaser an audited balance sheet for
the Businesses as of the Closing Date (the "Closing Balance
Sheet") shall be prepared, which shall include a report
thereon of Ernst & Young stating that the Closing Balance
Sheet has been prepared in accordance with GAAP except as
set forth in the notes thereto. The Purchaser shall provide
Ernst & Young with instructions as to the scope of such
audit and shall pay any costs incurred to perform such audit
in excess of the costs required in connection with the
preparation and audit of the Statement of Working Capital.
Notwithstanding the foregoing, the Closing Balance Sheet
shall not effect any of the provisions of Article II hereof,
including, without limitation, the preparation of the
Statement of Working Capital and the determination of the
Final Working Capital Adjustment.
11.8. Purchase of Certain Products. For a period of three
years following the Closing Date, at the reasonable request
of Newco (including as to volume of purchases), the Seller
shall sell to Newco the parts and materials currently sold
to the Controlex Business by the Seller's Morse Controls,
Morse Hudson and Morse Basildon divisions. Such sales shall
be made on the same terms and conditions as such current
sales; provided, however, that, upon twenty (20) days'
written notice to Newco and the Controlex Business, the
purchase price for such products may be increased to reflect
inflation. Notwithstanding the foregoing, the Seller shall
only be obligated to make such sales as long as the machines
currently used by such divisions to manufacture such parts
and materials are operational.
Article XII
INDEMNIFICATION AND RELATED MATTERS
12.1 Indemnification by the Seller. Subject to the
provisions of this Article XII, the Seller agrees to
indemnify, reimburse and hold the Purchaser and Newco, and
their respective officers, directors and Affiliates harmless
from and against all Damages, including, without limitation,
those arising from third-party claims, resulting from or
arising out of:
(a) the failure of any of the representations and
warranties contained in Article IV of this Agreement (other
than the representations and warranties contained in Section
4.18 hereof) to have been true 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; provided, however, that all references to
materiality in the representations and warranties contained
in Article IV shall be deemed to be omitted from this
Agreement for purposes of determining whether a
representation or warranty was true and therefore gives rise
to the Purchaser's and Newco's right to indemnification
hereunder;
(b) the failure of the 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;
and
(c) the Excluded Liabilities.
12.2. Indemnification by the Purchaser and Newco. Subject
to the provisions of this Article XII, the Purchaser and
Newco, jointly and severally, agree to indemnify, reimburse
and hold the Seller, its officers, directors and Affiliates
harmless from and against all Damages, including, without
limitation, those arising from third-party claims, resulting
from or arising out of:
(a) 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 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 in all
material respects as of such specified date;
(b) the failure of the Purchaser or Newco to comply in
all material respects with any of the covenants contained in
this Agreement which are required to be performed by the
Purchaser or Newco;
(c) the Assumed Liabilities; and
(d) the operation of any of the Businesses or ownership
of the Assets on or after the Closing Date (it being
understood that this Section 12.2(d) in no way diminishes
the Seller's obligations under Section 12.1 hereof).
12.3 Determination of Damages and Related Matters. In
calculating any amounts payable pursuant to Section 12.1 or
12.2 hereof, the Seller or the Purchaser and Newco, as the
case may be, shall receive credit for (i) any tax benefit
actually realized as a result of the facts giving rise to
the claim for indemnification, and (ii) any insurance
recoveries. The Seller and the Purchaser agree that, except
for those representations and warranties 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 con
nection with the transactions contemplated by this Agree
ment, including in the case of the Seller and its represen
tatives any representation or warranty, express or implied,
as to the accuracy or completeness of any information
regarding the Businesses.
12.4 Limitation on Indemnification Liabilities. The
indemnifications in favor of the Purchaser and Newco
contained in Section 12.1(a) hereof (a) shall not be
effective until the aggregate dollar amount of all Damages
indemnified against under such Section exceeds the excess,
if any, of $1,000,000 over all Environmental Liabilities
paid or accrued by the Purchaser pursuant to Section 1.4(e)
hereof (the "Threshold Amount"), and then only to the extent
such aggregate amount exceeds the Threshold Amount and
(b) shall terminate once the dollar amount of all such
Damages indemnified against under such Section aggregates
50% of the Purchase Price.
12.5 Survival of Representations, Warranties
and Covenants. The parties hereto agree that the representa
tions and warranties made in this Agreement and any
indemnification with respect thereto shall survive for one
year after the Closing Date; provided, that the represen
tations and warranties made in Sections 4.1 through 4.5,
4.10, 4.11 and 5.1 through 5.3 hereof shall survive until
expiration of the applicable statutes of limitation. The
foregoing time limitation shall be construed to apply only
to the indemnity obligations of the Seller under Section
12.1(a) and only to the indemnity obligations of the
Purchaser and Newco under Section 12.2(a) and not to any
other provisions of Section 12.1 or 12.2 hereof.
12.6 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 XII or upon the
discovery of any facts which one party believes may give
rise to a claim for indemnification under this Article XII,
the party seeking indemnification (the "Indemnitee") shall
promptly cause written notice of such claim which it
reasonably believes to be covered by this indemnity to be
forwarded to the other party (the "Indemnitor"); 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 one year after the Closing Date (except for
indemnification pertaining to the representations and
warranties set forth in Sections 4.1 through 4.5, 4.10, 4.11
and 5.1 through 5.3 hereof, any matters covered by Section
12.1(b) or (c) hereof or Section 12.2(b), (c) or (d) hereof,
as to which such one year 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, war
ranty 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.
12.7 Indemnification Procedure for Third-Party Claims.
(a) 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 (which counsel
shall be reasonably satisfactory to the Indemnitee) and to
defend against, negotiate, settle or otherwise deal with any
proceeding, claim, or demand which relates to any Damage
indemnified against hereunder; provided, however, (i) that
the Indemnitor exercises such option in writing within 30
days of receipt of notice; (ii) that the Indemnitee may
participate in any such proceeding with counsel of its
choice and at its expense; and (iii) that in the case of any
claim seeking equitable relief or requiring remedial action
in respect of any Assets or the Businesses, the Purchaser or
Newco shall have the right to defend (using counsel
reasonably satisfactory to the Seller) or settle such claim,
regardless of whether the Purchaser or Newco is the
Indemnitor or the Indemnitee; provided, that neither the
Purchaser nor Newco shall settle any such claim which
results in any indemnification payment by the Seller
hereunder without the consent of the Seller, which consent
shall not be unreasonably withheld. 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 ten 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. The Seller shall have
exclusive control of any dispute in respect of any such
liability arising solely by reason of the inclusion of Newco
in any consolidated, combined or unitary tax return of the
Seller with respect to any period ending on or before the
Closing Date.
12.8. Exclusive Remedy. Except as provided in Article VIII
and Sections 11.1(c), 13.2 and 14.3 hereof, the exclusive
remedy available to a party hereto in respect of the matters
covered by Section 12.1 or 12.2 hereof shall be to proceed
in the manner and subject to the limitations contained in
this Article XII; provided, that nothing contained in
Article II relating to an adjustment to the Purchase Price
shall limit, supersede or otherwise affect the rights of any
party under this Article XII, and nothing contained in this
Article XII shall limit, supersede or otherwise affect the
rights of any party under such Article II; provided,
further, however, that no party shall be entitled to be
compensated more than once for the same loss.
Article XIII
TERMINATION
13.1. Termination. This Agreement may be terminated:
(a) by the written agreement of the Purchaser, the Seller
and Newco;
(b) 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; and
(c) by either the Purchaser or the Seller if the Closing
shall not have occurred on or before October 31, 1993.
13.2 Liabilities After Termination. Upon any termination
of this Agreement pursuant to Section 13.1 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.
Article XIV
MISCELLANEOUS
14.1 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):
"Accounts Receivable" has the meaning set forth in
Section 1.2(c) hereof.
"Adel Business" has the meaning set forth in the
recitals hereof.
"Aeroproducts Business" has the meaning set forth in
the recitals hereof.
"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.
"Asset Allocation" has the meaning set forth in
Section 2.4 hereof.
"Asset Assignment" 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 hereof.
"Businesses" has the meaning set forth in the
recitals hereof.
"CB Employees" means Employees who, on the Closing
Date, are covered by a collective bargaining agreement.
"Closing" means the consummation of the transactions
contemplated by Sections 3.3, 3.4, 3.5 and 3.6 of this
Agreement.
"Closing Date" has the meaning set forth in Sec
tion 3.1 hereof.
"Code" means the Internal Revenue Code of 1986, as
amended.
"Compensation Items" has the meaning set forth in
Section 8.1 hereof.
"Confidentiality Agreement" has the meaning set forth
in Section 6.2 hereof.
"Contract" means, with respect to the Assets or any
Business, any contract, agreement, indenture, note, bond, loan,
instrument, lease, conditional sale contract, mortgage,
license, franchise, insurance policy, obligation, commitment or
other arrangement or agreement, whether written or oral, to
which the Seller or any Business is a party.
"Controlex Business" has the meaning set forth in the
recitals hereof.
"Damages" means all claims, actions, losses, damages,
costs (including, without limitation, costs of investigation)
expenses and liabilities (including reasonable attorneys' fees
incident to the foregoing), whether or not arising out of third-
party claims.
"Employee Benefit Plan" has the meaning set forth in
Section 4.12(b) hereof.
"Employees" means, except as set forth on Schedule
14.1(a) hereto, all persons employed in any of the Businesses
who are actively at work or on scheduled vacation on the day
immediately prior to the Closing Date.
"Environmental Laws" mean all federal, state, local
and foreign Laws and Orders issued, promulgated, approved or
entered relating to the protection of the environment or the
protection of public health and safety from any environmental
matter.
"Environmental Liability" means any liability or
obligation that relates to the operation of the Businesses and
arises out of any violation of any Environmental Law by Seller
or arises out of the Release, presence, transportation, storage
or disposal of any Hazardous Materials, in each case to the
extent such violation existed, or such Hazardous Materials were
Released, present, transported, stored or disposed of, prior to
the Closing Date, other than liabilities or obligations in
connection with the Wiggins Remediation not in excess of
$150,000.
"Equipment" has the meaning set forth in
Section 1.2(a) hereof.
"ERISA" means the Employee Retirement Income Security
Act of 1974, as amended.
"Ernst & Young" has the meaning set forth in Section
2.3 hereof.
"Excluded Assets" has the meaning set forth in
Section 1.3 hereof.
"Excluded Liabilities" has the meaning set forth in
Section 1.5 hereof.
"Final Working Capital Adjustment" has the meaning
set forth in Section 2.3(d) hereof.
"Financial Statements" has the meaning set forth in
Section 4.7 hereof.
"Former Employee" means any individual formerly
employed in any of the Businesses, including any such
individual who retired from any of the Businesses on or prior
to the Closing Date and any such individual who, on the Closing
Date, is not actively-at-work, including, without limitation,
any such individual on disability, sick leave, layoff or leave
of absence status on the Closing Date.
"GAAP" means generally accepted accounting principles
in the United States.
"Government Contract" shall mean any Contract,
including, without limitation a subcontract, with a
Governmental Body, whether foreign or domestic.
"Governmental Body" means any government or govern
mental or regulatory body thereof, or political subdivision
thereof, whether federal, state, local or foreign, or any
agency, department or instrumentality thereof, or any court or
arbitrator (public or private).
"Hazardous Materials" means all hazardous substances,
wastes, extremely hazardous substances, hazardous materials,
hazardous wastes, hazardous constituents, solid wastes, special
wastes, toxic substances, pollutants, contaminants, petroleum
or petroleum derived substances or wastes, and related
materials, including without limitation any such materials
defined, listed, identified under or described in any
Environmental Laws.
"HSR Act" has the meaning set forth in Section 4.6
hereof.
"Inactive CB Employee" means any Inactive Employee
who is covered by a collective bargaining agreement.
"Inactive Employee" means any Former Employee who is
on short-term or long-term disability, sick leave, layoff or
other authorized leave of absence status on the Closing Date.
"Indemnitee" has the meaning set forth in Section
12.6 hereof.
"Indemnitor" has the meaning set forth in Section
12.6 hereof.
"Initial Balance Sheet" means the balance sheet of
the Businesses at December 31, 1992, attached hereto as
Schedule 4.7(a).
"Initial Working Capital" has the meaning set forth
in Section 2.2 hereof.
"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.
"Law" means any federal, state, local or foreign law
(including common law), statute, code, ordinance, rule,
regulation, permit, licensing or other requirement or guideline
or judicial or administrative decision.
"Leased Real Property" means all the Real Property
leased by the Seller and used exclusively in any of the
Businesses.
"Legal Proceeding" means any judicial, administrative
or regulatory proceeding, investigation or inquiry or
administrative charge or complaint pending or threatened at law
or in equity before any court or before any federal, state,
municipal or other governmental department, commission, board,
bureau, agency or instrumentality.
"Liabilities" means all debts, claims, liabilities,
obligations, damages and expenses.
"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.
"Material Adverse Effect" means any material adverse
effect on, or any effect that results in a material adverse
change in, the Assets as a whole or the business, financial
condition, results of operations or liabilities of the
Businesses in the aggregate.
"Newco" has the meaning set forth in the recitals
hereof.
"Newco Documents" has the meaning set forth in
Section 4.2(b) hereof.
"Newco Shares" has the meaning set forth in the
recitals hereof.
"Newco's Severance Plan" has the meaning set forth in
Section 8.8(b) hereof.
"Non-CB Employee" means Employees who are not covered
by a collective bargaining agreement.
"Order" means any written 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
any of the Businesses.
"Permit" means any written approval, authorization,
consent, exemption, franchise, license, permit, waiver,
security clearance or certificate of occupancy or use, grant,
exception, variance by or registration with any Person.
"Permitted Exceptions" means (i) prior to the Closing
Date, Liens in favor of Bankers Trust Company, as 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 that are not in the aggregate
material to the Business or the Assets; (iv) zoning,
entitlement and other land use and environmental regulations by
Governmental Bodies, provided that such regulations have not
been violated by the Real Property or the existing use thereof;
(v) Liens arising out of a failure to comply with the
provisions of any bulk transfer laws under the Uniform
Commercial Code of any jurisdiction; and (vi) such other
imperfections in title, charges, easements, restrictions and
encumbrances which do not in the aggregate materially and
adversely affect the use of the Assets or the operation of the
Businesses, as presently conducted.
"Person" means any individual, corporation, partner
ship, firm, joint venture, association, joint-stock company,
trust, unincorporated organization or Governmental Body.
"Preliminary Working Capital Adjustment" has the
meaning set forth in Section 2.2 hereof.
"Purchase Price" has the meaning set forth in Section
2.1 hereof.
"Purchaser" has the meaning set forth in the recitals
hereof.
"Purchaser Documents" has the meaning set forth in
Section 5.2 hereof.
"Purchaser Representatives" has the meaning set forth
in Section 6.2 hereof.
"Real Property" has the meaning set forth in Section
1.2(d) hereof.
"Real Property Documents" has the meaning set forth
in Section 4.5(a) hereof.
"Release" means any release, spill, emission,
leaking, pumping, injection, deposit, disposal, discharge,
dispersal, leeching or migration into the environment or out of
any property, including the movement of any Hazardous Materials
through or in the air, soil, surface water, ground water or
property.
"Salaried Pension Plan" has the meaning set forth in
Section 8.3 hereof.
"Seller" has the meaning set forth in the recitals
hereof.
"Seller Documents" has the meaning set forth in
Section 4.2(a) hereof.
"Seller Representatives" has the meaning set forth in
Section 11.4(b) hereof.
"Statement of Working Capital" has the meaning set
forth in Section 2.3 hereof.
"Taxes" means all federal, state, municipal, local or
foreign taxes, assessments, additions to tax, interest,
penalties, deficiencies, duties, fines, fees, withholding tax
obligations, trust fund taxes and other governmental charges or
impositions of any kind or description, whether measured by
properties, assets, wages, payroll, purchases, value added,
payments, sales, use, business, capital stock, surplus or
income, arising out of or in connection with the operation and
ownership of the Businesses and the Assets by the Seller or
otherwise.
"Threshold Amount" has the meaning set forth in
Section 12.4 hereof.
"Union Pension Plans" means The Pension Plan For
Hourly Employees of IMO Industries Inc., Wiggins Connectors
Division and The Retirement Plan for Bargaining Unit Employees
of Adel Fasteners Division, IMO Industries Inc., Huntington,
West Virginia Plan.
"Union Plan" has the meaning set forth in Section
4.12(b) hereof.
"Welfare Plan" has the meaning set forth in Section
8.4 hereof.
"Wiggins Business" has the meaning set forth in the
recitals hereof.
"Wiggins Remediation" means the installation and
operation of a soil vapor extraction system with an enhanced
bioventing system to remediate volatile and non-volatile
organic compound contamination of certain areas of soil
(resulting from such soil being impacted by chemicals
originating from two former 2,500 gallon underground oil-
cutting storage tanks) located on the premises of the Wiggins
Business at 5000 Triggs Street, Los Angeles, California.
"Working Capital" has the meaning set forth in
Section 2.2 hereof.
14.2 Prorations. All personal and real property taxes and
special and general assessments relating to the Assets shall
be prorated by the parties 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 paid by the Seller.
All such assessments and taxes applicable to periods
following the Closing Date shall be the sole obligation,
responsibility and expense of the Purchaser.
14.3 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, provided that the Seller shall indemnify Newco,
the Purchaser and their Affiliates from and against all
Damages relating to claims of creditors of the Seller to the
extent that such claims are not Assumed Liabilities.
14.4 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.
14.5 Governing Law. This Agreement shall be governed by
and construed in accordance with the law of the State of New
York.
14.6. Transfer Taxes. The Purchaser and the Seller shall
equally share (a) in the cost of all transfer and
documentary taxes and fees imposed with respect to instru
ments of conveyance in the transaction contemplated hereby,
(b) in the cost of all sales, use, gains, excise and other
transfer or similar taxes on the transfer of the Assets to
Newco and the Newco Shares to the Purchaser contemplated
hereunder (including the creation of Newco and the transfer
of the Assets from the Seller to Newco as contemplated
hereunder) and (c) any costs or expenses relating to the
incorporation of Newco or the qualification of Newco in any
jurisdiction, including all costs and expenses incidental
thereto. The Seller shall prepare all such tax returns and
shall permit the Purchaser adequate opportunity to review
such returns prior to the filing thereof. The Purchaser,
Newco 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
perfect any exemption from any such transfer, documentary,
sales, gains, excise or use tax or otherwise comply with
applicable reporting requirements with respect to such
taxes.
14.7 Expenses. Except as otherwise provided in this
Agreement, 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 Agree
ment and the consummation of the transactions contemplated
hereby and thereby.
14.8 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.
14.9. Notices. All notices and other communications under
this Agreement shall be in writing and shall be deemed given
when delivered personally or four days after being mailed by
registered mail, return receipt requested, 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, prior to the Closing Date,
to Newco, to:
IMO Industries Inc.
3450 Princeton Pike
Lawrenceville, New Jersey 08648
Telephone: (609) 896-7600
Facsimile: (609) 896-7633
Attention: Thomas J. Bird; 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 or, following the Closing
Date, to Newco, to:
NovaDigm Acquisition, Inc.
c/o Kelso & Company, Inc.
350 Park Avenue
21st Floor
New York, New York 10022
Telephone: (212) 751-3939
Facsimile: (212) 223-2379
Attention: Mr. Thomas R. Wall, IV
with a copy to:
Debevoise & Plimpton
875 Third Avenue
New York, New York 10022
Telephone: (212) 909-6000
Facsimile: (212) 909-6836
Attention: Richard D. Bohm, Esq.
14.10 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.
14.11 Binding Effect; No Assignment. Except as otherwise
permitted in Section 14.14 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 and any attempted assignment without such
required consents shall be void; provided, however, that the
Purchaser and after the Closing Date Newco may assign their
respective rights under this Agreement, and cause their
respective obligations hereunder to be assumed, whether by
operation of law or otherwise, by either of their respective
Affiliates, provided, further, however, that this Agreement
may only be assigned to a Person to whom the Assets and the
Businesses are transferred and such Person shall also be
required to assume all of the obligations of the assignor
hereunder.
14.12 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.
14.13 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.
14.14 Third Parties. Except as provided in Section 12.1 or
12.2 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; provided, however, that in connection with the
financing of the acquisition of the Newco Shares hereunder,
the Purchaser or after the Closing Newco may grant a
security interest in its rights hereunder to any lenders to
the Purchaser.
14.15 Newco. Upon the execution of this Agreement by
Newco, Newco shall be entitled to all the rights and subject
to all the obligations of a party hereto.
IN WITNESS WHEREOF, the parties hereto have executed
this instrument as of the date and year first above written.
IMO INDUSTRIES INC.
By:/s/ Thomas J. Bird
Name: Thomas J. Bird
Title: Senior Vice Presi-
dent and General Counsel
NOVADIGM ACQUISITION, INC.
By:/s/ David Wahrhaftig
Name: David Wahrhaftig
Title:
By:
Name:
Title:
STOCK SALE AND ASSET TRANSFER AGREEMENT
BY AND BETWEEN
IMO INDUSTRIES INC.
AND
NOVADIGM ACQUISITION, INC.
Dated as of July 14, 1993
TABLE OF CONTENTS
Page
ARTICLE I. ASSETS TO BE ACQUIRED 2
1.1. Sale and Purchase of Newco Shares 2
1.2. Transfer and Assignment of Assets
to Newco 2
1.3. Excluded Assets 4
1.4. Assumed Liabilities 5
1.5. Excluded Liabilities 6
ARTICLE II. PURCHASE PRICE 6
2.1. Purchase Price and Payment 6
2.2. The Initial Working Capital 6
2.3. Statement of Working Capital 7
2.4. Allocation of Purchase Price 10
ARTICLE III. THE CLOSING 11
3.1. Closing Date 11
3.2. Proceedings at Closing 11
3.3. Deliveries by the Seller to the
Purchaser 11
3.4. Deliveries by the Purchaser to the
Seller 12
3.5. Deliveries by the Seller to Newco
and the Purchaser 12
3.6. Deliveries by Newco to the Seller 13
ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF THE
SELLER 13
4.1. Organization and Good Standing 13
4.2. Authorization of Agreement; No
Conflicts 13
4.3. Capitalization of Newco; Ownership 15
4.4. Title to Assets Other than Real
Property 16
4.5. Title to Real Property 16
4.6. Consents 17
4.7. Financial Statements 18
4.8. Absence of Certain Developments 18
4.9. Material Contracts 19
4.10. Intangible Property 21
4.11. Taxes 22
4.12. Employees and Employee Benefits 22
4.13. Litigation 24
4.14. Compliance with Law 25
4.15. Receivables 25
4.16. Inventory 25
4.17. Assets Necessary to Conduct the
Businesses 25
4.18. Environmental Matters 25
4.19. Brokers 26
4.20. Permits 26
4.21. Insurance Coverage 27
4.22. Customers 27
4.23. Bank and Brokerage Accounts 27
4.24. Operations of Newco 27
4.25. Disclosure 28
ARTICLE V. REPRESENTATIONS AND WARRANTIES OF THE
PURCHASER 28
5.1. Organization and Good Standing 28
5.2. Authorization of Agreement; No
Conflicts 28
5.3. Consents 29
5.4. Litigation 29
5.5. Brokers 29
5.6. Investment Intention 29
ARTICLE VI. COVENANTS OF THE SELLER 30
6.1. Cooperation 30
6.2. Access to Documents; Opportunity
to Ask Questions 30
6.3. Conduct of the Businesses 31
6.4. Consents and Conditions;
Assignment of Assets 32
6.5. HSR Act Filings 32
6.6. Exclusive Dealing 33
6.7. Notices of Certain Events 33
6.8. Novation Agreements 33
6.9. Filing of Tax Returns 34
6.10. Qualification of Newco 34
6.11. Release of Certain Liens 34
6.12. Special Intellectual Property
Actions 34
ARTICLE VII. COVENANTS OF THE PURCHASER 35
7.1. Cooperation 35
7.2. Confidentiality 35
7.3. Consents and Conditions 35
7.4. HSR Act Filings; Compliance with
Antitrust and Competition Laws 35
7.5. Financing 35
7.6. Novation Agreements 36
ARTICLE VIII. COVENANTS RELATING TO EMPLOYMENT AND
EMPLOYEE MATTERS 36
8.1. Continuation of Employment 36
8.2. Collective Bargaining and Other
Agreements 38
8.3. Salaried Pension Plans 38
8.4. Welfare Plans 38
8.5. Union Plans 39
8.6. Credited Service 39
8.7. Workers' Compensation 39
8.8. Termination Obligations 40
8.9. Indemnification 41
8.10. Right to Make Modifications 42
ARTICLE IX. CONDITIONS PRECEDENT TO THE
PURCHASER'S OBLIGATIONS 42
9.1. Representations, Warranties and
Covenants 42
9.2. HSR Act 43
9.3. No Prohibition 43
9.4. Opinion of the Seller's Counsel 43
9.5. Delivery of Documents 43
9.6. Secretary's Certificate 43
9.7. Consents and Permits 43
9.8. Purchaser Financing 43
9.9. Additional Documents and Matters 44
9.10. Resignations 44
9.11. Asset Assignment 44
9.12. Signatory 44
9.13. Employee Pension Benefit Plans 44
ARTICLE X. CONDITIONS PRECEDENT TO THE SELLER'S
OBLIGATIONS 45
10.1. Representations, Warranties and
Covenants 45
10.2. No Prohibition 45
10.3. Opinion of the Purchaser's
Counsel 45
10.4. Delivery of Documents 45
10.5. HSR Act 46
10.6. Secretary's Certificate 46
10.7. Signatory 46
10.8. Additional Documents and Matters 46
10.9. Consent and Permits 46
ARTICLE XI. ADDITIONAL POST-CLOSING COVENANTS 46
11.1. Further Assurances 46
11.2. Public Announcements 48
11.3. Joint Post-Closing Covenant of
the Seller and the Purchaser 48
11.4. Books and Records; Personnel 49
11.5. Noncompetition 50
11.6. Use of IMO Name 52
11.7. Closing Balance Sheet 52
11.8. Purchase of Certain Products 53
ARTICLE XII. INDEMNIFICATION AND RELATED MATTERS 53
12.1. Indemnification by the Seller 53
12.2. Indemnification by the Purchaser
and Newco 54
12.3. Determination of Damages and
Related Matters 54
12.4. Limitation on Indemnification
Liabilities 55
12.5. Survival of Representations,
Warranties and Covenants 55
12.6. Notice of Indemnification 55
12.7. Indemnification Procedure for
Third-Party Claims 56
12.8. Exclusive Remedy 57
ARTICLE XIII. TERMINATION 57
13.1. Termination 57
13.2. Liabilities After Termination 58
ARTICLE XIV. MISCELLANEOUS 58
14.1. Certain Definitions 58
14.2. Prorations 66
14.3. Waiver of Compliance with Bulk
Transfer Laws 66
14.4. Entire Agreement 66
14.5. Governing Law 66
14.6. Transfer Taxes 66
14.7. Expenses 67
14.8. Table of Contents and Headings 67
14.9. Notices 67
14.10. Severability 68
14.11. Binding Effect; No Assignment 68
14.12. Amendments 69
14.13. Counterparts 69
14.14. Third Parties 69
14.15. Newco 69
Schedules and Exhibits
Schedule 1.2(d) -- Real Property
Schedule 1.3(j) -- Excluded Assets
Schedule 1.4 -- Assumed Liabilities
Schedule 2.2(a) -- Initial Working Capital
Schedule 4.2 -- No Conflicts
Schedule 4.6 -- Consents
Schedule 4.7(a) -- Financial Statements
Schedule 4.7(b) -- GAAP Modification and
Undisclosed Liabilities
Schedule 4.8 -- Certain Business Developments
Schedule 4.8(h) -- Settlements and Monetary
Judgments
Schedule 4.9(a)(i) -- Contracts
Schedule 4.9(a)(ii) -- Non-Valid Contracts
Schedule 4.9(c) -- Investigations Relating to
Government Contracts
Schedule 4.9(d) -- Government Contracts Audits
Schedule 4.9(e) -- Government Contracts with Cost
Overruns
Schedule 4.10(a) -- Intangible Assets
Schedule 4.10(a)(i) -- Liens on Intangible Assets
Schedule 4.10(b) Infringements on Intangible
Assets
Schedule 4.10(c) -- Intangible Assets Licenses
Schedule 4.10(d) -- Intellectual Property
Royalties and Fees
Schedule 4.12(a) -- Collective Bargaining
Agreements
Schedule 4.12(b) -- Employee Benefit Plans
Schedule 4.13 -- Litigations
Schedule 4.14 -- Compliance with Law
Schedule 4.17 -- Assets Not Necessary to
Conduct Business
Schedule 4.18 -- Environmental Matters
Schedule 4.20 -- Permits
Schedule 4.21 -- Insurance Coverage
Schedule 4.23 -- Bank and Brokerage Accounts
Schedule 5.5 -- Purchaser's Brokers
Schedule 6.12(a) -- Patents and Registered
Trademarks Requiring Name
Changes
Schedule 10.9 -- Consents; Permits
Schedule 14.1(a) -- Excluded Employees
Exhibit A -- Form of Bargain and Sale Deeds
STOCK PURCHASE AGREEMENT
BY AND AMONG
IMO INDUSTRIES INC.,
IMO INDUSTRIES GMBH,
MARK CONTROLS CORPORATION,
AND
MARK CONTROLS GMBH i. Gr.
Dated as of October 28, 1993
Table of Contents
Page
ARTICLE I
ASSETS TO BE CONVEYED
1.1 Purchase and Sale of Common Stock 2
1.2 Transfer and Assignment of Assets 2
1.3 Contract Assignment 2
1.4 Real Estate Conveyance 3
1.5 Excluded Assets 4
1.6 Assumed Liabilities 5
1.7 Excluded Liabilities 5
ARTICLE II
PURCHASE PRICE
2.1 Purchase Price and Payment 7
2.2 Allocation of Purchase Price 8
2.3 Aggregate Purchase Price Adjustment 8
ARTICLE III
THE CLOSING
3.1 Closing Date 11
3.2 Proceedings at Closing 11
3.3 Deliveries by the Seller to Purchaser 11
3.4 Deliveries by the Seller to Newco and the
Purchaser 12
3.5 Deliveries by the Purchaser to the Seller 13
3.6 Deliveries by Newco to the Seller 14
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE SELLER
4.1 Organization and Good Standing 14
4.2 Authorization of Agreement; No Conflicts 15
4.3 Capitalization 16
4.4 Title and Condition of Properties 16
4.5 Consents 17
4.6 Financial Statements 17
4.7 Absence of Undisclosed Liabilities 17
4.8 Absence of Material Adverse Changes 17
4.9 Absence of Certain Developments 18
4.10 Material Contracts 19
4.11 Intellectual Property Rights 20
4.12 Taxes 21
4.13 Employees and Employee Benefits 21
4.14 Litigation 24
4.15 Compliance with Law 24
4.16 Inventory 24
4.17 Assets Necessary to Conduct Business 24
4.18 Environmental Matters 24
4.19 Brokers 25
4.20 Product Warranty 25
4.21 Customers and Suppliers 25
4.22 Disclosure 26
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
5.1 Organization and Good Standing 26
5.2 Authorization of Agreement 26
5.3 Consents 27
5.4 Litigation 27
5.5 Brokers 27
ARTICLE VI
COVENANTS OF THE SELLER
6.1 Cooperation 27
6.2 Access to Documents; Opportunity to Ask Questions 28
6.3 Conduct of Business 28
6.4 Consents and Conditions; Assignment of Assets 30
6.5 HSR Act Filings 30
ARTICLE VII
COVENANTS AND CERTAIN
REPRESENTATIONS OF THE PURCHASER
7.1 Cooperation 30
7.2 Confidentiality 30
7.3 Consents and Conditions 30
7.4 HSR Act Filings; Compliance with Antitrust
and Competition Laws 31
7.5 Purchase Money Loan 31
ARTICLE VIII
COVENANTS RELATING TO EMPLOYEES
AND EMPLOYEE BENEFITS PLANS
8.1 Employee Transfer to Newco 31
8.2 Collective Bargaining and Other Agreements 33
8.3 Pension Plans. 33
8.4 Savings Plan 34
8.5 Welfare Benefit Plans. 34
8.6 Accrued Vacation and Paid Sick Days 35
8.7 Purchaser's Right to Amend 35
8.8 Mutual Cooperation 35
8.9 Employee Benefits Indemnification 35
ARTICLE IX
CONDITIONS PRECEDENT TO THE PURCHASER'S OBLIGATIONS
9.1 Performance by Seller; Financing Contingency; 35
9.2 HSR Act 36
9.3 No Prohibition 36
ARTICLE X
CONDITIONS PRECEDENT TO THE SELLER'S OBLIGATIONS
10.1 Representations, Warranties and Covenants 37
10.2 German Asset Purchase Agreement 37
10.3 No Prohibition 37
10.4 Delivery of Documents 37
10.5 HSR Act 38
ARTICLE XI
ADDITIONAL POST-CLOSING COVENANTS
11.1 Agreement Not To Compete 38
11.2 Further Assurances 40
11.3 Tax Returns 41
11.4 Guarantee of Performance 42
11.5 Public Announcements 42
11.6 Joint Post-Closing Covenant of the Seller
and the Purchaser 42
11.7 Books and Records; Personnel 43
ARTICLE XII
INDEMNIFICATION AND RELATED MATTERS
12.1 Indemnification by the Seller and
the German Seller 43
12.2 Indemnification by the Purchaser 44
12.3 Determination of Damages and Related Matters 45
12.4 Limitation on Indemnification Liabilities 45
12.5 Survival of Representations, Warranties
and Covenants 46
12.6 Notice of Indemnification 47
12.7 Indemnification Procedure for Third-Party
Claims 47
12.8 Exclusive Remedy 49
ARTICLE XIII
TERMINATION
13.1 Termination 49
13.2 Liabilities After Termination; Payments
Upon Termination 50
ARTICLE XIV
MISCELLANEOUS
14.1 Certain Definitions 52
14.2 Prorations 59
14.3 Entire Agreement 59
14.4 Governing Law 59
14.5 Transfer Taxes 59
14.6 Expenses 60
14.7 Table of Contents and Headings 60
14.8 Notices 60
14.9 Severability 61
14.10 Binding Effect; No Assignment 61
14.11 Amendments 62
14.12 Counterparts 62
14.13 No Third Party Beneficiaries 62
14.14 Enforcement Expenses 62
Exhibits and Schedules
Schedule 1.2(a) -- Assets
Schedule 1.3(a) -- Permits and Contracts
Schedule 1.5(i) -- Other Excluded Assets
Schedule 1.7(l) -- Excluded Obligations,
Liabilities and Indebtedness
Schedule 2.2 -- Purchase Price
Allocation
Schedule 4.5 -- Consents
Schedule 4.6 -- Initial Balance Sheet
Schedule 4.6(a) -- Consolidating Stand-Alone Condensed
Income Statement
Schedule 4.6(b) -- Consolidated Income Statements
Schedule 4.7 -- Undisclosed Liabilities
Schedule 4.8 -- Activities out of
the Ordinary
Course
Schedule 4.9 -- Certain Developments
Schedule 4.10 -- Material Contracts
Schedule 4.11 -- Intellectual Property Rights
Schedule 4.12 -- Tax Benefit Transfer Leases
Schedule 4.13(a)(i) -- Collective Bargaining Agreements
Schedule 4.13(a)(ii) -- Employees
Schedule 4.13(b)(i) -- Employee Benefit Plans
Schedule 4.13(b)(ii) -- Benefit Arrangements
Schedule 4.13(e) -- Retiree Plans
Schedule 4.13(f) -- Multiemployer Pension Plans
Schedule 4.13(g) -- Severance/Termination Benefits
Schedule 4.13(i) -- Union Pension Plan Underfunding
Schedule 4.14 -- Litigation
Schedule 4.15 -- Compliance with Law
Schedule 4.18 -- Environmental
Matters
Schedule 4.20 -- Product Warranty
Schedule 4.21 -- Customers and Suppliers
Schedule 8.1(a) -- Excluded Employees
Schedule 8.1(b) -- Pumps and Controls Field Sales
Force
Schedule 14.1 -- Executive Officers and Key
Employees
Exhibit A -- Transition Services Agreement
Exhibit B -- Commitment Letter
STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT (the "Agreement"), dated as of
October 28, 1993 by and among Imo Industries, Inc., a Delaware
corporation (the "Seller"), Imo Industries GmbH (the "German
Seller"), Mark Controls Corporation, a Delaware corporation (the
"Purchaser"), and Mark Controls GmbH i. Gr. (the "German
Purchaser").
W I T N E S E T H :
WHEREAS: The Seller, through its Barksdale Controls
Division, is engaged in the business of designing, manufacturing,
selling and distributing pressure switches, temperature switches,
control valves, pressure transducers and related products and
services.
WHEREAS: On the Closing Date, the Seller shall own all
of the issued and outstanding common stock (the "Common Stock")
of a newly formed, wholly-owned subsidiary of Seller formed
immediately prior to the Closing Date ("Newco").
WHEREAS: On the Closing Date, on and subject to the
terms and conditions set forth herein, the Seller shall
contribute convey, assign and transfer all of the Assets and the
Assumed Liabilities (as each is hereinafter defined) to Newco and
Newco will assume the Assumed Liabilities (the "Assignment").
WHEREAS: The Seller shall retain all of the Excluded
Assets and all of the Excluded Liabilities (as each is
hereinafter defined).
WHEREAS: Immediately following the Assignment, and on
and subject to the terms and conditions set forth herein, the
Seller shall sell, and the Purchaser shall purchase all of the
issued and outstanding common stock of Newco.
WHEREAS: In connection with the execution and delivery
of this Agreement, the German Purchaser, Seller and the German
Seller shall enter into an Asset Purchase Agreement pursuant to
which the German Purchaser shall acquire certain assets and shall
assume certain liabilities of the German Seller.
WHEREAS: Certain capitalized terms used herein are
defined in Section 14.1 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 contained herein, the parties hereby agree as follows:
ARTICLE I
ASSETS TO BE CONVEYED
1.1 Purchase and Sale of Common Stock. Upon the
terms and subject to the conditions hereinafter set forth, and
effective as of the Closing Date, Purchaser shall purchase and
Seller shall sell, assign, transfer, convey and deliver to
Purchaser, all of the Common Stock.
1.2 Transfer and Assignment of Assets. Except as
otherwise provided in Section 1.5, upon the terms and subject to
the conditions hereinafter set forth, immediately prior to the
Closing, the Seller shall assign, transfer, convey and deliver to
Newco, and Newco shall acquire and accept from the Seller, all
right, title and interest in and to all of the assets, rights,
contracts and claims and other property listed on Schedule 1.2
hereof (and the Sub-schedules thereto) and all other property of
any kind primarily employed in the Business or arising out of the
Business (the "Assets") other than the Excluded Assets (as
hereinafter defined).
1.3 Contract Assignment.
(a) Except as otherwise provided in this Section
1.3, immediately prior to the Closing, the Seller shall
assign to Newco all rights existing under the Contracts and
Permits identified on Schedule 1.3(a) and all other
agreements related to the Business or necessary for the
conduct of the Business which are not inconsistent with the
warranties contained in Section 4.10, other than the
Excluded Contracts (as hereinafter defined). The term
"Assigned Contracts" as used in this Agreement means all
Contracts and other arrangements assigned to Newco under the
provisions of this Section 1.3(a) and all other Contracts
which become Assigned Contracts after the Closing Date under
the operation of Section 11.2(b).
(b) The term "Unapproved Contract" means any
agreement which would otherwise be an Assigned Contract
under the definition in Section 1.3(a) but which has the
following characteristics: (i) such agreement may not be
assigned without the consent of another person; (ii) such
consent shall not have been obtained by the Closing; and
(iii) in the reasonable judgment of the Purchaser the
failure to obtain such consent would cause a loss of
material contractual benefits to Newco or Purchaser under
such Contract or result in the imposition of any material
Liability upon Newco or the Purchaser or be unlawful. No
Unapproved Contract shall be deemed to be assigned to or
assumed by Newco or the Purchaser at Closing.
Notwithstanding the foregoing sentence, no purchase order
submitted by a customer in the ordinary course of business
shall be deemed an Unapproved Contract for the purposes of
this Agreement.
(c) The Seller shall not assign to Newco or the
Purchaser and neither Newco nor the Purchaser shall assume
any of the following Contracts (which are collectively
herein called the "Excluded Contracts"): (i) any Unapproved
Contract which the Purchaser does not elect for Newco to
treat in the manner prescribed by Section 11.2(b) below;
(ii) any Contract which is inconsistent with the warranties
contained in Section 4.10 which the Purchaser elects for
Newco not to assume; (iii) other than the Collective
Bargaining Agreement, the Union Pension Plan and the Change
of Control Agreements, any Contract relating to any Employee
Benefit Plan or Benefit Arrangement; and (iv) any Contract
which relates solely to Excluded Assets or Excluded
Liabilities.
1.4 Real Estate Conveyance.
(a) Immediately prior to the Closing, the Seller
shall deliver to Newco one or more grant deeds executed by
the Seller sufficient to transfer the Seller's interest in
the California Facility to Newco and sufficient when duly
recorded to evidence of record that Newco has the ownership
interest in the California Facility which the Seller is
obligated to convey pursuant to this Agreement, subject to
the Permitted Exceptions.
(b) Purchaser will obtain the following title
insurance commitments, policies, and riders (the "Title
Policy" or "Title Policies") in preparation for the Closing,
and at the Closing Seller will pay the premiums therefor in
full:
(i) with respect to the California
Facility, an ALTA Owner's Policy of Title Insurance Form
B-1987 (or equivalent policy acceptable to Purchaser if
an ALTA Owner's Policy of Title Insurance Form B-1987 is
not available in the state of California) issued by a
title insurer (the "Title Company") satisfactory to the
Purchaser, in such amount as the Purchaser determines to
be the fair market value of such parcel (including all
improvements located thereon), insuring title to the
California Facility to be in Newco as of the Closing,
subject only to Permitted Exceptions;
(ii) The Title Policy referred to
above will (a) insure title to the California Facility
and all recorded easements benefitting such parcel, (b)
contain an "extended coverage endorsement" insuring over
the general exceptions contained customarily in such
policies, (c) contain an ALTA Zoning Endorsement 3.1 (or
equivalent), (d) contain an endorsement insuring that
the parcel described in such Title Policy is the parcel
shown on the Survey delivered with respect to such
parcel and survey accuracy, (e) contain an endorsement
insuring that each street adjacent to such parcel is a
public street and that there is direct and unencumbered
pedestrian and vehicular access to such street from such
parcel, (f) if the California Facility consists of more
than one record parcel, contain a "contiguity"
endorsement insuring that all of the record parcels are
contiguous to one another, (g) contain a tax parcel
endorsement and (h) contain an owner's comprehensive
endorsement.
(c) With respect to the California Facility, the
Purchaser, at its sole expense, will procure in preparation
for the Closing a current ALTA/ASCM (1988 standards) survey
of such parcel certified to the Newco and the Title Company,
prepared by a licensed surveyor and conforming to current
ALTA Minimum Detail Requirements for Land Title Surveys,
disclosing the location of all improvements, easements,
party walls, sidewalks, roadways, utility lines, and other
matters shown customarily on such surveys, and showing
access affirmatively to public streets and roads (a
"Survey") and such other Table III items as Purchaser may
require. No Survey will disclose any survey defect or
encroachment from or onto the California Facility which has
not been cured or insured over prior to the Closing.
1.5 Excluded Assets. Notwithstanding anything to the
contrary contained in Section 1.2 hereof, the Seller and Newco
expressly understand and agree that Seller is not hereunder
selling, assigning, transferring, conveying or delivering to
Newco any of the following assets, properties, rights, contracts
and claims of Seller unless specifically mentioned otherwise
(collectively, the "Excluded Assets"):
(a) cash, bank accounts, certificates of
deposit, treasury bills, treasury notes and marketable
securities;
(b) except as otherwise specifically provided
herein, pension or other funded employee benefit plan
assets;
(c) except as otherwise specifically provided
herein, any policy of insurance or any prepaid premium,
reimbursement, refund or settlement relating thereto;
(d) except as set forth in Schedule 1.2 hereto,
any of Seller's right, title or interest in or to any name,
mark, trade name or trademark incorporating "Imo," "Imo
Delaval," "TransAmerica Delaval" or "Delaval," either alone
or in combination, and any and all goodwill represented
thereby and pertaining thereto, and any Intellectual
Property rights of Seller's TransInstruments division
(provided that Purchaser will continue to be permitted to
integrate and package Seller's transducer products using
existing knowhow of the Business);
(e) the Excluded Contracts;
(f) prepaid taxes pertaining to the Business and
all prepaid charges, sums and fees pertaining to any of the
Excluded Assets or the Excluded Liabilities;
(g) those books, records or other data not relat
ing solely to Seller's or Newco's ownership or operation of
the Business or required by applicable Law to be retained by
Seller; provided, however, that Seller shall provide
Purchaser with copies of and access to all books, records or
other data relating to Seller's ownership or operation of
the Business;
(h) any claims for refunds or rebates of any
Taxes paid with respect to any Pre-Closing Tax Period; and
(i) the other assets listed on Schedule 1.5(i)
hereto.
1.6 Assumed Liabilities. Effective as of the
Closing, Newco shall assume and discharge when due the following
Liabilities of the Seller (collectively, the "Assumed
Liabilities"):
(a) all Liabilities arising out of the Business
which would be shown as liabilities on a balance sheet for
the Business prepared as of the Closing Date in accordance
with the requirements prescribed in Section 2.3; and
(b) all Liabilities and obligations arising from
the operation of the Business (whether before, on or after
the Closing Date) other than those Liabilities and
obligations which (i) would not have existed had all of the
representations and the warranties contained in Article IV
hereof been true and correct as of the date made or (ii) are
Excluded Liabilities.
1.7 Excluded Liabilities. Notwithstanding anything
in Section 1.6 hereof to the contrary, the parties hereto
expressly understand and agree that Newco shall not assume or
become liable for any of the following Liabilities (the "Excluded
Liabilities") of the Seller and none of the Excluded Liabilities
shall be included as Assumed Liabilities for purposes of this
Agreement:
(a) any Liabilities or obligations to the extent
relating to any of the Excluded Assets;
(b) any Liabilities or obligations under or
relating to any of the Excluded Contracts;
(c) any of Seller's Liabilities arising under
this Agreement;
(d) Liabilities for Taxes imposed on Seller,
Newco or the Assets as a result of the ownership or
operation of the Assets or the Business, or arising solely
by reason of the inclusion of Newco in any consolidated,
combined or unitary tax return of the Seller for all Pre-
Closing Tax Periods, except that Newco or Purchaser will pay
Taxes other than income taxes in an amount (but not in
excess of the amount) actually shown as liabilities therefor
on the Closing Balance Sheet or as otherwise provided in
Section 14.5;
(e) any Liability which, pursuant to Section
1.6(b)(i), is not an Assumed Liability;
(f) any Liability or obligation relating to any
threatened or instituted Legal Proceeding (including for
this purpose any claim that may arise out of the Brenham,
Texas gas storage explosion which occurred on or about April
7, 1992) relating to personal injury or property loss or
damage arising out of or in connection with any product
liability claim whether made in law or equity relating to
products shipped or any service provided by Seller prior to
the Closing (other than obligations under product warranties
which are consistent with Seller's warranty in Section 4.20
below);
(g) any Liability arising under Environment,
Health and Safety Requirements relating in any way to (i)
the off site disposal or arranging for off site disposal or
treatment, or arranging with a transporter for transport for
off site disposal or treatment of any Hazardous Materials
relating to the Business or the California Facility on or
prior to the Closing Date, (ii) any assets or property
currently owned, operated or leased by Seller which are not
part of the Business or the California Facility, (iii) any
assets or property formerly owned, leased or operated by
Seller which are not part of the Assets, (iv) any civil
penalties and interest relating to that certain Stipulation
and Order of Judgment dated July 7, 1993 referred to on
Schedule 4.18 attached hereto or (v) failure by the Seller
(in connection with the Business) to timely file the Toxic
Chemical Release Inventory Forms for the years 1987 through
1991, inclusive, in respect of activities at the California
Facility;
(h) any obligation to repay any amounts errone
ously paid to or received by Seller from any source,
including without limitation, pursuant to any insurance
policy or arising out of or in connection with any payment
by or on behalf of any person, any insurer or any federal,
state or local governmental agency, it being understood and
agreed that Seller shall be responsible for any refunds or
the return of any amounts paid to Seller or on Seller's
behalf by any person, any insurer or any Governmental Body
prior to the Closing, and no such return of monies shall be
made out of or otherwise affect the Assets;
(i) any amounts pledged, promised or owed to any
charitable organization or religious group in excess of
$5,000 in the aggregate;
(j) Any Liabilities or obligations relating to
any Employee Benefit Plan or Benefit Arrangement, or
employee benefit plan, program, policy or arrangement
maintained or contributed to (or formerly maintained or
contributed to) by any member or former member of the
controlled group of companies (as such term is described in
Section 414 of the Code) of which Seller is or was a member,
except those Liabilities that Purchaser expressly assumes
pursuant to Article VIII or as otherwise provided herein.
(k) any other Liability or obligation of Seller
not arising out of the operation of the Business; and
(l) any other obligation, liability or indebted
ness of the Seller described in Schedule 1.7(l) hereto.
ARTICLE II
PURCHASE PRICE
2.1 Purchase Price and Payment. The aggregate
purchase price (the "Aggregate Purchase Price") to be paid by the
Purchaser and the German Purchaser to the Seller and the German
Seller as consideration for (i) in the case of the Purchaser, the
Common Stock and the non-competition covenant contained in
Section 11.1, and (ii) in the case of the German Purchaser,
pursuant to the German Asset Purchase Agreement, shall be
$28,577,100, plus or minus any adjustment as provided in Section
2.3 hereof, as appropriate. The purchase price to be paid under
the German Asset Purchase Agreement (the "German Purchase Price")
shall be the amount by which the aggregate amount shown on the
Closing Balance Sheet for the German Assets shall exceed the
amount shown on the Closing Balance Sheet for the German
Liabilities. The purchase price payable hereunder (the "Purchase
Price") shall be the sum of the Aggregate Purchase Price less the
German Purchase Price. In addition, Purchaser shall pay any
German value added tax ("German VAT") arising on the German
Purchase Price pursuant to the German Purchase Agreement. The
Purchase Price shall be in U.S. dollars, and shall be made no
later than 11:30 a.m. (New York City) on the Closing Date (i) by
release of the Deposit Amount to the Seller pursuant to the
Escrow Agreement to the account or accounts designated by Seller
and (ii) by wire transfer of immediately available funds for the
amount of the Aggregate Purchase Price in excess of the Deposit
Amount to such Seller account or accounts.
2.2 Allocation of Purchase Price. No later than five
business days prior to the Closing, Purchaser shall prepare and
deliver to Seller Schedule 2.2 to this Agreement, which shall set
forth the allocation of the Purchase Price among the Assets,
including an amount allocated to the non-competition covenants
set forth in Section 11.1 hereof, and Seller shall be given an
opportunity to review and consent to such allocation, which
consent shall not be unreasonably withheld. Notwithstanding the
foregoing, unless the parties otherwise agree, the amount of the
consideration under the German Purchase Agreement (which includes
the German Purchase Price and the liabilities assumed by the
German Purchaser under the German Purchase Agreement) allocated
to each of the German Assets shall be the amount at which such
asset is shown on the Closing Balance Sheet. Subject to the
requirements of any applicable tax law, all Tax Returns filed by
the Purchaser and the Seller shall be prepared consistently with
such allocation. Neither the Purchaser nor the Seller shall
advance any position to any Taxing authority which is
inconsistent with such allocation without the prior written
consent (which shall not be unreasonably withheld) of the other
party. In the event of any purchase price adjustment hereunder,
the Purchaser and Seller 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.
2.3 Aggregate Purchase Price Adjustment.
(a) As soon as practicable (but in no event later
than 60 days) following the Closing Date, the Purchaser
shall prepare and deliver to the Seller and the German
Seller a balance sheet for the Business as of the Closing
Date (the "Closing Balance Sheet"), which shall include (as
an exhibit thereto) a computation of the Working Capital
Adjustment (as defined below). The Closing Balance Sheet (i)
shall be prepared by the Purchaser in accordance with GAAP
applied on a basis consistent with the application of GAAP
used in the preparation of the Initial Balance Sheet and in
accordance with the principles that are not GAAP that are
disclosed in the Notes to the Initial Balance Sheet (except
that (A) such balance sheets may omit the notes thereto
which might otherwise be required by GAAP and (B) the
inventory to be transferred under the German Asset Purchase
Agreement (the "German Inventory") will be determined by a
physical count priced in accordance with the German Seller's
current practices, consistently applied, (ii) shall not
include any Excluded Asset, Excluded Liability or accrued
contribution to the Union Pension Plan (as defined in
Section 8.3(b)) (iii) shall not include any change in the
amount of any asset or liability to reflect the purchase and
sale effected pursuant to this Agreement (i.e., shall be
prepared as of a time immediately prior to the consummation
of such purchase and sale) and (iv) with respect to the
German Assets and Liabilities, (a) shall utilize the
exchange rate in effect on the Closing Date and (b) shall be
prepared on a consolidated basis that includes the German
Assets and German Liabilities.
(b) The "Preliminary Working Capital Adjustment"
shall equal the amount of Working Capital reflected on the
Closing Balance Sheet minus the amount of Working Capital
reflected on the Initial Balance Sheet. As used herein,
"Working Capital" shall mean the difference between the
current assets (excluding any current assets that are
Excluded Assets and excluding the German Inventory) of the
Business and the total liabilities (excluding any
liabilities that are Excluded Liabilities) of the Business,
as reflected on the Initial Balance Sheet or the Closing
Balance Sheet, as the case may be.
(c) Following the Closing Date, the Seller and
the German Seller shall afford the Purchaser access to all
books and records relating to the Business of which the
Seller or the German Seller is in possession and shall make
available the assistance of any of Seller's employees having
relevant knowledge of the Business, in each case as is neces
sary to enable Purchaser to prepare the Closing Balance
Sheet and to calculate the Preliminary Working Capital
Adjustment.
(d) The Seller and the German Seller shall have
a period of 45 days to review the Closing Balance Sheet and
the calculation of the Preliminary Working Capital
Adjustment following delivery of the Closing Balance Sheet
by Purchaser. During such period, Purchaser shall afford
the Seller and the German Seller access to any of its books,
records and work papers necessary to enable the Seller and
the German Seller to review the Closing Balance Sheet and
the calculation of the Preliminary Working Capital Adjust
ment. The Seller and the German Seller may dispute any
amounts reflected in the Preliminary Working Capital
Adjustment by giving notice in writing to the Purchaser
specifying each of the disputed items and setting forth in
reasonable detail the basis for such dispute; provided, how
ever, that the Seller and the German Seller may only dispute
the calculation of the Preliminary Working Capital
Adjustment to the extent that the aggregate of all items in
dispute would reduce the Preliminary Working Capital
Adjustment by more than $ 50,000. Failure by the Seller and
the German Seller to dispute the amounts reflected in the
Preliminary Working Capital Adjustment within 45 days of
delivery of the Closing Balance Sheet by Purchaser shall be
deemed an acquiescence therein by the Seller and the German
Seller. If within 30 days after delivery by the Seller and
the German Seller to the Purchaser of any notice of dispute,
the Purchaser and Seller and the German Seller are unable to
resolve all of such disputed items, then any remaining items
in dispute shall be submitted to KPMG Peat Marwick (the
"Arbitrator"). The Arbitrator shall first determine whether
the Purchaser prepared the Closing Balance Sheet in
accordance with this Agreement. If the Arbitrator finds
that a disputed item on the Closing Balance Sheet was
determined in accordance with this Agreement no adjustment
shall be made to such item. If the Arbitrator finds that a
disputed item was not determined in accordance with this
Agreement, the Arbitrator shall determine such disputed item
and report to Seller and the German Seller and the Purchaser
upon such item. The Arbitrator's decision shall be final,
conclusive and binding on all parties. The fees and
disbursements of the Arbitrator shall be borne equally by
the Purchaser, on the one hand, and the Seller and the
German Seller, on the other hand. The Preliminary Working
Capital Adjustment if undisputed or deemed undisputed or as
revised in accordance with the procedure outlined above
shall be the "Final Working Capital Adjustment."
(e) If the amount of the Final Working Capital
Adjustment is negative then the Aggregate Purchase Price
shall be decreased by such amount and the Seller and the
German Seller shall promptly (in no event more than 10 days
after the date on which the Final Working Capital Adjustment
is determined), pay to the Purchaser (pro rata based on the
proportion the Aggregate Purchase Price received by such
party bears to the Aggregate Purchase Price) an amount equal
to the Final Working Capital Adjustment in cash, with
interest from the Closing Date computed at the prime rate
announced from time to time by Bankers Trust Company, as in
effect from time to time.
(f) If the amount of the Final Working Capital
Adjustment is positive then the Aggregate Purchase Price
shall be increased by such amount and the Purchaser shall
promptly (in no event more than ten days after the date on
which the Final Working Capital Adjustment is determined)
pay to the Seller and the German Seller, pro rata based on
the proportion of the Aggregate Purchase Price received by
such party bears to the Aggregate Purchase Price, an amount
equal to the Final Working Capital Adjustment in cash, with
interest from the Closing Date computed at the prime rate
announced by Bankers Trust Company, as in effect from time
to time. The Purchaser shall pay any German VAT due as a
result of any positive Working Capital Adjustment or as a
result of any amount paid by the Purchaser in respect of the
adjustment in Section 2.3(g).
(g) If the amount in respect of the German
Inventory reflected on the Closing Balance Sheet differs by
an amount greater than $50,000 from the amount in respect
thereof reflected on the Initial Balance Sheet, then the
German Seller, in the case of a decrease in such amount, or
the Purchaser, in the case of an increase in such amount,
shall pay the other party an amount equal to such increase
or decrease, as the case may be, less $50,000.
ARTICLE III
THE CLOSING
3.1 Closing Date. The Closing shall take place at
the offices of Kirkland & Ellis, 200 East Randolph Drive,
Chicago, Illinois at 10:00 A.M., on such business day on or prior
to December 15, 1993 as the Purchaser may specify in writing on
at least five business days' prior notice to the Seller; provided
that the conditions to Closing set forth in Sections 9.2 and 10.5
hereof have been satisfied on or prior to such specified date.
The date on which the Closing shall be scheduled to occur
pursuant to the preceding provision is referred to in this
Agreement as the "Closing Date"; provided that, if the Closing
Date shall not occur on any earlier date, then the Closing Date
shall be December 15, 1993.
3.2 Proceedings at Closing. All proceedings to be
taken and all documents to be executed and delivered by Seller 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 Clos
ing 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.
3.3 Deliveries by the Seller to Purchaser. At the
Closing, the Seller shall deliver, or shall cause to be
delivered, to the Purchaser the following:
(a) one or more stock certificates evidencing
all of the Common Stock, endorsed in blank or accompanied by
duly executed assignment documents;
(b) resignations of each of the directors and
officers of Newco;
(c) all original stock ledgers, minute books,
books, records and other materials related solely to Newco
or the Business and the Business' corporate administration,
and record keeping and correct copies of all environmental
reports, studies and assessments with respect to the
California Facility (which Seller may deliver by delivery of
the foregoing to the Business' principal place of business);
(d) one or more certificates signed by an
officer of the Seller dated the Closing Date, stating that
the preconditions specified in Sections 9.1(a)-(b), inclu
sive, have been satisfied and certifying as to the
following:
(i) copies of resolutions of
Seller's Board of Directors authorizing and approving
this Agreement and the transactions contemplated herein;
and
(ii) copies of Seller's and Newco's
respective certificates of incorporation and by-laws.
(e) a certificate or certificates of the
Secretary or Assistant Secretary of each of the Seller as to
the names of the respective officers of Seller and Newco
authorized to sign this Agreement and the other documents
and agreements delivered hereunder by Seller and Newco,
respectively, and as to the specimens of true signatures of
such officers;
(f) a receipt for the Purchase Price; and
(g) any other document or delivery required by
this Agreement or reasonably requested by Purchaser or the
Title Company to effect the transactions contemplated
hereby.
3.4 Deliveries by the Seller to Newco and the
Purchaser. At the Closing, the Seller shall deliver, or shall
cause to be delivered, to Newco and the Purchaser the following:
(a) a letter agreeing to be bound by the
transition services term sheet (the "Transition Services
Agreement") substantially in substance as set forth in the
term sheet attached hereto as Exhibit A;
(b) an executed copy of an assignment and
assumption agreement (the "Assumption Agreement") in form
and substance reasonably satisfactory to Purchaser and
Seller, dated the Closing Date, pursuant to which Newco
shall assume all of the Assumed Liabilities;
(c) an executed copy of a patent assignment in
form and substance reasonably satisfactory to Purchaser and
Seller (the "Patent Assignment"), dated the Closing Date,
pursuant to which Seller shall assign and transfer certain
patents and the rights related thereto to Newco;
(d) an executed copy of the trademark assignment
in form and substance reasonably satisfactory to Purchaser
and Seller (the "Trademark Assignment"), dated the Closing
Date, pursuant to which Seller shall assign certain
trademarks and the rights related thereto to Newco;
(e) an executed copy of the copyright assignment
in form and substance reasonably satisfactory to Purchaser
and Seller (the "Copyright Assignment"), dated the Closing
Date, pursuant to which Seller shall assign certain
copyrighted material and the rights related thereto to
Newco;
(f) an executed copy of the Master Distributor
Agreement by and between Seller and Newco relating to sales
of the Business' products in Canada (the "Canadian
Distributor Agreement"), in form and substance satisfactory
to Purchaser and Seller;
(g) an executed copy of the agreement(s) by and
between Seller and Newco relating to sales of the Business'
products by the Seller's sales offices in the United
Kingdom, France and Italy (the "Sales Representative
Agreement(s)"), in form and substance satisfactory to
Purchaser and Seller; and
(h) Such bill of sale, grant deeds and other
instruments of sale, transfer, assignment, conveyance and
delivery, in form and substance satisfactory to counsel for
Purchaser and the Title Company, as are required in order to
transfer to Newco fee title to the California Facility free
and clear of adverse interests other than the Permitted
Exceptions and good and marketable title to the Assets other
than the California Facility, including, without limitation,
all vehicle titles and documents acceptable for recordation
in the United States Patent and Trademark Office, the United
States Copyright Office and any other similar domestic or
foreign office, department or agency.
3.5 Deliveries by the Purchaser to the Seller. At
the Closing, the Purchaser shall deliver or shall cause to be
delivered to the Seller the following:
(a) immediately available funds in the amount of
the Purchase Price, by wire transfer as provided in Section
2.1 hereof;
(b) one or more certificates signed by an
officer of the Purchaser, dated the Closing Date, stating
that the preconditions specified in Section 10.1 have been
satisfied and certifying as to the following:
(i) Copies of resolutions of
Purchaser's Boards of Directors authorizing and
approving this Agreement and the transactions
contemplated herein; and
(ii) A copy of Purchaser's
certificate of incorporation and by-laws;
(c) a certificate or certificates of the
Secretary or Assistant Secretary of Purchaser as to the
names of the officers of Purchaser authorized to sign this
Agreement and the other documents and agreements delivered
hereunder by Purchaser and as to the specimens of true
signatures of such officers;
(d) a written letter of direction directing the
Escrow Agent to pay the Deposit Amount to the Seller
pursuant to Section 2.1; and
(e) any other document or delivery required by
this Agreement or reasonably requested by Seller to effect
the transactions contemplated hereby.
3.6 Deliveries by Newco to the Seller. At the
Closing, Newco shall deliver or shall cause to be delivered to
the Seller the following:
(a) executed copies of the Transition Services
Agreement, the Assumption Agreement, the Patent Assignment,
the Trademark Assignment, the Copyright Assignment, the
Canadian Distributor Agreement and the Sales Representative
Agreement(s);
(b) a letter undertaking in form and substance
reasonably satisfactory to Seller and Purchaser pursuant to
which Newco shall agree to become an party to and be bound
by the terms of this Agreement; and
(c) any other document or delivery required by
this Agreement or reasonably requested by Seller to effect
the transactions contemplated hereby.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE SELLER
Seller hereby represents and warrants to the Purchaser
as follows:
4.1 Organization and Good Standing. Seller is, and
as of the Closing Date Newco will be, a corporation duly
organized, validly existing and in good standing under the laws
of its jurisdiction of incorporation. Seller has all requisite
corporate power and authority and all authorizations, licenses
and permits necessary to own and operate the Business and to
carry on the Business as it is now being conducted, and to
execute, deliver and perform this Agreement and to consummate the
transactions contemplated hereby. Newco will be incorporated no
sooner than the business day immediately preceding the Closing
and the Common Stock shall not be issued until the Closing.
Seller, with respect to the Business, has obtained and currently
maintains all qualifications to do business as a foreign
corporation in all other jurisdictions in which the character of
the Business's properties or the nature of the Business's
activities require it to be so qualified except where the failure
to be so qualified would not have a Material Adverse Effect.
4.2 Authorization of Agreement; No Conflicts. Seller
has full corporate power and authority to execute and deliver
this Agreement. Seller has (and as of the Closing Newco will
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 Seller or
Newco 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 Seller or Newco being hereinafter referred to, collectively,
as the "Seller Documents"), and to perform fully its obligations
hereunder and thereunder. The execution, delivery and
performance by Seller of this Agreement and by Seller and Newco
of each of the Seller Documents applicable to Seller or Newco has
been, or prior to the Closing will have been, duly authorized by
all necessary corporate action on the part of Seller or Newco, as
appropriate. This Agreement has been, and each of such Seller
Documents will be at or prior to the Closing, duly executed and
delivered by Seller or Newco, as appropriate and (assuming the
due authorization, execution and delivery by the other parties
hereto and thereto) this Agreement constitutes, and such Seller
Documents when so executed and delivered will constitute, legal,
valid and binding obligations of Seller or Newco, as appropriate,
enforceable against Seller or Newco, 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). None of the execution, delivery and
performance by either Seller of this Agreement and by Seller or
Newco, as applicable, of the Seller Documents, or the
consummation of the transactions contemplated hereby or thereby,
or compliance by Seller or Newco 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, bylaws or
other governing instrument of Seller or Newco, (ii) conflict
with, violate, result in the breach or termination of, give any
third party the right to terminate or to accelerate any
obligations under, or constitute a default under any Contract or
Order to which Seller or Newco is a party or by which it or any
of the Assets is bound or subject, (iii) constitute a violation
of any Law applicable to Seller or Newco, or (iv) result in the
creation of any Lien (other than any Lien in favor of the
Purchaser) upon any of the Common Stock or the Assets, except, in
each case, for violations, conflicts, breaches or defaults which,
alone or in the aggregate, would not hinder or impair the
transactions contemplated hereby or have a Material Adverse
Effect. Without limiting the generality of the foregoing, except
for Purchaser pursuant hereto, no Person has an option, a right
of first refusal, a right of first offer or similar right to
purchase or otherwise acquire any of the Assets (other than inven
tory or products of the Business in the ordinary course of
business), and neither Seller nor Newco has entered into any
letter of intent, commitment or agreement in principle regarding
any such purchase or acquisition.
4.3 Capitalization. As of the Closing Date, Newco's
entire authorized capital will consist of 1000 shares of Common
Stock. Newco's issued and outstanding capital stock will consist
of 1000 shares of Common Stock. All of the issued and
outstanding shares of Common Stock will be duly authorized,
validly issued, fully paid and nonassessable, and will be held of
record by the Seller. There will be no outstanding or authorized
options, warrants, purchase rights, subscription rights,
conversion rights, exchange rights or other contracts or
commitments that could require Newco to issue, sell or otherwise
cause to become outstanding any of its capital stock. There will
be no outstanding or authorized stock appreciation, phantom
stock, profit participation or similar rights with respect to
Newco. There will be no voting trusts, proxies or other
agreements or understandings with respect to the voting of the
Common Stock. At Closing Seller will convey the Common Stock to
Purchaser free and clear of all liens, encumbrances, options,
proxies, agreements and adverse interests of any kind.
4.4 Title and Condition of Properties.
(a) Seller does not own (and Newco shall not own
on the Closing Date) any real property which is utilized in
the Business except for the California Facility. To
Seller's Knowledge, as of the Closing Date, Newco shall own
the California Facility free of all adverse interests except
for the Permitted Exceptions.
(b) To Seller's Knowledge, Seller (with respect
to the Business) is not in violation of any applicable
zoning, building code or subdivision ordinance or other law,
regulation or requirement relating to the operation of the
California Facility or any of the Assets (including applic
able occupational health and safety laws and regulations),
which violations, individually or in the aggregate, has had
or will have a Material Adverse Effect. Within the three
(3) years prior to the date of this Agreement, Seller has
not received any notice of any such violation or any
condemnation proceeding with respect to any California Fac
ility or any of the Assets, except as has been previously
disclosed to Purchaser in writing.
(c) Except as otherwise indicated in this Agree
ment or on a Schedule to this Agreement, all of the Assets
other than the California Facility are owned by the Seller
free of any adverse interest other than Permitted Exceptions
and such Assets will be conveyed to Newco at the Closing
free and clear of any adverse interest other than Permitted
Exceptions.
4.5 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
either Seller or Newco in connection with the execution and
delivery by Seller or Newco of this Agreement or the Seller
Documents, or the compliance by Seller or Newco with any of the
provisions hereof or thereof, except (i) as set forth on Schedule
4.5 hereto and (ii) for compliance by the Seller with the
applicable requirements of the Hart-Scott-Rodino Antitrust
Improvements Act of 1976 and the rules and regulations
promulgated thereunder (the "HSR Act").
4.6 Financial Statements. Seller has furnished Pur
chaser with the Initial Balance Sheet of the Business as of
September 30, 1993 a copy of which is attached hereto as Schedule
4.6. The Initial Balance Sheet has been prepared in accordance
with GAAP except as set forth in the notes thereto (except that
such balance sheets may omit the notes thereto which might
otherwise be required by GAAP), and presents fairly the financial
position of the Business at that date. The Seller has furnished
Purchaser with a copy of the Consolidating Stand-Alone Condensed
Income Statements of the Business for the twelve-month periods
ending December 31, 1990, December 31, 1991 and December 31, 1992
and for the nine-month period ending September 30, 1993, a copy
of which is attached hereto as Schedule 4.6(a), and the
Consolidated Stand-Alone Condensed Income Statements of the
business for the twelve-month periods ending December 31, 1990,
December 31, 1991, and December 31, 1992 and for the nine-month
period ended September 30, 1993, copies of which are attached
hereto as Schedule 4.6(b). The Consolidated Stand-Alone
Condensed Income Statements present fairly the results of opera
tions of the Business and have been prepared on a consistent
basis for all periods reflected therein in accordance with the
Seller's internal accounting policies except as noted therein.
4.7 Absence of Undisclosed Liabilities. To Seller's
Knowledge, as of the Closing Date, Seller and Newco will have no
obligations or liabilities relating to the Business (whether
accrued, absolute, contingent, unliquidated or otherwise, whether
due or to become due and regardless of when or by whom asserted),
except (i) obligations under Contracts with respect to the
Business, (ii) liabilities to be reflected on the Closing Balance
Sheet, and (iii) liabilities set forth on Schedule 4.7 hereto or
as otherwise expressly disclosed in or contemplated by this Agree
ment or the Schedules attached hereto.
4.8 Absence of Material Adverse Changes. Except as
set forth on Schedule 4.8 hereto, since September 30, 1993 Seller
has operated the Business in the ordinary course consistent with
past practice and there has been no Material Adverse Effect.
4.9 Absence of Certain Developments.
(a) Except as set forth in Schedule 4.9 hereto
or as otherwise contemplated herein, with respect to the
Business, since the date of the Initial Balance Sheet,
neither Seller nor Newco has:
(i) sold, assigned or transferred
any operating unit or property (tangible or intangible)
which would have constituted part of the Assets if such
sale, assignment or transfer had not occurred except for
sales of products or inventory in the ordinary course of
business and except for dispositions and replacements of
worn out or outmoded property in accordance with past
practices;
(ii) made or granted any bonus or
any wage or salary increase to any employee or group of
employees who are to be hired by Purchaser (except as
required by pre-existing contract) or made or granted
any increase in any Employee Benefit Plan or Benefit
Arrangement (each as defined in Section 4.12 below)for
the benefit of any of those employees other than in the
ordinary course of business;
(iii) made capital expenditures or
commitments therefor in connection with the Business in
excess of $50,000;
(iv) acquired any business (whether
by merger, purchase of stock or assets or otherwise) to
be conveyed to Purchaser in whole or in part;
(v) suffered any extraordinary
losses to the Business as a whole or waived any rights
of material value relating to the Business, whether or
not in the ordinary course of business; and
(vi) suffered any damage,
destruction or casualty loss to its tangible assets
employed in the Business in excess of $10,000, whether
or not covered by insurance.
(b) No officer, director, employee, consultant,
advisor or agent of Seller or Newco has been or is
authorized to make or receive, and neither Seller nor Newco
knows of any of Seller's or Newco's officers, directors,
employees, consultants, advisors or agents making or
receiving, any bribe, kickback payment or other illegal
payment at any time and Seller has an express corporate
policy prohibiting such activities.
4.10 Material Contracts.
(a) Except as expressly contemplated by this
Agreement or as set forth on Schedule 4.10, and except for
purchase orders received in the ordinary course of business
consistent with past practices, Seller, in connection with
the Business, is not and, at the Closing Date, Newco will
not be a party to any written or oral:
(i) Contract for the employment of
any officer, partner, individual employee or other
person on a full-time, part-time or consulting basis or
entitling any such person to severance pay, parachute
payment, or other such payment;
(ii) Contract relating to the
borrowing of money or to mortgaging, pledging or
otherwise creating any Security Interest in any of the
Assets except for agreements relating to purchase money
security interests or personal property leases not
otherwise required to be disclosed pursuant to this
Agreement other than Security Interests in favor of
Bankers Trust Company, as collateral agent relating to
certain indebtedness of the Seller;
(iii) agreement with respect to the
lending or investing of funds;
(iv) license or royalty agreement
which requires annual payments in excess of $10,000;
(v) guaranty of any obligation for
borrowed money or any other obligation of any Person,
other than endorsements made for collection in the
ordinary course of business;
(vi) lease under which either of
them is the lessee of or holds or operates any real
property owned by any other party;
(vii) lease under which either of
them is lessee of or holds or operates any personal
property owned by any other party for which the annual
rental payment exceeds $10,000;
(viii) lease under which either them
is lessor of or permits any third party to hold or
operate any property, real or personal, owned or con
trolled by any of them;
(ix) Contract or group of related
Contracts (except oral Contracts terminable within 30
days or less without penalty) with the same party for
the purchase or sale of products or services under which
the undelivered balance of such products and services
has a selling price in excess of $50,000;
(x) other Contract or group of
related contracts (except oral contracts terminable
within 30 days or less without penalty) with the same
party continuing over a period of more than six months
for the date or dates thereof involving more than
$50,000;
(xi) Contract which prohibits or
limits conduct of the Business or any other business
related thereto anywhere in the world;
(xii) Contract with any officer,
director, shareholder, or other Affiliate (except
contracts terminable within 30 days or less without
penalty);
(xiii) Contract or other agreement with
any Affiliate for the supply by such Affiliate of any
raw materials, materials, parts, supplies or other goods
or services material to the conduct of the Business; or
(xiv) Contract which is otherwise
material to the Business taken as a whole, whether or
not entered into in the ordinary course of business.
(b) Except as set forth on Schedule 4.10, Seller
has performed all obligations required to be performed by it
under the Contracts listed on Schedule 4.10 and is not in
default or breach under any Contract to which it is subject
which failures to perform, defaults or breaches, alone or in
the aggregate, would have a Material Adverse Effect; no
event has occurred which with the passage of time or the
giving of notice or both would result in a default, breach
or event of noncompliance under any Contract to which Seller
(with respect to the Business) is subject which, alone or in
the aggregate, would have a Material Adverse Effect; and to
the Knowledge of Seller, there is no breach by the other
parties to any Contract which would have a Material Adverse
Effect.
(c) Seller has made available to Purchaser a
true and correct copy of all written contracts (other than
purchase orders) which are referred to on Schedule 4.10
attached hereto, together with all amendments, exhibits,
attachments, waivers or other changes thereto.
4.11 Intellectual Property Rights. Schedule 4.11 sets
forth a complete and correct list of all: (i) patented or
registered Intellectual Property Rights and pending patent appli
cations or other applications for registrations of Intellectual
Property Rights owned or filed by or on behalf of Seller and all
licenses in respect of Intellectual Property Rights other than
those names, marks, trade names or trademarks which are Excluded
Assets pursuant to Section 1.5(d) hereof; and (ii) material
unregistered trade names and trademarks and service marks owned
or used by the Seller in connection with the Business.
Except as set forth in Schedule 4.11: (i) Seller owns
and shall, immediately prior to the Closing, transfer to Newco
all right, title and interest in and to, or a valid license to
use, the Intellectual Property Rights free and clear of all
Liens, other than Permitted Exceptions; (ii) to the Knowledge of
Seller, no claim by any third party contesting the validity,
enforceability, use or ownership of any of the Intellectual
Property Rights has been made, is currently outstanding or is
threatened, and there are no grounds for the same; (iii) the loss
or expiration of any Intellectual Property Right or related group
of Intellectual Property Rights would not have a Material Adverse
Effect, and to the Knowledge of Seller, no such loss or
expiration is threatened, pending or reasonably foreseeable; (iv)
Seller has not received any notices of, and is not aware of any
facts which indicate a likelihood of, any infringement or
misappropriation by, or conflict with, any third party with
respect to the Intellectual Property Rights (including, without
limitation, any demand or request that either Seller or Newco
license any rights from a third party); and (v) to the Knowledge
of Seller, Seller has not infringed, misappropriated or otherwise
conflicted with any intellectual property rights or other rights
of any third parties and Seller is not aware of any infringement,
misappropriation or conflict which will occur as a result of the
continued operation of the Business as currently conducted.
The transactions contemplated by this Agreement will
have no material adverse effect on the right, title and interest
in and to the Intellectual Property Rights. Seller has taken all
necessary and desirable action to maintain and protect the
Intellectual Property Rights which are material to the Business
as currently conducted.
4.12 Taxes.
(a) Except as set forth in Schedule 4.12 hereto,
none of the property to be transferred to Newco is subject
to a tax benefit transfer lease executed in accordance with
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.
(b) The Seller is not a foreign person within
the meaning of Section 1445(b)(2) of the Code.
4.13 Employees and Employee Benefits.
(a) Except as set forth on Schedule 4.13(a)(i)
hereto, (i) Seller is not and, as of the Closing Date, Newco
will not be a party to any collective bargaining agreement
applicable to Employees or former Employees; (ii) none of
the Employees is represented by any labor organization; and
(iii) there is no labor strike, work stoppage or slowdown
pending against Seller or Newco and no pending lockout by
Seller or Newco, in each case, with respect to the Business
and Seller has no Knowledge of any facts which could give
rise or be expected to give rise to any such labor strike,
work stoppage, slowdown or lockout. Schedule 4.13(a)(ii)
constitutes a true and complete list of all Employees
specifying the position held by each such Employee, date of
hire, current rate of compensation (including bonuses and
commissions, if any) payable to each such Employee, number
of such Employee's accrued unused vacation days, whether
such Employee is absent from active work and, if so, the
date such absence commenced, the reason for such absence,
the anticipated date of return of such Employee to active
employment and the number of accrued unused sick days for
each hourly Employee. The aggregate number of accrued
unused sick days for the salaried Employees does not exceed
245.
(b) Schedule 4.13(b)(i) hereto lists each
employee benefit plan as defined in Section 3(3) of ERISA of
the Seller or of Newco covering any Employee or former
Employee (an "Employee Benefit Plan"). Schedule 4.13(b)(ii)
hereto lists each employment or severance contract, arrange
ment or plan including, but not limited to pension, profit
sharing, retirement or any other form of deferred
compensation plan or any stock or partnership interest
purchase, stock or partnership interest option, providing
for insurance coverage, fringe benefits, severance, termina
tion or similar coverage and all compensation policies and
practices maintained by the Seller or Newco covering any
Employee or former Employee of the Business and that is not
an Employee Benefit Plan (a "Benefit Arrangement").
(c) To Seller's Knowledge, none of Seller or any
trustee or administrator of any Employee Benefit Plan or
Benefit Arrangement, or any other person, has engaged in any
transaction with respect to any such Employee Benefit Plan
or Benefit Arrangement which is reasonably likely to subject
Newco or the Purchaser to any material tax or penalty (civil
or otherwise) under any applicable law (including, but not
limited to, ERISA or the Code). To Seller's Knowledge, no
actions, suits, investigations or claims with respect to any
Employee Benefit Plan or Benefit Arrangement (other than
routine claims for benefits) or any fiduciary or other
person dealing with such Employee Benefit Plan or Benefit
Arrangement which is reasonably likely to result in
liability to Newco or the Purchaser (whether direct or
indirect) are pending or threatened.
(d) The Union Pension Plan and each trust (if
any) forming a part thereof, has received a favorable
determination letter from the Internal Revenue Service as to
the qualification of such plan and the tax exempt status of
such related trust, and to Seller's Knowledge nothing has
occurred since the date of such determination letter that
could adversely affect the qualification of such Union
Pension Plan or the tax exempt status of such related trust.
The Union Pension Plan has been maintained, administered and
funded in all material respects, in accordance with
applicable law including the applicable provisions of ERISA
and the Code.
(e) Except as set forth on Schedule 4.13(e), no
Employee Benefit Plan or Benefit Arrangement provides
health, life insurance, accident or other "welfare-type"
benefits to current or future Retirees, current or future
former Employees, or current or future former independent
contractors with respect to the Business, their spouses,
dependents, or other beneficiaries, other than in accordance
with COBRA or applicable State continuation coverage law.
(f) Except as set forth on Schedule 4.13(f),
neither Seller nor, as of the Closing Date, Newco has any
obligation to contribute to or has any liability or poten
tial liability (including, but not limited to, actual or
potential withdrawal liability) with respect to any
"multiemployer pension plan" (as such term is defined in
Section 3(37) of ERISA), or with respect to any employee
benefit plan of the type described in Section 4063 and 4064
of ERISA or in Section 413(c) of the Code (and regulations
promulgated thereunder) with respect to the Business.
(g) Except as set forth on Schedule 4.13(g),
none of the Employee Benefit Plans or Benefit Arrangements
obligates Seller or Newco to pay separation, severance,
termination or similar-type benefits solely as a result of
any transaction contemplated by this Agreement or solely as
a result of a "change in control" as described in or
contemplated by Section 280G of the Code.
(h) Intentionally Omitted
(i) With respect to the Union Pension Plan,
except as disclosed on Schedule 4.13(i), as of the Closing
Date, the fair market value of the assets of such plan
equals or exceeds the present value of all vested and non-
vested liabilities thereunder as determined under the most
recent actuarial valuation for such Union Pension Plan.
(j) No Employee has or, as of the Closing Date
will have, a loan outstanding from the IMO Savings Plan (as
such term is defined in Section 8.4 hereof).
(k) With respect to the Union Pension Plan and
each vacation and paid sick day policy covering the
Employees, the Seller has provided the Purchaser with true,
complete and correct copies, to the extent applicable, of
(i) all documents pursuant to which such plan and policies
are maintained, funded and administered, (ii) the two most
recent annual reports (Form 5500 series) filed with the
Internal Revenue Service (with attachments), (iii) the two
most recent actuarial reports, (iv) the two most recent
financial statements, and (v) all governmental rulings,
determinations, and opinions (and pending requests for
governmental rulings, determinations, and opinions).
4.14 Litigation. Except as set forth on Schedule 4.14
hereto, there are no Legal Proceedings pending or, to the
Knowledge of Seller, threatened (i) against Seller or Newco in
connection with the operation of the Business which, alone or in
the aggregate, would have a Material Adverse Effect or result in
damages in excess of $50,000 and to Seller's Knowledge there is
no basis for any such Proceedings; (ii) that seeks to enjoin or
obtain damages in respect of the consummation of the transactions
contemplated by this Agreement; or (iii) that questions the
validity of this Agreement, any of the Seller Documents or any
action taken or to be taken by Seller or Newco in connection with
the consummation of the transactions contemplated hereby or
thereby.
4.15 Compliance with Law. Except as set forth on
Schedule 4.15 hereto or on another Schedule hereto, to the
Knowledge of Seller the Business is currently operating in
compliance with all applicable Laws and Orders of Governmental
Bodies other than non-compliances which alone or in the aggregate
would not have a Material Adverse Effect. Except as set forth on
Schedule 4.15 hereto, each of Seller and Newco has neither
received, nor knows of the issuance of, any notice of any such
violation or alleged violation.
4.16 Inventory. All inventories included in the
Assets, net of the reserves applicable thereto, consist of a
quality usable and saleable in the ordinary course of business at
prevailing market conditions, are not obsolete or damaged and are
not defective.
4.17 Assets Necessary to Conduct Business. Except for
the assets being conveyed pursuant to the German Asset Purchase
Agreement, the Assets comprise all of the contract rights and
other property necessary to operate the Business.
4.18 Environmental Matters.
(a) Except as may be disclosed to the Purchaser
on Schedule 4.18 hereto, Seller and Newco at the Closing
Date have all permits, licenses and other authorizations
referred to in the definition of "Environment, Health and
Safety Requirements" as required for the conduct of the
Business in all material respects as conducted by Seller
prior to the Closing Date.
(b) Except as set forth in Schedule 4.18, to
Seller's Knowledge, Seller and Newco are in compliance in
all material respects with all applicable Environment,
Health and Safety Requirements as required for conduct of
the Business by Seller as of the Closing Date.
(c) Except as set forth in Schedule 4.18, to
Seller's Knowledge no facts, events or conditions exist with
respect to the past or present operations, properties or
facilities of Seller in respect of the conduct of the
Business by the Seller that has or could reasonably be
expected to prevent or interfere with compliance with or
result in Liability under, any Environment, Health and
Safety Requirements (except for the Comprehensive
Environmental Response, Compensation and Liability Act).
The references to "properties" and "facilities" in this Sec
tion 4.18 include those that are owned, leased, subleased,
operated or otherwise subject to control by Seller or Newco.
(d) Except as set forth in Schedule 4.18 or
Schedule 4.14, Seller has not received any communication,
notice, report or information regarding any pending or
threatened charge, complaint, action, suit, proceeding,
hearing, investigation, claim, demand, or notice regarding
Seller alleging any failure to comply with, or alleging any
Liability under, any applicable Environment, Health and
Safety Requirements, or alleging any Liability under
criminal law or common law concerning any of the subject
matters referred to in the definition of "Environment,
Health and Safety Requirements" in any case regarding the
conduct of the Business by Seller.
4.19 Brokers. Other than Morgan Stanley & Co. Incorpo
rated ("Morgan Stanley"), no Person has acted directly or
indirectly as a broker, finder or financial advisor for Seller or
Newco in connection with the negotiations relating to or the
transactions contemplated by this Agreement and no Person other
than Morgan Stanley 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.
4.20 Product Warranty. Except as set forth on
Schedule 4.20, to the Knowledge of the Seller and Newco, no
products heretofore sold by Seller or Newco in connection with
the Business are now subject to any guarantee or warranty other
than pursuant to Seller's standard terms and conditions of sale a
copy of which is included on Schedule 4.20 hereto.
4.21 Customers and Suppliers. Schedule 4.21 hereto
lists the 10 largest customers and the 10 largest suppliers to
the Business during the year ended December 31, 1992. As of the
date hereof, neither Seller nor Newco has received any notice nor
has any knowledge that any such customer or supplier intends to
terminate its business with the Business and no such customer or
supplier has terminated its business with Seller in the last 12
months.
4.22 Disclosure. To Seller's Knowledge, neither this
Agreement, nor any of the Schedules, attachments or exhibits
hereto or to be delivered in connection herewith (including,
without limitation, the certificates to be delivered by the U.S.
Seller and Newco pursuant to Section 3.3) contain any untrue
statement of a fact, status, circumstance or condition or omit
any disclosure necessary to make the statements contained herein
or therein, in light of the circumstances in which they were
made, not misleading.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
The Purchaser hereby represents and warrants to the
Seller that:
5.1 Organization and Good Standing. Purchaser is a
corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware, 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.
5.2 Authorization of Agreement; No Breach. Purchaser
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 Purchaser 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
each Purchaser Document has been duly authorized by all necessary
action on the part of the Purchaser. This Agreement has been,
and the Purchaser Documents will be at or prior to the Closing,
duly executed and delivered by the Purchaser and (assuming the
due authorization, execution and delivery by the other parties
hereto and thereto) this Agreement constitutes, and the Purchaser
Documents when so executed and delivered will constitute, legal,
valid and binding obligations of the Purchaser, enforceable
against the Purchaser 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). None of the execution and
delivery by the Purchaser of this Agreement and the Purchaser
Documents, or the consummation of the transactions contemplated
hereby or thereby, or compliance by the Purchaser 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, (ii) conflict with,
violate, result in the breach or termination of, or constitute a
default under any Contract or Order to which the Purchaser is a
party or by which it or any of its properties or assets is bound
or subject, or (iii) constitute a violation of any Law applicable
to the Purchaser, except for violations, conflicts, breaches or
defaults which individually or in the aggregate would not
materially or adversely affect Seller, Newco or the German
Seller, hinder or impair the transactions contemplated hereby.
5.3 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 in connection with the execution and
delivery of this Agreement or the Purchaser Documents or the
compliance by the Purchaser with any of the provisions hereof or
thereof, except for compliance with the HSR Act.
5.4 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 or any action
taken or to be taken by the Purchaser in connection with the
consummation of the transactions contemplated hereby or thereby.
5.5 Brokers. Other than Michael Blitzer & Associates,
no Person has acted directly or indirectly as a broker, finder or
financial advisor for Purchaser in connection with the
negotiations relating to as the transactions contemplated by this
Agreement and no Person other than Michael Blitzer & Associates
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 Purchaser.
ARTICLE VI
COVENANTS OF THE SELLER
From and after the date hereof and until the Closing,
Seller hereby covenants and agrees with the Purchaser (i) as to
itself and, on the Closing Date, Newco, as applicable, (ii) as to
the Common Stock (iii) as to the Assets being conveyed by Seller
to Newco and (iv) and as to the Business, as applicable, that:
6.1 Cooperation. Each of Seller and Newco shall use
its best efforts to cause the consummation of the transactions
contemplated hereby in accordance with the terms and conditions
hereof.
6.2 Access to Documents; Opportunity to Ask
Questions. Seller shall provide the Purchaser with such
information as the Purchaser from time to time reasonably may
request with respect to the Business, and shall permit the
Purchaser and any of its directors, officers, employees, counsel,
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
Business, as the Purchaser from time to time reasonably may
request; provided, however, that Seller and Newco shall not be
obligated to provide the Purchaser with any information the pro
vision of which may be prohibited by law or contractual obliga
tion; provided, however, that Seller shall promptly notify Pur
chaser that such information is being withheld and shall inform
the Purchaser as to the reason such information is being
withheld. No disclosure by either Seller or Newco whatsoever
during any investigation by the Purchaser shall constitute an
enlargement of or additional warranty or representation of such
Seller or Newco beyond those expressly set forth in this Agree
ment. 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 agree
ment relating to confidentiality, dated as of December 30, 1992,
between the Seller and Purchaser (the "Confidentiality
Agreement").
6.3 Conduct of Business.
(a) Except as otherwise may be contemplated by
this Agreement or as the Purchaser may otherwise agree in
writing, at all times up to and including the Closing Date,
Seller will, and, on the Closing Date, Seller will cause
Newco to:
(i) conduct the Business'
operations and carry on cash management practices only
in the usual and ordinary course of business in
accordance with past practices;
(ii) keep in full force and effect
Seller's and Newco's corporate existence;
(iii) use all reasonable efforts in
accordance with past practices to retain the Business'
employees and preserve the Business' present business
relationships (including, without limitation, relation
ships with all customers, suppliers and referral
sources);
(iv) maintain the assets of the
Business, including, without limitation, the California
Facility, in the same repair, order and condition as
currently maintained, maintain insurance reasonably
comparable to that in effect on the date of the Initial
Balance Sheet,
(v) maintain the Business' books,
accounts and records in accordance with past custom and
practice;
(vi) maintain in full force and
effect the existence of all Intellectual Property Rights
material to the Business as currently conducted
(including, without limitation, the rights specifically
described in Section 4.11 hereof); and
(vii) promptly inform Purchaser in
writing of any material variances from the
representations and warranties contained in Article IV
hereof which become known to Seller.
(b) Except as otherwise specifically
contemplated herein, prior to the Closing Date, without the
prior written consent of Purchaser, Seller will not, and
will cause Newco not to:
(i) directly or indirectly,
solicit, encourage or initiate any discussion with, or
negotiate or otherwise deal with, or provide any
information to, any Person other than Purchaser and
Purchaser's Representatives, concerning any disposition
or sale of the Common Stock or the Assets (other than
the sale of inventory in the ordinary course of
business) or the sale of the Business; or enter into any
agreement concerning any sale, transfer, assignment or
other disposition of the Common Stock or the Assets
(other than the sale of inventory in the ordinary course
of business) or the Business;
(ii) cause or permit Newco to
declare, set aside or pay any dividend or make any
distribution with respect to its capital stock or
redeem, purchase or otherwise acquire any of its capital
stock;
(iii) grant any increase in salary
or bonus or otherwise increase the compensation payable
to any director, officer, employee, consultant, advisor
or agent, except wage or salary increases required by
pre-existing contracts or compensation policies which
are consistent with past practices;
(iv) enter into, modify, amend,
terminate or otherwise take any action to materially
increase liabilities under any employment or labor
agreement or any employee pension benefit plan or any
employee welfare benefit plan of the Business (as
described in Section 4.13) other than in the ordinary
course of business;
(v) terminate, amend or modify any
Contract (other than Excluded Contracts) or Permit other
than in the ordinary course of business;
(vi) enter into any Contract not in
the ordinary course of business or which requires annual
payments in excess of $10,000 or is for a term in excess
of one year; or
(vii) take any action which has had
or would have a Material Adverse Effect.
6.4 Consents and Conditions; Assignment of Assets.
Seller shall use its best efforts to obtain all approvals,
consents or waivers from Persons other than Governmental Bodies
necessary to assign to Newco Seller's interest in the Assets or
any claim, right or benefit arising thereunder or resulting
therefrom (each, an "Interest") as soon as practicable; provided,
however, that in no event shall 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.
6.5 HSR Act Filings. As promptly as practicable
after the execution of this Agreement, the Seller shall file any
reports or notifications that may be required to be filed under
the HSR Act and shall cooperate with the Purchaser in connection
with such filings or responses to requests for additional
information.
ARTICLE VII
COVENANTS AND CERTAIN
REPRESENTATIONS OF THE PURCHASER
From and after the date hereof, and until the Closing
Date, Purchaser hereby covenants and agrees with each Seller and,
in the case of Section 7.5, hereby also represents and warrants,
that:
7.1 Cooperation. Purchaser shall use its best
efforts to cause the consummation of the transactions
contemplated hereby in accordance with the terms and conditions
hereof.
7.2 Confidentiality. Purchaser shall comply with the
terms of the Confidentiality Agreement.
7.3 Consents and Conditions. Purchaser shall use its
best efforts to cooperate with the Seller in Seller's efforts
pursuant to Section 6.4 hereof to obtain all approvals, consents
or waivers from Persons other than Governmental Bodies necessary
to assign to Newco all of Seller's interest in the Assets or any
claim, right or benefit arising thereunder or resulting therefrom
as soon as practicable; provided, however, that in no event shall
the Purchaser 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.
7.4 HSR Act Filings; Compliance with Antitrust and
Competition Laws. As promptly as practicable after the execution
of this Agreement, and in any event within 5 business days of the
date hereof, the Purchaser shall file all reports and
notifications that may be required to be filed under the HSR Act
and shall cooperate with the Seller in connection with such
filings or responses to requests for additional information. The
Purchaser shall use its reasonable best efforts in accordance
with Purchaser's business judgment determined in its sole
discretion to resolve such objections, if any, as the Antitrust
Division of the Department of Justice, the Federal Trade
Commission, state antitrust enforcement authorities or
competition authorities of any other jurisdiction may assert
under the antitrust or competition laws with respect to the
transaction contemplated hereby.
7.5 Purchase Money Loan. Purchaser represents and
warrants that it has obtained a commitment letter dated October
21, 1993 from Continental Bank in the form attached to this
Agreement as Exhibit B (the "Commitment Letter") and that
Purchaser has accepted that commitment within the time limit
prescribed in that letter. Purchaser shall use reasonable
commercial efforts to obtain a loan from Continental Bank on the
Closing Date in sufficient amount to permit Purchaser to pay the
Seller the amount required under this Agreement; provided that
(i) Purchaser shall not be required to accept any change in any
of the terms prescribed in the Commitment Letter or any terms not
specified in the Commitment Letter which, in either case, in the
reasonable judgment of the Purchaser are materially
disadvantageous to the Purchaser and (ii) Purchaser shall not be
deemed to breach its obligations under this Section if
Continental Bank fails to disburse the subject loan because any
of the conditions to disbursement contemplated in the Commitment
Letter or in the subsequent loan documentation are not satisfied
for any reason other than the failure of Purchaser to satisfy its
obligations under this Section 7.5.
ARTICLE VIII
COVENANTS RELATING TO EMPLOYEES
AND EMPLOYEE BENEFITS PLANS
8.1 Employee Transfer to Newco. Immediately prior to
the Closing, and in connection with the transfer of assets
provided in Section 1.2, the Seller shall cause the employment of
the Employees and the Pumps and Controls Field Sales Force
Employees identified in Schedule 8.1(b) to be transferred to
Newco, except for any Employees identified in Schedule 8.1(a);
provided, however, notwithstanding the definition of "Employee"
or anything else in this Agreement to the contrary, the Seller
shall not transfer or cause to be transferred to Newco the
employment of any Employee who, immediately prior to the Closing,
is not reasonably expected by the Seller to be able to perform
all of his or her regular duties in his or her respective
position with the Seller for any reason within six months after
the Closing Date and neither Purchaser nor Newco shall have any
obligation or liability whatsoever with respect to any such
Employee; provided, however, that with respect to any Employee
who, immediately prior to the Closing, is absent from active
employment, is at the time of Closing reasonably expected by
Seller to be able to perform all of his or her regular duties in
his or her respective position within the six-month period after
the Closing Date but is not actually able to so perform within
such six-month period after the Closing Date by reason of a
disability incurred prior to the Closing Date, the Seller shall
retain all liabilities and obligations, if any, to provide long-
term disability benefits to such Employee in accordance with the
applicable long-term disability plan or program of the Seller
subject to reimbursement by the Purchaser monthly in arrears for
additional premium costs, if any, for such long-term disability
coverage (such additional premium costs, if any, to be reasonably
documented by the Seller and submitted to the Purchaser at the
Purchaser's request). In addition, any Employee who, as of the
Closing Date, is receiving long-term disability benefits shall
not be a Transferred Employee; provided, however, that Purchaser
shall honor the right, if any, of any such Employee to reinstate
ment that may be required by law. For purposes of this
Agreement, Employees (including CB Employees) whose employment is
transferred to Newco immediately prior to the Closing shall be
referred to herein as the "Transferred Employees." CB Employees
whose employment is transferred to Newco immediately prior to the
Closing shall be referred to herein as the "Transferred CB
Employees." With respect to the individuals identified on
Schedule 8.1(a), Purchaser or Newco shall, as soon as practicable
after the Closing Date, pay such individuals severance pay equal
to one week's pay times years of employment in the Business for
this purpose, or, if applicable, in lieu thereof, the amounts
provided under the Change of Control Agreements, provided,
however, that such individuals are not retained in the employ of
the Seller. Except as provided in the immediately preceding
sentence, notwithstanding anything in this Agreement to the
contrary or any Exhibit or Disclosure Schedule hereto, neither
Purchaser nor Newco shall assume any liability whatsoever and the
Sellers shall retain, bear, and discharge all liabilities with
respect to all employees and former employees of the Seller who
do not become Transferred Employees (including liabilities
pursuant to Section 4980B of the Code). Except as otherwise
expressly provided herein, Purchaser in its sole discretion shall
fix the terms and conditions of employment for each Transferred
Employee who is not a Transferred CB Employee. Terms and
conditions of employment for each Transferred CB Employee shall
be determined in accordance with the Collective Bargaining Agree
ment. Nothing in this Section 8.1 shall be construed to amend or
in any way modify any at-will employment policy of Purchaser.
8.2 Collective Bargaining and Other Agreements.
Effective as of the Closing Date, Newco shall assume all rights
and obligations of the Seller under the Collective Bargaining
Agreement and the Change of Control Agreements. The Seller and
Purchaser agree to execute and to cause Newco to execute such
documents as may be necessary to effect the transfer of the
Collective Bargaining Agreement as of the Closing Date.
8.3 Pension Plans.
(a) Effective as of the Closing Date, Purchaser
shall cover or cause Newco to cover each Transferred
Employee who is not a Transferred CB Employee under an
existing defined benefit pension plan of Purchaser on the
same terms applicable to other similarly situated employees
of Purchaser; provided, however, that Purchaser shall credit
or cause Newco to credit each such Transferred Employee with
the service recognized by the Seller under its defined
benefit plan prior to the Closing Date for purposes of
eligibility to participate and vesting but not for purposes
of benefit accruals or eligibility to receive early
retirement or other subsidized benefits under Purchaser's
defined benefit pension plans. As of the Closing Date, the
Seller shall cause each Transferred Employee who is not a
Transferred CB Employee to be fully vested in his accrued
benefits under the defined benefit pension plan or plans of
the Seller that covered such Transferred Employee prior to
the Closing Date. The Seller shall retain all assets and
liabilities, and neither Purchaser nor Newco shall assume
any assets, liabilities or obligations, with respect to the
defined benefit pension plan or plans of the Seller covering
Non-CB Employees.
(b) As of the Closing Date, the Seller and Newco
or Purchaser shall execute an Amendment and Continuation
Agreement in a form reasonably satisfactory to the parties
which provides for the continuation by Newco or the
Purchaser of the Pension Plan for Hourly Paid Employees of
IMO Industries Inc. Barksdale Controls (the "Union Pension
Plan") as of the Closing Date, such that, as of the Closing
Date, Purchaser or Newco shall be substituted for the Seller
therein. Purchaser shall credit or cause Newco to credit
Transferred CB Employees with their service recognized by
the Seller under the Union Pension Plan prior to the Closing
Date for all purposes of the Union Pension Plan. The Seller
shall transfer or cause to be transferred all assets of the
Union Pension Plan from the master trust in which such
assets are held to the master trust of the Purchaser as soon
as reasonably possible after the Purchaser submits
reasonably satisfactory evidence to the Seller that the
Purchaser maintains a tax-exempt master trust to hold the
assets of the Union Pension Plan.
8.4 Savings Plan. Effective as of the Closing Date,
Purchaser shall cover or cause Newco to cover each Transferred
Employee who, on the day before the Closing Date, was a member of
the class of employees eligible to participate in IMO Industries
Inc. Employees Stock Savings Plan (the "IMO Savings Plan") under
an existing savings plan of Purchaser that is intended to meet
the requirements of Code Section 401(k) ("Purchaser's Savings
Plan") on the same terms applicable to other similarly situated
employees of Purchaser; provided, however, that Purchaser shall
credit or cause Newco to credit such Transferred Employees with
their service with the Seller prior to the Closing Date for
purposes of eligibility to participate and vesting. Effective as
of the Closing Date, the Seller shall cause each Transferred
Employee to be fully vested in his accounts under the IMO Savings
Plan and shall permit each such Transferred Employee to elect to
receive a total distribution of his accounts under the IMO
Savings Plan as soon as practicable after the Closing Date, to
the extent permitted by law. Effective as of the Closing Date,
Purchaser shall cause Purchaser's Savings Plan to accept direct
rollover contributions (as such term is described in Section
401(a)(31) of the Code)from the IMO Savings Plan with respect to
the Transferred Employees.
8.5 Welfare Benefit Plans.
(a) Effective as of the Closing Date, Purchaser
shall cover or cause Newco to cover Transferred CB Employees
(and their eligible spouses and dependents) under such
welfare benefit plans and programs as are required pursuant
to the Collective Bargaining Agreement, crediting such
Transferred CB Employees with their service with the Seller
prior to the Closing Date for purposes of eligibility to
participate, pre-existing condition limitation periods and
other waiting periods.
(b) Effective as of the Closing Date, Purchaser
shall cover or cause Newco to cover each Transferred Non-CB
Employee (and his or her eligible spouse and dependents)
under Purchaser's welfare benefit plans and programs on the
same terms applicable to similarly situated employees of
Purchaser; provided, however, that Purchaser shall credit or
cause Newco to credit such Transferred Non-CB Employee with
his or her service with the Seller prior to the Closing Date
under Purchaser's welfare benefit plans and programs for
purposes of eligibility to participate, pre-existing limita
tion periods and other waiting periods.
(c) Except with respect to Purchaser's agreement
to provide severance benefits as set forth in Section 8.1
above, the Seller shall retain, bear and discharge all, and
neither Purchaser nor Newco shall assume any liabilities and
obligations with respect to the Seller's welfare benefit and
workers' compensation plans and programs, including but not
limited to the benefits to Retirees under such plans or
programs.
8.6 Accrued Vacation and Paid Sick Days. Purchaser
shall credit or cause Newco to credit each Transferred Employee
with his or her number of accrued vacation and paid sick days
with the Seller, if any, that such Transferred Employee has not
used as of the Closing Date.
8.7 Purchaser's Right to Amend. Purchaser retains
all rights to amend, terminate or otherwise modify at any time
its employee benefit plans and programs to the extent permitted
by the applicable plan documents, the Collective Bargaining
Agreement and applicable law.
8.8 Mutual Cooperation. Purchaser and the Seller
shall each cooperate with the other and shall provide to the
other such documentation, information and assistance as is
reasonably necessary to effect the provisions of this Article
VIII.
8.9 Employee Benefits Indemnification. From and
after the Closing Date, the Purchaser and Newco, jointly and
severally, shall indemnify the Seller from any liability, loss,
damage or expense the Seller may incur (including reasonable
attorneys' fees) with respect to (i) any claims of Transferred
Employees arising out of their employment with the Purchaser,
(ii) any Law relating to the termination of any such Employee's
or Transferred Employee's employment arising on or after the
Closing Date; provided, however, that neither Purchaser nor Newco
shall indemnify the Seller with respect to any claim by an
Employee or Transferred Employee for "constructive termination"
or any claim of any Employee or Transferred Employee for
severance payments (other than the severance payments Purchaser
has agreed to make pursuant to Section 8.1(a) hereof and (iii)
the Union Pension Plan (other than claims attributable to acts or
omissions with respect to the assets of such plan between the
date of this Agreement and the transfer referred to in Section
8.3(b)).
ARTICLE IX
CONDITIONS PRECEDENT TO THE PURCHASER'S OBLIGATIONS
The obligations of the Purchaser to consummate the
transactions contemplated hereby is, at the option of the
Purchaser, subject to the satisfaction of the following
conditions:
9.1 Performance by Seller; Financing
Contingency; German Asset Purchase Agreement.
(a) Each of the representations and warranties
of 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, it being understood that to the
extent that such representations and warranties were made as
of a specified date the same shall continue on the Closing
Date to be true and correct in all material respects as of
the specified date.
(b) Seller 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
it at or prior to the Closing Date.
(c) Intentionally Omitted
(d) Seller shall have executed and delivered to
Purchaser, at the Closing, all of the deliveries to be made
by Seller pursuant to Section 3.3;
(e) Seller shall have executed and delivered to
Newco and the Purchaser, at the Closing, all of the
deliveries to be made by Seller pursuant to Section 3.4;
(f) Seller shall have obtained the full release
of all Security Interests in the Assets in favor of Bankers
Trust Company, as collateral agent, relating to certain
indebtedness of the Seller and shall have delivered at
Closing for filing with all appropriate Governmental Bodies
U.C.C.-3 Termination Statements with respect to such
Security Interests;
(g) Seller shall have transferred the Assets to
Newco;
(h) each of the conditions to closing of the
German Purchaser under the German Asset Purchase Agreement
shall have been satisfied in full, other than the Closing
hereunder; and
(i) Purchaser will have obtained debt financing
in an amount sufficient to consummate the transactions
contemplated hereby on the terms set forth in the Commitment
Letter.
9.2 HSR Act. All applicable waiting periods in
respect of the transactions contemplated by this Agreement under
the HSR Act shall have expired.
9.3 No Prohibition. No Governmental Body shall have
instituted or notified any party hereto or any of their
affiliates of any intention or threat to institute any suit,
action or Legal Proceeding to restrain, enjoin or otherwise
question the validity or legality of the transactions
contemplated by this Agreement. No Law or Order of any court or
administrative agency shall be in effect which prohibits either
Seller or Newco from consummating the transactions contemplated
hereby.
ARTICLE X
CONDITIONS PRECEDENT TO THE SELLER'S OBLIGATIONS
The obligation of Seller to consummate (i) the transfer
conveyance and assignment of the Assets to Newco (ii) the assign
ment of the Assumed Liabilities to Newco and (iii) the sale of
the Common Stock to Purchaser are, at the option of Seller,
subject to the satisfaction of the following conditions.
10.1 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, it being understood that to the
extent that such representations and warranties were made as
of a specified date the same shall continue on the Closing
Date to be true and correct in all material respects as of
the specified date.
(b) 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 (or such
performance shall have been waived).
10.2 German Asset Purchase Agreement. Each of the
conditions to closing of the German Seller under the German Pur
chase Agreement shall have been satisfied in full, other than the
Closing hereunder.
10.3 No Prohibition. No Governmental Body shall have
instituted or notified any party hereto or any of their
affiliates of any intention or threat to institute any suit,
action or Legal Proceeding to restrain, enjoin or otherwise
question the validity or legality of the transactions
contemplated by this Agreement. No Law or Order of any court or
administrative agency shall be in effect which prohibits
Purchaser from consummating the transactions contemplated hereby.
10.4 Delivery of Documents.
(a) Purchaser shall have executed and delivered
to the Seller, at the Closing and made all of the deliveries
including payment of the Purchase Price, required to be made
by Purchaser pursuant to Section 3.5 hereof.
(b) Newco shall have executed all documents and
made all deliveries to the Seller, at the Closing, required
pursuant to Section 3.6 hereof.
10.5 HSR Act. All applicable waiting periods in
respect of the transactions contemplated by this Agreement under
the HSR Act shall have expired.
ARTICLE XI
ADDITIONAL POST-CLOSING COVENANTS
11.1 Agreement Not To Compete.
(a) Seller shall not, and shall take all actions
necessary to ensure that its Affiliates do not, for a period
of five years after the Closing Date, directly or
indirectly, own, manage, control, participate in, consult
with, render services for or in any manner engage in or be
connected with in any manner, anywhere in the world, with
any business which designs, manufactures, assembles,
produces, sells or distributes pressure switches,
temperature switches or control valves (other than as these
products are being used as components or replacement parts
in systems of the type currently sold by Seller's other
existing divisions so long as such systems continue to be
sold or serviced by Seller or its divisions) provided, how
ever, that nothing herein shall prohibit Seller from being a
passive owner of, in the aggregate, less than 5.0% of the
outstanding stock of any class of a corporation which is
publicly traded so long as neither Seller nor any of its
Affiliates have any active participation in the business or
management of such corporation.
(b) Neither Seller nor any of its Affiliates
will manufacture or assemble those transducers currently
manufactured by Seller's TransInstruments Division
("TransInstruments"), in any state, territory or
protectorate of the United States of America for a period of
two years after the Closing Date.
(c) The provisions of Section 11.1(a), (b) or
(d) to the contrary notwithstanding, Seller's Gems Sensor
Division ("Gems") may design, manufacture, assemble,
produce, sell and distribute environmental leak detection
systems, transducers and transducer-based components which
are used in environmental leak detection systems.
(d) In the event Seller disposes of the business
of its TransInstruments Division ("TransInstruments") and/or
Seller's CEC Instruments Division ("CEC") by sale of all or
substantially all of the assets, sale of stock, merger or
other disposition to any party which is not an Affiliate of
Seller (a "Non-Affiliate"), Seller shall not, directly or
indirectly, for a period commencing upon the date of such
disposition and ending on the expiration of five years from
the date of this Agreement, manufacture, distribute or sell
the products manufactured by such division that compete with
products manufactured or sold by the Business as of the
Closing Date (including as any such products may be improved
or updated) anywhere in the world. Nothing contained herein
shall be construed to require Seller to bind any Non-
Affiliate transferee of the business or assets of Trans
Instruments or CEC to the provisions of this Section 11.1.
(e) In the event that the TransInstruments
Division assumes or acquires CEC or the business of CEC or
any part thereof pursuant to a corporate restructuring of
Seller or otherwise, the operation of such business by
TransInstruments anywhere in the world shall not be deemed
to be a breach of Section 11.1(b).
(f) For a period of two years after the Closing
Date, Seller shall not, directly or indirectly, solicit,
encourage, persuade or attempt to persuade any employee of
the Business, or any Person who is an employee of the
Purchaser at any time after the Closing Date, to leave the
Purchaser's employ or such employ of the Business, or to
become employed by any Person other than the Purchaser, nor
shall Seller or its Affiliates employ (whether or not
solicited, encouraged, or persuaded) any member of
Purchaser's or the Business' sales force during such period.
For a period of two years after the Closing Date, Purchaser
shall not, directly or indirectly, solicit, encourage,
persuade or attempt to persuade any employee of the Seller
or any Affiliate of the Seller (other than employees
transferred pursuant to this Agreement) to leave the
Seller's or such Affiliate's employ, or to become employed
by any Person, nor shall Purchaser or its Affiliates employ
(whether or not solicited, encouraged, or persuaded) any
member of Seller's sales force during such period.
(g) The Seller agrees, covenants and
acknowledges that, from and after the Closing Date, the
Seller will not, and will cause its Affiliates not to
disclose, give, sell, use or otherwise divulge any
confidential or secret information (including but not
limited to any technology, process, trade secrets, know-how,
other intellectual property rights, strategies, financial
statements or other financial information not otherwise
publicly available, forecasts, operations, business plans,
prices, discounts, products, product specifications,
designs, plans, data or ideas) relating exclusively to the
Business. The Purchaser agrees, covenants and acknowledges
that, from and after the Closing Date, the Purchaser will
not, and will cause its Affiliates not to disclose, give,
sell, or otherwise divulge any confidential or secret
information (including but not limited to any technology,
process, trade secrets, know-how, other intellectual
property rights, strategies, financial statements or other
financial information not otherwise publicly available,
forecasts, operations, business plans, prices, discounts,
products, product specifications, designs, plans, data or
ideas) relating exclusively to the business of the Seller
other than the Business. The foregoing obligations of
confidentiality shall not apply to confidential information
which (i) is or become generally available to the public
through no act or omission on the part of the party who is
sought to be bound by confidentiality, (ii) is hereafter
received on a non-confidential basis by the Seller or
Purchaser, as the case may be, from a third party who has
the lawful right to disclose such confidential information,
(iii) is independently developed by an employee or agent of
the party who is sought to be bound by confidentiality who
did not have access to the confidential information or (iv)
the Seller or the Purchaser, as applicable, must disclose
pursuant to court order or Law.
(h) Neither the Seller nor the Purchaser shall
engage in any activity the purpose of which is to evade the
provisions of this Section 11.1.
(i) If, at the time of enforcement of this
Section 11.1, a court shall hold that the duration, scope or
geographic area restrictions stated herein are unreasonable
under circumstances then existing, the parties agree that
the maximum duration, scope or geographic area reasonable
under such circumstances shall be substituted for the stated
duration, scope and geographic area.
(j) The parties hereto acknowledge and agree
that the party seeking to enforce the provisions hereof
would be irreparably harmed in the event any of the
provisions of this Section 11.1 are not performed in
accordance with the specific terms hereof or are otherwise
breached by the other party. Accordingly, the parties
hereto agree that the parties hereto shall be entitled to an
injunction or injunctions to prevent breaches of the
provisions of this Section 11.1 and to enforce specifically
the terms and provisions of such Section in any action
instituted in any court of the United States or any state
thereof having jurisdiction over the parties and the matter,
in addition to any other remedy to which the parties hereto
may be entitled at law or in equity.
11.2 Further Assurances.
(a) From time to time after the Closing Date, the
Seller shall, and the Purchaser shall, and shall cause Newco
to (i), at the reasonable request of the Purchaser, 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 may
reasonably request in order to vest in the Purchaser and put
the Purchaser in possession of the Assets and to transfer to
the Purchaser any Contracts and all rights of the Seller
relating to the Assets and assure to the Purchaser the
benefits thereof, and, (ii) at the reasonable request of the
Seller, to give effect to Newco's assumption of the Assumed
Liabilities.
(b) To the extent any of the approvals, consents
or waivers referred to in Section 6.4 hereof have not been
obtained by any Seller as of the Closing, Seller shall use
its reasonable efforts to do the following:
(i) cooperate with the Purchaser
in any reasonable and lawful arrangements designed by
Purchaser to provide the benefits of such Interest to
the Purchaser; and
(ii) enforce, at the request of the
Purchaser, and at the expense for the account of Seller
any and all rights of Seller 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); and
(iii) use diligent efforts to obtain
after the Closing all necessary consents to the
assignment of such agreement to Purchaser (and upon the
grant of such consents, such Contract shall be
automatically assigned to Purchaser and assumed by
Purchaser).
To the extent that Seller 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 Newco and accepted by the Purchaser for purposes of
Article I hereof.
11.3 Tax Returns. To the extent required by
applicable law, the Seller shall include Newco in all
consolidated, combined or unitary Tax returns of the Seller for
tax periods of Newco ending on or prior to the Closing Date.
Seller shall not treat (nor file any Tax Return which treats) the
transfer of the Assets to Newco as qualifying under Section 351
of the Code and shall not advance any position to any taxing
authority which treats the transfer of the Assets to Newco as
qualifying under Section 351 of the Code.
11.4 Guarantee of Performance.
(a) The Seller hereby unconditionally guaranties
the full and prompt performance of all of the liabilities
and obligations of the German Seller under the German Asset
Purchase Agreement and the payment of any amount owed by the
German Seller with respect to any adjustment to the Purchase
Price pursuant to Section 2.3 hereof.
(b) The Purchaser hereby unconditionally
guaranties the full and prompt performance of all
liabilities and obligations of the German Purchaser under
the German Asset Purchase Agreement and the payment of any
amount owed by the German Purchaser with respect to any
adjustment to the Purchase Price pursuant to Section 2.3
hereof.
11.5 Public Announcements. Neither Seller (nor any of
its Affiliates) nor Purchaser (nor any of its Affiliates) shall
make any written public statement, including without limitation,
any press release, with respect to this Agreement and the
transactions contemplated hereby, prior to the initial public
disclosure of such Agreement and such transactions, without
consent of the other party (which consent shall not be
unreasonably withheld), except as may be required by Law.
Subsequent to such initial public disclosure and until such time
as the transactions contemplated hereby are consummated,
Purchaser shall (i) use reasonable efforts to consult with Seller
with respect to Purchaser's public disclosures concerning this
Agreement and the transactions contemplated hereby, (ii)
reasonably take into account Seller's comments on such public
disclosures and (iii) not make any written disclosure concerning
Seller's customers without Seller's prior consent. Each of
Seller and the Purchaser hereby agree to keep confidential any
information provided to it by the other party in connection with
this Section 11.5. Purchaser shall, at Seller's request, correct
any public disclosure prior to the Closing concerning Seller or
the Business which is materially incorrect as to fact.
11.6 Joint Post-Closing Covenant of the Seller and the
Purchaser. Seller and the Purchaser jointly covenant and agree
that, from and after the Closing Date, Seller and the Purchaser
will cooperate with each other in defending or prosecuting any
action, suit, proceeding, investigation or audit of the other
relating to (a) the preparation and audit of Seller's and the
Purchaser's Tax Returns relating to the Business for all periods
up to and including the Closing Date and (b) any audit of
Purchaser and/or Seller with respect to the sales, transfer and
similar taxes imposed by the laws of any state, relating to the
transactions contemplated by this Agreement. In furtherance here
of, the Purchaser and Seller further covenant and agree 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.
11.7 Books and Records; Personnel. For a period of
two years after the Closing Date (or such longer period as may be
required by any Governmental Body or ongoing Legal Proceeding):
(a) The Purchaser shall not dispose of or
destroy any of the business records and files of the
Business. If the Purchaser wishes to dispose of or destroy
such records and files after that time, it shall first give
30 days' prior written notice to the Seller and 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 60 days
after the date of the Seller's notice to the Purchaser.
(b) The Purchaser shall allow Seller and its
Representatives access to all business records and files of
the Business which are transferred to the Purchaser in
connection herewith and relating solely to the conduct of
the Business prior to the Closing Date, during regular busi
ness hours and upon reasonable notice at the Purchaser's
principal place of business or at any location where such
records are stored, and 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
provided no more than one time in any calendar year and
shall be had or done in such a manner so as not to interfere
with the normal conduct of the Purchaser's business or
operations.
(c) The Purchaser shall make available to
Seller, upon written request and at such Seller's expense
(i) the Purchaser's personnel to assist Seller in locating
and obtaining records and files maintained by the Purchaser
relating solely to the conduct of the Business prior to the
Closing Date and (ii) any of the Purchaser's personnel previ
ously in Seller's employ whose assistance or participation
is reasonably required by Seller in anticipation of, or
preparation for, existing or future litigation, arbitration,
administrative proceeding, tax return preparation or other
matters in which Seller or any of its affiliates is involved
and which is related to the conduct of Business prior to the
Closing Date.]
ARTICLE XII
INDEMNIFICATION AND RELATED MATTERS
12.1 Indemnification by the Seller and the German
Seller. Subject to the provisions of this Article XII, Seller
shall and, in the case of Sections 12.1(a), (b) and (c), the
Seller and the German Seller shall, jointly and severally,
indemnify and hold the Purchaser harmless from and against all
Damages, Liabilities or losses incurred in connection with or
resulting from or arising out of:
(a) the failure of any of the representations
and warranties of Seller contained in Article IV of this
Agreement or of the German Seller in the German Asset
Purchase Agreement, respectively, to have been true 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 in all material respects as of such
specified date;
(b) the failure of Seller to comply with any of
the covenants contained in this Agreement which are required
to be performed by Seller or any failure by the German
Seller to comply with any covenant or agreement required to
be performed by the German Seller pursuant to the German
Asset Purchase Agreement;
(c) the Excluded Liabilities or any German
Excluded Liability (as defined in the German Asset Purchase
Agreement); and
(d) any actual, alleged or threatened Liability
under any Environment, Health and Safety Requirements, or
under criminal law or common law concerning any of the sub
jects referred to in the definition of "Environment, Health
and Safety Requirements," that is based upon facts, events,
occurrences, circumstances, activities or other conditions
that occurred or existed at the California Facility on or
prior to the Closing Date, except that this provision shall
not apply to any Excluded Liability.
12.2 Indemnification by the Purchaser. Subject to the
provisions of this Article XII, the Purchaser shall indemnify and
hold Seller harmless from and against all Damages, Liabilities or
losses incurred in connection with, resulting from or arising out
of:
(a) the failure of any of the representations
and warranties contained in Article V of this Agreement or
of the German Purchaser in the German Asset Purchase
Agreement, respectively, to have been true 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 in all
material respects as of such specified date;
(b) the failure of the Purchaser to comply with
any of the covenants contained in this Agreement which are
required to be performed by the Purchaser or any failure by
the German Purchaser to comply with any covenant or
agreement required to be performed by the German Purchaser
pursuant to the German Asset Purchase Agreement;
(c) the Assumed Liabilities or any German
Assumed Liability (as defined in the German Asset Purchase
Agreement); and
(d) the operation of the Business or ownership
of the Assets after the Closing Date.
12.3 Determination of Damages and Related Matters. In
calculating any amount payable to the Purchaser pursuant to
Section 12.1 or payable to Seller pursuant to Section 12.2, the
Person obligated to pay such amount shall receive credit 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. Each of Seller and the Purchaser agrees 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.
12.4 Limitation on Indemnification Liabilities.
(a) The indemnifications in favor of the
Purchaser contained in Section 12.1(a) hereof shall not be
effective until the aggregate dollar amount of all losses,
liabilities, damages or expenses (including reasonable attor
neys' fees) indemnified against under such Section, without
limitation, exceeds $500,000 (the "Threshold Amount"), and
then only to the extent such aggregate amount exceeds the
Threshold Amount, and shall terminate once the dollar amount
of all losses, liabilities, damages and expenses (including
reasonable attorneys' fees) indemnified against aggregates
fifty percent (50%) of the Purchase Price; provided that
Purchaser shall be entitled to full indemnification against
the things cited in clauses (b), (c) and (d) of Section 12.1
and for any breach of the covenant set forth in Section 11.1
hereof without application of any Threshold Amount
requirement or any other limitation on full indemnification
against such things.
(b) The indemnification in favor of the
Purchaser contained in Section 12.1(d) hereof shall not be
effective until the aggregate dollar amount of all
Liabilities indemnified against under such section exceed
$100,000 (the "Environmental Threshold"). Once such
Liabilities exceed the Environmental Threshold the
indemnification shall apply to seventy-five percent (75%) of
the amount by which those Liabilities exceed the
Environmental Threshold without any limitation as to time or
dollar amount. The remaining twenty-five percent (25%) of
the amount by which such Liabilities exceed the
Environmental Threshold shall be paid without any limitation
as to the time or dollar amount by the Purchaser or Newco
and the Seller shall be indemnified by the Purchaser in
respect thereof.
(c) The indemnifications in favor of the Seller
contained in Section 12.2 (a) hereof shall not be effective
until the aggregate dollar amount of all losses,
liabilities, damages and expenses (including, without
limitation, reasonable attorneys' fees) indemnified against
under such Section exceeds $500,000 (the "Seller's Threshold
Amount") and then only to the extent such aggregate amount
exceeds the Seller's Threshold Amount, and shall terminate
once the dollar amount of all losses, liabilities, damages
and expenses (including reasonable attorneys' fees)
indemnified against aggregates fifty percent (50%) of the
Purchase Price; provided that Seller shall be entitled to
full indemnification against the things cited in clauses
(b), (c) and (d) of Section 12.2 without application of any
Sellers' Threshold Amount or any other limitation on full
indemnification against such things.
(d) Notwithstanding the foregoing, Purchaser's
right to recover pursuant to Section 12.1(c) shall be inde
pendent of, and shall not be subject to any of the
limitations on Seller's indemnification obligations pursuant
to this Section 12.4, whether or not the subject matter of
any claim in respect of an Excluded Liability also
constitutes a matter with respect to which Purchaser would
otherwise be entitled to recover under any other clause of
Section 12.1 hereof.
12.5 Survival of Representations, Warranties and Cov
enants. The parties hereto agree that the representations and
warranties made in this Agreement and any indemnification made
with respect thereto shall survive the Closing Date and shall
continue in full force and effect after the date hereof as
follows:
(a) Seller's representations and warranties set
forth in Sections 4.3 (Capitalization; Title to Common
Stock), 4.4 (Title and Condition of Properties), and 4.11
(Taxes), shall continue in full force and effect after the
Closing Date until the expiration of the applicable statute
of limitations with respect to such matters.
(b) Seller's representations and warranties
other than those set forth in (a) above and the
representations and warranties of the German Seller in the
German Asset Purchase Agreement shall continue in full force
and effect after the Closing Date for a period ending on the
later of (i) the date which is one year after the Closing
Date and (ii) March 31, 1995.
(c) All of Purchaser's and the German
Purchaser's representations and warranties shall remain in
full force and effect after the Closing Date for a period of
ending on the later of (i) the date which is one year after
the Closing Date or (ii) March 31, 1995.
(d) The parties hereto acknowledge and agree
that all claims for indemnification for breach of any
representation or warranty relative thereto must be made
within the periods set forth in (a)-(c) above, inclusive, by
giving notice pursuant to Section 12.6 below or shall be
time-barred but if a party shall give the other party notice
of facts or circumstances relating to any particular
warranty prior to the time limit prescribed by this
Agreement, then the party giving notice shall be entitled to
indemnification against claims and liabilities growing out
of such facts and circumstances even if such claims or the
amount of such liabilities are not determined until after
the time limit prescribed with respect to the relevant
representation or warranty. The foregoing time limitation
shall be construed to apply only to the indemnity
obligations of the Seller under Section 12.1(a) and only to
the indemnity obligations of the Purchaser under Section
12.2(a) and not to any other provisions of Section 12.1 or
12.2 hereof. The Seller's and the German Seller's
indemnification obligations under Sections 12.1(b)-(d) and
the Purchaser's and the German Purchaser's indemnification
obligations under Sections 12.2(b)-(d) shall continue in
full force and effect without any time limitation.
12.6 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 XII 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"). 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 to the extent then known.
12.7 Indemnification Procedure for Third-Party Claims.
(a) 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 (provided that the Indemnitee shall have the right to
approve such counsel, which approval shall not be unreason
ably withheld), 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 to the extent legally permissible in the
jurisdiction in which such litigation takes place; provided,
however, that the Indemnitee may participate in any such
proceeding with counsel of its choice provided that (except
as otherwise specified herein) the Indemnitee shall pay the
cost of its own separate counsel. 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 provided that Indemnitor will
not consent to the entry of any judgment or settlement which
(i) involves any consideration other than the payment of
money or (ii) fails to include a provision whereby all
plaintiffs or claimants release the Indemnitee from all
Liability with respect thereto without the prior written
consent of the Indemnitee. 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 of its choosing subject to the reasonable approval
of Indemnitor, at the expense of the Indemnitor, and control
the defense of such proceeding. 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 with respect to
any loss, liability, claim, obligation, damage and expense
occasioned by such settlement, provided that if the
Indemnitee reasonably concludes that the Indemnitor has
failed to assume defense of any claim or is not providing an
adequate defense of Indemnitee with respect to that claim,
then the Indemnitee shall be entitled to settle such claim
and Indemnitor shall be obligated to reimburse Indemnitee
for the cost of such settlement to the extent (i) Indemnitor
was responsible for indemnification against the claim and
(ii) the settlement is reasonable.
(b) Notwithstanding the foregoing, Purchaser
shall have the exclusive right to control the defense of and
determine the response to any claim arising under
Environment, Health and Safety Requirements which may
involve Remedial Action at the California Facility after the
Closing Date; provided Purchaser shall provide Seller with
reasonable advance notice of any such actions and shall not
take any such action which is unreasonable and to which
Seller shall object within 5 business days after notice
thereof. In connection therewith, Purchaser's right shall
include, but not be limited to, the right to conduct
studies, investigations, prepare draft and final
environmental reports, hire consultants, make reports and
conduct discussions and negotiations with governmental
authorities and prepare, propose and implement remediation
plans and other responses to such claims. In connection
with the foregoing:
(i) Purchaser will permit
representatives of Seller (including advisors and
consultants) to visit and inspect the Facility and to
enter the Facility for the purpose of conducting such
environmental tests as Seller may reasonably desire with
respect to such potential or actual claim, all during
normal business hours, on reasonable notice and at
Seller's expense;
(ii) Purchaser shall use reasonable
efforts to consult with Seller prior to notifying any
governmental authority of any event or the existence of
any state of facts that such Indemnified Party
recognizes may give rise to a potential or actual claim
and prior to initiating any discussions with any
governmental authority relating to such potential or
actual claim and shall consult with Seller, at Seller's
request, except where such prior notice and consultation
is not feasible; and
(iii) Purchaser shall cause to be
furnished to Seller drafts of all proposed remediation
plans with respect to any potential or actual claim not
less than ten business days prior to the date on which
they are required to be submitted to any applicable
governmental authorities. Purchaser will consult with
Seller, at Seller's request, in formulating and
implementing any proposed response to any actual or
potential claim and will keep Seller reasonably informed
with respect to Purchase's proposed response.
12.8 Exclusive Remedy. The exclusive remedy available
to a party hereto in respect of the matters covered by or indem
nified against in Section 12.1 or Section 12.2 hereof shall be to
proceed in the manner and subject to the limitations contained in
this Article XII.
ARTICLE XIII
TERMINATION
13.1 Termination. This Agreement may be terminated:
(a) by the written agreement of the Purchaser
and the Seller;
(b) by either the Purchaser, on the one hand, or
the Seller, on the other hand, if there shall be in effect a
non-appealable order of a court of competent jurisdiction
prohibiting the consummation of the transactions
contemplated hereby prior to December 15, 1993;
(c) by either the Purchaser or the Seller if
either (i) the German Asset Purchase Agreement is not signed
by all parties thereto on or prior to the close of normal
business hours in Chicago on November 12, 1993 or (ii) the
terms of the Canadian Distribution Agreement or any of the
Sales' Representative Agreements have not been agreed to the
mutual satisfaction of Purchaser and Seller (and a writing
evidencing such agreement executed by Seller and Purchaser)
on or prior to the close of normal business hours in Chicago
on November 12, 1993; or
(d) by either the Purchaser or Seller if the
Closing shall not have occurred on or before December 15,
1993.
13.2 Liabilities After Termination; Payments Upon
Termination.
(a) Except as otherwise provided in this Section
13.2, upon any termination of this Agreement pursuant to
Section 13.1, no party hereto shall thereafter have any
further liability or obligation under or by reason of this
Agreement.
(b) If this Agreement is terminated by either
Seller or Purchaser pursuant to the provisions of Section
13.1(c) above, then the entire Deposit Amount shall be paid
over to the Purchaser.
(c) If this Agreement shall be terminated
pursuant to Section 13.1(d) above and any of the conditions
specified in Article IX (other than the condition specified
in Section 9.1(i)) shall not have been satisfied in full on
the Closing Date, then the entire Deposit Amount shall be
paid over to Purchaser (whether or not the condition
specified in Section 9.1(i) shall have been satisfied).
(d) If Purchaser fails to proceed with the
Closing solely as a result of the nonsatisfaction of the
condition in Section 9.1(i) hereof and not also as the
result of the failure of any of the other conditions set
forth in Article IX to have been satisfied in full on the
Closing Date (provided, that Seller shall not be deemed to
have failed to satisfy any of such conditions if Seller
shall have been ready, willing and able to satisfy such
conditions in full on the Closing Date), then the entire
Deposit Amount shall be paid over to the Seller and
Purchaser shall have no further liability to Seller (other
than for breach of Section 7.2) except that, in the event
the Seller is able to prove by clear and convincing evidence
that the nonsatisfaction of the condition in Section 9.1(i)
was caused by the breach by Purchaser of its obligations
under Section 7.5, then, in such event, the Seller shall be
entitled to recover from Purchaser any damages (other than
damages excluded by Section 13.2 (h))in excess of the
Deposit Amount which the Purchaser shall have incurred by
reason of the failure of the Purchaser to consummate the
acquisition contemplated by this Agreement.
(e) If Purchaser fails to consummate the transac
tions contemplated hereby notwithstanding the fact that the
Seller shall have satisfied or have been ready, willing and
able to satisfy on the Closing Date each of the conditions
to Closing set forth in Article IX which was not in fact
satisfied on the Closing Date, then the entire Deposit
Amount shall be paid over to the Seller for application
towards (but not in limitation of) any and all damages
Seller may realize as a consequence of such failure;
provided, that Seller shall in no event have the right to
recover more than the excess of Seller's total damages over
the Deposit Amount or to recover damages excluded by
13.2(h).
(f) If Seller fails to consummate the
transactions contemplated hereby notwithstanding the fact
that the Purchaser shall have satisfied or have been ready,
willing and able to satisfy on the Closing Date each of the
conditions to Closing set forth in Article X which was not
in fact satisfied on the Closing Date, then Purchaser shall
be entitled to any and all damages Purchaser may realize as
a result of such failure (other than damages excluded by
Section 13.2 (h)), provided that in the event Seller sells
the Business pursuant to a contract or contracts entered
into with one year after the termination hereof for a
consideration in excess of the consideration payable under
this Agreement, then (i) the recovery to which the Purchaser
shall be entitled under this paragraph (f) shall be the
amount by which the consideration received therefor shall
exceed the consideration which would have been owed therefor
under this Agreement and (ii) Purchaser shall not be
entitled to any other damages by reason of such failure.
(g) Subject to the limitations in Section
13.2(d), (e), (f) and (h), no termination of this Agreement
shall relieve either party of any liability to the other
party for any breach of this Agreement prior to the date of
such termination.
(h) In no event shall any party to this
Agreement be responsible to any other party for any
consequences which may arise under such other party's
borrowing agreements or for any damages which may flow from
any such consequences.
ARTICLE XIV
MISCELLANEOUS
14.1 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):
"Accounts Receivables" means all accounts receivable and
all notes receivable (whether short-term or long-term) from third
parties or affiliates, together with any unpaid interest accrued
thereon from the respective obligors and any security or
collateral therefor, including recoverable deposits.
"Affiliate" of any Person means any other Person
controlling, controlled by or under common control with such
Person.
"Assets" has the meaning set forth in Section 1.2.
"Assigned Contracts" has the meaning set forth in
Section 1.3
"Assumed Liabilities" has the meaning set forth in
Section 1.6.
"Benefit Arrangement" has the meaning set forth in
Section 4.13(b).
"Business" means the business conducted by the Seller
and the German Seller (and their affiliates) involving the
design, manufacture, sale and/or distribution of pressure
switches, temperature switches, control valves, transducers and
related products and services, including but not limited to, all
business done under the names Barksdale, Shear-Seal and the
Little General whether conducted by the Seller's Barksdale
Controls Division, the German Seller, Newco or otherwise (but
with respect to pressure transducers only to the extent designed
and manufactured by Seller's Barksdale Controls Division).
"California Facility" means the U.S. Seller's plant
located at 3211 Fruitland Avenue, Vernon, California and the real
property owned in fee by the Seller at such location.
"CB Employee" means each Employee who immediately prior
to the Closing Date is covered by the Collective Bargaining
Agreement.
"Change of Control Agreements" shall mean the four
letter agreements dated November 16, 1992 set forth in Schedule
4.13(b)(ii), 4.10(a)(i) and 4.13(g) providing salary
continuation, job outplacement and other benefits.
"Closing" means the consummation of the transactions
contemplated by this Agreement.
"Closing Balance Sheet" has the meaning set forth in
Section 2.4(a) hereof.
"Closing Date" has the meaning set forth in Section 3.1
hereof.
"Code" means the Internal Revenue Code of 1986, as
amended.
"Collective Bargaining Agreement" means that certain
Agreement entered into on March 1, 1991, between IMO Industries,
Inc., Barksdale Controls Division and United Steel Workers of
America, AFL-CIO-CLC, Local Union 2018.
"Common Stock" has the meaning set forth in the recitals
hereof.
"Confidentiality Agreement" has the meaning set forth in
Section 6.2 hereof.
"Contract" means any contract, agreement, purchase
order, indenture, note, bond, loan, instrument, lease,
conditional sale contract, mortgage, license, franchise,
insurance policy, employee non-compete, distribution agreement,
commitment or other arrangement or agreement, whether written or
oral.
"Damages" means all claims, actions, losses, damages,
costs, expenses and liabilities (including reasonable attorneys'
fees incident to the foregoing).
"Deposit Amount" means the $750,000 deposited by the
Purchaser on the date hereof into an escrow account with the
Escrow Agent pursuant to the terms of the Escrow Agreement.
"Employees" means (i) all persons employed by the Seller
in the Business immediately prior to the Closing Date and (ii)
the Pumps and Controls Field Sales Force Employees identified on
Schedule 8.1(b) including any persons on short-term disability,
sick leave, layoff or leave or absence.
"Employee Benefit Plan" has the meaning set forth in
Section 4.13(b) hereof.
"Environment, Health and Safety Requirements" means all
of the terms and conditions of all permits, licenses and other
authorizations which are required under, and all other
limitations, restrictions, conditions, standards, prohibitions,
requirements, obligations, schedules, and timetables which are
contained in, all federal, state, local, and foreign
Environmental Laws (including rules, regulations, codes, plans,
judgments, orders, decrees, stipulations, injunctions, charges,
notices and demand letters issued, entered, promulgated or
approved thereunder) relating to public health and safety, worker
health and safety, or pollution or protection of the environment,
including Environmental Laws (as defined below) relating to
emissions, discharges, releases, or threatened releases of
Hazardous Materials into ambient air, surface water, ground
water, subsoil or lands or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal,
transport or handling of Hazardous Materials.
"Environmental Laws" shall include, but not be limited
to, the Comprehensive Environmental Response, Compensation and
Liability Act, the Solid Waste Disposal Act, the Occupational
Safety and Health Act, the Federal Water Pollution Control Act,
the Clean Air Act, the Safe Drinking Water Act, the
Toxic Substances Control Act, the Refuse Act, the Hazardous
Materials Transportation Act, the Emergency Planning and
Community Right-to-Know Act, the Federal Insecticide Fungicide
and Rodenticide Act, and any state or local laws that implement
those federal laws or cover the same or similar subject matters
as those federal laws.
"ERISA" means the Employee Retirement Income Security
Act of 1974, as amended.
"Escrow Agreement" means that certain Escrow Agreement
of even date herewith by and among Purchaser and Seller and
Continental Bank, N.A. as escrow agent (the "Escrow Agent").
"Excluded Contracts" has the meaning set forth in
Section 1.3(c) hereof.
"Final Working Capital Adjustment" has the meaning set
forth in Section 2.3(d) hereof.
"GAAP" means generally accepted accounting principles in
the United States.
"German Asset Purchase Agreement" means that certain
agreement by and among Purchaser, Seller, German Purchaser and
German Seller pursuant to which the German Purchaser shall
acquire certain assets and shall assume certain liabilities of
the German Seller, the form and substance of which shall be
satisfactory to each of the parties thereto.
"German Seller" has the meaning set forth in the
recitals hereof.
"Governmental Body" means any government or governmental
or regulatory body thereof, or political division thereof,
whether federal, state, local or foreign, or any agency or
instrumentality thereof, or any court or arbitrator (public or
private).
"Hazardous Materials" shall mean pollutants,
contaminants, and chemical, industrial and hazardous materials
and wastes, and shall include, but not be limited to, substances
regulated under any of the Environmental Laws.
"HSR Act" has the meaning set forth in Section 4.5
hereof.
"Indemnitor" has the meaning not forth in Section 12.6
hereof.
"Indemnitee" has the meaning set forth in Section 12.6
hereof.
"Initial Balance Sheet" means the balance sheet of the
Business at September 30, 1993 prepared by Sellers and attached
as Schedule 4.6 hereto.
"Intellectual Property Rights" shall mean all of the fol
lowing owned by or issued to Seller and used in or necessary for
conduct of the Business, along with all income, royalties,
damages and payments due or payable at Closing or thereafter
(including, without limitation, damages and payments for past or
future infringements or misappropriation thereof), the right to
sue and recover for past infringements or misappropriation
thereof and any and all corresponding rights that, now or
hereafter, may be secured throughout the world: patents, patent
applications, patent disclosures and inventions (whether or not
patentable and whether or not reduced to practice) and any
reissues, continuations, continuations-in-part, revisions,
extensions or reexaminations thereof; trademarks, service marks,
trade dress, logos, trade names and corporate names, together
with all goodwill associated therewith (including, without
limitation, the use of the current corporate name and trade
name(s) listed on the Intellectual Property Rights Schedule and
all translations, adaptations, derivations and combinations of
the foregoing); copyrights and copyrightable works; mask works;
and registrations, applications and renewals for any of the
foregoing; trade secrets and confidential information (including,
without limitation, ideas, formulae, compositions, know-how, manu
facturing and production processes and techniques, research and
development information, drawings, specifications, designs,
plans, proposals, technical data, financial and accounting data,
business and marketing plans, and customer and supplier lists and
related information); computer software (including, without
limitation, data, databases and documentation); other
intellectual property rights; licenses to any of the foregoing
and all copies and tangible embodiments of the foregoing (in
whatever form or medium), in each case including, without limi
tation, the items set forth on the Schedule 4.11 attached hereto.
"Interest" has the meaning set forth in Section 6.4
hereof.
"Knowledge" with respect to the Seller or Newco means
the collective knowledge which the executive officers and key
employees of Seller or Newco listed on Schedule 14.1 hereto would
have (i) after each such person shall have made reasonably
diligent investigation of all relevant files, books and records
of the Seller relating to the Business; and (ii) such persons
shall collectively have made reasonably diligent inquiry of such
other persons employed by Seller or any of its Affiliates with
whom it is reasonable to consult concerning the subject matter
about which such persons are making inquiry in order to be confi
dent that the representations in the agreement are complete and
accurate.
"Law" means any federal, state, local or foreign law
(including common law), statute, code, ordinance, rule,
regulation or other requirement or guideline.
"Legal Proceeding" means any judicial, administrative or
arbitral action, suit, proceeding (public or private), claim or
governmental proceeding.
"Liabilities" means any liability (whether known or
unknown, whether absolute or contingent, whether liquidated or
unliquidated, and whether due or to become due). "Liability"
shall include, but not be limited to, responsibility or Liability
for Remedial Action (including costs of Remedial Action and any
lawful government oversight costs incidental to Remedial Action),
Liability for natural resource damages, Liability for illness,
personal injury or the increased risk of or fear of illness or
personal injury, and Liability for economic losses or other
property damage.
"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
restrictions or limitation whatsoever.
"Material Adverse Effect" means any material adverse
effect on, or any effect that results in a material adverse
change in, the Assets as a whole or the condition, results of
operations, liabilities or prospects of the Business, as a whole.
"Non-CB Employee" means each Employee who is not covered
by the Collective Bargaining Agreement.
"Order" means any order, injunction, judgment, decree,
ruling, writ, assessment or arbitration award.
"Permit" means any written approval, authorization,
consent, franchise, license, permit or certificate by any Govern
mental Body.
"Permitted Exceptions" means (i) prior to the Closing
Date, Liens in favor of Bankers Trust Company, as collateral
agent, relating to certain indebtedness of Seller (ii) statutory
Liens for current Taxes 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 that are not in the
aggregate material to the Business or the Assets; (iv) zoning,
entitlement and other land use and environmental regulations by
Governmental Bodies, provided that such regulations have not been
violated; (v) such other easements and restrictions of record
which do not in the aggregate materially and adversely affect the
use of the Assets or the operation of the Business; and (vi) the
exceptions to title to the California Facility listed on Schedule
X that are approved in writing by Purchaser.
"Person" means any individual, corporation, partnership,
firm, joint venture, association, joint-stock company, trust,
unincorporated organization or Governmental Body.
"Pre-Closing Tax Period" means any Tax period (or
portion thereof) ending on or before the close of business on the
Closing Date and the allocable portion of any Tax period that
begins before the Closing Date and ends after the Closing Date.
For purposes of this definition, in the case of any Taxes that
are imposed on a periodic basis and are payable for a taxable
period that includes (but does not end on) the Closing Date, the
portion of such Tax which relates to the portion of such taxable
period ending on and including the Closing Date shall (x) in the
case of any Taxes other than Taxes based upon or related to
income, be deemed to be the amount of such Tax for the entire
taxable period multiplied by a fraction the numerator of which is
the number of days in the taxable period ending on and including
the Closing Date and the denominator of which is the number of
days in the entire taxable period, and (y) in the case of any Tax
based upon or related to income be deemed equal to the amount
which would be payable if the relevant taxable period ended on
and included the Closing Date. Any credits relating to a taxable
period that begins before and ends after the Closing Date shall
be taken into account as though the relevant taxable period ended
on and included the Closing Date. All determinations necessary
to give effect to the foregoing allocations shall be made in a
manner consistent with prior practice of the Seller.
"Preliminary Working Capital Adjustment" has the meaning
set forth in Section 2.3(b) hereof.
"Purchase Price" has the meaning set forth in Section
2.1 hereof.
"Purchaser" has the meaning set forth in the recitals
hereof.
"Purchaser Documents" has the meaning set forth in
Section 5.2 hereof.
"Purchaser Representative" has the meaning set forth in
Section 6.2 hereof.
"Remedial Action" means all actions, whether voluntary
or involuntary, reasonably necessary or advisable to comply with
applicable Environment, Health and Safety Requirements, to (A)
perform investigations, studies, analyses and samples, (B)
cleanup, remove, treat, cover or in any other way adjust
Hazardous Materials in the indoor or outdoor environment; (C)
prevent, control or mitigate the release of Hazardous Substances
so that they do not migrate or endanger public health or welfare
or the indoor or outdoor environment; or (D) perform remedial
studies, investigations, restoration and post-remedial studies,
investigation and monitoring on, about or in any Real Property.
"Retirees" means former Employees of the Business and
their spouses and beneficiaries with a right to receive post-
retirement welfare benefits from the Seller.
"Seller" has the meaning set forth in the recitals
hereof.
"Seller Documents" has the meaning set forth in Section
4.2 hereof.
"Tax" or "Taxes" means any federal, state, local or for
eign income, gross receipts, license, payroll, employment,
excise, severance, stamp, occupation, premium, property, real
property, windfall profits, environmental, customs, capital
stock, franchise, employees' income withholding, foreign or
domestic withholding, social security, health and unemployment
insurance property, sales, use, transfer, value added,
alternative or add-on minimum or other similar tax, governmental
fee, governmental assessment or governmental charge of any kind
whatsoever, including any interest, penalties or additions to Tax
or additional amounts with respect to the foregoing.
"Tax Returns" means returns, declarations, reports,
claims for refund, information returns or other documents
(including any related or supporting schedules, statements or
information) filed or required to be filed in connection with the
determination, assessment or collection of Taxes of any party or
the administration of any laws, regulations or administrative
requirements relating to any Taxes.
"Threshold Amount" has the meaning set forth in Section
12.4 hereof.
"Title Company" has the meaning set forth in Section 1.4
hereof.
"Title Policy" or "Title Policies" has the meaning set
forth in Section 1.4 hereof.
"Transferred CB Employees" has the meaning set forth in
Section 8.1 hereof.
"Transferred Employees" has the meaning set forth in
Section 8.1 hereof.
"Union Pension Plan" has the meaning set forth in
Section 8.3(b) hereof.
"Unapproved Contract" has the meaning set forth in
Section 1.3.
"Working Capital" has the meaning set forth in Section
2.3(b) hereof.
14.2 Prorations. All real property taxes and special
and general assessments relating to the Assets and all other
personal property taxes not accrued on the Closing Balance Sheet
shall be prorated by the parties as of the Closing Date, and all
such taxes applicable to Pre-Closing Tax Periods shall be the
sole obligation, responsibility and expense of each Seller, and
shall be paid by such Seller. All such assessments and taxes
applicable to periods following the Closing Date shall be the
sole obligation, responsibility and expense of the Purchaser.
14.3 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.
14.4 Governing Law. This Agreement shall be governed
by and construed in accordance with the domestic law of the State
of New York without giving effect to any choice or conflict of
law provision or rule (whether of the State of New York or any
other jurisdiction) that would cause the application of the laws
of any jurisdiction other than the State of New York. Purchaser
and Seller each hereby agree to the exclusive jurisdiction of the
United States Federal District Court within the Borough of
Manhattan, New York City, New York with respect to any claim or
cause of action arising under Article XIII hereof (an "Article
XIII Action"). Purchaser and Seller each waive any objection
based on forum non convenience and any objection to venue with
respect to any Article XIII Action.
14.5 Transfer Taxes. The Purchaser, on the one hand,
and each Seller, on the other, shall equally share in the cost of
(a) all transfer and documentary taxes and fees imposed with
respect to instruments of conveyance in the transactions contem
plated hereby and (b) all sales, use, gains, excise and other
transfer or similar taxes on the transfer of the Assets contem
plated hereunder. The Purchaser or Seller, as the case may be,
shall execute and deliver to the other at the Closing any certifi
cates or other documents as the other may reasonably request to
perfect any exemption from any such transfer, documentary, sales,
gains, excise or use tax.
14.6 Expenses. 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.
14.7 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.
14.8 Notices. All notices and other communications
under this Agreement shall be in writing and shall be deemed
given when delivered personally or four days after being mailed
by registered mail, return receipt requested, 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 German Seller, to:
Imo Industries Inc.
3450 Princeton Pike
Lawrenceville, New Jersey 08646
Telephone: (609) 896-7600
Facsimile: (609) 896-7688
Attention: Thomas J. Bird; 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.
and a copy to:
Punder, Volhord, Weber & Axster
9 West 57th Street
New York, New York 10019
Telephone: (212) 980-3335
Facsimile: 212-980-3337
Attention: Dr. Andreas Junius, Esq.
If to the Purchaser or the German Purchaser, to:
Mark Controls Corporation
5202 Old Orchard
Skokie, Illinois 60077
Telephone: (708) 470-8585
Facsimile: (708) 470-9774
Attention: David S. Snyder, Vice President
Finance and Strategy
with a copy to:
Kirkland & Ellis
200 East Randolph Drive
Chicago, Illinois 60601
Telephone: (312) 861-2000
Facsimile: (312) 861-2200
Attention: Robert H. Kinderman, Esq.
and a copy to:
Doser Amereller Noack (Baker & McKenzie)
Bethmannstrasse 50-54
D-60311 Frankfurt/M
Telephone: (49-69) 2-99-080
Facsimile: (49-69) 2-99-08-108
Attention: Dr. Walter R. Henle
14.9 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.
14.10 Binding Effect; No Assignment. This Agreement
shall be binding upon and inure to the benefit of the parties and
their respective successors and assigns. Nothing in this Agree
ment, express or implied, shall create or be deemed or be
construed to create any third party beneficiary rights or
remedies in any person or entity not a party to this Agreement
and their respective successors and assigns and no such person or
entity shall be deemed to be a third party beneficiary hereunder,
such parties specifically including, without limitation, any
employee of Seller. 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 and any attempted assignment
without such required consents shall be void.
14.11 Amendments. This Agreement may be amended, supple
mented 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.
14.12 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.
14.13 No Third Party Beneficiaries. This Agreement
shall not confer any rights or remedies upon any Person other
than the Parties and their respective successors and permitted
assigns.
14.14 Enforcement Expenses. In the event that any
party (the "Defaulting Party") shall fail to pay an amount or
perform any other obligation owed by such party under this
Agreement (including, without limitation, payment of the Deposit
Amount), the party to whom such amount or obligation shall be
owed (the "Nondefaulting Party") shall be entitled to collect
from the Defaulting Party all costs and expenses, including,
without limitation, reasonable attorneys' fees, which the
Nondefaulting Party shall incur to collect such amount, enforce
such obligation or obtain compensation due the Nondefaulting
Party (including, without limitation, any action relating to the
disposition of the Deposit Amount) by reason of the Defaulting
Party's failure to pay such amount or perform such obligation
when due. In the event any party shall bring a claim against the
other party and the defendant shall prevail on such claim, then
the defendant shall be entitled to recover from the plaintiff all
costs which the defendant shall have reasonably incurred to
defend against such claim.
* * * * *
IN WITNESS WHEREOF, the parties hereto have executed
this instrument as of the ____ day of November, 1993.
IMO INDUSTRIES INC.
By: /s/ Thomas J.Bird
Name: Thomas J. Bird
Title: Senior Vice President
IMO INDUSTRIES GMBH
By: /s/ James S. W. Cooper
Name: James S. W. Cooper
Title: Geschaftsfuhrer
MARK CONTROLS CORPORATION
By: /s/ William E. Bendix
Name: William E. Bendix
Title:
MARK CONTROLS GMBH i. Gr.
By: /s/ William E. Bendix
Name: William E. Bendix
Title: Geschaftsfuhrer,
(Managing Director)
AMENDMENT NO. 1 TO STOCK PURCHASE AGREEMENT
AMENDMENT No. 1, dated as of November 11, 1993
(this "Amendment") to Stock Purchase Agreement, dated as of
October 28, 1993, by and among Imo Industries Inc., a Delaware
corporation, Imo Industries GmbH, Mark Controls Corporation, a
Delaware corporation and Mark Controls GmbH i. Gr. (the
"Agreement").
The parties to this Amendment desire to amend the
agreement as hereinafter set forth. Therefore, the parties agree
as follows:
1. Subsection 13.1(c) of the Agreement is hereby
deleted in its entirety and the following substituted therefor:
"(c) by either the Purchaser or the Seller if
either
(1) the German Asset Purchase Agreement is not
signed by all parties thereto on or prior to the
close of normal business hours in Chicago on
November 18, 1993 or (ii) the terms of the
Canadian Distribution Agreement or any of the
Sales Representative Agreements have not been
agreed to the mutual satisfaction of Purchaser and
Seller (and a writing evidencing such agreement
executed by Seller and Purchaser) on or prior to
the close of normal business hours in Chicago on
November 18, 1993; or"
2. Subsection 11.2(b)(ii) of the Agreement is
hereby deleted in its entirety and the following substituted
therefor:
"(ii) enforce, at the request of
and at the expense of the Purchaser,and for the
Purchaser's account, any and all rights of Seller
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); and".
IN WITNESS WHEREOF, the parties hereto have
executed this Amendment as of the date and year first above
written.
IMO INDUSTRIES INC.
By: /s/ Thomas J. Bird
Name: Thomas J. Bird
Title: Senior VP
IMO INDUSTRIES GMBH
By : /s/J.S.W. Cooper
Name: James S. W. Cooper
Title: Geschaftsfuhrer
MARK CONTROLS CORPORATION
By: /s/ William E. Bendix
Name: William E. Bendix
Title: Managing Director
MARK CONTROLS GMBH I.Gr.
By: /s/ William E.Bendix
Name: William E. Bendix
Title: Managing Director
(Geschaftsfuhrer)
AMENDMENT NO. 2
TO
STOCK PURCHASE AGREEMENT
AMENDMENT NO. 2, dated as of December 1, 1993 (this
"Amendment") to the Stock Purchase Agreement, dated as of
October 28, 1993, by and among Imo Industries, Inc.
("Seller"), Mark Controls Corporation ("Purchaser"), Imo
Industries GmbH and Mark Controls GmbH i. Gr. (as amended by
Amendment No. 1 thereto dated as of November 11, 1993, the
"Purchase Agreement"). Capitalized terms used but not
otherwise defined herein shall have the meanings given to
such terms in the Purchase Agreement.
WHEREAS, the parties hereto desire to consummate
the transactions contemplated by the Purchase Agreement
effective as of December 1, 1993 and desire to amend the
Purchase Agreement to give effect to such intent and in
certain other respects.
NOW, THEREFORE, the parties hereto agree as
follows:
1. The Closing Date for all purposes of the Purchase
Agreement shall be December 1, 1993. This Amendment shall
serve as Purchaser's written notice to the Seller as required
pursuant to Section 3.1 of the Purchase Agreement
(notwithstanding the five business days advance notice
requirement therein, which is hereby waived).
Notwithstanding the foregoing, the Closing Balance Sheet
required by Section 2.3 of the Purchase Agreement shall be
prepared as of 5:01 P.M., Pacific Time, in respect of the
Seller, and 5:01 P.M., German Time, in respect of the German
Seller (as defined in the German Asset Purchase Agreement) on
November 30, 1993.
2. Notwithstanding anything to the contrary contained in
Section 1 hereof or Section 2.1 of the Purchase Agreement,
the Purchase Price shall be paid by the Purchaser on December
___, 1993 (the "Payment Date"). The time of Seller's
receipt of the Purchase Price in immediately available funds
is herein referred to as the "Payment Time." The Purchase
Price shall be increased by an amount equal to $15,000 in
respect of each Business Day (as defined below) from and
including the Closing Date to but not including the Payment
Date; provided, that the Purchase Price shall be increased by
an additional $15,000 if the Payment Time has not occurred on
or prior to 10:00 A.M., C.S.T., on the Payment Date. For
purposes hereof, "Business Day" means each day other than a
Saturday,Sunday or legal holiday in the States of California,
New York or Illinois during which banks are open for business
in each of the States of California, New York and Illinois.
3. The parties hereto acknowledge and agree that, although
the consummation of the transactions contemplated by the
Purchase Agreement shall be effective as of the Closing Date
specified in Section 1 hereof, the Seller shall retain
possession and operating control of the Business and the
Assets through and including the Payment Time. However, the
parties also acknowledge and agree that the Business shall be
operated at all times from and including the Closing Date for
the Purchaser's benefit. Therefore, the parties hereby agree
to the following:
(a) Seller and Newco shall at all times prior to
the payment Time continue to comply with the covenants and
provisions of Section 6.3 of the Purchase Agreement.
(b) At the Payment Time the Seller shall deliver
to the Purchaser an officer's certificate certifying
under the Purchase Agreement that (i) each of the
representations and warranties set forth in Sections
4.1, 4.2 and 4.3 of the Purchase Agreement are true and
correct in all material respects as of the Payment Time
with the same force and effect as though the same had
been made as of the Payment Time (except for the third
sentence of Section 4.1, which shall continue to be true
and correct as of the Closing Date), and (ii) Seller has
complied in all material respects with the covenants and
provisions of Section 6.3 through and including the
Payment Time.
(c) Seller shall hold in trust for Newco's benefit
and pay over to Newco all cash received and collected by
the Seller in respect of the Business and the Assets
(other than Excluded Assets and cash received from the
Purchaser) on and after the opening of business on the
Closing Date, including, without limitation, as a result
of the sale, collection or other disposition of any
inventory, accounts receivable or other assets conveyed
to Newco pursuant to the Purchase Agreement (the "Post
Closing Receipts"). Seller shall direct its lock box
bank to forward to Newco all Post Closing Receipts
received by Seller on or prior to the Payment Time
promptly (but in any event within three business days)
following the Payment Date and shall pay over to Newco
all Post Closing Receipts received by Seller thereafter
in accordance with the terms of the Purchase Agreement.
(d) It is understood and agreed that the Post
Closing Receipts shall not be (i) included in the
Closing Balance Sheet or (ii) used by Seller to pay,
discharge or satisfy any of the Excluded Liabilities.
4. The first sentence of Section 2.2 of thePurchase
Agreement is hereby amended in its entirety to read as
follows:
"No later that sixty (60) days following the
Closing Date, Purchaser shall prepare and deliver
to Seller Schedule 2.2 to this Agreement, which
shall set forth the allocation of the Purchase
Price among the Assets, including an amount
allocated to the non-competition covenants set
forth in Section 11.1 hereof, and Seller shall be
given an opportunity to review and consent to such
allocation, which consent shall not be unreasonably
withheld."
5. Purchaser acknowledges and agrees that Newco has not
adopted by-laws and therefore Purchaser hereby waives any and
all representations, warranties and covenants in the Purchase
Agreement and documents to be delivered thereunder relating
to the Bylaws of Newco.
6. Newco and Purchaser shall use all reasonable commercial
efforts following the Closing to phase out their use of
existing letterhead, invoices and other business forms and
stationery of the Business containing the name "Imo"
(collectively, "Imo Materials"); provided, that in no event
may Newco and Purchaser continue to use any Imo Materials
after December 31, 1993.
7. This Amendment No. 2 may be executed in counterparts,
each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
* * * * *
IN WITNESS WHEREOF, the parties hereto have
executed this instrument as of the date and year first above
written.
IMO INDUSTRIES INC.
By: /s/ Thomas J. Bird
Name: Thomas J. Bird
Title: Senior VP
IMO INDUSTRIES GMBH
By: /s/ James W. Cooper
Name: James W. Cooper
Title: Geschaftsfuhrer
MARK CONTROLS CORPORATION
By: /s/ William E.Bendix
Name: William E.Bendix
Title: Managing Director
Geschaftsfuhrer
MARK CONTROLS GMBH i.Gr.
By: /s/ William E. Bendix
Name: William E. Bendix
Title: Managing Director
(Geschaftsfuhrer)
GERMAN ASSET PURCHASE AGREEMENT
between
(1) IMO Industries GmbH, a limited liability company
incorporated under the laws of Germany and registered in the
local court at Friedberg with registered number HR B
638 ("the German Seller")
(2) Mark Controls GmbH i. Gr., a limited liability company in
the process of being incorporated under the laws of Germany
to be registered in the local court at Frankfurt am Main
("the German Purchaser");
(3) IMO Industries, Inc., a Delaware corporation with principal
place of business at 3450 Princeton Pike, Lawrenceville, New
Jersey 08646 ("IMO"); and
(4) Mark Controls Corporation, a Delaware corporation with
principal place of business at 5215 Old Orchard Road,
Skokie, Illinois 60077 ("Mark Controls").
RECITALS
(A) IMO and its subsidiary, the German Seller carry on, through
its Barksdale Division in the US and the Barksdale Product
Line in Germany, the business of designing, manufacturing,
selling and distributing pressure switches, temperature
switches, control valves, pressure transducers and related
products and services ("the Business"). IMO and the German
Seller intend to divest themselves of the Business both in
the US and in Germany.
(B) IMO intends to convey, assign and transfer to a newly formed
wholly owned subsidiary of IMO ("Newco") certain of the
assets used in the Business and certain of the liabilities
in connection with the Business as defined in, and upon the
terms of, a stock purchase agreement dated 28 October 1993
("the US Agreement") between (1) IMO, (2) the German Seller
(3) Mark Controls and (4) the German Purchaser.
(C) Pursuant to the terms of the US Agreement IMO is to sell to
Mark Controls the entire issued share capital of Newco.
(D) This Agreement (hereinafter "this Agreement") is the German
Asset Purchase Agreement defined in and contemplated by the
US Agreement whereby the parties to the US Agreement have
agreed that the German Seller shall sell and transfer the
Business as conducted by the German Seller including certain
assets and liabilities to the German Purchaser on the terms
of the German Asset Purchase Agreement. Unless otherwise
indicated, the term "the Business" as subsequently used in
this Agreement shall be deemed to refer to the Business as
conducted by the German Seller.
(E) The German Seller has agreed with effect from Closing to
sell and transfer, and the German Purchaser has agreed to
buy and assume, the Business, certain assets used in it and
certain liabilities relating to it as a going concern on the
terms of, and subject to the conditions set forth in, this
Agreement.
(F) IMO has agreed to guarantee the performance of the
obligations of the German Seller hereunder.
(G) Mark Controls has agreed to guarantee the performance of the
obligations of the German Purchaser hereunder.
TERMS AGREED:
Now the parties hereby agree as follows:
I
Business
1
Sale and Transfer of Movable Assets
1.1 The German Seller hereby sells with effect from Closing (as
defined in the US Agreement) and transfers at Closing to the
German Purchaser all of the movable fixed assets, owned by
the German Seller and employed primarily in connection with
the Business, including, without limitation, (i) those
listed in Schedule 1.1 and (ii) all technical equipment and
machines, factory and office equipment, furniture,
furnishings, vehicles and other equipment, together with all
spare parts, accessories and consumable supplies therefor,
located at the premises of the German Seller and primarily
employed in the Business, (excluding the Excluded Assets),
This list shall be deemed to include:
(i) all customer lists, sales publications,
advertising and promotional materials, printed terms
and conditions of sale, business forms, instructional
material and other technical and sales materials which
relate primarily to the Business together with any
plates, blocks, negatives, computer disks or tapes and
similar items relating to them; and
(ii) such and the following as are used by the German
Seller primarily in connection with the Business at
Closing: manufacturing drawings, sketches and
blueprints, designs, patterns, tools, dies, samples,
models, masters, maps, computer programmes,
specifications, processes, operations sheets, formulae,
quality control and inspection data, instructions,
other technical data (however recorded, whether in
writing or otherwise) provided always that the German
Seller shall only transfer possession of and such
rights as it has itself in the assets being transferred
pursuant to this Sub-clause 1.1 (ii).
As far as permitted by law, the German Seller will place the
German Purchaser in possession of all originals of the
technical, legal and sales documentation relating primarily
to the Business. With respect to such originals as are re
quired by law to be retained by the German Seller, the
German Seller will furnish the German Purchaser with copies
until such time as the originals may be handed over, at
which time such originals shall be delivered to the German
Purchaser.
The parties will each, at the reasonable request of the
other, from time to time provide the other parties, to the
extent permitted to such party by law or contract, access to
documents and information regarding the Business to the
extent that they relate to the time before Closing provided
that the receiving party shall treat the information or
documentation received by it as confidential in accordance
with the terms of the Confidentiality Agreement (as defined
in the US Agreement) between IMO and Mark Controls, by which
the German Seller and the German Purchaser hereby agree to
be bound.
1.2 To the extent that assets transferred according to Clause
1.1 above are outside the Premises as defined in Clause 5
below or in the possession of third parties, the claims for
the return of such items are hereby transferred to the
Purchaser.
2
Sale and Transfer of Inventory
2.1 The German Seller hereby sells with effect from Closing and
transfers at Closing to the German Purchaser all of the
inventory of the Business (whether held at the premises of
the German Seller or elsewhere), including all raw
materials, supplies, work in progress, parts and components
and finished goods and merchandise held, used or owned by
the German Seller at Closing for manufacture, processing or
sale in the Business, including, without limitation, all
items held on consignment by third parties or at other
locations of IMO or the German Seller and those items listed
in Schedule 2.1.
2.2 To the extent that the German Seller cannot transfer full
and unencumbered title because of the retention of title
rights of existing suppliers, it hereby transfers to the
German Purchaser as of Closing all rights to be vested with
title once payment is made. The German Seller will pay all
payables which are not German Assumed Liabilities (as
defined below) arising out of supply contracts and in
respect of which retention of title claims have arisen in
respect of assets transferred hereunder within 45 days of
notice of such claim. The German Seller will cooperate with
the Purchaser to establish corresponding proof of title
within 60 days of notice of such claim.
3
Contracts
3.1 Contracts
Subject to the provisions of Clause 3.2 below, the German
Seller hereby assigns and transfers to the German Purchaser
and the German Purchaser hereby accepts and assumes with
effect from Closing the rights and obligations under (i) the
contracts of the German Seller which are listed in Schedule
3.1 hereto and (ii) the contracts of the German Seller which
relate to the Business or are necessary for the conduct of
the Business which are not inconsistent with the warranties
contained in Clause 12.6 below (together "the Assumed
Contracts"):
3.2 With respect to the consent of third parties to the transfer
of the Assumed Contracts, the provisions of Clause 8 shall
apply, notwithstanding the provisions of Clauses 3.1 hereof.
4
Intellectual Property and Documents
4.1 The German Seller (and, in the case of its rights to the
name "Barksdale" in Europe, if any, IMO) hereby sells and
transfers to the German Purchaser at Closing all patents,
trademarks licences and other Intellectual Property Rights
owned by, issued to, or otherwise held by the German Seller
and used in or otherwise necessary for the Business,
including, without limitation, those items listed in
Schedule 4.1 ("the German Intellectual Property Rights") and
all of the German Seller's and IMO's rights, title and
interests to the name "Barksdale Controls" in Europe.
Further the German Seller transfers and sells to the German
Purchaser at Closing all rights to the business know-how
(know-how and other business secrets) used primarily in or
necessary for the conduct of the Business.
The German Seller will execute, in a form reasonably
acceptable to the German Purchaser, all documents necessary
for the transfer of the Intellectual Property Rights. The
German Purchaser will bear the costs of such transfer,
provided however that in no event shall the German Purchaser
be obliged to pay any consideration to any third party from
whom any approval, consent or waiver is required in respect
of such transfer, such cost being borne by the German
Seller.
5
Excluded Assets
5.1 Nothing in this Agreement shall operate to transfer from the
German Seller nor to impose any obligation or liability on
the German Purchaser in respect of any of the following
assets which are hereby excluded from this Agreement ("the
German Excluded Assets"):
- any and all real property held by the German
Seller;
- all receivables existing at Closing arising in the
ordinary course of business, unless otherwise provided
in this Agreement; for the purposes of this Agreement
the term "receivables arising in the ordinary course of
business" shall mean any claim for payment in respect
of goods delivered or services rendered by the German
Seller in connection with the Business prior to
Closing, irrespective of whether such claim has been
invoiced or become payable at Closing;
- cash, bank accounts and deposit, debt and equity
securities;
- except as otherwise specifically provided herein,
any policy of insurance or prepaid premium,
reimbursement, refund or settlement relating thereto;
- any of the German Seller's right, title or
interest in or to any name, mark, trade name or
trademark incorporating "IMO", "IMO Delaval",
"TransAmerica Delaval", or "Delaval" or any
translations thereof either alone or in combination,
and any and all goodwill represented thereby and
pertaining thereto;
- prepaid taxes pertaining to the Business and all
prepaid charges, sums and fees pertaining to any of the
Excluded Assets or the Excluded Liabilities;
- those books, records or other data not relating
solely to the German Seller's ownership or operation of
the Business or required by applicable law to be
retained by the German Seller, provided however that
the German Seller shall, if so requested by the German
Purchaser, provide the German Purchaser with copies and
access to all books, records and other data relating to
the German Seller's ownership or operation of the
Business;
- any claims for refunds of rebates of any taxes
paid with respect to any period before and including
the date of Closing.
German Assumed Liabilities
5.2 With effect from Closing, the German Purchaser shall, in
addition to paying the Purchase Price (as defined below),
assume and discharge when due the following liabilities of
the German Seller (together "the German Assumed
Liabilities"):
5.2.1 all Liabilities of the German Seller arising out of the
Business which would be shown as liabilities on a
balance sheet for the Business prepared as of the
Closing Date in accordance with the requirements of
Section 2.3 of the US Agreement; and
5.2.2 all Liabilities and obligations of the German Seller
arising from the operation of the Business (whether
before, on or after the Closing Date) other than those
Liabilities and obligations which (i) would not have
existed had all of the representations and warranties
contained in Clause 12 hereof and Article 4 of the US
Agreement been true and correct as of the date made or
(ii) are German Excluded Liabilities.
German Excluded Liabilities
5.3 Notwithstanding the provisions of Clause 5.2 hereof, nothing
in this Agreement shall operate as an assumption by the
German Purchaser from the German Seller, nor shall it
transfer any liability to the German Purchaser in respect of
any of the following liabilities, which are hereby excluded
from this Agreement ("German Excluded Liabilities"):
- any liabilities or obligations to the extent
relating to any of the Excluded Assets;
- any liabilities or obligations which are excluded
from the definition of German Assumed Liabilities
pursuant to Clause 5.2.2(i) hereunder;
- any liabilities or obligations of the German
Seller arising under, or to the extent relating to (i)
any contract not assumed by the German Purchaser under
Clause 3.1 above or (ii) under any Unapproved Contract
(as defined below) which the German Purchaser has not
been deemed to have assumed pursuant to clause 8 below;
- any of the German Seller's liabilities under this
Agreement;
- any liabilities to or for the benefit of any of
the Non-Transferring Employees;
- liabilities for Taxes, which are imposed on the
German Seller or the Assets as a result of the
ownership or operation of the Business, for all pre-
Closing Tax Periods except that the German Purchaser
will pay taxes other than income taxes in an amount
(but not in excess of the amount) actually shown as
liabilities therefor on the Closing Balance Sheet or as
otherwise provided in Section 14.5 of the US Agreement;
- any liability or obligation relating to any
threatened or instituted Legal Proceeding relating to
personal injury or property loss or damage arising out
of or in connection with any product liability claim
relating to products shipped or any service provided by
the German Seller prior to Closing (other than
obligations under product warranties consistent with
Section 12.14 hereof or Section 4.20 of the US
Agreement);
- any liability arising under Environment, Health
and Safety Requirements (as defined in clause 13.1
below) relating in any way to (i) the operation of the
Business prior to the Closing, (ii) the disposal or
arranging for the disposal or treatment, or arranging
for the transport for disposal or treatment of, any
Hazardous Materials relating to the Business on or
prior to the date of Closing, (iii) any assets or
property currently or formerly owned, operated or
leased by the German Seller, which are not part of the
Business, or (iv) any assets or property formerly
owned, leased or operated by the German Seller which
are not part of the Assets (as defined below);
- any obligation to repay any amounts erroneously
paid to, or received by, the German Seller from any
source, including, without limitation, pursuant to any
insurance policy or arising out of or in connection
with any payment by or on behalf of any person, any
insurer or any governmental agency, it being understood
and agreed that the German Seller shall be responsible
for any refunds or the return of any amounts paid to
the German Seller or on the German Seller's behalf by
any person, any insurer, or any governmental agency
prior to the date of Closing and no such return of
money shall be made out of, or otherwise affect, the
Assets;
- any amounts pledged, promised or owed to any
charitable organization or political or religious group
in excess of DM 8,500 in aggregate; and
- any other liability or obligation of the Seller
not arising out of the operation of the Business.
6
Public Law Permissions
To the extent transferrable, the German Seller transfers all
public law permissions which are necessary for the conduct of the
Business as previously conducted, which are set out in Schedule
6. To the extent that the public law permissions are not
transferrable, the German Seller will cooperate as reasonably
requested in the application for permissions.
7
Transfer of Employment Relationships
7.1 For the purposes of this Clause 7 the following definitions
shall apply:
"Transferring Employees" shall mean those employees of the
German Seller whose employment is to be transferred to the
German Purchaser as of the date of Closing, a list of whom
appears in Schedule 7.1 (which list shall include each
person's position title, month and year of birth, full years
of service with the German Seller or its predecessor, base
salary or rate of compensation, Christmas bonus and vacation
entitlements) except that any employees of the German Seller
listed on Schedule 7.1 who at or prior to Closing shall not
have agreed, or be deemed to have agreed by operation of
law, to the transfer of their employment agreement to the
German Purchaser, shall be deemed not to be Transferring
Employees; and
"Non-Transferring Employees" shall mean those employees of
the German Seller who are not Transferring Employees.
7.2 As a consequence of 613 a of the German Civil Code, the
German Purchaser assumes by operation of law the employment
agreements for German employees employed in the Business.
The parties acknowledge that certain of the employees of the
German Seller cannot be strictly allocated either to the
Business or to the business to be retained by the German
Seller. Therefore, the parties have jointly identified those
employees who will transfer under this Agreement.
7.3 The German Seller shall (with the German Purchaser's
reasonable cooperation and assistance) prior to the date of
Closing, seek to obtain the approval of all the Transferring
Employees to the transfer of their employment agreements to
the German Purchaser. The German Seller shall, prior to
Closing, seek the approval of all those of its employees who
primarily worked for the business and who are to remain
employed with the German Seller (i.e. the Non-Transferring
Employees) to remain employed by the German Seller. The
German Seller undertakes to indemnify and hold harmless the
German Purchaser from any cost or damages resulting from any
actions brought against the German Purchaser by any Non-
Transferring Employee claiming any right to be employed by
the German Purchaser or by any Person in respect of the Non-
Transferring Employees.
The German Seller specifically represents and warrants
further that none of the employment agreements of the
Transferring Employees have been terminated by the German
Seller (or any of its Affiliates, if different) with effect
at any time after the date hereof.
7.4 Save with the consent in writing of the German Purchaser
(which shall not be unreasonably be withheld) the German
Seller shall not terminate the employment (other than for
cause) or vary the terms of employment of any of the
Transferring Employees at any time before the Closing Date.
7.5 The German Seller hereby agrees and undertakes to indemnify
the German Purchaser at all times from and against all
costs, claims, damages, expenses and liabilities:
7.5.1 in any way connected with or arising from the
employment by the German Seller, or the termination of
the employment, of any of the Non-Transferring
Employees, including, without limitation, liability
with respect to employment agreements for the Non-
Transferring Employees;
7.5.2 arising out of or in any way connected with the
employment relationship with the Transferring Employees
during the period prior to the Closing Date when they
were in the German Seller's employ (other than pension
entitlements arising out of service by the Transferring
Employees with the German Seller prior to Closing).
7.6 The German Purchaser hereby agrees and undertakes to
indemnify the German Seller at all times from and against
all costs claims, damages, expenses and liabilities arising
out of or in any way connected with the German Purchaser's
employment relationship with the Transferring Employees or
the termination thereof by the German Purchaser during the
period from and after the Closing Date
8
Transfer of Contracts
8.1 To the extent that the transfer of the rights and
obligations under contracts requires the consent of third
parties, the parties hereto will endeavour to procure such
consent. If the required consent is not forthcoming, the
parties will operate their relationship between themselves
as if the contract had been transferred to the German
Purchaser with effect from Closing.
The term "Unapproved Contract" means any agreement which
would otherwise be assigned to the German Purchaser
hereunder but which has the following characteristics: (i)
such agreement may not be assigned without the consent of
another person; (ii) such consent shall not have been
obtained by the Closing; and (iii) in the reasonable
judgement of the German Purchaser the failure to obtain such
consent would cause a loss of material contractual benefits
to the German Purchaser or result in the imposition of any
material Liability upon the German Purchaser or be unlawful.
No Unapproved Contract shall be deemed to be assigned or
assumed by the German Purchaser at Closing. Notwithstanding
the previous sentence, no purchase order submitted by a
customer in the ordinary course of business shall be deemed
to be an Unapproved Contract for the purposes of this
Agreement.
The German Seller will (i) cooperate with the German
Purchaser in any reasonable and lawful arrangements designed
to provide the benefits and obligations of any such contract
to the German Purchaser at the German Seller's expense; (ii)
enforce, at the request of the German Purchaser and at the
expense of, and for the account of, the German Purchaser,
any and all rights of the German Seller arising under any
such contracts against the other party or parties thereto
and (iii) use diligent reasonable efforts to obtain after
Closing all necessary consents to the assignments of any
such contract to the German Purchaser. Upon the grant of
such consent, or to the extent that lawful arrangements
shall be made as described above, such agreement shall be
deemed to have been assigned to the German Purchaser and
assumed by the German Purchaser for the purposes of Clause
3.1 hereof.
9
Transfer
9.1 The parties agree that the possession of the assets and
other rights sold and transferred under 1, 2, 3 and
4 above shall transfer to the German Purchaser at Closing.
9.2 So far as any of the assets of the Business under 1 and
2 are away from the premises of the Business or in the
possession of third parties, the German Seller hereby
transfers its rights to the claims for re-possession of
those goods to the German Purchaser with effect from the
Closing.
9.3 The German Purchaser accepts all transfers and assignments
of assets and assumes all the German Assumed Liabilities
from the German Seller contemplated hereunder.
II
General Conditions
10
Closing
10.1 Closing of the contract shall take place contemporaneously
with, and shall be conditioned upon, the Closing of the US
Agreement as defined therein.
10.2 It shall be a condition precedent to the transfers
contemplated by this Agreement becoming effective and the
obligations of the parties to consummate the transactions
contemplated hereunder that no less than 80% of the
employees of the German Seller listed in Schedule 7.1 hereto
shall have agreed to, or be deemed to have consented to by
operation of law, the transfer of their employment to the
German Purchaser. At Closing the German Seller shall
deliver to the German Purchaser a list of the said
Transferring Employees.
10.3 The obligation of the German Seller to consummate the
transactions hereunder is, at the option of the German
Seller, subject to the satisfaction of the following
conditions:
10.3.1 Each of the representations and warranties of the
German 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, it being
understood that to the extent that such representations
and warranties were made as of a specified date the
same shall continue on the Closing Date to be true and
correct in all material respects as of the specified
date.
10.3.2 The German 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 (or such performance shall have been
waived).
10.4 The obligation of the German Purchaser to consummate the
transactions hereunder is, at the option of the German
Seller, subject to the satisfaction of the following
conditions:
10.4.1 Each of the representations and warranties of the
German Seller 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, it being
understood that to the extent that such representations
and warranties were made as of a specified date the
same shall continue on the Closing Date to be true and
correct in all material respects as of the specified
date.
10.4.2 The German Seller 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 (or
such performance shall have been waived).
10.5 The obligations of the parties to complete the transactions
contemplated by this Agreement shall be conditional upon the
entering into, on or before Closing, by the German Purchaser
and the German Seller of :
10.5.1 a lease agreement in respect of the premises at Dorn-
Assenheimer StraBe 27, in a form substantially as
attached hereto in Exhibit A ("the German Lease"); and
10.5.2 a letter agreeing to be bound by the sales assistance
terms attached hereto as Exhibit B (the "Services
Agreement").
10.6 At Closing:
10.6.1 the German Seller shall deliver or cause to be
delivered to the German Purchaser:
- Duly executed original of the German
Lease;
- Duly executed original of the Services
Agreement;
- An invoice showing value added tax to be
paid by the German Purchaser;
- A receipt to the German Purchaser for
payment of the Purchase Price;
- Duly executed assignments of
Intellectual Property Rights;
- Certified Handelsregister extract in
respect of the German Seller;
- one or more certificates signed by an
officer of the German Seller dated the Closing
Date, stating that the preconditions specified in
Clauses 10.4.1 and 10.4.2 have been satisfied and
certifying copies of resolutions of the German
Seller's sole shareholder authorising and
approving this Agreement and the transactions
contemplated herein; and
- any other document or delivery required
by this Agreement or reasonably requested by the
German Purchaser to give effect to the
transactions contemplated hereby.
10.6.2 the German Purchaser shall deliver, or cause to be
delivered, to the German Seller:
- Duly executed original of the German
Lease;
- Duly executed original of the Services
Agreement.
- evidence of the Purchase Price having
been paid according to Clause 11 below.
- Duly executed assignments of
Intellectual Property Rights.
- Certified Handelsregister extract in
respect of the German Purchaser;
- one or more certificates signed by an
officer of the German Purchaser dated the Closing
Date, stating that the preconditions specified in
Clauses 10.3.1 and 10.3.2 inclusive have been
satisfied and certifying copies of resolutions of
the German Purchaser's Board of Directors
authorising and approving this Agreement and the
transactions contemplated herein; and
- certified copies of (i) the articles of
association of the German Purchaser, (ii) the
resolutions appointing the managing director of
the German Purchaser and (iii) the application for
registration with the commercial register,
together with a statement by the German
Purchaser's general manager that such application
has been filed.
11
Purchase Price
11.1 The amount payable on the Closing Date by the German
Purchaser to the German Seller under this Agreement shall be
(a) the amount by which the aggregate amount shown on the
Initial Balance Sheet (as defined in the US Agreement) for
the assets transferred hereunder shall exceed the amount
shown on the Initial Balance Sheet for the German Assumed
Liabilities, (b) expressed in Deutsche Marks utilizing the
same exchange rate as utilized under Section 2.3 of the US
Agreement (which shall be the noon buying rate announced by
the Federal Reserve Bank of New York on the Closing Date and
(c) payable by wire transfer of immediately available funds
to an account or accounts designated by the German Seller.
Such amount shall be subject to adjustment as provided in
Section 2.3 of the US Agreement (as so adjusted, the
"Purchase Price").
11.2 The Purchase Price according to clause 11.1 shall be
increased by VAT at the statutory rate which shall be paid
by the German Purchaser to the German Seller.
11.3 The aggregate of the Purchase Price and the value of the
German Assumed Liabilities shall be apportioned among the
Assets including goodwill and other intangibles in an amount
with respect to each such asset equal to the amount at which
such asset is shown on the Closing Balance Sheet.
12
German Seller's Representations and Warranties
The German Seller makes the following representations and
warranties, with respect to the Business, to the German Purchaser
and Mark Controls:
12.1 Title and Condition of Properties.
12.1.1 The assets transferred to the German Purchaser pursuant
to this Agreement (collectively, the "Assets") do not
include any real property
12.1.2 To the German Seller's knowledge, the German Seller is
not in violation of any applicable zoning, building
code or subdivision ordinance or other law, regulation
or requirement relating to the operation of the
Business (including applicable occupational health and
safety laws and regulations), which violations,
individually or in the aggregate, has had or will have
a Material Adverse Effect. Within the three (3) years
prior to the date of this Agreement, the German Seller
has not received any notice of any such violation or
any condemnation proceeding with respect to any of the
Assets, except as has been previously disclosed to the
German Purchaser in writing.
12.1.3 Except as otherwise indicated in this Agreement on a
Schedule to this Agreement, all of the Assets are owned
free of any adverse interest other than Permitted
Exceptions and such Assets will be conveyed to the
German Purchaser at Closing free and clear of any
adverse interest other than Permitted Exceptions.
12.2 Consents.
No consent, waiver, approval or authorisation of, or
declaration or filing with, or notification to, any Person
or Governmental Body is required on the part of the German
Seller in connection with the execution and delivery by the
German Seller of this Agreement or the documents required to
be delivered hereunder by the German Seller, or the
compliance by the German Seller with any of the provisions
hereof or thereof, except (i) as set forth on Schedule 12.2
and (ii) as set forth in Clause 7. The German Seller and
the German Purchaser have determined that the transactions
contemplated hereunder do not require any pre or post
consummation filings with the German Cartel Office or with
any European Commission anti trust authorities.
12.3 Absence of Undisclosed Liabilities.
To the German Seller's Knowledge, as of the Closing Date the
German Seller will have no obligations or liabilities
relating to the Business (whether accrued, absolute,
contingent, unliquidated or otherwise, whether due or to
become due and regardless of when or by whom asserted)
except (i) obligations under Contracts with respect to the
Business, (ii) liabilities to be reflected on the Closing
Balance Sheet and (iii) liabilities set forth on Schedule
12.3 hereto or as otherwise expressly disclosed in or
contemplated by this Agreement or the US Agreement or the
Schedules attached hereto or thereto.
12.4 Absence of Material Adverse Changes.
Except as set forth on Schedule 12.4 hereto, since 30
September, 1993 the German Seller has operated the Business
in the ordinary course consistent with past practice and
there has been no Material Adverse Effect.
12.5 Absence of Certain Developments.
12.5.1 Except as set forth in Schedule 12.5 hereto or as
otherwise contemplated herein, with respect to the
Business, since the date of the Initial Balance Sheet,
the German Seller has not:
12.5.1.1 sold, assigned or transferred any operating
unit or tangible or intangible property which
would have constituted part of the Assets if such
sale, assignment or transfer had not occurred
except for sales of products or inventory in the
ordinary course of business and except for
dispositions and replacements of worn out or
outmoded property in accordance with past
practices;
12.5.1.2 made or granted any bonus or any wage or
salary increase to any Transferring Employee
(except as required by pre-existing contract) or
made or granted any increase in any Employee
Benefit Plan or fringe benefit (each as defined in
Sub-Clause 12.8 below) for the benefit of any
Transferring Employee other than in the
ordinary course of business;
12.5.1.3 made capital expenditures or commitments
therefor in connection with the Business in excess
of DM 80,000;
12.5.1.4 acquired any business (whether by merger,
purchase of stock or assets or otherwise) to be
conveyed to German Purchaser in whole or in part;
12.5.1.5 suffered any extraordinary losses to the
Business as a whole or waived any rights of
material value relating to the Business, whether
or not in the ordinary course of business; and
12.5.1.6 suffered any damage, destruction or casualty
loss to its tangible assets employed in the
Business in excess of DM 16,000, whether or not
covered by insurance.
12.5.2 No officer, director, employee, consultant, advisor or
agent of the German Seller has been or is authorised to
make or receive, and the German Seller does not know of
any of the German Seller's officers, directors,
employees, consultants, advisors or agents making or
receiving, any bribe, kickback payment or other illegal
payment at any time and the German Seller has an
express corporate policy prohibiting such activities.
12.6 Material Contracts.
12.6.1 Except as expressly disclosed in or contemplated by
this Agreement, or as set forth on Schedules 7.1, 12.6,
12.8 and 12.14 hereto, and except for purchase orders
received in the ordinary course of business consistent
with past practices, the German Seller is not and, as
at the Closing, will not be (in connection with the
Business) a party to any written or oral:
12.6.1.1 contract for the employment of any officer,
partner, individual employee or other person on a
full-time, part-time or consulting basis or
entitling any such person to severance pay,
parachute payment, or other such payment;
12.6.1.2 contract relating to the borrowing of money
or to mortgaging, pledging or otherwise creating
any Security Interest in any of the Assets, except
for agreements relating to purchase money security
interests or personal property leases not
otherwise required to be disclosed pursuant to
this Agreement.
12.6.1.3 agreement with respect to the lending or
investment of funds;
12.6.1.4 license or royalty agreement which requires
annual payments in excess of DM 16,000;
12.6.1.5 guarantee of any obligation for borrowed
money or any other obligation of any Person, other
than endorsements made for collection in the
ordinary course of business;
12.6.1.6 lease under which it is the lessee of or
holds or operates any real property owned by any
other party;
12.6.1.7 lease under which it is lessee of or holds or
operates any personal property owned by any other
party for which the annual rental payment exceeds
DM 16,000;
12.6.1.8 lease under which it is lessor of or permits
any third party to hold or operate any property,
real or personal, owned or controlled by it for
which the annual rental payment exceeds DM 80,000;
12.6.1.9 contract or group of related Contracts
(except oral contracts terminable within 30 days
or less without penalty) with the same party for
the purchase or sale of products or services under
which the undelivered balance of such products and
services has a selling price in excess of
DM 80,000;
12.6.1.10 other Contract or group of related contracts
(except oral Contracts terminable within 30 days
or less without penalty) with the same party
continuing over a period of more than six months
from the date or dates thereof involving more than
DM 80,000;
12.6.1.11 Contract which prohibits or limits conduct of
the Business or any other business related thereto
anywhere in the world;
12.6.1.12 other contract or other agreement with any
Affiliate for the supply by such Affiliate of any
raw materials, materials, parts, supplies or other
goods or services material to the conduct of the
Business; or
12.6.1.13 contract which is otherwise material to the
Business taken as a whole, whether or not entered
into the ordinary course of the business.
12.6.2 Except as set forth on Schedule 12.6, the German Seller
has performed all obligations required to be performed
by it under the Contracts listed on Schedule 12.6 and
is not in default or breach under any Assumed Contract
to which it is subject which failures to perform,
defaults or breaches, alone or in the aggregate would
have a Material Adverse Effect; no event has occurred
which with the passage of time or the giving of notice
or both would result in a default, breach or event of
noncompliance under any Assumed Contract to which the
German Seller (with respect to the Business) is subject
which, alone or in the aggregate, would have a Material
Adverse Effect; and to the knowledge of the German
Seller, there is no breach by the other parties to any
Assumed Contract which would have a Material Adverse
Effect.
12.6.3 The German Seller made available to the German
Purchaser a true and correct copy of all written
contracts which are referred to on Schedule 3.1 hereto
(other than purchase orders), together with all
amendments, exhibits, attachments, waivers or other
changes thereto.
12.7 Intellectual Property Rights.
12.7.1 Schedule 4.1 sets forth a complete and correct list of
all: (i) patented or registered Intellectual Property
Rights and pending patent applications or other
applications for registrations of Intellectual Property
Rights related to the Business owned or filed by or on
behalf of the German Seller and all licenses in respect
of Intellectual Property Rights other than those names,
marks, trade names, trademarks or licences of such
which are Excluded Assets; and (ii) material
unregistered trade names and trademarks and service
marks owned or used by the German Seller used in
connection with the Business.
12.7.2 Except as set forth in Schedule 12.7, (i) the German
Seller owns and shall at Closing transfer to the German
Purchaser all right, title and interest in and to, or a
valid license to use, the Intellectual Property Rights
free and clear of all Liens other than Permitted
Exceptions; (ii) to the Knowledge of the German Seller,
no claim by any third party contesting the validity,
enforceability, use or ownership of any of the
Intellectual Property Rights has been made, is
currently outstanding or is threatened, and there are
no grounds for the same; (iii) the loss or expiration
of any Intellectual Property Right or related group of
Intellectual Property Rights would not have a Material
Adverse Effect, and to the Knowledge of the German
Seller no such loss or expiration is threatened,
pending or reasonably foreseeable; (iv) the German
Seller has not received any notices of, and is not
aware of any facts which indicate a likelihood of, any
infringement or misappropriation by, or conflict with,
any third party with respect to the Intellectual
Property Rights (including, without limitation, any
demand or request that the German Seller license any
rights from a third party); and (v) to the Knowledge of
the German Seller, it has not infringed,
misappropriated or otherwise conflicted with any
intellectual property rights or other rights of any
third parties and it is not aware of any infringement,
misappropriation or conflict which will occur as a
result of the continued operation of the Business as
currently conducted.
12.7.3 The transactions contemplated by this Agreement will
have no Material Adverse Effect on the right, title and
interest in and to the Intellectual Property Rights.
The German Seller has taken all necessary and desirable
action to maintain and protect the Intellectual
Property Rights which are material to the Business as
currently conducted.
12.7.4 The term Intellectual Property Rights shall, for the
purposes of this paragraph 12, be limited to any such
Intellectual Property Rights owned, possessed, used by,
licensed to or otherwise held by the German Seller.
12.8 Employees and Employee
Benefits.
12.8.1 Schedule 12.8 hereto lists each employee benefit plan,
programme, policy and agreement maintained by the
German Seller, to which the German Purchaser shall have
any obligation or is reasonably expected to have any
liability. Schedule 12.8 hereto lists each employment
or severance contract or arrangement, each plan or
arrangement including, but not limited to, pension,
profit sharing, retirement or any other form of
deferred compensation plan or any stock or partnership
interest purchase, stock or partnership interest
option, providing for insurance coverage, fringe
benefits, severance, termination or similar coverage
and all compensation policies and practices maintained
by the German Seller covering any Transferring Employee
(an "Employee Benefit Plan").
12.8.2 All contributions required to have been made to, or
with respect to, each Employee Benefit Plan (including
governmental plans) for all periods up to and including
the Closing Date have been at the time when they were
due to be made or will be made by the Closing.
12.8.3 Except as set forth on Schedule 12.8, and except for
statutory obligations, no Employee Benefit Plan
provides health, life insurance, accident or other
"welfare-type" benefits to Transferring Employees, or
current or future former independent contractors with
respect to the Business, their spouses, dependents or
other beneficiaries.
12.8.4 Except as set forth on Schedule 12.8, none of the
Employee Benefit Plans obliges the German Seller to pay
separation, severance, termination or similar-type
benefits solely as a result of any transaction
contemplated by this Agreement or solely as a result of
a change of control of the Business as described in
Section 613a of the German Civil Code.
12.8.5 The German Seller has no liability or potential
liability with respect to any employee benefit plan,
programme, or arrangement (other than Employee Benefit
Plans) with respect to which the German Purchaser could
(by operation of law or otherwise) have any liability.
12.8.6 With respect to any wages, salaries, bonuses or
employee entitlements (including amounts required to be
contributed to governmental health, unemployment and/or
retirement benefit schemes) accrued during any period
prior to the Closing Date but not yet due and payable
as of Closing, the German Seller has either (i)
included all such amounts as accruals on the Initial
Balance Sheet or (ii)disclosed all such liabilities on
Schedule 12.8 hereto on an accrual basis from which
such liabilities can be derived for accrual on the
Closing Balance Sheet.
12.8.7 The warranties and representations contained in this
clause 12.8 shall only be applicable to the
Transferring Employees
12.8.8 The amount shown for pension liabilities shown in the
Closing Balance Sheet will be the maximum amount
legally permitted to be accrued and the provisions of
Section 6a of the German Income Tax Code and shall in
no event exceed DM 270.000; the maximum amount under
6a German Income Tax Code has also been accrued for
commercial balance sheet purposes; provided that such
accrued amount may be increased because of benefit
increases since the end of fiscal year 1992 of the
German Seller and/or reduced to the extent the number
of Transferring Employees may be less than the number
of Employees listed on Schedule 7.1.
12.9 Litigation.
Except as set forth in Schedule 12.9 hereto, there are no
legal proceedings of any type in process, nor are any
pending or, to the knowledge of the German Seller,
threatened, (i) against the German Seller in connection with
the operation of the Business which, alone or in aggregate,
if determined adversely would have a Material Adverse Effect
or result in damages in excess of DM 80,000 and to the
German Seller's knowledge there is no basis for any such
proceedings; (ii) that seeks to enjoin or obtain damages in
respect of the consummation of the transactions contemplated
by this Agreement; or (iii) that questions the validity of
this Agreement, any of the documents to be executed in
connection with this Agreement or any action taken or to be
taken by the German Seller in connection with the
consummation of the transactions contemplated hereby or
thereby.
12.10 Compliance with Law.
Except as set forth on Schedule 12.10 hereto or on another
Schedule hereto, to the knowledge of the German Seller, the
Business has always and is currently operating in compliance
with all applicable laws and orders of governmental bodies,
other than non-compliances which alone or in the aggregate
would not have a Material Adverse Effect. Except as set
forth in Schedule 12.10, the German Seller has neither
received, nor knows of the issuance of, any notice of any
such violation or alleged violation.
12.11 Inventory.
All inventory included in the Assets, net of reserves
applicable thereto, consists of goods of a quality usable
and saleable in the ordinary course of the Business at
prevailing market conditions and are not obsolete or
defective.
12.12 Assets and Contracts Necessary to Conduct Business.
Other than as set forth on Schedule 12.12, the Assets and
the Assumed Contracts, as each of these terms is defined in
this Agreement, comprise all of the assets and contractual
rights and other property necessary to operate the Business,
except for the Premises or the Accounts Receivable.
12.13 Environmental Matters.
12.13.1 For the purposes of this paragraph 12.13, the following
terms shall have the following meanings:
"Environmental Health and Safety Requirements"
shall mean all of the terms and conditions of all
permits, licences, and other authorisations which are
required under, and all other limitations,
restrictions, conditions, standards, prohibitions,
requirements, obligations, schedules, and timetables
which are contained in, all Environmental Laws (as
defined below) (including rules, regulations, codes,
plans, judgements, orders, decrees, stipulations,
injunctions, charges, notices and demand letters
issued, entered, promulgated or approved thereunder)
relating to public health and safety, worker health and
safety, or pollution or protection of the environment,
including Environmental Laws relating to past and
present emissions, discharges, releases, or threatened
releases of Hazardous Materials into ambient air,
surface water, ground water, subsoil or lands or
otherwise relating to the manufacture, processing,
distribution, use treatment, storage, disposal,
transport, or handling of Hazardous Materials;
"Environmental Laws" shall mean all laws relating
to the environment including, without limitation, the
following German environmental laws: the Environmental
Liability Act (Umwelthaftungsgesetz), the Federal Waste
Disposal Act (Abfallgesetz), the Act Concerning Trades
and Businesses (Gewerbeordnung), the Ordinance
Concerning Work Places (Arbeitsstattenverordnung), the
Federal Water Resources Act (Wasserhaushaltsgesetz),
the Federal Immission Control Act
(Bundesimmisiongesetz), the Drinking Water Ordinance
(Trinkwasserverordnung), the Chemicals Act
(Chemikaliengesetz), the Ordinance Concerning Hazardous
Substances (Gefahrstoffverordnung), the Act Concerning
the Transportation of Hazardous Goods (Gesetz uber die
Beforderung gefahrlicher Guter), the Plant Varieties
Protection Act (Pflanzenschutzgesetz) and any federal
or state laws, ordinances, regulations, administrative
rules or local by-laws enacted thereunder and/or
implementing those laws;
"Hazardous Materials" shall mean pollutants,
contaminants, and chemical, industrial and hazardous
materials and wastes and shall include, without
limitation, substances regulated under any of the
Environmental Laws.
12.13.2 Except as may be disclosed to the German Purchaser in
Schedule 12.13 hereto, the German Seller has, to its
Knowledge, at the date of Closing, all permits,
licences and other authorisations referred to in, and
is in compliance with all, the Environmental Health and
Safety Requirements as required for the conduct of the
Business as conducted by the German Seller prior to the
date of Closing.
12.13.3 Except as set forth in Schedule 12.13 hereto, to the
German Seller's Knowledge, no facts, events or
conditions exist with respect to the past or present
operations, properties or facilities of the Business
carried on at the date of Closing by the German Seller
that could reasonably be expected to prevent or
interfere with compliance with, or result in any
liability under, any of the Environmental Health and
Safety Requirements. The references to "properties"
and "facilities" shall include those that are owned,
leased, subleased, operated or otherwise subject to the
control by the German Seller.
12.13.4 Except as set forth in Schedule 12.13 hereto, the
German Seller has not received any communication,
notice, report or information, (including, without
limitation, administrative acts (Verwaltungsakte) on
the part of German environmental authorities),
regarding any pending or threatened charge, complaint,
action, suit proceeding, hearing, investigation, claim,
demand, or notice regarding the German Seller alleging
any failure to comply with, or alleging any liability
under, any applicable Environment Health and Safety
Requirements, or alleging any liability under criminal
law concerning any of the subject matters referred to
in the definition or "Environment Health and Safety
Requirements, in any case regarding the conduct of the
Business by the German Seller.
12.14 Product Warranty.
Except as disclosed in Schedule 12.14, to the knowledge of
the German Seller, no products heretofore sold by the German
Seller in connection with the Business are now subject to
any guarantee or warranty other than pursuant to the German
Seller's standard terms and conditions of sale, a copy of
which is included on Schedule 12.14 hereto.
12.15 Customers and Suppliers.
Schedule 12.15 hereto lists the 10 largest customers of, and
10 largest suppliers to, the Business during the year ended
31 December 1992. As of the date of this Agreement, the
German Seller has received neither any notice nor has it any
knowledge that any such customer or supplier intends to
terminate its business relationship with the Business and no
such customer or supplier has terminated its business with
the German Seller in the last 12 months.
12.16 Disclosure.
To the German Seller's knowledge, neither this Agreement nor
any of its Schedules, attachments or exhibits hereto or to
be delivered in connection herewith contain any untrue
statement of a fact, status, circumstance or condition or
omit any disclosure necessary to make the statements
contained herein or therein, in the light of the
circumstances in which they were made, not misleading.
13
German Purchaser's Representations and Warranties
The German Purchaser makes the following representations and
warranties vis-a-vis the German Seller and IMO:
13.1 No consent, waiver, approval, Order or authorisation of, or
declaration or filing with, or notification to any Person or
Governmental Body is required on the part of the German
Purchaser in connection with the execution and delivery of
this Agreement or the compliance by the German Purchaser
with any of the provisions hereof.
13.2 There is no Legal Proceeding pending or, to the knowledge of
the German Purchaser, threatened, that seeks to enjoin or
obtain damages in respect of the consummation of the
transactions contemplated by this Agreement or any action
taken or to be taken by the German Purchaser in connection
with the consummation of the transactions contemplated
hereby.
14
Certain Covenants
14.1 The German Purchaser shall use its best efforts and
cooperate with the German Seller in order to complete the
transactions contemplated by this Agreement.
14.2 The German Purchaser shall comply with the Confidentiality
Agreement.
14.3 The German Seller shall use its best efforts and cooperate
with the German Purchaser in order to complete the
transactions contemplated by this Agreement.
14.4 The German Seller shall comply with the Confidentiality
Agreement.
14.5 The German Seller shall provide the German Purchaser with
such information as the German Purchaser from time to time
reasonably may request with respect to the Business, and
shall permit the German Purchaser and any of its directors,
officers, employees, counsel, 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 Business, as the German
Purchaser from time to time reasonably may request; provided
however, that German Seller shall not be obliged to provide
the German Purchaser with any information the provision of
which may be prohibited by law or contractual obligation;
provided however, that the German Seller shall promptly
notify German Purchaser that such information is being
withheld and shall inform the German Purchaser as to the
reason such information is being withheld. No disclosure by
the German Seller whatsoever during any investigation by
the German Purchaser shall constitute an enlargement of or
additional warranty or representation of Seller beyond those
expressly set forth in this Agreement. All information and
access obtained by the German Purchaser in connection with
the transaction contemplated by this Agreement shall be
subject to the terms and conditions of the Confidentiality
Agreements.
14.6 Except as otherwise may be contemplated by this Agreement or
as the German Purchaser may otherwise agree in writing, at
all times up to and including the Closing Date, the German
Seller will:
14.6.1 conduct the Business' operations and carry on cash
management practices only in the usual and ordinary
course of business in accordance with past practices;
14.6.2 keep in full force and effect German Seller's corporate
existence;
14.6.3 use all reasonable efforts in accordance with past
practices to retain the Business' employees and
preserve the Business' present business relationships
(including, without limitation, relationships with all
customers, suppliers and referral sources);
14.6.4 maintain the assets of the Business, in the same
repair, order and condition as currently maintained,
maintain insurance reasonably comparable to that in
effect on the date of the Initial Balance Sheet;
14.6.5 maintain the Business' books, accounts and records in
accordance with past custom and practice;
14.6.6 maintain in full force and effect the existence of all
Intellectual Property Rights material to the Business
as currently conducted (including, without limitation,
the rights specifically described in Clauses 4 and 12
hereof); and
14.6.7 promptly inform the German Purchaser in writing of any
material variances from the representations and
warranties contained in Clause 12 hereof which become
known to Seller.
14.7 Except as otherwise specifically contemplated
herein, prior to the Closing Date, without the prior
written consent of the German Purchaser, the German
Seller will not, with respect to the Business:
14.7.1 directly or indirectly, solicit, encourage or initiate
any discussion with, or negotiate or otherwise deal
with, or provide any information to, any Person other
than the German Purchaser and the German Purchaser's
Representatives, concerning any disposition or sale of
the Assets (other than the sale of inventory in the
ordinary course of business) or the sale of the
Business; or enter into any agreement concerning any
sale, transfer, assignment or other disposition of the
Assets (other than the sale of inventory in the
ordinary course of business) or the Business;
14.7.2 grant any increase in salary or bonus or otherwise
increase the compensation payable to any director,
officer, employee, consultant, advisor or agent, except
wage or salary increases required by pre-existing
contracts or compensation policies which are consistent
with past practices;
14.7.3 enter into, modify, amend, terminate or otherwise take
any action to materially increase liabilities under any
employment or labour agreement or any employee pension
benefit plan or any employee welfare benefit plan of
the Business other than in the ordinary course of
business;
14.7.4 terminate, amend or modify any Contract (other than
Excluded Contracts) or Permit other than in the
ordinary course of business;
14.7.5 enter into any Contract not in the ordinary course of
business or which requires annual payments in excess of
DM 16,000 or is for a term in excess of one year; or
14.7.6 take any action which has had or would have a Material
Adverse Effect.
14.8 Each of the German Seller and the German Purchaser agrees
that, after the Closing, it will hold and will promptly
transfer and deliver to the other, from time to time as and
when received by it, any cash, cheques with appropriate
endorsements, or other property that it may receive on or
after the Closing which properly belongs to the other, and
will account to the other for all such receipts.
15
Remedies
15.1 The Purchaser and the German Purchaser shall be entitled to
indemnification for breaches of the German Seller's
representations, warranties and covenants hereunder and
against the German Excluded Liabilities and IMO and the
German Seller shall be entitled to indemnification for
breaches of the German Purchaser's representations,
warranties and covenants hereunder and against the German
Assumed Liabilities, in each case as provided in the U.S.
Agreement. All such indemnity claims hereunder shall be
governed by the terms of the U.S. Agreement and may be
brought either in New York of in the German Courts
(Frankfurt am Main).
15.2 377 et seq. of the German Commercial Code do not apply.
15.3 The German Seller does not make any representations and
warranties other than those that are specifically stated in
this Agreement, in particular the German Seller does not
warrant as to the profitability of the Business after
Closing.
15.4 The German Purchaser is entitled to rescind solely (i) under
the conditions of 13.1 of the US Agreement or (ii) by
virtue of a failure of the German Purchaser's conditions to
closing set forth in clauses 10.1, 10.2, 10.4 or 10.5 to be
satisfied on or prior to December 15, 1993. Otherwise its
right to rescind ("Wandlung") shall be excluded.
16
Guarantee
16.1 Each of IMO, in the case of the German Seller, and Mark
Controls, in the case of the German Purchaser, hereby
assumes a separate direct, primary and unconditional
liability to pay any sum or sums for which their such
party's respective subsidiary may be or become liable to pay
hereunder without the need for any prior claim or recourse
against the relevant subsidiary by the party making the
claim. The courts which have jurisdiction for a claim made
against each of the subsidiaries shall also be the courts
with jurisdiction over IMO and Mark Controls with respect to
claims arising under this guarantee.
17
Undertakings
17.1 German Seller and IMO shall not, and shall take all actions
necessary to ensure that its Affiliates do not, for a period
of three years after the Closing Date, directly or
indirectly, own, manage, control, participate in, consult
with, render services to or in any manner engage in or be
connected with in any manner, anywhere in the world, with
any business which designs, manufactures, assembles,
produces, sells or distributes pressure switches,
temperature switches or control valves (other than as these
products are being used as components or replacement parts
in systems of the type currently sold by IMO's other
existing divisions for so long as such systems continue to
be sold by IMO or its divisions) provided, however, that
nothing herein shall prohibit the German Seller from being a
passive owner of, in the aggregate, less than 5.0 % of the
outstanding stock of any class of a corporation which is
publicly traded so long as neither German Seller nor any of
its Affiliates have any active participation in the business
or management of such corporation.
17.2 Neither the German Seller nor any of its Affiliates will
manufacture or assemble those transducers currently
manufactured by IMO's TransInstruments Division
("TransInstruments"), in any state, territory or
protectorate of the United States of America for a period of
two years after the Closing Date.
17.3 The Provisions of Clauses 17.1, 17.2 or 17.4 to the contrary
notwithstanding, IMO's Gems Sensor Division ("Gems") may
design, manufacture, assemble, produce, sell, and distribute
environmental leak detection systems, transducers and
transducer-based components which are used in environmental
leak detection systems.
17.4 In the event that IMO disposes of the business of its
TransInstruments Division ("TransInstruments") and/or IMO's
CEC Instruments Division ("CEC") by sale of all or
substantially all of the assets, sale of stock, merger, or
other disposition to any party which is not an Affiliate of
IMO (a "Non-Affiliate"), the German Seller shall not,
directly or indirectly, for a period commencing upon the
date of such disposition and ending on the expiration of
three years from the date of this Agreement, manufacture,
distribute or sell the products manufactured by such
division that compete with products manufactured or sold by
the Business as of the Closing Date (including as any such
products may be improved or updated) anywhere in the world.
Nothing contained herein shall be construed to require the
German Seller to bind any Non-Affiliate transferee of the
business or assets of TransInstruments or CEC to the
provisions of this Clause 17.
17.5 In the event that the TransInstruments Division assumes or
acquires CEC or the business of CEC or any part thereof
pursuant to a corporate restructuring of IMO or otherwise,
the operation of such business by TransInstruments anywhere
in the world shall not be deemed to be a breach of Clause
17.2.
17.6 For a period of two years after the Closing Date, the German
Seller shall not, directly or indirectly, solicit,
encourage, persuade, or attempt to persuade any employee of
the Business, or any Person who is an employee of the German
Purchaser at any time after the Closing Date, to leave the
German Purchaser's employ or such employ of the Business, or
to become employed by any Person other than the German
Purchaser, nor shall the German Seller or its Affiliates
employ (whether or not solicited, encouraged, or persuaded)
any member of the German Purchaser's or the Business' sales
force during such period. For a period of two years after
the Closing Date, the German Purchaser shall not, directly
or indirectly, solicit, encourage, persuade, or attempt to
persuade any employee of the German Seller or any Affiliate
of the German Seller (other than employees transferred
pursuant to this Agreement) to leave the German Seller's or
such Affiliate's employ, or to become employed by any
Person, nor shall the German Purchaser or its Affiliates
employ (whether or not solicited, encouraged, or persuaded)
any member of the German Seller's sales force during such
period.
17.7 The German Seller agrees, covenants, and acknowledges that,
from and after the Closing Date, the German Seller will not,
and will cause its Affiliates not to disclose, give, sell
use, or otherwise divulge any confidential or secret
information (including but not limited to any technology,
process, trade secrets, know-how, other intellectual
property rights, strategies, financial statements or other
financial information not otherwise publicly available,
forecasts, operations, business plans, prices, discounts,
products, product specifications, designs, plans, data, or
ideas) relating exclusively to the Business. The German
Purchaser agrees, covenants, and acknowledges that, from and
after the Closing Date, the German Purchaser will not, and
will cause its Affiliates not to disclose, give, sell, or
otherwise divulge any confidential or secret information
(including but not limited to any technology, process, trade
secrets, know-how, other intellectual property rights,
strategies, financial statements, or other financial
information not otherwise publicly available, forecasts,
operations, business plans, prices, discounts, products,
product specifications, designs, plans, data, or ideas)
relating exclusively to the business of the German Seller
other than the Business. The foregoing confidentiality
obligations shall not apply to confidential information
which (i) is or become generally available to the public
through no act or omission on the part of the party who is
sought to be bound by confidentiality, (ii) is hereafter
received on a non-confidential basis by the German Seller or
the German Purchaser, as the case may be, from a third party
who has the lawful right to disclose such confidential
information, (iii) is independently developed by an employee
or agent of the party who is sought to be bound by
confidentiality who did not have access to the confidential
information of (iv) the German Seller or the German
Purchaser, as applicable, must disclose pursuant to court
order and Law.
17.8 Neither the German Seller nor the German Purchaser shall
engage in any activity the purpose of which is to evade the
provisions of this Clause 17.
17.9 If, at the time of enforcement of this Clause 17 a court
shall hold that the duration, scope of geographic area
restrictions stated herein are unreasonable under
circumstances then existing, the parties agree that the
maximum duration, scope of geographic area reasonable under
such circumstances shall be substituted for the stated
duration, scope, and geographic area.
17.10 The parties hereto acknowledge and agree that the party
seeking to enforce the provisions hereof would be
irreparably harmed in the event any of the provisions of
this Clause 17 are not performed in accordance with the
specific terms hereof or are otherwise breached by the
other party. Accordingly, the parties hereto agree that the
parties hereto shall be entitled to an injunction or
injunctions to prevent breaches of the provisions of this
Clause 17 and to enforce specifically the terms and
provisions of such Clause in any action instituted in any
court of the United States or Germany or any state of
either of them having jurisdiction over the parties and the
matter, in addition to any other remedy to which the
parties hereto may be entitled at law or in equity.
18
Further Cooperation and Transfer Conditions
18.1 Upon and after Closing the German Seller and the German
Purchaser shall each do, execute and deliver or cause to be
done, executed and delivered all such further acts, deeds,
documents, instruments of conveyance, assignment and
transfer and things as may be necessary to give effect to
the terms of this Agreement, to place control of the
Business in the hands of the German Purchaser and as the
German Purchaser may reasonably request in order effectively
to convey, transfer, vest and record title to each of the
assets which are to be transferred hereunder in the German
Purchaser and pending the doing of such acts, deeds,
documents and things the German Seller shall as from Closing
hold those Assets as a fiduciary ("treuhanderisch") for the
account of and to the order of the German Purchaser.
18.2 To the extent that the German Seller has claims against the
producer of assets, the German Seller transfers these to the
German Purchaser with effect from Closing.
18.3 For a period of two years after the Closing Date (or such
longer period as may be required by any Governmental Body or
ongoing Legal Proceeding):
18.3.1 none of the parties shall dispose of or destroy any of
the business records and files relating to the
Business. If, during the two year period referred to
above, any party wishes to dispose of or destroy such
records and files, it shall first give 30 days' prior
written notice ("Disposal Notice") to the other parties
and each of the other parties shall have the right, at
its option and expense, upon prior written notice to
the party which served the Disposal Notice, within such
30 day period, to take possession of the records and
files within 60 days after the date of the Disposal
Notice;
18.3.2 Each party shall cooperate and allow the other parties
and their Representatives access to all business
records and files in connection herewith and relating
solely to the conduct of the Business prior to the
Closing Date, during regular business hours and upon
reasonable notice at such party's principal place of
business or at any location where such records are
stored, and shall have the right, at its own expense,
to make copies of any such records and files; provided
however that any access or copying shall be in a
manner so as not to interfere with the normal conduct
of the parties' business or operations.
18.4 For a period of one year after the Closing Date, the German
Purchaser shall allow the German Seller access to the System
34 computer being transferred hereunder, during normal
business hours and upon reasonable notice, for purposes of
maintaining, accessing and removing data stored on such
computer which related to IMO's Gems Division. Any and all
such access may, at German Purchaser's option and sole
discretion, be conducted under the direct supervision of
employees of the German Purchaser and no data shall be
downloaded, copied or removed from such computer system
other than data relating to IMO's Gems Division.
19
Court Jurisdiction
This Agreement shall be governed by and construed in accordance
with German Law. Except as otherwise provided, all disputes
arising out of and in connection with this Agreement shall be
tried by the courts of Frankfurt am Main, Federal Republic of
Germany.
20
Client Information
The parties will agree the form and contents of all press
releases or other public disclosures of the transactions
contemplated by this agreement as provided in Section 11.5 of the
US Agreement.
21
Costs and General Clauses
21.1 Save as expressly provided otherwise herein, each party
bears its own costs in connection with the Agreement and all
ancillary agreements..
21.2 No ancillary agreement other than the agreements mentioned
in this Agreement or the US Agreement has been made. Any
amendment, including those to this clause, shall be binding
only if reduced to writing and signed by the parties.
21.3 In the event that any clause of this Agreement is or becomes
invalid or ineffective, the remainder of the contract will
not be affected. In this case the ineffective provision will
be replaced by a valid provision which most closely reflects
the economic purpose intended by the parties by the
ineffective provision. This also applies if there is any
omission in the contract.
21.4 All notices and other communications under this Agreement
shall be in writing and shall be deemed given when delivered
personally or four days after being mailed by registered
mail, return receipt requested, 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 German Seller
IMO Industries GmbH
Dorn-Assenheimer
StraBe 27, 61203
Reichelsheim (Wetterau)
Attention: Geschaftsfurer
with a copy to:
Imo Industries Inc.
3450 Princeton Pike
Lawrenceville, New Jersey 08646
Telephone: (609) 896-7600
Facsimile: (609) 896-7688
Attention: Thomas J. Bird; Senior Vice President
and General Counsel
Weil, Gotshal & Manges
767 Fifth Avenue
New York, New York 10153
Telephone: (212) 310-8000
Facsimile: (212) 310-8007
Attention: Stephen M. Besen, Esq.
Punder, Volhard, Weber & Axster
9 West 57th Street
New York, New York 10019
Telephone: (212) 980-3335
Facsimile: (212) 980-3337
Attention: Dr. Andreas Junius, Esq.
If to the German Purchaser:
Mark Controls GmbH, c/o:
Mark Controls Corporation
5215 Old Orchard Road
Skokie, Illinois 60077
Telephone: (708) 470-8585
Facsimile: (708) 470-9774
Attention: David S. Snyder, Vice President
Finance and Strategy
with a copy to:
Kirkland & Ellis
200 East Randolph Drive
Chicago, Illinois 60601
Telephone: (312) 861-2000
Facsimile: (312) 861-2200
Attention: Robert H. Kinderman, Esq.
and a copy to:
Doser Amereller Noack (Baker & McKenzie)
Bethmannstr. 50 - 54
D-60311 Frankfurt am Main
Telephone: (49-69) 2-99-080
Facsimile: (49-69) 2-99-08-108
Attention: Dr. Walter R. Henle, Esq.
Where notices under this Contract are required to be given
in writing, they may be given by fax, provided that a hard
copy shall be sent contemporaneously by registered mail.
21.5 In the event that any party ("the Defaulting Party") shall
fail to pay an amount owed under this Agreement or to
perform any other obligation owed by such party under this
Agreement, the party to whom such amount as obligation shall
be owed (the "Nondefaulting Party") shall be entitled to
collect from the Defaulting Party all costs and expenses
including, without limitation, reasonable attorneys' fees
which the Nondefaulting Party shall incur to collect such
amount, enforce such obligation or obtain compensation due
the Nondefaulting Party by reason of the Defaulting Party's
failure to pay such amount or perform such an obligation
when due.
21.6 Capitalised terms used in this Agreement shall, unless
otherwise specified herein, have the same meaning as defined
in the US Agreement.
* * * * *
IN WITNESS WHEREOF, the parties hereto have executed
this instrument as of the 18th day of November, 1993.
IMO INDUSTRIES INC.
By: /s/ Thomas J. Bird
Name: Thomas J. Bird
Title: Senior Vice President
IMO INDUSTRIES GMBH
By: /s/ Stuart Reid
Name: Stuart Reid
Title: Geschaftsfuhrer
MARK CONTROLS CORPORATION
By: /s/ William E. Bendix
Name: William E. Bendix
Title: President and Chief
Executive Officer
MARK CONTROLS GMBH i. Gr.
By: /s/ William E. Bendix
Name: William E. Bendix
Title: Geschaftsfuhrer
(Managing Director)
Exhibit B
Transition Sales Coverage in Germany
For a transitional period, not to exceed 120 days after Closing,
Mark Controls/Barksdale will provide continuing sales coverage in
Germany for IMO Industries GmbH's TransInstruments products.
Coverage will be provided by Messrs. Linder, Lane and Portner
within their original territories. Coverage will essentially be
a continuation of existing time and activities spent on
TransInstruments products including sales calls, contract
negotiations and promotional activities.
IMO Industries GmbH will arrange for new sales coverage within
the territory and will implement and transfer to this new
coverage scheme as quickly as possible, in any event, during the
120 day period referred to above.
IMO Industries GmbH agrees to pay DM 4000 per employee per month
during this period until each of the employees listed above is
relieved of their sales coverage responsibilities.
AMENDMENT NO. 1 TO GERMAN ASSET PURCHASE AGREEMENT
AMENDMENT No. 1, dated as of November 23, 1993 (this
"Amendment") to German Asset Purchase Agreement, dated as of
November 18, 1993, by and among Imo Industries GmbH, a limited
liability company incorporated under the laws of Germany, Imo
Industries Inc., a Delaware corporation, Mark Controls GmbH i.
Gr., a limited liability company in the process of being
incorporated under the laws of Germany, and Mark Controls
Corporation, a Delaware corporation (the "Agreement").
The parties to this Amendment desire to amend the
Agreement as hereinafter set forth. Therefore, the parties agree
as follows:
1. Section 11.1 of the Agreement is hereby deleted in
its entirety and the following substituted therefor:
The amount payable on the Closing Date by the
German Purchaser to the German Seller under this
Agreement shall be (a) the amount by which the
aggregate amount shown on the Initial Balance Sheet (as
defined in the US Agreement) for the assets transferred
hereunder shall exceed the amount shown on the Initial
Balance Sheet for the German Assumed Liabilities, (b)
expressed in Deutsche Marks utilizing the noon buying
rate announced by the Federal Reserve Bank of New York
on the business day immediately preceeding the Closing
Date and (c) payable by wire transfer of immediately
available funds to an account or accounts designated by
the German Seller. Such amount shall be subject to
adjustment as provided in Section 2.3 of the US
Agreement (as so adjusted, the "Purchase Price").
IN WITNESS WHEREOF, the parties hereto have executed
this Amendment as of the date and year first above written.
IMO INDUSTRIES GMBH
By: /s/ J.S.W. Cooper
Name: James S. W. Cooper
Title: Geschaftsfuhrer
IMO INDUSTRIES INC.
By: /s/ Thomas J. Bird
Name: Thomas J. Bird
Title: Senior Vice President
MARK CONTROLS GMBH i. Gr.
By: /s/ William E. Bendix
Name: William E. Bendix
Title: Managing Director
(Geschaftsfuhrer)
MARK CONTROLS CORPORATION
By: /s/ William E. Bendix
Name: William E. Bendix
Title: Managing Director
(Geschaftsfuhrer)
AMENDMENT NO. 2
TO
GERMAN ASSET PURCHASE AGREEMENT
AMENDMENT NO. 2, dated as of December 1, 1993
(this "Amendment") to the German Asset Purchase Agreement,
dated as of November 18, 1993, as amended by Amendment No.
1, dated as of November 23, 1993 (the "German Purchase
Agreement"), by and among Imo Industries, Inc., Mark
Controls Corporation, Imo Industries GmbH and Mark Controls
GmbH i. Gr. (the "German Purchaser"). Capitalized terms
used but not otherwise defined herein shall have the
meanings given to such terms in the German Purchase
Agreement.
WHEREAS, the parties hereto desire to consummate
the transactions contemplated by the German Purchase
Agreement effective as of December 1, 1993 and desire to
amend the German Purchase Agreement to give effect to such
intent and in certain other respects.
NOW, THEREFORE, the parties hereto agree as
follows:
1. The Closing Date for all purposes of the
German Purchase Agreement shall be December 1, 1993.
Notwithstanding the foregoing, the adjustment to the
Purchase Price referred to in Section 11.1 of the German
Purchase Agreement, if any, shall be made in accordance with
the provisions of Section 2.3 of the U.S. Agreement as
amended by Amendment No. 2 to the U.S. Agreement dated as of
the date hereof.
2. Notwithstanding anything to the contrary
contained in Section 1 hereof or the German Purchase
Agreement, the Purchase Price shall be paid by the German
Purchaser on December , 1993 (the "Payment Date"). The time
of the German Seller's receipt of the Purchase Price in
immediately available funds is herein referred to as the
"Payment Time."
3. The parties hereto acknowledge and agree that,
although the consummation of the transactions contemplated
by the Purchase Agreement shall be effective as of the
Closing Date specified in Section 1 hereof, the German
Seller shall retain possession and operating control of the
Business and the Assets through and including the Payment
Time. However, the parties also acknowledge and agree that
the Business shall be operated at all times from and
including the Closing Date for the German Purchaser's
benefit. Therefore, the parties hereby agree to the
following:
(a) The German Seller shall at all times prior to
the Payment Time continue to comply with the covenants
and provisions of Sections 14.6 and 14.7 of the German
Purchase Agreement.
(b) At the Payment Time the German Seller shall
deliver to the German Purchaser an officer's certificate
certifying under the German Purchase Agreement that (i) each
of the representations and warranties set forth in Section
12.1.3 of the Purchase Agreement is true and correct in all
material respects, and (ii) the German Seller has complied
in all material respects with the covenants and provisions
of Sections 14.6 and 14.7 through and including the Payment
Time.
(c) The German Seller shall hold in trust for the
German Purchaser's benefit and pay over to the German
Purchaser all cash received and collected by the German
Seller in respect of the Business and the Assets (other than
the German Excluded Assets, collections relating to items
shipped by the German Seller prior to the Closing Date and
cash received from the German Purchaser), on and after the
opening of business on the Closing Date (the "Post Closing
Receipts"). The German Seller shall pay over to the German
Purchaser all Post Closing Receipts received by the German
Seller from and after the opening of business on the Closing
Date through and including the Payment Time promptly (but in
any event within three business days) following the Payment
Date and shall pay over to the German Purchaser all Post
Closing Receipts received by the German Seller thereafter in
accordance with the terms of the German Purchase Agreement.
(d) It is understood and agreed that the Post-
Closing Receipts shall not be (i) included in the
Closing Balance Sheet (as defined in the U.S.
Agreement) or (ii) used by the German Seller to pay,
discharge or satisfy any of the German Excluded
Liabilities.
4. This Amendment No. 2 may be executed in
counterparts,
each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
* * * * * *
-2-
IN WITNESS WHEREOF, the parties hereto have executed this
instrument as of the date and year first above written.
IMO INDUSTRIES INC.
By: /s/ Thomas J. Bird
Name: Thomas J. Bird
Title: Senior Vice
President
IMO INDUSTRIES GMBH
By: /s/ J. S. W. Cooper
Name: J. S. W. Cooper
Title: Geschaftsfuhrer
MARK CONTROLS CORPORATION
By: /s/ William E. Bendix
Name: William E. Bendix
Title: Managing Director
(Geschaftsfuhrer)
MARK CONTROLS GMBH i. Gr.
By: /s/ William E. Bendix
Name: William E. Bendix
Title: Managing Director
(Geschaftsfuhrer)
SUBSIDIARIES AND AFFILIATES OF IMO INDUSTRIES INC.
DATE: 3/23/94
STATE OR
COUNTRY OF
INCORPORATION
NAME OR ORGANIZATION
IMO INDUSTRIES INTERNATIONAL INC.......................DELAWARE
IMO INDUSTRIES (UK) LIMITED .......................ENGLAND
IMO INDUSTRIES LIMITED.......................ENGLAND
IMO INDUSTRIES PENSION TRUSTEE LIMITED..ENGLAND
BAIRD ATOMIC LTD.............................ENGLAND
MORSE CONTROLS LIMITED.......................ENGLAND
MORSE CONTROLS AB.......................SWEDEN
MORSE CONTROLS PTY.LTD..................NEW SOUTH WALES
MORSE CONTROLS (NZ) LIMITED....... NEW ZEALAND
TELEFLEX-MORSE (N.Z.) LTD..........NEW ZEALAND
BOSTON GEAR COMPANY LIMITED.............ENGLAND
TELEFLEX LIMITED........................ENGLAND
TELEFLEX MORSE LTD......................ENGLAND
TURBOFLEX LIMITED............................ENGLAND
TORSIFLEX LIMITED.......................ENGLAND
T & A NASH (PENN) LIMITED...............ENGLAND
IMO INDUSTRIES SRL ...............................ITALY
IMO INDUSTRIES SARL...............................FRANCE
IMO INDUSTRIES GmbH...............................GERMANY
MORSE CONTROLSGmbH...........................GERMANY
TELEFLEXGmbH.................................GERMANY (1)
MORSE CONTROLS SARL.............................. FRANCE
MORSE CONTROLS S.L. ..............................SPAIN
IMO INDUSTRIES PTE LTD............................SINGAPORE
NHK MORSE CO., LTD................................JAPAN (2)
NHK JABSCO CO., LTD..........................JAPAN(3)
WEKA AG.......................................... SWITZERLAND
IMO AB............................................SWEDEN
IMO PUMPEN AG................................SWITZERLAND
IMO GRESHAM PUMPS (INDIA) LTD. ..............INDIA (4)
IMO-PUMPEN GmbH...................................GERMANY
DELAVAL-STORK V.O.F. .............................THE NETHERLANDS (5)
COMPONENTISTICA EUROPEA SRL............................ITALY(6)
ROLTRA-MORSE S.p.A. ..............................ITALY
ROLSAG S.p.A. ...............................ITALY(7)
SIRSA S.p.A. ................................ITALY(7)
ROLTRA MORSE POLAND Spzoo....................POLAND
EPN SISTEMAS, S.A. de C.V..............................MEXICO (8)
IMO INDUSTRIES (CANADA) INC............................CANADA
DELSALESCO, INC. ......................................U.S.VIRGIN ISLANDS
IMOSURE ASSURANCE, INC.................................VERMONT
IMOVEST INC............................................DELAWARE
BAIRD CORPORATION......................................MASSACHUSETTS
LABTEST EQUIPMENT COMPANY.........................CALIFORNIA
BAIRD EUROPE B.V. ...............................THE NETHERLANDS
BAIRD FRANCE SARL............................FRANCE
BAIRD LOMO JV................................RUSSIA (9)
BAIRD DO BRASIL REPRES., LTDA.....................BRAZIL
INCOM TRANSPORTATION, INC..............................DELAWARE
BOSTON GEAR INDUSTRIES OF CANADA INC...................CANADA
VARO INC. .............................................TEXAS
VARO TECHNOLOGY CENTER, INC. .....................TEXAS
VARO TECHNOLOGY CENTER JOINT VENTURE.........TEXAS (10)
TURBODEL INC. ....................................TEXAS
TRIPOWER VENTURE ............................TEXAS (11)
APPLIED OPTICS CENTER CORPORATION.................MASSACHUSETTS
TECNOLOGIA ELECTRONICA de JUAREZ, S.A. de C.V.....MEXICO
TRANSVARO ELEKTRON ALETLERI SANAYI VE TICARET A.S.TURKEY(12)
ITT AND VARO, A JOINT VENTURE ....................TEXAS(12)
KEI LASER, INC. ..................................MARYLAND
OPTIC-ELECTRONIC INTERNATIONAL, INC...............TEXAS
WARREN PUMPS INC. .....................................DELAWARE
DELTEX SERVICE INC.....................................TEXAS
_______________________________
(1) 52% owned by Imo Industries GmbH and 48% owned by Morse
Controls Limited
(2) 31% owned by Imo Industries International Inc. and 19% owned
by Imo Industries Inc.
(3) 50% owned by NHK Morse Co., Ltd.
(4) 40% owned by IMO AB.
(5) 50% owned by Imo Industries International Inc.
(6) 99% owned by Imo Industries Inc.
(7) 51% owned by Roltra-Morse S.p.A.
(8) 45% owned by Imo Industries Inc.
(9) 48% owned by Baird Europe B.V. and 2% owned by Baird
Corporation
(10) 50% owned by Varo Technology Center, Inc. and 50% owned by
Varo Inc.
(11) 50% owned by Turbodel Inc.
(12) 50% owned by Varo Inc.
EXHIBIT 23 -- CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration
Statements (Forms S-8 No. 33-13362 and No. 33-41260) pertaining
to the Imo Industries Inc. EmployeesO Stock Savings Plan and in
the Registration Statement (Form S-8 No. 33-26118) pertaining to
the Imo Industries Inc. Equity Incentive Plan for Key Employees
and the Equity Incentive Plan for Outside Directors of Imo
Industries Inc. of our report dated March 18, 1994, with respect
to the consolidated financial statements and schedules of Imo
Industries Inc. included in the Annual Report (Form 10-K) for
the year ended December 31, 1993.
ERNST & YOUNG
Princeton, New Jersey
March 31, 1994
