(Conformed Copy)
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, 1994
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)
1009 Lenox Drive, Building Four West
Lawrenceville, New Jersey 08648
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 609-896-7600.
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 check mark 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. (X)
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 15,1995............................................$117,048,202
Shares of Registrant's common stock, $1.00 par value, outstanding as of
March 15, 1995 ............................................17,025,193
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 18, 1995
TABLE OF CONTENTS
PART I
Item
1. Business.
General
History
Industry Segments
Discontinued Operations
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 industrial manufacturing
company that designs, produces and markets proprietary products focused on
mechanical and electronic controls and on engineered power products and
their support services. The Company operates in the United States, Canada,
several European countries and the Pacific Rim. In 1994, the Company
announced it accepted an offer to sell its Turbomachinery business segment
to Mannesmann Demag of Dusseldorf, Germany. As a result of this acceptance,
and the subsequent consummation of the sale, the Company has focused its
operations on the remaining two core business segments, as follows:
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 & Instrumentation 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.
In addition to the two segments comprising the Company's continuing core
operations, the Company has a third business segment entitled Other
included in its continuing operations for financial reporting purposes.
This segment includes operations previously sold and an operation to be
sold as part of the Company's asset divestiture program.
The Company's Electro-Optical Systems and Turbomachinery businesses are
being accounted for as discontinued operations and, accordingly, have been
excluded from the Company's segments. The previously reported financial
information has been reclassified to reflect the Turbomachinery business
segment as a discontinued operation.
History
The Company, founded in 1901 in the United States by Dr. Carl Gustaf
Patrick 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 11 of the Notes to Consolidated Financial Statements
included in Part IV of this Form 10-K Report as indexed at Item 14(a)(1).
Information regarding the businesses sold and held for sale and the
discontinued operations is provided later in this section and is contained
in Note 4 and Notes 2 and 3, 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 and
electronic 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 actuators,
window controls, latches and door panels/assemblies for Fiat, and
a manual gear shift system that is currently used in Fiat, Lotus, Porsche
and other automobiles.
Pumps, Power Transmission & Instrumentation
The Pumps, Power Transmission & Instrumentation 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
AB, IMO Pump, Warren Pumps, Boston Gear/Delroyd, 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 that 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 instrumentation 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.
Discontinued Operations
Electro-Optical Systems
In January 1994, pursuant to a plan approved by the Board of Directors, the
Company announced its intention to dispose of its Electro-Optical Systems
operations which consists of the Company's subsidiaries Varo Inc. and Baird
Corporation. On January 3, 1995, the Company completed the sale of its
Baird Analytical Instruments Division to Thermo Instruments Systems Inc.
for approximately $12.3 million, which was used to repay a portion of the
Company's domestic senior debt. On February 8, 1995, the Company announced
that it has a letter of intent from Litton Industries for the acquisition
of the Optical Systems and Ni-Tec divisions of Varo Inc. and the Optical
Systems division of Baird Corporation. These sales will complete a
substantial part the Company's planned divestiture of its Electro-Optical
Systems business. The Company is continuing discussions with prospective
buyers of the remaining Varo division, the Electronic Systems division, and
expects to close on this sale in 1995.
Turbomachinery
On July 28, 1994, the Company announced that it had reached an agreement in
principle to sell its Delaval Turbine and TurboCare divisions, which
comprise substantially all of the Company's Turbomachinery business
segment, and its 50% interest in Delaval-Stork, a Dutch joint venture, to
Mannesmann Demag of Dusseldorf, Germany. The parties entered into a letter
of intent in August 1994 and the sale was approved by the Company's Board
of Directors. On January 17, 1995, the Company completed the sale for $124
million. Of this amount, $109 million was received at closing, with the
remainder earning interest to the Company and to be received at specified
future contract dates. A portion of the proceeds were used by the Company
to pay off its domestic senior debt in January 1995, and in March 1995 the
Company redeemed $40 million of its 12.25% Senior Subordinated Debentures
with the remainder of the proceeds. The transaction, which will be
reflected in the Company's first quarter of 1995, will result in an
estimated gain of $40 million after tax. Deferred debt expense of $4.2
million, associated with the portions of the domestic senior debt and
senior subordinated debentures repaid, was written off as an extraordinary
charge in the first quarter of 1995.
In accordance with APB Opinion No. 30, the disposals of these business
segments have been accounted for as discontinued operations and,
accordingly, their operating results have been segregated and reported as
Discontinued Operations in the accompanying Consolidated Statements of
Income. Prior year financial statements have been reclassified to conform
to the current year presentation.
See Notes 2 and 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 discontinued operations.
Restructuring Plan
Asset Divestiture Program
As of December 31, 1994, the Company had substantially completed the
restructuring plan announced on October 29, 1992, pursuant to which it
divested six of its operating units in 1993, and two of its operating units
and a portion of its underutilized real estate holdings in 1994. The
divestitures included units of its aerospace businesses, units of its
instruments and transducer businesses, certain other non-strategic
businesses and underutilized real estate holdings. As discussed above, in
January 1994, the Company announced its intention to dispose of its
Electro-Optical Systems business, and on January 17, 1995 completed the
sale of its Delaval Turbine and TurboCare divisions, which comprise
substantially all of its Turbomachinery business segment, and its 50%
interest in Delaval Stork, a Dutch joint venture. Both of these businesses
are being accounted for as discontinued operations.
During 1994, the Company sold its CEC Instruments and Turboflex Ltd.
operations, its Corporate headquarters building and other previously
identified assets for aggregate proceeds of $13.2 million. The proceeds
were used to repay a portion of the Company's domestic senior debt.
As of December 31, 1993, the Company had sold its Heim Bearings, Aerospace
and Barksdale Controls operations for proceeds of approximately $91
million, and thus had 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 one non-strategic business and some
remaining underutilized real estate holdings. The Company targets
completion of these divestitures over the next 9 to 12 months.
Restructuring Program
In January 1994, the Company announced plans to reduce its cost structure
and to improve productivity on a worldwide basis. In the fourth quarter of
1993, the Company recorded a charge to continuing operations of $6.6
million relating to this program. The actions taken under this
restructuring plan in 1994, were to implement cost-cutting measures at its
core operations to reduce its expense structure and to eliminate
duplicative functions. The Company has consolidated certain operations in
the European controls and automotive components divisions and has revised
operating processes and reduced employment levels at the pumps and other
operations. The number of employees in core operations company-wide
declined by approximately 210 , or 6 % between mid-1993 and mid-1994. This
program was substantially complete as of December 31, 1994, with the
remainder expected to be completed by the end of the first quarter of 1995.
See Note 4 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 50% 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 1994, sales by the Company's direct sales
forces accounted for approximately 94%, 67%, and 33% of the Morse Controls,
Pumps, Power Transmission & Instrumentation 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 50%, 46% and 54% of segment
sales, and 21%, 15% and 18% of consolidated sales in 1994, 1993 and 1992,
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.
Total sales to the Department of Defense in the form of prime and
subcontracts were approximately 7% of net sales in 1994, 12% of sales in
1993 and 12% of sales in 1992. The level of sales from continuing
operations to the United States Department of Defense has been
significantly reduced from the 1992 total company-wide level of 22% (in the
form of prime and subcontracts) due to the discontinuance of the Electro-
Optical Systems and Turbomachinery operations. 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 1994, 1993 or 1992.
Backlog
The Company's continuing operations' backlog of unfilled orders at
February 28, 1995 and 1994 and at December 31, 1994, 1993 and 1992 by
business segment was as follows:
February 28 December 31
1995 1994 1994 1993 1992
(Dollars in millions)
Morse Controls $ 49.6 $ 45.7 $ 48.7 $ 41.1 $ 42.8
Pumps, Power Transmission
& Instrumentation 62.1 62.3 57.6 62.5 75.2
Other 2.3 4.7 1.8 4.6 41.4
$114.0 $112.7 $108.1 $108.3 $159.4
Backlog is considered significant only to the Warren Pumps operation of the
Pumps, Power Transmission & Instrumentation Business segment, which
requires long lead times for the manufacture of its 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, 1994, the
Company believes that all but approximately $2.6 million of its orders will
be filled in 1995.
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 (currently
having a term of 17 years from the date of issuance 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. In
January 1995, the Company transferred its rights to use the "Delaval" name
in connection with certain products of the Turbomachinery segment to
Mannesmann Demag as part of the divestiture of its Turbomachinery business.
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 its 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 1994, 1993 and 1992 by business segment were as
follows:
Year Ended December 31
1994 1993 1992
(Dollars in millions)
Morse Controls $ 2.8 $ 3.3 $ 3.3
Pumps, Power Transmission
& Instrumentation 3.3 3.6 3.9
Other .1 2.3 2.7
$ 6.2 $ 9.2 $ 9.9
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 three New Jersey "Industrial Establishments"
owned by the Company at the time of the Distribution. The Company is in
the process of selling a portion of one site and leasing another site. The
Company will retain responsibility to meet all requirements of ISRA. 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 been identified as a Potentially
Responsible Party by the United States Environmental Protection Agency, and
in one instance the State of Washington, alleging that because various of
its divisions had arranged for the disposal of hazardous wastes at a number
of facilities that have been targeted for clean-up pursuant to the
Comprehensive Environmental Response Compensation and Liability Act
("CERCLA") or similar State law. Although CERCLA and corresponding State
law 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 either qualifies as a de minimis or minor
contributor at each site. 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, 1994, the Company employed approximately 6,200 persons
worldwide of which 3,900 relate to continuing operations. Approximately
4,100 persons were employed in the United States, and approximately 2,100
persons were employed outside of the United States. Approximately 2,000 of
the employees associated with continuing operations are located in the
United States. There are approximately 1,200 persons worldwide covered by
collective bargaining agreements with various unions expiring at various
dates in 1995 through 1997. The Company considers its relations with its
employees to be satisfactory.
Item 2. Properties.
The Company's continuing operations have 45 manufacturing facilities in 12
states in the United States, the United Kingdom, Germany, Singapore,
Sweden, Switzerland, Italy, France, and Australia of which 26 are owned and
19 are leased. In addition, the Company owns 4 closed manufacturing
facilities (approximately 426,000 square feet of building space on 75.4
acres of land) that are being offered for sale. The properties owned by
the Company consist of approximately 3.06 million square feet of building
space, inclusive of the 426,000 square feet of the closed facilities, on
approximately 507.3 acres (including 227.2 acres of undeveloped land). The
leases expire over a period of years from 1995 to 2054 with renewal options
for varying terms contained in 9 of the leases. The Company's executive
office, which is leased by the Company, is located in Lawrenceville, New
Jersey and occupies approximately 37,140 square feet.
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 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 9 391 415
Pumps, Power Transmission
& Instrumentation 11 1 954 120
Other (Including Discontinued
Operations) 9 9 1,288 510
26 19 2,633 1,045
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 United States
District Court for 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 $8.5 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 with a complaint in a case brought
in the United States District Court for the Northern District of 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. In connection with
this matter, the Company filed a counterclaim against the insurer seeking
payment of $8.5 million in defense costs that the Company previously paid
in connection with the LILCO litigation. On January 25, 1995, the Court
entered a judgment based on its December 15, 1994 memorandum and order
dismissing the Company's counterclaim, denying the Company's Motion for
Summary Judgment, and finding sua sponte that there was no coverage under
the insurer's policy for the LILCO matter. On February 8, 1995, the Company
filed an Application for Leave to File Motion for Reconsideration of the
Judgment which was subsequently denied. The Company also filed a Notice of
Appeal with the Ninth Circuit Court of Appeals. Subsequent to entry of the
District Court Judgment, the insurer moved to have the judgment modified to
award the insurer the $10 million defense costs and $1.2 million indemnity
payment. The Company has filed a motion in opposition to this motion. Oral
arguments relating to this motion were held on February 24, 1995 and the
Company is awaiting the District Court's decision.
The Company and one of its subsidiaries are two of a large number of
defendants in a number of lawsuits brought by approximately 13,500
claimants who allege injury caused by exposure to asbestos. Although the
Company and its subsidiary have never been producers or direct suppliers of
asbestos, it is alleged that the industrial and marine products sold by the
Company and the subsidiary had components which contained asbestos. The
allegations state a claim for asbestos exposure when Company-manufactured
equipment was maintained or installed. Suits against the Company have been
tendered to its insurers who are defending under their stated reservation
of rights. The insurers for the subsidiary are being identified and have
been and will be provided notice. Should settlements for these claims be
reached at levels comparable to those reached by the Company in the past,
they 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 and March subpoenas and the government subsequently withdrew
the February subpoena. The investigation appears directed at quality
control, testing and documentation activities which began at Ni-Tec while
it was a division of Optic-Electronic Corp. Optic-Electronic Corp. was
acquired by the Company in November 1990 and subsequently merged with Varo
Inc. in 1991. The Company continues to cooperate fully with the
investigation.
The Securities and Exchange Commission (the "Commission") is conducting an
inquiry into, among other things, certain accounting practices at Ni-Tec
and the 1991 and 1992 fiscal year financial reporting by the Company with
respect thereto. The Commission has sought certain information from the
Company relating to such inquiry and the Company has cooperated with this
request. This inquiry has been dormant since August 1994.
The Company was notified in August 1994 that its Electro-Optical operations
are being investigated by the United States Attorney for the District of
Columbia. The investigation concerns the appropriateness of certifications
submitted by Company personnel regarding its contracts with the Arab
Republic of Egypt that were funded by the United States Government. In
connection with this investigation, the Company has received and has
responded to a subpoena issued by the Grand Jury for the District of
Columbia.
Regarding environmental matters, the operations of the Company, like those
of other companies engaged in similar businesses, involve the use, disposal
and clean-up of substances regulated under environmental protection laws.
In a number of instances the Company has been identified as a Potentially
Responsible Party by the United States Environmental Protection Agency, and
in one instance the State of Washington, alleging that because various of
its divisions had arranged for the disposal of hazardous wastes at a number
of facilities that have been targeted for clean-up pursuant to the
Comprehensive Environmental Response Compensation and Liability Act
("CERCLA") or similar State law. Although CERCLA and corresponding State
law 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 either qualifies as a de minimis or minor
contributor at each site. Accordingly, the Company believes that the
portion of remediation costs that it will be responsible for will therefore
not be material.
The Company is a defendant in an action filed in the United States District
Court for the Middle District of Louisiana brought by Gulf States Utilities
Company ("GSU"). The complaint alleges that the Company breached its
contract for the sale of two emergency diesel generators delivered to GSU's
River Bend Nuclear Generating Station in 1981 and 1982. GSU alleges that
it has incurred a loss of $8 million and claims additional amounts for the
use of money and an equitable adjustment of the purchase price. In July
1992, the District Court for the Middle District of Louisiana granted the
Company's motion for Summary Judgment dismissing GSU's claims. In November
1993, the Fifth Circuit Court of Appeals reversed and remanded the case for
trial. The ruling eliminated the Company's statute of limitations defense,
but preserved all other defenses. In February 1995, a settlement of this
matter was tentatively reached requiring a $1.8 million payment by the
Company to GSU.
The Company also has two other lawsuits pending against it relating to
equipment sold by its former diesel engine division and a lawsuit relating
to performance shortfalls in products delivered by its former Delaval
Turbine Division in a prior year.
With respect to the litigation and claims described in the preceding
paragraphs, it is management's opinion that the Company either expects to
prevail, has adequate insurance coverage or has established appropriate
reserves to cover potential liabilities; however, the ultimate outcome of
any of these matters is indeterminable at this time.
In addition, the Company is involved in various other pending legal
proceedings arising out of the Company's business. The adverse outcome of
any of these legal proceedings is not expected to have a material adverse
effect on the financial condition of the Company. However, if all or
substantially all of these legal proceedings were to be determined
adversely to the Company, which is viewed by the Company as only a remote
possibility, there could be a material adverse effect on the financial
condition of the Company.
Item 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 1994.
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 * 56 Chairman, Chief Executive
Officer and President
Thomas J. Bird, Jr. 51 Executive Vice President,
General Counsel and Secretary
William M. Brown 52 Executive Vice President and
Chief Financial Officer
J. Dwayne Attaway 53 Executive Vice President
John J. Carr 52 Executive Vice President
Brian Lewis 61 Executive Vice President
Gary E. Walker 57 Executive Vice President
David C. Christensen 61 Senior Vice President,
Human Resources
Robert A. Derr II 49 Vice President and
Corporate Controller
Geoffrey M. Dobson 57 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 as Chief Executive Officer and
President in September 1993 and was elected Chairman in June 1994. 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, Jr. was promoted to his current position in October 1994.
Mr. Bird served as Senior Vice President, General Counsel and Secretary
from June 1992 to October 1994, and as Vice President and Associate General
Counsel from July 1990 to June 1992. Prior to joining the Company in July
1990, 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/Delroyd, Fincor
Electronics, Gems Sensors, IMO AB, 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 had responsibility for the
Company's former 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.
Dividend
Declared
High Low Per Share
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 10 1/8 7 --
2nd Quarter 10 7/8 9 1/2 --
3rd Quarter 12 9 3/8 --
4th Quarter 12 1/4 8 3/4 --
1995:
1st Quarter 11 1/2 6 1/4 --
(through March 15, 1995)
The last sale price for the Company's Common Stock as reported by the
New York Stock Exchange on March 15, 1995, was $6 7/8 per share. As of
March 15, 1995, there were approximately 24,289 holders of record of
the Company's Common Stock.
Three 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 is
prohibited from declaring or paying cash dividends through at least July
31, 1997.
<TABLE>
Item 6. Selected Financial Data.
(Dollars in millions except per share amounts)
Year Ended December 31, (a) <F1>
<CAPTION>
1994 1993* 1992* 1991* 1990 *
<S> <C> <C> <C> <C> <C>
Net sales $463.9 $494.2 $573.2 $596.0 $641.1
Gross profit 130.8 144.5 143.9 157.5 175.2
Selling, general and administrative
expenses 86.8 108.5 112.7 114.4 113.0
Research and development expenses 6.2 9.2 9.9 8.8 9.6
Unusual items --- 15.7 16.7 --- ---
Income from continuing operations
before interest expense, income
taxes, minority interest,
extraordinary item and cumulative
effect of change in accounting
principle 40.5 12.0 7.0 35.9 58.1
Interest expense 34.0 38.4 44.5 44.3 42.4
Income (loss) from continuing
operations before extraordinary
item and cumulative effect of
change in accounting principle 3.6 (40.1) (25.8) (5.3) 9.2
Discontinued operations,
net of taxes 5.6 (212.4) (29.2) 16.7 12.0
Extraordinary item (5.3) (18.1) --- --- ---
Cumulative effect of change in
accounting principle, net of taxes --- --- (27.6) --- ---
Net income (loss) 3.9 (270.6) (82.6) 11.4 21.2
Earnings (loss) per share:
Continuing operations before
cumulative effect of change in
accounting principle
and extraordinary item .22 (2.37) (1.53) (.31) .52
Discontinued operations .32 (12.58) (1.73) .99 .68
Extraordinary item (.31) (1.07) --- --- ---
Cumulative effect of change in
accounting principle --- --- (1.64) --- ---
Net income (loss) .23 (16.02) (4.90) .68 1.20
Cash dividends per share --- --- .375 .50 .485
Capital expenditures 9.2 10.4 15.0 14.6 24.7
Depreciation and amortization
expense 22.0 23.2 24.2 24.4 24.6
Working capital 135.2 107.1 111.0 226.8 239.7
Total assets:
Continuing operations 429.7 454.9 583.8 599.3 613.4
Discontinued operations 145.0 141.7 328.0 361.6 359.0
Total assets 574.7 596.6 911.8 960.9 972.4
Total long-term debt including
current portion 394.0 362.3 399.4 410.4 415.2
Shareholders' equity (deficit) (28.0) (35.7) 239.4 334.7 331.0
<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 1994 presentation.
</TABLE>
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
Restructuring Summary
As of March 28, 1995, the Company has either completed the sale of, or has
received a letter of intent for the sale of, substantially all of the
businesses included in the asset divestiture program initially begun in
October, 1992. Proceeds from asset sales completed during the first
quarter of 1995 have been used to repay all of the Company's outstanding
senior domestic bank debt as well as to redeem $40 million of the Company's
12.25% Senior Subordinated Debentures.
Additionally, as a result of an approximately $40 million after-tax gain
realized on the January 17, 1995 sale of the Turbomachinery business,
shareholders' equity will be restored to a positive value in the first
quarter of 1995.
The remaining businesses included in this program, not currently under
contract, are expected to be under contract of sale in the near future and
to be sold prior to year-end. Additionally, certain idle facilities remain
to be sold and the Company continues to actively pursue the sale of these
properties.
Asset Sales
The Company sold its Heim Bearings, Aerospace and Barksdale Controls
operations for aggregate proceeds of approximately $91 million in 1993 and
its CEC Instruments division, Corporate headquarters building and other
previously identified assets for aggregate proceeds of $13.2 million in
1994. Results of these operations to their date of sale as well as an
operation remaining to be sold, other than the Electro-Optical and
Turbomachinery businesses, are included in continuing operations reported
in the consolidated financial statements.
The Company sold the Baird Analytical Instruments division of its Electro-
Optical Systems business to a subsidiary of Thermo Instruments Systems Inc.
on January 3, 1995 for $12.3 million in cash, which was used to reduce its
domestic senior debt.
On January 17, 1995, the Company completed the sale of its Delaval Turbine
and TurboCare divisions, which comprised substantially all of the Company's
Turbomachinery business segment, and its 50% interest in Delaval-Stork, a
Dutch joint venture, to Mannesmann Demag of Dusseldorf, Germany, for $124
million. At closing, the Company received $109 million in cash, with the
balance earning interest until it is received at specified future contract
dates subject to adjustment as provided in the agreement. These proceeds
were used to complete the repayment of the Company's domestic senior debt
and to redeem $40 million of the Company's 12.25% senior subordinated
debentures.
On February 8, 1995, the Company announced that it has a letter of intent
for the acquisition of most of its Electro-Optical Systems business by
Litton Industries, for approximately book value. Under the terms of the
letter of intent, Litton would acquire all of the assets of the Varo night
vision and laser business, other than real estate, and would lease the
operations' facilities in Dallas, Texas, for two years with options to
extend the leases. The sale is subject to the receipt of certain
government approvals. Management believes that this transaction will close
in the second quarter of 1995. Not included in the proposed agreement is
Varo's Electronic Systems division, which is being marketed to interested
parties. Management intends to use the proceeds of these sales to pay down
debt.
Other Restructuring
In 1993, the Company recorded a charge to operations for other
restructuring activities which benefited 1994 operating results. The
Company has implemented cost-cutting measures at its core operations to
reduce its expense structure and to eliminate duplicative functions. The
Company has also consolidated certain operations in the European controls
and automotive components divisions and has revised operating processes and
reduced employment levels at the pumps and other operations. The number of
employees in core operations company-wide declined by approximately 210,
or 6 % between mid-1993 and mid-1994. These organizational restructuring
measures have been providing net cash benefits, which for continuing
operations, approximated $2 million in 1994 and will approximate $5
million annually thereafter based largely on reduced employment costs. The
majority of the restructuring has been completed.
Results of Operations
The net income per share in 1994 was $.23 compared with a net loss per
share of $16.02 in 1993 and a net loss per share of $4.90 in 1992.
1994 1993 1992
Earnings (loss) per share:
Continuing operations before
extraordinary item and
cumulative effect of change
in accounting principle $ .22 $ (2.37) $ (1.53)
Discontinued operations $ .32 $(12.58) $ (1.73)
Extraordinary item $ (.31) $ (1.07) ---
Cumulative effect of change in
accounting principle --- --- $ (1.64)
Net income (loss) $ .23 $(16.02) $ (4.90)
The Electro-Optical and Turbomachinery businesses are accounted for as
discontinued operations in the accompanying consolidated financial
statements. Accordingly, the discussion that follows concerns only the
results of continuing operations. The 1993 and 1992 amounts have been
reclassified to conform to this presentation. As a result of discontinuing
the Electro-Optical Systems and Turbomachinery business segments, the
Company has focused its operations on the remaining two core business
segments, the Morse Controls segment and the Pumps, Power Transmission &
Instrumentation segment.
The twelve months ended December 31, 1994 include an extraordinary charge
of $5.3 million after-tax ($.31 per share) representing fees and charges
related to extinguishment of debt in connection with the restructuring of
the Company's senior credit facilities in August 1994.
The results of operations for the twelve months ended December 31, 1993
included 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 related 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 were
issued and included in long-term debt. The Make-Whole Notes were repaid in
August 1994. Additionally, approximately $4 million of fees related to the
1993 restructuring of the Company's credit facilities were paid in 1993.
This amount was being amortized until August 1994, at which time, the
balance was recognized as an extraordinary charge in connection with the
extinguishment of the restructured credit facilities.
The twelve months ended December 31, 1993 include net unusual charges of
$15.7 million in loss from continuing operations. These charges include
$6.6 million related to the restructuring and consolidation of certain of
the Company's operating units ($3.7 million included in the Morse Controls
segment, $1.7 million included in the Pumps, Power Transmission &
Instrumentation segment and $1.2 million included in Corporate Expense, all
principally comprised of severance costs), $10.1 million for an expected
net loss overall related to the Company's asset divestiture program
(included in the Other segment), and $5 million in debt-related financing
fees (included in Corporate Expense). 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 (included in the Other segment). Of the $21.7 million of
unusual charges, required cash outlays were approximately $7.1 million and
$.2 million in 1994 and 1993, respectively. The estimated cash requirement
for 1995 is $1.3 million, with the remainder representing non-cash charges.
As a result of unanticipated losses in 1993, the Company provided reserves
of $13.6 million against previously recorded future tax benefits in loss
from continuing operations. These tax benefits may be realized in future
years.
The twelve months ended December 31, 1992 include unusual charges of $16.7
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. No cash outlays are
anticipated in the future related to these charges.
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.
The Company had income from discontinued operations of $5.6 million (net of
income tax expense of $.8 million) or $.32 per share in 1994, a loss of
$212.4 million (including income tax expense of $1.4 million) or $12.58 per
share in 1993, and a loss of $29.2 million (net of an income tax benefit of
$13.9 million) or $1.73 per share in 1992. The loss recorded in 1993
includes an estimated loss on disposal of the Company's Electro-Optical
Systems business 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, of which approximately $4.6 million was
expended in 1994. The results from operations for the discontinued
operations include allocations for interest of $17.4 million, $18.0 million
and $13.4 million for 1994, 1993 and 1992, respectively.
The Company had income from continuing operations of $3.7 million or $.22
per share in 1994. The 1993 loss from continuing operations of $40.1
million or $2.37 per share was primarily as a result of the net unusual
charges of $15.7 million and the $13.6 million tax reserve provided against
previously recorded future tax benefits. The Company had a loss from
continuing operations of $25.8 million or $1.53 per share in 1992 including
unusual charges of $16.7 million.
Net Sales
Net sales from continuing operations in 1994 were $463.9 million, compared
with $494.2 million in 1993. Sales from core operations (excluding
operations divested since the beginning of 1993 or pending divestiture)
were $452.9 million in 1994 compared with $413.8 million in 1993, an
increase of 9.5%. A significant portion of this increase is attributable
to the Company's Italian automobile business as the Company continues to be
a key supplier to Fiat S.p.A.
Net sales from continuing operations in 1993 were $494.2 million, a decline
of $79.0 million or 13.8% from $573.2 million for 1992. A large part of
this decline, $34.7 million, 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 divested divisions, the Company's core businesses had
sales of $413.8 million in 1993 versus $458.1 million in 1992, a decline of
$44.3 million or 9.7%. Over 80% of this decline, approximately $37
million, was due to unfavorable foreign exchange rate effects. The major
portion of the remaining decline was attributable to decreases in volume
occurring in the Company's Italian automobile business.
Costs and Expenses
Selling, general and administrative expenses declined $21.7 million in 1994
compared with 1993, with most of the decline attributable to businesses
sold subsequent to June 30, 1993, to the phase-out of certain
postretirement benefit subsidies in 1994, and lower levels of general and
administrative staff. Selling, general and administrative expenses as a
percent of sales decreased to 18.7% in 1994 compared with 22.0% in 1993.
Research and development expenditures were 1.3% of sales in 1994, 1.9% in
1993 and 1.7% in 1992.
Selling, general and administrative expenses decreased $4.2 million in 1993
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 $1.1 million in
1993 primarily because of the consolidation of a joint venture that became
wholly-owned in late 1992 offsetting decreases in other core operations.
General and administrative expenses decreased slightly on a year-to-year
basis. However, because sales decreased while the Company maintained its
selling efforts, total selling, general and administrative expenses were
22.0% of sales in 1993 compared with 19.7% for 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 from continuing
operations over the phase out period at approximately $4 million per year.
The pre-tax amount amortized to income from continuing operations was $4.4
million in 1994. The Company does not anticipate a significant increase or
decrease in cash requirements related to this change in policy during the
phase out period.
Average borrowings in 1994 were $51 million lower than in 1993. As a
result, total interest expense (before allocation to discontinued
operations) of $51.7 million in 1994 was $5.5 million less than in 1993.
Similarly, because average borrowings in 1993 were $21 million lower than
in 1992, interest expense of $57.2 million in 1993 decreased $2.3 million
compared with 1992. The interest expense for continuing operations as
shown on the Consolidated Statements of Income excludes interest expense
incurred by the discontinued operations as well as an interest allocation
to the discontinued operations of $17.4 million in 1994, $18.0 million in
1993 and $13.4 million in 1992.
Income tax expense from continuing operations for 1994 was $2.4 million and
for 1993 was $13.6 million. The 1994 amount represents foreign and state
income taxes. The 1993 amount is principally comprised of the provision of
a reserve against previously recorded tax benefits. The Company did not
record a benefit for the 1993 loss as 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 $70
million expiring in 2009, foreign tax credit carryforwards of approximately
$16 million expiring through 1999 and minimum tax credits of approximately
$2.1 million which may be carried forward indefinitely. These
carryforwards are available to offset future taxable income and have been
reserved in accordance with FASB Statement No. 109. These existing tax
loss carryforwards will allow the Company's future earnings to be
essentially free from the payment of U.S. taxes for the foreseeable
future.
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 $1.1 million.
Segment Operating Results
The Morse Controls segment had sales of $197.0 million in 1994, compared
with $163.9 million for 1993, a 20.2% increase resulting from a 32.7%
increase in sales to the Italian automotive industry and an 8.9% increase
in all other sales worldwide. The increased sales level resulted in
operating income for the segment of $14.7 million in 1994, compared with
$3.1 million in 1993. Operating income in 1993 included unusual charges of
$3.7 million related to restructuring and facilities consolidations.
The Pumps, Power Transmission & Instrumentation segment had sales of $256.0
million, a 2.4% increase over the $249.9 million in 1993. Sales were up in
the power transmission sector, flat in the instrumentation sector and down
slightly in the pumps sector. Segment operating income was $29.1 million
in 1994, a 41% improvement over 1993, largely as the result of improved
volume in the power transmission sector, the phase-out of certain
postretirement benefit subsidies, and reduced overhead expenses. Operating
income was also adversely impacted in the fourth quarter of 1993 by
restructuring charges.
Power transmission sales and operating profit both improved for the year
compared with 1993, benefiting from the upturn in general industrial
activity in the U.S. Pump operations sales and operating profit were
adversely affected by the continued fall-off in defense business.
Fourth Quarter Results
Net sales from continuing operations of $116.5 million in the fourth
quarter of 1994 were $4.4 million higher than the $112.1 million for the
fourth quarter of 1993. However, excluding operations divested since the
beginning of 1993 or pending divestiture, fourth quarter sales of core
operations were $114.8 million, or 11.0% higher than 1993 fourth quarter
sales of $103.4 million. The fourth quarter of 1994 includes income of $1.3
million (pre-tax) related to the phase-out of certain postretirement
benefit subsidies. The fourth quarter of 1994 had income from continuing
operations of $1.1 million ($.07 per share), compared with a loss from
continuing operations of $40.5 million ($2.39 per share) in the same period
of 1993. A charge of $21.7 million of unusual items and the provision of a
$13.6 million reserve against previously recorded future tax benefits were
recorded in the fourth quarter of 1993.
Morse Controls segment sales for the fourth quarter of 1994, were 22.4%
ahead of sales in the fourth quarter of 1993. Roltra-Morse's revenue
gained 34%, while worldwide sales elsewhere in the segment were up 11%.
Operations for the quarter benefited from increased sales, and from cost-
cutting actions taken at the end of 1993; operating income was $3.8
million, compared with a $3.9 million loss in the fourth quarter of 1993 as
a result of unusual items related to restructuring and facilities
consolidations.
Roltra-Morse, the segment's automotive components supplier, participated in
an increase in Fiat car production as well as a higher market share on
certain Fiat models, and a successful entry into production in Poland.
Worldwide, there was continued recovery in major sectors served by the
segment's other mechanical and electronic controls products, such as
pleasure marine, construction, agriculture and truck markets.
Pumps, Power Transmission & Instrumentation segment sales in the fourth
quarter were 3.9% ahead of the comparable year-earlier period, and
operating profit improved substantially to $6.8 million, compared with $2.9
million in 1993.
Fourth-quarter Pump group sales were flat year-over-year, as the continued
decline in Navy business was matched by an increase in commercial business
to such markets as pulp and paper, chemical and hydrocarbon processing,
crude oil and machinery.
Power Transmission sales advanced 7.8% year-over-year, primarily into
industrial distribution channels, reflecting the stronger general economic
environment that has persisted in the U.S. throughout 1994. A wide range of
OEMs and end-users are served via this conduit.
Instrumentation group sales comparisons were favorable by 4.2%, as
improvement in Europe and Canada outpaced a moderate decline in U.S.
shipments. There was a major shipment of instrumentation to the Navy in
the fourth quarter of 1993 that was not repeated in 1994.
Liquidity and Capital Resources
The Company's domestic liquidity requirements are served by a revolving
credit facility, while its needs outside the U.S. are covered by short and
intermediate term credit facilities from foreign banks.
Effective August 5, 1994, the Company obtained credit facilities for
borrowings up to $150 million from a group of lenders (the "New Credit
Agreement"), secured by the assets of the Company's domestic operations and
all or a portion of the stock of certain of the Company's subsidiaries. The
New Credit Agreement provided for a $65 million revolving credit facility
through July 31, 1997, a $40 million term loan amortizing to July 1997, and
a $45 million bridge loan maturing January 1996. The revolving credit
facility is extendible to July 1999 under certain conditions. Proceeds
from the New Credit Agreement were used to repay the Company's working
capital loans under the former domestic senior credit facilities, its $30
million 12.75% Senior Note and its $12.4 million Make-Whole Note.
As a result of the extinguishment of the prior facilities in connection
with the New Credit Agreement, the Company incurred a $5.3 million
extraordinary charge in the third quarter of 1994, of which $3.7 million
represents a prepayment premium paid for the $30 million 12.75% Senior
Note.
The Company's operating activities provided cash of $16.8 million in 1994,
compared with providing cash of $25.1 million in 1993. Net cash used by
investing activities was $.3 million in 1994, compared with cash provided
of $70.8 million in the 1993 period. The change in net cash provided by
investing activities is principally a result of $13.2 million of net
proceeds generated from the sale of assets in the 1994 period versus $86.5
million in 1993. Cash and cash equivalents were $26.9 million at December
31, 1994 compared with $22.4 million at December 31, 1993.
Working capital at December 31, 1994 was $135.2 million, an increase of
$28.1 million from the end of 1993, due principally to the reduction in
current debt in 1994. The ratio of current assets to current liabilities
was 1.9 at December 31, 1994, compared with 1.6 at December 31, 1993.
Principally as a result of the 1993 loss, the Company's total debt as a
percent of its total capitalization was 107.5% at December 31, 1994, and
109.7% at December 31, 1993.
Depreciation for continuing operations decreased $2.6 million to $15.7
million in 1994, from $18.3 million in 1993 which, in turn, decreased $1.6
million from 1992. Amortization of intangibles for continuing operations
was $6.3 million in 1994, $4.9 million in 1993, and $4.4 million in 1992.
Additions to property, plant and equipment, made primarily to improve
productivity, were $9.2 million in 1994. The Company anticipates that
capital expenditures in 1995 will increase significantly over the 1994
level to make the necessary investments to maintain and improve competitive
advantages at its operations. There were no material outstanding
commitments for the acquisition of property, plant and equipment at
December 31, 1994.
At December 31, 1994, the Company had 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 $36.7 million and $45 million in term and bridge loans,
respectively, outstanding under the New Credit Agreement, both of which
were repaid with proceeds received in January 1995 from the sales of the
Baird Analytical Instruments division and the Turbomachinery business. In
March 1995, $40 million of the 12.25% senior subordinated debentures were
redeemed with the remainder of these proceeds. Deferred debt expense of
$4.2 million, associated with the portions of the domestic senior debt and
senior subordinated debentures repaid, was written off as an extraordinary
charge in the first quarter of 1995. The Company expects to use proceeds
from the remainder of its divestiture program to reduce its 12.25% senior
subordinated debentures thereby further reducing the Company's interest
expense. As of December 31, 1994, there were no borrowings under the $65
million revolving credit facility; however $35 million of standby letters
of credit were outstanding. Letter of credit exposure was reduced to $20.5
million after the Turbomachinery business sale in January 1995. At the
same time, and in keeping with the terms of the New Credit Agreement, the
$65 million revolving credit facility was reduced to $50 million. The
Company also has approximately $30.7 million in foreign short-term credit
facilities with approximately $12.8 million outstanding as of December 31,
1994.
Business Environment
General economic conditions worldwide continue to create business
opportunities 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 45% 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.
Total sales to the DoD in the form of prime and subcontracts were
approximately 7% of net sales from continuing operations in 1994 and 12% in
1993. The level of sales from continuing operations to the United States
Department of Defense has been significantly reduced from the 1992 total
company-wide level of 22% (in the form of prime and subcontracts) due to
the discontinuance of the Electro-Optical Systems and Turbomachinery
operations.
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 18, 1995 (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, 1994, 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:
Consolidated Financial Statements Page
Consolidated Statements of Income for the Years
Ended December 31, 1994, 1993 and 1992...................F-1
Consolidated Balance Sheets at December 31, 1994
and 1993.................................................F-2
Consolidated Statements of Cash Flows for the
Years Ended December 31, 1994, 1993 and 1992.............F-3
Consolidated Statements of Shareholders' Equity (Deficit)
for the Years Ended December 31, 1994, 1993 and 1992.....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 schedule for the
year ended December 31, 1994, 1993 and 1992 is filed as part of
this Report and should be read in conjunction with the Company's
Consolidated Financial Statements.
Schedule Page
II Valuation and Qualifying Accounts.................... S-1
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
The following reports on Form 8-K were filed during the quarter ended
December 31, 1994:
On December 23, 1994, the Company filed a Report on Form 8-K
reporting under Items 5 and 7.
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) 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) (17) 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) Amendment dated January 1, 1993 to the Employment
Agreement between the Company and William J.
Holcombe, as amended July 19, 1994
10.4 (15) Change in Control Agreement dated January 9, 1987
between the Company and John J. Carr
10.5 (15) Change in Control Agreement dated April 8, 1990
between the Company and J. Dwayne Attaway
10.6 Letter Agreements between the Company and J. Dwayne
Attaway dated April 21, 1994 and April 29, 1994,
respectively
10.7 (15) Change in Control Agreement dated December 23, 1988
between the Company and Brian Lewis
10.8 (15) Change in Control Agreement dated August 5, 1992
between the Company and William M. Brown
10.9 (15) Change in Control Agreement dated August 13, 1992
between the Company and Thomas J. Bird
10.10 (17) Change in Control Agreement dated April 19, 1993
between the Company and Gary E. Walker and agreed to
by him on May 10, 1993
10.11 Letter Agreements dated May 19, 1994 between the
Company and Gary E. Walker
10.12 (A) (17) Employment Agreement dated September 13, 1993
between the Company and Donald K. Farrar
(B) Amendment dated November 17, 1994 to the Employment
Agreement between the Company and Donald K. Farrar
10.13 (17) Change in Control Agreement dated September 13, 1993
between the Company and Donald K. Farrar
Other Material Contracts:
10.14 (2) The Company's Retirement Plan for Salaried Employees
10.15 (A) (8) The Company's Salaried Employees Stock Savings Plan
(11) as amended on July 1, 1987 and as amended on June
14, 1988
(B) (14) Amendment dated March 16, 1989 to the Imo Industries
Inc. Employees Stock Savings Plan
(C) (12) Amendments dated September 6, 1990 and February 14,
1991 to the Imo Industries Inc. Employees Stock
Savings Plan
(D) (13) Amendment dated May 9, 1991 to the Imo Industries
Inc. Employees Stock Savings Plan
(E) (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
(F) (15) Amendments dated December 30, 1991 and August 3,
1992 to the Imo Industries Inc. Employees Stock
Savings Plan
(G) Trust Agreement for the Imo Industries Inc.
Employees Stock Savings Plan as of March 1, 1995
between the Company and Eagle Trust Company
10.16 (1) Distribution Agreement dated December 18, 1986
between Transamerica Corporation and the Company
10.17 (1) Tax Agreement between the Company and Transamerica
Corporation
10.18 (A) (9) Revolving Credit Agreement, dated September 16, 1988
(10) by and among the Company, Bankers 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, Bankers 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, Bankers 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) (17) 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.
(iii) Amended and Restated Combined Restated Credit
Agreement dated as of August 19, 1994 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.
(iv) Consent, Amendment No. 1 and Agreement dated as of
January 17, 1995 among the Company, Bankers Trust
Company as lender, issuer and agent, Chemical Bank,
CIBC, Inc., Barclays Bank PLC, and National City
Bank, Istituto Bancario San Paolo Di Torino S.p.A.,
Commerzbank AG, New York Branch, ABN-AMRO Bank N.V.,
New York Branch, The Prudential Insurance Company of
America as lenders and Mannesmann Capital
Corporation as Assignee
(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) (17) 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
(iii) Amended and Restated Credit Agreement dated as of
August 19, 1994 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., and The Prudential Insurance Company
of America
(iv) Consent, Amendment No. 1 and Agreement dated as of
January 17, 1995 among the Company, Bankers Trust
Company as lender, issuer and agent, Chemical Bank,
CIBC, Inc., Barclays Bank PLC, and National City
Bank, Istituto Bancario San Paolo Di Torino S.p.A.,
Commerzbank AG, New York Branch, ABN-AMRO Bank N.V.,
New York Branch, The Prudential Insurance Company of
America as lenders and Mannesmann Capital
Corporation as Assignee
(F) (17) 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 10-K/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) (17) 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
10.18 (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) (17) 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 10.18 (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) (17) 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 10.18 (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) (17) Schedule of Additional Omitted Mortgages and Deeds
of Trust
10.19 (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 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
(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) (17) 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
10.20 (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
10.21 (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 The Prudential Insurance Company of America
(H) (17) 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 The Prudential Insurance Company of America
10.22 (A) (17) 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
10.18(D)(i) as amended, (ii) the Credit Agreement
identified herein as Exhibit 10.18(E)(i) as amended,
(iii) the Amended and Restated 12.75% Promissory
Note Agreement identified herein as Exhibit
10.19(I)(i) as amended, and (iv) the Amended and
Restated 10.35% Promissory Note Agreement identified
herein as Exhibit 10.21(G) as amended.
(B) (17) 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 10.18(D)(i) as amended,
(ii) the Credit Agreement identified herein as
Exhibit 10.18(E)(i) as amended,(iii) the Amended and
Restated 12.75% Promissory Note Agreement identified
herein as Exhibit 10.19(I)(i) as amended, and (iv)
the Amended and Restated 10.35% Promissory Note
Agreement identified herein as Exhibit 10.21(G) as
amended.
10.23 (6) Agreement and Plan of Merger dated July 13, 1987
among the Company, BC Acquisition Corp. and Baird
Corporation
10.24 (4) Stock Purchase Agreement dated November 30, 1987
between the Company and TRIFIN B.V.
10.25 (9) Agreement and Plan of Merger, dated as of August 21,
1988 by and among the Company, VI Acquisition Corp.
and Varo Inc.
10.26 (9) Stock option agreement, dated as of August 21, 1988,
between VI Acquisition Corp. and Varo Inc.
10.27 (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.
10.28 (11) Share Purchase Agreement dated April 27, 1989, among
Aureoleena Investments Limited, Bushbranch
Investments Limited, and Holdings Limited, as
vendors, and R. J. Burns, C. P. Burns and J. A.
Burns as guarantors, and Morse Controls Limited as
purchaser
10.29 (11) Stock Purchase Agreement dated July 31, 1989 between
Immobiliare Marsicana S.R.L. and Ser-Fid Italiana
S.p.A.
10.30 (11) Agreement for sale of assets dated November 30, 1989
among Ferguson Gear Company, Robert E. Lewis and the
Company
10.31 (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
10.32 (12) Stock Purchase Agreement dated as of May 31, 1990
among United Scientific Holdings PLC, United
Scientific Inc. and the Company
10.33 (17) Asset Sale Agreement dated as of May 10, 1993
between the Company and Roller Bearing Company of
America
10.34 (17) Stock Sale and Asset Transfer Agreement dated as of
July 14, 1993 between the Company and Nova Digm
Acquisition, Inc.
10.35 (i) (17) 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) (17) 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) (17) 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.
10.36 (i) (17) German Asset Purchase Agreement among Imo Industries
GmbH, Mark Controls GmbH i. Gr., the Company and
Mark Controls Corporation
(ii) (17) 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) (17) Amendment No. 2 dated as of December 1, 1993 to
the German Asset Purchase Agreement dated as of
November 23, 1993 among the Company, Mark Controls
Corporation, Imo Industries GmbH and Mark Controls
GmbH i. Gr.
10.37 (A) (18) Credit Agreement dated as of August 5, 1994 among
the Company, as Borrower, Baird Corporation, as
Guarantor, Warren Pumps Inc., as Guarantor, the
Institutions from time to time party thereto as
Lenders and as Issuing Banks, and Citibank, N.A., as
Agent
(B) First Amendment dated as of November 18, 1994,
Second Amendment dated as of January 11, 1995, and
Third Amendment dated as of February 17, 1995 to the
Credit Agreement dated as of August 5, 1994 among
the Company as Borrower, Baird Corporation, as
Guarantor, Warren Pumps Inc., as Guarantor, the
Institutions from time to time party thereto as
Lenders and as Issuing Banks, and Citibank, N.A., as
Agent
10.38 (A) (18) Asset Purchase Agreement dated as of October 14,
1994 by and among the Company, Varo Inc., Baird
Corporation, Optic Electronic International, Inc.,
TPG Partners, L.P. and Varo Acquisition Corp.
(B) (18) Amendment dated as of October 28, 1994 to the Asset
Purchase Agreement dated as of October 14, 1994 by
and among the Company, Varo Inc., Baird Corporation,
Optic Electronic International, Inc., TPG Partners,
L.P. and Varo Acquisition Corp.
(C) Letter dated December 20, 1994 issued to the Company
by Varo Systems, Inc., (formerly Varo Acquisition
Corp.), Varo Holdings Corp. and TPG Partners L.P.
terminating the Asset Purchase Agreement dated as of
October 14, 1994 by and among the Company, Varo
Inc., Baird Corporation, Optic Electronic
International Inc., TPG Partners L.P. and Varo
Acquisition Corp.
10.39 (A) (18) Asset Purchase Agreement dated as of November 4,
1994 by and among the Company, Imo Industries
International Inc. and Mannesmann Capital
Corporation
(B) Agreement, Amendment and Waiver dated January 17,
1995 by and among the Company and Mannesmann Capital
Corporation
10.40 Asset and Stock Purchase Agreement dated as of
January 1, 1995 by and among the Company and Thermo
Jarrell Ash Corporation
20 Proxy Statement for the Company's 1995 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 LLP dated March 29, 1995
27 Financial Data Schedule as of December 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.
(17)Incorporated by reference to the Company's Form 10-K filed with the
Commission on March 31, 1994.
(18)Incorporated by reference to the Company's Form 10-Q filed with the
Commission on November 14, 1994.
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 29, 1995
IMO INDUSTRIES INC.
By: /s/ DONALD K. FARRAR
Donald K. Farrar
Chairman, 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 Chairman, Chief Executive Officer,
Donald K. Farrar President and Director
(principal executive officer) March 29, 1995
/s/ WILLIAM M. BROWN Executive Vice President and
William M. Brown Chief Financial Officer
(principal financial officer) March 29, 1995
/s/ ROBERT A. DERR II Vice President and
Robert A. Derr II Corporate Controller
(principal accounting officer) March 29, 1995
/s/ JAMES B. EDWARDS Director March 29, 1995
James B. Edwards
/s/ J. SPENCER GOULD Director March 29, 1995
J. Spencer Gould
/s/ RICHARD J. GROSH Director March 29, 1995
Richard J. Grosh
/s/ CARTER P. THACHER Director March 29, 1995
Carter P. Thacher
/s/ ARTHUR E. VAN LEUVEN Director March 29, 1995
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>
1994 1993*<F1> 1992*<F1>
<S> <C> <C> <C>
Net Sales $ 463,891 $ 494,183 $ 573,183
Cost of products sold 333,098 349,668 429,307
Gross Profit 130,793 144,515 143,876
Selling, general and administrative
expenses 86,758 108,503 112,722
Research and development expenses 6,173 9,223 9,909
Unusual items --- 15,701 16,740
Income from Operations 37,862 11,088 4,505
Interest expense 33,971 38,362 44,463
Interest income (1,714) (577) (742)
Other (income) expense--net (876) (605) (817)
Equity in (income) loss of
unconsolidated companies --- 231 (983)
Income (Loss) From Continuing Operations
Before Income Taxes, Minority Interest,
Extraordinary Item and Cumulative
Effect of Change in Accounting
Principle 6,481 (26,323) (37,416)
Income taxes (benefit):
Current 2,433 --- ---
Deferred --- 13,600 (12,011)
Total Income Taxes (Benefit) 2,433 13,600 (12,011)
Minority interest 393 164 426
Income (Loss) From Continuing Operations
Before Extraordinary Item and
Cumulative Effect of Change in
Accounting Principle 3,655 (40,087) (25,831)
Discontinued Operations:
Income (Loss) from Operations (net
of income tax expense (benefit)
of $.8 million in 1994, $1.4
million in 1993 and $(13.9)
million in 1992) 5,575 (44,370) (29,169)
Estimated Loss on Disposal --- (168,014) ---
Total Income (Loss) from
Discontinued Operations 5,575 (212,384) (29,169)
Extraordinary Item - Loss on
Extinguishment of Debt (5,299) (18,095) ---
Cumulative effect of change in
accounting principle (net of income
tax benefit of $16,910) --- --- (27,590)
Net Income (Loss) $ 3,931 $(270,566) $ (82,590)
Earnings (loss) per share:
Continuing operations before
extraordinary item and cumulative
effect of change in accounting
principle $ .22 $ (2.37) $ (1.53)
Discontinued operations $ .32 $ (12.58) $ (1.73)
Extraordinary item $ (.31) $ (1.07) ---
Cumulative effect of change in
accounting principle --- --- $ (1.64)
Net income (loss) $ .23 $ (16.02) $ (4.90)
Weighted average number of
shares outstanding 16,926,071 16,890,501 16,869,394
<FN>
See accompanying notes to consolidated financial statements.
<F1> * Reclassified to conform to 1994 presentation.
F-1
</TABLE>
<TABLE>
Imo Industries Inc. and Subsidiaries
Consolidated Balance Sheets
(Dollars in thousands)
December 31,
<CAPTION>
1994 1993 *<F1>
<S> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents $ 26,942 $ 22,356
Trade accounts and notes receivable, less
allowance of $2,659 in 1994 and $2,951 in 1993 84,924 79,293
Inventories-net 86,823 89,106
Recoverable income taxes --- 3,826
Deferred income taxes 4,328 2,680
Net assets of discontinued operations - current 68,697 73,766
Prepaid expenses and other current assets 6,593 13,685
Total Current Assets 278,307 284,712
Property, Plant and Equipment-on the basis of cost
Land 6,018 8,787
Buildings and improvements 46,414 58,501
Machinery and equipment 131,269 135,576
183,701 202,864
Less allowances for depreciation and amortization (91,297) (90,939)
Net Property, Plant and Equipment 92,404 111,925
Intangible Assets, Principally Goodwill 82,435 88,250
Investments in and Advances to Unconsolidated Companies 3,653 3,337
Net Assets of Discontinued Operations - Noncurrent 76,273 67,945
Other Assets 41,587 40,384
Total Assets $ 574,659 $ 596,553
___________________________________________________________________________
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
Current Liabilities
Notes payable $ 12,771 $ 42,759
Trade accounts payable 47,696 39,978
Accrued expenses and other liabilities 53,676 73,657
Accrued costs related to discontinued operations 6,444 12,688
Income taxes payable 5,479 ---
Current portion of long-term debt 17,039 8,527
Total Current Liabilities 143,105 177,609
Long-Term Debt 376,998 353,752
Deferred Income Taxes 7,364 13,944
Accrued Postretirement Benefits - Long-Term 30,918 33,186
Accrued Pension Expense and Other Liabilities 41,997 52,034
Total Liabilities 600,382 630,525
Minority Interest 2,281 1,746
SHAREHOLDERS' EQUITY (DEFICIT)
Preferred stock: $1.00 par value; authorized and
unissued 5,000,000 shares --- ---
Common stock: $1.00 par value; authorized 25,000,000
shares; issued 18,680,428 and 18,584,058 in 1994
and 1993, respectively 18,680 18,584
Additional paid-in capital 79,789 79,080
Retained earnings (deficit) (106,302) (110,233)
Cumulative foreign currency translation adjustments (1,298) (3,361)
Minimum pension liability adjustment (853) (1,768)
Treasury stock at cost - 1,672,788 shares
in 1994 and 1993 (18,020) (18,020)
Total Shareholders' Equity (Deficit) (28,004) (35,718)
Total Liabilities and Shareholders' Equity (Deficit) $ 574,659 $ 596,553
<FN>
See accompanying notes to consolidated financial statements.
<F1> * Reclassified to conform to 1994 presentation.
F-2
</TABLE>
<TABLE>
Imo Industries Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(Dollars in thousands)
Year Ended December 31,
<CAPTION>
1994 1993<F1>* 1992<F1>*
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income (loss) $ 3,931 $(270,566) $(82,590)
Adjustments to reconcile net income
(loss) to net cash provided by
continuing operations:
Discontinued operations (5,575) 212,384 29,169
Depreciation 15,650 18,275 19,834
Amortization 6,343 4,900 4,412
Provision for losses on accounts
receivable 745 1,667 723
Provision (credit) for deferred
income taxes --- 13,600 (12,011)
Dividends received in excess of
(less than) equity in earnings
of unconsolidated companies --- 271 (837)
Minority interest in net income 393 164 426
Gain on sale of property, plant
and equipment (79) (451) (737)
Extraordinary item 5,299 18,095 _
Cumulative effect of accounting change
(net of applicable income taxes) --- --- 27,590
Unusual items --- 15,701 16,740
Other changes in operating assets
and liabilities:
(Increase) decrease in accounts and
notes receivable (6,957) 8,238 21,714
(Increase) decrease in inventories (1,583) 8,344 19,082
Decrease (increase) in recoverable
income taxes 3,826 7,270 (4,488)
Decrease in accounts payable and
accrued expenses (3,171) (674) (5,342)
Other operating assets and
liabilities (5,816) (8,779) (9,665)
Net cash provided by continuing
operations 13,006 28,439 24,020
Net cash provided (used) by
discontinued operations 3,772 (3,337) 2,448
Net Cash Provided by Operating Activities 16,778 25,102 26,468
INVESTING ACTIVITIES
Proceeds from asset divestiture
program, net 13,155 86,481 _
Purchases of property, plant and equipment (9,206) (10,393) (14,957)
Acquisitions, net of cash acquired --- --- (8,168)
Proceeds from sale of property, plant
and equipment 413 138 2,366
Net cash used by discontinued
operations (3,995) (5,674) (5,217)
Other (675) 252 773
Net Cash Provided by (Used in)
Investing Activities (308) 70,804 (25,203)
FINANCING ACTIVITIES
(Decrease) increase in notes payable (31,346) (29,915) 32,262
Proceeds from long-term borrowings 86,951 4,377 412
Principal payments on long-term debt (56,759) (55,575) (18,422)
Proceeds from stock options exercised 415 --- 39
Payment of debt financing costs (11,277) (8,326) _
Dividends paid --- --- (8,432)
Dividends paid to minority interests --- (82) (182)
Other 15 (236) (285)
Net Cash (Used in) Provided by
Financing Activities (12,001) (89,757) 5,392
Effect of exchange rate changes on cash 117 (462) (530)
Increase in Cash and Cash Equivalents 4,586 5,687 6,127
Cash and cash equivalents at
beginning of year 22,356 16,669 10,542
Cash and Cash Equivalents at
End of Year $ 26,942 $ 22,356 $ 16,669
<FN>
See accompanying notes to consolidated financial statements.
<F1> * Reclassified to conform to 1994 presentation.
F-3
</TABLE>
<TABLE>
Imo Industries Inc. and Subsidiaries
Consolidated Statements of Shareholders' Equity (Deficit)
(Dollars in thousands)
<CAPTION>
Cumulative
Addit- Foreign Minimum
ional 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,
1992 *<F1> $18,540 $78,532 $249,247 $ 6,363 $ - $(18,020) $334,662
Net income
(loss) - - (82,590) - - - (82,590)
Cash dividends
($.375 per share) - - (6,324) - - - (6,324)
Foreign currency
translation
adjustments - - - (6,384) - - (6,384)
Shares issued
under stock
option plan 14 25 - - - - 39
Balance at
December 31,
1992 *<F1> 18,554 78,557 160,333 (21) - (18,020) 239,403
Net income
(loss) - - (270,566) - - - (270,566)
Foreign currency
translation
adjustments - - - (3,340) - - (3,340)
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 *<F1> 18,584 79,080 (110,233) (3,361) (1,768) (18,020) (35,718)
Net income - - 3,931 - - - 3,931
Foreign currency
translation
adjustments - - - 2,063 - - 2,063
Minimum pension
liability
adjustment - - - - 915 - 915
Shares issued
under stock
option plan 56 359 - - - - 415
Restricted shares
issued under the
equity incentive
plan 40 350 - - - - 390
Balance at
December 31,
1994 $18,680 $79,789 $(106,302) $(1,298) $ (853) $(18,020) $(28,004)
<FN>
See accompanying notes to consolidated financial statements.
<F1> * Reclassified to conform to current year presentation.
F-4
</TABLE>
Imo Industries Inc. and Subsidiaries
Notes to Consolidated Financial Statements
Note 1 Significant Accounting Policies
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 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.
Financial Instruments: The Company uses forward exchange contracts to
hedge certain firm foreign commitments denominated in foreign currencies.
Gains or losses on forward contracts are deferred and offset against the
foreign exchange gains and losses on the underlying hedged item. The
forward exchange contracts are for periods of less than one year, and the
amounts outstanding as well as gains or losses on such contracts are not
material.
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 are recorded generally when the Company's
products are shipped.
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 $49.5 million in
1994, $56.7 million in 1993 and $58.4 million in 1992. Total interest
capitalized was $.2 million in 1994, $.1 million in 1993 and $.9 million in
1992.
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, 1994 and 1993 was
$68.7 million and $73.6 million, respectively, net of respective
accumulated amortization of $14.4 million and $12.9 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
December 31, 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 and Turbomachinery business segments as discontinued
operations 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 Operations
Electro-Optical Systems
In January 1994, pursuant to a plan approved by the Board of Directors, the
Company announced its intention to dispose of its Electro-Optical Systems
operations. On January 3, 1995, the Company completed the sale of its Baird
Analytical Instruments Division to Thermo Instruments Systems Inc. for
approximately $12.3 million, which was used to repay a portion of the
Company's domestic senior debt (See Note 3). On February 8, 1995, the
Company announced that it has a letter of intent from Litton Industries for
the acquisition of the Optical Systems and Ni-Tec divisions of Varo Inc.
and the Optical Systems division of Baird Corporation. These sales will
complete a substantial part of the Company's planned divestiture of its
Electro-Optical Systems business. The Company is continuing discussions
with prospective buyers of the remaining Varo division, the Electronic
Systems division, and expects to complete this sale in 1995.
Turbomachinery
On July 28, 1994, the Company announced that it had reached an agreement in
principle to sell its Delaval Turbine and TurboCare divisions, which
comprise substantially all of the Company's Turbomachinery business
segment, and its 50% interest in Delaval-Stork, a Dutch joint venture, to
Mannesmann Demag of Dusseldorf, Germany. The parties entered into a letter
of intent in August 1994 and the sale was approved by the Company's Board
of Directors. On January 17, 1995, the Company completed the sale of its
Delaval Turbine and TurboCare divisions and its 50% interest in Delaval-
Stork, to Mannesmann Demag for $124 million. Of this amount, $109 million
was received at closing, with the remainder earning interest to the Company
and to be received at specified future contract dates subject to adjustment
as provided in the agreement. A portion of the proceeds have been used by
the Company to pay off its domestic senior debt in January 1995 and in
March 1995 the Company redeemed $40 million of its 12.25% Senior
Subordinated Debentures with the remainder of the proceeds. The
transaction, which will be reflected in the Company's first quarter of
1995, will result in an estimated gain of $40 million after tax (See Note
3).
In accordance with APB Opinion No. 30, the disposals of these business
segments have been accounted for as discontinued operations and,
accordingly, their operating results have been segregated and reported as
Discontinued Operations in the accompanying Consolidated Statements of
Income. Prior year financial statements have been reclassified to conform
to the current year presentation.
Net assets and liabilities of the Discontinued Operations consist of the
following:
December 31 (Dollars in thousands) 1994 1993
Current Assets:
Receivables $ 57,778 $ 48,122
Inventories 60,280 80,241
Other current assets 2,031 2,068
120,089 130,431
Current Liabilities:
Trade accounts payable 21,049 23,637
Other current liabilities 30,343 33,028
51,392 56,665
Net Current Assets $ 68,697 $ 73,766
Long-term Assets:
Property $ 67,522 $ 72,778
Intangible assets 3,988 4,873
Other long-term assets 9,308 5,195
80,818 82,846
Long-term Liabilities 4,545 14,901
Net Long-term Assets $ 76,273 $ 67,945
Net Assets $144,970 $141,711
Net assets related to the Electro-Optical Systems business are $85 million
as of December 31, 1994 and 1993, and net assets related to the
Turbomachinery business are $60 million and $56.7 million as of December
31, 1994 and 1993, respectively.
A condensed summary of operations for the Discontinued Operations is as
follows:
Year Ended December 31
(Dollars in thousands) 1994 1993 1992
Net Sales $341,550 $319,074 $355,074
Income (loss) from operations
before income taxes and
minority interest 6,375 (42,587) (43,250)
Income taxes (benefit) 800 1,400 (13,875)
Minority interest --- 383 (206)
Income (loss) from operations $5,575 $(44,370) $(29,169)
The income (loss) from operations of the Discontinued Operations for 1994,
1993 and 1992 includes allocated interest expense. Interest expense of
$17.4 million, $18.0 million, and $13.4 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.
Electro-Optical Business
The Electro-Optical loss from operations was $45.3 million and $32.7
million for 1993 and 1992, respectively. In 1994, losses from the Electro-
Optical Systems operations resulted in a net charge of $6.2 million to the
Accrued Expenses of Discontinued Operations reserve established as of
December 31, 1993. Included in the 1993 loss are 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. Included in the 1992 loss are unusual charges
of $27.9 million. 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 Electro-Optical discontinued operation to
estimated realizable value. As of December 31, 1994, the Company has an
accrual for anticipated operating losses of $6.4 million (including $4.2
million of allocated interest) through the date of sale, which is expected
to occur during the second quarter of 1995.
Turbomachinery Business
The Turbomachinery business income from operations was $5.6 million, $1.0
million and $3.6 million for 1994, 1993 and 1992, respectively. Included
in the 1993 income are unusual charges of $2.0 million consisting of
restructuring costs. Included in the 1992 income are unusual charges of
$7.3 million of which $3.0 million is estimated costs associated with
pending litigation and $4.0 million related to estimated warranty and
performance claims.
See Note 15 for discussion of contingencies related to the Electro-Optical
Systems and Turbomachinery businesses.
Note 3 Subsequent Events
On January 3, 1995, the Company completed the sale of the Baird Analytical
Instruments division of its Electro-Optical Systems business to Thermo
Instrument Systems Inc., a subsidiary of Thermo Electron Corporation, for
$12.3 million in cash, which was used to reduce its domestic senior debt.
A loss was previously recognized in connection with the net realizable
value adjustment on the entire Electro-Optical Systems business recorded in
1993.
On January 17, 1995, the Company completed the sale of its Delaval Turbine
and TurboCare divisions, which comprise substantially all of the Company's
Turbomachinery business segment, and its 50% interest in Delaval-Stork, a
Dutch joint venture, to Mannesmann Capital Corporation, a subsidiary of
Mannesmann Demag of Dusseldorf, Germany, for $124 million in cash. At
closing, the Company received $109 million, with the balance earning
interest until it is received at specified future contract dates subject to
adjustment as provided in the agreement. A portion of these proceeds were
used to complete the repayment of the Company's domestic senior debt in
January 1995. In March 1995, $40 million of the 12.25% Senior Subordinated
Debentures were redeemed with the remainder of these proceeds. This
transaction, which will be reflected in the Company's financial statements
in the first quarter of 1995, will result in an estimated after-tax gain of
$40 million.
Deferred debt expense of $4.2 million, associated with the portions of the
domestic senior debt and senior subordinated debentures extinguished in
connection with the above transactions, was written off as an extraordinary
charge in the first quarter of 1995.
Both the Electro-Optical Systems and Turbomachinery business segments have
been accounted for as discontinued operations, and an interest allocation
has been included in the income (loss) from operations of the discontinued
operations in each of the three years in the period ended December 31, 1994
(See Note 2).
Presented below is an unaudited condensed balance sheet which sets forth
historical information as adjusted to give effect to the sales of the
Company's Baird Analytical Instruments division and its Turbomachinery
business including its 50% interest in Delaval-Stork, and the related debt
repayments. The adjustments assume that the transactions occurred on the
balance sheet date.
December 31, 1994
(Dollars in thousands) Reported Adjustments Adjusted
(Unaudited) (Unaudited)
Cash and cash equivalents $ 26,942 $ --- $ 26,942
Other current assets 182,668 5,000 187,668
Noncurrent assets 220,079 5,800 225,879
Net assets of discontinued operations 144,970 (72,870) 72,100
Total Assets $574,659 $ (62,070) $512,589
Notes payable and current portion of
long-term debt $ 29,810 $ (13,333) $ 16,477
Other liabilities 195,855 23,797 219,652
Long-term debt 376,998 (108,334) 268,664
Shareholders' equity (deficit) (28,004) 35,800 7,796
Total Liabilities and
Shareholders' Equity (Deficit) $574,659 $ (62,070) $512,589
Note 4 Restructuring Plan
Asset Divestiture Program
As of December 31, 1994, the Company had substantially completed the
restructuring plan announced on October 29, 1992, pursuant to which it
divested six of its operating units in 1993, two of its operating units and
a portion of its underutilized real estate holdings in 1994. The
divestitures included units of its aerospace businesses, units of its
instruments and transducer businesses, certain other non-strategic
businesses and underutilized real estate holdings. As discussed above, in
January 1994, the Company announced its intention to dispose of its
Electro-Optical Systems business, and on January 17, 1995 completed the
sale of its Delaval Turbine and TurboCare divisions, which comprise
substantially all of its Turbomachinery business segment, and its 50%
interest in Delaval-Stork, a Dutch joint venture. Both of these businesses
are being accounted for as discontinued operations (See Note 2).
During 1994, the Company sold its CEC Instruments and Turboflex Ltd.
operations, its Corporate headquarters building and other previously
identified assets for aggregate proceeds of $13.2 million. The proceeds
were used to repay a portion of the Company's domestic senior debt.
As of December 31, 1993, the Company had sold its Heim Bearings, Aerospace
and Barksdale Controls operations for proceeds of approximately $91
million, and thus had 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 1993 restructured credit facilities.
Excluding the Electro-Optical Systems operations, the remaining assets to
be sold in this program consist of one non-strategic business and the
remainder of its underutilized real estate holdings. The Company targets
completion of the divestitures over the next 9 to 12 months.
The operating units sold and the remaining assets to be sold as part of the
asset divestiture program, except for the Electro-Optical Systems and
Turbomachinery businesses, have been grouped as a separate segment entitled
Other for segment reporting purposes. See Note 11 for segment operating
results for the years ending December 31, 1994, 1993 and 1992. These units
in total produced a loss before income taxes of $2 million in 1994 and
essentially break-even results before unusual items and income taxes for
the years 1993 and 1992. These results are net of $2.2 million , $5.9
million and $8.3 million of interest expense which has been allocated based
on net assets for the years 1994, 1993 and 1992, 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. In the fourth
quarter of 1993, the Company recorded a charge in continuing operations of
$6.6 million relating to this program. The actions taken in 1994, under
this restructuring plan, were to implement cost-cutting measures at its
core operations to reduce its expense structure and to eliminate
duplicative functions. The company has consolidated certain operations in
the European controls and automotive components divisions and has revised
operating processes and reduced employment levels at the pumps and other
operations. The number of employees in core operations declined by
approximately 210, or 6% between mid-1993 and mid-1994. This program was
substantially complete as of December 31, 1994, with the remainder expected
to be completed by the end of the first quarter of 1995.
In the fourth quarter of 1993, the Company recorded a charge of $6.6
million ($.39 per share) relating to this program, which amount was
classified as an unusual charge in loss from continuing operations (See
Note 7). The restructuring charge was principally comprised of severance
costs and impacts both the Company's industry segments and the Corporate
office (See Note 11). Accrued restructuring costs included in accrued
expenses and other liabilities are $1.3 million and $6.4 million at
December 31, 1994 and 1993, respectively.
Note 5 Inventories
Inventories are summarized as follows:
December 31 (Dollars in thousands) 1994 1993
Finished products $ 35,649 $ 38,476
Work in process 31,990 28,669
Materials and supplies 32,952 36,037
100,591 103,182
Less customers' progress payments 1,635 2,255
Less valuation allowance 12,133 11,821
$ 86,823 $ 89,106
Note 6 Accrued Expenses and Other Liabilities
Accrued expenses and other liabilities consist of the following:
December 31 (Dollars in thousands) 1994 1993
Accrued contract completion costs $ 556 $ 886
Accrued product warranty costs 5,037 4,050
Accrued litigation and claim costs 4,493 14,312
Payroll and related items 12,773 13,872
Accrued interest payable 10,573 11,590
Accrued restructuring costs 1,321 6,389
Accrued divestiture costs 8,582 4,178
Other 10,341 18,380
$ 53,676 $ 73,657
Note 7 Unusual Items
During the twelve months ended December 31, 1993, the Company recognized
unusual charges of $15.7 million ($.93 per share) in loss from continuing
operations. During the fourth quarter of 1993, the Company recognized
charges of $21.7 million that include provisions of $6.6 million related to
the restructuring and consolidation of certain of the Company's operating
units (See Note 4), $10.1 million expected net loss overall related to the
Company's asset divestiture program (See Note 4) 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 of December 31, 1993, as a
result of the fourth quarter net loss. 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 $16.7
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 8 Income Taxes
The components of income tax expense (benefit) from continuing operations
are:
Year Ended December 31
(Dollars in thousands) 1994 1993 1992
Current:
Federal $ --- $ --- $ ---
Foreign 1,973 --- ---
State 460 --- ---
2,433 --- ---
Deferred:
Federal --- 13,000 (7,498)
Foreign and State --- 600 (4,513)
--- 13,600 (12,011)
$ 2,433 $ 13,600 $(12,011)
Income tax expense (benefit) from discontinued operations, in thousands, is
as follows: 1994 - $800; 1993 - $1,400; and 1992 - $(13,875).
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, 1994 and 1993 are as follows:
December 31
(Dollars in thousands) 1994 1993
Current Long-term Current Long-term
Deferred tax assets:
Postretirement benefit
obligation $ 765 $ 11,593 $ 765 $ 14,340
Expenses not currently
deductible 19,174 25,879 21,308 32,436
Net operating loss carryover --- 24,673 --- 17,150
Tax credit carryover --- 8,653 --- 1,755
Total deferred tax assets 19,939 70,798 22,073 65,681
Valuation allowance for
deferred tax assets (15,140) (53,770) (15,061) (45,154)
Net deferred tax assets 4,799 17,028 7,012 20,527
Deferred tax liabilities:
Tax over book depreciation --- 14,908 --- 17,708
Difference between
book and tax basis of
property --- 3,930 --- 8,455
Difference between book
and tax basis of income
recognition 471 1,230 4,332 4,332
Other --- 4,324 --- 3,976
Total deferred tax liabilities 471 24,392 4,332 34,471
Net deferred tax assets
(liabilities) $ 4,328 $ (7,364) $ 2,680 $(13,944)
At December 31, 1994, unremitted earnings of foreign subsidiaries were
approximately $23.3 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 $1.1 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) 1994 1993 1992
United States $(2,322) $(22,656) $(39,685)
Foreign 8,803 (3,667) 2,269
$ 6,481 $(26,323) $(37,416)
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) 1994 1993 1992
Tax at U.S. federal income tax rate $ 2,268 $ (9,213) $(12,721)
State taxes, net of federal income
tax effect 299 396 (1,092)
Impact of foreign tax rates and
credits (1,108) --- 141
Impact of foreign sales corporation
exempt income --- --- (702)
Net U.S. tax on distributions of
current foreign earnings 935 --- 175
Goodwill amortization 656 694 1,554
Other/valuation reserve (617) 21,723 634
Income tax expense (benefit) $ 2,433 $ 13,600 $(12,011)
Net income taxes paid during 1994 and 1992 were $.2 million and $3.7
million, respectively, and net income tax refunds received during 1993 were
$7 million.
The Company has net operating loss carryforwards of approximately $70
million expiring through 2009, foreign tax credit carryforwards of
approximately $16 million expiring through 1999, which, for financial
reporting purposes, are reflected as deductible foreign taxes, and minimum
tax credits of approximately $2.1 million which may be carried forward
indefinitely. These carryforwards are available to offset future taxable
income and have been reserved in accordance with FASB Statement No. 109.
Note 9 Notes Payable and Long-Term Debt
Effective August 5, 1994, the Company obtained credit facilities for
borrowings up to $150 million from a group of lenders (the "New Credit
Agreement"), secured by the assets of the Company's domestic operations and
all or a portion of the stock of certain of the Company's subsidiaries. The
New Credit Agreement provided for a $65 million revolving credit facility
through July 31, 1997, a $40 million term loan amortizing to July 1997, and
a $45 million bridge loan maturing January 1996. Both the revolving credit
facility and the term loan are extendible to July 1999 under certain
conditions. Proceeds from the New Credit Agreement were used to repay the
Company's working capital loans under the former domestic senior credit
facilities, its $30 million 12.75% Senior Note and its $12.4 million Make-
Whole Notes.
At December 31, 1994, the Company had $36.7 million and $45 million in term
and bridge loans, respectively, outstanding under the New Credit Agreement,
both of which were repaid with proceeds received in January 1995 from the
sales of the Baird Analytical Instruments division and the Turbomachinery
business (See Note 3). As of December 31, 1994, there were no borrowings
under the $65 million revolving credit facility; however $35.1 million in
standby letters of credit were outstanding. Letter of credit exposure was
reduced to $20.5 million after the Turbomachinery business sale in January
1995. At the same time, and in keeping with the terms of the New Credit
Agreement, the $65 million revolving credit facility was reduced to $50
million. The Company currently has approximately $30.7 million in foreign
short-term credit facilities with approximately $12.8 million outstanding
as of December 31, 1994. 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 8.8% and 8.2% at December 31, 1994 and 1993,
respectively.
Long-term debt of continuing operations consists of the following:
December 31 (Dollars in thousands) 1994 1993
Promissory note with interest at 12.75%,
due March 31, 1995 $ --- $ 30,000
Promissory note with interest at 10.35%,
$5 million due annually from
1994 to 2003 --- 4,379
Make-Whole Notes with interest at 2%
over the prime rate, due December 31, 1996 --- 11,519
Bridge Loan due January 31, 1996 (1) 45,000 ---
Term Loan, $3.3 million due quarterly
October 31, 1994 to July 31, 1997 (2) 36,667 ---
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 12,370 16,381
394,037 362,279
Less current portion 17,039 8,527
$376,998 $353,752
(1) This loan bears interest at a rate equal to the sum of the "Eurodollar
Rate" calculated in accordance with the New Credit Agreement plus 4.5% for
the first six months after the closing date of the New Credit Agreement,
and increasing by 0.25% every three months thereafter.
(2) This loan bears interest at the rate of 2.75% in excess of the
"Eurodollar Rate" calculated in accordance with the New Credit Agreement.
___________________________________________________________________
The aggregate annual maturities of long-term debt from continuing
operations, in thousands, for the four years subsequent to 1995 are: 1996 -
$60,525; 1997 - $161,381; 1998 - $2,059; and 1999 - $37,533.
Total debt of the discontinued operations, in thousands, amounted to $1,654
and $3,277 as of December 31, 1994 and 1993, respectively. Of these
amounts, approximately $1,605 and $1,807 represent the long-term portion.
The 12.25% senior subordinated debentures are redeemable in whole or in
part, at the option of the Company at any time, at 100% of their principal
amount, plus accrued interest. Interest is payable semi-annually on
February 15 and August 15. The fair value of these instruments at December
31, 1994, based on market bid prices, was $151.1 million. In March 1995,
$40 million of the 12.25% senior subordinated debentures were redeemed from
the proceeds received from the sale of the Turbomachinery business in
January 1995 (See Note 3).
The 12% senior subordinated debentures are currently redeemable in whole or
in part, at the option of the Company, at 105% of their principal amount,
plus accrued interest. The redemption price declines to 102.5% on November
1, 1995 and to 100% 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, 1994, based on market bid prices, was $151.9 million.
The New Credit Agreement requires the Company, among other things, to meet
certain objectives with respect to financial ratios and it and the 12.25%
and 12% senior subordinated debentures contain provisions which place
certain limitations on dividend payments and outside borrowings. Under the
most restrictive of such provisions, the Company must maintain certain
minimum consolidated net worth levels, interest coverage and fixed charge
coverage levels and the Company is prohibited from declaring or paying cash
dividends through at least July 31, 1997.
Bank, advisory and legal fees associated with the 1994 refinancing of the
New Credit Agreement amounted to approximately $5.6 million payable in
1994. In addition, a $5.3 million ($.31 per share) charge related to the
extinguishment of senior debt under the former domestic senior credit
facilities was recorded as an extraordinary charge in 1994. The $5.3
million charge is comprised of a $3.7 million premium paid in 1994 on the
prepayment of its $30 million 12.75% senior promissory note and the write-
off of approximately $1.6 million of previously deferred loan costs.
Bank, advisory and legal fees associated with the 1993 restructuring of the
Company's domestic senior credit facilities 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.
Deferred debt expense of $4.2 million, associated with the portions of the
domestic senior debt and the 12.25% senior subordinated debentures repaid
in the first quarter of 1995 as discussed in the preceding paragraphs, was
written off as an extraordinary charge in the first quarter of 1995 (See
Note 3).
Note 10 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. During 1994, the aforementioned criteria was met. Vested dates
are based on the original grant dates of the replaced options.
On June 20, 1994, certain additional outstanding non-qualified stock
options, granted on previous dates under the Plan, were repriced pursuant
to the August 17, 1993 Board of Directors approval. This resulted in the
replacement of 15,000 non-qualified stock options at various exercise
prices ranging from $11.625 to $20.375, by 9,970 non-qualified stock
options at an exercise price of $10.25, the fair market value at the date
of the replacement grant. 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. Grants of
40,000 shares and 30,000 shares of restricted stock were made in 1994 and
1993, respectively, all of which were outstanding as of December 31, 1994.
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) 1994 1993 1992
Options:
Granted 450 498 197
Exercised (56) --- (14)
Canceled (159) (150) (225)
Repricing
Canceled (15) (468) ---
Issued 10 273 ---
Outstanding at end of year 1,537 1,307 1,154
Exercisable at end of year 654 652 767
Available for grant at end of year 55 341 524
Option price range per share:
Granted $ 9.75 $7.375 $11.125
-$ 10.25 -$12.00
Exercised $ 7.00 --- $10.375
-$ 7.375
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, 1994. In December 1990, 40,000 stock options were granted at $10.375
per share, all of which were exercisable as of December 31, 1994.
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.
Employees Stock Savings Plan
Up to 600,000 shares of the Company's common stock are reserved for
issuance under the Company's Employees Stock Savings Plan. (See Note 12)
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 11 Operations by Industry Segment and Geographic Area
The Company classifies its continuing operations into two core business
segments: Morse Controls and Pumps, Power Transmission & Instrumentation.
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. A third business segment entitled Other is included in continuing
operations for financial reporting purposes, and includes operations
previously sold and operations to be sold as part of the Company's asset
divestiture program. Certain 1993 and 1992 amounts have been restated to
conform to the 1994 presentation reflecting the Turbomachinery business
segment as a discontinued operation. 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) 1994 1993 1992
Net Sales
Morse Controls $196,955 $163,876 $192,733
Pumps, Power Transmission
& Instrumentation 255,962 249,896 265,336
Other 10,974 80,411 115,114
Total net sales $463,891 $494,183 $573,183
Segment operating income
Morse Controls $ 14,677 $ 3,090 $ 6,031
Pumps, Power Transmission
& Instrumentation 29,143 20,646 18,263
Other 38 1,117 (8,739)
Total segment operating income 43,858 24,853 15,555
Equity in income (loss) of
unconsolidated companies --- (231) 983
Unallocated corporate expenses (5,120) (13,160) (10,233)
Net interest expense (32,257) (37,785) (43,721)
Income (loss) from continuing
operations before income taxes,
minority interest, extraordinary
item and cumulative effect of
change in accounting principle $ 6,481 $(26,323) $(37,416)
A reconciliation of segment operating income to income from operations
follows:
Year Ended December 31
(Dollars in thousands) 1994 1993 1992
Segment operating income $ 43,858 $ 24,853 $ 15,555
Unallocated corporate expenses (5,120) (13,160) (10,233)
Other income (876) (605) (817)
Income from operations $ 37,862 $ 11,088 $ 4,505
Segment operating income for the year ended December 31, 1993, includes
$9.5 million of unusual charges, of which $3.7 million, $1.7 million, and
$4.1 million relates to the Morse Controls, Pumps, Power Transmission &
Instrumentation, and Other segments, respectively. Unallocated corporate
expenses include unusual charges of $6.2 million for the year ended
December 31, 1993.
Segment operating income for the year ended December 31, 1992, includes
unusual charges of $16.7 million, of which $.3 million, $.4 million, and
$16.0 million relates to the Morse Controls, Pumps, Power Transmission &
Instrumentation, and Other segments, respectively.
The Morse Controls segment had sales to one commercial customer (Fiat
S.p.A. and its subsidiaries) that accounted for 21%, 15% and 18% of
consolidated sales in 1994, 1993 and 1992, respectively. No other customer
accounted for 10% or more of any segment's sales in 1994, 1993 or 1992.
Year Ended December
(Dollars in thousands) 1994 1993 1992
Identifiable assets
Morse Controls $165,148 $155,745 $167,717
Pumps, Power Transmission
& Instrumentation 196,318 196,748 194,408
Other 24,074 46,434 130,599
Corporate 44,149 55,915 91,118
Discontinued Operations:
Electro-Optical 85,000 85,000 266,092
Turbomachinery 59,970 56,711 61,894
Total identifiable assets $574,659 $596,553 $911,828
Depreciation and amortization
Morse Controls $ 7,374 $ 6,775 $ 7,737
Pumps, Power Transmission
& Instrumentation 9,820 9,449 9,388
Other 826 3,435 4,622
Corporate 3,973 3,516 2,499
Total depreciation and amortization $ 21,993 $ 23,175 $ 24,246
Capital expenditures
Morse Controls $ 4,042 $ 4,907 $ 5,638
Pumps, Power Transmission
& Instrumentation 4,586 4,065 5,055
Other 68 1,069 982
Corporate 510 352 3,282
Total capital expenditures $ 9,206 $ 10,393 $ 14,957
The continuing operations of the Company on a geographic basis are as
follows:
Year Ended December 31
(Dollars in thousands) 1994 1993 1992
Net sales
United States $246,601 $307,918 $344,808
Foreign (principally Europe) 217,290 186,265 228,375
Total net sales $463,891 $494,183 $573,183
Segment operating income
United States $ 31,679 $ 26,046 $ 8,451
Foreign 12,179 (1,193) 7,104
Total segment operating income $ 43,858 $ 24,853 $ 15,555
Identifiable assets
Continuing Operations:
United States $254,261 $283,614 $408,297
Foreign 175,428 171,228 175,545
Discontinued Operations:
United States 141,053 135,585 322,827
Foreign 3,917 6,126 5,159
Total identifiable assets $574,659 $596,553 $911,828
Export sales
Asia $ 2,763 $ 4,362 $ 5,547
Latin America 2,368 1,699 4,202
Canada 3,748 3,132 7,280
Mexico 861 701 530
Europe 2,857 2,750 5,505
Other 3,293 2,596 3,474
Total export sales $ 15,890 $ 15,240 $ 26,538
Note 12 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 $7.9 million in
1994, $8.4 million in 1993 and $8.7 million in 1992, and includes
amortization of prior service cost and transition amounts for periods of 6
to 13 years. In 1993 the Company's divestiture program resulted in a
decrease in U.S. pension plan participants. The total curtailment and
settlement gain, in 1993, of $1.2 million was applied to the reserve for
divestitures (See Note 4). The Company included a $1.9 million curtailment
loss in its estimated loss on disposal related to the discontinued
operation in 1993. 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 $5.7 million, $4.5 million and
$3.9 million charged to discontinued operations in 1994, 1993 and 1992,
respectively) is comprised of the following:
Year Ended December 31
(Dollars in thousands) 1994 1993 1992
Service cost $ 7,237 $ 7,678 $ 7,526
Interest cost on projected
benefit obligation 14,158 13,802 14,271
Actual return on plan assets (449) (22,646) (10,620)
Net amortization and deferral (12,963) 9,567 (2,452)
Net pension expense $ 7,983 $ 8,401 $ 8,725
Assumptions used in the accounting for the Company-sponsored defined
benefit plans:
Year Ended December 31 1994 1993 1992
Weighted average discount rate 8.5% 7.5% 8.0%
Rate of increase in compensation levels 5.3% 5.3% 5.3%
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) 1994 1993
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 $101,869 $ 60,492 $102,819 $ 62,394
Accumulated benefit
obligation $105,020 $ 61,253 $107,089 $ 63,428
Projected benefit obligation $119,886 $ 62,661 $128,485 $ 64,432
Plan assets at fair value 127,850 47,542 135,616 49,326
Plan assets in excess of (less
than) projected benefit
obligation 7,964 (15,119) 7,131 (15,106)
Unrecognized net (gain)
or loss (5,897) (175) (1,300) 1,752
Prior service cost not yet
recognized in net periodic
pension cost 4,066 3,348 4,779 3,524
Unrecognized net (asset)
obligation at transition 3,407 821 4,198 1,251
Adjustment required to recognize
minimum liability _ (4,165) _ (6,507)
Pension asset (liability)
recognized in the
balance sheet $ 9,540 $ (15,290) $ 14,808 $(15,086)
Plan assets at December 31, 1994, 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 (Employees 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 for 1992.
Note 13 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 8), 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.
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 $4 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
increased the discount rate in 1994 to 8.5% from 7.5% in 1993 in line with
the change in the overall economic environment. This change has an
insignificant effect on the net periodic postretirement benefit cost.
The following tables set forth the plans' combined status reconciled with
the amounts included in the consolidated balance sheet:
December 31
(Dollars in thousands) 1994
Life
Medical Insurance
Plans Plans Total
Accumulated postretirement
benefit obligation:
Retirees $ 16,709 $ 4,826 $ 21,535
Fully eligible active
plan participants 1,365 262 1,873
Other active plan participants 1,326 68 1,148
19,400 5,156 24,556
Plan assets --- --- ---
Unrecognized prior service cost 7,840 7,376 15,216
Unrecognized net loss (2,423) (2,043) (4,466)
Postretirement benefit liability
recognized in the balance sheet $ 24,817 $ 10,489 $ 35,306
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 prior service cost --- --- ---
Unrecognized net loss (3,693) (920) (4,613)
Postretirement benefit liability
recognized in the balance sheet $ 34,321 $ 8,835 $ 43,156
The 1994 accrued postretirement benefits amount is classified as follows;
$2.2 million current liabilities, $30.9 million long-term liabilities, and
$2.2 million in net assets of discontinued operations - noncurrent. For
1993, these amounts are $2.2 million, $33.2 million and $7.8 million,
respectively.
As a result of the divestitures in 1994 and 1993, the Company recognized a
$0.3 million gain and a $2.2 million gain, respectively, related to the
curtailment of its postretirement benefit plans. These curtailment gains
were applied to the reserve for divestitures (See Note 4).
As a result of the Company's decision to sell its Electro-Optical Systems
operations a curtailment gain of $1.3 million was recognized in 1993. This
curtailment gain is a component of the estimated loss on disposal of
discontinued operations (See Note 2).
Net periodic postretirement benefit cost (including $2.3 million credited
in 1994 and $1.0 million charged in 1993 to discontinued operations)
included the following components:
Year Ended December 31
(Dollars in thousands) 1994
Life
Medical Insurance
Plans Plans Total
Service cost $ 100 $ 7 $ 107
Interest cost 1,547 289 1,836
Amortization of prior service cost (5,955) (1,967) (7,922)
Amortization of loss 543 103 646
Net periodic postretirement
benefit cost $ (3,765) $ (1,568) $ (5,333)
Year Ended December 31
(Dollars in thousands) 1993
Life
Medical Insurance
Plans Plans Total
Service cost $ 372 $ 63 $ 435
Interest cost 2,999 750 3,749
Amortization of prior service cost ---
Amortization of loss ---
Net periodic postretirement
benefit cost $ 3,371 $ 813 $ 4,184
Actual negotiated health care premiums were used in calculating 1994 and
1993 health care costs. It is expected that the annual increase in medical
costs will be 13.5% from 1994 to 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 $1.7
million at beginning of year 1994 and the net periodic cost by $.1 million
for the year. The weighted average discount rate used in determining the
accumulated postretirement benefit obligation was 8.5% and 7.5% in 1994 and
1993, respectively.
Note 14 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, 1994, are:
(Dollars in thousands)
1995 $ 5,100
1996 4,567
1997 3,433
1998 3,081
1999 1,505
Thereafter 3,503
Total minimum lease payments $ 21,189
Total rental expense under operating leases charged against continuing
operations was $8.9 million in 1994, $9.3 million in 1993 and $10.9 million
in 1992.
Note 15 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 United States
District Court for 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 $8.5 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 with a complaint in a case brought
in United States District Court for the Northern District of 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. In connection with
this matter, the Company filed a counterclaim against the insurer seeking
payment of $8.5 million in defense costs that the Company previously paid
in connection with the LILCO litigation. On January 25, 1995, the Court
entered a judgment, based on its December 15, 1994 memorandum and order,
dismissing the Company's counterclaim, denying the Company's Motion for
Summary Judgment, and finding sua sponte that there was no coverage under
the insurer's policy for the LILCO matter. On February 8, 1995, the Company
filed an Application for Leave to File Motion for Reconsideration of the
Judgment which was subsequently denied. The Company also filed a Notice of
Appeal with the Ninth Circuit Court of Appeals. Subsequent to entry of the
District Court Judgment, the insurer moved to have the judgment modified to
award the insurer the $10 million defense costs and $1.2 million indemnity
payment. The Company has filed a motion in opposition to this motion.
Oral arguments relating to this motion were held on February 24, 1995 and
the Company is awaiting the District Court's decision.
The Company and one of its subsidiaries are two of a large number of
defendants in a number of lawsuits brought by approximately 13,500
claimants who allege injury caused by exposure to asbestos. Although the
Company and its subsidiary have never been producers or direct suppliers of
asbestos, it is alleged that the industrial and marine products sold by the
Company and the subsidiary had components which contained asbestos. The
allegations state a claim for asbestos exposure when Company-manufactured
equipment was maintained or installed. Suits against the Company have been
tendered to its insurers who are defending under their stated reservation
of rights. The insurers for the subsidiary are being identified and have
been and will be provided notice. Should settlements for these claims be
reached at levels comparable to those reached by the Company in the past,
they 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 and March subpoenas and the government subsequently withdrew
the February subpoena. The investigation appears directed at quality
control, testing and documentation activities which began at Ni-Tec while
it was a division of Optic-Electronic Corp. Optic-Electronic Corp. was
acquired by the Company in November 1990 and subsequently merged with Varo
Inc. in 1991. The Company continues to cooperate fully with the
investigation.
The Securities and Exchange Commission (the "Commission") is conducting an
inquiry into, among other things, certain accounting practices at Ni-Tec
and the 1991 and 1992 fiscal year financial reporting by the Company with
respect thereto. The Commission has sought certain information from the
Company relating to such inquiry and the Company has cooperated with this
request. This inquiry has been dormant since August 1994.
The Company was notified in August 1994 that its Electro-Optical operations
are being investigated by the United States Attorney for the District of
Columbia. The investigation concerns the appropriateness of certifications
submitted by Company personnel regarding its contracts with the Arab
Republic of Egypt that were funded by the United States Government. In
connection with this investigation, the Company has received and has
responded to a subpoena issued by the Grand Jury for the District of
Columbia.
Regarding environmental matters, the operations of the Company, like those
of other companies engaged in similar businesses, involve the use, disposal
and clean-up of substances regulated under environmental protection laws.
In a number of instances the Company has been identified as a Potentially
Responsible Party by the United States Environmental Protection Agency, and
in one instance the State of Washington, alleging that because various of
its divisions had arranged for the disposal of hazardous wastes at a number
of facilities that have been targeted for clean-up pursuant to the
Comprehensive Environmental Response Compensation and Liability Act
("CERCLA") or similar State law. Although CERCLA and corresponding State
law 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 either qualifies as a de minimis or minor
contributor at each site. 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 is a defendant in an action filed in the United States District
Court for the Middle District of Louisiana brought by Gulf States Utilities
Company ("GSU"). The complaint alleges that the Company breached its
contract for the sale of two emergency diesel generators delivered to GSU's
River Bend Nuclear Generating Station in 1981 and 1982. GSU alleges that
it has incurred a loss of $8 million and claims additional amounts for the
use of money and an equitable adjustment of the purchase price. In July
1992, the District Court for the Middle District of Louisiana granted the
Company's motion for Summary Judgment dismissing GSU's claims. In November
1993, the Fifth Circuit Court of Appeals reversed and remanded the case for
trial. The ruling eliminated the Company's statute of limitations defense,
but preserved all other defenses. In February 1995, a settlement of this
matter was tentatively reached requiring a $1.8 million payment by the
Company to GSU.
The Company also has one other lawsuit pending against it relating to
equipment sold by its former diesel engine division and a lawsuit relating
to performance shortfalls in products delivered by its Delaval Turbine
Division in a prior year.
With respect to the litigation and claims described in the preceding
paragraphs, it is management's opinion that the Company either expects to
prevail, has adequate insurance coverage or has established appropriate
reserves to cover potential liabilities; however, the ultimate outcome of
any of these matters is indeterminable at this time.
In addition, the Company is involved in various other pending legal
proceedings arising out of the Company's business. The adverse outcome of
any of these legal proceedings is not expected to have a material adverse
effect on the financial condition of the Company. However, if all or
substantially all of these legal proceedings were to be determined
adversely to the Company, which is viewed by the Company as only a remote
possibility, there could be a material adverse effect on the financial
condition of the Company.
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 LLP, 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, 1994 and 1993, 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, 1994. Our audits also included the financial statement schedule listed
in the Index at Item 14(a). These financial statements and schedule are
the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements and schedule 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, 1994 and 1993, and the
consolidated results of their operations and their cash flows for each of
the three years in the period ended December 31, 1994, in conformity with
generally accepted accounting principles. Also, in our opinion, the
related financial statement schedule, when considered in relation to the
basic financial statements as a whole, presents fairly in all material
respects the information set forth therein.
As discussed in Note 13 to the financial statements, in 1992 the Company
changed its method of accounting for postretirement benefits other than
pensions.
ERNST & YOUNG LLP
Princeton, New Jersey
February 15, 1995
F-6
Imo Industries Inc. and Subsidiaries
Quarterly Financial Information (Unaudited)
Quarterly financial information for 1994 and 1993 is as follows:
(Dollars in thousands except per share amounts)
1st* 2nd* 3rd 4th
1994 (a) Quarter Quarter Quarter Quarter
Net sales $110,742 $123,230 $113,421 $116,498
Gross profit 31,200 33,799 31,629 34,165
Income (loss) before
extraordinary item:
Continuing operations 511 (12) 2,051 1,105
Discontinued operations 394 1,764 737 2,680
Extraordinary item --- --- (5,299) ---
Net income (loss) 905 1,752 (2,511) 3,785
Earnings (loss) per share:
Before extraordinary item:
Continuing operations .03 --- .12 .07
Discontinued operations .02 .10 .04 .15
Extraordinary item --- --- (.31) ---
Net income (loss) .05 .10 (.15) .22
1st* 2nd* 3rd* 4th*
1993 (a) Quarter Quarter Quarter Quarter
Net sales $132,868 $131,643 $117,546 $112,126
Gross profit 37,571 39,557 35,251 32,136
Income (loss) before
extraordinary income:
Continuing operations (1,807) 1,861 347 (40,488)
Discontinued operations (619) (111) (6,584) (205,070)
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 (.11) .11 .02 (2.39)
Discontinued operations (.03) (.01) (.39) (12.13)
Extraordinary item --- (.66) (.41) ---
Net income (loss) (.14) (.56) (.78) (14.52)
(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.
* Reclassified to conform to 1994 full year presentation.
F-7
<TABLE>
SCHEDULE II
IMO INDUSTRIES INC. AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
(Dollars in thousands)
THREE-YEAR PERIOD ENDED DECEMBER 31, 1994
<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, 1994:
Allowance for doubtful
accounts $ 2,951 $ 745 $ 13(2)<F2> $ 871(4)<F4> $ 2,659
$ 179(3)<F3>
Inventory Valuation
Allowance $ 11,821 $ 5,452 $ --- $4,376(7)<F7> $12,133
$ 764(3)<F3>
Valuation allowance for
deferred tax assets $ 60,215 $ --- $8,695(3)<F3> $ --- $68,910
Accrued product warranty
liability $ 4,050 $ 1,915 $ 17(2)<F2> $ 945(5)<F5> $ 5,037
Accrued contract completion
costs $ 886 $ 324 $ --- $ 179(3)<F3> $ 556
$ 475(6)<F6>
YEAR ENDED DECEMBER 31, 1993: *<F9>
Allowance for doubtful
accounts $ 3,008 $ 1,618 $ --- $ 327(8)<F8> $ 2,951
$1,177(4)<F4>
$ 108(2)<F2>
$ 63(3)<F3>
Inventory Valuation
Allowance $ 14,247 $ 3,494 $ --- $2,620(7)<F7> $11,821
$1,870(3)<F3>
$1,430(8)<F8>
Valuation allowance for
deferred tax assets $ 1,500 $15,000 $43,715(1)<F1> $ --- $60,215
Accrued product warranty
liability $ 5,761 $ 1,529 $ 30(2)<F2> $ 65(2)<F2> $ 4,050
$ 63(3)<F3> $3,208(5)<F5>
$ 60(3)<F3>
Accrued contract completion
costs $ 701 $ 627 $ 60(3)<F3> $ 502(6)<F6> $ 886
YEAR ENDED DECEMBER 31, 1992: *<F9>
Allowance for doubtful
accounts $ 2,922 $ 1,034 $ 35(3)<F3> $ 248(2)<F2> $ 3,008
$ 202(3)<F3>
$ 533(4)<F4>
Inventory Valuation
Allowance $ 9,313 $ 9,760 $ 1,415(3)<F3> $ 227(2)<F2> $14,247
$6,014(7)<F7>
Valuation allowance for
deferred tax assets $ --- $ 1,500 $ --- $ --- $ 1,500
Accrued product warranty
liability $ 2,524 $ 4,469 $ 1,798(3)<F3> $2,981(5)<F5> $ 5,761
$ 49(2)<F2>
Accrued contract completion
costs $ 950 $ 490 $ --- $ 739(6)<F6> $ 701
<FN>
<F1>(1) Net change in allowance primarily to offset tax benefit
of current year tax loss.
<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 1994 presentation.
S-1
</TABLE>
BY-LAWS
OF
IMO INDUSTRIES INC.
ARTICLE I
OFFICES
Section 1.1 The registered office of the Corporation shall be in the
City of Wilmington, County of New Castle, State of Delaware.
Section 1.2 The Corporation may also have offices at such other places as
the Board of Directors may from time to time determine or the business of
the Corporation may require.
ARTICLE II
SEAL
Section 2.1 The corporate seal shall have inscribed thereon the name
of the Corporation, and the words "Incorporated March 2, 1959 Delaware."
Said seal may be used by causing it or a facsimile thereof to be impressed
or affixed or otherwise reproduced. The Secretary may have duplicate seals
made and deposited for use with such offices as the Board of Directors may
designate.
Section 2.2 It shall not be necessary to the validity of any
instrument executed by any authorized officer or officers of the Corporation
that the execution of such instrument be evidenced by the corporate seal.
All documents, instruments, contracts and writings of all kinds signed on
behalf of the Corporation by any authorized officer or officers thereof
shall be as effectual and binding on the Corporation without the corporate
seal as if the execution of the same had been evidenced by affixing the
corporate seal thereto.
ARTICLE III
MEETINGS OF STOCKHOLDERS
Section 3.1 All meetings of the stockholders shall be held at such
office or place, within or without the State of Delaware, as may be
designated by the Board of Directors and as shall be specified in the notice
of the meeting.
Section 3.2 The annual meeting of the stockholders shall be held on
such day of the year and at such place and time as shall be designated by
the Board of Directors and specified in the notice of the annual meeting.
At the annual meeting the stockholders shall elect a Board of Directors by a
plurality vote and by written ballot, and transact such other business as
may properly be brought before the meeting.
Section 3.3 The holders of a majority of the shares of stock issued
and outstanding and entitled to vote, present in person or represented by
proxy, shall be requisite and shall constitute a quorum at all meetings of
the stockholders for the transaction of business except as otherwise
provided by law, by the Restated Certificate of Incorporation or by these
By-Laws. If, however, such majority shall not be present or represented at
any meeting of the stockholders, the stockholders entitled to vote, present
in person or by proxy, shall have power to adjourn the meeting from time to
time, without notice other than announcement at the meeting, until a quorum
shall be present or represented. At such adjourned meeting at which a
quorum is present or represented, any business may be transacted which might
have been transacted at the original meeting.
Section 3.4 At each meeting of the stockholders every stockholder
having the right to vote shall be entitled to vote in person or by proxy
appointed by an instrument in writing executed by such stockholder or by his
duly authorized attorney and submitted to the Secretary at or before such
meeting, but no such proxy shall be voted or acted upon after three years
from its date, unless proxy provides for a longer period. Each stockholder
shall have one vote for each share of stock having voting power, registered
in his name on the books of the Corporation; provided, however, that except
where a date shall have been fixed as a record date for the determination of
stockholders entitled to vote as provided in these By-Laws, no share of
stock shall be voted at any election for directors which has been
transferred on the books of the Corporation after the close of business on
the day next preceding the day on which notice of such meeting is given.
The Board of Directors, in its discretion, or the officer of the Corporation
presiding at a meeting of stockholders, in his discretion, may require that
any votes cast at such meeting shall be cast by written ballot except that
all elections of directors by the stockholders shall be by written ballot.
When a quorum exists at any meeting, the vote of the holders of a majority
of the stock having voting power present in person or represented by proxy
shall decide any question brought before such meeting, unless the question
is one for which, by express provision of statute or of the Restated
Certificate of Incorporation or of these By-Laws, a different vote is
required.
Section 3.5 Written notice of the annual meeting shall be mailed to
each stockholder entitled to vote thereat at such address as appears on the
records of the corporation, not less than ten nor more than sixty days prior
to the meeting.
Section 3.6 Special meetings of the stockholders, for any purpose or
purposes, unless otherwise prescribed by statute, may be called by the
Chairman of the Board and shall be called by him or the Secretary at the
request in writing of a majority of the Board of Directors then in office.
Such request shall state the purpose or purposes of the proposed meeting.
Section 3.7 Business transacted at all special meetings shall be
confined to the objects stated in the notice thereof.
Section 3.8 Written notice of a special meeting of stockholders,
stating the time and place and object thereof, shall be mailed, postage
prepaid, at least ten but not more than sixty days before such meeting, to
each stockholder entitled to vote thereat at such address as appears on the
records of the Corporation.
Section 3.9 The officer of the Corporation who has charge of the
stock ledger of the Corporation shall prepare and make, at least ten days
before every meeting of stockholders, a complete list of the stockholders
entitled to vote at the meeting, arranged in alphabetical order, and showing
the address of each stockholder and the number of shares registered in the
name of each stockholder. Such list shall be open to the examination of any
stockholder, for any purpose germane to the meeting, during ordinary
business hours, for a period of at least ten days prior to the meeting,
either at a place within the city where the meeting is to be held, which
place shall be specified in the notice of the meeting, or, if not so
specified, at the place where the meeting is to be held. The list shall
also be produced and kept at the time and place of the meeting during the
whole time thereof, and may be inspected by any stockholder of the
Corporation who is present. The stock ledger of the Corporation shall be
the only evidence as to who are the stockholders entitled to examine the
stock ledger, the list required by this Section 3.9 or the books of the
Corporation, or to vote in person or by proxy at any meeting of
stockholders.
Section 3.10 In advance of any meeting of the stockholders, the Board
of Directors may appoint judges of election, who need not be stockholders,
to act at such meeting or any adjournment thereof. If judges of election
are not so appointed, the chairman of any such meeting may make such
appointment at the meeting. The number of judges shall be one or three. No
person who is a candidate for office shall act as a judge. The judges of
election shall do all such acts as may be proper to conduct the election or
vote and such other duties as may be prescribed by statute with fairness to
all stockholders, and, if requested by the chairman of the meeting, shall
make a written report of any matter determined by them and execute a
certificate as to any fact found by them. If there be three judges of
election, the decision, act or certificate of a majority shall be the
decision, act or certificate of all.
Section 3.11 Meetings of the stockholders shall not be conducted
pursuant to Robert's Rules of Order and shall be conducted in such manner
and by such practices and procedures as the Chairman of such meeting shall,
in his discretion, deem to be fair and equitable.
Section 3.12 Any stockholder who wishes to nominate an individual as
a director of the Corporation must submit in writing to the Board of
Directors, at least 45 days before the date of the meeting of stockholders
for election of directors at which such nomination is proposed to be made,
information concerning such candidate equivalent to the information
contained in the Corporation's Proxy Statement concerning the Board of
Directors' nominee; provided, however, that with respect only to the 1987
annual meeting of stockholders such information must be submitted at least
ten days before the date of the 1987 annual meeting of stockholders.
ARTICLE IV
DIRECTORS
Section 4.1 The business and affairs of the Corporation shall be
managed by or under the direction of the Board of Directors. The specific
number of directors shall be fixed from time to time exclusively by the
Board of Directors. The directors shall be divided into three classes,
designated Class I, Class II and Class III, and each Class shall consist, as
nearly as may be possible, of one-third of the total number of directors
constituting the entire Board of Directors. As of the adoption (in December
1986) of these By-Laws, five directors have been elected, of which one is a
Class I Director with a term expiring at the 1987 annual meeting of
stockholders, two are Class II Directors with terms expiring at the 1988
annual meeting of stockholders, and two are Class III Directors with terms
expiring at the 1989 annual meeting of stockholders. At the 1987 annual
meeting of stockholders, a Class I Director shall be elected for a three-
year term. At each succeeding annual meeting of stockholders beginning in
1988, successors to the class of directors whose term expires at that annual
meeting shall be elected for a three-year term. In case the Board of
Directors shall change the number of directors, any increase or decrease
shall be apportioned among the classes so as to maintain the number of
directors in each class as nearly equal as possible and any additional
directors of any class elected to fill a vacancy resulting from an increase
in such class shall hold office for a term that shall coincide with the
remaining term of that class, but in no case will a decrease in the number
of directors shorten the term of any incumbent director. A director shall
hold office until the annual meeting for the year in which such director's
term expires and until his or her successor shall be elected and qualified,
subject, however, to such director's prior death, resignation, retirement,
disqualification or removal from office.
Section 4.2 Any vacancy in the Board of Directors which results from
an increase in the number of directors may be filled by a majority of the
directors then in office, provided that a quorum is present, and any other
vacancy occurring in the Board of Directors may be filled by a majority of
the directors then in office, even if less than a quorum, or by a sole
remaining director, and each director elected to fill a vacancy not
resulting from an increase in the number of directors shall have the same
remaining term as that of such director's predecessor.
Notwithstanding the foregoing, whenever the holders of any one or more
classes or series of preferred stock issued by the Corporation shall have
the right, voting separately by class or series, to elect directors at an
annual or special meeting of stockholders, the election, term of office,
filling of vacancies and other features of such directorships shall be
governed by the terms of the Corporation's Restated Certificate of
Incorporation applicable thereto, and such directors so elected shall not be
divided into classes unless expressly provided by the terms thereof. The
directors of the Corporation need not be stockholders.
Section 4.3 The directors may hold their meetings and have one or
more offices, and keep the books of the Corporation outside of Delaware or
at such other offices of the Corporation or other places as they may from
time to time determine.
Section 4.4 Directors, in addition to expenses of attendance, shall
be allowed such compensation as may be fixed from time to time by the Board
of Directors; provided that nothing herein contained shall be construed to
preclude any director from serving the Corporation in any other capacity and
receiving compensation therefor.
Section 4.5 In addition to the powers by these By-Laws expressly
conferred upon it, the Board may exercise all such powers of the Corporation
and do all such lawful acts and things as are not by statute or by the
Restated Certificate of Incorporation or by these By-Laws directed or
required to be exercised or done by the stockholders.
Section 4.6 directors may hold office until age 72. If any director
will attain age 72 later than 18 months following April 1 in the year in
which such director would stand for election or re-election, he may do so.
If any director will attain age 72 earlier than 18 months following April 1
in the year in which such director would stand for election or re-election,
he may not do so. Nevertheless, directors who are also employees of the
Corporation or any of its subsidiaries shall be limited to remaining a
director for a period of one year following termination of employment unless
such employee-director was the Chief Executive Officer of the Corporation
immediately preceding termination of employment, in which case only the age
72 limitation shall apply, as described herein. Nothing stated herein shall
affect the right to otherwise disqualify or remove a director from office as
stated in Section 4.1 hereof.
ARTICLE V
COMMITTEES
Section 5.1 The Board of Directors shall designate an Executive
Committee to consist of three or more directors to hold office at the
pleasure of the Board and may fill vacancies in, or reconstitute the
membership of, the Executive Committee. Meetings of the Executive Committee
for any purpose or purposes may be called by the Chairman of the Board or
the Chairman of the Executive Committee, and shall be called by either of
them at the request in writing of at least two members of the Executive
Committee, to be held in such place as shall be designated from time to time
by the Chairman of the Board, the Chairman of the Executive Committee or
such members of the Executive Committee and indicated in the notice of such
meetings. At least twenty-four hours' notice of such meetings shall be
given to each member of the Executive Committee either personally or by
telegram or by telephone.
The Executive Committee shall have full power to take all action which
the Board of Directors has power to take, except as limited by Section 141
of the General Corporation Law of the State of Delaware. All obligations
incurred by the Corporation pursuant to action of the Executive Committee
shall be as valid and legally binding upon the Corporation as those incurred
pursuant to the action of the Board of Directors. The Secretary or a member
of the Executive Committee shall keep minutes of all its proceedings, all of
which shall be reported as soon as practicable to the Board of Directors,
but in no event later than the next meeting of the Board of Directors. The
Chairman of the Executive Committee shall preside at all meetings of the
Executive Committee and in his absence the Executive Committee shall select
from its members a Chairman of each meeting. The presence of a majority of
the members of the Executive Committee (but in no event less than two) shall
be necessary to constitute a quorum for the transaction of business. A
majority of the members of the Executive Committee shall be "Independent
directors." Independent directors are directors who are not at the time
employees of the Company. The Chairman of the Board shall at all times be a
member, and may also be the Chairman of the Executive Committee.
Section 5.2 The Board of Directors shall have an Audit Committee and
a Compensation Committee composed of directors and having such purposes,
powers and duties as the Board shall prescribe. The Executive, Audit and
Compensation Committees are referred to as "Standing Committees." The Board
of Directors may from time to time create such other committees of the Board
composed of directors for such purposes and with such powers and duties as
the Board shall prescribe. Such other committees are referred to as
"Special Committees." A majority of all the members of any Standing
Committee or Special Committee may take action on its behalf. The Chairman
of any Standing or Special Committee (except as provided in paragraph 5.1
with respect to the Executive Committee) shall fix the time and place of its
meetings unless the Board of Directors shall otherwise provide. The Board
of Directors shall have power to change the members of any such Standing or
Special Committee at any time, to fill vacancies, and to discharge any such
Standing or Special Committee, either with or without cause, at any time.
The Board may delegate to a Standing or Special Committee the full power of
the Board with respect to a particular matter.
Section 5.3 Members of the Executive Committee and of any other
Special or Standing Committee shall, in addition to expenses of attendance,
be allowed such compensation as may be fixed from time to time by the Board
of Directors.
Section 5.4 The term of a Standing Committee shall be for one year
unless otherwise prescribed by the Board.
ARTICLE VI
MEETINGS OF THE BOARD
Section 6.1 The organization meeting of each newly elected Board of
Directors may be held immediately following the stockholders meeting at
which such directors were elected without the necessity of notice to such
directors to constitute a legally convened meeting or at such time and place
as may be fixed by a notice, or a waiver of notice, or a consent signed by
all of such directors.
Section 6.2 Regular meetings of the Board of Directors shall be held
without call or notice at such time and place as shall from time to time be
fixed by the Board.
Section 6.3 Special meetings of the Board may be called by the
Chairman of the Board on forty-eight hours' notice to each director, either
personally or in writing by mail, or by telegram, or by telephone; special
meetings shall be called by the Chairman of the Board or the Secretary in
like manner and on like notice on the written request of three directors.
Notice of special meetings of the Board shall state the time and place of
the meeting but need not state the purpose thereof except as otherwise
expressly provided in these By-Laws.
Section 6.4 One or more directors may participate in any meeting of
the Board of Directors, or of any committee thereof, by means of a
conference telephone or similar communications equipment which enables all
persons participating in the meeting to hear one another, and such
participation in a meeting shall constitute presence in person at the
meeting.
Section 6.5 At all meetings of the Board of Directors, the presence,
in person or by telephonic or similar communications equipment, of a
majority of the directors shall constitute a quorum for the transaction of
business, and the act of a majority of the directors present at a duly
convened meeting at which a quorum is present shall be the act of the Board
of Directors, except as may be otherwise specifically provided by statute or
by the Restated Certificate of Incorporation or by these By-Laws. If a
quorum shall not be present, in person or by telephonic or similar
communications equipment, at any meeting of the Board of Directors, the
directors present may adjourn the meeting from time to time, without notice
other than announcement at the meeting, until a quorum shall be present.
Section 6.6 Any action required or permitted to be taken at any
meeting of the Board of Directors or of any committee thereof may be taken
without a meeting if all members of the Board of Directors or a committee
thereof, as the case may be, consent thereto in writing, and such consent or
consents is or are filed with the Secretary of the Corporation.
ARTICLE VII
OFFICERS
Section 7.1 The officers of the Corporation shall be chosen by the
directors and shall be a Chairman of the Board, a President, one or more
Vice-Presidents, a Treasurer, a Secretary, and one or more Assistant
Treasurers, and Assistant Secretaries. The Board of Directors may also
choose such other officers as they may determine. Any number of offices may
be held by the same person.
Section 7.2 The Board of Directors, at its organizational meeting
after each annual meeting of stockholders, shall choose a Chairman of the
Board, a President, one or more Vice-Presidents, the Secretary, the
Treasurer, and such other officers as they may determine, none of whom,
except the Chairman of the Board, need be members of the Board. At such
meeting, the Board of Directors shall also choose a Chairman of the
Executive, Audit and Compensation Committees, respectively.
Section 7.3 The Board may appoint such other officers and agents as
it shall deem necessary, who shall hold their offices for such terms and
shall exercise such powers and perform such duties as shall be determined
from time to time by the Board.
Section 7.4 The salary of the Chairman of the Board shall be fixed by
the Board of Directors. The salaries of all officers of the Corporation may
be fixed by the Board of Directors or the Board may authorize the Chairman
of the Board to fix their salaries and report thereon to the Board.
Section 7.5 The officers of the Corporation shall hold office until
their successors are chosen and qualify or until their earlier resignation
or removal. Any officer elected or appointed by the Board of Directors may
be removed at any time by the Board of Directors without prejudice to his
contract rights. If the office of any officers or officers becomes vacant
for any reason, the vacancy shall be filled by the Board of Directors.
Section 7.6 In the case of the absence of any officer of the
Corporation, or for any other reason that the Board may deem sufficient, the
Board may delegate, for the time being, the powers or duties, or any of
them, of such officer to any other officer.
ARTICLE VIII
THE CHAIRMAN OF THE BOARD
Section 8.1 The Chairman of the Board shall preside at all meetings
of the stockholders and of the Board of Directors and shall be ex-officio a
member of all Standing Committees. The Chairman of the Board shall be an
officer of the Corporation.
Section 8.2 In the absence of disability of the Chairman of the
Board, the President shall perform the duties and exercise the powers of the
Chairman of the Board.
ARTICLE IX
THE PRESIDENT
Section 9.1 The President shall perform such duties and have such
powers as from time to time may be assigned to him by the Board of Directors
or the Chairman of the Board.
Section 9.2 In the absence or disability of the President, a Vice-
President designated by the Board of Directors or by the Chairman of the
Board shall perform the duties and exercise the powers of the President.
ARTICLE X
VICE-PRESIDENTS
Section 10.1 The Vice-Presidents shall respectively perform such
duties and have such powers as may be assigned to each of them by the Board
of Directors or by the Chairman of the Board.
ARTICLE XI
THE SECRETARY AND ASSISTANT SECRETARIES
Section 11.1 The Secretary shall attend all sessions of the Board and
all meetings of the stockholders and record all votes and the minutes of all
proceedings in a book to be kept for that purpose; and shall perform like
duties for the Standing Committees when required. The Secretary shall give,
or cause to be given, notice of all meetings of the stockholders and the
Board of Directors. The Secretary shall keep in safe custody the seal of
the Corporation, and shall have authority to affix the same to any
instrument requiring it.
Section 11.2 The Assistant Secretaries, in the order of their
seniority, shall, in the absence or disability of the Secretary, perform the
duties and exercise the powers of the Secretary.
ARTICLE XII
THE TREASURER AND ASSISTANT TREASURERS
Section 12.1 The Treasurer shall have the custody of the corporate
funds and securities and shall deposit all moneys and other valuable effects
in the name and to the credit of the Corporation, in such depositories as
may be designated by the Board of Directors.
Section 12.2 The Treasurer shall disburse the funds of the
Corporation as may be ordered by the Board or by the Chairman of the Board,
taking proper vouchers for such disbursements, and shall render to the
Chairman of the Board and the Board of Directors, at the regular meetings of
the Board, or whenever they may require it, an account of all his
transactions as Treasurer.
Section 12.3 The Treasurer shall give the Corporation a bond, if
required by the Board of Directors, in a sum, and with one or more sureties,
satisfactory to the Board, for the faithful performance of the duties of his
office, and for the restoration to the Corporation, in case of his death,
resignation, retirement or removal from office, of all books, papers,
vouchers, money and other property of whatever kind in his possession or
under his control belonging to the Corporation; but the Board of Directors
may, if they see fit, dispense with such bond.
Section 12.4 The Assistant Treasurers, in the order of their
seniority shall, in the absence or disability of the Treasurer, perform the
duties and exercise the powers of the Treasurer.
ARTICLE XIII
INDEMNIFICATION
Section 13.1 Subject to the Section 13.3, the Corporation shall
indemnify any person who was or is a party or is threatened to be made a
party to any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative (other than an
action by or in the right of the Corporation) by reason of the fact that he
is or was a director, officer or employee of the Corporation, or is or was
serving at the request of the Corporation as a director, officer, or
employee of another corporation, partnership, joint venture, trust or other
enterprise, against expenses (including attorneys' fees), judgments, fines
and amounts paid in settlement actually and reasonably incurred by him in
connection with such action, suit or proceeding if he acted in good faith
and in a manner he reasonably believed to be in, or not opposed to the best
interests of the Corporation, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was unlawful.
The termination of any action, suit or proceeding by judgment, order,
settlement, conviction, or upon a plea of nolo contendere or its equivalent,
shall not, of itself, create a presumption that the person did not act in
good faith and in a manner which he reasonably believed to be in, or not
opposed to, the best interests of the Corporation, and, with respect to any
criminal action or proceeding, had reasonable cause to believe that his
conduct was unlawful.
Section 13.2 Subject to Section 13.3, the Corporation shall indemnify
any person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action or suit by or in the right of the
Corporation to procure a judgment in its favor by reason of the fact that he
is or was a director, officer, or employee of the Corporation, or is or was
serving at the request of the Corporation as a director, officer, or
employee of another corporation, partnership, joint venture, trust or other
enterprise against expenses (including attorneys' fees) actually and
reasonably incurred by him in connection with the defense or settlement of
such action or suit if he acted in good faith and in a manner he reasonably
believed to be in, or not opposed to, the best interests of the Corporation;
except that no indemnification shall be made in respect of any claim, issue
or matter as to which such person shall have been adjudged to be liable to
the Corporation unless and only to the extent that the Court of Chancery or
the court in which such action or suit was brought shall determine upon
application that, despite the adjudication of liability but in view of all
the circumstances of the case, such person is fairly and reasonably entitled
to indemnity for such expenses which the Court of Chancery or such other
court shall deem proper.
Section 13.3 Any indemnification under this Article XIII (unless
ordered by a court) shall be made by the Corporation only as authorized in
the specific case upon a determination that indemnification of the director,
officer, or employee is proper in the circumstances because he has met the
applicable standard of conduct set forth in Section 13.1 or Section 13.2 of
this Article XIII, as the case may be. Such determination shall be made (i)
by the Board of Directors by a majority vote of a quorum consisting of
directors who were not parties to such action, suit or proceeding, or (ii)
if such a quorum is not obtainable, or, even if obtainable a quorum of
disinterested directors so directs, by independent legal counsel in a
written opinion, or (iii) by the stockholders. To the extent, however, that
a director, officer, or employee of the Corporation has been successful on
the merits or otherwise in defense of any action, suit or proceeding
described above, or in defense of any claim, issue or matter therein, he
shall be indemnified against expenses (including attorneys' fees) actually
and reasonably incurred by him in connection therewith, without the
necessity of authorization in the specific case.
Section 13.4 For purposes of any determination under Section 13.3 of
this Article XIII, a person shall be deemed to have acted in good faith and
in a manner he reasonably believed to be in, or not opposed to, the best
interests of the Corporation, or, with respect to any criminal action or
proceeding, to have had no reasonable cause to believe his conduct was
unlawful, if his action is based on the records or books of account of the
Corporation or another enterprise, or on information supplied to him by the
officers of the Corporation or another enterprise in the course of their
duties, or on the advice of legal counsel for the Corporation or another
enterprise or on information or records given or reports made to the
Corporation or another enterprise by an independent certified public
accountant or by an appraiser or other expert selected with reasonable care
by the Corporation or another enterprise. The term "another enterprise" as
used in this Section 13.4 shall mean any other corporation or any
partnership, joint venture, trust or other entity of which such person is or
was serving at the request of the Corporation as a director, officer, or
employee. The provisions of this Section 13.4 shall not be deemed to be
exclusive or to limit in any way the circumstances in which a person may be
deemed to have met the applicable standard of conduct set forth in Sections
13.1 or 13.2 of this Article XIII, as the case may be.
Section 13.5 Notwithstanding any contrary determination in the
specific case under Section 13.3 of this Article XIII, and notwithstanding
the absence of any determination thereunder, any director, officer, or
employee may apply to any court of competent jurisdiction in the State of
Delaware for indemnification to the extent otherwise permissible under
Sections 13.1 or 13.2 of this Article XIII. The basis of such
indemnification by a court shall be a determination by such court that
indemnification of the director, officer, or employee is proper in the
circumstances because he has met the applicable standards of conduct set
forth in Sections 13.1 or 13.2 of this Article XIII, as the case may be.
Notice of any application for indemnification pursuant to this Section 13.5
shall be given to the Corporation promptly upon the filing of such
application.
Section 13.6 Expenses incurred in defending or investigating a
threatened or pending action, suit or proceeding shall be paid by the
Corporation in advance of the final disposition of such action, suit or
proceeding upon receipt of an undertaking by or on behalf of the director,
officer, or employee to repay such amount if it shall ultimately be
determined that he is not entitled to be indemnified by the Corporation as
authorized in this Article XIII.
Section 13.7 The indemnification and advancement of expenses provided
by, or granted pursuant to, the other Sections of this Article XIII shall
not be deemed exclusive of any other rights to which those seeking
indemnification or advancement of expenses may be entitled under any By-Law,
agreement, contract, vote of stockholders or disinterested directors or
pursuant to the direction (howsoever embodied) of any court of competent
jurisdiction or otherwise, both as to action in his official capacity and as
to action in another capacity while holding such office, it being the policy
of the Corporation that indemnification of, and advancement of expenses to,
the persons specified in Sections 13.1 and 13.2 of this Article XIII shall
be made to the fullest extent permitted by law. To this end, the provisions
of this Article XIII shall be deemed to have been amended for the benefit of
such persons effective immediately upon any modification of the General
Corporation Law of Delaware which expands or enlarges the power or
obligation of corporations organized under such Law to indemnify, or advance
expenses to, such persons. The Corporation shall have authority to (i)
deposit funds in trust or in escrow, (ii) establish any form of self-
insurance, (iii) secure its indemnity obligation by grant of a security
interest or other lien on the assets of the Corporation, or (iv) establish a
letter of credit, guaranty or surety arrangement for the benefit of such
persons in connection with the anticipated indemnification or advancement of
expenses contemplated in this Article XIII. The provisions of this Article
XIII shall not be deemed to preclude the indemnification of, or advancement
of expenses to, any person who is not specified in Sections 13.1 or 13.2 of
this Article XIII but whom the Corporation has the power or obligation to
indemnify, or to advance expenses for, under the provisions of the General
Corporation Law of the State of Delaware, or otherwise. The indemnification
and advancement of expenses provided by, or granted pursuant to, this
Article XIII shall, unless otherwise provided when authorized or ratified,
continue as to a person who has ceased to be a director, officer and
employee and shall inure to the benefit of the heirs, executors and
administrators of such person. The undertaking of the Corporation to
provide indemnification and advancement of expenses, which is provided by or
granted pursuant to this Article XIII, shall constitute a contractual
obligation between the Corporation and each director, officer and employee
of the Corporation.
Section 13.8 The Corporation may purchase and maintain insurance on
behalf of any person who is or was a director, officer or employee of the
Corporation, or is or was serving at the request of the Corporation as a
director, officer or employee of another corporation, partnership, joint
venture, trust or other enterprise against any liability asserted against
him and incurred by him in any such capacity, or arising out of his status
as such, whether or not the Corporation would have the power of the
obligation to indemnify him against such liability under the provisions of
this Article XIII.
Section 13.9 For purposes of this Article XIII, references to the
"Corporation" shall include, in addition to the resulting corporation, any
constituent corporation (including any constituent of a constituent)
absorbed in a consolidation or merger which, if its separate existence had
continued, would have had power and authority to indemnify its directors,
officers, and employees so that any person who is or was a director, officer
or employee of such constituent corporation, or is or was serving at the
request of such constituent corporation as a director, officer or employee
of another corporation, partnership, joint venture, trust or other
enterprise, shall stand in the same position under the provisions of this
Article XIII with respect to the resulting or surviving corporation as he
would have with respect to such constituent corporation if its separate
existence had continued.
Section 13.10 Notwithstanding any other provision of these By-Laws,
the repeal of any amendment of this Article XIII which diminishes, impairs
or otherwise adversely affects the rights to indemnification or advancement
of expenses afforded to a director, officer or employee by, or granted
pursuant to, this Article XIII shall be effective only with respect to acts
or omissions occurring after the effective date of such repeal or amendment.
The provisions of this Article XIII in effect immediately prior to such
repeal or amendment shall be determinative as to the rights to
indemnification and advancement of expenses afforded to such persons with
respect to acts or omissions occurring at any time prior to such repeal or
amendment.
ARTICLE XIV
CERTIFICATES OF STOCK
Section 14.1 The certificates of stock of the Corporation shall be
numbered and shall be entered in the books of the Corporation as they are
issued. They shall exhibit the holder's name and number of shares and shall
be signed by the Chairman of the Board, the President or a Vice-President,
and by the Treasurer or an Assistant Treasurer or the Secretary or an
Assistant Secretary. Where a certificate is countersigned (a) by a transfer
agent other than the Corporation or its employee, or (b) by a registrar
other than the Corporation or its employee, any other signature on the
certificate may be facsimile. In case any officer, transfer agent or
registrar who has signed or whose facsimile signature has been placed upon a
certificate shall have ceased to be such officer, transfer agent or
registrar before such certificate is issued, it may be issued by the
Corporation with the same effect as if he were such officer, transfer agent
or registrar at the date of issue.
ARTICLE XV
TRANSFERS OF STOCK
Section 15.1 Transfers of stock shall be made on the books of the
Corporation only by the person named in the certificate or by attorney,
lawfully constituted in writing, and upon surrender of the certificate
therefor.
ARTICLE XVI
FIXING RECORD DATE
Section 16.1 In order that the Corporation may determine the
stockholders entitled to notice of or to vote at any meeting of stockholders
or any adjournment thereof, or entitled to receive payment of any dividend
or other distribution or allotment of any rights, or entitled to exercise
any rights in respect of any change, conversion or exchange of stock or for
the purpose of any other lawful action, the Board of Directors may fix, in
advance, a record date, which shall not be more than sixty nor less than ten
days before the date of such meeting, nor more than sixty days prior to any
other action. A determination of stockholders or record entitled to notice
of or to vote at a meeting of stockholders shall apply to any adjournments
of the meeting; provided, however, that the Board of Directors may fix a new
record date for the adjourned meeting.
ARTICLE XVII
REGISTERED STOCKHOLDERS
Section 17.1 The Corporation shall be entitled to treat the holder of
record of any share of shares of stock as the holder in fact thereof and
accordingly shall not be bound to recognize any equitable or other claim to
or interest in such share on the part of any other person, whether or not it
shall have express or other notice thereof, save as expressly provided by
the laws of Delaware.
ARTICLE XVIII
LOST CERTIFICATES
Section 18.1 The Board of Directors may authorize the issue of a new
certificate of stock in the place or any certificate theretofore issued by
the Corporation, alleged to have been lost, stolen or destroyed, and the
Board of Directors may, in their discretion, require the owner of the lost,
stolen or destroyed certificate, or his legal representatives, to give the
Corporation a bond sufficient to indemnify the Corporation against any claim
that may be made against it on account of the alleged loss, theft or
destruction of any such certificate and to furnish some proof of the loss,
theft or destruction of such certificate as they shall deem proper and to
comply with such other regulations as the Board shall from time to time fix
including advertising such loss or destruction in such manner as the Board
of Directors may require. A new certificate may be issued without requiring
any bond when, in the judgment of the Board of Directors, it is proper to do
so.
ARTICLE XIX
INSPECTION OF BOOKS AND RECORDS
Section 19.1 The directors shall determine from time to time whether,
and if allowed, when and under what conditions and regulations the books and
records of the Corporation (except such as may by statute be specifically
open to inspection) or any of them shall be open to the inspection of the
stockholders, and the stockholders' rights in this respect are and shall be
restricted and limited accordingly.
ARTICLE XX
CHECKS
Section 20.1 All checks or demands for money and notes of the
Corporation shall be signed by such officer or officers as the Board of
Directors may from time to time designate.
ARTICLE XXI
FISCAL YEAR
Section 21.1 The fiscal year of the Corporation shall be as determined
by the Board of Directors.
ARTICLE XXII
DIVIDENDS
Section 22.1 Dividends upon the capital stock of the Corporation,
subject to the provisions of the Restated Certificate of Incorporation, if
any, may be declared by the Board of Directors at any regular or special
meeting, pursuant to law. Dividends may be paid in cash, in property, or in
shares of the capital stock.
Section 22.2 Before payment of any dividend, there may be set aside
out of any funds of the Corporation available for dividends such sum or sums
as the directors from time to time, in their absolute discretion, think
proper as a reserve fund to meet contingencies, or for equalizing dividends,
or for repairing or maintaining any property of the Corporation, or for such
other purpose as the directors shall think conducive to the interests of the
Corporation.
ARTICLE XXIII
DIRECTORS' ANNUAL STATEMENTS
Section 23.1 The Board of Directors shall present at each annual
meeting of the stockholders a full and clear statement of the business and
affairs of the Corporation for the preceding year.
ARTICLE XXIV
NOTICES
Section 24.1 Whenever under the provisions of these By-Laws notice is
required to be given to any director, committee member, officer or
stockholder, it shall not be construed to mean personal notice, but such
notice may be given, in the case of stockholders, in writing, by mail, by
depositing the same in the post office or letter-box, in a postpaid sealed
wrapper, addressed to such stockholder, at such address as appears on the
books of the Corporation, or, in default of other address, to such
stockholder at the General Post Office in the City of Wilmington, Delaware,
and in the case of directors, committee members and officers, by telephone,
or by mail or by telegram to the last business address known to the
Secretary of the Corporation, and such notice shall be deemed to be given at
the time when the same shall be thus mailed or telegraphed or telephoned.
ARTICLE XXV
WAIVER OF NOTICE
Section 25.1 Whenever, under the provisions of these By-Laws or of any
law, the stockholders, directors or committees are authorized to hold any
meeting after notice or after a particular notice, or after the lapse of any
prescribed period of time, such meeting may be held without notice or
without said particular notice or without such lapse of time by the written
waiver or waivers of notice and written consent or consents to act, signed
by every person entitled to such notice, or entitled to be present at any
such meeting or participate in any such action, whether signed before or
after the time stated therein. Except as otherwise provided by law,
attendance of a person at a meeting shall constitute a waiver of notice of
such meeting.
ARTICLE XXVI
AMENDMENTS
Section 26.1 These By-Laws may be amended or repealed and new By-Laws
may be adopted by (a) the affirmative vote of a majority of the Board of
Directors then in office, at any meeting of the Board of Directors or (b)
the affirmative vote of the holders of at least eighty percent (80%) of the
voting power of all of the issued and outstanding shares of stock of the
Corporation which are entitled to vote either (i) at the annual stockholders
meeting or (ii) at any special stockholders meeting, provided, in the case
of the annual or any special meeting of stockholders, a brief description of
such proposed amendment or repeal and adoption of new By-Laws is contained
in the notice of such annual or special stockholders meeting.
Notwithstanding the foregoing, the repeal or any amendment of Article XIII
shall be subject to the provisions of Section 13.10.
SECRETARIAL CERTIFICATE
I, GEORGE SZWABIUK, DO HEREBY CERTIFY that I am the Assistant
Secretary of Imo Industries Inc., a corporation organized under the laws
of the State of Delaware, and as such have custody of the corporate
records, including the minute books of the Corporation;
I HEREBY FURTHER CERTIFY that on the 21st day of June, 1994, the
Board of Directors of Imo Industries Inc. adopted the following
resolution which is recorded in the minute books of the Corporation, is
presently outstanding, and is in full force and effect:
RESOLVED, that Section 8.1 of the Company's By-Laws be and hereby
is amended and restated in its entirety as follows:
Section 8.1 The Chairman of the Board shall preside at all
meetings of the stockholders and of the Board of Directors.
The Chairman of the Board shall be an officer of the
Corporation.
IN WITNESS WHEREOF, I have hereunto set my hand and the seal of Imo
Industries Inc. this 10th day of March, 1995.
/s/ GEORGE SZWABIUK
George Szwabiuk
Restated and Amended Agreement
THIS RESTATED AND AMENDED AGREEMENT is made and entered
into as of January 1, 1993, by and between Imo Industries
Inc., a Delaware corporation ("Employer") and William J.
Holcombe ("Employee").
WHEREAS, the parties entered into a Restated and Amended
Employment Agreement effective as of May 9, 1989 which was
subsequently amended on March 6, 1991; May 5, 1992 and
October 20, 1992, respectively (collectively "the Former
Agreement");
WHEREAS, the parties desire to further amend the Former
Agreement and execute a revised unified document.
WHEREAS, Employer recognizes the uniquely valuable
services rendered by Employee prior to his retirement and
desires to reinstate those valuable services for the future,
while also providing for an orderly senior management
transition to a new chief executive officer in contemplation
of Employee's eventual resumption of retirement from his role
as chief executive officer;
WHEREAS, Employee is willing to continue to render his
services in directing the affairs of Employer and arrange for
an orderly management transition to a new chief executive
officer.
NOW, THEREFORE, in consideration of the mutual covenants
made herein, the parties agree as follows:
1. The Former Agreement. The Former Agreement is
hereby canceled and is of no further effect.
2. Employment. The parties agree that Employee will
remain in Employer's employ for the period stated
in paragraph 4 hereof and upon the other terms and
conditions herein provided.
3. Position and Responsibilities.
a) During the period of his employment
hereunder, Employee agrees to serve Employer
and Employer hereby employs Employee as
Chairman of the Board, President and Chief
Executive Officer of Employer. In addition to
his other senior management duties as Chief
Executive Officer, the parties acknowledge that
Employee, during the term of this Agreement, is
expected to:
i) assist in the identification and
employment of a potential replacement
chief executive officer ("the
Replacement"), (which may occur in phases
by the initial designation of a
"Replacement and/or Chief Operating
Officer"); subject to the approval of the
Board of Directors, both a replacement
chief executive officer and a chief
operating officer may be employed;
ii) while keeping the Board of Directors of
Employer ("the Board") informed on the
progress and effectivity of these efforts,
Employee may request that the Board,
acting through a designated screening
committee, make the first effort in
identifying candidates for the positions
of Replacement and/or Chief Operating
Officer.
iii) provide transitional instruction,
guidance and oversight to the Replacement
and/or Chief Operating Officer.
b) Final designation of a Chief Operating
Officer and/or the Replacement shall be
effected with the concurrence of the Board.
c) During the term then remaining under this
Agreement, Employee shall serve as Chairman of
the Board and as a member of the Executive
Committee thereof, as well as any other
committee of the Board to which the Board may
reasonably appoint him. Upon the surrender of
his office and for the term then remaining
under this Agreement, Employee's status shall
thereupon become that of a retiree and
consultant to the Company.
4. Terms and Performance.
a) Term of Employment. The period of Employee's
employment hereunder shall be deemed to have
commenced as of September 1, 1986 (under a
preceding agreement of employment, as amended)
and shall continue to expiration on September
1, 1994, unless terminated sooner by mutual
agreement or by operation of paragraph 3.
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. However, nothing stated herein
shall prevent or restrict Employee from making
any personal investments which do not conflict,
either in time or interest, with Employer.
5. Duties of Office.
a) In his capacity as officer, described in
paragraph 3 hereof, Employee shall have the
power, responsibility, and authority
customarily appertaining to that position in a
publicly-held corporation. This shall include,
but not be limited to, the authority to conduct
the affairs of the Employer except those
reserved to the Board by the Bylaws of the
Employer and further includes, without
limitation, the power to appoint and dismiss
employees of the Employer, to enter into any
and all kinds of agreements, sales, leases,
mortgages, and other contracts on behalf of the
Employer and to do all other acts which he may
consider necessary or conducive to the best
interests and welfare of the Employer, all
subject to the general policy direction of the
Board.
b) The Employer and its Board shall, during the
term of this Agreement, include Employee in any
list of nominees for election as directors
which may be recommended or otherwise proposed
to the shareholders and shall further use their
best efforts, consistent with their fiduciary
responsibility to the shareholders of the
Employer to cause the election and retention of
Employee as a member of the Board of Employer.
6. Compensation.
a) Employee's salary for the calendar year 1993
is fixed at $550,000, payable in monthly
installments.
b) Although Employee's salary may be adjusted by
the Board from time to time, the adjustment
shall not be a reduction from the $550,000
stated in "a" above, regardless of Employee's
role of office or as a consultant, as described
in paragraph 3 above. The amount of Management
Incentive Compensation while employed, if any,
shall be determined by the Board in accordance
with its usual evaluative practices.
c) The Board shall review at least yearly the
annual basic salary stated in subparagraph "a"
above, and shall in its discretion grant such
increases for cost of living, merit, or other
similar or customary reasons as it may in good
faith deem appropriate.
d) In the event of Employee's death during the
term of this Agreement, Employer shall pay one-
half of Employee's basic salary compensation
then in effect for the remainder of the term of
this Agreement. Such payment shall be made to
Employee's executor, administrator or to such
specific beneficiary as Employee may designate
in his Will and give written notice of to the
Employer; in the event of conflict between
Employee's Will and written notice to Employer,
the written notice shall control.
e) If Employee becomes disabled during the term
of this Agreement, the terms of any applicable
formal plan of disability compensation then in
effect by Employer shall control, provided that
it compensates Employee for a period of time
equal to the shorter of the duration of the
disability or the remainder of the term of this
Agreement in an amount at least two-thirds of
his monthly salary then in effect; if the
formal plan does not so compensate, Employer
shall make up the difference, subject,
nevertheless, to the terms of the formal plan.
(f) The provisions of a "change in control"
agreement between Employer and Employee, dated
January 7, 1987, are hereby ratified and shall
continue in effect during the Term hereof.
7. Pension. Notwithstanding Employee's
participation in Employer's "Retirement Plan for
Salaried U.S. Employees of Imo Delaval Inc. (now
Imo Industries Inc.) and Affiliates" (the "Plan")
and any benefit expected by Employee to be derived
therefrom, Employee shall be entitled to receive a
minimum retirement amount equivalent to a straight
life benefit of $24,000 per month which shall be
first offset by the following amounts:
(a) $1,399.67, which Employee is entitled to
receive by resuming payments under an election
of early retirement made by Employee under the
provisions of the predecessor retirement plan
to the Plan and which payment is presently
suspended as a result of the reemployment of
Employee as of September 1, 1986.
(b) $67.60, which Employee is entitled to
receive under the Plan's predecessor plan for
the interval from September 1, 1986 to December
31, 1986.
(c) $17,349.51, which is the straight life benefit
equivalent of the single sum settlement
received by Employee in 1992 from the
Employer's non-qualified retirement plan.
The remaining portion of the guaranteed
$24,000 per month shall be subject to further
actuarial adjustment as a result of any
optional form of benefit which Employee may
elect upon his retirement. The said guaranteed
amount shall apply regardless of when Employee
retires.
8. Additional Compensation. In addition to the
basic compensation set forth in paragraph 6, the
Employer shall provide Employee during the period
in which he renders service to the Employer as an
employee hereunder any and all additional benefits
(commensurate with his position and length of
service) which the Board, in its sole and absolute
discretion, may make available to its executive
officers (or employees in general, if any one is
not available solely for executive officers) under
any general profit-sharing plan, bonus or incentive
compensation plan, pension plan, 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 at any time or
from time to time during the term hereof.
Likewise, upon this Agreement being converted to a
consultancy, as provided in paragraph 3(c),
Employee shall have the benefit of the Company's
medical and dental plans as made available to
active employees, as well as other benefits
customarily made available to retirees.
9. Special Termination of Employment.
a) The Employer shall have the right to
terminate Employee's employment under this
Agreement prior to the expiration of the term
upon the occurrence of any one of the following
events:
i) the death of Employee (provided, however, the
obligation of the Employer under subparagraph
6(d) shall not terminate);
ii) the giving of written notice by the
Employer to Employee of the termination of
his employment upon the "Complete
Disability" of Employee in accordance with
subparagraph 6(e) hereof.
iii) the giving of written notice by the
Employer to Employee of the termination of
his employment by discharge for "Cause" as
herein defined.
b) The term "Cause", as used herein with
reference to the discharge of Employee by the
Employer, shall mean willful and gross
misconduct on the part of Employee that is
materially and demonstrably detrimental to the
Employer and its subsidiaries taken as a whole
or the commission by Employee of one or more
acts which constitute an indictable crime under
United States federal, state or local law, as
determined in good faith by a written
resolution duly adopted by the affirmative vote
of not less than 2/3 of all the non-employee
directors at a meeting duly called and held for
that purpose after reasonable notice to
Employee and opportunity for Employee and his
counsel to be heard. Disability because of
illness or accident or any other physical or
mental incapacity shall not constitute a basis
for discharge for Cause.
10. Default. The occurrence of an "Event of
Default", as described in this paragraph 10, shall
constitute a breach of the Employer's obligations
under this Agreement unless expressly waived in a
writing signed by Employee as to each such
occurrence. "Events of Default" shall mean the
following events, unless remedied or otherwise
cured within thirty (30) business days after the
Employer's receipt of written notice from Employee
of such breach:
a) A breach by the Employer of any of its
express or implied obligations under this
Agreement;
b) the assignment to Employee of any duties, or
any limitation of his responsibilities and
reporting relationships, inconsistent with his
positions, duties, responsibilities, reporting
relations and status with the Employer as
contemplated and described elsewhere herein, or
any removal of Employee from, or any failure to
re-elect Employee to, any of Employee's
positions with the Employer, except in
connection with the termination of the
employment of Employee by the Employer for
Cause or as a result of his death or permanent
disability;
c) any failure by the Employer to pay, or any
reduction by the Employer of, Employee's base
annual salary or bonus compensation in effect
immediately prior to the date hereof or any
failure by the Employer to grant an increase in
Employee's base annual salary each year
consistent with any increase in the applicable
annual cost of living index, unless no
increases in base salary are being given to
other executive employees of the Employer;
d) any failure by the Employer to provide
Employee with all benefit plans and programs
and other fringe benefits (or their equivalent)
from time to time in effect for the benefit of
any executive, management or administrative
group which customarily includes a person
holding the employment position with the
Employer then held by Employee; or
e) the relocation of the principal place of
Employee's employment to a location that is
more than 30 miles from his residence in the
Princeton-Lawrenceville area of New Jersey, or
the imposition of travel requirements on
Employee not substantially consistent with such
travel requirements existing immediately prior
to the date hereof.
11. Covenant Not to Compete. During the period in
which Employee renders services under this
Agreement and for a period of one (1) year
thereafter, unless there shall earlier occur an
Event of Default, Employee shall not, without the
written consent of the Employer, directly or
indirectly engage in the production, manufacture,
or distribution of any product which competes with
any product manufactured or marketed by the
Employer or any of its subsidiaries of any tier,
except as an investor in a publicly-held
corporation in which Employee holds less than 5% of
the outstanding shares of any class of stock.
12. Confidentiality. During the period in which he
renders service under this Agreement and
thereafter, Employee shall not divulge to any third
party or otherwise use, except in the course of his
employment with the Employer, any trade secrets
owned by the Employer and not a part of the public
domain through any breach of fiduciary duty by
Employee. Nothing in this paragraph 12 shall be
construed (i) as a grant of any rights to trade
secrets owned by the Employer, or (ii) to authorize
disclosure of trade secrets of the Employer at any
time after termination of employment with the
Employer.
13. Effect of Default.
a) Upon the occurrence of any Event of Default
which has not been waived in writing by Employee, Annual
Compensation (as herein defined) which would have been
paid Employee during the remainder of the term of this
Agreement if no Event of Default had occurred shall
become due and payable and shall be paid to Employee in
a single sum. For purposes of this paragraph 13,
"Annual Compensation" shall mean the salary under
paragraph 6(a) in effect at the time of the Event of
Default plus an amount representing the present value of
all employee benefits (other than discretionary bonuses
and incentive compensation under plans then in effect)
which would have been paid during the remaining term of
this Agreement. Discretionary bonuses or incentive
compensation shall be included herein as being equal to
one (1) additional year's basic salary then in effect.
All present value calculations will be made by the
Employer's independent auditors utilizing the interest
rate provided for in paragraph 17.
b) In no event shall the amount payable
hereunder upon the occurrence of an Event of Default be
less than 2.99 multiplied by Employee's basic
compensation then in effect under paragraph 6(b).
14. Binding Effect.
a) The provisions hereof shall be binding upon
and shall inure to the benefit of Employee, his heirs
and personal representatives, and the Employer and its
successors and assigns. This Agreement shall not be
assignable, in whole or in part. This Agreement
contains the entire agreement between the parties hereto
with respect to the subject matter hereof. It may be
amended or modified only by a writing signed by the
party against whom enforcement of any waiver, change,
modification, extension or discharge is sought.
b) No delay or failure on the part of either
party in exercising any power or right shall operate as
a waiver thereof, nor shall any single or partial
exercise of any power or right preclude other or further
exercise thereof or the exercise of any other power or
right.
15. Governing Law. This Agreement shall be governed
by and construed in accordance with the laws of the State of
New Jersey.
16. Arbitration. Any dispute, controversy, or claim
arising out of or relating to this Agreement, or the breach
thereof, shall be settled by arbitration before three
arbitrators in the City of New York, in accordance with the
rules then obtaining of the American Arbitration Association,
and judgment upon award rendered by the arbitrators may be
entered in any court having jurisdiction thereof.
17. Legal Expenses. At least monthly, the Employer
shall pay all costs and expenses, including attorneys' fees
and disbursements of the Employee, in connection with any
legal proceedings (including, but not limited to,
arbitration), whether or not instituted by the Employer or
Employee, relating to the interpretation or enforcement of
any provision of this Agreement. The Employer also agrees to
pay prejudgment interest on any money judgment obtained by
Employee as a result of such proceedings, calculated at the
Prime Rate, as reported in the Wall Street Journal, as in
effect from time to time from the date that payment should
have been made to Employee under this Agreement.
18. No Mitigation. All payments and benefits to
which Employee is entitled under this Agreement shall be made
and provided without offset, deduction or mitigation on
account of income Employee may receive from other employment
or otherwise.
IN WITNESS WHEREOF, the Employer has executed this
Agreement in multiple originals by its duly authorized
representatives, and Employee has executed this Agreement
personally, as of the day and year first hereinabove written.
/s/WILLIAM J. HOLCOMBE
W. J. Holcombe
IMO INDUSTRIES INC.
By:/S/THOMAS J. BIRD
Thomas J. Bird
Senior Vice President &
General Counsel
AMENDED AGREEMENT
THIS AMENDMENT is made and entered into as of July
19, 1994, by and between Imo Industries Inc., a Delaware
corporation ("Employer") and William J. Holcombe
("Employee").
WHEREAS, the parties entered into a Restated and
Amended Employment Agreement effective as of January 1,
1993 pursuant to the terms of which Employee's status
was subsequently converted to that of a consultant to
the Employer, ("the Former Agreement");
WHEREAS, the parties desire to amend the Former
Agreement;
WHEREAS, Employer recognizes the uniquely valuable
services rendered by Employee prior to his retirement
and desires to have Employee's knowledge of corporate
history and transactions available to its Board of
Directors;
WHEREAS, Employee desires to terminate his role as
a Director and as a consultant to the Employer, but is
willing to provide historical information to the Board
as a consultant.
NOW, THEREFORE, in consideration of the mutual
covenants made herein, the parties agree as follows:
1.Paragraph 3. Position and Responsibilities is
deleted in its entirety and replaced with the following:
a)Upon the surrender of his office on October 31,
1993 and for the term remaining under this
Agreement, Employee's status shall thereupon
become that of a retiree and consultant to the
Employer.
b)Effective with the date of this Amendment and for
the remaining term of his consultancy, Employee
agrees to provide consulting services to the
Employer's Board of Directors, upon request of
any Director, related to the following:
i)the corporate history of the Employer;
ii)any transactions entered into by Employer
while Employee served as an active employee;
and
iii)any other matters relating to Employer
which occurred while Employee served as an
active employee.
2.Paragraph 4. Terms and Performance paragraph a)
is amended to expire on December 31, 1994 and paragraph
b) is deleted in its entirety.
3.Paragraph 5. Duties of Office is deleted in its
entirety.
4.Paragraph 6. Compensation is amended by adding
the following subparagraph:
(g)During the period from September 1, 1994 to
December 31, 1994 Employee shall be paid a
consulting fee of twenty-five thousand dollars
per month ($25,000/month) payable at the end
of each month.
5.Paragraph 8. Additional Compensation is amended
by changing the last sentence thereof to read as
follows:
Upon this Agreement being converted to a
consultancy, as provided in paragraph 3(a), and for the
remaining term thereof, Employee shall have the benefit
of the Company's dental plan as made available to active
employees, as well as other benefits customarily made
available to retirees. Employee shall be eligible for
the Retiree Premium medical plan upon payment of the
monthly premiums therefor and, while Employee maintains
coverage under such plan, the $500 annual cap on direct
purchase prescription medicines shall be waived and
replaced with the same drug benefit as available to an
active employee.
Except as modified herein, the Former Agreement
remains in full force and effect.
IN WITNESS WHEREOF, the Employer has executed this
Agreement in multiple originals by its duly authorized
representatives, and Employee has executed this
Agreement personally, as of the day and year first
hereinabove written.
/s/WILLIAM J. HOLCOMBE
W. J. Holcombe
IMO INDUSTRIES INC.
By: /s/THOMAS J. BIRD
Thomas J. Bird
April 21, 1994
Mr. J. D. Attaway
Executive Vice President
Varo Inc.
2800 West Kingsley
Garland, TX 75041
Dear Dwayne:
As you know, Imo Industries has decided to explore the sale
of its Electro-Optical Systems businesses which includes Varo
Inc. and Baird Corporation. We believe such a sale will be
in the best interests of our shareholders and we have engaged
CS First Boston to assist us in this regard.
To achieve this goal, we will need your 100% support
throughout the entire offering and sale process, in order to
present the EOS Group at its best to prospective buyers and
maintain expected performance levels during the period prior
to completion of the sale.
We believe that an important factor in a buyer's interest is
having a stable management in place, one that will be
available to carry on under new ownership. However, we also
recognize there is no assurance that such will turn out to be
true.
To protect you from the uncertainties associated with the
divestiture process and in consideration of your focusing
your full attention on helping Imo achieve a successful sale
transaction, the Company will provide you with severance
protection in the event one or more buyers (of the entire EOS
Group or portions thereof as and when they aggregate a major
portion of the Group, which shall be defined as more than 50%
of the average revenues of the EOS Group during the 12 month
period which precedes the purchase or purchases) chooses not
to employ you or initially employs you and subsequently
terminates your employment as defined below prior to June 30,
1996.
The purpose of this is to provide pay and benefit protection
along with job search assistance, should it become necessary
for you to seek a new position. It will include the
following:
1. Pay Continuation. Upon termination, the Company
will pay you a monthly severance payment in an
amount equal to your base salary through June,
1996. If you should become employed by or
otherwise receive compensation from the buyer of an
EOS business, the Company severance payments will
be reduced by the amount of income or compensation
(excluding the value of any benefits) from such
employment for the remaining period. This pay
continuation is in lieu of severance pay under
Company policy, but in no event will it be less
than said policy would otherwise provide.
2. Benefit Continuation. For the period of pay
continuation, the Company will also continue
medical, dental and basic executive life insurance
( the same as in effect for active employees)
provided you continue to authorize required
employee contributions. All other employee
benefits including AD&D, disability, supplemental
life insurance, flexible spending accounts and
premium conversion will cease on your termination
date. Contributions cannot be made to the Employee
Stock Savings Plan after your termination date.
Subject to the approval of the Compensation
Committee, for purposes of exercisability and
expiration of options granted under the Equity
Incentive Plan for Key Employees, you will be
considered to have retired as of your termination
date.
3. Pension. Pension benefits under the Imo
Retirement Plan and the Imo Supplemental Executive
Retirement Plan (SERP) will commence effective July
1, 1996. Your benefit calculation will treat your
service and compensation as if you had been
employed through June 1996 at your base salary at
time of termination. Your combined life annuity
benefit will not be less than $4,167 per month.
The actuarial present value of that portion of the
benefit to be paid from the SERP will, upon your
termination date, be deposited in the SERP account
and earmarked for the earned benefit.
4. Job Search Assistance. The Company will arrange
and pay for the services of a recognized
professional outplacement firm mutually acceptable
to you and the Company to assist in your job
search, subject to a maximum of $20,000 in fees
from such firm or firms.
5. Unused Vacation. You will be paid for any earned
but unused vacation per Company policy at time of
termination.
6. Company Car. You may continue use of your Company
car (including reasonable repair and maintenance
expenses but not fuel) through June 1996, and be
given the opportunity to purchase it at book value
at the end of said period.
7. Alternative Employment. Once the Optical Systems
and Ni-Tec Divisions have been sold, in the event
the Buyer(s) does not offer you continued
employment, you will be allowed a reasonable amount
of normal work time to pursue alternative
employment. After June 1995, the amount of time
devoted to Imo business will be by mutual consent.
For purposes of eligibility, termination will be deemed to
have occurred if, as of the date of sale(s), Imo does not
continue your employment at your then current level of
compensation or the Buyer(s) does not employ you in a
position of like authority, responsibility, and compensation
essentially similar to your current position and
compensation, or prior to June 30, 1996 the Buyer(s) (i)
terminates you for other than just cause based on clear
evidence of your willful misconduct, (ii) substantially
reduces your position or compensation or (iii) requires
relocation to an area outside the Dallas metropolitan area
without your consent.
The same severance benefits described in this letter will
also apply should Imo determine that your services are no
longer needed (for reasons other than cause or willful
misconduct) in the event the EOS businesses are not sold or
prior to completing the sale of essentially all of the EOS
businesses.
You agree not to compete with any continuing Imo business
through June 1996, and you agree to provide consulting
services to Imo, so long as you are not employed, through
June 1995.
It is our sincere hope that, if a sale is consummated,
continued employment and opportunity with the new owner will
be favorable for you. However, if it turns out not to be so,
I hope the protection provided in this letter will help make
possible a smooth transition to new employment.
This Agreement will expire automatically if the EOS Group is
not sold or under contact to be sold by July 1, 1996.
Please acknowledge your acceptance and agreement to the above
by signing and returning one copy directly to me. This offer
is void if not returned to me by May 19, 1994.
Sincerely,
/s/DAVID C. CHRISTENSEN
David C. Christensen
Senior Vice President,
Human Resources
ACKNOWLEDGED AND ACCEPTED:
/s/J. DWAYNE ATTAWAY
Name
May 6, 1994
Date
April 29, 1994
Mr. J. D. Attaway
Executive Vice President
Varo Inc.
2800 West Kingsley
Garland, TX 75041
Dear Dwayne:
As you know, Imo Industries has decided to explore the sale
of its Electro-Optical Systems businesses which includes Varo
Inc. and Baird Corporation. We believe such a sale will be
in the best interests of our shareholders and we have engaged
CS First Boston to assist us in this regard.
To achieve this goal, we will need your 100% support
throughout the entire offering and sale process, in order to
present the EOS Group at its best to prospective buyers and
maintain expected performance levels during the period prior
to completion of the sale.
To recognize your position of leadership in this sale
process, Imo has established a Special Divestiture Incentive
Program for selected key staff members. Your individual
target incentive award is $50,000.
Because your responsibility covers multiple divisions, the
awarded amount will be considered to be earned provided (1)
you have done your best to maximize Imo operating
performance, preserve the value of the company and
effectively assist in the sale of the business on optimum
terms and (2) the sale of all or essentially all of the EOS
businesses has taken place (either in one or a series of
transactions) or your employment has been terminated by Imo
prior to the expiration date of this agreement for reasons
other than cause.
As an added consideration, should your employment with Imo
terminate as a result of this divestiture program, any
unvested stock options granted to you under the company's
Equity Incentive Plan for Key Employees will vest in full
upon such termination date (with all other provisions of the
option agreement to remain according to its terms).
This special divestiture program is not an employment
contract, but simply an extra incentive for your help and to
recognize the extraordinary circumstances under which you
will be working. It will be in addition to any bonus you may
earn under Imo's Executive Incentive Compensation Program,
which you will be prorated for the portion of the year under
Imo ownership.
This special Divestiture Incentive Program will expire
automatically (unless extended) if the EOS Group is not sold
or under contract to be sold by March 31, 1995 or is
otherwise withdrawn from the market.
In addition to this divestiture bonus, you will be eligible
for severance protection benefits as described to you in a
separate letter.
Please acknowledge your acceptance and agreement to the above
by signing and returning one copy directly to me. This offer
is void if not returned to me by May 19, 1994.
Sincerely,
/s/DAVID C. CHRISTENSEN
David C. Christensen
Senior Vice President,
Human Resources
eb
ACKNOWLEDGED AND ACCEPTED:
/s/J. DWAYNE ATTAWAY
DATE: May 6, 1994
PERSONAL AND CONFIDENTIAL
May 19, 1994
Mr. Gary E. Walker
Executive Vice President
Turbomachinery Group
Dear Gary:
As you know, Imo Industries is considering an unsolicited
offer to buy the Turbomachinery Group.
If we decide to go forward, we will need your continued 100%
support throughout the entire sale process, in order to
present the Turbomachinery Group at its best to the
prospective buyer and maintain expected performance levels
during the period prior to completion of the sale.
We are told that the prospective buyer wants to retain the
current management to carry on under new ownership and is
prepared to offer employment agreements to certain key
people. However, to protect you from the uncertainties
associated with a change of ownership and in consideration of
your focusing your full attention on helping Imo achieve a
successful sale transaction, the Company wants to assure you
of severance protection in the event a buyer chooses not to
employ you or terminates your employment as defined below
within 12 months following the sale.
The purpose of this is to provide pay and benefit protection
along with job search assistance, should it become necessary
for you to seek a new position. It will include the
following:
1. Pay Continuation. In the event of termination, the
Company will pay you a monthly severance payment in
an amount equal to your base salary, for a period of
up to 18 months or until you commence other
employment (about which you agree to notify the
Company), whichever occurs first. If you should
engage in other professional employment, including
self employment, at a lower rate of pay, the Company
severance payments will be reduced by the amount of
income from such other employment for the remaining
period. This pay continuation is in lieu of
severance pay under Company policy, but in no event
will it be less than said policy would otherwise
provide.
2. Benefit Continuation. For the period during which
severance payments are being made, the Company will
also continue medical, dental and basic executive
life insurance (the same as in effect for active
employees) provided you continue to authorize
required employee contributions. All other employee
benefits including AD&D, disability, supplemental
life insurance, flexible spending accounts and
premium conversion will cease on your termination
date. Contributions cannot be made to the Employee
Stock Savings Plan and you will not accrue
additional benefits under the Company sponsored
pension plan.
3. Job Search Assistance. The Company will arrange
and pay for the services of a recognized
professional outplacement firm mutually acceptable
to you and the Company to assist in your job search,
subject to a maximum of $20,000.
4. Unused Vacation. You will be paid for any earned
but unused vacation per Company policy at time of
termination.
5. Company Car. You may continue use of your Company
car (including reasonable repair and maintenance
expenses but not fuel) during the period of severance
payments and be given the opportunity to purchase it
at book value at the end of said period.
If the buyer notifies Imo prior to a sale that it does not
intend to employ you, the benefits set forth above will be
provided by Imo. Otherwise, Imo intends to require that the
buyer assume this obligation or enter into a new agreement
which includes comparable severance benefits. Any amounts
due hereunder would be subject to offset as a result of any
termination or employment contract benefits received from the
buyer.
For purposes of eligibility, termination will be deemed to
have occurred if, as of the date of sale, the buyer does not
employ you in a position essentially similar to your current
position and compensation, or within 12 months following the
date of sale the buyer (i) terminates you for other than just
cause based on clear evidence of your willful misconduct, or
(ii) substantially reduces your position or compensation or
requires you to relocate your residence without your consent.
It is our sincere hope that, if a sale is consummated,
continued employment and opportunity with the new owner will
be favorable for you. However, if it turns out not to be so,
I hope the protection provided in this letter will help make
possible a smooth transition to new employment.
This Agreement will expire automatically if the
Turbomachinery Group is not sold or under contract to be sold
by September 30, 1994.
Please acknowledge your acceptance and agreement to the above
by signing and returning one copy directly to me. This offer
is void if not returned to me by May 27, 1994.
Sincerely,
/s/DAVID C. CHRISTENSEN
David C. Christensen
Senior Vice President,
Human Resources
eb
ACKNOWLEDGED AND ACCEPTED:
/S/GARY E. WALKER
Name
May 20, 1994
Date
PERSONAL AND CONFIDENTIAL
May 19, 1994
Mr. Gary E. Walker
Executive Vice President
Turbomachinery Group
Dear Gary:
As you know, Imo Industries is considering an unsolicited
offer to buy the Turbomachinery Group.
If we decide to go forward, we will need your continued 100%
support throughout the entire sale process, in order to
present the Turbomachinery Group at its best to the
prospective buyer and maintain expected performance levels
during the period prior to completion of the sale.
To recognize your position of leadership in this sale
process, IMO has established a special Divestiture Incentive
Plan. Your individual target bonus will be $100,000. This
divestiture bonus is in addition to any bonus you may earn
under IMO's 1994 Executive Incentive Compensation Program,
which will be prorated to the date of sale.
The target bonus amount will be paid by IMO one month
following completion of a sale, provided you remain employed
until the closing date and have demonstrated your best
efforts to achieve Turbomachinery operating performance
goals, preserve the value of the company and effectively
assist in activities related to the sale of the business on
optimum terms. The actual amount of the bonus may be reduced
or eliminated by the Chief Executive Officer if, in his sole
discretion, he determines that said best efforts have not
been demonstrated.
As an added consideration, the company will recommend to its
Board of Directors that, should your employment with Imo
terminate as a result of this divestiture, any unvested stock
options granted to you under the company's Equity Incentive
Plan for Key Employees would vest in full upon such
termination date (with all other provisions of the option
agreement to remain according to its terms). Approval is
pending Board action and is subject to later written
confirmation.
Because only a few key managers are eligible, please do not
disclose the existence of this plan to others.
This special divestiture incentive will expire automatically
if the Turbomachinery Group is not sold or under contract to
be sold by September 30, 1994
Please acknowledge your receipt and acceptance below and
promptly return one copy directly to me. This offer will be
void if not returned by May 27, 1994.
Sincerely,
/s/DAVID C. CHRISTENSEN
David C. Christensen
Sr. Vice President
Human Resources
ACKNOWLEDGED AND ACCEPTED:
/s/GARY E. WALKER
DATE: May 20, 1994
AMENDMENT NO. 1 TO EMPLOYMENT AGREEMENT
OF DONALD K. FARRAR
WHEREAS, Imo Industries Inc., a Delaware corporation
("Employer") and Donald K. Farrar ("Employee") have
previously entered into an Employment Agreement effective as
of September 13, 1993;
WHEREAS, Employer and Employee desire to amend said
Agreement to reflect a voluntary reduction in salary
retroactive to January 1, 1994;
NOW THEREFORE, in consideration of the mutual covenants
herein contained, the parties hereby agree as follows:
1. Article 4 Compensation is amended to read as
follows:
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 $450,000 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 evaluation process.
The Board shall review at least annually,
beginning as at January 1, 1996, the annual
basic salary stated above and shall in its
discretion grant such increases for cost of
living, merit or other similarly or customary
reasons, if any, as it may in good faith deem
appropriate.
2. Article 5 Stock Option is amended by adding the
following subparagraph:
d. Promptly after the effective date of this
Amendment, a special restricted stock award of
40,000 share of Imo Industries Inc. Common
Capital Stock will be granted under the
current Equity Incentive Plan for Key
Employees which shall vest as to 20% of the
shares on December 31, 1995 (the "Vesting
Date") and as to an additional 10% each
succeeding anniversary of the Vesting Date
until 100% of the shares are vested.
e. Promptly after the effective date of this
Amendment, a special option in the amount of
50,000 shares of Imo Industries Inc. Common
Capital Stock will be granted under the
current Equity Incentive Plan for Key
Employees which shall vest as to 20% of the
shares on December 31, 1995 (the "Vesting
Date") and as to an additional 10% on each
succeeding anniversary of the Vesting Date
until the right to exercise the option shall
have accrued with respect to 100% of the
shares subject to such option.
IN WITNESS WHEREOF, the parties have executed this
Agreement to be effective as of this 17th day of November,
1994.
IMO INDUSTRIES INC.
/s/DONALD K. FARRAR By:/s/T.J. BIRD
Donald K. Farrar T.J. BIRD
Participant-Directed DC Plan
Committee Administrator
EAGLE TRUST COMPANY
TRUST AGREEMENT
THIS AGREEMENT OF TRUST (the "Agreement") made as of
this 1st day of March 1995 by and between IMO Industries
Inc., a New Jersey State corporation, (the "Employer") and
EAGLE TRUST COMPANY, a trust company incorporated under
Chapter 10 of the Pennsylvania Banking Code, (the "Trustee"),
W I T N E S S E T H :
WHEREAS, the Employer has adopted and is maintaining the
IMO Industries Inc. Employee Stock Savings Plan (the "Plan")
for the exclusive benefit of its Employees; and
WHEREAS, the Employer and the Trustee deem it necessary
and desirable to enter into a written agreement of trust for
the investment of plan assets in funds ("Funds");
NOW, THEREFORE, in consideration of the mutual covenants
contained herein, the parties hereto, intending to be legally
bound, hereby agree and declare as follows:
ARTICLE 1
ESTABLISHMENT OF THE TRUST
Section 1.1 The Employer and the Trustee hereby agree
to the establishment of a trust consisting of such sums as
shall from time to time be paid to the Trustee under the Plan
for investment in Funds and such earnings, income and
appreciation as may accrue thereon (the "Trust").
Section 1.2 The Trust shall be held, invested,
reinvested and administered by the Trustee in accordance with
the terms of the Plan and this Agreement solely in the
interest of Participants and their Beneficiaries and for the
exclusive purpose of providing benefits to Participants and
their Beneficiaries and defraying reasonable expenses of
administering the Plan. Except as provided in Section 4.2,
no assets of the Plan shall inure to the benefit of the
Employer.
Section 1.3 The Trustee shall pay benefits and
expenses from the Trust only upon the written direction of
the fiduciary named in the plan as having the authority to
control and manage the administration of the Plan (the
"Committee"). The Trustee shall be fully entitled to rely on
such directions furnished by the Committee, and shall be
under no duty to ascertain whether the directions are in
accordance with the provisions of the Plan.
Section 1.4The Trustee shall carry out the duties and
responsibilities herein specified, but shall be under no duty
to determine whether the amount of any contribution by the
Employer or any Participant is in accordance with the terms
of the Plan nor shall the Trustee be responsible for the
collection of any contributions under the Plan.
ARTICLE II
INVESTMENT OF THE FUND
Section 2.1 The Employer shall have the exclusive
authority and discretion to select Funds available for
investment under the Plan. In making such selection, the
Employer shall use the care, skill, prudence and diligence
under the circumstances then prevailing that a prudent person
acting in a like capacity and familiar with such matters
would use in the conduct of an enterprise of a like character
and with like aims. The available investments under the Plan
shall be sufficiently diversified so as to minimize the risk
of large losses, unless under the circumstances it is clearly
prudent not to do so. The selection of Funds currently
available for investment under the Plan is attached as
Exhibit A. The Employer hereby agrees that it shall give the
Trustee at least 30 days written notice (which notice may,
however, be waived by the Trustee) primor to adding any new
Fund to the list.
Section 2.2 Each Participant shall have the exclusive
right, in accordance with the provisions of the Plan, to
direct the investment by the Trustee of all amounts allocated
to the separate accounts of the Participant under the Plan
among any one or more of the available Funds. All investment
directions by Participants shall be timely furnished to the
Trustee by the Committee, except to the extent such
directions are transmitted telephonically or otherwise by
Participants directly to the Trustee or its delegate in
accordance with rules and procedures established and approved
by the Committee and communicated to the Trustee. In making
any investment of the assets of the Trust, the Trustee shall
be fully entitled to rely on such directions furnished to it
by the Committee or by Participants in accordance with the
Committee's approved rules and procedures, and shall be under
no duty to make any inquiry or investigation with respect
thereto.
Section 2.3 If the Trustee receives any contribution
under the Plan that is not accompanied by instructions
directing its investment, the Trustee shall immediately
notify the Committee of this fact, and the Trustee may, in
its discretion, hold or return all or a portion of the
contribution uninvested without liability for loss of income
or appreciation pending receipt of proper investment
directions. Otherwise, it is specifically intended under the
Plan and this Agreement that the Trustee shall have no
discretionary authority to determine the investment of the
assets of the Trust.
Section 2.4 Subject to the provisions of Sections 2.1,
2.2 and 2.3, the Trustee shall have the authority, in
addition to any authority given by law, to exercise the
following powers in the administration of the Trust:
(a) to invest and reinvest all or a part of the Trust
in accordance with Participants' investment
directions in any available Fund selected by the
Employer without restriction to investments
authorized for fiduciaries.
(b) to dispose of all or any part of the investments
or securities which may from time to time, or at
any time, constitute the Trust in accordance with
the investment directions by Participants furnished
to it pursuant to Section 2.2 or the written
directions by the Committee furnished to it
pursuant to Section 1.3, and to make, execute and
deliver to the purchasers good and sufficient deeds
of conveyance, and all assignments, transfers and
other legal instruments, either necessary or
convenient for passing the title and ownership free
and discharged of all trusts and without liability
on the part of such purchasers to see to the
application of the purchase money;
(c) to hold cash uninvested to the extent necessary to
pay benefits or expenses of the Plan;
(d) to cause any investment of the Trust to be
registered in the name of the Trustee or the name
of its nominee or nominees or to retain such
investment unregistered or in a form permitting
transfer by delivery; provided that the books and
records of the Trustee shall at all times show that
all such investments are part of the Trust;
(e) to deliver or cause to be delivered proxy
materials to the Committee or the Investment
Manager pursuant to whose direction such funds were
acquired or, for the IMO Company Stock Fund, to the
participants;
(f) upon the written direction of the Committee, to
apply for, purchase, hold or transfer any life
insurance, retirement income, endowment or annuity
contract;
(g) to consult and employ any suitable agent,
including an affiliate of the Trustee, to act on
behalf of the Trustee and to contract for legal,
accounting, clerical and other services deemed
necessary by the Trustee to manage and administer
the Trust according to the terms of the Plan and
this Agreement. (h)upon the written direction of
the Committee, to make loans from the Trust to
Participants in amounts and on terms approved by
the Committee in accordance with the provisions of
the Plan; provided that the Committee shall have
the sole responsibility for computing and
collecting all loan repayments required to be made
under the Plan and for furnishing the Trustee with
copies of all promissory notes evidencing such
loans; and
(i) to pay from the Trust all taxes imposed or levied
with respect to the Trust or any part thereof under
existing or future laws, and to contest the
validity or amount of any tax, assessment, claim or
demand respecting the Trust or any part thereof.
Section 2.5 Except as may be authorized by regulations
promulgated by the Secretary of Labor, the Trustee shall not
maintain the indicia of ownership in any assets of the Trust
outside of the jurisdiction of the district courts of the
United States.
ARTICLE III
DUTIES AND RESPONSIBILITIES
Section 3.1 The Trustee, the Employer and the
Committee shall each discharge their assigned duties and
responsibilities under this Agreement and the Plan solely in
the interest of Participants and their Beneficiaries in the
following manner:
(a) for the exclusive purpose of providing benefits
to Participants and their Beneficiaries and
defraying reasonable expenses of administering the
Plan;
(b) with the care, skill, prudence, and diligence
under the circumstances then prevailing that a
prudent person acting in a like capacity and
familiar with such matters would use in the
conduct of an enterprise of a like character and
with like aims;
(c) by diversifying the available investments under
the Plan so as to minimize the risk of large
losses, unless under the circumstances it is
clearly prudent not to do so; and
(d) in accordance with the provisions of the Plan
and this Trust Agreement insofar as they are
consistent with the provisions of the Employee
Retirement Income Security Act of 1974, as amended
("ERISA").
Section 3.2 The Trustee shall keep full and accurate
accounts of all receipts, investments, disbursements and
other transactions hereunder, including such specific records
as may be agreed upon in writing between the Employer and the
Trustee. All such accounts, books and records shall be open
to inspection and audit at all reasonable times by any
authorized representative of the Employer or the Committee.
A Participant may examine only those individual account
records pertaining directly to him.
Section 3.3 Within 120 days after the end of each Plan
Year or within 120 days after its removal or resignation, the
Trustee shall file with the Committee a written account of
the administration of the Trust showing all transactions
effected by the Trustee subsequent to the period covered by
the last preceding account to the end of such Plan Year or
date of removal or resignation and all property held at its
fair market value at the end of the accounting period. Upon
approval of such accounting by the Committee, neither the
Employer nor the Committee shall be entitled to any further
accounting by the Trustee. The Committee may approve such
accounting by written notice of approval delivered to the
Trustee or by failure to express objection to such accounting
within 90 days from the date on which the accounting is
delivered to the Committee.
Section 3.4 The Trustee shall furnish the Committee
with statements not less frequently than Quarterly reflecting
the current fair market value of the Trust Account.
Section 3.5 The Trustee shall not be required to
determine the facts concerning the eligibility of any
Participant to participate in the Plan, the amount of
benefits payable to any Participant or Beneficiary under the
Plan, or the date or method of payment or disbursement. The
Trustee shall be fully entitled to rely solely upon the
written advice and directions of the Committee as to any such
question of fact.
Section 3.6 Unless resulting from the Trustee's
negligence, willful misconduct, lack of good faith, or breach
of its fiduciary duties under this Agreement or the Employee
Retirement Income Security Act of 1974, as amended, the
Employer shall indemnify and save harmless the Trustee from,
against, for and in respect of any and all damages, losses,
obligations, liabilities, liens, deficiencies, costs and
expenses, including without limitation, reasonable attorney's
fees and other costs and expenses incident to any suit,
action, investigation, claim or proceedings suffered,
sustained, incurred or required to be paid by the Trustee in
connection with the Plan or this Agreement.
Section 3.7 The Trustee acknowledges its status as a
"fiduciary" of the Plan within the meaning of ERISA, as
amended, and agrees to maintain insurance covering its
fiduciary responsibilities. The Trustee shall provide the
Employer evidence of such insurance upon request.
ARTICLE IV
PROHIBITION OF DIVERSION
Section 4.1 Except as provided in Section 4.2 of this
Article, at no time prior to the satisfaction of all
liabilities with respect to Participants and their
Beneficiaries under the Plan shall any part of the corpus or
income of the Trust be used for, or diverted to, purposes
other than for the exclusive benefit of Participants or their
Beneficiaries, or for defraying reasonable expenses of
administering the Plan.
Section 4.2 The provisions of Section 4.1
notwithstanding, contributions made by the Employer under the
Plan shall be returned to the Employer under the following
conditions:
(a) If a contribution is made by mistake of fact, such
contribution shall be returned to the Employer
within one year of the payment of such
contribution;
(b) Contributions to the Plan are specifically
conditioned upon their deductibility under the
Code. To the extent a deduction is disallowed for
any such contribution, it shall be returned to the
Employer within one year after the disallowance of
the deduction. Contributions which are not
deductible in the taxable year in which made but
are deductible in subsequent taxable years, shall
not be considered to be disallowed for purposes of
this subsection; and
(c) Contributions to the Plan are specifically
conditioned on initial and continued qualification
of the Plan under the Code. If the Plan is
determined to be disqualified, contributions made
in respect of any period subsequent to the
effective date of such disqualification shall be
returned to the Employer within one year after the
date of denial of qualification.
ARTICLE V
COMMUNICATION WITH COMMITTEE AND EMPLOYER
Section 5.1 Whenever the Trustee is permitted or
required to act upon the directions or instructions of the
Committee, the Trustee shall be entitled to act upon any
certification or regular Committee action, signed by the
person then acting as Chairman or Secretary of the Committee,
or upon any written communication signed by any two or more
members of the Committee or any person or agent designated to
act on behalf of the Committee. Such person or agent shall
be so designated either under the provisions of the Plan or
in writing by the Committee, and their authority shall
continue until revoked in writing. The current members of
the Committee are set forth in Exhibit B.
The Trustee shall incur no liability for failure to act
on such person's or agent's instructions or orders without
written communication, and the Trustee shall be fully
protected in all actions taken in good faith in reliance upon
any instructions, directions, certifications and
communications believed to be genuine and to have been signed
or communicated by the proper person.
Section 5.2 The Employer shall notify the Trustee in
writing as to the appointment, removal or resignation of any
member of the Committee. After such notification, the
Trustee shall be fully protected in acting upon the
directions of, or dealing with, any member of the Committee
until it receives notice to the contrary. The Trustee shall
have no duty to inquire into the qualifications of any member
of the Committee. The members of the Committee, the
fiduciary named in the Plan as having the authority to
control and manage the administration of the Plan, are set
forth in Exhibit B.
ARTICLE VI
TRUSTEE'S COMPENSATION; EXPENSES
Section 6.1 The Trustee shall be entitled to
reasonable compensation for its services as set forth in
Exhibit C. If approved by the Committee, the Trustee shall
also be entitled to reimbursement for all direct expenses
properly and actually incurred on behalf of the Plan.
Expenses shall be paid out of the Trust unless paid directly
by the Employer. Fees shall be paid based upon the attached
Schedule.
Section 6.2 Expenses incurred by the Employer or the
Committee, or any other persons designated to act on behalf
of the Employer or the Committee, shall be the responsibility
of the Employer or other person specified in the Plan. Such
expenses, however, may be paid from the Trust Fund upon
written direction to the Trustee by the Employer or
Committee.
ARTICLE VII
RESIGNATION AND REMOVAL OF TRUSTEE
Section 7.1 The Trustee may resign at any time by
written notice to the Employer which shall be effective 30
days after delivery, unless prior thereto, a successor
Trustee shall have been appointed.
Section 7.2 The Trustee may be removed by the Employer
at any time upon 30 days written notice to the Trustee; such
notice, however, may be waived by the Trustee.
Section 7.3 The appointment of a successor Trustee
hereunder shall be accomplished by and shall take effect upon
the delivery to the resigning or removed Trustee, as the case
may be, of written notice of the Employer appointing such
successor Trustee, and an acceptance in writing of the office
of successor Trustee hereunder executed by the successor so
appointed. Any successor Trustee may be either a corporation
authorized and empowered to exercise trust powers or one or
more individuals. All of the provisions set forth herein
with respect to the Trustee shall relate to each successor
Trustee so appointed with the same force and effect as if
such successor Trustee had been originally named herein as
the Trustee hereunder. If a successor Trustee shall not have
been appointed within 30 days after notice of resignation
shall have been given under the provisions of this article,
the resigning Trustee or the Employer may apply to any court
of competent jurisdiction for the appointment of a successor
Trustee.
Section 7.4 Upon the appointment of a successor
Trustee, the resigning or removed Trustee shall transfer and
deliver the Trust to such successor Trustee, after reserving
such reasonable amount as it shall deem necessary to provide
for its expenses in the settlement of its account, the amount
of any compensation due to it and any sums chargeable against
the Trust for which it may be liable. If the sums so
reserved are not sufficient for such purposes, the resigning
or removed Trustee shall be entitled to reimbursement for any
deficiency from the successor Trustee and the Employer who
shall be jointly and severally liable therefor.
ARTICLE VIII
AMENDMENT AND TERMINATION OF THE TRUST AND PLAN
Section 8.1 The Employer may, by delivery to the
Trustee of an instrument in writing, amend, terminate or
partially terminate this Agreement at any time; provided,
however, that no amendment shall increase the duties or
liabilities of the Trustee without the Trustee's consent;
and, provided further, that no amendment shall divert any
part of the Trust to any purpose other than providing
benefits to Participants and their Beneficiaries or defraying
reasonable expenses of administering the Plan.
Section 8.2If the Plan is terminated in whole or in
part, or if the Employer permanently discontinues its
contributions to the Plan, the Trustee shall distribute the
Trust or any part thereof in such manner and at such times as
the committee shall direct in writing. In the absence of
receipt of such written directions within 90 days after the
effective date of such termination, the Trustee shall
distribute the Trust in accordance with the provisions of the
Plan.
ARTICLE IX
MISCELLANEOUS PROVISIONS
Section 9.1 Unless the context of this Agreement
clearly indicates otherwise, the terms defined in the Plan
shall, when used herein, have the same meaning as in the
Plan.
Section 9.2 Except as otherwise required in the case
of any qualified domestic relations order within the meaning
of Section 414(p) of the Code, the benefits or proceeds of
any allocated or unallocated portion of the assets of the
Trust and any interest of any Participant or Beneficiary
arising out of or created by the Plan either before or after
the Participant's retirement shall not be subject to
execution, attachment, garnishment or other legal or judicial
process whatsoever by any person, whether creditor or
otherwise, claiming against such Participant or Beneficiary.
No Participant or Beneficiary shall have the right to
alienate, encumber or assign any of the payments or proceeds
or any other interest arising out of or created by the Plan
and any action purporting to do so shall be void. The
provisions of this Section shall apply to all Participants
and Beneficiaries, regardless of their citizenship or place
of residence.
Section 9.3Nothing contained in this Agreement or in the
Plan shall require the Employer to retain any Employee in its
service.
Section 9.4 Any person dealing with the Trustee may
rely upon a copy of this Agreement and any amendments thereto
certified to be true and correct by the Trustee.
Section 9.5 The Trustee hereby acknowledges receipt of
a copy of the Plan. The Employer will cause a copy of any
amendment to the Plan to be delivered to the Trustee.
Section 9.6 The construction, validity and
administration of this Agreement and the Plan shall be
governed by the laws of the Commonwealth of Pennsylvania,
except to the extent that such laws have been specifically
superseded by ERISA.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the day and year first above written.
ATTEST: [NAME OF EMPLOYER]
/s/ELAINE BANGS /s/DONALD F. VOSBURGH
Name Name
Executive Secretary Vice President
Title Title
3/1/95 3/1/95
Date Date
ATTEST: EAGLE TRUST COMPANY
/s/SUZANNE C. O'BOYLE /s/JEANNIE M. DURANTE
Name Name
Trust Officer
Title Title
3/7/95 3/7/95
Date Date
Exhibit A
IMO Industries Inc. Employee Savings Plan
Current Investment Options
as of March 1, 1995
SEI Stable Asset Fund
Merrill Lynch Capital Fund
Transamerica
SEI Equity Income Fund
SEI S&P 500 Index Fund
SEI Small Cap Fund
Scudder International Fund
IMO Company Stock
Exhibit B
IMO Industries Inc. Employee Savings Plan
Authorized Representatives
Plan Administration and Benefits Committee
as of March 1, 1995
Donald F. Vosburgh - Chairman V.P. Human Resources
Name Title
Jill Kovach Mgr of Financial Plan & Ana.
Name Title
David C. Christensen Senior V.P. Human Resources
Name Title
Geoffrey M. Dobson V.P. Treasurer
Name Title
Name Title
Name Title
Name Title
Name Title
Name Title
Exhibit C
IMO Industries Inc. Employee Savings Plan
Fee Schedule
as of March 1, 1995
Eagle Trust Company services at $7,500.00 per year,
including:
Plan Trustee
Complete Plan Level Accounting
Transaction Processing
Income Collection and Posting
Tax Withholding
Disbursements
Mutual Fund Processing
Disbursement
Lump Sum Checks
Loan Checks
Periodic Payments
Custodial Services
Comprehensive Trust Reports
Transaction Activity
Position Information
Tax Reporting
Regulatory Reporting
=============================================================
AMENDED AND RESTATED COMBINED RESTATED CREDIT AGREEMENT
Dated as of August 19, 1994
Among
IMO INDUSTRIES INC.,
THE LENDERS LISTED HEREIN
AND
BANKERS TRUST COMPANY,
as a Lender, Issuer Bank and Agent
=============================================================
AMENDED AND RESTATED COMBINED RESTATED CREDIT AGREEMENT
AMENDED AND RESTATED COMBINED RESTATED CREDIT
AGREEMENT, dated as of August 19, 1994, among IMO INDUSTRIES
INC., a Delaware corporation (together with its successors,
the "Borrower"), THE LENDERS SIGNATORY HERETO (each a
"Lender" and collectively, the "Lenders") and BANKERS TRUST
COMPANY, a New York banking corporation ("BTCo"), as a
Lender, as Issuer Bank (as hereinafter defined), and as agent
for the Lenders (in such capacity, and including its
successors and assigns in such capacity, the "Agent").
W I T N E S S E T H:
WHEREAS, the Borrower, the Lenders, the Issuer
Bank and the Agent are parties to a Combined Restated Credit
Agreement dated as of July 15, 1993 (the "Prior Credit
Agreement");
WHEREAS, pursuant to the Prior Credit Agreement,
the Lenders made certain loans (the "Loans") to the Borrower
and the Issuer Bank issued for the account of the Borrower
certain letters of credit;
WHEREAS, as of the date hereof, pursuant to the
Prior Credit Agreement, there are outstanding those letters
of credit issued on behalf of the Borrower or its affiliates
described on Schedule 1 (collectively, the "Letters of
Credit");
WHEREAS, on the date hereof, the Borrower is
refinancing and causing to be repaid to the Lenders all of
the Loans and causing Citibank, N.A. to issue to the Issuer
Bank its irrevocable standby letter of credit in the face
amount of $11,483,617.14 (the "Citibank LOC") and the Lenders
and the Agent are releasing certain liens and security
interests securing the Prior Credit Agreement; and
WHEREAS, the parties hereto desire to amend and
restate the Prior Credit Agreement, among other things, to
reflect the repayment of the Loans and the release of the
Collateral (as defined in the Prior Credit Agreement) and to
evidence certain arrangements relating to the Letters of
Credit and the Citibank LOC);
A G R E E M E N T:
NOW THEREFORE, in consideration of the
foregoing, and for valuable consideration, the parties hereto
hereby amend and restate the Prior Credit Agreement as
follows:
SECTION 1. DEFINITIONS
As used in this Agreement, the following
terms have the meanings indicated:
"Acceptable Rating" means, as applied to
the indebtedness of any Person, a rating of at least Baa2 by
Moody's Investors Service or BBB by Standard & Poor's
Corporation.
"Affiliate" means, with respect to any
Person, any other Person or "group" of Persons (as the term
"group" is defined for purposes of Section13(d) of the
Exchange Act) directly or indirectly controlling, controlled
by, or under common control with such Person. For the
purposes of this definition, "control" (including, with
correlative meanings, the terms "controlling", "controlled
by" and "under common control with"), as used with respect to
any Person, means the possession, directly or indirectly, of
the power to direct or cause the direction of management and
policies of such Person, whether through the ownership of
voting securities or by contract or otherwise. Neither any
Lender nor any parent of any Lender nor any Subsidiary of any
such Lender or parent shall be treated as an Affiliate of the
Borrower.
"Agent" has the meaning assigned to that
term in the introduction to this Agreement.
"Agreement" means this Amended and Restated
Credit Agreement.
"Bankruptcy Code" means Title 11 of the
United States Code entitled "Bankruptcy," as from time to
time amended, and any successor statute.
"Blocking Event" means the occurrence and
continuance of any of the following: (A) a declaration that
any amount is due and payable under this Agreement end that
such amount has not been paid under the Citibank LOC after
presentation by the Agent of appropriate drawing
documentation, and (B) a default in the payment of any
reimbursement obligations in respect of Letters of Credit
owing under this Agreement when due (after giving effect to
any applicable grace period and after presentation by the
Agent of appropriate drawing documentation under the Citibank
LOC).
"Borrower" has the meaning assigned to that
term in the introduction to this Agreement.
"BTCo" has the meaning assigned to that
term in the introduction to this Agreement.
"Business Day" means any day excluding
Saturday and Sunday and excluding any day which is a legal
holiday under the laws of the States of New York or New
Jersey or is a day on which banking institutions or
insurance companies located in the States of New York or New
Jersey are authorized or required by law or other
governmental action to close.
"Capitalized Lease" means any lease which
is or should be capitalized on the balance sheet of the
lessee in accordance with GAAP.
"Code" means the Internal Revenue Code of
1886, as from time to time amended. Any reference to the
Code shall include a reference to corresponding provisions of
any successor statute.
"Consolidated" means, as applied to any
financial or accounting term or amount, such term or amount
determined on a consolidated basis in accordance with GAAP.
"Effective Date" has the meaning assigned
to that term in Section 2 hereof.
"Event of Default" has the meaning
assigned to that term in Section 7 hereof.
"Exchange Act" means the Securities
Exchange Act of 1934, as from time to time amended, and any
successor statute.
"Federal Funds Rate" means on any one day
the weighted average of the rate on overnight Federal funds
transactions with members of the Federal Reserve System only
arranged by Federal funds brokers as published as of such day
by the Federal Reserve Bank or New York; provided that, if
such day is not a Business Day, the Federal Funds Rate shall
be measured as of the immediately preceding Business Day.
"Final Maturity Date" means July 19, 1995.
"GAAP" means generally accepted accounting
principles set forth in the opinions and pronouncements of
the Accounting Principles Board of the American Institute of
Certified Public Accountants and statements and
pronouncements of the FASB or in such other statements by
such other entity as may be approved by a significant
segment of the accounting profession, which are applicable to
the circumstances as of the date of determination.
"Government Acts" has the meaning assigned
to that term in Section 5.7 hereof.
"Governmental Authority" means any nation
or government, any state or other political subdivision
thereof and any entity (including, without limitation, any
court or arbitrator or panel) exercising executive,
legislative, judicial, regulatory or administrative functions
of or pertaining to government.
"Indebtedness", as applied to any Person,
means, without duplication (i) all indebtedness for borrowed
money owed by that Person, (ii) that portion of obligations
with respect to Capitalized Leases which is properly
classified as a liability on a balance sheet of that Person
in conformity with GAAP, (iii) notes payable and drafts
accepted, in each case, representing extensions of credit to
such Person whether or not representing obligations for
borrowed money (including, without limitation, matured
reimbursement obligations in respect of letters of credit),
(iv) any obligation owed by that Person for all or any part
of the deferred purchase price of property or services which
purchase price is (a) due more than six months from the date
of incurrence of the obligation in respect thereof or (b)
evidenced by a note or similar written instrument and (v) all
indebtedness secured by any lien on any property or asset
owed or held by that Person regardless of whether the
indebtedness secured thereby shall have been assumed by that
Person or is nonrecourse to the credit of that Person.
"Issuer Bank" means BTCo, and its permitted
successors and assigns.
"Lender" and "Lenders" have the meaning set
forth in the introduction to this Agreement and shall include
(i) any permitted assignee of a Lender under Section 9.1C
hereof and (ii) BTCo in its individual capacity.
"Letter of Credit Exposure" means, in
respect of any Lender, at any date of determination, such
Lender's Pro Rata Share of the Total Letter of Credit
Exposure then outstanding.
"Letters of Credit" has the meaning set
forth in the recitals of this Agreement.
"Loans" has the meaning set forth in the
recitals of the Agreement.
"Material Subsidiary" means, at any date of
determination, in the case of the Borrower, each Subsidiary
of the Borrower now existing or hereafter acquired or formed
by the Borrower which (x) accounted for more than 5% of the
Consolidated revenues of the Borrower and its Subsidiaries
during the twelve month period ending on the date of the most
recent Consolidated balance sheet of the Borrower delivered
to the Lenders or (y) was the owner of more than 5% of the
Consolidated assets of the Borrower and its Subsidiaries at
the date of the most recent Consolidated balance sheet of the
Borrower delivered to the Lenders.
"Obligations" means all obligations of every
nature of the Borrower, whether fixed or contingent,
liquidated or unliquidated or matured or unmatured, from time
to time owed to the Lenders and the Agent or any of them
under or in connection with this Agreement.
"Other Restated Credit Agreement" means the
Amended and Restated Credit Agreement, dated as of the date
hereof, among the Borrower, BTCo. and certain Lenders named
therein.
"Payment Office" means the office of the
Agent or any Lender, as the case may be, designated as such
on the relevant signature pages hereof or such other office
as to which any party shall notify the other parties in
writing.
"Person" means an individual or a
corporation, partnership, trust, incorporated or
unincorporated association, joint venture, joint stock
company, Governmental Authority or other entity of any kind.
"Potential Event of Default" means a
condition or event which, after notice or lapse of time or
both, would constitute an Event of Default if that condition
or event were not cured or removed within any applicable
grace or cure period.
"Prime Rate" means the higher of (measured
on a day-by-day basis):
(a) the rate which BTCo announces from time
to time as its prime lending rate, as in effect from
time to time. The prime lending rate is a reference
rate and does not necessarily represent the lowest or
best rate actually charged to any customer. BTCo may
make commercial loans or other loans at rates of
interest at, above or below the prime lending rate; or
(b) the Federal Funds Rate plus 1/2 of 1%.
"Prior Credit Agreement" has the meaning set
forth in the recitals to the Agreement.
"Pro Rata Share" means, in respect of each
Lender, the percentage set forth for such Lender on Annex 1.
"Regulation D" means Regulation D of the
Board of Governors of the Federal Reserve as from time to
time in effect end any successor to all or a portion thereof
establishing reserve requirements.
"Requisite Lenders" means, at any time,
Lenders holding at least 66 2/3% of the sum of Total Letter
of Credit Exposure then outstanding hereunder.
"Stated Amount" of each Letter of Credit
shall mean the maximum amount which is, or, with respect to
any Letter of Credit that by its terms provides for increases
over time in the maximum amount available to be drawn
thereunder, may become at any given time, available to be
drawn thereunder, determined without regard to whether any
conditions to drawing could then be met.
"Subsidiary" of any Person means any
corporation or other entity of which such Person, directly or
indirectly, shall at the time (a) own shares of any class or
classes having power for the election of at least a majority
of the members of the Board of Directors (or the governing
body) of such corporation or other entity other than shares
or other interests having such power only by reason of the
happening of a contingency or (b) otherwise have the legal
right to elect such a majority other than by reason of the
happening of a contingency.
"Taxes" has the meaning assigned to that
term in Section 4.4(i) hereof.
"Total Letter of Credit Exposure" means, at
any date of determination, the sum of (i) the Stated Amount
of each Letter of Credit then outstanding plus (ii) the
aggregate amount of all unreimbursed drawings in respect of
the Letters of Credit.
"UCC" means the Uniform Commercial Code as
in effect in each applicable jurisdiction.
"United States Dollars" or "U.S. Dollars" or
"$" means such coin or currency of the United States of
America as at the time shall be legal tender for the payment
of public and private debts.
SECTION 2. EFFECTIVE DATE
This Agreement shall become effective on the
date (the "Effective Date") on which (i) each party hereto
shall have returned an executed copy hereof to the Agent at
the address designated on its signature page hereto, and (ii)
all of the conditions in Section 6 hereof shall have been
satisfied.
SECTION 3. FEES
3.1 Lenders' and Agent's Fees.
(i) On such dates and at such times as are set forth in
Section4 hereof, the Borrower shall pay fees in respect of
the Letters of Credit as set forth therein.
(ii) The Borrower shall pay to the Agent for its account
an annual administrative fee of $10,000, which shall be paid
in quarterly installments of $2,500 payable in advance on the
Effective Date and on each quarterly anniversary of the
Effective Date.
3.2 Time of Payment.
The Borrower shall make payment of each of
the Lender's fees and each of the Agent's fees hereunder, not
later than Noon (New York time) on the date when due in U.S.
Dollars and in immediately available funds, to the Agent at
its Payment Office.
SECTION 4. PAYMENTS
4.1 Cash Collateralization.
The Borrower shall have the right at any
time, upon notice to the Agent and with the consent of the
Requisite Lenders, to provide cash collateral for all or any
portion of the aggregate undrawn Stated Amount of the Letters
of Credit. All such cash collateral shall be applied in
accordance with Section4.5.
4.2 Mandatory Payments.
On the Final Maturity Date, or upon the
earlier acceleration of the Obligations pursuant to Section
7.2 hereof, the Borrower shall pay to the Agent an amount
equal to all unreimbursed drawings in respect of Letters of
Credit, the then undrawn Stated Amount of all then
outstanding Letters of Credit and all other amounts then
outstanding under this Agreement. All such amounts received
by the Agent shall be applied in accordance with Section 4.5.
4.3 Method and Place of Payment.
All payments to be made by the Borrower
hereunder shall be made to the Agent, not later than Noon
(New York time) on the date when due and shall be made in
U.S. Dollars in immediately available funds at the Agent's
Payment Office. Whenever any payment shall be stated to be
due on a day which is not a Business Day, the due date
thereof shall be extended to the next succeeding Business
Day. In the event the Borrower fails to make any payment
when due hereunder, without limiting any other remedies
available to the Agent, the Lenders or the Issuer Bank, the
Agent shall immediately be entitled to draw on the Citibank
LOC in the amount of such payment and upon receipt of such
draw together with interest i$ such amount is not received by
the Agent on the date of the draw, the Borrower's obligation
in respect thereof shall be discharged. Upon receipt of
payments of fees pursuant to Section 3 from the Borrower or
under the Citibank LOC, the Agent shall promptly remit to
each Lender its Pro Rata Share of all such payments received
in immediately available funds by the Agent for the account
of such Lender. Such payments shall be made at the Payment
Office of such Lender or such other office as such Lender may
specify in writing from time to time to the Borrower. Any
amount due hereunder from the Borrower that is not paid when
due (whether by the Borrower or from the proceeds of a draw
under the Citibank LOC) shall bear interest (before as well
as after judgment) payable on demand at 3% over the Prime
Rate from and including the date when such payment was due to
but excluding the date of receipt of payment. Any amount
representing the payment of any fees by the Borrower and due
to a Lender from the Agent pursuant to this Agreement which
is not paid by the Agent when due shall bear interest payable
by the Agent from the date due to but excluding the date
paid at the Federal Funds Rate.
4.4 Net Payments; Cash Collateral Account.
(i) All payments by the Borrower under this Agreement
shall be made without set-off or counterclaim and in such
amounts as may be necessary in order that all such payments
(after deduction or withholding for or on account of any
present or future taxes, levies, imposts, duties or other
charges of whatsoever nature imposed by any government or any
political subdivision or taxing authority thereof, other than
any tax on or measured by the overall net income of a Lender
pursuant to the income tax laws of the United States or the
jurisdiction of such Lender's incorporation or organization
or any jurisdiction in which such Lender maintains an office
or conducts business (collectively, the "Taxes")) shall not
be less than the amounts otherwise specified to be paid
hereunder. With respect to each deduction or withholding for
or on account of any Taxes, the Borrower shall promptly
furnish to each Lender such certificates, receipts and other
documents as may be required (in the judgment of such Lender)
to establish any tax credit to which such Lender may be
entitled. The Borrower shall also reimburse each Lender,
upon the written request of such Lender, for taxes imposed on
or measured by the net income of such Lender pursuant to the
laws of the United States of America, any State or political
subdivision thereof, or the jurisdiction in which such Lender
is incorporated, or a jurisdiction in which the principal
office or lending office of such Lender is located, or under
the laws of any political subdivision or taxing authority of
any such jurisdiction, as such Lender shall determine are or
were payable by such Lender in respect of amounts of Taxes
deducted or withheld from increased amounts payable to such
Lender pursuant to this Section 4.4.
(ii) Without prejudice to the provisions of paragraph
(i) of this Section 4.4, the Borrower will promptly indemnify
each Lender against and reimburse each Lender on demand for
any Taxes paid by such Lender (together with any interest,
penalties and expenses, including counsel fees and expenses,
payable or incurred in connection therewith) on or in
relation to any sum received or receivable hereunder by such
Lender, or the Agent on its behalf (whether or not correctly
asserted), including any tax or other such charge of such
Lender arising by virtue of payments under this Section
4.4(ii). A certificate as to any additional amounts payable
to a Lender under this Section 4.4 submitted to the Borrower
by such Lender shall show in reasonable detail the amount
payable and the calculations used to determine in good faith
such amount and shall, absent manifest error, be final,
conclusive and binding upon all parties hereto.
(iii) Each Lender that is organized under the laws of
any jurisdiction other than the United States of America or
any State thereof (including the District of Columbia) agrees
to furnish to the Borrower and the Agent, upon demand, two
copies of either U.S. Internal Revenue Service Form 4224 or
U.S. Internal Revenue Service Form 1001 or any successor
forms thereto (wherein such Lender claims entitlement to
complete exemption from or reduced rate of U.S. federal
withholding tax on interest paid by the Borrower hereunder)
and upon request of the Borrower to provide to the Borrower
and the Agent a new Form 4224 or Form 1001 or any successor
form thereto if any previously delivered form is found to be
incomplete or incorrect in any material respect or upon the
obsolescence of any previously delivered form.
4.5 Application of Payments; Cash Collateral Account.
(i) To the extent any payments are required to be
applied hereunder as cash collateral for Letters of Credit
(including payments made with the proceeds of any drawing
under the Citibank LOC), such payments shall be so applied by
the Agent until such time as all Letters of Credit are cash
collateralized to 105% of their aggregate undrawn Stated
Amounts. Interest shall accrue on such cash collateral and
shall be held as additional cash collateral for Letters of
Credit.
(ii) The Issuer Bank shall credit all amounts received
by it as cash collateral in accordance herewith to a cash
collateral account in the name of the Issuer Bank on its
books, within the Issuer Bank's sole dominion and control,
designated by the Issuer Bank and over which the Issuer Bank
shall have exclusive right of withdrawal (the "Cash
Collateral Account").
(iii) The Borrower hereby grants the Issuer Bank a
security interest in and right of set-off against any end all
amounts in the Cash Collateral Account to secure the
Obligations hereunder and ell reimbursement obligations in
connection with the Letters of Credit (including, without
limitation, any interest which accrues after the commencement
of any case, proceeding or other action relating to the
bankruptcy, insolvency, reorganization of the Borrower) and
any extensions or renewals of any of the foregoing.
(iv) If any Event of Default has occurred, the Issuer
Bank may exercise all rights of a secured party under the UCC
and, in addition, the Issuer Bank may, without limitation,
draw on the full amount of the Citibank LOC and, without
being required to give any notice or demand, withdraw cash in
the Cash Collateral Account and apply such cash and other
cash, if any, then held by the Issuer as collateral to the
payment of the Obligations.
(v) Without limiting the Issuer Bank's rights under
subparagraph (iv) above, the Borrower hereby further agrees
that amounts on deposit in the Cash Collateral Account may be
applied to the payment of the Borrowers' reimbursement
obligations under Section 8.2 hereof with respect to all
drawings under the Letters of Credit in the order in which
such drawings are made, and the Issuer Bank is hereby
authorized (without any requirement of notice or demand to
the applicants) to liquidate the Cash Collateral Account and
to withdraw cash therefrom as may be necessary in order to
effect such reimbursement.
(vi) Provided no Event of Default has occurred and is
continuing, the Borrower shall be entitled to receive from
time to time upon its request in writing releases of funds on
deposit in the Cash Collateral Account in an amount equal to
the excess therein over 105% of the Stated Amount of all
Letters of Credit then outstanding.
4.6 Citibank LQC Reduction Certificates.
The Issuer Bank shall upon the
Borrower's request deliver from time to time reduction
certificates in respect of the Citibank LOC; provided,
however, that no such reduction certificate shall cause the
Stated Amount of the Citibank LOC to be less than an amount
equal to 105% of the Stated Amounts of all the Letters of
Credit less the amount then on deposit in the Cash Collateral
Account.
SECTION 5. LETTERS OF CREDIT
5.1 Letters of Credit
A. Expiry; Participations.
(i) Letters of Credit may not be extended, or if
terminated, may not be reissued. The Issuer Bank shall not
be obligated to extend the expiration date of or to renew any
Letter of Credit, including, without limitation, any Letter
of Credit which by its terms provides for an automatic
renewal thereof.
(ii) Each Lender shall be deemed to have purchased from
the Issuer Bank on the Effective Date a participation in each
Letter of Credit in an aggregate amount equal to such
Lender's Letter of Credit Exposure on the Effective Date.
The amount of each Lender's participation in the Letters of
Credit shall automatically be adjusted from time to time to
be equal to such Lender's Letter of Credit Exposure, and each
Lender shall be deemed to participate in each Letter of
Credit in the proportion of its Letter of Credit Exposure to
the Total Letter of Credit Exposure.
B. Borrower's Obligation To Replace.
The Borrower will use its best efforts
to replace each Letter of Credit with a new letter of credit
issued by Citibank, N.A.
C. Special Effective Date Provisions.
(i) Each Letter of Credit shall be deemed for all
purposes of this Agreement to have been issued hereunder.
(ii) On the Effective Date, the Borrower shall pay any
and all accrued agency fees, administrative fees and fees in
respect of the Letters of Credit owing under the Prior Credit
Agreement, to the Effective Date, whether or not then due and
payable.
5.2 Payment of Amounts Drawn Under Letters of Credit
In the event of a drawing under a Letter of
Credit by the beneficiary thereof, the Issuer Bank shall by
writing or by telephone promptly notify the Borrower and the
Agent of such drawing, whether or not the Issuer Bank intends
to honor such drawing and, if so, the date on which the
Issuer Bank intends to honor such drawing. If the Borrower
shall have notified the Agent and the Issuer Bank on the
Business Day immediately prior to the date the Issuer Bank
has advised the Borrower it intends to honor such drawing
that the Borrower intends to reimburse such drawing in whole
or in part with its own funds the Borrower may so reimburse
the drawing in whole or in part in immediately available
funds. In the event the Borrower fails to reimburse the
drawing in whole on the date of such drawing, the Agent shall
withdraw funds from the Cash Collateral Account and/or draw
on the Citibank LOC in the amount of such drawing, and apply
the amount so withdrawn or drawn toward the reimbursement of
such drawing and, in the event of any shortfall, shall by
writing or by telephone (confirmed in writing) promptly
notify the Borrower of the amount of the shortfall, and the
Borrower shall reimburse the Issuer Bank for the amount of
such insufficiency on the same Business Day in immediately
available funds. Nothing herein shall relieve any Lender
from its obligation in respect of its Letter of Credit
Exposure hereunder.
5.3 Payment by Lenders
In the event that the Borrower and Citibank
N.A. shall fail to reimburse the Issuer Bank for any amount
required to be reimbursed under Section 5.2 hereof, the
Issuer Bank shall promptly notify each Lender of such amount
and of such Lender's respective participation therein;
provided, however, that in no event shall any Lender be
required to contribute an amount in excess of its Pro Rata
Share of the Total Letter of Credit Exposure. Each Lender
shall make available to the Issuer Bank an amount equal to
its respective participation in immediately available funds,
at the office of the Issuer Bank specified in such notice,
not later than 1:00 P.M. (New York time) on the Business Day
after the date notified by the Issuer Bank. In the event
that any Lender fails to make available to the Issuer Bank
such amount of such Lender's participation, the Issuer Bank
shall be entitled to recover such amount on demand from such
Lender together with interest at the customary rate set by
the Agent for the correction of errors among banks for three
Business Days and thereafter at the Prime Rate. Nothing in
this Section 5.3 shall be deemed to prejudice the right of
any Lender to recover from the Issuer Bank any amounts made
available by such Lender to the Issuer Bank pursuant to this
Section 5.3 in the event that it is determined by a court of
competent jurisdiction that the payment with respect to a
Letter of Credit by the Issuer Bank in respect of which
payment was made by such Lender constituted gross negligence
or willful misconduct on the part of the Issuer Bank. To the
extent the Issuer Bank receives from the Borrower payments
reimbursing (in whole or in part) drawings honored by the
Issuer Bank under any Letter of Credit, the Issuer Bank shall
distribute to each Lender which has paid all amounts payable
by it under this Section 8.3 in respect of such Letter of
Credit such Lender's Pro Rata Share of such payments when
received.
5.4 Compensation
(i) The Borrower shall pay to the Issuer Bank, with
respect to the amendment of each Letter of Credit and each
payment made thereunder, processing charges in accordance
with the Issuer Bank's standard schedule for such charges in
effect at the time of such amendment or payment, as the case
may be. Such amounts shall be paid directly to, and for the
sole benefit of, the Issuer Bank.
(ii) The Borrower agrees to pay the Agent for
distribution to each Lender in respect of all Letters of
Credit outstanding on and after the Effective Date such
Lender's Pro Rata Share of a fee equal to (i) .25% per annum
of the average daily maximum amount available on and after
the Effective Date to be drawn under such outstanding Letters
of Credit during the period from the Effective Date through
December 31, 1994, and (ii) 2.0% per annum of the average
daily maximum amount available on and after January 1, 1995
to be drawn under such outstanding Letters of Credit during
the period from January 1, 1995 until such time as all
Letters of Credit have either expired or been terminated, in
each case, payable in arrears on and through the last day of
each fiscal quarter of the Borrower and calculated on the
basis of a 360-day year and the actual numbers of days
elapsed.
5.5 Obligations Absolute
The obligation of the Borrower to reimburse
the Issuer Bank in connection with drawings made under the
Letters of Credit as provided in Section 5.2 and the
obligations of the Lenders under Section 5.3 hereof shall,
other than in the case of gross negligence or willful
misconduct on the part of the Issuer Bank, be unconditional
and irrevocable and shall be paid strictly in accordance with
the terms of this Agreement under all circumstances
including, without limitation, the following circumstances:
A. any lack of validity or enforceability of any
Letter of Credit;
B. the existence of any claim, set-off, defense or
other right which the Borrower or any Affiliate of the
Borrower may have at any time against a beneficiary or any
transferee of any Letter of Credit (or any Person for whom
any such beneficiary or transferee may be acting), the Issuer
Bank, any Lender or any other Person, whether in connection
with this Agreement, the transactions contemplated herein or
any unrelated transaction;
C. any draft, demand, certificate or any other
document presented under any Letter of Credit proving to be
forged, fraudulent, invalid or insufficient in any respect or
any statement therein being untrue or inaccurate in any
respect;
D. payment by the Issuer Bank under any Letter of
Credit against presentation of a demand, draft or certificate
or other document which does not comply with the terms of
such Letter of Credit;
E. any rescission, waiver, amendment or modification
of any of the terms or provisions of this Agreement or any
instrument or agreement executed pursuant thereto;
F. the failure to pursue any remedy against any other
obligor in respect of any reimbursement obligation owing
hereunder;
G. any other circumstance or happening whatsoever,
which is similar to any of the foregoing; or
H. the fact that an Event of Default or a Potential
Event of Default shall have occurred and be continuing.
5.6 Additional Payments
If by reason of (a) any change in applicable
law, regulation, rule, decree or regulatory requirement or
any change in the interpretation or application by any
judicial or regulatory authority of any law, regulation,
rule, decree or regulatory requirement or (b) compliance by
the Issuer Bank or any Lender with any direction, request or
requirement (whether or not having the force of law) of any
governmental or monetary authority including, without
limitation, Regulation D:
(i) the Issuer Bank or any Lender shall be subject to
any tax, levy, charge or withholding of any nature other than
any tax on or measured by the overall net income of the
Issuer Bank or a Lender pursuant to the income tax laws of
the United States or the jurisdiction of the Issuer Bank's
such Lender's incorporation or organization or any
jurisdiction in which the Issuer Bank or such Lender
maintains an office or conducts business or to any variation
thereof or to any penalty with respect to the maintenance or
fulfillment of its obligations under this Section 8;
(ii) any reserve, deposit or similar requirement is or
shall be applicable, imposed or modified in respect of any
Letter of Credit or participations therein purchased by any
Lender; or
(iii) there shall be imposed on the Issuer Bank or any
Lender any other condition regarding this Section 5, any
Letter of Credit or any participation therein;
and the result of the foregoing is to directly or
indirectly increase the cost to the Issuer Bank or any Lender
of issuing, making or maintaining any Letter of Credit or of
purchasing or maintaining any participation therein, or to
reduce the amount receivable in respect thereof by the Issuer
Bank or any Lender, then and in any such case the Issuer Bank
or such Lender may, at any time within a reasonable period
after the additional cost is incurred or the amount received
is reduced, notify the Borrower and the Borrower shall pay
within ten Business Days after such notification such amounts
as the Issuer Bank or such Lender may specify to be necessary
to compensate the Issuer Bank or such Lender for such
additional cost or reduced receipt, together with interest on
such amount from the date demanded until payment in full
thereof at a rate per annum equal at all times to 3% over the
Prime Rate. The determination by the Issuer Bank or any
Lender, as the case may be, of any amount due pursuant to
this Section 5.6 as set forth in a certificate setting forth
the calculation thereof in reasonable detail shall, in the
absence of manifest error, be final, conclusive and binding
on all of the parties hereto.
5.7 Indemnification; Nature of Issuer Bank's Duties
In addition to amounts payable as elsewhere
provided in this Section 5, without duplication, the Borrower
hereby agrees to protect, indemnify, pay and save the Issuer
Bank harmless from and against any and all claims, demands,
liabilities, damages, losses, costs, charges and expenses
(including reasonable attorneys' fees and allocated costs of
internal counsel) which the Issuer Bank may incur or be
subject to as a consequence, direct or indirect, of (i) the
issuance, pursuant to the Prior Credit Agreement, of the
Letters of Credit, other than as a result of the gross
negligence or willful misconduct of the Issuer Bank, or (ii)
the failure of the Issuer Bank to honor a drawing under any
Letter of Credit as a result of any act or omission, whether
rightful or wrongful, of any present or future de jure or de
facto government or governmental authority (all such acts or
omissions herein called "Government Acts").
As between the Borrower and the Issuer Bank,
the Borrower assumes all risks of the acts and omissions of,
or misuse of the Letters of Credit issued by the Issuer Bank
by, the respective beneficiaries of such Letters of Credit.
In furtherance and not in limitation of the foregoing, the
Issuer Bank shall, absent its gross negligence or willful
misconduct as finally judicially determined, not be
responsible: (i)for the form, validity, sufficiency,
accuracy, genuineness or legal effects of any document
submitted by any party in connection with the original
application for and issuance of such Letters of Credit, even
if it should in fact prove to be in any or all respects
invalid, insufficient, inaccurate, fraudulent or forged;
(ii)for the validity or sufficiency of any instrument
transferring or assigning or purporting to transfer or assign
any such Letter of Credit or the rights or benefits
thereunder or proceeds thereof, in whole or in part, which
may prove to be invalid or ineffective for any reason;
(iii)for failure of the beneficiary of any such Letter of
Credit to comply fully with conditions required in order to
draw upon such Letter of Credit; (iv)for errors, omissions,
interruptions or delays in transmission or delivery of any
messages, by hand delivery, overnight courier, mail,
facsimile transmission, cable, telegraph, telex or otherwise,
whether or not they be in cipher; (v)for errors in
interpretation of technical terms; (vi) for any loss or delay
in the transmission or otherwise of any document required in
order to make a drawing under any such Letter of Credit or of
the proceeds thereof; (vii) for the misapplication by the
beneficiary of any such Letter of Credit of the proceeds of
any drawing under such Letter of Credit; and (viii) for any
consequences arising from causes beyond the control of the
Issuer Bank, including, without limitation, any Government
Acts. None of the above shall effect, impair, or prevent the
vesting of any of the Issuer Bank's rights or powers
hereunder.
In furtherance and extension and not in
limitation of the specific provisions hereinabove set forth,
any action taken or omitted by the Issuer Bank under or in
connection with the Letters of Credit issued by it or the
related certificates, if taken or omitted in good faith,
shall, absent its gross negligence or willful misconduct as
finally judicially determined, not put the Issuer Bank under
any resulting liability to the Borrower.
SECTION 6. CONDITIONS PRECEDENT TO THE
EFFECTIVENESS OF THIS AGREEMENT
The effectiveness of this Agreement is
subject to the payment in full of all amounts owing in
respect of the Loans, together with all interest accrued on
the principal thereof and all accrued fees and other amounts
outstanding under the Prior Credit Agreement and the delivery
by Citibank, N.A. to the Agent of the Citibank LOC.
SECTION 7. EVENTS OF DEFAULT
If any of the following conditions or events
("Events of Default") shall occur and be continuing (and
whether such occurrence shall be voluntary or involuntary or
come about or be effected by operation of law or otherwise):
7.1 Failure To Make Payments When Due
Failure to pay any Letter of Credit
reimbursement obligation when due as provided in Section 5.2
or to pay the fees described in Sections 3.1 and 5.4 hereof,
or any other amount owing hereunder, including the payments
required pursuant to Section 4.2, in each case within two
Business Days after the date due; or
7.2 Letters of Credit
Citibank, N.A. shall assert that the
Citibank LOC is not a valid and binding obligation of
Citibank, N.A., enforceable in accordance with its terms, the
Citibank LOC shall not be promptly honored upon presentation
by the Agent of appropriate drawing documentation, or
Citibank, N.A. shall become insolvent or otherwise unable to
pay its debts as they come due;
THEN upon the occurrence of any Event of
Default described in (i) Section 7.1, the Agent may, and upon
the written request of the Requisite Lenders, shall, take any
and all actions available under applicable law to enforce the
obligations to which such Event of Default relates or (ii)
Section 7.2, the Agent may and, upon the written request of
the Requisite Lenders, shall, by written notice to the
Borrower, declare to be due and payable an amount equal to
the Stated Amount of all Letters of Credit then outstanding,
together with all other amounts owing hereunder, and the same
shall forthwith become, immediately due and payable, together
with accrued interest thereon. Without limiting any other
remedies hereunder, upon the occurrence and during the
continuance of any Event of Default, the Agent shall be
entitled without notice or demand, to drew, from time to
time, under the Citibank LOC an amount equal to all amounts
then due and unpaid hereunder (such amounts to be determined
as set forth in clause (i)or clause (ii)above, as
applicable); provided that the foregoing shall not effect in
any way the obligations of the Lenders to purchase from the
Issuer Bank participations in the unreimbursed amount of any
drawings under any Letters of Credit as provided in Section
5.3 hereof.
SECTION 8. AGENT
8.1 Appointment
BTCo is hereby appointed the Agent hereunder
and each Lender hereby authorizes the Agent to act hereunder
and under the other instruments and agreements referred to
herein (including, without limitation, the Citibank LOC) as
its agent hereunder and thereunder. BTCo agrees to act as
such upon the express conditions contained in this Section 8.
The provisions of this Section 8 are solely for the benefit
of the Agent, and neither the Borrower nor any other Person
shall have any rights as a third party beneficiary of any of
the provisions hereof. In performing its functions and
duties under this Agreement, the Agent shall act solely as
agent of the Lenders and does not assume and shall not be
deemed to have assumed, except as specified in the
immediately preceding sentence, any obligation towards or
relationship of agency or trust with or for the Borrower or
any other Person.
8.2 Powers; General Immunity
A. Duties Specified. Each Lender
irrevocably authorizes the Agent to take such action on such
Lender's behalf and to exercise such powers hereunder and
under the other instruments and agreements referred to herein
(including, without limitation, the other Loan Documents) as
are specifically delegated to the Agent by the terms hereof
and thereof, together with such powers as are reasonably
incidental thereto. The Agent shall have only those duties
and responsibilities which are expressly specified in this
Agreement and it may perform such duties by or through its
agents or employees. The duties of the Agent shall be
mechanical and administrative in nature; and the Agent shall
not have by reason of this Agreement a fiduciary or trust
relationship in respect of any Lender; and nothing in this
Agreement, expressed or implied, is intended to or shall be
so construed as to impose upon the Agent any obligations in
respect of this Agreement or the other instruments and
agreements referred to herein except as expressly set forth
herein or therein.
B. No Responsibility for Certain Matters.
The Agent shall not be responsible to any Lender for the
execution, effectiveness, genuineness, validity,
enforceability, collectibility or sufficiency of this
Agreement or any Letter of Credit, or for any
representations, warranties, recitals or statements made
herein or therein or made in any written or oral statement or
in any financial or other statements, instruments, reports,
certificates or any other documents in connection herewith or
therewith furnished or made by the Agent to any Lender or by
or on behalf of the Borrower to the Agent or any Lender, or
be required to ascertain or inquire as to the performance or
observance of any of the terms, conditions, provisions,
covenants or agreements contained herein or therein, or of
the existence or possible existence of any Event of Default
or Potential Event of Default.
C. Exculpatory Provisions. Neither the
Agent nor any of its officers, directors, employees or agents
shall be responsible or liable to any Lender for any action
taken or omitted hereunder or under the Citibank LOC or in
connection herewith or therewith unless caused by its or
their gross negligence or willful misconduct. If the Agent
shall request instructions from any Lender with respect to
any act or action (including the failure to take an action)
in connection with this Agreement or the Citibank LOC, the
Agent shall be entitled to refrain from such act or taking
such action unless and until the Agent shall have received
instructions from the Requisite Lenders. Without prejudice
to the generality of the foregoing, (i) the Agent shall be
entitled to rely, and shall be fully protected in relying,
upon any communication, instrument or document believed by it
to be genuine and correct and to have been signed or sent by
the proper person or persons, and shall be entitled to rely
and shall be protected in relying on opinions and judgments
of attorneys (who may be attorneys for the Borrower),
accountants, experts and other professional advisors selected
by it; and (ii) no Lender shall have any right of action
whatsoever against the Agent as a result of the Agent acting
or (where so instructed) refraining from acting under this
Agreement or the other instruments and agreements referred to
herein or therein in accordance with the instructions of the
Requisite Lenders. The Agent shall be entitled to refrain
from exercising any power, discretion or authority vested in
it under this Agreement or the other instruments and
agreements referred to herein unless and until it has
obtained the instructions of the Requisite Lenders.
D. Agent Entitled To Act as Lender. The
agency hereby created shall in no way impair or affect any of
the rights and powers of, or impose any duties or obligations
upon, the Agent in its individual capacity as a Lender
hereunder. The term "Lender" or "Lenders" or any similar
term shall, unless the context clearly otherwise indicates,
include the Agent in its individual capacity. The Agent and
its Affiliates may accept deposits from, lend money to and
generally engage in any kind of banking, trust, financial
advisory or other business with the Borrower or any Affiliate
or Subsidiary thereof as if it were not performing the duties
specified herein, and may accept fees and other consideration
from the Borrower or any Affiliate or Subsidiary thereof for
services in connection with this Agreement and otherwise
without having to account for the same to the Lenders.
8.3 Riqht to Indemnity
Each Lender severally agrees to indemnify
the Agent in accordance with its Pro Rata Share to the extent
the Agent shall not have been reimbursed by the Borrower, for
and against any and all liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs,
expenses (including, without limitation, counsel fees and
disbursements) or disbursements of any kind or nature
whatsoever which may be imposed on, incurred by or asserted
against the Agent in performing its duties hereunder or in
any way relating to or arising out of this Agreement or the
agreements or instruments referred to herein; provided that
no Lender shall be liable for any portion of such
liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements
resulting from the Agent's gross negligence or willful
misconduct. If any indemnity furnished to the Agent for any
purpose shall, in the opinion of the Agent, be insufficient
or become impaired, the Agent may call for additional
indemnity and cease, or not commence, to do the acts
indemnified against until such additional indemnity is
furnished.
8.4 Resignation by the Agent
(a) The Agent may resign from the performance of all its
functions and duties hereunder at any time by giving 30 days'
prior written notice to the Borrower and the Lenders. Such
resignation shall take effect upon the acceptance by a
successor Agent of appointment pursuant to clauses (b) and (c)
below or as otherwise provided below.
(b) Upon any such notice of resignation, the Requisite
Lenders shall appoint a successor Agent who shall be
satisfactory to the Borrower and shall be an incorporated bank
or trust company with a combined surplus and undivided capital
of at least $500 million.
(c) If a successor Agent shall not have been so appointed
within said 30-day period, the resigning Agent, with the
consent of the Borrower, shall then appoint a successor Agent
who shall serve as the Agent until such time, if any, as the
Requisite Lenders, with the consent of the Borrower, appoint a
successor Agent as provided above.
(d) If no successor Agent has been appointed pursuant to
clause (b) or (c) by the 40th day after the date such notice of
resignation was given by the resigning Agent, the Agent's
resignation shall become effective and the Requisite Lenders
shall thereafter perform all the duties of the Agent hereunder
and shall be entitled to all the fees otherwise payable
thereafter to the Agent until such time, if any, as the
Requisite Lenders, with the consent of the Borrower, appoint a
successor Agent as provided above.
8.5 Successor Agent
The Agent may resign at any time as provided
in Section 8.4 hereof, and the Agent may be removed at any
time with or without cause by an instrument or concurrent
instruments in writing delivered to the Borrower and the
Agent and signed by the Requisite Lenders. Upon any such
notice of resignation or any such removal, the Requisite
Lenders shall have the right, upon five days' notice to the
Borrowers, to appoint a successor Agent. Upon the acceptance
of any appointment as the Agent hereunder by a successor
Agent, that successor Agent shall thereupon succeed to and
become vested with all the rights, powers, privileges and
duties of the retiring or removed Agent, and the retiring or
removed Agent shall be discharged from its duties and
obligations as the Agent under this Agreement. After any
retiring or removed Agent's resignation or removal hereunder
as the Agent the provisions of this Section 8 shall inure to
its benefit as to any actions taken or omitted to be taken by
it while it was the Agent under this Agreement.
SECTION 9. MISCELLANEOUS
9.1 Benefit of Agreement
A. This Agreement shall be binding upon and
inure to the benefit of and be enforceable by the respective
successors and assigns of the parties hereto; provided that
the Borrower may not assign or transfer any of its right or
interest hereunder without the prior written consent of 100%
of the Lenders.
B. Any Lender may sell participations in
all or any part of any Letters of Credit in which it has
purchased (or is deemed to have purchased) a participation
interest, or any other interest herein to another bank or
other entity, in which event (a) such Lender shall remain a
"Lender" for all purposes hereunder and the participant shall
not constitute a "Lender" hereunder (except if, and to the
extent that, such transferee was a Lender on the date hereof)
and (b) no Lender shall transfer, grant or assign any
participation under which the participant shall have rights
to approve any amendment or waiver of this Agreement except,
with respect to amendments to this Agreement, to the extent
such amendment or waiver would (i) extend the required
maturity date or expiration date of any Letter of Credit in
which the participant is participating, (ii) change the
Stated Amounts of or any amounts payable in respect of, or
fees payable under, any Letter of Credit in which such
participant is participating, or (iii) affect the matters
requiring the vote of the Requisite Lenders or all the
Lenders; provided that such right to approve such amendment
or waiver may only be granted on a pro rata basis to the
extent of such participation and only with respect to the
Letter of Credit participations in which such participant is
participating. The participant shall not have any other
rights under this Agreement or any Letter of Credit or any
other document delivered in connection herewith (the
participant's rights against such Lender in respect of such
participation to be those set forth in the agreement executed
by such Lender in favor of the participant relating thereto)
and all amounts payable by the Borrower hereunder shall be
determined as if such Lender had not sold such participation.
C. Any Lender may assign its rights and
delegate its obligations under this Agreement, (i) without
the consent of any other Person, to any other Lender or
lender under the Other Restated Credit Agreement or any
Affiliate thereof or to any one or more additional banks or
financial institutions whose long-term indebtedness has an
Acceptable Rating, pursuant to a transfer supplement
substantially in the form of Exhibit I to the Prior Credit
Agreement executed by such assignee, such transferor Lender
and the Agent, and (ii) with the consent of the Borrower and
the Agent (which consents shall not be unreasonably
withheld), to any other bank or financial institution whose
long-term indebtedness does not have an Acceptable Rating;
provided that (a) the amount of such Lender's Letter of
Credit Exposure so assigned is not less than the lesser of
(x) $2,000,000 and (y) the amount of such Lender's Letter of
Credit Exposure then in effect, (b) such Lender gives written
notice of such assignment to each of the Agent, the Issuer
Bank and the Borrower at least five Business Days in advance
of such assignment, (c) the assignee agrees to assume all the
obligations of the assignor related to that portion of the
assignor's Letter of Credit Exposure being assigned and (d)
the assignor and/or the assignee remit to the Agent, for its
account, an administrative fee of $3,000 in respect of such
assignment, payable in U.S. Dollars in immediately available
funds. Any permitted assignee under clause (i) or (ii) of
the immediately preceding sentence is referred to as an
"Eligible Assignee." Upon an effective assignment hereunder
and upon notice thereof by such Lender to the Borrower, the
assignee shall have, to the extent of such assignment (unless
otherwise provided thereby), the same rights and benefits as
it would have if it were Lender hereunder and the assigning
Lender shall, to the extent of such assignment and
assumption, be relieved of its obligations hereunder to the
extent of such assignment and assumption. Each assignee
hereunder, if not already a Lender, agrees to provide the
documents referred to in Section 4.4(iii) hereof, if
required, promptly after it becomes a Lender hereunder.
Nothing in this Section 9.1 shall prevent or
prohibit any Lender from pledging its rights under this
Agreement and/or its Letters of Credit hereunder to a Federal
Reserve Bank in support of borrowings made by such Lender
from such Federal Reserve Bank; provided that no such pledge
shall at any time release such Lender from any of its
obligations hereunder.
D. Any Lender may furnish any information
concerning the Borrower in possession of such Lender from
time to time to Affiliates of such Lender and to assignees
and participants hereunder (including prospective assignees
and participants); provided, however, that the furnishing of
such information (and the nature, manner and extent thereof)
by such Lender to its Affiliates and such assignees and
participants shall be governed by the relevant agreement,
assignment or participation agreement relating to such
arrangement, assignment or participation, as the case may be.
9.2 Expenses
Whether or not the transactions contemplated
hereby shall be consummated, the Borrower agrees to promptly
pay (i) all the actual and reasonable out-of-pocket costs and
expenses of the Agent in connection with the negotiation,
preparation and execution of this Agreement, and all related
documents, whether or not referred to herein; (ii) the
reasonable fees, expenses and disbursements of Cahill Gordon
& Reindel, counsel to the Agent and the Lenders, in
connection with the negotiation, preparation, execution and
administration of this Agreement, and all related documents,
whether or not referred to herein, and any amendments and
waivers hereto or thereto or consents with respect hereto or
thereto; and (iii) all costs and expenses (including
reasonable attorneys' fees of separate counsel for each
Lender, expenses and disbursements, reasonable allocated
costs of internal counsel, costs of settlement and the
expenses and disbursements and reasonable fees of any other
experts or advisors) incurred by the Lenders in enforcing any
obligations of or in collecting any payments due from the
Borrower hereunder by reason of any Event of Default or in
connection with any refinancing or restructuring of the
credit arrangements provided under this Agreement in the
nature of a "work-out" or of any insolvency or bankruptcy
proceedings or otherwise.
9.3 Indemnity
In addition to the payment of expenses
pursuant to Section 9.2 hereof, but without duplication of
any other amount payable hereunder, whether or not the
transactions contemplated hereby shall be consummated, the
Borrower agrees to indemnify, pay and hold the Agent and each
Lender and the officers, directors, employees, agents,
advisors and Affiliates of each of them (collectively called
the "Indemnitees") harmless from and against any and all
liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, claims, costs, expenses and
disbursements of any kind or nature whatsoever (including,
without limitation, the reasonable fees, expenses and
disbursements of counsel for such Indemnitees in connection
with any investigative, administrative or judicial proceeding
commenced or threatened, whether or not such Indemnitee shall
be designated a party thereto), which may be imposed on,
incurred by, or asserted against that Indemnitee, in any
manner relating to or arising out of this Agreement or the
use or intended use of the Letters of Credit (the
"indemnified liabilities"); provided that the Borrower shall
have no obligation to an Indemnitee hereunder to the extent
it is finally judicially determined that such indemnified
liabilities arose solely from the gross negligence or willful
misconduct of that Indemnitee. The Borrower shall have a
right of recoupment against any amounts paid by the Borrower
to any Indemnitee in respect of the foregoing to the extent
that any such payment resulted from the gross negligence or
willful misconduct of such Indemnitee as finally judicially
determined. To the extent that the undertaking to indemnify,
pay and hold harmless set forth in the preceding sentence may
be unenforceable because it is violative of any law or public
policy or otherwise, the Borrower shall contribute the
maximum portion which it is permitted to pay and satisfy
under applicable law to the payment and satisfaction of all
indemnified liabilities incurred by the Indemnitees or any of
them.
9.4 Set-Off
In addition to any rights now or hereafter
granted under applicable law and not by way of limitation of
any such rights, upon the occurrence of any Blocking Event,
each Lender is hereby authorized by the Borrower at any time
and from time to time, without prior notice to the Borrower
or to any other Person, and without presentment, demand or
protest, any such being hereby expressly waived, to set off
and to appropriate and to apply any and all deposits (general
or special, including, but not limited to, Indebtedness
evidenced by certificates of deposit, whether matured or
unmatured but not including trust accounts) and any other
Indebtedness at any time held or owing by that Lender
(including, without limitation, any branches or agencies
thereof, wherever located) to or for the credit or the
account of the Borrower against and on account of the
obligations and liabilities of the Borrower to that Lender
under this Agreement, including, but not limited to, all
claims of any nature or description arising out of or
connected with this Agreement, the Letters of Credit or any
related document, irrespective of whether or not (a) that
Lender shall have made any demand hereunder or (b) that
Lender shall have declared any obligation of the Borrower
with respect to the Letters of Credit and other amounts due
hereunder to be due and payable as permitted by Section 7
hereof and although said obligations and liabilities, or any
of them, may be contingent or unmatured. After any such set-
off, the relevant Lender shall notify the Borrower in writing
with respect thereto; provided that the failure to provide
such notice shall not in any way affect the validity or
enforceability of any such set-off. The Borrower expressly
consents to the foregoing.
9.5 Ratable Sharing
Subject to the last sentence of this Section
9.5, each Lender and each subsequent holder by purchase of a
participation interest in all or any part of any Letter of
Credit, agree among themselves that except as otherwise
expressly provided in this Agreement, (i) with respect to all
amounts received by them which are applicable to the payment
of amounts payable in respect of Letters of Credit, equitable
adjustment will be made so that, in effect, all such amounts
will be shared among the Lenders proportionately to their
respective Pro Rata Shares, whether received by voluntary
payment, by the exercise of the right of set-off or banker's
lien, by counterclaim or cross action or by the enforcement
of any other rights or remedies hereunder, (ii) if any of
them shall exercise any right of counterclaim, set-off,
banker's lien or similar right with respect to amounts owed
by the Borrower hereunder or in respect of the Letters of
Credit, such Lender or holder, as the case may be, shall
apportion the amount recovered as a result of the exercise of
such right in accordance with each Lender's respective Pro
Rata Share, and (iii) if any of them shall thereby through
the exercise of any right of counterclaim, set-off, banker's
lien or otherwise or as adequate protection of a deposit
treated as cash collateral under the Bankruptcy Code, receive
the amount of any participation in any Letter of Credit or
any amount payable hereunder, as the case may be, which is
greater than the proportion received by any other holder, the
amount of such participation therein or any other amount
payable hereunder, that Lender or that holder receiving such
proportionately greater payments shall (y) notify each other
Lender and the Agent of such receipt and (z) purchase
participations (which it shall be deemed to have done
simultaneously upon the receipt of such payment) held by the
other holders so that all such reimbursement of amounts drawn
or payable with respect to Letters of Credit shall be
proportionate to their respective Pro Rata Shares; provided
that if all or part of such proportionately greater payment
received by such purchasing holder is thereafter recovered
from such holder, those purchases shall be rescinded and the
purchase prices paid for such participations shall be
returned to that holder to the extent of such recovery, but
without interest. The Borrower expressly consents to the
foregoing arrangement and agrees that any holder of a
participation in any Letter of Credit so purchased and any
other subsequent holder of a participation in any Letter of
Credit otherwise acquired may exercise any and all rights of
banker's lien, set-off or counterclaim with respect to any
and all monies owing by the Borrower to that holder as fully
as if that holder were a holder of such participation in any
Letter of Credit in the amount of the participation held by
that holder.
9.6 Amendments and waivers
No amendment, modification, termination or
waiver of any provision of this Agreement, or of the Letters
of Credit or consent to any departure by the Borrower
therefrom shall in any event be effective without the written
concurrence of the Borrower (other than a waiver) and the
Requisite Lenders; except that any amendment, modification,
termination, waiver or consent that has the effect of (i)
extending the final expiration date for the Letters of
Credit, (ii) decreasing any fees or other compensation, (iii)
altering the voting percentages or the pro rata mechanisms
set forth herein or (iv) increasing any Lender's Letter of
Credit Exposure or increasing the Total Letter of Credit
Exposure (including amendments, modifications, terminations,
waivers or consents to any definitions (or adding any new
definitions) that would directly or indirectly affect any of
the foregoing items set forth in clauses (i) through (iv))
shall be effective only if evidenced by a writing signed by
or on behalf of each Lender. No amendment, modification,
termination or waiver of any provision of Section 8 hereof or
any of the rights, duties, indemnities or obligations of the
Agent, as agent, shall be effective without the written
concurrence of the Agent. The Agent may, but shall have no
obligation to, with the concurrence of any Lender, execute
amendments, modifications, waivers or consents on behalf of
that Lender. Any waiver or consent shall be effective only
in the specific instance and for the specific purpose for
which it was given. No notice to or demand on the Borrower
in any case shall entitle the Borrower to any further notice
or demand in similar or other circumstances. Any amendment,
modification, termination, waiver or consent effected in
accordance with this Section 9.6 shall be binding upon each
Lender, each holder of the Letters of Credit, at the time
outstanding, each future holder of the Letters of Credit and,
if signed by the Borrower, on the Borrower.
9.7 Notices
Unless otherwise provided herein, any notice
or other communication herein required or permitted to be
given shall be in writing and may be personally served,
telecopied, telexed or sent by United States mail and shall
be deemed to have been given when delivered in person, upon
receipt of telecopy or telex or four Business Days after
depositing it in the United States mail, registered or
certified, with postage prepaid and properly addressed;
provided that notices to the Agent or any Lender shall not be
effective until received by the Agent or such Lender. For
the purposes hereof, the addresses of the parties hereto
(until notice of a change thereof is delivered as provided in
this Section 9.7) shall be set forth under each party's name
on the signature pages hereto.
9.8 Survival of Warranties and Certain Agreements
A. All agreements made herein shall survive
the execution and delivery of this Agreement. This Agreement
together with that certain letter agreement, dated August 5,
1994 from Bankers Trust Company, as a Lender, Issuer Bank and
Agent, and the Lenders listed herein to Citibank, N.A. (the
"Letter Agreement") are intended to amend and restate the
Prior Credit Agreement and, except to the extent set forth in
the Letter Agreement, the Prior Credit Agreement shall be of
no further force and effect.
B. Notwithstanding anything in this
Agreement or implied by law to the contrary, the agreements
of the Borrower set forth in Sections 9.2 and 9.3 hereof and
the agreement of the Lenders set forth in Section 9.5 hereof
shall survive the cancellation of all Letters of Credit and
the termination of this Agreement.
9.9 Failure or Indulgence Not Waiver;
Remedies Cumulative
No failure or delay on the part of the Agent
or any Lender or the Issuer Bank in the exercise of any
power, right or privilege hereunder, under the Citibank LOC
or under the Letters of Credit shall impair such power, right
or privilege or be construed to be a waiver of any default or
acquiescence therein, nor shall any single or partial
exercise of any such power, right or privilege preclude other
or further exercise thereof or of any other right, power or
privilege. All rights and remedies existing under this
Agreement or the other documents related hereto, including
the Citibank LOC, are cumulative to and not exclusive of any
rights or remedies otherwise available.
9.10 Severability
In case any provision in or obligation under
this Agreement or the Letters of Credit shall be invalid,
illegal or unenforceable in any jurisdiction, the validity,
legality and enforceability of the remaining provisions or
obligations thereof, or of such provision or obligation in
any other jurisdiction, shall not in any way be affected or
impaired thereby.
9.11 Obligations Several; Independent
Nature of Lenders' Rights
The obligation of each Lender hereunder is
several, and no Lender shall be responsible for the
obligation or commitment of any other Lender hereunder.
Nothing contained in this Agreement and no action taken by
the Lenders pursuant hereto shall be deemed to constitute the
Lenders to be a partnership, an association, a joint venture
or any other kind of entity. The amounts payable at any time
hereunder to each Lender shall be a separate and independent
debt, each Lender shall be entitled to protect and enforce
its rights arising out of this Agreement, and it shall not be
necessary for any other Lender to be joined as an additional
party in any proceeding for such purpose.
9.12 Headings
Section and subsection headings in this
Agreement are included herein for convenience of reference
only and shall not constitute a part of this Agreement for
any other purpose or be given any substantive effect.
9.13 APPLICABLE LAW; CONSENT TO JURISDICTION
AND SERVICE OF PROCESS
A. THIS AGREEMENT 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.
B. ALL JUDICIAL PROCEEDINGS BROUGHT AGAINST
THE BORROWER WITH RESPECT TO THIS AGREEMENT 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 THE BORROWER ACCEPTS FOR ITSELF AND IN CONNECTIQN
WITH ITS PROPERTIES, GENERALLY AND UNCONDITIONALLY, THE
NONEXCLUSIVE JURISDICTION OF THE AFORESAID COURTS, AND
IRREVOCABLY AGREES TO BE BOUND BY ANY JUDGMENT RENDERED
THEREBY IN CONNECTION WITH THIS AGREEMENT. THE PARTIES
HERETO HEREBY IRREVOCABLY WAIVE TRIAL BY JURY, AND THE
BORROWER HEREBY IRREVOCABLY WAIVES ANY OBJECTION, INCLUDING,
WITHOUT LIMITATION, ANY OBJECTION TO THE LAYING OF VENUE OR
BASED ON THE GROUNDS OF FORUM NON CONVENIENS, WHICH IT MAY
NOW OR HEREAFTER HAVE TO THE BRINGlNG OF ANY SUCH ACTION OR
PROCEEDING IN SUCH RESPECTIVE JURISDICTIONS.
9.14 Successors and Assigns
This Agreement shall be binding upon the
parties hereto and their respective successors and assigns
and shall inure to the benefit of the parties hereto and the
successors and assigns of the Lenders. The terms and
provisions of this Agreement shall inure to the benefit of
any permitted assignee or transferee of the Letters of Credit
and in the event of such transfer or assignment, the rights
and privileges herein conferred upon the Lenders shall
automatically extend to and be vested in such permitted
transferee or assignee, all subject to the terms and
conditions hereof. The Borrower's rights or any interest
therein hereunder may not be assigned without the written
consent of all the Lenders. The Lenders' rights of
assignment are limited by and subject to Section 9.1 hereof.
9.15 Counterparts
This Agreement and any amendments, waivers,
consents or supplements 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 instrument.
9.16 Certain Information; Confidentiality
The Borrower shall provide to the Agent and
each Lender, as and when the same are provided to Citibank,
N.A., copies of such financial statements and reports and
other information as the Borrower is required to provide to
Citibank, N.A. pursuant to the credit agreement with
Citibank, N.A. that is being executed on or about the
Effective Date. Each Lender and the Agent agree to keep
information obtained by it pursuant hereto confidential and
agree that it will only use such information in connection
with the transactions contemplated by this Agreement and not
disclose any of such information other than (i) to such
Lender's or the Agent's, as the case may be, officers,
employees, representatives, professional consultants and
agents who are advised of the confidential nature of such
information, (ii) to any other Lender, (iii) to the extent
such information presently is or hereafter becomes available
to such Lender or the Agent, as the case may be, on a non-
confidential basis from a source other than the Borrower,
(iv) to the extent disclosure is required by law, regulation
or judicial order (which requirement or order shall be
promptly notified to the Borrower) or requested or required
by bank regulators or auditors or the National Association of
Insurance Commissioners or any similar organization, (v) to
assignees or participants or potential assignees or
participants of such Lender hereunder or under the Other
Restated Credit Agreement to which such Lender is a party who
agree to be bound by the provisions of this Section 9.16,
(vi) any internationally recognized rating agency in
connection with the Borrower's rating with such agency, and
(vii) any other Person to which such delivery or disclosure
may be necessary or appropriate (a) in compliance with any
applicable law, rule, or regulation or order, (b) in response
to any subpoena or other legal process, (c) in connection
with any litigation to which any Lender is a party, or (d) in
order to protect or enforce such Lender's rights in respect
of any Obligations owed to it.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed as of the date first above
written.
IMO INDUSTRIES INC., the Borrower
By /s/G.M. DOBSON
Name: G.M. Dobson
Title: Vice President & Treasurer
Notice of Information:
Imo Industries Inc.
1009 Lenox Drive
Building 4
Lawrenceville, New Jersey 08648
Attention: Thomas J. Bird
Telephone No.: (609) 896-7730
Telecopy No.: (609) 896-7366
BANKERS TRUST COMPANY, as a Lender,
Issuer Bank and Agent
By: /s/RICHARD SOLAR
Name: Richard Solar
Title: Managing Director
All Notices:
Bankers Trust Company
130 Liberty Street
New York, New York 10006
Attention: Commercial
Loan Division
Telephone No.: (212) 250-4169
Telecopy No.: (212) 250-7351
Payment Office:
Bankers Trust Company
130 Liberty Street
New York, New York 10006
Attention: Richard Solar
Telephone No.: (212) 454-3440
Telecopy No.: (212) 454-2605
Letter of Credit
Information:
Bankers Trust Company
130 Liberty Street
New York, New York 10006
Attention: Richard Solar
Telephone No.: (212) 454-3440
Telecopy No.: (212) 454-2605
CHEMICAL BANK
By: /s/WILLIAM CAGGIANO
Name: William Caggiano
Title: Managing Director
All Notices:
Chemical Bank
270 Park Avenue
New York, New York 10017
Attention: William Caggiano
Telephone No.: (212) 270-2070
Telecopy No.: (212) 972-0009
Payment Office:
Chemical Bank
270 Park Avenue, 10th Floor
New York, New York 10017
Attention: Andrew Statsiw
Telephone No.: (212) 270-3896
Telecopy No.: (212) 682-8937
Letter of Credit
Information:
Chemical Bank
270 Park Avenue
New York, New York 10017
Attention: William Caggiano
Telephone No.: (212) 270-2070
Telecopy No.: (212) 972-0009
CIBC, INC., as a Lender
By: /s/TIMOTHY E. DOYLE
Name: Timothy E. Doyle
Title: Authorized Signatory
All Notices:
CIBC, Inc.
Two Paces West
2727 Paces Ferry Road,
Suite 1200
Atlanta, GA 30339
Attention: Kim Swink
Telephone No.: (404) 319-4829
Telecopy No.: (404) 319-4950
Payment Office:
CIBC, Inc.
Two Paces West
2727 Paces Ferry Road,
Suite 1200
Atlanta, GA 30339
Attention: Kim Swink
Telephone No.: (404) 319-4829
Telecopy No.: (404) 319-4950
Letter of Credit
Information:
CIBC, Inc.
Two Paces West
2727 Paces Ferry Road,
Suite 1200
Atlanta, GA 30339
Attention: Kim Swink
Telephone No.: (404) 319-4829
Telecopy No.: (404) 319-4950
BARCLAYS BANK PLC
By: /s/JOHN C. LIVINGSTON
Name: John C. Livingston
Title: Vice President
All Notices:
Barclays Bank PLC
75 Wall Street
New York, New York 10265
Attention: John C. Livingston
Telephone No.: (212) 412-5104
Telecopy No.: (212) 412-5661
Payment Office:
Barclays Bank PLC
75 Wall Street
New York, New York 10265
Attention: John C. Livingston
Niko Mandaira
Telephone No.: (212) 412-3370
Telecopy No.: (212) 412-5661
(212) 412-5015
Letter of Credit
Information:
Barclays Bank PLC
75 Wall Street
New York, New York 10265
Attention: John C. Livingston
Niko Mandaira
Telephone No.: (212) 412-3370
Telecopy No.: (212) 412-5661
(212) 412-5015
NATIONAL CITY BANK
By: /s/DAVID A. BURNS
Name: David A. Burns
Title: Assistant Vice
President
All Notices:
National City Bank
1900 East 9th Street
Locator #2102
Cleveland, OH 44114-
3484
Attention: David A. Burns
Telephone No.: (216) 575-3061
Telecopy No.: (216) 575-9396
Payment Office:
National City Bank, C&C
Loans
1900 East 9th Street
Locator #3032
Cleveland, OH 44114-
3484
Attention: Wendy Pollarine
Telephone No.: (216) 575-2156
Telecopy No.: (216) 575-3207
Letter of Credit
Information:
National City Bank
1900 East 9th Street
Cleveland, OH 44114-
3484
Attention: Wendy Pollarine
Telephone No.: (216) 575-2156
Telecopy No.: (216) 575-3207
ABN-AMRO BANK N.V., NEW YORK
BRANCH,
as a Lender
By: /s/PARKER H. DOUGLAS
Name: Parker H. Douglas
Title: Group Vice President
By: /s/EISSO VANDERMEULEN
Name: Eisso Vander Meulen
Title: Credit Officer
All Notices:
ABN-AMRO Bank N.V., New York
Branch
500 Park Avenue - 3rd Floor
New York, New York
10022
Attention: Parker H. Douglas
Telephone No.: (212) 446-4144
Telecopy No.: (212) 319-4339
Payment Office:
ABN-AMRO Bank N.V., New York
Branch
500 Park Avenue - 3rd Floor
New York, New York
10022
Attention: Parker H. Douglas
Telephone No.: (212) 446-4144
Telecopy No.: (212) 319-4339
Letter of Credit
Information:
ABN-AMRO Bank N.V., New York
Branch
500 Park Avenue - 4th
Floor
New York, New York
10022
Attention: Anthony Zingalli
Telephone No.: (212) 446-4112
Telecopy No.: (212) 759-8916
COMMERZBANK AG, NEW YORK
BRANCH, as a Lender
By: /s/JUERGEN BOYSEN
Name: Juergen Boysen
Title: Senior Vice President
By: /s/MICHAEL D. HINTZ
Name: Michael D. Hintz
Title: Vice President
All Notices:
Commerzbank AG, New York Branch
2 World Financial Center
New York, New York 10281
Attention: Johan Sorensson
Telephone No.: (212) 266-7309
Telecopy No.: (212) 266-7235
Payment Office:
Commerzbank AG, New
York Branch
2 World Financial Center
New York, New York 10281
Attention: Helma Saitta
Telephone No.: (212) 266-7317
Telecopy No.: (212) 266-7235
Letter of Credit
Information:
Commerzbank AG, New
York Branch
2 World Financial
Center
New York, New York
10281
Attention: Joch Pausch
Telephone No.: (212) 266-7255
Telecopy No.: (212) 266-7235
ISTITUTO BANCARIO SAN PAOLO
DI TORINO S.p.A., as a
Lender
By: /s/WILLIAM J. DEANGELO
Name: William J. DeAngelo
Title: First Vice President
All Notices:
Istituto Bancario San Paolo
di Torino S.p.A.
245 Park Avenue - 35th
Floor
New York, New York
10167
Attention: Luca Sacchi
Telephone No.: (212) 692-3130
Telecopy No.: (212) 599-5303
Payment Office:
Istituto Bancario San
Paolo
di Torino S.p.A.
245 Park Avenue - 35th
Floor
New York, New York
10167
Attention: Luca Sacchi
Telephone No.: (212) 692-3130
Telecopy No.: (212) 599-5303
Letter of Credit
Information:
Istituto Bancario San
Paolo
di Torino S.p.A.
245 Park Avenue - 35th
Floor
New York, New York
10167
Attention: Luca Sacchi
Telephone No.: (212) 692-3130
Telecopy No.: (212) 599-5303
Annex I
Pro Rata Share
Lender Pro Rata Share
Bankers Trust Company 28.035292521892%
Chemical Bank 14.017646260946%
Barclays Bank PLC 14.017646260946%
Canadian Imperial Bank of Commerce 7.008823130473%
National City Bank 7.008823130473%
ABN Amro Bank N.V., New York Branch 27.681570855667%
Istituto Bancario San Paolo Di 2.230197839603%
Torino S.p.A., New York Limited Branch
Schedule 1
LETTERS OF CREDIT
(COMBINED RESTATED CREDIT AGREEMENT)
L/C NO. AMOUNT EXPIRY DATE
S05129 $549,183.30 31-Mar-95
S05130 $549,183.30 31-Mar-95
S06223 $415,464.00 16-Sep-94
S06224 $481,411.00 16-Sep-94
S07375 $50,000.00 16-Dec-94
S07740 $10,283.28 17-Jan-95
S07862 $98,325.00 15-Jan-95
S08066 $9,000.00 15-Aug-95
S08067 $38,829.87 15-Aug-95
S08390 $328,523.48 16-Sep-94
S08752 $153,575.00 09-Sep-94
S08801 $1,250,000.00 31-Jul-95
S09405 $3,103,000.00 31-Jul-95
S09406 $2,900,000.00 24-Jul-95
S09413 $1,000,000.00 31-Jul-95
$10,936,778.23
CONSENT, AMENDMENT NO. 1 AND AGREEMENT
CONSENT, AMENDMENT NO. 1 AND AGREEMENT (this
"Agreement"), dated as of January 17, 1995, relating to the
Amended and Restated Credit Agreement and the Amended and
Restated Combined Restated Credit Agreement (each as
hereinafter defined, and collectively, the "Credit
Agreements"; capitalized terms used but not defined herein
have the meanings assigned to them in the applicable Credit
Agreement), among Imo Industries Inc., a Delaware
corporation (the "Borrower"), each of the financial
institutions party to the Amended and Restated Credit
Agreement (together with their respective successors and
permitted assigns and transferees, the "Amended and Restated
Credit Agreement Lenders"), each of the financial
institutions party to the Amended and Restated Combined
Restated Credit Agreement (together with their respective
successors and permitted assigns and transferees, the
"Amended and Restated Combined Restated Credit Agreement
Lenders"), Bankers Trust Company, a New York banking
corporation ("BTCo"; together with the Amended and Restated
Credit Agreement Lenders and the Amended and Restated
Combined Restated Credit Agreement Lenders, the "Lenders"),
as Issuer Bank and as Agent under the Credit Agreements, and
Mannesmann Capital Corporation, a New York Corporation
("Mannesmann"), as assignee of certain Letters of Credit
under the Credit Agreements.
W I T N E S S E T H :
WHEREAS, the Borrower has entered into (i) the
Amended and Restated Credit Agreement, dated as of August
19, 1994 (the "Amended and Restated Credit Agreement"),
among the Borrower, each of the Amended and Restated Credit
Agreement Lenders and BTCo as Issuer Bank and as Agent and
(ii) the Amended and Restated Combined Restated Credit
Agreement, dated as of August 19, 1994 (the "Amended and
Restated Combined Restated Credit Agreement"), among the
Borrower, each of the Amended and Restated Combined Restated
Credit Agreement Lenders and BTCo as Issuer Bank and as
Agent; and
WHEREAS, pursuant to Sections 9.1 and 9.14 of
each of the Credit Agreements, the Borrower may not assign
or transfer any of its right or interest thereunder without
the prior written consent of 100% of the Lenders; and
WHEREAS, pursuant to Section 5.1(C)(i) of each
of the Credit Agreements, BTCo, as Issuer Bank on behalf of
the Lenders, has issued for the account of the Borrower and
its divisions and subsidiaries certain Letters of Credit,
which Letters of Credit are backed by two Citibank LOCs in
the event that any of the beneficiaries under the Letters of
Credit make a draw request thereunder; and
WHEREAS, pursuant to that certain Asset Purchase
Agreement, dated as of November 4, 1994 (as amended, amended
and restated, supplemented or otherwise modified from time
to time, the "Purchase Agreement"), among the Borrower, Imo
Industries International Inc. and Mannesmann, it is
contemplated that the Borrower and its affiliates will sell
to Mannesmann and its affiliates (i) certain assets,
properties and obligations of the Borrower's Delaval Turbine
Division and Turbo Care Division and (ii) the Borrower's 50%
partnership interest in Delaval-Stork V.O.F. relating to its
business of designing, manufacturing, distributing, selling
and servicing compression equipment, turbines, boiler feed
pumps and centrifugal pumps, parts and components therefor
and parts and services for the relevant aftermarkets
(collectively, the "Business"), including its interest as
account party in the Letters of Credit set forth on Schedule
1 hereto (the "Turbine L/Cs"); and
WHEREAS, the Borrower has requested that the
Lenders consent to the assignment of the account party
interest in the Turbine L/Cs to Mannesmann and permit
Westdeutsche Landesbank Girozentrale, New York Branch
("Westdeutsche") to issue (i) an irrevocable standy letter
of credit in the face amount of $1,735,847.60 in respect of
the Turbine L/Cs issued under the Amended and Restated
Credit Agreement and (ii) an irrevocable standby letter of
credit in the face amount of $3,407,503.68 in respect of the
Turbine L/Cs issued under the Amended and Restated Combined
Restated Credit Agreement (collectively, the "Westdeutsche
LOC's") to replace the coverage of the Citibank LOCs.
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 (i) consent to the assignment
of the account party interest of the Borrower and its
affiliates in the Turbine L/Cs to Mannesmann upon the
consummation of the sale of the Business to Mannesmann as
contemplated in the Purchase Agreement and (ii) consent to
the replacement of the Citibank LOCs with the Westdeutsche
LOCs with respect to the Turbine L/Cs, and the Lenders
authorize and direct BTCo as Agent and Issuer Bank to take
any and all actions and to execute and deliver all such
instruments and documents as it shall deem necessary or
desirable in connection therewith.
SECTION TWO - AMENDMENT
2.1 Amendment of Recitals
(a) The Recitals to each of the Credit Agreements are
hereby amended by deleting the word "and" at the end of the
fourth recital thereof and adding the words "and the
Westdeutsche LOC" immediately after the words "Citibank LOC"
in the last recital thereof.
(b) The Recitals to the Amended and Restated Credit
Agreement are hereby amended by adding the following recital
immediately before the last recital thereof:
WHEREAS, Wesdeutsche Landesbank Girozentrale,
New York Branch ("Westdeutsche") is issuing to the Issuer
Bank its irrevocable standby letter of credit in the face
amount of $1,735,847.60 (the "Westdeutsche LOC") in respect
of the Letters of Credit issued for the account of the
turbine division of the Borrower (the "Turbine L/Cs"); and
(c) The Recitals to the Amended and Restated Combined
Restated Credit Agreement are hereby amended by adding the
following recital immediately before the last recital
thereof:
WHEREAS, Wesdeutsche Landesbank Girozentrale,
New York Branch ("Westdeutsche") is issuing to the Issuer
Bank its irrevocable standby letter of credit in the face
amount of $3,407,503.68 (the "Westdeutsche LOC") in respect
of the Letters of Credit issued for the account of the
turbine division of the Borrower (the "Turbine L/Cs"); and
2.2 Amendment of Definitions
The definition of "Blocking Event" in each of the
Credit Agreements is hereby amended by adding the words "or
the Westdeutsche LOC, as applicable," immediately after the
words "Citibank LOC" in the first instance such words appear
and adding the words "or the Westdeutsche LOC, as
applicable" immediately after the words "Citibank LOC" in
the second instance such words appear.
2.3 Amendment of Section 4.3
Section 4.3 of each of the Credit Agreements is hereby
amended by adding the words "or the Westdeutsche LOC, as
applicable" immediately after the words "Citibank LOC" in
the first instance such words appear and adding the words
"or the Westdeutsche LOC" immediately after the words
"Citibank LOC" in every other instance such words appear.
2.4 Amendment of Section 4.5
Section 4.5(i) of each of the Credit Agreements is
hereby amended by adding the words "or the Westdeutsche LOC"
immediately after the words "Citibank LOC" and Section
4.5(iv) of each of the Credit Agreements is hereby amended
by adding the words "or the Westdeutsche LOC, as applicable"
immediately after the words "Citibank LOC".
2.5 Amendment of Section 4.6
Section 4.6 of each of the Credit Agreements is hereby
amended by adding the words "other than the Turbine L/Cs"
immediately after the words "Letters of Credit".
2.6 New Section Regarding Reduction Certificates
Each of the Credit Agreeements is hereby amended by
adding the following section:
4.7 Westdeutsche LOC Reduction Certificates
The Issuer Bank shall upon the Borrower's
request deliver from time to time reduction certificates in
respect of the Westdeutsche LOC; provided, however, that no
such reduction certificate shall cause the Stated Amount of
the Westdeutsche LOC to be less than an amount equal to 105%
of the Stated Amounts of all the Turbine L/Cs less the
amount then on deposit in the Cash Collateral Account.
2.7 Amendment of Section 5.2
Each of the Credit Agreements is hereby amended by
adding the words "or the Westdeutsche LOC, as applicable,"
immediately after the words "Citibank LOC".
2.8 Amendment of Section 5.3
Each of the Credit Agreements is hereby amended by
adding the words "or Westdeutsche, as applicable"
immediately after the words "Citibank, N.A.".
2.9 Amendments to Events of Default
(a) Each of the Credit Agreements is hereby amended by
(i) deleting the word "or" at the end of section 7.1, (ii)
deleting the heading to section 7.2 and replacing it with
the heading "Citibank LOC" and (iii) adding the following
section:
7.3 Westdeutsche LOC
Westdeutsche shall assert that the Westdeutsche
LOC is not a valid and binding obligation of Westdeutsche,
enforceable in accordance with its terms, the Westdeutsche
LOC shall not be promptly honored upon presentation by the
Agent of appropriate drawing documentation or Westdeutsche
shall become insolvent or otherwise unable to pay its debts
as they become due;
(b) Each of the Credit Agreements is hereby amended by
adding the words "or the Westdeutsche LOC, as applicable"
immediately after the words "Citibank LOC" in the paragraph
beginning with the word "THEN" immediately before Section 8.
2.10 Amendment of Section 8.1
Section 8.1 of each of the Credit Agreements is hereby
amended by adding the words "and the Westdeutsche LOC"
immediately after the words "Citibank LOC".
2.11 Amendment of Section 8.2(C)
Section 8.2(C) of each of the Credit Agreements is
hereby amended by adding the words "or the Westdeutsche LOC"
immediately after the words "Citibank LOC" in each instance
such words appear.
SECTION THREE - AGREEMENT
From and after the effective date hereof, (i)
Mannesmann shall assume and agrees to perform and be bound
by all of the rights and obligations of the Borrower under
(x) each of the Credit Agreements and (y) each of the
applications and agreements and notices of issuance, in each
case relating to the Letters of Credit which are Turbine
L/Cs and (ii) the obligations of the Borrower under (x) each
of the Credit Agreements and (y) each of the applications
and agreements and notices of issuance, in each case
relating to the Letters of Credit shall be effective only in
respect of Letters of Credit other than the Turbine L/Cs.
SECTION FOUR - EFFECTIVENESS; PAYMENT OF EXPENSES
(a) This Agreement shall become effective upon (i) the
execution and delivery hereof by the Borrower, BTCo, each of
the Lenders and Mannesmann, (ii) the delivery by
Westdeutsche to the Agent of the Westdeutsche LOCs and (iii)
the delivery by Mannesmann to the Agent of board resolutions
and an incumbency certificate authorizing the execution of
this Agreement, certified by the secretary or an assistant
secretary of Mannesmann.
(b) The Borrower agrees to pay all the reasonable and
actual out-of pocket costs and expenses of BTCo as Agent and
as Issuer Bank, relating to the negotiation, preparation and
execution of this Agreement and all related documents,
including, without limitation, the reasonable fees, expenses
and disbursements of counsel to the Agent and the Lenders.
SECTION FIVE - MISCELLANEOUS.
(a) This Agreement shall not constitute a consent or
waiver to or modification of any other provision, term or
condition of the Credit Agreements. Except as herein
expressly consented, the Credit Agreements 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 either of the Credit Agreements
shall mean such 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 Agreement 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 AGREEMENT 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 Agreement to be duly executed as of the date
first above written.
IMO INDUSTRIES INC.,
as Borrower
By: /s/THOMAS J. BIRD
Name: THOMAS J. BIRD
Title:EXECUTIVE
VICE PRESIDENT
BANKERS TRUST COMPANY, as a
Lender, as Issuer Bank and
as Agent
By: /s/EDWARD G. BENEDICT
Name: EDWARD G. BENEDICT
Title: VICE PRESIDENT
CHEMICAL BANK, as a Lender
By: /s/WILLIAM J. CAGGIANO
Name: WILLIAM J. CAGGIANO
Title: MANAGING DIRECTOR
CIBC, INC., as a Lender
By: /s/TIMOTHY E. DOYLE
Name: TIMOTHY E. DOYLE
Title: VICE PRESIDENT
BARCLAYS BANK PLC, as a Lender
By: /s/JOHN C. LIVINGSTON
Name: JOHN C. LIVINGSTON
Title: VICE PRESIDENT
NATIONAL CITY BANK, as a Lender
By: /s/JAY C. HALL
Name: JAY C. HALL
Title: S.V.P.
ISTITUTO BANCARIO SAN PAOLO
DI TORINO S.p.A, as a Lender
By: /s/GERARD M. MCKENNA
Name: GERARD M. MCKENNA
Title: VICE PRESIDENT
COMMERZBANK AG, NEW YORK BRANCH
as a Lender
By: /s/JUERGEN BOYSEN
Name:JUERGEN BOYSEN
Title:SENIOR VICE PRESIDENT
By: /s/MICHAEL D. HINTZ
Name: MCHAEL D. HINTZ
Title: VICE PRESIDENT
ABN-AMRO BANK, N.V., NEW YORK
BRANCH, as a Lender
By: /s/PARKER H. DOUGLAS
Name: PARKER H. DOUGLAS
Title: GROUP VICE PRESIDENT
By: /s/E.J. MAHNE
Name: E.J. MAHNE
Title: S.V.P.
THE PRUDENTIAL INSURANCE COMPANY
OF AMERICA, as a Lender
By: /s/JOHN MULLMAN
Name: JOHN MULLMAN
Title: VICE PRESIDENT
MANNESMANN CAPITAL CORPORATION,
as Assignee
By: /s/JOSEPH E. INNAMORATI
Name: JOSEPH E. INNAMORATI
Title: VICE PRESIDENT
Schedule 1
TURBINE L/C's
L/C EXPIRY L/C CREDIT
NUMBER DATE BALANCE AGREEMENT
S-09908 01/17/95 380,000.00 New
S-09720 01/17/95 495,650.00 New
S-09546 01/20/95 6,467.80 New
S-05129 03/31/95 549,183.30 Combined
S-09434 03/31/95 150,267.00 New
S-05130 03/31/95 549,183.30 Combined
S-09863 04/14/95 67,500.00 New
S-09864 04/14/95 67,500.00 New
S-10013 07/16/95 11,031.85 New
S-08801 07/31/95 1,250,000.00 Combined
S-06223 09/16/95 415,464.00 Combined
S-06224 09/16/95 481,411.00 Combined
S-10079 09/18/95 8,797.30 New
S-09944 08/31/95 1,993.30 New
S-09730 01/02/96 33,500.00 New
S-09877 02/15/96 310,632.00 New
S-09995 02/15/96 41,849.00 New
S-09996 02/15/96 78,000.00 New
AMENDED AND RESTATED CREDIT AGREEMENT
Dated as of August 19, 1994
Among
IMO INDUSTRIES INC.,
THE LENDERS LISTED HEREIN
AND
BANKERS TRUST COMPANY,
as a Lender, Issuer Bank and Agent
AMENDED AND RESTATED CREDIT AGREEMENT
AMENDED AND RESTATED CREDIT AGREEMENT, dated as of
August 19, 1994, among IMO INDUSTRIES INC., a Delaware
corporation (together with its successors, the "Borrower"), THE
LENDERS SIGNATORY HERETO (each a "Lender" and collectively, the
"Lenders") and BANKERS TRUST COMPANY, a New York banking
corporation ("BTCo"), as a Lender, as Issuer Bank (as
hereinafter defined), and as agent for the Lenders (in such
capacity, and including its successors and assigns in such
capacity, the "Agent").
W I T N E S S E T H:
WHEREAS, the Borrower, the Lenders, the Issuer Bank
and the Agent are parties to a Credit Agreement dated as of
July 15, 1993 (the "Prior Credit Agreement");
WHEREAS, pursuant to the Prior Credit Agreement,
the Lenders made certain loans (the "Loans") to the Borrower
and the Issuer Bank issued for the account of the Borrower
certain letters of credit;
WHEREAS, as of the date hereof, pursuant to the
Prior Credit Agreement, there are outstanding those letters of
credit issued on behalf of the Borrower or its affiliates
described on Schedule 1 (collectively, the "Letters of
Credit");
WHEREAS, on the date hereof, the Borrower is
refinancing and causing to be repaid to the Lenders all of the
Loans and causing Citibank, N.A. to issue to the Issuer Bank
its irrevocable standby letter of credit in the face amount of
$20,373,087.74 (the "Citibank LOC") and the Lenders and the
Agent are releasing certain liens and security interests
securing the Prior Credit Agreement; and
WHEREAS, the parties hereto desire to amend and
restate the Prior Credit Agreement, among other things, to
reflect the repayment of the Loans and the release of the
Collateral (as defined in the Prior Credit Agreement) and to
evidence certain arrangements relating to the Letters of Credit
and the Citibank LOC;
NOW THEREFORE, in consideration of the foregoing,
and for valuable consideration, the parties hereto hereby amend
and restate the Prior Credit Agreement as follows:
Section 1 DEFINITIONS
As used in this Agreement, the following terms have
the meanings indicated:
"Acceptable Rating" means, as applied to the indebtedness
of any Person, a rating of at least Baa by Moody's Investors
Service or BBB by Standard & Poor's Corporation.
"Affiliate" means, with respect to any Person, any other
Person or "group" of Persons (as the term "group" is defined
for purposes of Section 13(d) of the Exchange Act) directly or
indirectly controlling, controlled by, or under common control
with such Person. For the purposes of this definition,
"control" (including, with correlative meanings, the terms
"controlling", "controlled by" and "under common control
with"), as used with respect to any Person, means the
possession, directly or indirectly, of the power to direct or
cause the direction of management and policies of such Person,
whether through the ownership of voting securities or by
contract or otherwise. Neither any Lender nor any parent of
any Lender nor any Subsidiary of any such Lender or parent
shall be treated as an Affiliate of the Borrower.
"Agent" has the meaning assigned to that term in the
introduction to this Agreement.
"Agreement" means this Amended and Restated Credit
Agreement.
"Bankruptcy Code" means Title 11 of the United States
Code entitled "Bankruptcy," as from time to time amended, and
any successor statute.
"Blocking Event" means the occurrence and continuance of
any of the following: (A) a declaration that any amount is due
and payable under this Agreement and that such amount has not
been paid under the Citibank LOC after presentation by the
Agent of appropriate drawing documentation, and (B) a default
in the payment of any reimbursement obligations in respect of
Letters of Credit owing under this Agreement when due (after
giving effect to any applicable grace period and after
presentation by the Agent of appropriate drawing documentation
under the Citibank LOC).
"Borrower" has the meaning assigned to that term in the
introduction to this Agreement.
"BTCo" has the meaning assigned to that term in the
introduction to this Agreement.
"Business Day" means any day excluding Saturday and
Sunday and excluding any day which is a legal holiday under the
laws of the States of New York or New Jersey or is a day on
which banking institutions or insurance companies located in
the States of New York or New Jersey are authorized or required
by law or other governmental action to close.
"Capitalized Lease" means any lease which is or should be
capitalized on the balance sheet of the lessee in accordance
with GAAP.
"Code" means the Internal Revenue Code of 1986, as from
time to time amended. Any reference to the Code shall include
a reference to corresponding provisions of any successor
statute.
"Consolidated" means, as applied to any financial or
accounting term or amount, such term or amount determined on a
consolidated basis in accordance with GAAP.
"Effective Date" has the meaning assigned to that term in
Section 2 hereof.
"Event of Default" has the meaning assigned to that term
in Section 7 hereof.
"Exchange Act" means the Securities Exchange Act of 1934,
as from time to time amended, and any successor statute.
"Federal Funds Rate" means on any one day the weighted
average of the rate on overnight Federal funds transactions
with members of the Federal Reserve System only arranged by
Federal funds brokers as published as of such day by the
Federal Reserve Bank of New York, provided, that if such day is
not a Business Day, the Federal Funds Rate shall be measured
as of the immediately preceding Business Day.
"Final Maturity Date" means July 19, 1995.
"GAAP" means generally accepted accounting principles set
forth in the opinions and pronouncements of the Accounting
Principles Board of the American Institute of Certified Public
Accountants and statements and pronouncements of the FASB or in
such other statements by such other entity as may be approved
by a significant segment of the accounting profession, which
are applicable to the circumstances as of the date of
determination.
"Government Acts" has the meaning assigned to that term
in Section 5.7 hereof.
"Governmental Authority" means any nation or government,
any state or other political subdivision thereof and any entity
(including, without limitation, any court or arbitrator or
panel) exercising executive, legislative, judicial, regulatory
or administrative functions of or pertaining to government.
"Indebtedness", as applied to any Person, means, without
duplication (i) all indebtedness for borrowed money owed by
that Person, (ii) that portion of obligations with respect to
Capitalized Leases which is properly classified as a liability
on a balance sheet of that Person in conformity with GAAP,
(iii) notes payable and drafts accepted, in each case,
representing extensions of credit to such Person whether or not
representing obligations for borrowed money (including, without
limitation, matured reimbursement obligations in respect of
letters of credit), (iv) any obligation owed by that Person for
all or any part of the deferred purchase price of property or
services which purchase price is (a) due more than six months
from the date of incurrence of the obligation in respect
thereof or (b) evidenced by a note or similar written
instrument and (v) all indebtedness secured by any lien on any
property or asset owed or held by that Person regardless of
whether the indebtedness secured thereby shall have been
assumed by that Person or is nonrecourse to the credit of that
Person.
"Issuer Bank" means BTCo, and its permitted successors
and assigns.
"Lender" and "Lenders" have the meaning set forth in the
introduction to this Agreement and shall include (I) any
permitted assignee of a Lender under Section 9.1C hereof and
(ii) BTCo in its individual capacity.
"Letter of Credit Exposure" means, in respect of any
Lender, at any date of determination, such Lender's Pro Rata
Share of the Total Letter of Credit Exposure then outstanding.
"Letters of Credit" has the meaning set forth in the
recitals of this Agreement.
"Loans" has the meaning set forth in the recitals of the
Agreement.
"Material Subsidiary" means, at any date of
determination, in the case of the Borrower, each Subsidiary of
the Borrower now existing or hereafter acquired or formed by
the Borrower which (x) accounted for more than 5% of the
Consolidated revenues of the Borrower and its Subsidiaries
during the twelve month period ending on the date of the most
recent Consolidated balance sheet of the Borrower delivered to
the Lenders or (y) was the owner of more than 5% of the
Consolidated assets of the Borrower and its Subsidiaries at the
date of the most recent Consolidated balance sheet of the
Borrower delivered to the Lenders.
"Obligations" means all obligations of every nature of
the Borrower, whether fixed or contingent, liquidated or
unliquidated or matured or unmatured, from time to time owed to
the Lenders and the Agent or any of them under or in connection
with this Agreement.
"Other Restated Credit Agreement" means the Amended and
Restated Combined Restated Credit Agreement, dated as of the
date hereof, among the Borrower, BTCo and certain Lenders named
therein.
"Payment Office" means the office of the Agent or any
Lender, as the case may be, designated as such on the relevant
signature pages hereof or such other office as to which any
party shall notify the other parties in writing.
"Person" means an individual or a corporation,
partnership, trust, incorporated or unincorporated
association, joint venture, joint stock company, Governmental
Authority or other entity of any kind.
"Potential Event of Default" means a condition or event
which, after notice or lapse of time or both, would constitute
an Event of Default if that condition or event were not cured
or removed within any applicable grace or cure period.
"Prime Rate" means the higher of (measured on a
day-by-day basis):
(a)the rate which BTCo announces from time to time
as its prime lending rate, as in effect from time to time.
The prime lending rate is a reference rate and does not
necessarily represent the lowest or best rate actually
charged to any customer. BTCo may make commercial loans
or other loans at rates of interest at, above or below the
prime lending rate; or
(b)the Federal Funds Rate plus 1/2 of 1%.
"Prior Credit Agreement" has the meaning set forth in the
recitals to the Agreement.
"Pro Rata Share" means, in respect of each Lender, the
percentage set forth for such Lender on Annex I.
"Regulation D" means Regulation D of the Board of
Governors of the Federal Reserve as from time to time in effect
and any successor to all or a portion thereof establishing
reserve requirements.
"Requisite Lenders" means, at any time, Lenders holding
at least 66 2/3% of the sum of Total Letter of Credit Exposure
then outstanding hereunder.
"Stated Amount" of each Letter of Credit shall mean the
maximum amount which is, or, with respect to any Letter of
Credit that by its terms provides for increases over time in
the maximum amount available to be drawn thereunder, may become
at any given time, available to be drawn thereunder, determined
without regard to whether any conditions to drawing could then
be met.
"Subsidiary" of any Person means any corporation or other
entity of which such Person, directly or indirectly, shall at
the time (a) own shares of any class or classes having power
for the election of at least a majority of the members of the
Board of Directors (or the governing body) of such corporation
or other entity other than shares or other interests having
such power only by reason of the happening of a contingency or
(b) otherwise have the legal right to elect such a majority
other than by reason of the happening of a contingency.
"Taxes" has the meaning assigned to that term in Section
4.4(i) hereof.
"Total Letter of Credit Exposure" means, at any date of
determination, the sum of (i) the Stated Amount of each Letter
of Credit then outstanding plus (ii) the aggregate amount of
all unreimbursed drawings in respect of the Letters of Credit.
"UCC" means the Uniform Commercial Code as in effect in
each applicable jurisdiction.
"United States Dollars" or "U.S. Dollars" or "$" means
such coin or currency of the United States of America as at the
time shall be legal tender for the payment of public and
private debts.
Section 2 EFFECTIVE DATE
This Agreement shall become effective on the date (the
"Effective Date") on which (i) each party hereto shall have
returned an executed copy hereof to the Agent at the address
designated on its signature page hereto and (ii) all of the
conditions in Section 6 hereof shall have been satisfied.
Section 2 FEES
3.1 Lenders' and Agent's Fees
(i) On such dates and at such times as are set forth in
Section 4 hereof, the Borrower shall pay fees in respect of the
Letters of Credit as set forth therein.
(ii) The Borrower shall pay to the Agent for its account
an annual administrative fee of $10,000, which shall be paid in
quarterly installments of $2,500 payable in advance on the
Effective Date and on each quarterly anniversary of the
Effective Date.
3.2 Time of Payment
The Borrower shall make payment of each of the Lender's
fees and each of the Agent's fees hereunder, not later than
Noon (New York time) on the date when due in U.S. Dollars and
in immediately available funds, to the Agent at its Payment
Office.
Section 4 PAYMENTS
4.1 Cash Collateralization
The Borrower shall have the right at any time, upon notice
to the Agent and with the consent of the Requisite Lenders, to
provide cash collateral for all or any portion of the aggregate
undrawn Stated Amount of the Letters of Credit. All such cash
collateral shall be applied in accordance with Section 4.5.
4.2 Mandatory Payments
On the Final Maturity Date, or upon the earlier
acceleration of the Obligations pursuant to Section 7.2 hereof,
the Borrower shall pay to the Agent an amount equal to all
unreimbursed drawings in respect of Letters of Credit, the then
undrawn Stated Amount of all then outstanding Letters of Credit
and all other amounts then outstanding under this Agreement.
All such amounts received by the Agent shall be applied in
accordance with Section 4.5.
4.3 Method and Place of Payment
All payments to be made by the Borrower hereunder shall be
made to the Agent, not later than Noon (New York time) on the
date when due and shall be made in U.S. Dollars in immediately
available funds at the Agent's Payment Office. Whenever any
payment shall be stated to be due on a day which is not a
Business Day, the due date thereof shall be extended to the
next succeeding Business Day. In the event the Borrower fails
to make any payment when due hereunder, without limiting any
other remedies available to the Agent, the Lenders or the
Issuer Bank, the Agent shall immediately be entitled to draw on
the Citibank LOC in the amount of such payment and upon receipt
of such draw together with interest if such amount is not
received by the Agent on the date of the draw, the Borrower's
obligation in respect thereof shall be discharged. Upon
receipt of payments of fees pursuant to Section 3 from the
Borrower or under the Citibank LOC, the Agent shall promptly
remit to each Lender its Pro Rata Share of all such payments
received in immediately available funds by the Agent for the
account of such Lender. Such payments shall be made at the
Payment Office of such Lender or such other office as such
Lender may specify in writing from time to time to the
Borrower. Any amount due hereunder from the Borrower that is
not paid when due (whether by the Borrower or from the proceeds
of a draw under the Citibank LOC) shall bear interest (before
as well as after judgment) payable on demand at 3% over the
Prime Rate from and including the date when such payment was
due to but excluding the date of receipt of payment. Any amount
representing the payment of any fees by the Borrower and due to
a Lender from the Agent pursuant to this Agreement which is not
paid by the Agent when due shall bear interest payable by the
Agent from the date due to but excluding the date paid at the
Federal Funds Rate.
4.4 Net Payments; Cash Collateral Account
(i) All payments by the Borrower under this Agreement
shall be made without set-off or counterclaim and in such
amounts as may be necessary in order that all such payments
(after deduction or withholding for or on account of any
present or future taxes, levies, imposts, duties or other
charges of whatsoever nature imposed by any government or any
political subdivision or taxing authority thereof, other than
any tax on or measured by the overall net income of a Lender
pursuant to the income tax laws of the United States or the
jurisdiction of such Lender's incorporation or organization or
any jurisdiction in which such Lender maintains an office or
conducts business (collectively, the "Taxes")) shall not be
less than the amounts otherwise specified to be paid hereunder.
With respect to each deduction or withholding for or on account
of any Taxes, the Borrower shall promptly furnish to each
Lender such certificates, receipts and other documents as may
be required (in the judgment of such Lender) to establish any
tax credit to which such Lender may be entitled. The Borrower
shall also reimburse each Lender, upon the written request of
such Lender, for taxes imposed on or measured by the net income
of such Lender pursuant to the laws of the United States of
America, any State or political subdivision thereof, or the
jurisdiction in which such Lender is incorporated, or a
jurisdiction in which the principal office or lending office of
such Lender is located, or under the laws of any political
subdivision or taxing authority of any such jurisdiction, as
such Lender shall determine are or were payable by such Lender
in respect of amounts of Taxes deducted or withheld from
increased amounts payable to such Lender pursuant to this
Section 4.4.
(ii) Without prejudice to the provisions of paragraph (i)
of this Section 4.4, the Borrower will promptly indemnify each
Lender against and reimburse each Lender on demand for any
Taxes paid by such Lender (together with any interest,
penalties and expenses, including counsel fees and expenses,
payable or incurred in connection therewith) on or in relation
to any sum received or receivable hereunder by such Lender, or
the Agent on its behalf (whether or not correctly asserted),
including any tax or other such charge of such Lender arising
by virtue of payments under this Section 4.4(ii). A
certificate as to any additional amounts payable to a Lender
under this Section 4.4 submitted to the Borrower by such Lender
shall show in reasonable detail the amount payable and the
calculations used to determine in good faith such amount and
shall, absent manifest error, be final, conclusive and binding
upon all parties hereto.
(iii) Each Lender that is organized under the laws of any
jurisdiction other than the United States of America or any
State thereof (including the District of Columbia) agrees to
furnish to the Borrower and the Agent, upon demand, two copies
of either U.S. Internal Revenue Service Form 4224 or U.S.
Internal Revenue Service Form 1001 or any successor forms
thereto (wherein such Lender claims entitlement to complete
exemption from or reduced rate of U.S. federal withholding tax
on interest paid by the Borrower hereunder) and upon request of
the Borrower to provide to the Borrower and the Agent a new
Form 4224 or Form 1001 or any successor form thereto if any
previously delivered form is found to be incomplete or
incorrect in any material respect or upon the obsolescence of
any previously delivered form.
4.5 Application of Payments; Cash Collateral Account
(i) To the extent any payments are required to be applied
hereunder as cash collateral for Letters of Credit (including
payments made with the proceeds of any drawing under the
Citibank LOC), such payments shall be so applied by the Agent
until such time as all Letters of Credit are cash
collateralized to 105% of their aggregate undrawn Stated
Amounts. Interest shall accrue on such cash collateral and
shall be held as additional cash collateral for Letters of
Credit.
(ii) The Issuer Bank shall credit all amounts received by
it as cash collateral in accordance herewith to a cash
collateral account in the name of the Issuer Bank on its books,
within the Issuer Bank's sole dominion and control, designated
by the Issuer Bank and over which the Issuer Bank shall have
exclusive right of withdrawal (the "Cash Collateral Account").
(iii) The Borrower hereby grants the Issuer Bank a security
interest in and right of set-off against any and all amounts in
the Cash Collateral Account to secure the Obligations hereunder
and all reimbursement obligations in connection with the
Letters of Credit (including, without limitation, any interest
which accrues after the commencement of any case, proceeding or
other action relating to the bankruptcy, insolvency,
reorganization of the Borrower) and any extensions or renewals
of any of the foregoing.
(iv) If any Event of Default has occurred, the Issuer Bank
may exercise all rights of a secured party under the UCC and,
in addition, the Issuer Bank may, without limitation, draw on
the full amount of the Citibank LOC and, without being required
to give any notice or demand, withdraw cash in the Cash
Collateral Account and apply such cash and other cash, if any,
then held by the Issuer as collateral to the payment of the
Obligations.
(v) Without limiting the Issuer Bank's rights under
subparagraph (iv) above, the Borrower hereby further agrees
that amounts on deposit in the Cash Collateral Account may be
applied to the payment of the Borrowers' reimbursement
obligations under Section 5.2 hereof with respect to all
drawings under the Letters of Credit in the order in which such
drawings are made, and the Issuer Bank is hereby authorized
(without any requirement of notice or demand to the applicants)
to liquidate the Cash Collateral Account and to withdraw cash
therefrom as may be necessary in order to effect such
reimbursement.
(vi) Provided no Event of Default has occurred and is
continuing, the Borrower shall be entitled to receive from time
to time upon its request in writing releases of funds on
deposit in the Cash Collateral Account in an amount equal to
the excess therein over 105% of the Stated Amount of all
Letters of Credit then outstanding.
4.6 Citibank LOC Reduction Certificates
The Issuer Bank shall upon the Borrower's request deliver
from time to time reduction certificates in respect of the
Citibank LOC; provided, however, that no such reduction
certificate shall cause the Stated Amount of the Citibank LOC
to be less than an amount equal to 105% of the Stated Amounts
of all the Letters of Credit less the amount then on deposit in
the Cash Collateral Account.
Section 5 LETTERS OF CREDIT
5.1 Letters of Credit
A. Expiry; Participations.
(1) Letters of Credit may not be extended, or if
terminated, may not be reissued. The Issuer Bank shall not be
obligated to extend the expiration date of or to renew any
Letter of Credit, including, without limitation, any Letter of
Credit which by its terms provides for an automatic renewal
thereof.
(ii) Each Lender shall be deemed to have purchased from
the Issuer Bank on the Effective Date a participation in each
Letter of Credit in an aggregate amount equal to such Lender's
Letter of Credit Exposure on the Effective Date. The amount of
each Lender's participation in the Letters of Credit shall
automatically be adjusted from time to time to be equal to such
Lender's Letter of Credit Exposure, and each Lender shall be
deemed to participate in each Letter of Credit in the
proportion of its Letter of Credit Exposure to the Total Letter
of Credit Exposure.
B. Borrower's Obligation To Replace.
The Borrower will use its best efforts to replace each
Letter of Credit with a new letter of credit issued by
Citibank, N.A.
C. Special Effective Date Provisions.
(i) Each Letter of Credit shall be deemed for all
purposes of this Agreement to have been issued hereunder.
(ii) On the Effective Date, the Borrower shall pay any and
all accrued agency fees, administrative fees and fees in
respect of the Letters of Credit owing under the Prior Credit
Agreement, to the Effective Date, whether or not then due and
payable.
5.2 Payment of Amounts Drawn Under Letters of Credit
In the event of a drawing under a Letter of Credit by the
beneficiary thereof, the Issuer Bank shall by writing or by
telephone promptly notify the Borrower and the Agent of such
drawing, whether or not the Issuer Bank intends to honor such
drawing and, if so, the date on which the Issuer Bank intends
to honor such drawing. If the Borrower shall have notified the
Agent and the Issuer Bank on the Business Day immediately prior
to the date the Issuer Bank has advised the Borrower it intends
to honor such drawing that the Borrower intends to reimburse
such drawing in whole or in part with its own funds the
Borrower may so reimburse the drawing in whole or in part in
immediately available funds. In the event the Borrower fails
to reimburse the drawing in whole on the date of such drawing,
the Agent shall withdraw funds from the Cash Collateral Account
and/or draw on the Citibank LOC in the amount of such drawing,
and apply the amount so withdrawn or drawn toward the
reimbursement of such drawing and, in the event of any
shortfall, shall by writing or by telephone (confirmed in
writing) promptly notify the Borrower of the amount of the
shortfall, and the Borrower shall reimburse the Issuer Bank for
the amount of such insufficiency on the same Business Day in
immediately available funds. Nothing herein shall relieve any
Lender from its obligation in respect of its Letter of Credit
Exposure hereunder.
5.3 Payment by Lenders
In the event that the Borrower and Citibank, N.A. shall
fail to reimburse the Issuer Bank for any amount required to be
reimbursed under Section 5.2 hereof, the Issuer Bank shall
promptly notify each Lender of such amount and of such Lender's
respective participation therein; provided, however, that in no
event shall any Lender be required to contribute an amount in
excess of its Pro Rata Share of the Total Letter of Credit
Exposure. Each Lender shall make available to the Issuer Bank
an amount equal to its respective participation in immediately
available funds, at the office of the Issuer Bank specified in
such notice, not later than 1:00 P.M. (New York time) on the
Business Day after the date notified by the Issuer Bank. In
the event that any Lender fails to make available to the Issuer
Bank such amount of such Lender's participation, the Issuer
Bank shall be entitled to recover such amount on demand from
such Lender together with interest at the customary rate set by
the Agent for the correction of errors among banks for three
Business Days and thereafter at the Prime Rate. Nothing in
this Section 5.3 shall be deemed to prejudice the right of any
Lender to recover from the Issuer Bank any amounts made
available by such Lender to the Issuer Bank pursuant to this
Section 5.3 in the event that it is determined by a court of
competent jurisdiction that the payment with respect to a
Letter of Credit by the Issuer Bank in respect of which payment
was made by such Lender constituted gross negligence or willful
misconduct on the part of the Issuer Bank. To the extent the
Issuer Bank receives from the Borrower payments reimbursing (in
whole or in part) drawings honored by the Issuer Bank under any
Letter of Credit, the Issuer Bank shall distribute to each
Lender which has paid all amounts payable by it under this
Section 5.3 in respect of such Letter of Credit such Lender's
Pro Rata Share of such payments when received.
5.4 Compensation
(i) The Borrower shall pay to the Issuer Bank, with
respect to the amendment of each Letter of Credit and each
payment made thereunder, processing charges in accordance with
the Issuer Bank's standard schedule for such charges in effect
at the time of such amendment or payment, as the case may be.
Such amounts shall be paid directly to, and for the sole
benefit of, the Issuer Bank.
(ii) The Borrower agrees to pay the Agent for distribution
to each Lender in respect of all Letters of Credit outstanding
on and after the Effective Date such Lender's Pro Rata Share of
a fee equal to (i) .25% per annum of the average daily maximum
amount available on and after the Effective Date to be drawn
under such outstanding Letters of Credit during the period from
the Effective Date through December 31, 1994, and (ii) 2.0% per
annum of the average daily maximum amount available on and
after January 1 1995 to be drawn under such outstanding Letters
of Credit during the period from January 1, 1995 until such
time as all Letters of Credit have either expired or been
terminated, in each case, payable in arrears on and through the
last day of each fiscal quarter of the Borrower and calculated
on the basis of a 360-day year and the actual numbers of days
elapsed.
5.5 Obligations Absolute
The obligation of the Borrower to reimburse the Issuer
Bank in connection with drawings made under the Letters of
Credit as provided in Section 5.2 and the obligations of the
Lenders under Section 5.3 hereof shall, other than in the case
of gross negligence or willful misconduct on the part of the
Issuer Bank, be unconditional and irrevocable and shall be paid
strictly in accordance with the terms of this Agreement under
all circumstances including, without limitation, the following
circumstances:
A. any lack of validity or enforceability of any Letter
of Credit;
B. the existence of any claim, set-off, defense or other
right which the Borrower or any Affiliate of the Borrower may
have at any time against a beneficiary or any transferee of any
Letter of Credit (or any Person for whom any such beneficiary
or transferee may be acting), the Issuer Bank, any Lender or
any other Person, whether in connection with this Agreement,
the transactions contemplated herein or any unrelated
transaction;
C. any draft, demand, certificate or any other document
presented under any Letter of Credit proving to be forged,
fraudulent, invalid or insufficient in any respect or any
statement therein being untrue or inaccurate in any respect;
D. payment by the Issuer Bank under any Letter of Credit
against presentation of a demand, draft or certificate or other
document which does not comply with the terms of such Letter of
Credit;
E. any rescission, waiver, amendment or modification of
any of the terms or provisions of this Agreement or any
instrument or agreement executed pursuant thereto;
F. the failure to pursue any remedy against any other
obligor in respect of any reimbursement obligation owing
hereunder;
G. any other circumstance or happening whatsoever, which
is similar to any of the foregoing; or
H. the fact that an Event of Default or a Potential Event
of Default shall have occurred and be continuing.
5.6 Additional Payments
If by reason of (a) any change in applicable law,
regulation, rule, decree or regulatory requirement or any
change in the interpretation or application by any judicial or
regulatory authority of any law, regulation, rule, decree or
regulatory requirement or (b) compliance by the Issuer Bank or
any Lender with any direction, request or requirement (whether
or not having the force of law) of any governmental or monetary
authority including, without limitation, Regulation D:
(i) the Issuer Bank or any Lender shall be subject to any
tax, levy, charge or withholding of any nature other than any
tax on or measured by the overall net income of the Issuer Bank
or a Lender pursuant to the income tax laws of the United
States or the jurisdiction of the Issuer Bank's such Lender's
incorporation or organization or any jurisdiction in which the
Issuer Bank or such Lender maintains an office or conducts
business or to any variation thereof or to any penalty with
respect to the maintenance or fulfillment of its obligations
under this Section 5;
(ii) any reserve, deposit or similar requirement is or
shall be applicable, imposed or modified in respect of any
Letter of Credit or participations therein purchased by any
Lender; or
(iii) there shall be imposed on the Issuer Bank or any
Lender any other condition regarding this Section 5, any Letter
of Credit or any participation therein;
and the result of the foregoing is to directly or indirectly
increase the cost to the Issuer Bank or any Lender of issuing,
making or maintaining any Letter of Credit or of purchasing or
maintaining any participation therein, or to reduce the amount
receivable in respect thereof by the Issuer Bank or any Lender,
then and in any such case the Issuer Bank or such Lender may,
at any time within a reasonable period after the additional
cost is incurred or the amount received is reduced, notify the
Borrower and the Borrower shall pay within ten Business Days
after such notification such amounts as the Issuer Bank or such
Lender may specify to be necessary to compensate the Issuer
Bank or such Lender for such additional cost or reduced
receipt, together with interest on such amount from the date
demanded until payment in full thereof at a rate per annum
equal at all times to 3% over the Prime Rate. The
determination by the Issuer Bank or any Lender, as the case may
be, of any amount due pursuant to this Section 5.6 as set forth
in a certificate setting forth the calculation thereof in
reasonable detail shall, in the absence of manifest error, be
final, conclusive and binding on all of the parties hereto.
5.7 Indemnification; Nature of Issuer Bank's Duties
In addition to amounts payable as elsewhere provided in this
Section 5, without duplication, the Borrower hereby agrees to
protect, indemnify, pay and save the Issuer Bank harmless from
and against any and all claims, demands, liabilities, damages,
losses, costs, charges and expenses (including reasonable
attorneys' fees and allocated costs of internal counsel) which
the Issuer Bank may incur or be subject to as a consequence,
direct or indirect, of (i) the issuance, pursuant to the Prior
Credit Agreement, of the Letters of Credit, other than as a
result of the gross negligence or willful misconduct of the
Issuer Bank, or (ii) the failure of the Issuer Bank to honor a
drawing under any Letter of Credit as a result of any act or
omission, whether rightful or wrongful, of any present or
future de jure or de facto government or governmental authority
(all such acts or omissions herein called "Government Acts").
As between the Borrower and the Issuer Bank, the Borrower
assumes all risks of the acts and omissions of, or misuse of
the Letters of Credit issued by the Issuer Bank by, the
respective beneficiaries of such Letters of Credit. In
furtherance and not in limitation of the foregoing, the Issuer
Bank shall, absent its gross negligence or willful misconduct
as finally judicially determined, not be responsible: (i) for
the form, validity, sufficiency, accuracy, genuineness or legal
effects of any document submitted by any party in connection
with the original application for and issuance of such Letters
of Credit, even if it should in fact prove to be in any or all
respects invalid, insufficient, inaccurate, fraudulent or
forged; (ii) for the validity or sufficiency of any instrument
transferring or assigning or purporting to transfer or assign
any such Letter of Credit or the rights or benefits thereunder
or proceeds thereof, in whole or in part, which may prove to be
invalid or ineffective for any reason; (iii) for failure of the
beneficiary of any such Letter of Credit to comply fully with
conditions required in order to draw upon such Letter of
Credit; (iv) for errors, omissions, interruptions or delays in
transmission or delivery of any messages, by hand delivery,
overnight courier, mail, facsimile transmission, cable,
telegraph, telex or otherwise, whether or not they be in
cipher; (v) for errors in interpretation of technical terms;
(vi) for any loss or delay in the transmission or otherwise of
any document required in order to make a drawing under any such
Letter of Credit or of the proceeds thereof; (vii) for the
misapplication by the beneficiary of any such Letter of Credit
of the proceeds of any drawing under such Letter of Credit; and
(viii) for any consequences arising from causes beyond the
control of the Issuer Bank, including, without limitation, any
Government Acts. None of the above shall affect, impair, or
prevent the vesting of any of the Issuer Bank's rights or
powers hereunder.
In furtherance and extension and not in limitation of the
specific provisions hereinabove set forth, any action taken or
omitted by the Issuer Bank under or in connection with the
Letters of Credit issued by it or the related certificates, if
taken or omitted in good faith, shall, absent its gross
negligence or willful misconduct as finally judicially
determined, not put the Issuer Bank under any resulting
liability to the Borrower.
Section 6 CONDITIONS PRECEDENT TO THE EFFECTIVENESS
OF THIS AGREEMENT
The effectiveness of this Agreement is subject to the payment
in full of all amounts owing in respect of the Loans, together
with all interest accrued on the principal thereof and all
accrued fees and other amounts outstanding under the Prior
Credit Agreement and the delivery by Citibank, N.A. to the
Agent of the Citibank LOC.
Section 7 EVENTS OF DEFAULT
If any of the following conditions or events ("Events of
Default") shall occur and be continuing (and whether such
occurrence shall be voluntary or involuntary or come about or
be effected by operation of law or otherwise):
7.1 Failure To Make Payments When Due
Failure to pay any Letter of Credit reimbursement obligation
when due as provided in Section 5.2 or to pay the fees
described in Sections 3.1 and 5.4 hereof, or any other amount
owing hereunder, including the payments required pursuant to
Section 4.2, in each case within two Business Days after the
date due; or
7.2 Letters of Credit
Citibank, N.A. shall assert that the Citibank LOC is not a
valid and binding obligation of Citibank, N.A., enforceable in
accordance with its terms, the Citibank LOC shall not be
promptly honored upon presentation by the Agent of appropriate
drawing documentation or Citibank, N.A. shall become insolvent
or otherwise unable to pay its debts as they come due;
THEN upon the occurrence of any Event of Default described in
(i) Section 7.1, the Agent may and, upon the written request of
the Requisite Lenders, shall, take any and all actions
available under applicable law to enforce the obligations to
which such Event of Default relates or (ii) Section 7.2, the
Agent may and, upon the written request of the Requisite
Lenders, shall, by written notice to the Borrower, declare to
be due and payable an amount equal to the Stated of Amount of
all Letters of Credit then outstanding, together with all other
amounts owing hereunder and the same shall forthwith become,
immediately due and payable, together with accrued interest
thereon. Without limiting any other remedies hereunder, upon
the occurrence and during the continuance of any Event of
Default, the Agent shall be entitled without notice or demand,
to draw, from time to time, under the Citibank LOC an amount
equal to all amounts then due and unpaid hereunder (such
amounts to be determined as set forth in clause (i) or clause
(ii) above, as applicable); provided that the foregoing shall
not affect in any way the obligations of the Lenders to
purchase from the Issuer Bank participations in the
unreimbursed amount of any drawings under any Letters of Credit
as provided in Section 5.3 hereof.
Section 8 AGENT
8.1 Appointment
BTCo is hereby appointed the Agent hereunder and each Lender
hereby authorizes the Agent to act hereunder and under the
other instruments and agreements referred to herein (including,
without limitation, the Citibank LOC) as its agent hereunder
and thereunder. BTCo agrees to act as such upon the express
conditions contained in this Section 8. The provisions of this
Section 8 are solely for the benefit of the Agent, and neither
the Borrower nor any other Person shall have any rights as a
third party beneficiary of any of the provisions hereof. In
performing its functions and duties under this Agreement, the
Agent shall act solely as agent of the Lenders and does not
assume and shall not be deemed to have assumed, except as
specified in the immediately preceding sentence, any obligation
towards or relationship of agency or trust with or for the
Borrower or any other Person.
8.2 Powers; General Immunity
A. Duties Specified. Each Lender irrevocably authorizes the
Agent to take such action on such Lender's behalf and to
exercise such powers hereunder and under the other instruments
and agreements referred to herein (including, without
limitation, the other Loan Documents) as are specifically
delegated to the Agent by the terms hereof and thereof,
together with such powers as are reasonably incidental thereto.
The Agent shall have only those duties and responsibilities
which are expressly specified in this Agreement and it may
perform such duties by or through its agents or employees. The
duties of the Agent shall be mechanical and administrative in
nature; and the Agent shall not have by reason of this
Agreement a fiduciary or trust relationship in respect of any
Lender; and nothing in this Agreement, expressed or implied, is
intended to or shall be so construed as to impose upon the
Agent any obligations in respect of this Agreement or the other
instruments and agreements referred to herein except as
expressly set forth herein or therein.
B. No Responsibility for Certain Matters. The Agent shall
not be responsible to any Lender for the execution,
effectiveness, genuineness, validity, enforceability,
collectibility or sufficiency of this Agreement or any Letter
of Credit, or for any representations, warranties, recitals or
statements made herein or therein or made in any written or
oral statement or in any financial or other statements,
instruments, reports, certificates or any other documents in
connection herewith or therewith furnished or made by the Agent
to any Lender or by or on behalf of the Borrower to the Agent
or any Lender, or be required to ascertain or inquire as to the
performance or observance of any of the terms, conditions,
provisions, covenants or agreements contained herein or
therein, or of the existence or possible existence of any Event
of Default or Potential Event of Default.
C. Exculpatory Provisions. Neither the Agent nor any of its
officers, directors, employees or agents shall be responsible
or liable to any Lender for any action taken or omitted
hereunder or under the Citibank LOC or in connection herewith
or therewith unless caused by its or their gross negligence or
willful misconduct. If the Agent shall request instructions
from any Lender with respect to any act or action (including
the failure to take an action) in connection with this
Agreement or the Citibank LOC, the Agent shall be entitled to
refrain from such act or taking such action unless and until
the Agent shall have received instructions from the Requisite
Lenders. Without prejudice to the generality of the foregoing,
(i) the Agent shall be entitled to rely, and shall be fully
protected in relying, upon any communication, instrument or
document believed by it to be genuine and correct and to have
been signed or sent by the proper person or persons, and shall
be entitled to rely and shall be protected in relying on
opinions and judgments of attorneys (who may be attorneys for
the Borrower), accountants, experts and other professional
advisors selected by it; and (ii) no Lender shall have any
right of action whatsoever against the Agent as a result of the
Agent acting or (where so instructed) refraining from acting
under this Agreement or the other instruments and agreements
referred to herein or therein in accordance with the
instructions of the Requisite Lenders. The Agent shall be
entitled to refrain from exercising any power, discretion or
authority vested in it under this Agreement or the other
instruments and agreements referred to herein unless and until
it has obtained the instructions of the Requisite Lenders.
D. Agent Entitled To Act as Lender. The agency hereby
created shall in no way impair or affect any of the rights and
powers of, or impose any duties or obligations upon, the Agent
in its individual capacity as a Lender hereunder. The term
"Lender" or "Lenders" or any similar term shall, unless the
context clearly otherwise indicates, include the Agent in its
individual capacity. The Agent and its Affiliates may accept
deposits from, lend money to and generally engage in any kind
of banking, trust, financial advisory or other business with
the Borrower or any Affiliate or Subsidiary thereof as if it
were not performing the duties specified herein, and may accept
fees and other consideration from the Borrower or any Affiliate
or Subsidiary thereof for services in connection with this
Agreement and otherwise without having to account for the same
to the Lenders.
8.3 Right to Indemnity
Each Lender severally agrees to indemnify the Agent in
accordance with its Pro Rata Share to the extent the Agent
shall not have been reimbursed by the Borrower, for and against
any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses
(including, without limitation, counsel fees and disbursements)
or disbursements of any kind or nature whatsoever which may be
imposed on, incurred by or asserted against the Agent in
performing its duties hereunder or in any way relating to or
arising out of this Agreement or the agreements or instruments
referred to herein; provided that no Lender shall be liable for
any portion of such liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or
disbursements resulting from the Agent's gross negligence or
willful misconduct. If any indemnity furnished to the Agent
for any purpose shall, in the opinion of the Agent, be
insufficient or become impaired, the Agent may call for
additional indemnity and cease, or not commence, to do the acts
indemnified against until such additional indemnity is
furnished.
8.4 Resignation by the Agent
(a) The Agent may resign from the performance of all its
functions and duties hereunder at any time by giving 30 days'
prior written notice to the Borrower and the Lenders. Such
resignation shall take effect upon the acceptance by a
successor Agent of appointment pursuant to clauses (b) and (c)
below or as otherwise provided below.
(b) Upon any such notice of resignation, the Requisite Lenders
shall appoint a successor Agent who shall be satisfactory to
the Borrower and shall be an incorporated bank or trust company
with a combined surplus and undivided capital of at least $500
million.
(c) If a successor Agent shall not have been so appointed
within said 30-day period, the resigning Agent, with the
consent of the Borrower, shall then appoint a successor Agent
who shall serve as the Agent until such time, if any, as the
Requisite Lenders, with the consent of the Borrower, appoint a
successor Agent as provided above.
(d) If no successor Agent has been appointed pursuant to
clause (b) or (c) by the 40th day after the date such notice of
resignation was given by the resigning Agent, the Agent's
resignation shall become effective and the Requisite Lenders
shall thereafter perform all the duties of the Agent hereunder
and shall be entitled to all the fees otherwise payable
thereafter to the Agent until such time, if any, as the
Requisite Lenders, with the consent of the Borrower, appoint a
successor Agent as provided above.
8.5 Successor Agent
The Agent may resign at any time as provided in Section 8.4
hereof, and the Agent may be removed at any time with or
without cause by an instrument or concurrent instruments in
writing delivered to the Borrower and the Agent and signed by
the Requisite Lenders. Upon any such notice of resignation or
any such removal, the Requisite Lenders shall have the right,
upon five days' notice to the Borrowers, to appoint a successor
Agent. Upon the acceptance of any appointment as the Agent
hereunder by a successor Agent, that successor Agent shall
thereupon succeed to and become vested with all the rights,
powers, privileges and duties of the retiring or removed Agent,
and the retiring or removed Agent shall be discharged from its
duties and obligations as the Agent under this Agreement.
After any retiring or removed Agent's resignation or removal
hereunder as the Agent the provisions of this Section 8 shall
inure to its benefit as to any actions taken or omitted to be
taken by it while it was the Agent under this Agreement.
Section 9 MISCELLANEOUS
9.1 Benefit of Agreement
A. This Agreement shall be binding upon and inure to the
benefit of and be enforceable by the respective successors and
assigns of the parties hereto, provided that the Borrower may
not assign or transfer any of its right or interest hereunder
without the prior written consent of 100% of the Lenders.
B. Any Lender may sell participations in all or any part of
any Letters of Credit in which it has purchased (or is deemed
to have purchased) a participation interest, or any other
interest herein to another bank or other entity, in which event
(a) such Lender shall remain a "Lender" for all purposes
hereunder and the participant shall not constitute a "Lender"
hereunder (except if, and to the extent that, such transferee
was a Lender on the date hereof) and (b) no Lender shall
transfer, grant or assign any participation under which the
participant shall have rights to approve any amendment or
waiver of this Agreement except, with respect to amendments to
this Agreement, to the extent such amendment or waiver would
(i) extend the required maturity date or expiration date of any
Letter of Credit in which the participant is participating,
(ii) change the Stated Amounts of or any amounts payable in
respect of, or fees payable under, any Letter of Credit in
which such participant is participating, or (iii) affect the
matters requiring the vote of the Requisite Lenders or all the
Lenders; provided that such right to approve such amendment or
waiver may only be granted on a pro rata basis to the extent of
such participation and only with respect to the Letter of
Credit participations in which such participant is
participating. The participant shall not have any other rights
under this Agreement or any Letter of Credit or any other
document delivered in connection herewith (the participant's
rights against such Lender in respect of such participation to
be those set forth in the agreement executed by such Lender in
favor of the participant relating thereto) and all amounts
payable by the Borrower hereunder shall be determined as if
such Lender had not sold such participation.
C. Any Lender may assign its rights and delegate its
obligations under this Agreement, (i) without the consent of
any other Person, to any other Lender or lender under the Other
Restated Credit Agreement or any Affiliate thereof or to any
one or more additional banks or financial institutions whose
long-term indebtedness has an Acceptable Rating, pursuant to a
transfer supplement substantially in the form of Exhibit I to
the Prior Credit Agreement executed by such assignee, such
transferor Lender and the Agent, and (ii) with the consent of
the Borrower and the Agent (which consents shall not be
unreasonably withheld), to any other bank or financial
institution whose long-term indebtedness does not have an
Acceptable Rating, provided that (a) the amount of such
Lender's Letter of Credit Exposure so assigned is not less than
the lesser of (x) $2,000,000 and (y) the amount of such
Lender's Letter of Credit Exposure then in effect, (b) such
Lender gives written notice of such assignment to each of the
Agent, the Issuer Bank and the Borrower at least five Business
Days in advance of such assignment, (c) the assignee agrees to
assume all the obligations of the assignor related to that
portion of the assignor's Letter of Credit Exposure being
assigned and (d) the assignor and/or the assignee remit to the
Agent, for its account, an administrative fee of $3,000 in
respect of such assignment, payable in U.S. Dollars in
immediately available funds. Any permitted assignee under
clause (i) or (ii) of the immediately preceding sentence is
referred to as an "Eligible Assignee." Upon an effective
assignment hereunder and upon notice thereof by such Lender to
the Borrower, the assignee shall have, to the extent of such
assignment (unless otherwise provided thereby), the same rights
and benefits as it would have if it were Lender hereunder and
the assigning Lender shall, to the extent of such assignment
and assumption, be relieved of its obligations hereunder to the
extent of such assignment and assumption. Each assignee
hereunder, if not already a Lender, agrees to provide the
documents referred to in Section 4.4(iii) hereof, if required,
promptly after it becomes a Lender hereunder.
Nothing in this Section 9.1 shall prevent or prohibit any
Lender from pledging its rights under this Agreement and/or its
Letters of Credit hereunder to a Federal Reserve Bank in
support of borrowings made by such Lender from such Federal
Reserve Bank, provided that no such pledge shall at any time
release such Lender from any of its obligations hereunder.
D. Any Lender may furnish any information concerning the
Borrower in possession of such Lender from time to time to
Affiliates of such Lender and to assignees and participants
hereunder (including prospective assignees and participants);
provided, however, that the furnishing of such information (and
the nature, manner and extent thereof) by such Lender to its
Affiliates and such assignees and participants shall be
governed by the relevant agreement, assignment or participation
agreement relating to such arrangement, assignment or
participation, as the case may be.
9.2 Expenses
Whether or not the transactions contemplated hereby shall be
consummated, the Borrower agrees to promptly pay (i) all the
actual and reasonable out-of-pocket costs and expenses of the
Agent in connection with the negotiation, preparation and
execution of this Agreement, and all related documents, whether
or not referred to herein; (ii) the reasonable fees, expenses
and disbursements of Cahill Gordon & Reindel, counsel to the
Agent and the Lenders, in connection with the negotiation,
preparation, execution and administration of this Agreement,
and all related documents, whether or not referred to herein,
and any amendments and waivers hereto or thereto or consents
with respect hereto or thereto; and (iii) all costs and
expenses (including reasonable attorneys' fees of separate
counsel for each Lender, expenses and disbursements, reasonable
allocated costs of internal counsel, costs of settlement and
the expenses and disbursements and reasonable fees of any other
experts or advisors) incurred by the Lenders in enforcing any
obligations of or in collecting any payments due from the
Borrower hereunder by reason of any Event of Default or in
connection with any refinancing or restructuring of the credit
arrangements provided under this Agreement in the nature of a
"work-out" or of any insolvency or bankruptcy proceedings or
otherwise.
9.3 Indemnity
In addition to the payment of expenses pursuant to Section 9.2
hereof, but without duplication of any other amount payable
hereunder, whether or not the transactions contemplated hereby
shall be consummated, the Borrower agrees to indemnify, pay and
hold the Agent and each Lender and the officers, directors,
employees, agents, advisors and Affiliates of each of them
(collectively called the "Indemnitees") harmless from and
against any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, claims, costs, expenses
and disbursements of any kind or nature whatsoever (including,
without limitation, the reasonable fees, expenses and
disbursements of counsel for such Indemnitees in connection
with any investigative, administrative or judicial proceeding
commenced or threatened, whether or not such Indemnitee shall
be designated a party thereto), which may be imposed on,
incurred by, or asserted against that Indemnitee, in any manner
relating to or arising out of this Agreement or the use or
intended use of the Letters of Credit (the "indemnified
liabilities"); provided that the Borrower shall have no
obligation to an Indemnitee hereunder to the extent it is
finally judicially determined that such indemnified liabilities
arose solely from the gross negligence or willful misconduct of
that Indemnitee. The Borrower shall have a right of recoupment
against any amounts paid by the Borrower to any Indemnitee in
respect of the foregoing to the extent that any such payment
resulted from the gross negligence or willful misconduct of
such Indemnitee as finally judicially determined. To the
extent that the undertaking to indemnify, pay and hold harmless
set forth in the preceding sentence may be unenforceable
because it is violative of any law or public policy or
otherwise, the Borrower shall contribute the maximum portion
which it is permitted to pay and satisfy under applicable law
to the payment and satisfaction of all indemnified liabilities
incurred by the Indemnitees or any of them.
The foregoing indemnity set forth in this Section 9.3 shall
include, without limitation, indemnification by the Borrower to
each Indemnitee for any and all expenses and costs (including,
without limitation, remedial, removal, response, abatement,
clean-up, investigative, closure and monitoring costs), losses,
claims (including claims for contribution or indemnity and
including the costs of investigating or defending any claim and
whether or not such claim is ultimately defeated, and whether
the conditions creating such claim arose before, during or
after the Borrower's ownership, operation, possession or
control of its business, property or facilities, or before, on
or after the date hereof, and including any amounts paid
incidental to any compromise or settlement by the Indemnitees
or any Indemnitee to the holders of any such claim), lawsuits,
liabilities, obligations, actions, judgments, disbursements,
encumbrances, liens, damages (including, without limitation,
damages for contamination or destruction of natural resources),
penalties and fines of any nature (including, without
limitation, in all cases the reasonable fees and disbursements
of counsel in connection therewith) incurred, suffered or
sustained by that Indemnitee based upon, arising under or
relating to Environmental Laws, based on, arising out of or
relating to, in whole or in part, the exercise and/or
enforcement of any rights or remedies by any Indemnitee under
this Agreement or any related documents.
9.4 Set-Off
In addition to any rights now or hereafter granted under
applicable law and not by way of limitation of any such rights,
upon the occurrence of any Blocking Event, each Lender is
hereby authorized by the Borrower at any time and from time to
time, without prior notice to the Borrower or to any other
Person, and without presentment, demand or protest, any such
being hereby expressly waived, to set off and to appropriate
and to apply any and all deposits (general or special,
including, but not limited to, Indebtedness evidenced by
certificates of deposit, whether matured or unmatured but not
including trust accounts) and any other Indebtedness at any
time held or owing by that Lender (including, without
limitation, any branches or agencies thereof, wherever located)
to or for the credit or the account of the Borrower against and
on account of the obligations and liabilities of the Borrower
to that Lender under this Agreement, including, but not limited
to, all claims of any nature or description arising out of or
connected with this Agreement, the Letters of Credit or any
related document, irrespective of whether or not (a) that
Lender shall have made any demand hereunder or (b) that Lender
shall have declared any obligation of the Borrower with respect
to the Letters of Credit and other amounts due hereunder to be
due and payable as permitted by Section 7 hereof and although
said obligations and liabilities, or any of them, may be
contingent or unmatured. After any such set-off, the relevant
Lender shall notify the Borrower in writing with respect
thereto, provided that the failure to provide such notice shall
not in any way affect the validity or enforceability of any
such set off. The Borrower expressly consents to the
foregoing.
9.5 Ratable Sharing
Subject to the last sentence of this Section 9.5, each Lender
and each subsequent holder by purchase of a participation
interest in all or any part of any Letter of Credit, agree
among themselves that except as otherwise expressly provided in
this Agreement, (i) with respect to all amounts received by
them which are applicable to the payment of amounts payable in
respect of Letters of Credit, equitable adjustment will be made
so that, in effect, all such amounts will be shared among the
Lenders proportionately to their respective Pro Rata Shares,
whether received by voluntary payment, by the exercise of the
right of set-off or banker's lien, by counterclaim or cross
action or by the enforcement of any other rights or remedies
hereunder, (ii) if any of them shall exercise any right of
counterclaim, set-off, banker's lien or similar right with
respect to amounts owed by the Borrower hereunder or in respect
of the Letters of Credit, such Lender or holder, as the case
may be, shall apportion the amount recovered as a result of the
exercise of such right in accordance with each Lender's
respective Pro Rata Share, and (iii) if any of them shall
thereby through the exercise of any right of counterclaim, set-
off, banker's lien or otherwise or as adequate protection of a
deposit treated as cash collateral under the Bankruptcy Code,
receive the amount of any participation in any Letter of Credit
or any amount payable hereunder, as the case may be, which is
greater than the proportion received by any other holder, the
amount of such participation therein or any other amount
payable hereunder, that Lender or that holder receiving such
proportionately greater payments shall (y) notify each other
Lender and the Agent of such receipt and (z) purchase
participations (which it shall be deemed to have done
simultaneously upon the receipt of such payment) held by the
other holders so that all such reimbursement of amounts drawn
or payable with respect to Letters of Credit shall be
proportionate to their respective Pro Rata Shares, provided
that if all or part of such proportionately greater payment
received by such purchasing holder is thereafter recovered from
such holder, those purchases shall be rescinded and the
purchase prices paid for such participations shall be returned
to that holder to the extent of such recovery, but without
interest. The Borrower expressly consents to the foregoing
arrangement and agrees that any holder of a participation in
any Letter of Credit so purchased and any other subsequent
holder of a participation in any Letter of Credit otherwise
acquired may exercise any and all rights of banker's lien, set-
off or counterclaim with respect to any and all monies owing by
the Borrower to that holder as fully as if that holder were a
holder of such participation in any Letter of Credit in the
amount of the participation held by that holder.
9.6 Amendments and Waivers
No amendment, modification, termination or waiver of any
provision of this Agreement, or of the Letters of Credit or
consent to any departure by the Borrower therefrom shall in any
event be effective without the written concurrence of the
Borrower (other than a waiver) and the Requisite Lenders;
except that any amendment, modification, termination, waiver or
consent that has the effect of (i) extending the final
expiration date for the Letters of Credit, (ii) decreasing any
fees or other compensation, (iii) altering the voting
percentages or the pro rata mechanisms set forth herein or (iv)
increasing any Lender's Letter of Credit Exposure or increasing
the Total Letter of Credit Exposure (including amendments,
modifications, terminations, waivers or consents to any
definitions (or adding any new definitions) that would directly
or indirectly affect any of the foregoing items set forth in
clauses (i) through (iv)) shall be effective only if evidenced
by a writing signed by or on behalf of each Lender. No
amendment, modification, termination or waiver of any provision
of Section 8 hereof or any of the rights, duties, indemnities
or obligations of the Agent, as agent, shall be effective
without the written concurrence of the Agent. The Agent may,
but shall have no obligation to, with the concurrence of any
Lender, execute amendments, modifications, waivers or consents
on behalf of that Lender. Any waiver or consent shall be
effective only in the specific instance and for the specific
purpose for which it was given. No notice to or demand on the
Borrower in any case shall entitle the Borrower to any further
notice or demand in similar or other circumstances. Any
amendment, modification, termination, waiver or consent
effected in accordance with this Section 9.6 shall be binding
upon each Lender, each holder of the Letters of Credit, at the
time outstanding, each future holder of the Letters of Credit
and, if signed by the Borrower, on the Borrower.
9.7 Notices
Unless otherwise provided herein, any notice or other
communication herein required or permitted to be given shall be
in writing and may be personally served, telecopied, telexed or
sent by United States mail and shall be deemed to have been
given when delivered in person, upon receipt of telecopy or
telex or four Business Days after depositing it in the United
States mail, registered or certified, with postage prepaid and
properly addressed; provided that notices to the Agent or any
Lender shall not be effective until received by the Agent or
such Lender. For the purposes hereof, the addresses of the
parties hereto (until notice of a change thereof is delivered
as provided in this Section 9.7) shall be set forth under each
party's name on the signature pages hereto.
9.8 Survival of Warranties and Certain Agreements
A. All agreements made herein shall survive the execution and
delivery of this Agreement. This Agreement together with that
certain letter agreement, dated August 5, 1994 from Bankers
Trust Company, as a Lender, Issuer Bank and Agent, and the
Lenders listed herein to Citibank, N.A. (the "Letter
Agreement") are intended to amend and restate the Prior Credit
Agreement and, except to the extent set forth in the Letter
Agreement, the Prior Credit Agreement shall be of no further
force and effect.
B. Notwithstanding anything in this Agreement or implied by
law to the contrary, the agreements of the Borrower set forth
in Sections 9.2 and 9.3 hereof and the agreement of the Lenders
set forth in Section 9.5 hereof shall survive the cancellation
of all Letters of Credit and the termination of this Agreement.
9.9 Failure or Indulgence Not Waiver;
Remedies Cumulative
No failure or delay on the part of the Agent or any Lender or
the Issuer Bank in the exercise of any power, right or
privilege hereunder, under the Citibank LOC or under the
Letters of Credit shall impair such power, right or privilege
or be construed to be a waiver of any default or acquiescence
therein, nor shall any single or partial exercise of any such
power, right or privilege preclude other or further exercise
thereof or of any other right, power or privilege. All rights
and remedies existing under this Agreement or the other
documents related hereto, including the Citibank LOC, are
cumulative to and not exclusive of any rights or remedies
otherwise available.
9.10 Severability
In case any provision in or obligation under this Agreement or
the Letters of Credit shall be invalid, illegal or
unenforceable in any jurisdiction, the validity, legality and
enforceability of the remaining provisions or obligations
thereof, or of such provision or obligation in any other
jurisdiction, shall not in any way be affected or impaired
thereby.
9.11 Obligations Several; Independent Nature of
Lenders' Rights
The obligation of each Lender hereunder is several, and no
Lender shall be responsible for the obligation or commitment of
any other Lender hereunder. Nothing contained in this
Agreement and no action taken by the Lenders pursuant hereto
shall be deemed to constitute the Lenders to be a partnership,
an association, a joint venture or any other kind of entity.
The amounts payable at any time hereunder to each Lender shall
be a separate and independent debt, each Lender shall be
entitled to protect and enforce its rights arising out of this
Agreement, and it shall not be necessary for any other Lender
to be joined as an additional party in any proceeding for such
purpose.
9.12 Headings
Section and subsection headings in this Agreement are included
herein for convenience of reference only and shall not
constitute a part of this Agreement for any other purpose or be
given any substantive effect.
9.13 APPLICABLE LAW; CONSENT TO JURISDICTION
AND SERVICE OF PROCESS
A. THIS AGREEMENT 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.
B. ALL JUDICIAL PROCEEDINGS BROUGHT AGAINST THE BORROWER WITH
RESPECT TO THIS AGREEMENT 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 THE
BORROWER ACCEPTS FOR ITSELF AND IN CONNECTION WITH ITS
PROPERTIES, GENERALLY AND UNCONDITIONALLY, THE NONEXCLUSIVE
JURISDICTION OF THE AFORESAID COURTS, AND IRREVOCABLY AGREES TO
BE BOUND BY ANY JUDGMENT RENDERED THEREBY IN CONNECTION WITH
THIS AGREEMENT. THE PARTIES HERETO HEREBY IRREVOCABLY WAIVE
TRIAL BY JURY, AND THE BORROWER HEREBY IRREVOCABLY WAIVES ANY
OBJECTION, INCLUDING, WITHOUT LIMITATION, ANY OBJECTION TO THE
LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON
CONVENIENS, WHICH IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING
OF ANY SUCH ACTION OR PROCEEDING IN SUCH RESPECTIVE
JURISDICTIONS.
9.14 Successors and Assigns
This Agreement shall be binding upon the parties hereto and
their respective successors and assigns and shall inure to the
benefit of the parties hereto and the successors and assigns of
the Lenders. The terms and provisions of this Agreement shall
inure to the benefit of any permitted assignee or transferee of
the Letters of Credit and in the event of such transfer or
assignment, the rights and privileges herein conferred upon the
Lenders shall automatically extend to and be vested in such
permitted transferee or assignee, all subject to the terms and
conditions hereof. The Borrower's rights or any interest
therein hereunder may not be assigned without the written
consent of all the Lenders. The Lenders' rights of assignment
are limited by and subject to Section 9.1 hereof.
9.15 Counterparts
This Agreement and any amendments, waivers, consents or
supplements 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 instrument.
9.16 Certain Information; Confidentiality
The Borrower shall provide to the Agent and each Lender, as and
when the same are provided to Citibank, N.A., copies of such
financial statements and reports and other information as the
Borrower is required to provide to Citibank, N.A. pursuant to
the credit agreement with Citibank, N.A. that is being executed
on or about the Effective Date. Each Lender and the Agent
agree to keep information obtained by it pursuant hereto
confidential and agree that it will only use such information
in connection with the transactions contemplated by this
Agreement and not disclose any of such information other than
(i) to such Lender's or the Agent's, as the case may be,
officers, employees, representatives, professional consultants
and agents who are advised of the confidential nature of such
information, (ii) to any other Lender, (iii) to the extent such
information presently is or hereafter becomes available to such
Lender or the Agent, as the case may be, on a non-confidential
basis from a source other than the Borrower, (iv) to the extent
disclosure is required by law, regulation or judicial order
(which requirement or order shall be promptly notified to the
Borrower) or requested or required by bank regulators or
auditors or the National Association of Insurance Commissioners
or any similar organization, (v) to assignees or participants
or potential assignees or participants of such Lender hereunder
or under the Other Restated Credit Agreement to which such
Lender is a party who agree to be bound by the provisions of
this Section 9.16, (vi) any internationally recognized rating
agency in connection with the Borrower's rating with such
agency, and (vii) any other Person to which such delivery or
disclosure may be necessary or appropriate (a) in compliance
with any applicable law, rule, or regulation or order, (b) in
response to any subpoena or other legal process, (c) in
connection with any litigation to which any Lender is a party,
or (d) in order to protect or enforce such Lender's rights in
respect of any Obligations owed to it.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed as of the date first above
written.
IMO INDUSTRIES INC., the Borrower
By: /s/G.M. DOBSON
Name: G.M. Dobson
Title: Vice President & Treasurer
Notice of Information:
Imo Industries Inc.
1009 Lenox Drive
Building 4
Lawrenceville, New Jersey 08648
Attention: Thomas J. Bird
Telephone No.: (609) 896-7730
Telecopy No.: (609) 896-7366
BANKERS TRUST COMPANY, as a Lender, Issuer
Bank and Agent
By: /s/RICHARD SOLAR
Name: Richard Solar
Title: Managing Director
All Notices:
Bankers Trust Company
130 Liberty Street
New York, New York 10006
Attention: Commercial Loan Division
Telephone No.: (212) 250-4169
Telecopy No.: (212) 250-7351
Payment Office:
Bankers Trust Company
130 Liberty Street
New York, New York 10006
Attention: Richard Solar
Telephone No.: (212) 454-3440
Telecopy No.: (212) 454-2605
Letter of Credit Information:
Bankers Trust Company
130 Liberty Street
New York, New York 10006
Attention: Richard Solar
Telephone No.: (212) 454-3440
Telecopy No.: (212) 454-2605
CHEMICAL BANK, as a Lender
By: /s/WILLIAM CAGGIANO
Name: William Caggiano
Title: Managing Director
All Notices:
Chemical Bank
270 Park Avenue
New York, New York 10017
Attention: William Caggiano
Telephone No.: (212) 270-2070
Telecopy No.: (212) 972-0009
Payment Office:
Chemical Bank
270 Park Avenue, 10th Floor
New York, New York 10017
Attention: Andrew Statsiw
Telephone No.: (212) 270-3896
Telecopy No.: (212) 682-8937
Letter of Credit Information:
Chemical Bank
270 Park Avenue
New York, New York 10017
Attention: William Caggiano
Telephone No.: (212) 270-2070
Telecopy No.: (212) 972-0009
CIBC, INC., as a Lender
By: /s/TIMOTHY E. DOYLE
Name: Timothy E. Doyle
Title: Authorized Signatory
All Notices:
CIBC, Inc.
Two Paces West
2727 Paces Ferry Road, Suite 1200
Atlanta, GA 30339
Attention: Kim Swink
Telephone No.: (404) 319-4829
Telecopy No.: (404) 319-4950
Payment Office:
CIBC, Inc.
Two Paces West
2727 Paces Ferry Road, Suite 1200
Atlanta, GA 30339
Attention: Kim Swink
Telephone No.: (404) 319-4829
Telecopy No.: (404) 319-4950
Letter of Credit Information:
CIBC, Inc.
Two Paces West
2727 Paces Ferry Road, Suite 1200
Attention: Kim Swink
Telephone No.: (404) 319-4829
Telecopy No.: (404) 319-4950
BARCLAYS BANK PLC, as a Lender
By: /s/JOHN C. LIVINGSTON
Name: John C. Livingston
Title: Vice President
All Notices:
Barclays Bank PLC
75 Wall Street
New York, New York 10265
Attention: John C. Livingston
Telephone No.: (212) 412-5104
Telecopy No.: (212) 412-5661
Payment Office:
Barclays Bank PLC
75 Wall Street
New York, New York 10265
Attention: John C. Livingston
Niko Mandaira
Telephone No.: (212) 412-3370
Telecopy No.: (212) 412-5661
(212) 412-5015
Letter of Credit Information:
Barclays Bank PLC
75 Wall Street
New York, New York 10265
Attention: John C. Livingston
Niko Mandaira
Telephone No.: (212) 412-3370
Telecopy No.: (212) 412-5661
(212) 412-5015
NATIONAL CITY BANK, as a Lender
By: /s/DAVID A. BURNS
Name: David A. Burns
Title: Assistant Vice President
All Notices:
National City Bank
1900 East 9th Street
Locator #2102
Cleveland, OH 44114-3484
Attention: David A. Burns
Telephone No.: (216) 575-3285
Telecopy No.: (216) 575-9396
Payment Office:
National City Bank, C&C Loans
1900 East 9th Street
Locator #3032
Cleveland, OH 44114-3484
Attention: Wendy Pollarine
Telephone No.: (216) 575-2156
Telecopy No.: (216) 575-3207
Letter of Credit Information:
National City Bank
1900 East 9th Street
Cleveland, OH 44114-3484
Attention: Wendy Pollarine
Telephone No.: (216) 575-2156
Telecopy No.: (216) 575-3207
ABN AMRO BANK N.V., NEW YORK BRANCH,
as a Lender
By: /s/PARKER H. DOUGLAS
Name: Parker H. Douglas
Title: Group Vice President
By: /s/EISSO VANDER MEULEN
Name: Eisso Vander Meulen
Title: Credit Officer
All Notices:
ABN AMRO Bank N.V., New York Branch
500 Park Avenue - 3rd Floor
New York, New York 10022
Attention: Parker H. Douglas
Telephone No.: (212) 446-4144
Telecopy No.: (212) 319-4339
Payment Office:
ABN AMRO Bank N.V., New York Branch
500 Park Avenue -3rd Floor
New York, New York 10022
Attention: Parker H. Douglas
Telephone No.: (212) 446-4144
Telecopy No.: (212) 319-4339
Letter of Credit Information:
ABN AMRO Bank N.V., New York Branch
500 Park Avenue - 4th Floor
New York, New York 10022
Attention: Anthony Zingalli
Telephone No.: (212) 446-4112
Telecopy No.: (212) 759-8916
COMMERZBANK AG, NEW YORK BRANCH, as a
Lender
By: /s/JUERGEN BOYSEN
Name: Juergen Boysen
Title: Senior Vice President
By: /s/MICHAEL D. HINTZ
Name: Michael D. Hintz
Title: Vice President
All Notices:
Commerzbank AG, New York Branch
2 World Financial Center
New York, New York 10281
Attention: Johan Sorensson
Telephone No.: (212) 266-7309
Telecopy No.: (212) 266-7235
Payment Office:
Commerzbank AG, New York Branch
2 World Financial Center
New York, New York 10281
Attention: Helma Saitta
Telephone No.: (212) 266-7317
Telecopy No.: (212) 266-7235
Letter of Credit Information:
Commerzbank AG, New York Branch
2 World Financial Center
New York, New York 10281
Attention: Jochen Pausch
Telephone No.: (212) 266-7255
Telecopy No.: (212) 266-7235
ISTITUTO BANCARIO SAN PAOLO
DI TORINO S.p.A., as a Lender
By: /s/WILLIAM J. DEANGELO
Name: William J. DeAngelo
Title: First Vice President
All Notices:
Istituto Bancario San Paolo
di Torino S.p.A.
245 Park Avenue - 35th Floor
New York, New York 10167
Attention: Luca Sacchi
Telephone No.: (212) 692-3130
Telecopy No.: (212) 599-5303
Payment Office:
Istituto Bancario San Paolo
di Torino S.p.A.
245 Park Avenue - 35th Floor
New York, New York 10167
Attention: Luca Sacchi
Telephone No.: (212) 692-3130
Telecopy No.: (212) 599-5303
Letter of Credit Information:
Istituto Bancario San Paolo
di Torino S.p.A.
245 Park Avenue - 35th Floor
New York, New York 10167
Attention: Luca Sacchi
Telephone No.: (212) 692-3130
Telecopy No.: (212) 599-5303
THE PRUDENTIAL INSURANCE
COMPANY OF AMERICA, as a Lender
By: /s/ROBERT E. DAVIS
Name: David E. Davis
Title: Vice President
All Notices:
Prudential Insurance Company
of America
4 Gateway Center, 6th Floor
Newark, NJ 07102
Attention: Chairman of Prudential
Specialized Finance Group
Payment Office:
Prudential Insurance Company
of America
4 Gateway Center, 6th Floor
Newark, NJ 07102
Attention: Manager of
Investment, Information
and Accounting Services
Telephone No.: (201) 802-7500
Letter of Credit Information:
Prudential Insurance Company
of America
4 Gateway Center, 6th Floor
Newark, NJ 07102
Attention: Manager of
Investment, Information
and Accounting Services
Telephone No.: (201) 802-7500
Annex I
Pro Rata Shares
Lender Pro Rata Share
Bankers Trust 12.116076928080%
Company
Chemical Bank 6.923472530332%
Barclays Bank 6.923472530332%
PLC
Canadian 3.461736265166%
Imperial Bank
of Commerce
National City 5.192604397749%
Bank
ABN Amro Bank 8.246335777959%
N.V., New
York Branch
Commerzbank AG, 3.321877998278%
New York
Branch
Istituto 0.664375599656%
Bancario San
Paolo Di
Torino S.p.A.,
New York
Limited Branch
The Prudential 53.150047972449%
Insurance
Company of
America
LETTERS OF CREDIT
(NEW CREDIT AGREEMENT)
L/C NO. AMOUNT EXPIRY DATE
S08921 $92,500.00 03-Jan-95
S09233 $3,013,698.40 22-May-95
S09234 $1,440,910.00 22-May-95
S09235 $1,600,000.00 22-May-95
S09237 $800,000.00 22-May-95
S09275 $176,490.20 30-Jun-95
S09281 $3,600,000.00 26-May-95
S09282 $49,173.90 31-Oct-94
S09374 $8,637.10 17-Oct-94
S09414 $100,000.00 26-Jul-95
S09428 $440,000.00 31-Mar-95
S09434 $150,267.00 31-Mar-95
S09449 $11,500.00 31-Mar-95
S09453 $1,700,000.00 01-Sep-95
S09469 $69,000.00 31-Jul-95
S09477 $10,960.00 15-Sep-95
S09546 $6,467.80 20-Jan-95
S09612 $8,804.00 28-Feb-95
S09639 $200,000.00 21-Nov-94
S09652 $829,705.00 25-Nov-94
S09672 $10,262.80 17-Jan-95
S09702 $6,330.00 15-Mar-96
S09720 $496,650.00 17-Jan-95
S09731 $7,000.00 30-Sep-94
S09737 $1,118,646.05 31-Jan-95
S09759 $15,010.00 31-Oct-94
S09757 $5,509.00 16-Sep-94
S09730 $33,500.00 02-Jan-96
S09758 $17,510.00 31-Oct-94
S09768 $10,240.00 31-Oct-94
S09769 $5,980.00 30-Aug-94
S09864 $67,500.00 14-Apr-95
S09863 $67,500.00 14-Apr-95
S09870 $398,750.00 02-Jan-96
S09871 $797,500.00 02-Oct-95
S09908 $380,000.00 17-Jan-95
S09927 $55,000.00 15-Feb-96
S09944 $1,993.30 31-Aug-95
S09946 $89,550.00 25-Oct-94
S09877 $310,632.00 15-Feb-96
S09995 $41,849.00 15-Feb-96
S09996 $78,000.00 15-Feb-96
S09997 $251,000.00 31-Oct-94
S10013 $11,031.85 17-Jul-95
S10039 $12,586.00 17-Jul-95
S10079 $8,797.30 18-Sep-95
S10082 $797,500.00 31-Oct-95
TOTAL O/S $19,402,940.70
CONSENT, AMENDMENT NO. 1 AND AGREEMENT
CONSENT, AMENDMENT NO. 1 AND AGREEMENT (this
"Agreement"), dated as of January 17, 1995, relating to the
Amended and Restated Credit Agreement and the Amended and
Restated Combined Restated Credit Agreement (each as
hereinafter defined, and collectively, the "Credit
Agreements"; capitalized terms used but not defined herein
have the meanings assigned to them in the applicable Credit
Agreement), among Imo Industries Inc., a Delaware
corporation (the "Borrower"), each of the financial
institutions party to the Amended and Restated Credit
Agreement (together with their respective successors and
permitted assigns and transferees, the "Amended and Restated
Credit Agreement Lenders"), each of the financial
institutions party to the Amended and Restated Combined
Restated Credit Agreement (together with their respective
successors and permitted assigns and transferees, the
"Amended and Restated Combined Restated Credit Agreement
Lenders"), Bankers Trust Company, a New York banking
corporation ("BTCo"; together with the Amended and Restated
Credit Agreement Lenders and the Amended and Restated
Combined Restated Credit Agreement Lenders, the "Lenders"),
as Issuer Bank and as Agent under the Credit Agreements, and
Mannesmann Capital Corporation, a New York Corporation
("Mannesmann"), as assignee of certain Letters of Credit
under the Credit Agreements.
W I T N E S S E T H :
WHEREAS, the Borrower has entered into (i) the
Amended and Restated Credit Agreement, dated as of August
19, 1994 (the "Amended and Restated Credit Agreement"),
among the Borrower, each of the Amended and Restated Credit
Agreement Lenders and BTCo as Issuer Bank and as Agent and
(ii) the Amended and Restated Combined Restated Credit
Agreement, dated as of August 19, 1994 (the "Amended and
Restated Combined Restated Credit Agreement"), among the
Borrower, each of the Amended and Restated Combined Restated
Credit Agreement Lenders and BTCo as Issuer Bank and as
Agent; and
WHEREAS, pursuant to Sections 9.1 and 9.14 of
each of the Credit Agreements, the Borrower may not assign
or transfer any of its right or interest thereunder without
the prior written consent of 100% of the Lenders; and
WHEREAS, pursuant to Section 5.1(C)(i) of each
of the Credit Agreements, BTCo, as Issuer Bank on behalf of
the Lenders, has issued for the account of the Borrower and
its divisions and subsidiaries certain Letters of Credit,
which Letters of Credit are backed by two Citibank LOCs in
the event that any of the beneficiaries under the Letters of
Credit make a draw request thereunder; and
WHEREAS, pursuant to that certain Asset Purchase
Agreement, dated as of November 4, 1994 (as amended, amended
and restated, supplemented or otherwise modified from time
to time, the "Purchase Agreement"), among the Borrower, Imo
Industries International Inc. and Mannesmann, it is
contemplated that the Borrower and its affiliates will sell
to Mannesmann and its affiliates (i) certain assets,
properties and obligations of the Borrower's Delaval Turbine
Division and Turbo Care Division and (ii) the Borrower's 50%
partnership interest in Delaval-Stork V.O.F. relating to its
business of designing, manufacturing, distributing, selling
and servicing compression equipment, turbines, boiler feed
pumps and centrifugal pumps, parts and components therefor
and parts and services for the relevant aftermarkets
(collectively, the "Business"), including its interest as
account party in the Letters of Credit set forth on Schedule
1 hereto (the "Turbine L/Cs"); and
WHEREAS, the Borrower has requested that the
Lenders consent to the assignment of the account party
interest in the Turbine L/Cs to Mannesmann and permit
Westdeutsche Landesbank Girozentrale, New York Branch
("Westdeutsche") to issue (i) an irrevocable standy letter
of credit in the face amount of $1,735,847.60 in respect of
the Turbine L/Cs issued under the Amended and Restated
Credit Agreement and (ii) an irrevocable standby letter of
credit in the face amount of $3,407,503.68 in respect of the
Turbine L/Cs issued under the Amended and Restated Combined
Restated Credit Agreement (collectively, the "Westdeutsche
LOC's") to replace the coverage of the Citibank LOCs.
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 (i) consent to the assignment
of the account party interest of the Borrower and its
affiliates in the Turbine L/Cs to Mannesmann upon the
consummation of the sale of the Business to Mannesmann as
contemplated in the Purchase Agreement and (ii) consent to
the replacement of the Citibank LOCs with the Westdeutsche
LOCs with respect to the Turbine L/Cs, and the Lenders
authorize and direct BTCo as Agent and Issuer Bank to take
any and all actions and to execute and deliver all such
instruments and documents as it shall deem necessary or
desirable in connection therewith.
SECTION TWO - AMENDMENT
2.1 Amendment of Recitals
(a) The Recitals to each of the Credit Agreements are
hereby amended by deleting the word "and" at the end of the
fourth recital thereof and adding the words "and the
Westdeutsche LOC" immediately after the words "Citibank LOC"
in the last recital thereof.
(b) The Recitals to the Amended and Restated Credit
Agreement are hereby amended by adding the following recital
immediately before the last recital thereof:
WHEREAS, Wesdeutsche Landesbank Girozentrale,
New York Branch ("Westdeutsche") is issuing to the Issuer
Bank its irrevocable standby letter of credit in the face
amount of $1,735,847.60 (the "Westdeutsche LOC") in respect
of the Letters of Credit issued for the account of the
turbine division of the Borrower (the "Turbine L/Cs"); and
(c) The Recitals to the Amended and Restated Combined
Restated Credit Agreement are hereby amended by adding the
following recital immediately before the last recital
thereof:
WHEREAS, Wesdeutsche Landesbank Girozentrale,
New York Branch ("Westdeutsche") is issuing to the Issuer
Bank its irrevocable standby letter of credit in the face
amount of $3,407,503.68 (the "Westdeutsche LOC") in respect
of the Letters of Credit issued for the account of the
turbine division of the Borrower (the "Turbine L/Cs"); and
2.2 Amendment of Definitions
The definition of "Blocking Event" in each of the
Credit Agreements is hereby amended by adding the words "or
the Westdeutsche LOC, as applicable," immediately after the
words "Citibank LOC" in the first instance such words appear
and adding the words "or the Westdeutsche LOC, as
applicable" immediately after the words "Citibank LOC" in
the second instance such words appear.
2.3 Amendment of Section 4.3
Section 4.3 of each of the Credit Agreements is hereby
amended by adding the words "or the Westdeutsche LOC, as
applicable" immediately after the words "Citibank LOC" in
the first instance such words appear and adding the words
"or the Westdeutsche LOC" immediately after the words
"Citibank LOC" in every other instance such words appear.
2.4 Amendment of Section 4.5
Section 4.5(i) of each of the Credit Agreements is
hereby amended by adding the words "or the Westdeutsche LOC"
immediately after the words "Citibank LOC" and Section
4.5(iv) of each of the Credit Agreements is hereby amended
by adding the words "or the Westdeutsche LOC, as applicable"
immediately after the words "Citibank LOC".
2.5 Amendment of Section 4.6
Section 4.6 of each of the Credit Agreements is hereby
amended by adding the words "other than the Turbine L/Cs"
immediately after the words "Letters of Credit".
2.6 New Section Regarding Reduction Certificates
Each of the Credit Agreeements is hereby amended by
adding the following section:
4.7 Westdeutsche LOC Reduction Certificates
The Issuer Bank shall upon the Borrower's
request deliver from time to time reduction certificates in
respect of the Westdeutsche LOC; provided, however, that no
such reduction certificate shall cause the Stated Amount of
the Westdeutsche LOC to be less than an amount equal to 105%
of the Stated Amounts of all the Turbine L/Cs less the
amount then on deposit in the Cash Collateral Account.
2.7 Amendment of Section 5.2
Each of the Credit Agreements is hereby amended by
adding the words "or the Westdeutsche LOC, as applicable,"
immediately after the words "Citibank LOC".
2.8 Amendment of Section 5.3
Each of the Credit Agreements is hereby amended by
adding the words "or Westdeutsche, as applicable"
immediately after the words "Citibank, N.A.".
2.9 Amendments to Events of Default
(a) Each of the Credit Agreements is hereby amended by
(i) deleting the word "or" at the end of section 7.1, (ii)
deleting the heading to section 7.2 and replacing it with
the heading "Citibank LOC" and (iii) adding the following
section:
7.3 Westdeutsche LOC
Westdeutsche shall assert that the Westdeutsche
LOC is not a valid and binding obligation of Westdeutsche,
enforceable in accordance with its terms, the Westdeutsche
LOC shall not be promptly honored upon presentation by the
Agent of appropriate drawing documentation or Westdeutsche
shall become insolvent or otherwise unable to pay its debts
as they become due;
(b) Each of the Credit Agreements is hereby amended by
adding the words "or the Westdeutsche LOC, as applicable"
immediately after the words "Citibank LOC" in the paragraph
beginning with the word "THEN" immediately before Section 8.
2.10 Amendment of Section 8.1
Section 8.1 of each of the Credit Agreements is hereby
amended by adding the words "and the Westdeutsche LOC"
immediately after the words "Citibank LOC".
2.11 Amendment of Section 8.2(C)
Section 8.2(C) of each of the Credit Agreements is
hereby amended by adding the words "or the Westdeutsche LOC"
immediately after the words "Citibank LOC" in each instance
such words appear.
SECTION THREE - AGREEMENT
From and after the effective date hereof, (i)
Mannesmann shall assume and agrees to perform and be bound
by all of the rights and obligations of the Borrower under
(x) each of the Credit Agreements and (y) each of the
applications and agreements and notices of issuance, in each
case relating to the Letters of Credit which are Turbine
L/Cs and (ii) the obligations of the Borrower under (x) each
of the Credit Agreements and (y) each of the applications
and agreements and notices of issuance, in each case
relating to the Letters of Credit shall be effective only in
respect of Letters of Credit other than the Turbine L/Cs.
SECTION FOUR - EFFECTIVENESS; PAYMENT OF EXPENSES
(a) This Agreement shall become effective upon (i) the
execution and delivery hereof by the Borrower, BTCo, each of
the Lenders and Mannesmann, (ii) the delivery by
Westdeutsche to the Agent of the Westdeutsche LOCs and (iii)
the delivery by Mannesmann to the Agent of board resolutions
and an incumbency certificate authorizing the execution of
this Agreement, certified by the secretary or an assistant
secretary of Mannesmann.
(b) The Borrower agrees to pay all the reasonable and
actual out-of pocket costs and expenses of BTCo as Agent and
as Issuer Bank, relating to the negotiation, preparation and
execution of this Agreement and all related documents,
including, without limitation, the reasonable fees, expenses
and disbursements of counsel to the Agent and the Lenders.
SECTION FIVE - MISCELLANEOUS.
(a) This Agreement shall not constitute a consent or
waiver to or modification of any other provision, term or
condition of the Credit Agreements. Except as herein
expressly consented, the Credit Agreements 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 either of the Credit Agreements
shall mean such 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 Agreement 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 AGREEMENT 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 Agreement to be duly executed as of the date
first above written.
IMO INDUSTRIES INC.,
as Borrower
By: /s/THOMAS J. BIRD
Name: THOMAS J. BIRD
Title:EXECUTIVE VICE PRESIDENT
BANKERS TRUST COMPANY, as a
Lender, as Issuer Bank and
as Agent
By: /s/EDWARD G. BENEDICT
Name: EDWARD G. BENEDICT
Title: VICE PRESIDENT
CHEMICAL BANK, as a Lender
By: /s/WILLIAM J. CAGGIANO
Name: WILLIAM J. CAGGIANO
Title: MANAGING DIRECTOR
CIBC, INC., as a Lender
By: /s/TIMOTHY E. DOYLE
Name: TIMOTHY E. DOYLE
Title: VICE PRESIDENT
BARCLAYS BANK PLC, as a Lender
By: /s/JOHN C. LIVINGSTON
Name: JOHN C. LIVINGSTON
Title: VICE PRESIDENT
NATIONAL CITY BANK, as a Lender
By: /s/JAY C. HALL
Name: JAY C. HALL
Title: S.V.P.
ISTITUTO BANCARIO SAN PAOLO
DI TORINO S.p.A, as a Lender
By: /s/GERARD M. MCKENNA
Name: GERARD M. MCKENNA
Title: VICE PRESIDENT
COMMERZBANK AG, NEW YORK BRANCH
as a Lender
By: /s/JUERGEN BOYSEN
Name:JUERGEN BOYSEN
Title:SENIOR VICE PRESIDENT
By: /s/MICHAEL D. HINTZ
Name: MCHAEL D. HINTZ
Title: VICE PRESIDENT
ABN-AMRO BANK, N.V., NEW YORK
BRANCH, as a Lender
By: /s/PARKER H. DOUGLAS
Name: PARKER H. DOUGLAS
Title: GROUP VICE PRESIDENT
By: /s/E.J. MAHNE
Name: E.J. MAHNE
Title: S.V.P.
THE PRUDENTIAL INSURANCE COMPANY
OF AMERICA, as a Lender
By: /s/JOHN MULLMAN
Name: JOHN MULLMAN
Title: VICE PRESIDENT
MANNESMANN CAPITAL CORPORATION,
as Assignee
By: /s/JOSEPH E. INNAMORATI
Name: JOSEPH E. INNAMORATI
Title: VICE PRESIDENT
Schedule 1
TURBINE L/C's
L/C EXPIRY L/C CREDIT
NUMBER DATE BALANCE AGREEMENT
S-09908 01/17/95 380,000.00 New
S-09720 01/17/95 495,650.00 New
S-09546 01/20/95 6,467.80 New
S-05129 03/31/95 549,183.30 Combined
S-09434 03/31/95 150,267.00 New
S-05130 03/31/95 549,183.30 Combined
S-09863 04/14/95 67,500.00 New
S-09864 04/14/95 67,500.00 New
S-10013 07/16/95 11,031.85 New
S-08801 07/31/95 1,250,000.00 Combined
S-06223 09/16/95 415,464.00 Combined
S-06224 09/16/95 481,411.00 Combined
S-10079 09/18/95 8,797.30 New
S-09944 08/31/95 1,993.30 New
S-09730 01/02/96 33,500.00 New
S-09877 02/15/96 310,632.00 New
S-09995 02/15/96 41,849.00 New
S-09996 02/15/96 78,000.00 New
EXECUTION COPY
FIRST AMENDMENT TO
CREDIT AGREEMENT
First Amendment (this "Amendment") dated as of November
18, 1994 among Imo Industries Inc. (with its successors and
permitted assigns, the "Borrower") and the undersigned
Lenders (as defined below), to the Credit Agreement dated as
of August 5, 1994 (as the same may be amended, supplemented
or modified from time to time, the "Credit Agreement") among
the Borrower, Baird Corporation, Varo Inc., Warren Pumps
Inc., the institutions from time to time party thereto as
lenders (the "Lenders"), the institutions from time to time
party thereto as issuing banks (the "Issuing Banks"), and
Citibank, N.A., in its capacity as agent and collateral agent
for the Lenders and the Issuing Banks (in such capacity, the
"Agent").
W I T N E S S E T H:
WHEREAS, the parties hereto desire to amend the Credit
Agreement as hereinafter set forth;
NOW, THEREFORE, in consideration of the above premises,
the Borrower and the undersigned Lenders agree as follows:
SECTION 1. Defined Terms. Capitalized terms used
herein without definition shall have the meanings ascribed to
such terms in the Credit Agreement, or, if not defined in the
Credit Agreement, as defined in the List of Closing Documents
referred to below.
SECTION 2. Amendment of Exhibit F. The item in the
List of Closing Documents attached to the Credit Agreement
and made a part thereof as Exhibit F which calls for the
delivery of the German Pledge Agreement is, effective as of
the Amendment Effective Date, hereby amended by replacing the
reference to "90 days" therein with a reference to "180
days".
SECTION 3. Amendment of Section 1.01. The definition
of "EBITDA" in Section 1.01 of the Credit Agreement is,
effective as of the Amendment Effective Date, hereby amended
by inserting the following sentence at the end of such
definition:
For purposes of determining the Fixed Charge Coverage
Ratio and the Interest Coverage Ratio with respect to
any period, there shall be deducted in the calculation
of EBITDA, to the extent such items have not already
caused a decrease in Consolidated Net Income of the
Borrower and its Subsidiaries (other than Varo, Baird
and their respective Subsidiaries) for such period, the
aggregate amount of claims, liabilities, obligations,
losses, damages, penalties, actions, judgments, suits,
costs, expenses and disbursements of any kind or nature
whatsoever (other than any of the foregoing which are
being contested in good faith by appropriate
proceedings) which have been imposed on, incurred by
and/or asserted against the Borrower and/or any of its
Subsidiaries (other than Varo, Baird and their
respective Subsidiaries) (collectively, "Claims") during
such period in respect of (x) the Accommodation
Obligations referred to in Section 9.05(vi) and/or (y)
any indemnities given or made in connection with the
sale of any or all of the Baird Analytical Instruments
Division, the Delaval Condenser Division or the
Turbomachinery Businesses; provided, however, that, in
the case of (x) and (y), no such deduction shall be made
for any period unless and until the aggregate amount of
Claims during such period and any previous period
exceeds the aggregate amount of reserves taken by the
Borrower and/or its Subsidiaries in accordance with GAAP
in respect of such Accommodation Obligations and/or
indemnities prior to or during such period.
SECTION 4. Amendment of Section 9.02.
4.01 Section 9.02 of the Credit Agreement is, effective
as of the Amendment Effective Date, hereby amended (x) by
inserting the words "and/or its Subsidiaries, as applicable,"
immediately after the first appearance of "the Borrower" in
each of clauses (vii), (viii) and (ix) of such Section and
(y) by replacing the proviso to clause (ix) of such Section
with the following:
provided that no such sale shall be made unless the
Borrower shall receive Net Cash Proceeds of at least
$110,000,000 in respect of such sale; and
4.02 Section 9.02 of the Credit Agreement is, effective
as of the Amendment Effective Date, hereby further amended by
(x) deleting the word "and" after the end of clause (viii) of
such Section and (y) adding the following clause (x) at the
end of such Section:
(x) the Borrower may sell in a single transaction
the Borrower's Delaval Condenser Division, so long as
(x) the Borrower receives gross cash proceeds of at
least $700,000 in respect of such sale, (y) the Net Cash
Proceeds received by the Borrower in connection with
such sale are applied in accordance with Section
3.01(b)(iii) of this Agreement and (z) within 90 days of
the closing of such sale, the Borrower shall repay Term
Loans in an aggregate amount at least equal to the
aggregate face amount of Receivables held by the
Borrower's Delaval Condenser Division on the date of
such closing, such amount to be disclosed to the Agent
in writing (it being understood and agreed that (1) the
repayment referred to in the preceding clause (z) shall
be allocated and applied in the manner specified in the
third sentence of Section 3.01(b)(iii) of this
Agreement, and (2) subject to any applicable grace
period set forth in Section 11.01(a) of this Agreement,
the Borrower's failure to make any payment contemplated
by this proviso shall constitute an Event of Default).
SECTION 5. Amendment of Section 9.05. Section 9.05 of
the Credit Agreement is, effective as of the Amendment
Effective Date, hereby amended (x) by deleting the word "and"
at the end of clause (iv) of such Section, (y) by replacing
the period at the end of clause (v) of such Section with ";
and" and (z) by inserting the following at the end of such
Section:
(vi) Accommodation Obligations arising from and
after the Closing Date (as therein defined) under the
Asset Purchase Agreement dated as of October 14, 1994,
and amended as of November 11, 1994, by and among the
Borrower, Varo, Baird, Optic Electronic International,
Inc., and TPG Partners, L.P. and Varo Acquisition Corp.,
and under the TEJ Stock Purchase Agreement (as defined
in such Asset Purchase Agreement), without giving effect
to any further amendments, supplements, waivers or other
modifications of such agreements which are entered into
without the written consent of the Requisite Lenders
(other than any such amendments, supplements, waivers or
other modifications that do not materially increase such
Accommodation Obligations).
SECTION 6. Conditions Precedent to the Effectiveness of
this Amendment. This Amendment shall become effective as of
the date hereof on the date (the "Amendment Effective Date")
when the following conditions precedent have been satisfied
(unless waived by the Lenders):
6.01 The Agent shall have received a copy of this
Amendment duly executed by the Borrower and the Requisite
Lenders.
6.02 Each of the representations and warranties of the
Borrower and the Guarantors contained in the Credit Agreement
and in the other Loan Documents shall be true and correct on
and as of the Amendment Effective Date, except to the extent
that any such representation or warranty expressly relates to
a prior date, in which case, such representation and warranty
shall be true and correct as of such earlier date.
6.03 All corporate and other proceedings, and all
documents, instruments and other legal matters in connection
with the transactions contemplated by this Amendment, shall
be satisfactory in all respects in form and substance to the
Agent.
6.04 No Default or Event of Default shall have occurred
and be continuing on the Amendment Effective Date.
6.05 All fees and expenses payable on or prior to the
Amendment Effective Date shall have been paid to the Lenders,
the Issuing Banks and the Agent.
SECTION 7. Representations and Warranties. The
Borrower hereby represents and warrants to the Lenders, the
Issuing Banks and the Agent that (a) as of the date hereof no
Default or Event of Default under the Credit Agreement shall
have occurred and be continuing and (b) all of the
representations and warranties of the Borrower and the
Guarantors contained in the Credit Agreement and in any other
Loan Document continue to be true and correct as of the date
of execution hereof, as though made on and as of such date,
except to the extent that such representations or warranties
expressly relate to prior dates, in which case, such
representations and warranties shall be true and correct as
of such earlier dates.
SECTION 8. Reference to and Effect on the Loan
Documents.
8.01 Upon the effectiveness of this Amendment, on and
after the date hereof, each reference in the Credit Agreement
to "this Agreement", "hereunder", "hereof" or words of like
import, and each reference in the other Loan Documents to the
Credit Agreement, shall mean and be a reference to the Credit
Agreement as amended hereby.
8.02 Except as specifically amended above, all of the
terms of the Credit Agreement and all other Loan Documents
shall remain unchanged and in full force and effect.
8.03 The execution, delivery and effectiveness of this
Amendment shall not, except as expressly provided herein,
operate as a waiver of any right, power or remedy of any
Lender, any Issuing Bank or the Agent, nor constitute a
waiver of any provision of the Credit Agreement or any of the
other Loan Documents.
SECTION 9. Costs and Expenses. The Borrower agrees to
pay on demand in accordance with the terms of Section 14.02
of the Credit Agreement all costs and expenses in connection
with the preparation, reproduction, execution and delivery of
this Amendment, including the reasonable fees and out-of-
pocket expenses of Sidley & Austin, counsel for the Agent.
SECTION 10. Execution in Counterparts. This Amendment
may be executed and delivered 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 and all of which taken together shall constitute
one and the same original agreement.
SECTION 11. Governing Law. THIS AMENDMENT SHALL BE
INTERPRETED, AND THE RIGHTS AND LIABILITIES OF THE PARTIES
HERETO DETERMINED, IN ACCORDANCE WITH THE INTERNAL LAW OF THE
STATE OF NEW YORK.
IN WITNESS WHEREOF, this Amendment has been duly
executed on the date set forth above.
IMO INDUSTRIES INC.
By:/s/W. M. BROWN
Name: W. M. Brown
Title: Executive Vice President and
Chief Financial Officer
CITIBANK, N.A., as Agent and as
a Lender
By:/s/TIMOTHY L. FREEMAN
Name: Timothy L. Freeman
Title:Vice President
THE BANK OF NEW YORK COMMERCIAL
CORPORATION
By:/s/STEPHEN V. MANGIANTE
Name: Stephen V. Mangiante
Title: Assistant Vice President
GENERAL ELECTRIC CAPITAL
CORPORATION
By:/s/CATHARINE L. MIDKIFF
Name: Catharine L. Midkiff
Title: V.P.-Commercial Finance
HELLER FINANCIAL, INC.
By:/s/LAWRENCE P. GARNI
Name: Lawrence P. Garni
Title: A.V.P.
NATIONAL WESTMINSTER BANK Plc
By:/s/IAN M. CRESSY
Name: Ian M. Cressy
Title: Senior Vice President
PILGRIM PRIME RATE TRUST
By:/s/KATHLEEN LENARCIC
Name: Kathleen Lenarcic
Title: Senior Credit Analyst
SANWA BUSINESS CREDIT CORPORATION
By:/s/PETER L. SKAVLA
Name: Peter L. Skavla
Title: Vice President
TRANSAMERICA BUSINESS CREDIT
CORPORATION
By:/s/MICHAEL J. MCBRIDE
Name: Michael J. McBride
Title: V.P.
Acknowledged and agreed
to:
BAIRD CORPORATION
By:/s/W. M. BROWN
Name: W. M. Brown
Title: Executive Vice President and
Chief Financial Officer
VARO INC.
By:/s/W. M. BROWN
Name: W. M. Brown
Title: Executive Vice President and
Chief Financial Officer
WARREN PUMPS INC.
By:/s/W. M. BROWN
Name: W. M. Brown
Title: Executive Vice President and
Chief Financial Officer
SECOND AMENDMENT TO
CREDIT AGREEMENT
Second Amendment (this "Amendment") dated as of January 11,
1995 among Imo Industries Inc. (with its successors and
permitted assigns, the "Borrower") and the undersigned
Lenders (as defined below), to the Credit Agreement dated as
of August 5, 1994 (as previously amended by the First
Amendment thereto dated as of November 18, 1994, and as such
agreement may be amended, supplemented or modified from time
to time, the "Credit Agreement") among the Borrower, Baird
Corporation, Varo Inc., Warren Pumps Inc., the institutions
from time to time party thereto as lenders (the "Lenders"),
the institutions from time to time party thereto as issuing
banks (the "Issuing Banks"), and Citibank, N.A., in its
capacity as agent and collateral agent for the Lenders and
the Issuing Banks (in such capacity, the "Agent").
W I T N E S S E T H:
WHEREAS, the parties hereto desire to amend the Credit
Agreement as hereinafter set forth;
NOW, THEREFORE, in consideration of the above premises,
the Borrower and the undersigned Lenders agree as follows:
SECTION 1. Defined Terms. Capitalized terms used
herein without definition shall have the meanings ascribed to
such terms in the Credit Agreement.
SECTION 2. Amendment of Section 8.16. Section 8.16 of
the Credit Agreement is, effective as of the Amendment
Effective Date, hereby amended in its entirety to read as
follows:
8.16. Deltex Service Inc. If, (i) on February 15,
1995, the Borrower or any of its Subsidiaries owns the
Capital Stock of Deltex Service Inc. ("Deltex"), a Texas
corporation and currently a wholly owned Subsidiary of
the Borrower and (ii) prior to February 15, 1995 the
Borrower has not sold all or substantially all of the
assets of Deltex, the Borrower shall forthwith (x)
provide the Agent with a first priority Lien on the
Capital Stock of Deltex as security for the Obligations
and (y) cause Deltex to provide the Agent with a
guaranty by Deltex of the Obligations in form and
substance satisfactory to the Agent, for the benefit of
the Agent, the Lenders and the Issuing Banks, a valid
and perfected Lien on the assets of Deltex as security
for such guaranty pursuant to a security agreement in
form and substance satisfactory to the Agent.
SECTION 3. Amendment of Section 9.02(ix). Section
9.02(ix) of the Credit Agreement is, effective as of the
Amendment Effective Date, hereby amended by replacing the
reference therein to "$110,000,000" with a reference to
"$106,000,000".
SECTION 4. Waiver. Pursuant to Section 8.17 of the
Credit Agreement, the Borrower agreed to deliver to the
Agent, within 90 days of the Closing Date, a certificate of
the Secretary of Imo Industries International Inc. ("IIII").
IIII was merged into the Borrower subsequent to the
expiration of the 90-day period referred to above.
The undersigned hereby agree to waive the requirements
of Section 8.17 of the Credit Agreement, but only to the
extent Section 8.17 requires the delivery of a certificate of
the Secretary of IIII within 90 days of the Closing Date. To
the extent that the Borrower's failure to deliver a
certificate of the Secretary of IIII constitutes an Event of
Default under the Credit Agreement, such Event of Default is
hereby waived.
SECTION 5. Conditions Precedent to the Effectiveness of
this Amendment. This Amendment shall become effective as of
the date hereof on the date (the "Amendment Effective Date")
when the following conditions precedent have been satisfied
(unless waived by the Lenders):
5.01 The Agent shall have received a copy of this
Amendment duly executed by the Borrower and the Requisite
Lenders.
5.02 Each of the representations and warranties of the
Borrower and the Guarantors contained in the Credit Agreement
and in the other Loan Documents shall be true and correct on
and as of the Amendment Effective Date, except to the extent
that any such representation or warranty expressly relates to
a prior date, in which case, such representation and warranty
shall be true and correct as of such earlier date.
5.03 All corporate and other proceedings, and all
documents, instruments and other legal matters in connection
with the transactions contemplated by this Amendment, shall
be satisfactory in all respects in form and substance to the
Agent.
5.04 No Default or Event of Default shall have occurred
and be continuing on the Amendment Effective Date.
5.05 All fees and expenses payable on or prior to the
Amendment Effective Date shall have been paid to the Lenders,
the Issuing Banks and the Agent.
SECTION 6. Representations and Warranties. The
Borrower hereby represents and warrants to the Lenders, the
Issuing Banks and the Agent that (a) as of the date hereof no
Default or Event of Default under the Credit Agreement shall
have occurred and be continuing and (b) all of the
representations and warranties of the Borrower and the
Guarantors contained in the Credit Agreement and in any other
Loan Document continue to be true and correct as of the date
of execution hereof, as though made on and as of such date,
except to the extent that such representations or warranties
expressly relate to prior dates, in which case, such
representations and warranties shall be true and correct as
of such earlier dates.
SECTION 7. Reference to and Effect on the Loan
Documents.
7.01 Upon the effectiveness of this Amendment, on and
after the date hereof, each reference in the Credit Agreement
to "this Agreement", "hereunder", "hereof" or words of like
import, and each reference in the other Loan Documents to the
Credit Agreement, shall mean and be a reference to the Credit
Agreement as amended hereby.
7.02 Except as specifically amended above, all of the
terms of the Credit Agreement and all other Loan Documents
shall remain unchanged and in full force and effect.
7.03 The execution, delivery and effectiveness of this
Amendment shall not, except as expressly provided herein,
operate as a waiver of any right, power or remedy of any
Lender, any Issuing Bank or the Agent, nor constitute a
waiver of any provision of the Credit Agreement or any of the
Loan Documents.
SECTION 8. Costs and Expenses. The Borrower agrees to
pay on demand in accordance with the terms of Section 14.02
of the Credit Agreement all costs and expenses in connection
with the preparation, reproduction, execution and delivery of
this Amendment, including the reasonable fees and out-of-
pocket expenses of Sidley & Austin, counsel for the Agent.
SECTION 9. Execution in Counterparts. This Amendment
may be executed and delivered 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 and all of which taken together shall constitute
one and the same original agreement.
SECTION 10. Governing Law. THIS AMENDMENT SHALL BE
INTERPRETED, AND THE RIGHTS AND LIABILITIES OF THE PARTIES
HERETO DETERMINED, IN ACCORDANCE WITH THE INTERNAL LAW OF THE
STATE OF NEW YORK.
IN WITNESS WHEREOF, this Amendment has been duly
executed on the date set forth above.
IMO INDUSTRIES INC.
By: /s/GEOFFREY M. DOBSON
Name: Geoffrey M. Dobson
Title: Vice President and Treasurer
CITIBANK, N.A., as Agent and as
a Lender
By: /s/TIMOTHY L. FREEMAN
Name: Timothy L. Freeman
Title: Vice President
THE BANK OF NEW YORK COMMERCIAL
CORPORATION
By: /s/STEPHEN V. MANGIANTE
Name: Stephen V. Mangiante
Title: Vice President
GENERAL ELECTRIC CAPITAL
CORPORATION
By: /s/CATHARINE L. MIDKIFF
Name: Catharine L. Midkiff
Title:V.P.-Commercial Finance
HELLER FINANCIAL, INC.
By:/s/RICHARD PELLER
Name: Richard Peller
Title: Sr. V.P.
NATIONAL WESTMINSTER BANK Plc
By:/s/ALEXANDER JACKSON
Name: Alexander Jackson
Title: Vice President
PILGRIM PRIME RATE TRUST
By:/s/KATHLEEN LENARCIC
Name: Katheleen Lenarcic
Title: Senior Credit Analyst
SANWA BUSINESS CREDIT CORPORATION
By:/s/PETER L. SKAVLA
Name: Peter L. Skavla
Title: Vice President
TRANSAMERICA BUSINESS CREDIT
CORPORATION
By:/s/PERRY VAVOULES
Name: Perry Vavoules
Title: V.P.
Acknowledged and agreed
to:
BAIRD CORPORATION
By:/s/GEOFFREY M. DOBSON
Name: Geoffrey M. Dobson
Title: Vice President and Treasurer
VARO INC.
By:/s/GEOFFREY M. DOBSON
Name: Geoffrey M. Dobson
Title: Vice President and Treasurer
WARREN PUMPS INC.
By:/s/GEOFFREY M. DOBSON
Name: Geoffrey M. Dobson
Title: Vice President and Treasurer
EXECUTION COPY
THIRD AMENDMENT TO
CREDIT AGREEMENT
Third Amendment (this "Amendment") dated as of February
17, 1995 among Imo Industries Inc. (with its successors and
permitted assigns, the "Borrower") and the undersigned
Lenders (as defined below), to the Credit Agreement dated as
of August 5, 1994 (as previously amended by the First
Amendment thereto dated as of November 18, 1994 and the
Second Amendment thereto dated as of January 11, 1995, and as
such agreement may be further amended, supplemented or
modified from time to time, the "Credit Agreement") among the
Borrower, Baird Corporation ("Baird"), Varo Inc. ("Varo"),
Warren Pumps Inc., the institutions from time to time party
thereto as lenders (the "Lenders"), the institutions from
time to time party thereto as issuing banks (the "Issuing
Banks"), and Citibank, N.A., in its capacity as agent and
collateral agent for the Lenders and the Issuing Banks (in
such capacity, the "Agent").
W I T N E S S E T H:
WHEREAS, the parties hereto desire to amend the Credit
Agreement as hereinafter set forth;
NOW, THEREFORE, in consideration of the above premises,
the Borrower and the undersigned Lenders agree as follows:
SECTION 1. Defined Terms. Capitalized terms used
herein without definition shall have the meanings ascribed to
such terms in the Credit Agreement, or, if not defined in the
Credit Agreement, as defined in the List of Closing Documents
referred to below.
SECTION 2. Amendment of Section 9.01. Section 9.01 of
the Credit Agreement is, effective as of the Amendment
Effective Date, hereby amended by (x) deleting the word "and"
immediately following clause (xiv) thereof, (y) replacing the
period at the end of clause (xv) of such Section with ";
and", and (z) inserting the following clause (xvi) at the end
of such Section:
(xvi) Indebtedness of Baird permitted under this
Agreement and which has been assumed by Varo in
connection with the transfer by Baird to Varo of
substantially all of the assets of Baird's Optical
Systems Division as contemplated by clause (xv) of
Section 9.02.
SECTION 3. Amendment of Section 9.02. Section 9.02 of
the Credit Agreement is, effective as of the Amendment
Effective Date, hereby amended as follows:
3.01 The word "related" is deleted from each of clauses
(viii) and (ix) of such Section.
3.02 The word "and" immediately following clause (ix)
of such Section is deleted, and clause (x) of such Section is
amended to read in full as follows:
(x)the Borrower may sell in a single transaction the
Borrower's Delaval Condenser Division (other than any
Real Property used and/or held by such Division, or any
of such Division's Receivables), so long as the Borrower
receives gross cash proceeds of at least $300,000 in
respect of such sale;
3.03 The following clauses are inserted at the end of
such Section:
(xi) at any time during the period from and
including the closing of the sale contemplated by clause
(x) above (the "Initial Sale") to and including March
31, 1997, the Borrower may sell in a single transaction
all or any part of the Real Property which was used
and/or held by the Borrower's Delaval Condenser Division
at the time of the closing of the Initial Sale;
(xii) Baird may sell substantially all of the assets
of Baird's Miller-Holzwarth Division;
(xiii) the Borrower may sell the Borrower's Real
Property located at 60 Round Hill Road, Fairfield,
Connecticut;
(xiv) the Borrower may sell all of the Borrower's
interest in EPN Sistemas, S.A. De C.V.; and
(xv) effective on or after December 31, 1994, Baird
may transfer substantially all of the assets of Baird's
Optical Systems Division to Varo.
SECTION 4. Amendment of Section 9.04. Clause (vii) of
Section 9.04 of the Credit Agreement is, effective as of the
Amendment Effective Date, hereby amended to read in full as
follows:
(vii) Investments in bank accounts listed on
Schedule 9.18 made in the ordinary course of business
not at any time exceeding in the aggregate $5,000,000;
provided that if at any time any non-contingent
Revolving Credit Obligations are outstanding,
Investments at such time in such bank accounts shall not
exceed in the aggregate $1,500,000;
SECTION 5. Amendment of Section 9.05. Section 9.05 of
the Credit Agreement is, effective as of the Amendment
Effective Date, hereby amended by (x) deleting the word "and"
immediately following clause (iv) thereof, (y) replacing the
period at the end of such Section with "; and", and (z)
inserting the following clauses at the end of such Section:
(vii) Accommodation Obligations permitted under this
Agreement and which have been assumed by Varo in
connection with the transfer by Baird to Varo of
substantially all of the assets of Baird's Optical
Systems Division as contemplated by clause (xv) of
Section 9.02.
SECTION 6. Amendment of Section 9.17. Section 9.17 of
the Credit Agreement is, effective as of the Amendment
Effective Date, hereby amended by (x) deleting the last
proviso of the Section in its entirety and (y) amending the
first proviso of such Section to read in full as follows:
provided that, notwithstanding anything contained in
this Agreement to the contrary, upon (a) the final
payment in full of the A Term Loans and the B Term
Loans, (b) the Borrower's reduction of the Revolving
Credit Commitments to an aggregate amount not to exceed
$50,000,000 in accordance with Section 3.01(a)(ii) and
(c) the repayment in full of all non-contingent
Revolving Credit Obligations, the Borrower may from time
to time withdraw funds from the Investment Account in
accordance with Section 11.03(c) in an aggregate amount
not to exceed $40,000,000,
SECTION 7. Amendment of Section 10.01. Section 10.01
of the Credit Agreement is, effective as of the Amendment
Effective Date, hereby amended to read in full as follows:
10.01. Minimum Consolidated Net Worth. The
Consolidated Net Worth of the Borrower and its Subsidiaries
at all times during any period from the last day of the
fiscal quarter preceding each fiscal quarter in each Fiscal
Year set forth below to the last day of such fiscal quarter
set forth below shall not be less than the minimum amount set
forth opposite such fiscal quarter:
Fiscal Quarter Minimum Amount
First fiscal quarter of 1995 -$33,000,000
Second fiscal quarter of 1995 $ 5,000,000
Third fiscal quarter of 1995 $ 7,000,000
Fourth fiscal quarter of 1995 $ 9,100,000
First fiscal quarter of 1996 $11,500,000
Second fiscal quarter of 1996 $14,300,000
Third fiscal quarter of 1996 $17,400,000
Fourth fiscal quarter of 1996 $20,300,000
First fiscal quarter of 1997 $23,900,000
Second fiscal quarter of 1997 $28,400,000
Third fiscal quarter of 1997 $32,900,000
SECTION 8. Amendment of Section 10.02. Section 10.02
of the Credit Agreement is, effective as of the Amendment
Effective Date, hereby amended to read in full as follows:
10.02. Minimum Fixed Charge Coverage Ratio. The Fixed
Charge Coverage Ratio of the Borrower and its Subsidiaries
(other than Varo, Baird and their respective Subsidiaries) on
a consolidated basis, as determined as of the last day of
each fiscal quarter of the Borrower set forth below for the
twelve month period ending on such date, shall not be less
than the minimum ratio set forth opposite such fiscal
quarter:
Fiscal Quarter Minimum Amount
First fiscal quarter of 1995 1.20 to 1
Second fiscal quarter of 1995 1.25 to 1
Third fiscal quarter of 1995 1.25 to 1
Fourth fiscal quarter of 1995 1.25 to 1
First fiscal quarter of 1996 1.25 to 1
Second fiscal quarter of 1996 1.15 to 1
Third fiscal quarter of 1996 1.15 to 1
Fourth fiscal quarter of 1996 1.15 to 1
First fiscal quarter of 1997 1.25 to 1
Second fiscal quarter of 1997 1.25 to 1
SECTION 9. Amendment of Section 10.03. Section 10.03
of the Credit Amendment is, effective as of the Credit
Agreement is, effective as of the Amendment Effective Date,
hereby amended to read in full as follows:
10.03. Minimum Interest Coverage Ratio The Interest Coverage
Ratio of the Borrower and its Subsidiaries (other than Varo,
Baird and their respective Subsidiaries) on a consolidated
basis, as determined as of the last day of each fiscal
quarter of the Borrower set forth below for the twelve month
period ending on such date, shall not be less than the
minimum ratio set forth opposite such fiscal quarter:
Fiscal Quarter Minimum Amount
First fiscal quarter of 1995 1.60 to 1
Second fiscal quarter of 1995 1.75 to 1
Third fiscal quarter of 1995 1.80 to 1
Fourth fiscal quarter of 1995 1.90 to 1
First fiscal quarter of 1996 2.10 to 1
Second fiscal quarter of 1996 2.10 to 1
Third fiscal quarter of 1996 2.20 to 1
Fourth fiscal quarter of 1996 2.25 to 1
First fiscal quarter of 1997 2.50 to 1
Second fiscal quarter of 1997 2.50 to 1
SECTION 10. Amendment of Section 10.04. Section 10.04
of the Credit Agreement is, effective as of the Amendment
Effective Date, hereby amended to read in full as follows:
10.04. Maximum Capital Expenditures. Capital
Expenditures made or incurred by the Borrower and the
Borrower's Subsidiaries (other than Varo, Baird and their
respective Subsidiaries which are Restricted Subsidiaries) on
a consolidated basis during each Fiscal Year set forth below
shall not exceed in the aggregate the amount set forth
opposite such Fiscal Year:
Fiscal Quarter Minimum Amount
Fiscal Year 1995 $29,000,000
Fiscal Year 1996 $21,000,000
Fiscal Year 1997 $14,000,000
SECTION 11. Amendment of Schedule 9.09. Schedule 9.09
to the Credit Agreement is, effective as of the Amendment
Effective Date, hereby amended by inserting the following at
the end of such Schedule:
"Deltex Service Inc..............Texas"
SECTION 12. Amendment of Exhibit F. The item in the
List of Closing Documents attached to the Credit Agreement
and made a part thereof as Exhibit F which calls for delivery
of the German Pledge Agreement is, effective as of the
Amendment Effective Date, hereby deleted.
SECTION 13. Conditions Precedent to the Effectiveness
of this Amendment. This Amendment shall become effective as
of the date hereof on the date (the "Amendment Effective
Date") when the following conditions precedent have been
satisfied (unless waived by the Lenders):
13.01 The Agent shall have received a copy of this
Amendment duly executed by the Borrower and the Requisite
Lenders.
13.02 Each of the representations and warranties of the
Borrower and the Guarantors contained in the Credit Agreement
and in the other Loan Documents shall be true and correct on
and as of the Amendment Effective Date, except to the extent
that any such representation or warranty expressly relates to
a prior date, in which case, such representation and warranty
shall be true and correct as of such earlier date.
13.03 All corporate and other proceedings, and all
documents, instruments and other legal matters in connection
with the transactions contemplated by this Amendment, shall
be satisfactory in all respects in form and substance to the
Agent.
13.04 No Default or Event of Default shall have
occurred and be continuing on the Amendment Effective Date.
13.05 All fees and expenses payable on or prior to the
Amendment Effective Date shall have been paid to the Lenders,
the Issuing Banks and the Agent.
SECTION 14. Representations and Warranties. The
Borrower hereby represents and warrants to the Lenders, the
Issuing Banks and the Agent that (a) as of the date hereof no
Default or Event of Default under the Credit Agreement shall
have occurred and be continuing and (b) all of the
representations and warranties of the Borrower and the
Guarantors contained in the Credit Agreement and in any other
Loan Document continue to be true and correct as of the date
of execution hereof, as though made on and as of such date,
except to the extent that such representations or warranties
expressly relate to prior dates, in which case, such
representations and warranties shall be true and correct as
of such earlier dates.
SECTION 15. Reference to and Effect on the Loan
Documents.
15.01 Upon the effectiveness of this Amendment, on and
after the date hereof, each reference in the Credit Agreement
to "this Agreement", "hereunder", "hereof" or words of like
import, and each reference in the other Loan Documents to the
Credit Agreement, shall mean and be a reference to the Credit
Agreement as amended hereby.
15.02 Except as specifically amended above, all of the
terms of the Credit Agreement and all other Loan Documents
shall remain unchanged and in full force and effect.
15.03 The execution, delivery and effectiveness of this
Amendment shall not, except as expressly provided herein,
operate as a waiver of any right, power or remedy of any
Lender, any Issuing Bank or the Agent, nor constitute a
waiver of any provision of the Credit Agreement or any of the
Loan Documents.
SECTION 16. Costs and Expenses. The Borrower agrees to
pay on demand in accordance with the terms of Section 14.02
of the Credit Agreement all costs and expenses in connection
with the preparation, reproduction, execution and delivery of
this Amendment, including the reasonable fees and out-of-
pocket expenses of Sidley & Austin, counsel for the Agent.
SECTION 17. Execution in Counterparts. This Amendment
may be executed and delivered 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 and all of which taken together shall constitute
one and the same original agreement.
SECTION 18. Governing Law. THIS AMENDMENT SHALL BE
INTERPRETED, AND THE RIGHTS AND LIABILITIES OF THE PARTIES
HERETO DETERMINED, IN ACCORDANCE WITH THE INTERNAL LAW OF THE
STATE OF NEW YORK.
IN WITNESS WHEREOF, this Amendment has been duly
executed on the date set forth above.
IMO INDUSTRIES INC.
By:/s/G.M. DOBSON
Name: G. M. DOBSON
Title: VICE PRESIDENT AND TREASURER
CITIBANK, N.A., as Agent and as
a Lender
By: /s/TIMOTHY L. FREEMAN
Name: TIMOTHY L. FREEMAN
Title: VICE PRESIDENT
THE BANK OF NEW YORK COMMERCIAL
CORPORATION
By:/s/STEPHEN V. MANGIANTE
Name: STEPHEN V. MANGIANTE
Title: VICE PRESIDENT
GENERAL ELECTRIC CAPITAL
CORPORATION
By:/s/CATHARINE L. MIDKIFF
Name: CATHARINE L. MIDKIFF
Title: V.P.-COMMERCIAL FINANCE
HELLER FINANCIAL, INC.
By:/s/LAWRENCE P. GARNI
Name: LAWRENCE P. GARNI
Title: A.V.P.
NATIONAL WESTMINSTER BANK Plc
By:/s/IAN M. CRESSY
Name: IAN M. CRESSY
Title: SENIOR VICE PRESIDENT
SANWA BUSINESS CREDIT CORPORATION
By:/s/PETER L. SKAVLA
Name: PETER L. SKAVLA
Title: V.P.
TRANSAMERICA BUSINESS CREDIT
CORPORATION
By:/s/PERRY VAVOULES
Name: PERRY VAVOULES
Title: V.P.
Acknowledged and agreed
to:
BAIRD CORPORATION
By:/s/G.M. DOBSON
Name: G.M. DOBSON
Title: VICE PRESIDENT AND TREASURER
VARO INC.
By:/s/G.M. DOBSON
Name: G.M. DOBSON
Title: VICE PRESIDENT AND TREASURER
WARREN PUMPS INC.
By:/s/G.M. DOBSON
Name: G.M. DOBSON
Title: VICE PRESIDENT AND TREASURER
Varo Systems, Inc.
Varo Holdings Corp.
TPG Partners, L.P.
201 Main Street, Suite 2420
Fort Worth, Texas 76102
December 20, 1994
Imo Industries Inc.
1009 Lenox Drive, Building 4 West
P.O. Box 6550
Lawrenceville, N.J. 08648
Attention: Thomas J. Bird, Esq.
Senior Vice President and General Counsel
Gentlemen:
Pursuant to Section 14.03 of that certain Asset
Purchase Agreement dated as of October 14, 1994, by and
among Imo Industries Inc., Baird Corporation, Optic
Electronic International, Inc., TPG Partners, L.P. and
Varo Systems, Inc. (formerly Varo Acquisition Corp.)(the
"Asset Agreement")and Section 8.2 of that certain Stock
Purchase Agreement dated as of November 11, 1994, among
Varo, Inc., Imo Industries International, Inc., Varo
Systems, Inc. and Varo Holdings Corp. (the "Stock
Agreement"), the undersigned hereby terminate each of
the Asset Agreement and the Stock Agreement effective as
of the close of business on December 20, 1994, due to a
failure to be satisfied as of the close of business on
December 20, 1994, of the conditions contained in
Section 8.12 of the Asset Agreement and Section 6.3 of
the Stock Agreement.
Sincerely yours,
VARO SYSTEMS, INC.
By:/s/WILLIAM S. PRICE
William S. Price, Vice President
VARO HOLDINGS CORP.
By:/s/WILLIAM S. PRICE
William S. Price, President
TPG PARTNERS, L.P.
By: TPG GenPar, L.P., General Partner
By: TPG Advisors, Inc., General Partner
By:/s/WILLIAM S. PRICE
William S. Price, Vice President
cc: Baker & Botts, L.L.P.
The Warner
1299 Pennsylvania Avenue, N.W.
Washington, D.C. 20004-2400
Attention: Daniel J. Riley, Esq.
AGREEMENT, AMENDMENT AND WAIVER
TO THE ASSET PURCHASE AGREEMENT
AGREEMENT, AMENDMENT and WAIVER, dated as of
January 17, 1995 (this "Agreement"), by and between Imo
Industries Inc., a Delaware corporation (the "Seller"),
and Mannesmann Capital Corporation, a New York
corporation (the "Purchaser").
W I T N E S S E T H:
WHEREAS, the Seller, Imo Industries International
Inc. (the "JV Seller") and the Purchaser have entered
into an Asset Purchase Agreement, dated as of November
4, 1994 (the "Asset Purchase Agreement"; capitalized
terms used herein without definition shall have the
meanings assigned to such terms in the Asset Purchase
Agreement); and
WHEREAS, the JV Seller has been merged with and
into the Seller as of December 30, 1994; and
WHEREAS, the Seller and the Purchaser have agreed
to amend the Asset Purchase Agreement and to waive
compliance with certain provisions thereof as set forth
below;
NOW THEREFORE, in consideration of the premises and
the mutual covenants and agreements hereinafter set
forth, the Seller and the Purchaser hereby agree as
follows:
SECTION 1. Amendments to the Asset Purchase
Agreement. Subject to the satisfaction of the
conditions precedent set forth in Sections 2 and 4
hereof, the Asset Purchase Agreement is hereby amended
as follows:
(a) Section 2.2 of the Asset Purchase Agreement
is hereby amended by deleting subsection (a) of such
Section 2.2 and substituting in place thereof the
following:
"(a) As used herein, the term "Closing Net Book
Value" shall mean an amount equal to (x) the
aggregate of (i) the net book value of the Assets,
including the South Plant Assets but not including
the Joint Venture Interest, less the net book value
of the Assumed Liabilities, and (ii) fifty percent
(50%) of the net book value of the Joint Venture
Assets less fifty percent (50%) of the Joint
Venture Liabilities, as such net book values are
determined pursuant to Section 2.2(b) and set forth
in the Final Balance Sheet, minus (y) $1,000,000.".
(b) Section 2.2 of the Asset Purchase Agreement
is hereby further amended by deleting the first sentence
of subsection (b) of such Section 2.2 in its entirety
and substituting in place thereof the following:
"Within ninety (90) days after the Closing Date,
the Seller shall prepare and deliver to the
Purchaser a statement of (i) the net book value of
the Assets, including the South Plant Assets but
not including the Joint Venture Interest, and the
Assumed Liabilities, and (ii) the net book value of
the Joint Venture Assets and the Joint Venture
Liabilities, in each case, as of the close of
business on December 31, 1994, together with
footnotes (the "Closing Balance Sheet").".
(c) Section 2.2 of the Asset Purchase Agreement
is hereby further amended by deleting the third sentence
of subsection (b) of such Section 2.2 in its entirety
and substituting in place thereof the following:
"The Closing Balance Sheet shall be audited in
accordance with United States generally accepted
auditing standards by the Seller's independent
accountants, Ernst & Young ("Seller's
Accountants"), and shall be accompanied (within the
90-day period referred to above) by a letter report
of Seller's Accountants rendering its opinion that
the Closing Balance Sheet presents fairly in all
material respects, (i) the net book value of the
Assets, including the South Plant Assets and not
including the Joint Venture Interest, and the
Assumed Liabilities, and (ii) the net book value of
the Joint Venture Assets and the Joint Venture
Liabilities, in each case, as of the close of
business on December 31, 1994 on the basis of
accounting set forth in this Section 2.2(b).".
(d) Section 3.1 of the Asset Purchase Agreement
is hereby amended by deleting the first sentence of
subsection (a) of such Section 3.1 in its entirety and
substituting in place thereof the following:
"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 January 17, 1995 and
such date of Closing is referred to in this
Agreement as the "Closing Date." The Closing shall
be deemed effective as of 12:01 A.M. on January 17,
1995, and notwithstanding the fact that the Closing
Balance Sheet shall be prepared as of the close of
business on December 31, 1994, title to, and risk
of loss of, the Assets and the Business shall not
pass until the effective time of the Closing."
(e) Section 3.3 of the Asset Purchase Agreement
is hereby amended by adding immediately following the
words "Owned Real Property" appearing in the second line
of subsection (f) of such Section 3.3 the following:
"(other than the North Plant)".
(f) Section 3.3 of the Asset Purchase Agreement
is hereby further amended by deleting subsection (l) of
such Section 3.3 in its entirety and substituting in
place thereof the following:
"(l) a lease with respect to the North Plant in
the form of Exhibit G hereto (the "North Plant
Lease") duly executed by the Seller;".
(g) Section 3.3 of the Asset Purchase Agreement
is hereby further amended by adding immediately
following the words "Real Property" appearing in the
second line of subsection (t) of such Section 3.3 the
following: "(other than the North Plant)".
(h) Section 3.5 of the Asset Purchase Agreement
is hereby amended by adding immediately following the
words "Real Property" appearing in the second line of
subsection (h) of such Section 3.5 the following:
"(other than the North Plant)".
(i) Section 3.5 of the Asset Purchase Agreement
is hereby further amended by deleting subsection (i) of
such Section 3.5 in its entirety and substituting in
place thereof the following: "(i) the North Plant Lease
duly executed by the Purchaser;".
(j) Section 9.6 of the Asset Purchase Agreement
is hereby amended by deleting such section in its
entirety and substituting in place thereof the
following:
"9.6. Subdivision Approvals and North Plant
Lease. Purchaser shall be satisfied with the
actions of the Planning Board of the Township of
Hamilton, New Jersey prior to the date hereof in
respect of the legal Subdivision of the Turbine
Trenton Property, including the conditions to the
Subdivision imposed by the Planning Board of the
Township of Hamilton. Seller, Purchaser and Demag
Delaval Turbomachinery Corp., a Delaware
corporation and wholly owned subsidiary of the
Purchaser, shall have entered into the North Plant
Lease."
(k) Section 9.8 of the Asset Purchase Agreement
is hereby amended by adding immediately following the
word "Property" appearing in the sixth line of such
Section 9.8 the following: "(other than the North
Plant)".
(l) Article XII of the Asset Purchase Agreement
is hereby amended by adding the following to the end
thereof:
"12.7. Supply of Electricity to South Plant. The
Purchaser covenants and agrees that, from and after
the Closing Date until eighteen months thereafter
(or such earlier or later date as the Purchaser and
Seller may agree), the Purchaser will, and will
cause its Affiliates to, supply the Seller
electricity from the North Plant to the South Plant
on the same basis as electricity was being supplied
from the North Plant to the South Plant immediately
prior to the Closing Date (the "Electricity
Service") it being understood that in the event of
any curtailment or interruption of the electricity
supply to the North Plant the only obligation of
the Purchaser and its Affiliates to the Seller
shall be as set forth in fifth and sixth sentences
of this Section 12.7. The Electricity Service
shall be supplied to the Seller at the Purchaser's
cost for such service as billed by the electric
utility company delivering such service (the
"Electric Utility") to the Purchaser and as
indicated on the metering equipment dedicated to
the electric service provided to the South Plant
(the "Electricity Service Cost"). The Purchaser
shall, or shall cause its Affiliates to, invoice
the Seller after Purchaser's (or its Affiliates')
receipt of our invoice therefor from the Electric
Utility for the Electricity Service Cost for such
month, and the Seller shall pay to the Purchaser
the amount of the Electricity Service Cost not
later than twenty (20) days from the date the
Seller receives such invoice. All invoices issued
by the Purchaser for Electricity Service Costs
shall be supported by detail reports or billing
summaries the Purchaser receives from the
Electricity Utility. If the Electricity Service
is, or is to be, interrupted or curtailed in order
to make necessary repairs or alterations to
existing systems or to perform critical
preventative maintenance, the Purchaser shall use
reasonable diligence to communicate to the Seller
the nature of the cause of the interruption or
curtailment and the expected duration of the
interruption or curtailment and to develop a
schedule which is acceptable to both parties where
possible to resolve the Electricity Service as soon
as practical. In the case of a continuing
electricity outage, the Purchaser will use
reasonable efforts to notify the Electric Utility
and seek to have the Electric Utility restore the
Electricity Service as soon as practical.
Notwithstanding anything to the contrary in this
Agreement, this Section 12.7 shall survive the
Closing and shall remain in full force and effect
indefinitely until terminated pursuant to the first
sentence of this Section 12.7 provided that the
rights of the Seller under this Section 12.7 shall
terminate upon the sale or lease by the Seller of
all or a substantial portion of the South Plant."
(m) Section 15.1 of the Asset Purchase Agreement
is hereby amended by adding the following definitions
for the terms "Electric Utility", "Electricity Service",
"Electricity Service Cost" and "North Plant Lease" where
such definitions would appear in such Section 15.1 in
correct alphabetical order:
"'Electric Utility' has the meaning set forth in
Section 12.7 hereof.
"'Electricity Service' has the meaning set forth
in Section 12.7 hereof."
"'Electricity Service Cost' has the meaning set
forth in Section 12.7 hereof."
"'North Plant Lease' has the meaning set forth in
Section 3.3(l) hereof.".
SECTION 2. Waivers. Subject to the satisfaction
of the condition precedent set forth in Section 4
hereof, the Purchaser hereby:
(a) Waives the Seller's noncompliance with the
provisions of Section 9.7 of the Asset Purchase
Agreement with respect to the Seller's obligation to
obtain the consents for the assignment of (i) the Co-
Production Agreement, dated September 7, 1991, between
the Turbine Division and Nanjing Chemical Industrial
Group, and (ii) the Exclusive License Agreement, dated
as of October 1, 1984, by and between Warren A. Rhoades,
Jr., and Marchem Products Company; assigned by
Assignment and Assumption Agreement, dated as of March
3, 1988, among Warren A. Rhoades, Jr., Marchem Products
Company and Imo Delaval Inc.; terminated by a letter
agreement, dated January 10, 1990, between the Seller
and Warren A. Rhoades, Jr.
(b) Waives the noncompliance with the provisions
of Section 9.9 of the Asset Purchase Agreement.
(c) Waives the noncompliance with the provisions
of the Asset Purchase Agreement with respect to the
items set forth on Schedule 1 to this Agreement.
Notwithstanding the foregoing, the parties agree
that any Damages of the Purchaser or its Affiliates
which result from the fact that the Seller has not
obtained prior to the Closing Date any Permits at its
Bridgeton, Missouri and Brazoria County, Texas
facilities of a nature similar to the Permits in place
at the other facilities of the TurboCare Facilities,
which were required by Law to have obtained in
connection with the conduct of the Business as of the
Closing Date as determined by Erler and Kalinowski, Inc.
("E-K") within 45 days of the Closing Date or such
Permits previously identified by the E-K Summaries, the
E-K Report or the E-K Environmental Issues Compendium
dated January 10, 1995 ("Unobtained Permits") shall be
Retained Liabilities, provided that the foregoing shall
not apply to Damages which result from the failure to
assign or transfer any Permit of Seller or the Divisions
existing as of the Closing Date or the absence of
consent by a Governmental Body to the assignment or
transfer of any such Permit, and provided further that
the rights of the Purchaser and its Affiliates hereunder
are subject to the Purchaser taking, after the Closing
Date, such actions as are reasonably required in order
to obtain the Unobtained Permits in a reasonable time.
(d) Waives the noncompliance of the covenants set
forth in Section 6.10 of the Asset Purchase Agreement,
provided that the Purchaser shall pay to the Seller the
amount currently being allocated to the Divisions in
respect of the Divisions' current occupation of the
office space at 30 Pioneer Road, Singapore and Grove
House, Marylebone Road, England for the remainder of the
terms of Seller's lease with respect to each such
premises.
SECTION 3. Termination of Certain Leases.
Notwithstanding anything in the Asset Purchase
Agreement, it is hereby agreed that the Seller's
leasehold interest in the premises located at 84
Ethnikis Anistasios, Athens, Greece and 22 Dalvey
Estate, Singapore will not be assigned to the Purchaser
but shall be terminated and Purchaser shall indemnify
and reimburse the Seller for all reasonable costs and
expenses it incurs in connection with such termination
but, in each case, such costs and expenses (other than
reasonable attorneys' fees) shall not exceed the
remaining amount due under such leases.
SECTION 4. References to the JV Seller. It is
hereby agreed that as a result of the merger of the JV
Seller with and into the Seller as of December 30, 1994,
all references to the JV Seller in the Asset Purchase
Agreement shall hereinafter be deemed to be references
to the Seller, provided that the foregoing shall not be
deemed to modify the definitions of Assumed Liabilities,
Joint Venture obligations or Retained Liabilities.
SECTION 5. Conditions to Effectiveness. This
Agreement shall become effective when, and only when,
the Seller shall have received counterparts of this
Agreement executed by the Purchaser and the Purchaser
shall have received counterparts of this Agreement
executed by the Seller.
SECTION 6. Effect on the Asset Purchase
Agreement. Except as specifically provided herein, the
Asset Purchase Agreement shall remain in full force and
effect and is hereby ratified and confirmed.
Notwithstanding anything contained in the Asset Purchase
Agreement to the contrary, Section 6.7 thereof shall
survive the Closing.
SECTION 7. Binding Effect. Except as otherwise
permitted by Section 15.14 of the Asset Purchase
Agreement, this Agreement shall be binding upon and
inure to the benefit of the parties and their respective
successors and assigns as permitted under the Asset
Purchase Agreement.
SECTION 8. Execution in 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.
SECTION 9. Governing Law. This Agreement shall
be governed by and construed in accordance with the Law
of the State of New York without regard to the
principles of conflicts of laws.
SECTION 10. Headings. Section headings in this
Agreement are included herein for reference purposes
only and are to be given no effect in the construction
or interpretation of this Agreement.
SECTION 11. Further Assurances. Without limiting
any of the provisions of the Asset Purchase Agreement
and subject to Section 12.1 thereof, at the reasonable
request of Purchaser, Seller shall cooperate with
Purchaser and take such other and further action as may
be required to obtain any approvals, Permits, consents
or waivers required to be obtained by Seller prior to
the Closing Date which have not been so obtained.
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: Executive Vice President,
Secretary and General Counsel
MANNESMANN CAPITAL CORPORATION
By: /s/JOSEPH G. INNAMORATI
Name: Joseph G. Innamorati
Title: Assistant Secretary
SCHEDULE 1
ADDITIONAL WAIVERS
1. The assignment or transfer of the Permits set
forth on Annex A hereto.
2. The consent to the assignment of the lease for 82
Grange Road, Singapore.
ASSET AND STOCK PURCHASE AGREEMENT
This Asset and Stock Purchase Agreement is made and
entered into as of the 1st day of January, 1995, by and
among Thermo Jarrell Ash Corporation, a corporation
organized under the laws of Massachusetts (the "Buyer"), and
Imo Industries Inc., a corporation organized under the laws
of Delaware (together with its subsidiaries, "Imo").
WITNESSETH:
Imo, through the Analytical Instruments Division (the
"Division") of Baird Corporation (the "Company"), a wholly-
owned subsidiary of Imo, is engaged in the business of
developing, manufacturing, marketing, conducting market
research and general liaison in connection with such
research, and selling optical emission spectrometers (the
"Business"). The Business is conducted through the Company
directly, through Baird Europe B.V., a wholly-owned
subsidiary of the Company organized under the laws of the
Netherlands ("Baird Europe"), through Baird France S.A.R.L.,
a wholly-owned subsidiary of Baird Europe organized under
the laws of France ("Baird France"), through Baird Do Brasil
Representacoes LTDA, a wholly-owned subsidiary of the
Company organized under the laws of Brazil ("Baird Brazil"),
through Baird Analytical Instrument Technology Company
(Beijing), Limited, a wholly-owned subsidiary of the Company
organized under the laws of China ("Baird China") and
through representative offices in China (the "Representative
Offices").
The Buyer desires to purchase, and Imo desires to cause
the Company to sell, (a) all of the assets of the Company
used primarily in the Business, subject to certain
liabilities, (b) all of the outstanding shares of capital
stock of Baird Europe (the "Dutch Shares"), (c) all of the
outstanding quotas of capital of Baird Brazil (the "Brazil
Shares") and (d) all of the shareholding of Baird China (the
"China Shares").
NOW, THEREFORE, in consideration of the premises and the
mutual covenants, agreements and provisions herein
contained, the parties hereto agree as follows:
ARTICLE 1
PURCHASE AND SALE OF ASSETS AND SHARES
Section 1.1. Certain Definitions. As used herein, the
following terms shall have the following meanings.
(a) "Assets" means the Company Assets and the
Foreign Assets.
(b) "Companies" means the Company and the Foreign
Companies.
(c) "Company Assets" means all assets owned by the
Company and used primarily in the Business and all rights of
the Company related primarily to the Business.
(d) "Division Employee" means any employee of the
Company employed primarily in the Business who, on the
Closing Date, is actively at work or absent due to short-
term (six months or less) sick leave, maternity leave, jury
duty or similar short-term leave.
(e) "Employees" means Division Employees and Foreign
Employees.
(f) "Foreign Assets" means all of the assets of
every nature, kind and description of the Foreign Companies.
(g) "Foreign Companies" means Baird Europe, Baird
France, Baird Brazil and Baird China.
(h) "Foreign Employee" means any employee of a
Foreign Company employed on the Closing Date.
(I) "Foreign Liabilities" means only those
liabilities of the Foreign Companies (i) reflected on the
Balance Sheet (as defined in Section 1.6), (ii) incurred in
the ordinary course of business and not reflected on the
Balance Sheet, (iii) to customers under any warranty
obligations outstanding as of the Closing Date (as defined
in Section 1.9) and (iv) under any contract or agreement to
which a Foreign Company is a party and which has been
disclosed to Buyer or is not required to be disclosed
pursuant to Section 2.1(m).
(j) "Shares" means the Dutch Shares, the China
Shares and the Brazil Shares.
Section 1.2. Sale of Assets. At the Closing (as
defined in Section 1.9 below), the Buyer shall purchase,
acquire and accept, and Imo shall cause the Company to
assign, transfer, convey and deliver all of the Company
Assets, which shall include, without limitation, the
following:
(a) Inventories. All inventories of raw materials,
work in process, finished products and resale merchandise,
scrap inventory, and expendable manufacturing supplies.
(b) Machinery and Equipment. All machinery and
equipment used in the research and development,
manufacture, production, assembly, test, handling,
distribution, demonstration and sale of products, together
with the spare-parts inventories and all manufacturing or
production tools and maintenance supplies pertaining
thereto.
(c) Intellectual Property Rights and Trademarks. All
patents, trademarks, service marks, copyrights, trade names
(except the name "Baird") and applications therefor.
(d) Technical Information and Intangibles. All
inventions, discoveries (whether patentable or
unpatentable), processes, designs, know-how, trade secrets,
proprietary data, software programs and intellectual
property of all kinds, including drawings, plans,
specifications, processes, patents, dies, designs, blue
prints, records, data, product development records,
production outlines, diskettes, source code, object code,
flow charts, information, media or knowledge and procedures,
and customer and supplier lists.
(e) Contract and Other Rights. All real and personal
property leases, licenses, sales, distribution, supply and
other agreements, purchase contracts, sales orders, prepaid
items, warranties and all causes of action and claims
related thereto.
(f) Motor Vehicles. All cars, trucks and other motor
vehicles, automotive equipment and other rolling stock.
(g) Books and Records. All books, records and
accounts, correspondence, production records, technical,
accounting, manufacturing and procedural manuals, and
customer lists; employment records relating to Division
Employees; studies, reports or summaries relating to any
environmental conditions or consequences of any operation,
as well as all studies, reports or summaries relating
directly to the general condition of the Business; and any
confidential information which has been reduced to writing
relating to or arising out of the Business.
(h) Permits and Approvals. To the extent
transferable, all permits, licenses, approvals and
authorizations of any governmental or other regulatory
authority.
(i) Prepaid Expenses. All prepaid expenses and other
similar assets.
(j) Furniture and Fixtures. All office furniture,
office equipment and supplies and computer hardware.
(k) Accounts Receivable. All trade and other
accounts and notes receivable and any rights of recovery or
setoff of every type and character, including, without
limitation, a promissory note from Mike Routh in the amount
of $175,000.
(l) Miscellaneous Supplies. All catalogs, brochures,
product literature, product-related application notes,
manuals, technical papers, other printed materials, shipping
and packaging materials and labels, cartons and shipping
containers, palettes, shipping equipment, graphics, artwork,
photographic film, slides, negatives, color separations,
printer's and photographer's plates and so-called "camera-
ready materials" and sales and advertising materials.
(m) Representative Offices. All of the Company's
interests in the Representative Offices.
Section 1.3. Excluded Assets. Notwithstanding
anything to the contrary herein, the Company Assets shall
not include the following assets of the Company (the
"Excluded Assets"):
(a) The buildings and real property located at 125
Middlesex Turnpike, Bedford, Massachusetts (the "Bedford
Facility").
(b) Claims for refunds relating to Taxes (as defined
in Section 2.1 (e)) paid with respect to Pre-Closing Periods
(as defined in Section 3.1 (a) (i)).
(c) The name "Baird", as to which a license shall be
granted to the Buyer by the Company.
(d) The assets of any Employee Plan (as defined in
Section 2.1(w)), except as contemplated by Section 3.11(c).
(e) The names "Imo", "Varo" or "Delaval."
(f) cash, bank accounts, certificates of deposit,
treasury bills and notes and marketable securities.
(g) All assets of the Company not used primarily in
the Business.
(h) All assets described on Schedule 1.3 attached
hereto.
Section 1.4 Sale of Shares. At the Closing, the
Buyer shall purchase, or shall cause one of its subsidiaries
to purchase, and Imo shall cause the Company to sell, the
Dutch Shares and the Brazil Shares, free and clear of any
liens, claims, pledges or encumbrances whatsoever.
Notwithstanding the foregoing, the parties acknowledge that
transfer of the Brazil Shares must be registered with the
Brazil Board of Trade within 30 days after the transfer.
The parties undertake to use their best efforts to execute
such agreements, instruments and documents, and to take such
actions, as shall be required to effect such registration.
The parties further acknowledge that transfer of the China
Shares requires approval of the Beijing Municipal New
Technology Industry Development Experimental Zone
("BNTIDEZ") and issuance of an amended business license by
the relevant office of the State Administration for Industry
and Commerce of the Peoples Republic of China (the "SAIC"),
and that such approvals will not have been obtained as of
the Closing. Transfer of the China Shares shall be made in
accordance with Section 1.13 below. Notwithstanding any
delays in effecting the full legal transfer of the Brazil
Shares and China Shares, the parties agree that, from and
after the Closing, Buyer will have full responsibility for
the operation of the business of Baird Brazil and Baird
China and any benefits derived from such operation will
accrue to Buyer.
Section 1.5. Purchase Price for the Assets and the
Shares. Subject to Section 1.7, the aggregate purchase price
for the Assets and the Shares shall be $12,263,000 (the
"Purchase Price").
Section 1.6. Assumption of Liabilities. At the
Closing, the Buyer shall assume only the following
liabilities of the Company (the "Assumed Liabilities"): (i)
liabilities of the Company reflected on the balance sheet of
the Business dated August 31,1994, attached hereto as
Exhibit A (the "Balance Sheet"), except for any such
liabilities discharged since the date of the Balance Sheet,
(ii) liabilities incurred by the Company in the ordinary
course of business and not reflected on the Balance Sheet,
(iii) liabilities to customers of the Business under
warranty obligations outstanding as of the Closing Date, and
(iv) liabilities and obligations under any contract or
agreement assigned to the Buyer pursuant hereto. In
furtherance of, but without limiting, the foregoing, except
to the extent reflected on the Balance Sheet, the Assumed
Liabilities will not include any liabilities or obligations
of the Company (a) for any environmental conditions existing
as of the Closing Date at any Company facility ( including
the Bedford Facility) or at any site to which any material
generated by the Company was transported prior to Closing,
except for any such liabilities that result from the acts of
the Buyer, (b) for any litigation resulting from events
occurring prior to the Closing Date, (c) for any product
liability claims (except for warranty claims assumed by
Buyer pursuant to this Section 1.6) relating to products
sold prior to the Closing Date, (d) to any retired or other
former employees of the Company who do not receive and
accept an offer of employment as of the Closing from the
Buyer, (e) under any pension or other employee benefit or
welfare plan maintained at any time by the Company, or (f)
under any agreements with Division Employees providing for
severance payments in the event such employees are
terminated by Buyer after the Closing.
Section 1.7. Post-Closing Adjustment. The Purchase
Price set forth in Section 1.5 shall be subject to
adjustment after the Closing Date as follows:
(a) Within 60 days after the Closing Date, the Buyer
shall prepare and deliver to Imo a consolidated balance
sheet reflecting the Assets, the Assumed Liabilities and the
Foreign Liabilities (the "Draft Closing Balance Sheet").
The Buyer shall prepare the Draft Closing Balance Sheet in
accordance with generally accepted accounting principals
applied on a basis consistent with the preparation of the
Financial Statements (as defined in Section 2.1(d)).
(b) Imo shall deliver to the Buyer within 60 days
after receiving the Draft Closing Balance Sheet a detailed
statement describing its objections (if any) thereto.
Failure of Imo so to object to the Draft Closing Balance
Sheet shall constitute acceptance thereof, whereupon the
Draft Closing Balance Sheet shall be deemed to be the
"Closing Balance Sheet". Imo and the Company shall use
reasonable efforts to resolve any such objections, but if
they do not reach a final resolution within 30 days after
the Buyer has received the statement of objections, the
Buyer and Imo shall select an accounting firm mutually
acceptable to them (the "Neutral Auditors") to resolve any
remaining objections. If the Buyer and Imo are unable to
agree on the choice of Neutral Auditors, they shall select
as Neutral Auditors a nationally recognized accounting firm
by lot (after excluding their respective regular independent
accounting firms). The Neutral Auditors shall determine
whether the objections raised by Imo are valid. The Draft
Closing Balance Sheet shall be adjusted in accordance with
the Neutral Auditor's determination and, as so adjusted,
shall be the Closing Balance Sheet. Such determination by
the Neutral Auditors shall be conclusive and binding upon
the Buyer and Imo. The Buyer and Imo shall share equally
the fees and expenses of the Neutral Auditors.
(c) During the preparation of the Draft Closing
Balance Sheet by the Buyer and the period of any dispute
referred to above, Imo shall cooperate fully with the Buyer
and the Buyer's accountants in order to prepare the Draft
Closing Balance Sheet. Imo shall have access to all books
and records and other information of the Buyer used in
connection with the preparation of the Draft Closing Balance
Sheet; provided, however, that any such access shall be
allowed only in such manner as not to interfere unreasonably
with the operations of the Buyer.
(d) If the Net Book Value (as defined below) as shown
on the Closing Balance Sheet is less than $5,763,000, Imo
shall pay to the Buyer, by wire transfer in immediately
available funds, within three business days after the date
on which the Closing Balance Sheet is finally determined
pursuant to this Section 1.7, an amount equal to such
deficiency (plus interest thereon from the Closing Date at
the interest rate equal to the base rate of Bank of Boston
as announced from time to time). "Net Book Value" shall
mean the excess of the (1) tangible Assets over (2) the
Assumed Liabilities and the Foreign Liabilities.
(e) If the Net Book Value as shown on the Closing
Balance Sheet is more than $5,763,000, the Buyer shall pay
to Imo, by wire transfer in immediately available funds,
within three business days after the date on which the
Closing Balance Sheet is finally determined pursuant to this
Section 1.7, an amount equal to such excess (plus interest
thereon from the Closing Date at the interest rate equal to
the base rate of Bank of Boston as announced from time to
time).
Section 1.8. Allocation of Purchase Price. Imo and
the Buyer agree that the Purchase Price shall be
provisionally allocated among the Company Assets and the
Shares as provided on Exhibit B attached hereto. The final
allocation of the Purchase Price shall differ from the
provisional allocation only to reflect changes in the book
value of the Assets as shown on the Closing Balance Sheet.
The Buyer and Imo will each report the federal, state,
provincial, foreign and local income and other tax
consequences of the transaction contemplated hereby in a
manner consistent with such allocation.
Section 1.9. The Closing. The closing of the
transactions contemplated by this Agreement (the "Closing")
shall occur at the offices of Thermo Electron Corporation,
81 Wyman Street, Waltham, Massachusetts, at 10:00 a.m. on
the date set forth in the first paragraph of this Agreement
(the "Closing Date").
Section 1.10. Proceedings at Closing. All
proceedings to be taken and all documents to be executed and
delivered by the Company or Imo in connection with the
consummation of the transactions contemplated hereby shall
be reasonably satisfactory in form and substance to the
Buyer and its counsel. All proceedings to be taken and all
documents to be executed and delivered by the Buyer in
connection with the consummation of the transactions
contemplated hereby shall be reasonably satisfactory in form
and substance to Imo and its counsel.
Section 1.11. Deliveries by Imo to the Buyer. At the
Closing, Imo shall deliver, or cause to be delivered, to the
Buyer, or any subsidiary of the Buyer, such executed
assignments, patent assignments, trademark assignments,
bills of sale, certificates of title, stock powers or other
documents, each dated the Closing Date, as shall transfer to
the Buyer all of the Companies' right title and interest in
and to the Assets, the Dutch Shares and the Brazil Shares.
Transfer of the Dutch Shares shall take place by notarial
deed of transfer. The parties undertake to appear either in
person or by proxy before one of the notaries of Baker &
McKenzie in Amsterdam, The Netherlands, to execute the
notarial deed of transfer. The transfer shall be registered
in the shareholders register of Baird Europe.
Section 1.12. Deliveries by the Buyer to Imo. At the
Closing, the Buyer shall deliver to Imo:
(a) the Purchase Price in accordance with Section 1.5;
(b) an executed assumption agreement, dated as of the
Closing Date, pursuant to which the Buyer shall assume
all of the Assumed Liabilities; and
(c) an executed lease, dated the Closing Date for a
portion of the Bedford Facility (the "Bedford Lease").
Section 1.13. Transfer of China Shares. Imo shall
cause the Company to enter into an equity purchase agreement
with Buyer to effect the transfer of the China Shares. In
the event of any conflict between this Agreement and such
equity purchase agreement, the terms of this Agreement shall
control, except to the extent prohibited by applicable law.
Subject to the terms of such equity purchase agreement, the
transfer of the China Shares shall be complete upon Buyer's
receipt of the approval of BNTIDEZ and an amended business
license from SAIC. Imo and the Buyer agree to use their
respective best efforts to cause the transfer of the China
Shares to be approved by BNTIDEZ and the amended business
license to be issued to the Buyer by SAIC, and to take such
other steps as are reasonably necessary to effect the
transfer of the China Shares as soon as practicable
following the Closing. If the transfer of the China Shares
has not occurred by April 30, 1995 (unless the parties
hereafter agree to an extension of time), then Imo shall
promptly pay Buyer $200,000, provided that Buyer has timely
made all submissions required under applicable laws and
procedures of the Peoples Republic of China.
Notwithstanding the foregoing, if, subsequent to any such
payment, the transfer of the China Shares is approved by
BNTIDEZ, Buyer shall refund such payment to Imo.
Section 1.14 Lease of Netherlands Facility. Imo
hereby agrees to permit Baird Europe to lease the facility
located at Produktieweg 30, 2382 PC, Zoeterwoude, The
Netherlands (the "Dutch Facility") for a period of four
months after the Closing. The parties shall enter into a
lease with respect to the Dutch Facility as soon as
practicable following the Closing. Such lease will be on
substantially the same terms and conditions as the Bedford
Lease, except for such changes as are required due to
differences between the Bedford Facility and the Dutch
Facility or as are required due to applicable laws, rules or
regulations. Monthly rent under the lease for the Dutch
Facility shall be 6,000 Dutch guilders and the Buyer shall
make a $25,114 payment to Imo upon execution of the lease.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES
Section 2.1. Representations and Warranties of Imo.
Imo represents and warrants to Buyer that, except as
specifically and fully set forth on the Disclosure Schedule
attached hereto as Exhibit C (specifically identifying the
relevant subsection hereof):
(a) Organization and Qualification. Imo is a
corporation duly organized, validly existing and in good
standing under the laws of Delaware and has all requisite
corporate power and authority to own and operate the
Business as it is now being conducted.
Each of the Companies is a company duly organized, validly
existing and in good standing under the laws of the
jurisdiction of incorporation or organization and has all
requisite power and authority to own and lease its
properties and to carry on the Business as it is now being
conducted. Complete and correct copies of the
organizational documents of the Foreign Companies have been
delivered to the Buyer. Except for its ownership of the
Shares and its interests in the Representative Offices, the
Company does not have any interest in any company,
partnership, joint venture or other entity that conducts the
Business. The Foreign Companies do not conduct any business
other than the Business. The Foreign Companies do not have
any subsidiaries and do not own any capital stock or other
interest any company, partnership, joint venture or other
entity.
(b) Authority. Imo has full right, power, capacity
and authority to execute, deliver and perform this Agreement
and to consummate the transactions contemplated hereby. The
execution, delivery and performance of this Agreement and
the consummation of the transactions contemplated hereby
have been duly and validly authorized by all necessary
corporate action on the part of Imo and the Company. This
Agreement has been duly and validly executed and delivered
by Imo and constitutes the valid and binding obligation of
Imo enforceable against it in accordance with the terms
hereof. Neither the execution, delivery and performance of
this Agreement nor the consummation of the transactions
contemplated hereby will (i) conflict with or result in a
violation, breach, termination or acceleration of, or
default under (or would result in a violation, breach,
termination, acceleration or default with the giving of
notice or passage of time, or both) any of the terms,
conditions or provisions of the charter documents of Imo or
any of the Companies, as amended, or of any note, bond,
mortgage, indenture, license, agreement or other instrument
or obligation to which Imo or any of the Companies is a
party or by which any of the Companies or any of the Assets
may be bound or affected; (ii) result in the violation of
any order, writ, injunction, decree, statute, rule or
regulation applicable to Imo or any of the Companies or any
of the Assets; or (iii) result in the imposition of any
lien, encumbrance, charge or claim upon any of the Assets.
No consent or approval by, or notification to or filing
with, any court, governmental authority or third party is
required in connection with the execution, delivery and
performance of this Agreement by Imo or the consummation of
the transactions contemplated hereby, except for those that
have already been obtained or made. Imo acknowledges that
the Buyer has relied upon representations made by Imo
regarding the value and geographical location of assets of
the Business in determining not to make a pre-merger
notification filing under the Hart-Scott-Rodino Act of 1976,
and Imo represents and warrants that such representations
are true and correct in all material respects.
(c) Capitalization. The authorized capital stock of
Baird Europe consists of 2,000 shares of common stock, 500
Dutch guilders par value per share. There are 2,000 shares
of common stock of Baird Europe issued and outstanding, all
of which are owned by the Company. The authorized capital
stock of Baird Brazil consists of 28,000 quotas each with a
nominal value of 1.00 Brazilian reales, with 27,998 quotas
owned by the Company and two (2) quotas owned by Jorge
Rinaldo Rodrigues Soares, as nominee holder. The
authorized share capital of Baird China consists of
$200,000. All of such capital was paid up by the Company in
accordance with Article 11.2 of the Articles of Association
of Baird China and is owned by the Company. The authorized
capital stock of Baird France consists of 900 shares (the
"France Shares"), each having a par value of 100 French
francs, all of which are owned by Baird Europe. All of the
Shares and the France Shares have been duly authorized and
validly issued, are fully paid, non-accessible and free of
pre-emptive rights. The Company holds good and marketable
title to the Shares, Baird Europe holds good and marketable
title to the France Shares, and the transfer of the Shares
to the Buyer pursuant to this Agreement will vest in the
Buyer full title to the Shares, free and clear of any liens,
claims, equities, options, calls, voting trusts, agreements,
commitments and encumbrances whatsoever. The offer and sale
of the Shares to the Buyer complies with all federal, state
and, subject to Section 1.4 hereof, foreign securities laws
applicable thereto. There are no options, warrants,
convertible instruments or other rights, agreements, or
commitments, contingent or otherwise, relating to the
issuance or sale of any shares of capital stock or
shareholding of Baird Europe, Baird China, Baird Brazil or
Baird France.
(d) Financial Statements. Attached hereto as Exhibit
D are true and complete copies of the Balance Sheet and the
income statement of the Business as of and for the 8- month
period ended August 31, 1994 (collectively, the "Financial
Statements"). The Financial Statements present fairly the
financial condition and results of operations of the
Business as at the dates and for the periods indicated, in
each case in accordance with generally accepted accounting
principles applied on a basis consistent with previous
years, and give a true, complete and reliable picture of the
financial position of the Business.
(e) Taxes. Each of the Foreign Companies has, in all
material respects, accurately prepared and duly and timely
filed all national, state, provincial, local or foreign tax
returns or reports which were required to be filed in
respect of all income, franchise, excise, sales, use,
property (real and personal), payroll and other taxes,
levies, imports, duties, license and registration fees,
charges or withholdings of any nature whatsoever
(collectively, "Taxes") applicable to such Foreign Company,
and has paid all Taxes due and payable from such Foreign
Company, except where the same are being contested in good
faith and adequate reserves have been established therefor.
No deficiency for any Tax has been asserted against any
Foreign Company. None of the Foreign Companies is in
default in the payment of any Taxes due and payable or any
assessments received in respect thereof, and there are no
claims pending, or to the best knowledge of Imo, threatened
against any of the Foreign Companies for past due Taxes, nor
is there any basis for any such claim. All Taxes incurred,
but not yet due, have been fully accrued on the books of the
Business.
(f) Backlog. The backlog of the Business as of the
Closing is at least $5,000,000.
(g) Properties. The Companies have good, full and
marketable title to all of the Assets, free and clear of all
mortgages, liens, attachments, pledges, encumbrances or
security interests of any nature whatsoever. There are no
pending proceedings affecting any Assets or, to the best
knowledge of Imo, threatened which could have a material
adverse effect on the use of any such Assets for the
purposes for which such Assets were acquired.
(h) Accounts Receivable. All accounts and notes
receivable shown on the Balance Sheet, and all accounts and
notes receivable of the Foreign Companies and, with respect
to the Business, the Company subsequent to the date of the
Balance Sheet have arisen in the ordinary course of business
and conform generally to normal trade practices and the past
practices of the Business. Such accounts receivable, less
the allowances for doubtful accounts reflected on the
Balance Sheet or, in the case of accounts receivable arising
after the date of the Balance Sheet, on the books of the
Business, have been established in accordance with generally
accepted accounting principles consistently applied and are
collectible within one year after the Closing Date.
(i) Inventories. All Inventories (as defined below)
are of a quality and quantity usable and salable in the
ordinary course of business. Items included in such
Inventories are carried on the books of the Companies at the
lower of cost or market and, with respect to Inventories
existing as of the date of the Balance Sheet, are reflected
on the Balance Sheet, net of applicable reserves for excess
and obsolete items. Such reserves have been determined in
accordance with past practices and conform to generally
accepted accounting principles consistently applied. The
term "Inventories" includes all stock of raw materials, work-
in-process and finished goods held by the Foreign Companies
and, with respect to the Business, the Company, for
manufacturing, assembly, processing, finishing, sale or
resale to others.
(j) Purchase and Sale Commitments. No outstanding
purchase commitments of the Foreign Companies and, with
respect to the Business, the Company, are in excess of the
normal, ordinary and usual requirements of the Business
consistent with past practices, and, to the best knowledge
of Imo, the aggregate of the contract prices to which the
Foreign Companies and, with respect to the Business, the
Company have agreed is not so excessive when compared with
current market prices for the relevant commodities or
services that a material loss to the Business is likely to
result. To the best knowledge of Imo, no outstanding sales
commitment by the Foreign Companies and, with respect to the
Business, the Company purports to obligate the Companies to
sell any product or service at a price which, because of
currently prevailing and projected costs of materials or
labor, is likely to result, when all such sales commitments
are taken in the aggregate, in a material loss to the
Business. To the best knowledge of Imo, there are no
suppliers to the Business with respect to which practical
alternative sources of supply, or comparable products, are
not available on comparable terms and conditions.
(k) Governmental Authorization. The Companies
possess all governmental permits, licenses, franchises,
concessions, zoning variances and other approvals,
authorizations and orders which are required under all
applicable local, state, provincial, federal or foreign laws
and regulations of any jurisdiction and which are material
to the operation of the Business as presently conducted.
All such permits, licenses, franchises, concessions, zoning
variances, approvals, authorizations and orders are
presently in full force and effect, the Companies are in
compliance with the requirements thereof in all material
respects, no suspension or cancellation of any of them is,
to the best knowledge of Imo, threatened and, except as set
forth on the Disclosure Schedule, no consent or approval of
any party to, or any other person or governmental agency
having jurisdiction of, any such permit, license, franchise,
concession, zoning variance, approval, authorization or
order is required for the transfer thereof to the Buyer.
All of such permits, licenses, franchises, concessions,
zoning variances, appraisals, authorizations and orders are
listed on the Disclosure Schedule.
(l) Patents; Trademarks. To the best knowledge of
Imo, the Companies own or have adequate license to use, free
and clear of any obligation of payment, encumbrance, lien or
claim, all patents, trademarks, trade names, service marks,
brand names and copyrights, and applications therefor, used
in the conduct of the Business or the use of which is
necessary for the conduct of Business as presently conducted
by the Companies (the "Intangibles"). Set forth on the
Disclosure Schedule is a complete list and summary
description of all Intangibles and licenses or sublicenses
entered into or granted by or to the Companies with respect
thereto and the countries of registration. The Companies
own or possess adequate rights to use, free and clear of any
obligation of payment, encumbrance, lien or claim, all
inventions, technology, technical know-how, processes,
designs, trade secrets, vendor and customer lists and other
confidential information required for or used in the
Business as presently conducted by the Companies ("Trade
Secrets"). No person has made any claim or demand upon any
of the Companies pertaining to, and no proceedings are
pending or so far as is known, threatened, which challenge
the rights of any of the Companies in respect of any
Intangibles or Trade Secrets. No Intangible owned or used
by any of the Companies is subject to any order, ruling,
decree, judgment or stipulation by or with any court,
arbitrator or administrative agency which is adverse to the
Business. To the best knowledge of Imo, none of the Foreign
Companies or, in the conduct of the Business, the Company
has infringed or engaged in the unauthorized use of, or
violated any confidentiality agreement that pertains to, any
patent, trademark, trade name, service mark, brand name or
copyright, or any invention, technology, technical know-how,
process, design, trade secret or other intellectual property
of another. Imo is not aware of any infringement or
unauthorized use by a third party of any Intangible or Trade
Secret.
(m) Contracts and Agreements. Imo has provided the
Buyer with true, correct and complete copies (or reasonably
detailed descriptions) of all of the following oral or
written contracts, agreements, leases and other documents
presently in effect to which any of the Foreign Companies
or, with respect to the Business, the Company is a party:
(i) each agreement that involves aggregate future
payments by any of the Companies of more than $25,000;
(ii) each distributorship, sales agency, franchise,
joint venture or partnership agreement;
(iii) each agreement not made in the ordinary course of
business which is to be performed after the Closing;
(iv) each outstanding commitment to make a capital
expenditure, capital addition or capital improvement
involving an amount in excess of $10,000;
(v) each real or personal property lease;
(vi) each agreement relating to the loan of money or
availability of credit to or from any of the Companies;
(vii) each agreement limiting the freedom of any of the
Companies to compete in any line of business or with any
person or entity;
(viii) each written agreement, contract, arrangement or
understanding between any of the Companies and any
Employee;
(ix) each intellectual property license agreement,
whether as licensee or licensor;
(x) each collective bargaining agreement or other
contract or commitment to or with any labor union or
other group of Employees;
(xi) each mortgage, pledge, security, title retention,
or similar agreement encumbering any of the Assets; and
(xii) each other agreement which cannot be terminated by
the Companies within one year after the date hereof
without penalty.
(n) Validity. There is no material default or
claimed or purported or alleged material default, or basis
upon which, with notice or lapse of time or both (including
notice of this Agreement), a default would exist, in any
obligation of any of the Companies to be performed under any
lease, contract, plan, policy or other instrument or
arrangement referred to in Section 2.1(m) and, to the best
knowledge of Imo, there is no material default by any other
party under any such lease, contract, plan, policy or other
instrument or agreement.
(o) No Changes. Since August 31, 1994, there has
not been:
(i) any material adverse change in the condition
(financial or otherwise), assets, liabilities,
earnings, business or prospects of the Business;
(ii) any sale, assignment, lease, transfer or other
disposition of any tangible asset of the Business,
except in the ordinary course of business consistent
with past practices, or any sale, assignment, lease,
transfer or other disposition of any Intangible or
Trade Secret;
(iii) any amendment, termination or waiver of a
material right of any of the Companies related to the
Business;
(iv) any damage, destruction or loss (whether or
not covered by insurance) to property having a material
adverse effect on the Business;
(v) any increase in the compensation or benefits
payable or to become payable by any of the Companies to
any Employees except for ordinary increases in
accordance with prior practice;
(vi) any acquisition of any assets other than in
the ordinary course of business consistent with past
practices; or
(vii) any material reduction in the rate of, or
gross margins associated with, firm bookings or orders
for the products and services of the Business.
(p) Litigation or Proceedings. None of the Foreign
Companies or, with respect to the Business, the Company is
engaged in or a party to or, to the best knowledge of Imo,
threatened with, any claim or legal action or other
proceeding before any court, any arbitrator of any kind or
any administrative agency, or any governmental
investigation, in any jurisdiction nor, to the best
knowledge of Imo, does any basis for any such claim or legal
action or other proceeding or governmental investigation
exist. There are no orders, rulings, decrees, judgments or
stipulations to which any of the Foreign Companies or, with
respect to the Business, the Company is a party by or with
any court, arbitrator or administrative agency.
(q) Compliance with Laws. Each of the Foreign
Companies and, with respect to the Business, the Company is
in compliance, in all material respects, with all applicable
building, zoning, occupational safety and health, pension,
export control, environmental control, employment, equal
opportunity, or other law, ordinance, regulation, order or
governmental policy. None of the Foreign Companies or, with
respect to the Business, the Company, (i) has received any
written complaint from any governmental authority, and to
the best knowledge of Imo none is threatened, alleging that
any of the Companies has violated any such law, ordinance,
regulation, order or policy, or (ii) is a party to any
agreement or instrument, or subject to any judgment, order,
writ or injunction which materially adversely affects, or
might reasonably be expected materially adversely to affect,
the operations, prospects, properties, assets or condition,
financial or otherwise of the Business.
(r) Recalls. No product of the Business has been
recalled since November 16, 1987. To the best knowledge of
Imo, there is no basis for any recall or for any withdrawal
or suspension of any approval by any governmental regulatory
agency, with respect to any product of the Business sold or
proposed to be sold by the Companies.
(s) No Termination of Relationship. Imo is unaware
and has no reason to expect that any relationship between
any of the Companies and a customer or supplier will be
terminated or adversely affected after the sale of the
Shares and Assets hereunder.
(t) Purchased Assets Complete. The Assets include
all of the assets, properties and rights, except for the
Excluded Assets, necessary for the operation of the Business
as presently conducted.
(u) Labor Matters. There are no labor strikes,
slowdowns, work stoppages or unfair labor practice
complaints relating to any Employee pending or, to the best
of knowledge of Imo, threatened against any of the Companies
and, to the best knowledge of Imo, there are no pending
labor organizing activities or election proceedings pending
with respect to any Employees. None of the Employees are
represented by a labor union. No labor grievance relating
to any Employees has been filed by way of arbitration or
otherwise and is pending and no claim therefor has been
asserted.
(v) Environmental Matters.
(i) There are no pending or threatened claims, suits
or proceedings arising out of or related to any actual
or alleged (i) noncompliance with any law, rule or
regulation relating to Hazardous Materials (as defined
below) by any of the Foreign Companies or, in the
conduct of the Business, by the Company, or (ii)
discharge, spill or release of any Hazardous Materials
on any of the properties owned, operated or controlled
at any time by any of the Foreign Companies or, in the
conduct of the Business, by the Company, or on any
property to which any of the Foreign Companies, or, in
the conduct of the Business, the Company has
transported any Hazardous Materials. For the purposes
of this Agreement, "Hazardous Material" means any
flammable, explosive or radioactive material, or any
hazardous or toxic waste, substance, or material,
including, without limitation, petroleum based products
and substances defined as "hazardous substances",
"hazardous materials", "solid waste" or "toxic
substances" under any applicable local, state,
provincial, federal, national or foreign laws, rules or
regulations relating to hazardous or toxic materials
and substances, air pollution (including noise and
odors), water pollution, liquid and solid waste,
pesticides, drinking water, community and employee
health, environmental land use management, stormwater,
sediment control, nuisances, radiation, wetlands,
endangered species, environmental permitting and
petroleum products (collectively, "Environmental
Laws").
(ii) The Disclosure Schedule contains a list of all
environmental reports, investigations and audits known
to the Company relating to premises currently owned or
operated by the Foreign Companies or, in the conduct of
the Business, the Company, whether conducted by or on
behalf of any of the Companies or a third party, and
whether done at the initiative of the Companies or
directed by a governmental body or other third party.
Complete and accurate copies of each such report, or
the results of each such report, investigation or
audit, have been provided to the Buyer.
(w) Employee Benefit Plans. The Disclosure Schedule
contains a true, correct and complete list of all benefit
plans (as defined in Section 3(3) of ERISA) and all pension,
benefit, profit sharing, retirement, deferred compensation,
welfare, insurance, disability, bonus, vacation pay,
severance pay and other similar plans, programs and
agreements, whether reduced to writing or not, relating to
any of the Employees (the "Employee Plans") and, except as
set forth on the Disclosure Schedule, none of the Companies
has any obligations, contingent or otherwise, past or
present, under applicable law or the terms of any Employee
Plan. With respect to all Employee Plans, each of the
Companies is in compliance with the requirements prescribed
by any and all statutes, orders or governmental rules or
regulations currently in effect, applicable to such Employee
Plans. Each of the Companies has performed all obligations
required to be performed by it under, and is not in
violation of, and there has been no default or violation by
any other party with respect to, any of the Employee Plans.
There are no pending or, to the knowledge of Imo, threatened
claims, suits or other proceedings by Employees, former
employees of any of the Foreign Companies, or beneficiaries
or spouses of any of the above, involving any Employee Plan.
Imo has provided the Buyer with copies of each Employee Plan
that is in writing and with a written summary of each oral
Employee Plan. Each Employee Plan that is an "employee
pension benefit plan" as such term is defined in Section
3(2) of ERISA and any corresponding trust intended to
qualify under Sections 401(a) and 501(a) of the Internal
Revenue Code (the "Code") do so qualify and the Company has
received a favorable determination letter from the IRS with
respect to such qualification of each such Employee Plan,
and no such determination letter has been revoked and no
such revocation has been threatened and no such Employee
Plan has been amended since the date of its most recent
determination letter or application therefor in any respect
and no act or omission has occurred that would adversely
affect its qualification or materially increase its cost.
Neither the Company nor any ERISA Affiliate (as defined
below) contributes to or has an obligation to contribute to
or has contributed to or had an obligation to contribute to
within the past six years, a "multi-employer" plan as
defined in Section 400 1(a)(3) of ERISA. Neither the
Company nor any ERISA Affiliate has withdrawn from a multi-
employer plan in a complete or partial withdrawal that
resulted in any unsatisfied employer liability. Neither the
Company nor any ERISA Affiliate contributes to an employee
pension benefit plan that is subject to Section 412 of the
Code or Title IV of ERISA. "ERISA Affiliate" means an
entity which is a member of (i) a controlled group of
corporations (as defined in Section 414(b) of the Code),
(ii) a group of trades or businesses under common control
(as defined in Section 414(c) of the Code), or (iii) an
affiliated service group (as defined in Section 414(m) of
the Code or the regulations under Section 414(o) of the
Code), any of which includes the Company.
(x) Insurance Policies. The Disclosure Schedule sets
forth a list (including the name of the insurer, the name of
the policyholder, the name of each insured, the policy
number and periods of coverage, and the scope of coverage)
of all policies of fire, theft, casualty, liability,
burglary, fidelity, workers compensation, business
interruption, environmental, product liability, automobile
and other forms of insurance under which any of the Foreign
Companies or, with respect to the Business, the Company is
the beneficiary. None of the Companies has received notice
from any insurer under any such policy disclaiming coverage
or canceling or materially amending any such policy. Such
policies or extensions or renewals thereof in such amounts
will be outstanding and in full force without interruption
until the Closing Date.
(y) Product and Service Warranties. Imo has provided
the Buyer with copies of the current standard warranty used
for each of the products and services of the Business. The
Disclosure Schedule also describes any and all other product
or service warranties made by or on behalf of the Foreign
Companies or, with respect to the Business, the Company,
that deviate materially from the current standard warranties
and which remain in effect on the date hereof, or pursuant
to which any of the Companies has any remaining obligations.
The Disclosure Schedule sets forth the aggregate amount of
warranty claims made in each of the last three full fiscal
years.
(z) Customers and Suppliers. The Disclosure Schedule
sets forth a list of (i) each customer that accounted for
more than 2% of the revenues of the Business during the last
full fiscal year and (ii) each supplier that is the sole
supplier of any significant product or component material to
the Business. To the best of Imo's knowledge, there are no
suppliers of significant products or services to the
Business as to which practical alternative sources of supply
or comparable products are not available.
(aa) Real Property Leases. The Disclosure Schedule
lists and describes briefly all real property leased or
subleased to the Foreign Companies or, with respect to the
Business, the Company, and lists the term of such lease, any
extension and expansion options and the rent payable
thereunder. Imo has delivered to the Buyer correct and
complete copies of the leases and subleases (as amended to
date) listed in the Disclosure Schedule. With respect to
each lease and sublease listed in the Disclosure Schedule:
(i) the lease or sublease is legal, valid, binding
and enforceable and in full force and effect;
(ii) the lease or sublease is assignable to the Buyer
without the consent or approval of any party (except as
set forth in the Disclosure Schedule); and
(iii)To the best knowledge of Imo, none of the
Companies has experienced any material disruption in the
delivery of adequate quantities of heat, electricity,
water or sewer services.
(bb) Real Estate. The Company does not own any real
property other then the Bedford Facility. None of the
Foreign Companies will own, as of the Closing, any real
property.
(cc) Government Contracts. With respect to the
Business, the Company has not been suspended or debarred
from bidding on contracts or subcontracts with any
governmental body; no such suspension or debarment has been
initiated or, to the best of Imo's knowledge, threatened;
and the consummation of the transactions contemplated by
this Agreement will not result in any such suspension or
debarment. With respect to the Business, the Company does
not have any agreements, contracts or commitments which
require it to obtain or maintain a security clearance with
any governmental body.
(dd) Termination of Certain Activities. As of the
Closing, the Company will have ceased all pre-painting
preparation and all painting activities at the Bedford
facility.
Section 2.2. Representations and Warranties of Buyer.
Buyer represents, warrants and guarantees to Imo that:
(a) Organization and Good Standing. The Buyer is a
corporation duly organized, validly existing and in good
standing under the laws of Massachusetts and has all
requisite corporate power and authority to own, lease and
operate its properties and to carry on its business as it is
now being conducted.
(b) Authority. The execution and delivery hereof,
and the consummation of the transactions contemplated
hereby, have been duly and validly authorized by all
necessary corporate action on the part of the Buyer.
Neither the execution and delivery hereof nor the
consummation of the transactions contemplated hereby will
(i) conflict with or result in a violation, breach,
termination or default under (or would result in a
violation, breach, termination or default with the giving of
notice or passage of time or both), any of the terms,
conditions or provisions of the charter documents of the
Buyer, or of any note, bond, mortgage, indenture, license,
agreement or other instrument or obligation to which the
Buyer is a party, or by which the Buyer or any of its
properties or assets may be bound or affected or (ii) result
in the violation of any order, writ, injunction, decree,
statute, rule or regulation applicable to the Buyer, or its
properties or assets. No consent or approval by, or
notification to or filing with, any court, governmental
authority or third party is required in connection with the
execution, delivery and performance of the Agreement by the
Buyer or the consummation of the transactions contemplated
hereby, except for those that have already been obtained or
made.
Section 2.3 Definition of Knowledge. For purposes of
Section 2.1, the "knowledge" of Imo shall be deemed to
include the knowledge of the Company.
Section 2.4 Incorporation of Chinese Equity Purchase
Agreement. The representations and warranties set forth in
the equity purchase agreement referred to in Section 1.13
shall be incorporated herein by reference and shall be
subject to the indemnification provisions of Article 4
hereof.
ARTICLE 3
POST-CLOSING AGREEMENTS
Section 3.1 Taxes.
(a) Liability.
(i) Except as provided in Section 3.2, Imo shall be
liable for any and all claims, losses, liabilities,
obligations, damages, impositions, assessments, demands,
judgments, settlements, costs and expenses (including
reasonable attorneys', accountants' and experts' fees and
expenses and any applicable assessments of interest and
penalties) with respect to Taxes attributable to the
Business or for which any Foreign Company may be liable with
respect to any and all periods, or portions thereof, ending
on or before the Closing Date ("Pre-Closing Periods").
(ii) Except as provided in Section 3.2 hereof, the
Buyer shall be liable for any and all claims, losses,
liabilities, obligations, damages, impositions, assessments,
demands, judgments, settlements, costs and expenses
(including reasonable attorneys', accountants' and experts'
fees and expenses and any applicable assessments of interest
and penalties) with respect to Taxes attributable to the
Business, or for which any Foreign Company may be liable,
with respect to any and all periods, or portions thereof,
beginning after the Closing Date ("Post-Closing Periods").
(iii) In case of any Tax that is attributable to a
period which includes a Pre-Closing Period and a Post-
Closing Period, for purposes of determining the amount of
such Tax that is attributable to a Pre-Closing Period versus
a Post-Closing Period (any of the foregoing periods being
hereinafter referred to as a "Relevant Period"), the
following rules shall apply:
(A) In the case of ad valorem Taxes imposed on
the Assets or any of the Companies, similar Taxes imposed on
any Foreign Company based on capital (including net worth or
long-term debt) or number of shares of stock authorized,
issued or outstanding, the portion attributable to each
Relevant Period shall be the amount of such Taxes for the
entire taxable period multiplied by a fraction, the
numerator of which is the number of days in the Relevant
Period and the denominator of which is the number of days in
the entire taxable period.
(B) In the case of any Tax not described in
Section 3.1 (a)(iii)(A), the portion attributable to each
Relevant Period shall be determined on the basis of an
interim closing of the books of the Company or the relevant
Foreign Company on the last day of each Relevant Period.
For purposes of this Section 3.1(a)(iii)(B), the liability
for such Tax with respect to the Relevant Period shall be
the product of (i) such Tax for the entire taxable period
multiplied by (ii) a fraction, the numerator of which is the
hypothetical Tax for such Relevant Period (determined on the
basis of such interim closing of the books, without
annualization) and the denominator of which is the sum of
such numerator plus the aggregate amount of the hypothetical
Tax for each other Relevant Period (determined on the basis
of such interim closing of the books, without annualization)
contained in the taxable period. The hypothetical Tax for
any period shall in no case be less than zero.
(b) Tax Return Preparation and Filing Responsibility.
(i) Imo shall prepare and file or cause to be
prepared and filed the following Tax returns:
(A) all Tax returns of the Company for any
period; and
(B) all Tax returns of the Foreign Companies
that relate solely to Pre-Closing Periods.
(ii) Buyer shall prepare and file or cause to be
prepared and filed all Tax returns of the Foreign Companies
other than those described in Section 3.1 (b)(i))(B) above.
(iii) Imo shall provide Buyer with a copy of each
Tax return required to be filed by the Company pursuant to
Section 3.1 (b)(i)(B) that has not been filed on or before
the Closing Date at least thirty days prior to the filing
thereof. If Buyer disagrees with any item contained in any
such Tax return, the parties will attempt to reach an
agreement on the disputed item. If the parties cannot reach
an agreement within 15 days, the dispute will be submitted
to and settled prior to the deadline for filing the
applicable return by the Neutral Auditors, whose fee will be
borne equally by Buyer and Imo.
(iv) Buyer shall provide Imo with a copy of each
Income Tax return required to be filed by Buyer pursuant to
Section 3.1 (b)(ii) that relates to both a Pre-Closing
Period and a Post-Closing Period at least thirty days prior
to the filing thereof along with a calculation of the Tax
attributable to the Pre-Closing Period. If Imo disagrees
with any item contained in such Tax return or calculation,
the parties will attempt to reach an agreement on the
disputed item. If the parties cannot reach an agreement
within 15 days, the dispute will be settled prior to the
deadline for filing the applicable return by the Neutral
Auditors, whose fee shall be borne equally by Buyer and Imo.
(c) Tax Contests.
(i) If any taxing authority proposes any adjustment
or questions the treatment of any item, which adjustment or
question could, if pursued successfully, result in or give
rise to solely a claim (a "Buyer Tax Claim") against Imo by
the Buyer under Section 3.1(a), solely a claim (an "Imo Tax
Claim") against the Buyer by Imo under the Section 3.1(a),
or both an Imo Tax Claim and a Buyer Tax Claim (a "Joint Tax
Claim"), then the party hereto first receiving notice of
such adjustment or question (a "Tax Dispute") shall promptly
notify the other party hereto in writing of such Tax
Dispute.
(ii) In the case of a Buyer Tax Claim, Imo shall
have the right, at its sole cost and expense, to control the
defense, prosecution, settlement and/or compromise of the
Tax Dispute underlying such Buyer Tax Claim; provided,
however, that in any event Imo shall not, without the
Buyer's prior written consent (which consent shall not be
unreasonably withheld), enter into any settlement or
compromise of such Tax Dispute that would have a material
adverse effect on the Tax liability of the Buyer for any
Post-Closing Period. In the case of an Imo Tax Claim or a
Joint Tax Claim, the Buyer shall have the right, at its sole
cost and expense, to control the defense, prosecution,
settlement and/or compromise of the Tax Dispute underlying
such Imo Tax Claim or Joint Tax Claim; provided, however,
that the Buyer will not, without Imo's prior written consent
(which consent shall not be unreasonably withheld), enter
into any settlement or compromise of such Tax Dispute that
would have a material address effect on the Tax liability of
Imo for any Pre-Closing Period.
(iii) The party hereto that controls a Tax Dispute
under the provisions of Section 3.1(c)(i) or 3.1(c)(ii)
shall keep the other party hereto informed of all events and
developments relating to such Tax Dispute and the other
party hereto, or its authorized representatives, shall be
entitled, at its own expense, to attend (but not control)
all conferences, meetings and proceedings relating to such
Tax Dispute.
(d) No Carrybacks. The Buyer agrees that to the
maximum extent permitted by applicable law, neither the
Buyer nor any of the Buyer's affiliates or subsidiary
corporations (including, with respect to Post-Closing
Periods, the Foreign Companies) will carry back to any
taxable period of the Company or any of its subsidiaries or
affiliates (including, with respect to Pre-Closing Periods,
the Foreign Companies) any loss, credit, or deduction
incurred or generated in, or attributable to, any Post-
Closing Period that would affect any Tax return of the
Company or any of its subsidiaries or affiliates (other than
the Foreign Companies), and the Buyer agrees to make or
exercise, or cause to be made or exercised, any and all
necessary or permitted elections or options available under
applicable law to avoid any such carryback.
(e) Termination of Tax Sharing Agreements. Except as
provided in this Agreement, any and all Tax allocation
agreements, Tax sharing agreements, intercompany agreements,
or other agreements or arrangements to which any of the
Foreign Companies is a party and relating to any Tax matters
shall be terminated with respect to the Foreign Companies as
of the day before the Closing Date, and from and after the
Closing Date will have no further force or effect for any
taxable period (whether current, future, or past taxable
periods).
(f) Payments. Any payment required under this
Section 3.1 shall be made by the Buyer or Imo, as the case
may be, in immediately available funds and no later than 10
days following the receipt of notice from the other party of
the amount due. Any payment not made when due under this
Section 3.1 shall bear interest, compounded monthly on the
last day of each calendar month, from the due date at an
interest rate equal to the prime rate of Bank of Boston as
announced from time to time.
(g) Conflict. In the event of a conflict between
provisions of this Section 3.1 and other provisions of this
Agreement, the provisions of this Section 3.1 shall control.
Section 3.2. Transfer Taxes. Imo and the Buyer shall
equally share the cost of all transfer, documentary or
sales or similar taxes, if any, applicable to the sale of
the Assets and the transfer of the Shares hereunder.
Section 3.3. Proprietary Information.
(a) After the Closing, Imo shall hold in confidence,
and shall cause all of its officers, directors, personnel
and affiliates to hold in confidence, all information of a
secret or confidential nature with respect to the Business,
and shall not disclose, publish or make use of the same
without the consent of the Buyer, except to the extent that
such information shall have become public knowledge other
than by breach of this Agreement by Imo or any of its
officers, directors, personnel or affiliates or is required
to be disclosed by applicable law or legal process, provided
that, in the event such disclosure is required by law or
legal process, Imo shall provide the Buyer with reasonable
advance notice of such requirement to enable Buyer to seek a
protective order or take other steps to protect the
confidentiality of such information and provided further
that Imo shall use its best efforts to minimize the scope of
such disclosure.
(b) Imo agrees that the remedy at law for any breach
of this Section 3.3 would be inadequate and that the Buyer
shall be entitled to injunctive relief.
Section 3.4. Sharing of Data. Imo shall have the
right for a period of three years following the Closing Date
(or, with respect to Tax information, until the expiration
of the relevant statute of limitations) to have access,
during normal business hours and upon reasonable notice, to
such books, records and accounts, including financial and
Tax information, correspondence, production records,
employment records and other similar information as are
transferred to the Buyer pursuant to the terms of this
Agreement as shall be necessary to permit Imo to comply with
its obligations under this Agreement and under applicable
laws and regulations. The Buyer shall have the right for a
period of three years (or, with respect to Tax information,
until the expiration of the relevant statute of limitations)
following the Closing Date to have access, during normal
business hours and upon reasonable notice, to such books,
records and accounts, including financial and Tax
information, correspondence, production records, employment
records and other records that are retained by Imo as shall
be necessary to permit the Buyer to comply with its
obligations under this Agreement and under applicable laws
and regulations.
Section 3.5. Cooperation in Litigation. Imo and the
Buyer each will fully cooperate with the other in the
defense or prosecution of any litigation or proceeding
already instituted or which may be instituted hereafter
against or by such other party relating to or in any manner
arising out of the conduct of the Business prior to the
Closing Date or the conduct of the Business by the Buyer
after the Closing Date (other than litigation among the
parties hereto arising out of the transactions contemplated
by this Agreement). The party requesting such cooperation
shall pay the out-of-pocket expenses (including legal fees
and disbursements) of the party providing such cooperation
and of its officers, directors, employees and agents
reasonably incurred in connection with providing such
cooperation, but shall not be responsible to reimburse the
party providing such cooperation for such party's time spent
in such cooperation or the salaries or costs of fringe
benefits or similar expenses paid by the party providing
such cooperation to its officers, directors, employees and
agents while assisting in the defense or prosecution of any
such litigation or proceeding.
Section 3.6. Expenses. The Buyer and Imo each will
bear entirely their respective expenses incurred in
connection with this Agreement and the transactions
contemplated hereby, including but not limited to legal and
accounting expenses.
Section 3.7. Regarding Certain Consents.
(a) Nothing in this Agreement shall be construed as
an attempt to assign any contract, agreement, license,
permit or claim included in the Company Assets
(individually, a "Contract Right") that is by its terms or
in law not assignable without the consent of the other party
thereto, unless such consent shall have been given. In
order, however, to provide Buyer the full realization and
value of every Contract Right of the character described in
the preceding sentence, subject to Section 3.7(b) below, Imo
at and after the Closing will, at the request and under the
direction of the Buyer and in the name of the Company or
otherwise as the Buyer shall specify, take or cause to be
taken all such action (including without limitation the
appointment of the Buyer as attorney-in-fact for the
Company, but with powers limited to the specific purposes
contemplated hereby) and do or cause to be done all such
things as is reasonable to (i) assure that the rights of the
Company under all Contract Rights shall be preserved for the
benefit of the Buyer, and (ii) facilitate receipt of the
consideration to which the Company would otherwise be
entitled in and under all Contract Rights, which
consideration shall be held for the benefit of, and shall be
delivered to, the Buyer. Buyer shall pay all out-of-pocket
costs incurred by Imo in taking any action referred to in
the previous sentence, but Buyer shall not be obligated to
reimburse Imo for employee salaries or overhead. In order
to accomplish the foregoing, Imo may designate the Buyer as
subcontractor to perform obligations of the Company under
Contract Rights. Nothing in this Section shall in any way
diminish the obligations hereunder of Imo to use its best
efforts to obtain all consents and approvals and to take all
such other actions as are necessary to enable the Company to
convey or assign valid title to all the Company Assets to
the Buyer.
(b) Imo and Buyer will cooperate fully with each
other and will use all reasonable efforts to obtain the
novation of each contract with the U.S. Government, or any
agency or department thereof that is included among the
Assets (a "Government Contract") in accordance with FAR
Section 42.1204 pursuant to a novation agreement with the
United States Government (a "Novation Agreement"), and Imo
hereby agrees expeditiously to take all reasonable steps to
obtain approval of all required Novation Agreements.
(i) With respect to each Government Contract, the
performance obligations of the Company thereunder shall be
subcontracted to Buyer subject to Government approval under
the Government Contract until such Government Contract has
been novated. Buyer, as a subcontractor or delegatee, shall
perform such Government Contract and Imo shall promptly pay
over to Buyer in full any amounts received by the Company as
a result of performance by Buyer of such Government
Contract. Prior to the novation of each such Government
Contract to Buyer, Imo shall cause the Company, as the
contracting party, to take such timely action as is
reasonably necessary to allow Buyer to perform such
Government Contract and to protect any rights that may exist
or accrue under such Government Contract until it is
novated. In connection therewith, Buyer or its designee is
authorized to act as agent on behalf of the Company for
purposes of performing and administering each such
Government Contract and subcontract during the period after
the Closing until such Government Contract is novated to
Buyer; provided, however, such authority to act as agent
shall not authorize Buyer to settle or compromise claims
under such Government Contract or subcontract where such
claims are not Assumed Liabilities. Buyer shall indemnify
and hold Imo and its directors, officers, employees,
affiliates, agents and assigns harmless from any loss that
directly results from any action or omission of Buyer in
connection with the performance or administration by Buyer,
as contemplated by this Section 3.7(b), of any Government
Contract during the period after the Closing until such
Government Contract is novated, and Imo shall indemnify and
hold Buyer and its directors, officers, employees,
affiliates, agents and assigns harmless from any loss that
directly results from any action or omission of Imo, or any
of its officers, directors, employees, affiliates, agents or
assigns, in connection with the performance of its
responsibilities as primary contractor under any Government
Contract during the period after the Closing until such
Government Contract is novated.
(ii) Effective upon the novation of the Government
Contract to Buyer, the Government Contract shall be assumed
by Buyer, provided that Imo shall reimburse Buyer for any
monetary benefit received by the Company or Imo (net of any
actual out-of-pocket costs of Imo) in connection with such
Government Contract that would have accrued to Buyer had the
Government Contract been novated as of the Closing Date.
Any subcontract or other delegation which Imo and/or the
Company and Buyer have theretofore entered into or agreed
upon in respect of such Government Contract shall be
terminated as of the effective date of such Novation
Agreement.
(iii) Imo and Buyer shall cooperate with each other
to preserve all bids, quotations and proposals made in the
ordinary course of the Business by the Company and to
facilitate the award of the Government Contract related
thereto consistent with applicable legal requirements. Any
Government Contracts awarded to the Company pursuant to such
bids, quotations and proposals shall be deemed to be assumed
by Buyer.
Section 3.8 Use of Baird Name. Imo shall cause the
Company to grant to the Buyer a perpetual, royalty-free
license to use the name "Baird" in connection with making,
using or selling analytical instruments. Such license shall
be exclusive, except that the Company and its affiliates
and assigns may continue to use the name in the business of
the Company's Optical Systems Division.
Section 3.9. No Solicitation or Hiring of Former
Employees. For a period of five years after the Closing
Date, neither Imo nor any of its affiliates shall solicit
any Division Employee who accepted employment with the Buyer
or any Foreign Employee to terminate his employment with the
Buyer or the Foreign Companies or to become an employee of
Imo or any of its affiliates.
Section 3.10. Noncompetition Agreement.
(a) For a period of five years after the Closing
Date, neither Imo nor any entity in which Imo owns,
beneficially or of record, directly or indirectly, any of
the outstanding capital stock or other equity interest, or
in which Imo is a partner, joint venturer, lender, or has
any other ownership or management interest (other than as
the holder of not more than five percent (5%) of the
outstanding stock of a publicly traded company), will engage
anywhere in the world in the manufacture, sale or
distribution of products competitive with products sold by
the Business as of the Closing.
(b) The parties hereto agree that the duration and
geographic scope of the noncompetition provision set forth
in this Section 3.10 are reasonable. In the event that any
court of competent jurisdiction determines that the duration
or the geographic scope, or both, are unreasonable and that
such provision is to that extent unenforceable, the parties
hereto agree that the provision shall remain in full force
and effect for the greatest time period and in the greatest
area that would not render it unenforceable. The parties
intend that this noncompetition provision shall be deemed to
be a series of separate covenants, one for each and every
political subdivision of each and every country where this
provision is intended to be effective. Imo agrees that
damages are an inadequate remedy for any breach of this
provision and that the Buyer shall, whether or not it is
pursuing any potential remedies at law, be entitled to
equitable relief in the form of preliminary and permanent
injunctions without bond or other security upon any actual
or threatened breach of this noncompetition provision.
Section 3.11. Employee Matters.
(a) The Buyer shall offer employment to all Division
Employees as of the Closing Date at salary levels consistent
with the salary levels of such employees at that time.
Division Employees who accept employment with the Buyer
shall be entitled to participate in Buyer's employee benefit
plans to the same extent as Buyer's similarly situated
employees, and such Division Employees shall receive credit
for their years of service to the Company to the extent that
length of service is relevant for vesting or benefit
calculations or allowances under benefit plans available to
Buyer's employees.
(b) Nothing contained herein shall require Buyer to
employ any Division Employee for any particular length of
time or shall prevent Buyer from changing the terms and
conditions of employment (including, without limitation,
compensation and benefits) of any Division Employee;
provided that Buyer shall be fully responsible for
severance, termination or other costs resulting from the
termination of the employment of any Division Employees
(except to the extent such costs are excluded from Assumed
Liabilities pursuant to Section 1.6) or the changing of any
such terms and conditions after the Closing.
(c) As of the Closing Date, Imo shall take such
action as shall be required to cause each Division Employee
accepting employment with the Buyer to have a fully non-
forfeitable right to such Division Employees' account
balance under the Company's 401(k) Plan (the "Company
Plan"). Each Division Employee shall be permitted to make a
lump sum withdrawal of his or her account balance under the
Company Plan. The Buyer shall cause the Buyer's 401(k) plan
to accept direct rollovers with respect to a Division
Employee from the Company Plan.
(d) Notwithstanding any other provision of this
Agreement, the parties hereto do not intend to create any
third party beneficiary rights respecting any Division
Employee or any former employee of the Business as a result
of the provisions herein and specifically hereby negate any
such intention. Without intending to limit the generality
of the preceding sentence, nothing contained in this
Agreement shall, under any circumstances whatsoever, be
construed as expressly or impliedly constituting or creating
any employment contract, offer of employment, promise of
continuing employment, promise of employee benefits or other
obligation of any other kind of or by the Buyer to, or in
favor of, any Division Employees or former employees of the
Business and the Buyer expressly disclaims any and all
liability to any such third party arising out of this
Agreement.
(e) All Employees are listed on Exhibit E attached
hereto, and the Buyer shall have no obligations of any kind
whatsoever with respect to any present or former employee of
any of the Companies other than the Employees listed on
Exhibit E.
ARTICLE 4
INDEMNIFICATION
Section 4.1. Indemnification by Imo. Imo hereby
agrees to indemnify the Buyer for the full amount of all
damages (as defined below) suffered by Buyer as a result of:
(a) the failure of any representation or warranty
contained in Section 2.1 to have been true as of the Closing
Date, except for any such representation or warranty that is
made as of a date other than the Closing Date, in which case
this Section 4.1(a) shall apply to the failure of such
representation or warranty to have been true as of such
other date;
(b) any failure by Imo to perform any obligation or
comply with any covenant or agreement specified herein or in
any other document executed at the Closing;
(c) any liability of the Company that is not an
Assumed Liability, regardless of whether the existence of
such liability represents a breach of a representation or
warranty contained in Section 2.1, including, without
limitation, (i) any claims based upon any event occurring
prior to the Closing Date, (ii) any claims based upon the
actual or alleged release into the environment prior to the
Closing Date of any Hazardous Materials on any property
owned, occupied or controlled by the Company at any time or
to which any Hazardous Materials were transported by the
Company at any time, (iii) any product liability claims,
regardless of when asserted, arising out of the manufacture
or sale of products shipped by the Company prior to the
Closing Date, and (iv) any claim under any Employee Plan
maintained at any time by the Company; or
(d) any liabilities of the Foreign Companies that are
not Foreign Liabilities, including, without limitation, (i)
any claims based upon any event occurring prior to the
Closing Date, (ii) any claims based upon the actual or
alleged release into the environment prior to the Closing
Date of any Hazardous Materials on any property owned,
occupied or controlled by any Foreign Company at any time
or to which any Hazardous Materials were transported by any
Foreign Company at any time, (iii) any product liability
claims, regardless of when asserted, arising out of the
manufacture or sale of products shipped by any Foreign
Company prior to the Closing Date, and (iv) any claim under
any Employee Plan maintained at any time by any Foreign
Company.
Section 4.2. Indemnification by Buyer. Buyer hereby
agrees to indemnify Imo, upon its demand, for the full
amount of all damages (as defined below) suffered by Imo as
result of (a) the failure of any representation or warranty
contained in Section 2.2 to have been true as of the Closing
Date, (b) any failure by the Buyer to perform any
obligation or comply with any covenant or agreement
specified herein or in any other document executed at the
Closing, or (c) any claim asserted with respect to Assumed
Liabilities or Foreign Liabilities.
Section 4.3. Definitions. For the purpose of this
Article 4, (a) the term "damages" shall be determined and
computed by reference to the effect of the compensable event
on the indemnified party and shall be deemed to include (i)
all losses, liabilities, expenses or costs actually incurred
by the indemnified party, including reasonable attorney's
fees and (ii) interest at a rate per annum equal to two
percent (2%) above the prime rate announced from time to
time by Bank of Boston from the date any such claim for
indemnification is made by the indemnified party, or if an
unliquidated claim, from such later date as the claim is
liquidated, to the date full indemnification is made
therefor and (b) the term "result of" shall include any
condition or event that would not have existed or occurred
had the related representation been accurate or the related
obligation or covenant been performed or the related claim
not been made. Damages shall in no event include
consequential damages of any kind.
Section 4.4. Limitations on Indemnifications.
(a) The obligations of Imo under Section 4.1(a), and
the obligations of the Buyer under Section 4.2(a), shall
terminate as to any claims brought thereunder after the
second anniversary of the Closing Date, except that the
obligations of Imo under Section 4.1(a) with respect to any
inaccuracy in Sections 2.1(b), (c), (g) or (v) and the
obligations of the Buyer under Section 4.2(a) with respect
to any inaccuracy in Section 2.3(b), shall survive
indefinitely.
(b) Notwithstanding anything to the contrary herein,
Imo shall have no obligations under Section 4.1(a) until the
aggregate of all damages for which Imo would, but for this
sentence, be liable exceeds $200,000 on a cumulative basis,
and thereafter Imo shall be obligated to indemnify the Buyer
only for the amount of such excess. Notwithstanding
anything to the contrary herein, Imo shall have no
obligation under Sections 4.1(c) or (d) with respect to any
individual claim for indemnification by the Buyer that is
less than $1,000. For purposes of determining whether the
$1,000 threshold set forth in the preceding sentence has
been satisfied, any series of claims arising out of
substantially the same set of facts shall be deemed to be an
individual claim.
(c) Imo's indemnity obligation under Section 4.1(a)
(except with respect to indemnification for breaches of
Sections 2.1(b) or (c)) shall terminate after the dollar
amount of all losses, liabilities, damages and expenses as
to which the Company has actually indemnified the Buyer
exceeds $5,000,000.
Section 4.5. Procedures Relating to Indemnification.
In order for a party (the "Indemnified Party") to be
entitled to any payment under the indemnification provided
for under this Agreement in respect of, arising out of or
involving a claim, legal proceeding or demand made by any
person, firm, governmental authority, corporation or other
entity (other than any of the parties to this Agreement)
against the Indemnified Party (a "Third Party Claim"), such
Indemnified Party must notify the other party (the
"Indemnifying Party") in writing of the Third Party Claim,
setting forth in reasonable detail the information available
to the Indemnified Party forming the basis for such claim,
as promptly as practicable after receipt by such Indemnified
Party of written notice of the Third Party Claim (the
"Indemnification Notice"). Thereafter, the Indemnified
Party shall deliver to the Indemnifying Party, within five
business days after the Indemnified Party's receipt thereof,
copies of all notices and documents (including court papers)
received by the Indemnified Party relating to the Third
Party Claim.
In connection with any Third Party Claim, the
Indemnifying Party, at the sole cost and expense of the
Indemnifying Party, may, upon written notice to the
Indemnified Party, assume the defense of any such Third
Party Claim if (a) the Indemnifying Party acknowledges in
writing the obligation of the Indemnifying Party to
indemnify in accordance with the terms of this Agreement the
Indemnified Party with respect to such Third Party Claim,
and (b) the Third Party Claim involved seeks solely monetary
damages. Should the Indemnifying Party so elect to assume
the defense of a Third Party Claim, the Indemnifying Party
will not be liable to the Indemnified Party for legal
expenses subsequently incurred by the Indemnified Party in
connection with the defense thereof. If the Indemnifying
Party assumes such defense, the Indemnified Party shall be
entitled to participate in, but not control, the defense
thereof at its own expense. If the Indemnifying Party shall
fail to defend such Third Party Claim, or if after
commencing or undertaking any such defense to such Third
Party Claim, fails to prosecute, or withdraws from such
defense, the Indemnified Party shall have the right to
undertake such defense at the Indemnifying Party's expense.
Whether or not the Indemnifying Party chooses to defend or
prosecute any Third Party Claim, the Indemnified and
Indemnifying Parties shall cooperate in the defense or
prosecution thereof. Such cooperation shall include access
during normal business hours afforded to the Indemnifying
Party to, and retention by the Indemnified Party of, records
and information which are necessary for the defense or
prosecution of such Third Party Claim, and making employees
available on a mutually convenient basis to provide
additional information and explanation of any material
provided hereunder, and the Indemnifying Party shall
reimburse the Indemnified Party for all of its reasonable
out-of-pocket expenses in connection therewith. If the
Indemnifying Party elects to assume the defense of any such
Third Party Claim, the Indemnified Party shall not admit any
liability with respect of, or settle, compromise or
discharge, such Third Party Claim without the Indemnifying
Party's prior written consent, which consent shall not
reasonably be withheld.
Section 4.6 Exclusive Remedy. Except in the case of
fraud or as otherwise specifically provided herein, the
indemnification provisions of this Article IV shall be the
exclusive remedy available to any party hereto in respect of
the matters contained in this Agreement.
Section 4.7 Exclusive Obligations of Imo.
Notwithstanding anything to the contrary contained in this
Agreement, any provision contained herein requiring the
performance of the Company or any of the Foreign Companies,
and all obligations and liabilities of the Company or of
any of the Foreign Companies, shall be construed as the
direct obligations of Imo to cause such performance or the
discharge of any such obligations or liabilities, and not as
obligations or liabilities of the Company or any of the
Foreign Companies.
ARTICLE 5
GENERAL
Section 5.1. Modification. All of the parties hereto
may, by mutual consent, amend, modify and supplement this
Agreement in such manner as may be agreed upon by them in
writing.
Section 5.2. Waivers. Each of the parties hereto
may, by an instrument in writing, extend the time for or
waive the performance of any of the obligations of another
party hereto or waive compliance by such other party with
any of the covenants or conditions contained herein. All
representations, warranties and guarantees in Sections 2.1
and 2.2 shall survive the Closing, and shall not be deemed
waived, regardless of any due diligence investigations
undertaken by the Buyer or Imo, except for matters disclosed
on the Disclosure Schedule.
Section 5.3. Notices. All notices, requests,
demands, consents and other communications that are required
or permitted hereunder shall be in writing or by written
telecommunication, and shall be deemed given if delivered
personally or, if mailed by registered or certified mail,
postage prepaid, three days after mailing, or if sent by
written telecommunication, upon confirmation of receipt, in
each case as follows:
If to Buyer:
Thermo Jarrell Ash Corporation
8 East Forge Parkway
Franklin, MA 02038-3148
Attention: President
Telephone: (508) 520-1880
Telecopy: (508) 520-1732
With copies to:
Thermo Electron Corporation
81 Wyman Street
Waltham, MA 02254-9046
Telephone: (617) 622-1000
Telecopy: (617) 622-1207
Attention: General Counsel
If to Imo to:
Imo Industries Inc.
Princeton Pike Corporate Center
1009 Lenox Drive
Building Four West
P.O. Box 6550
Lawrenceville, NJ 08648
Attention: General Counsel
Telephone: (609) 896-7600
Telecopy: (609) 896-7633
Section 5.4. Representations and Warranties Separate.
No representation or warranty contained herein shall be
construed as limiting any other representation or warranty
contained herein.
Section 5.5. Entire Agreement. This Agreement
supersedes any and all oral or written agreements or
understandings heretofore made relating to the subject
matter hereof (including without limitation the letter of
intent dated September 27, 1994) and constitutes the entire
agreement of the parties relating to the subject matter
hereof.
Section 5.6. Parties in Interest; Assignment. All
covenants and agreements contained in this Agreement made by
or on behalf of any of the parties hereto shall bind and
inure to the benefit of the respective successors and
permitted assigns. No party hereto may assign its rights or
delegate its duties and obligations under this Agreement
without the prior written consent of the other parties
hereto; provided that the Buyer may assign its rights
hereunder to any affiliate of the Buyer.
Section 5.7. No Implied Rights or Remedies. Except
as otherwise expressly provided herein, nothing herein
expressed or implied is intended or shall be construed to
confer upon or to give any person, firm or corporation,
other than the Buyer and Imo, any rights or remedies under
or by reason of this Agreement.
Section 5.8. Headings. The headings in this
Agreement are inserted for convenience of reference only and
shall not be a part of or control or affect the meaning
hereof.
Section 5.9. Severability. If any provision of this
Agreement shall be declared void or unenforceable by any
judicial or administrative authority, the validity of any
other provision shall not be affected thereby.
Section 5.10. Counterparts. This Agreement may be
executed in several counterparts, each of which shall be
deemed an original, but all of which together shall
constitute one and the same instrument.
Section 5.11. Governing Law. This Agreement shall be
construed and interpreted according to the laws of the
Commonwealth of Massachusetts.
Section 5.12. Exhibits. The Schedules and Exhibits
attached hereto and referred to in this Agreement are a part
of this Agreement for all purposes.
Section 5.13. Further Assurances. Imo will execute,
or cause to be executed, and furnish to the Buyer all
documents and will do or cause to be done all other things
that the Buyer may reasonably request from time to time in
order to vest, prefect or confirm of record in the Buyer the
title to any of the Assets or otherwise to give full effect
to this Agreement and to effectuate the intent of the
parties.
Section 5.14. Brokers. The Buyer shall indemnify Imo
against any liability resulting from the retention by the
Buyer of any broker or finder in connection with this
transaction. Imo shall indemnify the Buyer against any
liability resulting from the retention by Imo of any broker
of finder including, without limitation, CS First Boston, in
connection with this transaction.
IN WITNESS WHEREOF, each of the parties hereto has duly
executed this Agreement or caused this Agreement to be duly
executed on its behalf, all as of the day and year first
above written.
THERMO JARRELL ASH CORPORATION
By:/s/CONAN R. DEADY
Title: Attorney-in-Fact
IMO INDUSTRIES INC.
By:/s/WILLIAM M. BROWN
Title: Executive Vice President and
Chief Financial Officer
SUBSIDIARIES AND AFFILIATES OF IMO INDUSTRIES INC.
Date: 3/8/95 STATE OR
COUNTRY OF
INCORPORATION
NAME OR
ORGANIZATION
_____________________________________________________________
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
IMO INDUSTRIES SRL.......................................ITALY
IMO INDUSTRIES SARL......................................FRANCE
IMO INDUSTRIES GmbH......................................GERMANY
MORSE CONTROLS GmbH..................................GERMANY
TELEFLEX GmbH........................................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
ROLTRA-MORSE S.p.A.......................................ITALY (5)
ROLSAG S.p.A.........................................ITALY (6)
SIRSA S.p.A..........................................ITALY (6)
ROLTRA MORSE POLAND Spzoo............................POLAND
IMO INDUSTRIES (CANADA) INC..............................CANADA
DELSALESCO, INC..........................................U.S. VIRGIN
ISLANDS
IMOVEST INC..............................................DELAWARE
BAIRD CORPORATION........................................MASSACHUSETTS
LABTEST EQUIPMENT COMPANY............................CALIFORNIA
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 (7)
TURBODEL INC.........................................TEXAS
TRIPOWER VENTURE.................................TEXAS (8)
APPLIED OPTICS CENTER CORPORATION....................MASSACHUSETTS
TECNOLOGIA ELECTRONICA de JUAREZ, S.A. de C.V........MEXICO
TRANSVARO ELEKTRON ALETLERI SANAYI VE TICARET A.S....TURKEY (9)
ITT AND VARO, A JOINT VENTURE........................TEXAS (9)
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 Ltd.
(2)50% owned by Imo Industries Inc.
(3)50% owned by NHK Morse Co., Ltd.
(4)40% owned by IMO AB.
(5)99% owned by Imo Industries Inc.
(6)51% owned by Roltra-Morse S.p.A.
(7)50% owned by Varo Technology Center, Inc. and 50% owned by
Varo Inc.
(8)50% owned by Turbodel Inc.
(9)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. Employees 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 February 15, 1995, 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, 1994.
ERNST & YOUNG LLP
Princeton, New Jersey
March 29, 1995
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